EUROHOLD BULGARIA AD

Transcription

1 EUROHOLD BULGARIA AD Prospectus For Admission to Trading of Securities on a Regulated Market (Republic of Poland, Warsaw Stock Exchange, Main Market) 108,643,712 ORDINARY, REGISTERED, DEMATERIALIZED AND FREELY TRANSFERABLE SHARES FROM THE SHARE CAPITAL OF EUROHOLD BULGARIA AD WITH A VOTING RIGHT AND A NOMINAL VALUE BGN 1.00 (PLN ACCORDING TO THE NATIONAL BANK OF POLAND EXCHANGE RATE AS OF THE DATE OF THE PROSPECTUS) EACH ARE SUBJECT TO ADMISSION TO TRADING ISIN BG In compliance with Regulation (EU) 809/2004 of the Financial Supervision Commission from 29 April 2004 in relation to Directive 2003/71/EU of the European Parliament and Council regarding the information, contained in prospectuses, as well as the form, the inclusion by reference and the publication of such prospectuses and the distribution of marketing materials and Ordinance 2 of the Financial Supervision Commission from 17 September 2003 for prospectuses at public offerings and admission to trading to regulated stock market/exchanges and disclosure of information of public entities and other Issuers of securities. 19 SEPTEMBER 2011 The current Prospectus contains the entire required information, necessary to take an informed investment decision, including the main risk factors/risks, related to the Issuer and its business activity and operations. It is in the best interest of each investor to read this Prospectus in its entirety before taking any decision. This Prospectus is written in Bulgarian and is duly translated into English, and its Summary is additionally translated into Polish, with respect to admission to trading of the securities on the Warsaw Stock Exchange. Nevertheless, in case of any discrepancy, the Bulgarian version, as submitted for approval to the Financial Supervision Commission in Bulgaria, will be considered relevant. THE BULGARIAN FINANCIAL SUPERVISION COMMISSION HAS APPROVED THIS PROSPECTUS BY VIRTUE OF DECISION E/ , AND DOES NOT BEAR ANY RESPONSIBILITY WHETHER THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AND TRUE All members of the Management Board and the Supervisory Board of EuroHold Bulgaria AD along with the CFO of EuroHold are jointly and individually are fully liable for any material or any other damages, resulting from any incorrect, untrue, misleading or incomplete data, contained in the Prospectus. The persons, responsible for the creation and compilation of the financial statements of the Issuer, bear joint liability together with the persons, mentioned above, for any damages resulting from incorrect, untrue, misleading or incomplete data, contained in the financial reports and statements. In addition, the registered auditor of the Issuer is liable for any damages resulting from the audited by him financial statements.

2 TABLE OF CONTENT: SECTION ONE: SUMMARY...6 I. LIABLE PERSONS...6 II. AUDITORS...6 III. SUMMARY OF THE PROSPECTUS IN ENGLISH Identity of directors, senior management, advisers and auditors Offer statistics and expected timetable Key information concerning selected financial data; capitalisation and indebtedness; reasons for the admission to trading; risk factors Information concerning the issuer Operating and financial review and prospects Directors, senior management and employees Major shareholders and related-party transactions Financial information Details on the offer and admission to trading Additional information IV. SUMMARY OF THE PROSPECTUS IN POLISH (PODSUMOWANIE) Opis dyrektorów, kierownictwa wyŝszego szczebla, doradców i audytorów Statystyka i przewidywany harmonogram wprowadzenia akcji do obrotu Kluczowe informacje dotyczące wybranych danych finansowych; kapitalizacji i zadłuŝenia; przyczyn dopuszczenia do obrotu; czynników ryzyka Informacje dotyczące Emitenta Perspektywy finansowe i operacyjne Dyrektorzy, kadra kierownicza i pracownicy Główni akcjonariusze i transakcje z powiązanymi podmiotami Informacje finansowe Szczegóły dotyczące oferty oraz dopuszczenia do obrotu Dodatkowe informacje...58 SECTION TWO: REGISTRATION DOCUMENT...63 I. SELECTED FINANCIAL INFORMATION...63 II. RISKS Systematic risks Unsystematic risks Risk related to securities markets, shares and listing Risk management...83 III. ISSUER INFORMATION History Investments...90 IV. BUSINESS ACTIVITY REVIEW Main activities Competitive advantages Main goals Strategy by business segments Synergies New products Impact of macroeconomic environment Main markets V. GROUP S ORGANIZATIONAL STRUCTURE VI. PROPERTY, PLANT AND EQUIPMENT VII. OPERATING AND FINANCIAL REVIEW Extracts from the consolidated financial statements Operating and financial results

3 3. Important factors, affecting the main activity VIII. CAPITAL RESOURCES Capital resources Cash flow Borrowing requirements and funding structure Limitations on the use of Group s capital resources Sources of financing for implementation of investment commitments IX. RESEARCH AND DEVELOPMENT, PATENTS AND LICENCES X. INFORMATION ABOUT MARKET TRENDS Insurance Car sales Leasing business Asset management and brokerage Real estate XI. FORECASTS XII. ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY BODIES AND EXECUTIVE MANAGEMENT Supervisory Board Management Board Key employees Information on conflicts of interest XIII. REMUNERATION AND OTHER BENEFITS XIV. CONTRACTS ON APPOINTMENT OF MEMBERS OF BODIES XV. EMPLOYEES Number of Employees Shareholdings and Stock Options Agreements for Participation of Employees in the Share Capital of the Issuer XVI. PRINCIPAL SHAREHOLDERS XVII. RELATED PARTY TRANSACTIONS Definition of related party within the meaning of IAS Transactions with the majority shareholder XVIII. FINANCIAL INFORMATION Historical financial information Interim and other financial information Dividend policy Court, Arbitration and Arbitration Proceedings Events after the reporting period XIX. ADDITIONAL INFORMATION Share capital Changes in the share capital Reserves Articles of Associations Management and supervisory board XX. SIGNIFICANT CONTRACTS XXI. THIRD PARTIES AND STATEMENT OF EXPERTS AND DECLARATION ABOUT ANY KIND OF INTEREST SECTION THREE: OFFERED SECURITIES I. KEY INFORMATION Statement on working capital Capitalization and indebtedness Conflict of interest Reasons for admission to trading on a regulated market in the Republic of Poland II. INFORMATION ON THE SECURITIES General information on the securities Rights attached to the shares

4 3. Resolutions, authorizations and approvals Expected date of the listing Restrictions on the transferability Acquisition proposals Tender offers Taxation Legal regime regarding the import and export of capitals III. OFFERING CONDITIONS IV. ADMISSION TO TRADING General information Information on the BSE Listing Information on ongoing IPO Stabilization V. SELLING SECURITIES SHAREHOLDERS VI. EXPENSES INCURRED FROM THE ISSUE VII. DILUTION VIII. ADDITIONAL INFORMATION Regulatory framework of the capital market regulations in Bulgaria and in Poland Securities trading on the BSE Sofia and the WSE and trade settlement Advisors involved in the admission to trading process IX. DOCUMENTS AVAILABLE FOR REVIEW X. INFORMATION FOR INVESTMENTS XI. OTHER INFORMATION Environmental protection Statement by experts and declarations of any interest References to defined terms and legislation Information included by reference Presentation of exchange rates and currencies Definitions and abbreviations XII. DECLARATIONS Declaration of the author of the current document Declaration of the Issuer as per article 81, para. 2 from the Law on Publicly offered securities

5 ALL INVESTORS, INTERESTED IN THE OFFER SHARES, MAY ACQUAINT THEMSELVES WITH THE ORIGINAL OF THIS DOCUMENT, AS WELL AS RECEIVE A HARD COPY AND ADDITIONAL INFORMATION AT THE OFFICES OF: PUBLIC COMPANY EUROHOLD BULGARIA AD Sofia 1592, 43 Christopher Columbus Blvd. Tel.: (+359 2) Fax: (+359 2) Contact person: Galya Georgieva Web address: g_georgieva@eurohold.bg EUROHOLD BULGARIA AD INFORMS ALL POTENTIAL INVESTORS THAT INVESTING IN THE OFFER SHARES IS CONNECTED WITH CERTAIN RISKS. RISK FACTORS, SPECIFIC FOR THE OPERATIONS AND BUSINESS OF THE ISSUER, ARE DESCRIBED IN DETAIL ON PAGE 70, AS WELL AS IN OTHER PARTS OF THIS DOCUMENT. 5

6 SECTION ONE: SUMMARY I. LIABLE PERSONS The Prospectus for Admission to Trading of Securities of EuroHold Bulgaria AD has been prepared by Assen Minchev managing director, and by Galya Georgieva financial director of EuroHold Bulgaria AD. Assen Minchev and Galya Georgieva, acting as persons in charge of the preparation of the Prospectus, declare that to the best of their knowledge and upon undertaking all reasonable efforts the information contained herein is accurate and complete and corresponds to the facts and does not omit anything which may reasonably affect its meaning. In general, the Issuer EuroHold Bulgaria AD with headquarters in Sofia, is responsible for the contents of the information as an entity which makes the Public Offering of Securities. The members of the Management Mr. Board Kiril Boshov, Mr. Assen Minchev, Mr. Assen Assenov, Mrs. Zlatolina Mukova and Expat Capital AD shall be jointly and severally liable in case of inaccurate, misleading or incomplete data in the Prospectus. Mrs. Galya Georgieva (financial director), acting as a person preparing the annual financial statements of the Issuer for the years 2008 and 2009 and the interim individual financial statement for the period ending on 30 June 2010, and Todor Popov (accountant-in-chief), acting as a person preparing the interim consolidated financial statement for the period ending in 30 June 2010, the annual financial statement as of December 31, 2010 and the interim financial statement for the period ending in June 30, 2011, both acting as persons of the Issuer as defined in art. 34 (2) of the Accountancy Act, shall be jointly and severally liable in case of inaccurate, misleading or incomplete data in the financial statements of the Issuer where information derived from the financial statements is incorporated in this Prospectus. The registered auditor Mrs. Stoyanka Apostolova, manager of BDO Bulgaria OOD, in her capacity as registered auditor, certified the annual financial statements of EuroHold Bulgaria AD for financial years 2008, 2009 and 2010 is jointly liable along with the above-mentioned persons for any damages resulting from incorrect, misleading or incomplete data in the audited financial statements of the Issuer, included in this Prospectus. According to art. 81 (5) of the Law on the Public Offering of Securities the persons responsible for the contents of the Prospectus (including the registered auditor) declare that, to the best of their knowledge and upon undertaking reasonable efforts to verify the information supplied by each of them (the members of the management board shall bear responsibility in respect of all information in the Prospectus, the person under art. 34 (2) of the Accountancy Act shall be held responsible for the information included in the financial statements as incorporated in the Prospectus, and the auditor shall be responsible for the information included in the audited financial statements as incorporated in the Prospectus), the information is accurate and complete and corresponds to the facts and does not omit anything which may be expected to affect its meaning. The declarations represent a separate schedule to the Prospectus and shall be interpreted as an integral part thereof. II. AUDITORS The certified auditor of EuroHold Bulgaria AD for the years 2008, 2009 and 2010 has been BDO Bulgaria Ltd a specialized audit company, registered with the Institute of the Registered Auditors in Bulgaria under reg. No 16, residing at 51B Bulgaria Blvd., floor 4, Triaditsa District, Sofia 1404, represented by the managing partner Stoyanka Apostolova, diploma No 0046/1991. The certified auditor is a member of the Institute of the Registered Auditors in Bulgaria. During the aforesaid period the certified auditor has neither resigned, nor has been dismissed or re-elected. 6

7 III. SUMMARY OF THE PROSPECTUS IN ENGLISH This summary must be read as an introduction to this Prospectus and any decision to invest in the shares should be based on a consideration of the Prospectus as a whole. Where a claim relating to the information contained in this Prospectus is brought to court in a member state of the EEA, the plaintiff may, under the national legislation of the member state where the claim is brought, be required to bear the costs of translating the Prospectus before the legal proceedings are initiated. Civil liability will attach to EuroHold Bulgaria in connection with the contents of this summary only if this summary is misleading, inaccurate or inconsistent when read together with the other parts of this Prospectus. The following information and data has been derived from the information appearing elsewhere in this Prospectus. The summary does not contain all information which potential investors might consider important. Potential investors are encouraged to read the entire Prospectus, including in particular, the Risk Factors, detailed Financial Information and other information, before making any investment decision. 1. Identity of directors, senior management, advisers and auditors EuroHold Bulgaria AD has a two-tier management system, as follows: a Management Board which consists of four natural persons and one legal entity, and a Supervisory Board of three natural persons. The Management Board of EuroHold Bulgaria AD comprises five members: Chairman Mr. Kiril Ivanov Boshov; Executive director (CEO) Mr. Assen Minchev Minchev; and members Mrs. Zlatolina Ivanova Mukova; Mr. Assen Emanouilov Assenov; and Expat Capital AD, through its two representatives for Mr. Nikola Simeonov Yanev and Lyubomir Christov Stoev. The Supervisory Board comprises four members: Chairman Mr. Assen Milkov Christov; Vice-chairman Mr. Dimitar Stoianov Dimitrov; and independent members Ivan Georgiev Munkov Nikolay Vassilev Vassilev Key managers of the Issuer are the Chief Financial Officer Galya Alexandrova Georgieva and the executive directors of the respective sub-holding divisions, as follows: For the insurance sub-holding - EuroIns Insurance Group AD these are Kiril Ivanov Boshov and Zlatolina Ivanova Mukova (see XII.2. Administrative, management and supervisory bodies and executive management in Section Two). For the automotive sub-holding Avto Union AD this is Assen Emanouilov Assenov who heads the leasing sub-holding as well EuroLease Group (with trade name BG AutoLease Group B.V.) (see XII.2. Administrative, management and supervisory bodies and executive management in Section Two) For Euro Finance AD the key managers are Kiril Ivanov Boshov (see XII.2. Administrative, management and supervisory bodies and executive management in Section Two) and Momchil Petkov Petkov. Further information about the directors and the senior management can be found in XII.2. Administrative, management and supervisory bodies and executive management in Section Two. The Polish law firm Łuczyński i Wspólnicy Sp.k was authorized by EuroHold Bulgaria to perform certain legal matters with respect to Polish law related to the elaboration and passportization of the Prospectus, the registration of the EuroHold Bulgaria shares in the Polish National Depository for Securities and their admission to trading on a regulated market in the Republic of Poland, i.e. the Main market operated by the Warsaw Stock Exchange. The certified auditor of EuroHold Bulgaria AD for the years 2008, 2009 and 2010 has been BDO Bulgaria Ltd a specialized audit company, registered with the Institute of the Registered Auditors in 7

8 Bulgaria under reg. No 16, residing at 51B Bulgaria Blvd., floor 4, Triaditsa District, Sofia 1404, represented by the managing partner Stoyanka Apostolova, diploma No 0046/1991. The certified auditor is a member of the Institute of the Registered Auditors in Bulgaria. During the aforesaid period the certified auditor has neither resigned, nor has been dismissed or re-elected. 2. Offer statistics and expected timetable TYPE AND CLASS OF THE SHARES Shares ordinary, registered, dematerialized, freely transferable, with 1 (one) voting right in the General Meeting of the shareholders of the Company. Subject of the present admission to trading on a regulated market are ordinary, registered, dematerialized, freely transferred, voting shares, presenting, as of the current moment, all the existing shares of the registered capital of EuroHold Bulgaria AD. All the shares are from one and the same class and give equal rights to their owners. ISIN FORM OF THE SECURITIES CURRENCY OF THE ISSUE BG Shares of the present offering are registered and dematerialized. The main depository institution regarding the shares is Central Depository AD, with address: 1303 Sofia, 10 Tri Ushi Str., floor 4. The Central Depository AD organizes and maintains dematerialized shares records in the Republic of Bulgaria, as well as the books of the shareholders of the issuers of dematerialized shares, such as EuroHold Bulgaria AD. Depository institution in Poland shall be The National Depository for Securities (Krajowy Depozyt Papierów Wartościowych S.A.), having its address at Warsaw, 4 KsiąŜęca Str. All the shares of EuroHold Bulgaria AD are denominated in Bulgarian leva (BGN). After the registration of the shares to trading on the WSE, they will be denominated in Polish zlotys (PLN). The Issuer Eurohold Bulgaria AD expects the admission of its shares to trading on the organized by the Warsaw Stock Exchange regulated market on the territory of the Republic of Poland to happen till the end of November, Key information concerning selected financial data; capitalisation and indebtedness; reasons for the admission to trading; risk factors In the following tables key indicators are presented from the audited annual consolidated financial statements of EuroHold Bulgaria AD for the period 2008 to 2010 along with selected information from the interim consolidated financial statements for the six months ending on 30 June of 2010 and The consolidated financial statements are prepared in accordance with the applicable international financial reporting standards. Extracts from the consolidated financial statements of EuroHold Bulgaria AD: INDICATOR Reporting period (BGN '000) * 2009* Growth 2010 Growth Growth Revenue from operating activities Revenue from discontinued operations 412, , , % 416, % 194, , % - 22,466 19, % 10, % 12, % Total revenue 412, , , % 426, % 206, , % 8

9 Profit/(Loss) for the period 4,124 4, % % -5, % Net result attributable to the Shareholders 8,451 8,451 1, % 2, % -4, % Earnings per share (BGN) % % % *** Total assets 705, , , % 603, % 658, , % Net assets 188, , , % 207, % 226, , % Share capital ** 62,239 62,239 59, % 59, % 62, , % Number of shares ('000 sh.) 62,498 62,498 62, % 62, % 62, , % * The figures are reclassified for comparison purposes see the important note on page 63. ** The share capital is deducted with the amount of shares owned by subsidiaries *** The change in the extracted figures from the statement of financial position ended on 30 June 2011 is based on the figures from the financial statements for the period ended on December 31, 2010 Source: EuroHold Bulgaria AD Further financial information can be found in I. Selected financial information in Section Two. The table below presents data on capitalization and indebtedness of the Group based on audited consolidated financial statements as of December 31, 2008, December 31, 2009 and December 31, 2010 and unaudited interim consolidated financial statements as of June 30, 2011: Capitalization and indebtedness (BGN 000) 1. Equity and non-controlling interest 188, , , ,784 Equity 175, , , ,451 Non-controlling interest 12,742 55,703 52,270 52, Non-current liabilities 332, , , ,979 Borrowings 227, , , ,492 Bonds 77,601 63,267 33,580 24,813 Deferred tax liabilities 14,088 13,363 13,211 13,210 Non-current liabilities 13,604 12,561 43,219 29, Current liabilities 184, , , ,087 Reserves for insurance contracts 110, , , ,914 Current liabilities 52,098 28,971 18,861 20,985 Trade and other receivables 17,093 26,673 14,635 14,361 Payables to reinsurers 4,362 4,093 2,133 2, Total liabilities, (2+3) 517, , , , EQUITY AND LIABILITIES, (1+4) 705, , , , Equity / Total assets, (1/5) Equity / Total liabilities, (1/4) Total liabilities / Total assets, (4/5) Current liabilities / Total liabilities, (3/4) Non-current liabilities / Equity, (2/1) Source: EuroHold Bulgaria AD Over the reviewed period the financial leverage ratio remains at relatively stable levels. The Group borrows funds based on its accumulated earnings and growth of its equity. The achieved stability of financial independence and leverage ratios facilitate the access to financial resources. The capital structure of EuroHold Bulgaria is stable. The amount of equity is 39% of the total assets of the Group which provides the required stability of the company. 9

10 Liabilities (BGN 000) Current liabilities 163,087 Non-current liabilities 208,979 Total liabilities 372,066 Liabilities guaranteed - Unguaranteed liabilities 372,066 Total liabilities 372,066 Secured liabilities 144,010 Liabilities not secured 228,056 Total liabilities 372,066 Direct liabilities 372,066 Indirect liabilities - Total liabilities 372,066 Contingent liabilities - Source: EuroHold Bulgaria AD The secured obligations of the Group represent current and non-current bank loans for working capital and are secured with pledges of land and buildings of the Group. The Issuer is not a guarantee of its other obligations or liabilities to third parties. Reasons for the admission to trading Some of the main reasons why the Group wants admission of its shares to trading on a regulated market in Poland are: Risks Access to a larger and more developed capital market; Access to more and larger institutional investors, more individual ones, as well as attracting internationally recognized investors with a mandate for investing in companies admitted to trading on a regulated market in Poland; Increasing the liquidity and the free-float of the shares of Eurohold Bulgaria AD; Ensuring long-term liquidity for all shareholders of Eurohold Bulgaria AD; Opportunity for realization of larger trading volumes and adequate pricing of the shares of the Group. Investing in the Shares covered by the Prospectus carries risks which could have a significant adverse impact on the Issuer s outlook, results and financial situation, or lead to a decrease in the value of the Shares. Before deciding to invest in the Shares, potential investors should carefully analyze and consider the risk factors described in II. Risks in Section Two. a. Systematic risks Influence of the global economic and financial crisis Risks related to the general macroeconomic, political and social situation, and government policy Political risk Sovereign credit risk Inflation risk Currency risk Interest rate risk Emerging and developing markets Risks associated with Bulgarian capital markets b. Unsystematic risks 10

11 Risk relating to the business operations of the Issuer Strategic development risks Risks related to the management of the Company Risks arising from inability to attract and retain key employees Risk related to changes in the regulatory environment Risks related to the integration of future acquisitions Financial risk Currency risk Liquidity Risk Risk related to the possible transactions between companies in the group with terms different from the market terms as well as related to the dependence on the group activity EuroIns Insurance Group AD (EIG) Risk related to the lack of possibility to raise funds Insurance risk and risk related to incorrect product pricing Risk of underestimation of technical reserves Foreign exchange risk Risk of insurance contracts being terminated by the insured Risk of insurance fraud Risk of reinsurance being unavailable, insufficient reinsurance policy and reinsurer s default Credit risk EuroLease Group (ELG) Credit risk Liquidity risk Market risk (interest rate risk, currency risk, etc.) Risk of insurance provider not paying for damaged or stolen leased assets Risk of lack of external financing at reasonable rates Concentration risk Avto Union (AU) Risks of non-performance of delivery by suppliers or other disruptions Force Majeure circumstances fires, earthquakes, floods Dependence on prevailing norms and regulations Real Estate Market development Access to sources of financing and cost of financing Regulatory risks, related to the environment Natural disasters Euro-Finance (EF) 11

12 Market and credit risk Settlement and clearing risk Regulatory Risk Communication and data transmission risk c. Risk related to securities markets, shares and listing Marketability and share price fluctuations risks Risks, arising from future sales of substantial amount of EuroHold s shares Regulatory obligations risks Tax treatment risks Risks related to inability to list Risk related to the future market of the shares and its liquidity Risk of shares trading suspension Dual listing risks Admission delay or risks of non-occurrence of admission to trading Foreign exchange rate fluctuations risk Dilution risks Returns of shares risk 4. Information concerning the issuer a. History and development of the issuer The trade name of the Issuer is EUROHOLD BULGARIA AD. Its trade name is defined in Art. 2, paragraph 1 in its Articles of Association. According to Art. 2, paragraph 3 of the Articles of Association, the trade name of the company may be spelled in English language, as follows: EUROHOLD BULGARIA S.A.. EuroHold Bulgaria AD is a holding Company, registered in the Republic of Bulgaria and operates in compliance with Bulgarian legislation. EuroHold Bulgaria AD is a public company as defined in the Public Offering of Securities Act. The initial registration of the Company is with the Commercial Registry at Sofia City Court, under file 14436/ 2006, under , volume 1509, page 116. On EuroHold Bulgaria was registered with the Commercial Registry at the Registry Agency in compliance with the requirements of the Commercial Registry Act. The unique identification code (UIC) of the Company is EuroHold Bulgaria AD is set up for an indefinite term, namely the Company is not limited by a certain term or other preclusive condition. EuroHold Bulgaria AD is a public limited company formed by the merger between EuroHold AD, registered under file 13770/ 1996 of Sofia City Court and Starcom Holding AD, registered under file 6333/ 1995 of Sofia City Court. By means of the merger, the newly established holding company EuroHold Bulgaria AD strengthened its positions as one of the biggest Groups in Bulgaria with important potential for development, significant equity and financial resources. EuroHold Bulgaria AD was established with a capital in the amount of BGN 50,002,586, divided into 50,002,586 regular, registered, non-privileged, dematerialized voting shares, with dividend rights and liquidation quota with nominal value of BGN 1 each one. From the company s establishment up to this moment several capital increases by cash contributions have been performed, whereas as of the date of this Prospectus the capital of the company amounts to BGN 108,643,712, divided into 108,643,712 regular, registered, non-privileged, dematerialized voting shares, with divided rights and liquidation quota with nominal value of BGN 1 each one. Detailed description of the changes in the share capital can be found in Chapter XIX.2. Changes in the share capital, Section

13 When EuroHold Bulgaria AD was established, it had many subsidiaries in its structure, which operated in the field of insurance, leasing, real estate and industry. Aiming to optimizing of costs and achieving higher synergies between all subsidiaries, EuroHold split functionally into separate legal entities all its subsidiaries. On EuroHold Bulgaria AD founded EuroIns Insurance Group EAD aiming at consolidation of its insurance operations. On a session of the General Meeting of the Shareholders of EuroHold Bulgaria AD was held and a decision was taken to do a contribution in-kind of the shares, held by EuroHold Bulgaria AD in its subsidiaries EuroIns AD, EuroIns Romania Asigurare Reasigurare SA and Health assurance company St. Nicolay Chudotvorets EAD (currently EuroIns Health Assurance EAD). The described in-kind contribution was performed after the Bulgarian Financial Supervision Commission and the Romanian Commission on Supervision of Insurance granted their approvals. Subsequently EuroIns Insurance Group EAD acquired Macosped Osiguruvanje AD, Skopje (currently EuroIns Osiguruvanje AD, Skopje) following the approval of the Ministry of Finance of the Republic of Macedonia on The formation of the automotive sub-holding of EuroHold Bulgaria AD EuroHold Automotive Group EAD started at the end of The company was founded in 2007 and its initial share capital was formed by contribution in-kind of the shares from the capital of Cargoexpress EOOD (currently Bulvaria Varna EOOD) Opel and Chevrolet dealer for the city of Varna. The consolidation of the automotive operations of EuroHold Bulgaria AD was made by means of contribution in kind of the Issuer s shares in its subsidiaries Scandinavia Motors EAD official importer of SAAB for Bulgaria, Nissan Sofia AD the biggest dealer of Renault Nissan Bulgaria and EuroLease Rent-a-Car EOOD exclusive franchise partner of Budget Rent-a-car for Bulgaria. The General Meeting of the Shareholders of EuroHold Bulgaria AD approved the above contribution in-kind at its session held on and on the automotive sub-holding was founded. Meanwhile in April 2009 EuroHold Automotive Group EAD acquired control over Avto Union AD s group, which comprised Auto Italia EAD official importer of Fiat and Lancia for Bulgaria, Bulvaria Holding EAD dealer of Opel and Chevrolet in Sofia, Gransport Auto EOOD official importer of Maserati for Bulgaria, Milano Motors EOOD official importer of Alfa Romeo and scooters Piaggio, Vespa and Guillera, Star Motors EOOD official representative of Mazda for Bulgaria and Bulvaria Rent-a-Car EOOD official franchiser of Avis Europe for Bulgaria. At the end of 2010 EuroHold Automotive Group EAD (currently Avto Union Group EAD) transferred its shareholdings in Scandinavia Motors EAD, Nissan Sofia AD and EuroLease Rent-a-Car EOOD to Avto Union AD. The latter has acquired Espace Auto EOOD the biggest Renault dealer which completed the process of the formation of automotive sub-holding of EuroHold Bulgaria AD. As of the date of this Prospectus Bulvaria-Rent-a-Car EOOD was merged into EuroLease Rent-a-Car EOOD, which became its universal assignee. This transformation will decrease Avto Union AD s expenses related to the rent-a-car business with over BGN a year. At the end of 2008 EuroHold Bulgaria AD acquired 100 % of the share capital of the Dutch company BG AutoLease Holding B.V. (with former trade name Wivotech B.V.), which on in turn had acquired another Dutch company BG AutoLease Group B.V. (with previous trade name Doesign B.V.). EuroHold Bulgaria AD completed a contribution in-kind in the share capital of its subsidiary company BG AutoLease Holding B.V. of its controlling stakes in EuroLease Auto EAD, Bulgaria, EuroLease Auto IFN SA, Romania, EuroLease Auto EAD, Macedonia. BG AutoLease Holding B.V. contributed in-kind the said shareholdings in the capital of BG AutoLease Group B.V. the leasing sub-holding in the structure of EuroHold Bulgaria AD. In 2007 EuroHold Bulgaria AD defined its industrial companies as non-strategic, therefore a decision for their sale was taken and the sale took place in August As of the date of this Prospectus EuroHold Bulgaria AD owns majority shareholding in the investment intermediary Euro-Finance AD, which has been part of the Group since In the real estate area the Group has two operating companies EuroHold Imoti EOOD and Avto Union Properties EOOD. Issuer s statutory business activity and goals The statutory activity of EuroHold Bulgaria is acquisition, management, evaluation and sale of shares of Bulgarian and foreign companies; acquisition, management and sale of bonds; acquisition, evaluation and sale of patents, concession of licenses for patent use to companies where the company has shares; financing of companies where the company has shares. The Company is entitled to participate in Bulgarian and foreign companies, regardless of their business activity, complying with the conditions set by the law and the Articles of Association of the Company. The Company is not allowed to participate in a company which is not a legal entity; to acquire licenses, which are not intended for use in its subsidiaries; to acquire real estate which is not intended for its own use. The acquisition of shares in real estate companies is allowed. 13

14 Headquarters and address of management The headquarters and the address of management of the Issuer is Republic of Bulgaria AD, Sofia, 1592, Iskar district, 43 Christopher Columbus Blvd. The head office of the Company is located at the same address. This is also the official correspondence address of the Company. The Issuer may be contacted as follows: Business address: 43 Christopher Columbus Blvd Telephone 02/ ; 02/ Fax 02/ Web site b. Business overview EuroHold Bulgaria AD is registered in the Republic of Bulgaria. Its main activities include: acquisition, management, evaluation and sell of participations in Bulgarian and foreign companies; financing of companies, where the company participates; participation in Bulgarian and foreign companies. EuroHold Bulgaria AD s revenues are formed mainly by its financial activity, related to acquisition and management of participations and financing of related companies. As of EuroHold Bulgaria AD has direct participation in five subsidiary and two associated companies. The companies from EuroHold Bulgaria AD s portfolio operate on the following markets: insurance and health insurance market, leasing market, financial, automotive, real estate. The overall business is focused on extracting maximum synergies from the largely intertwined segments of Cars sales Leasing Insurance. During the period covered by historical information Group s companies offer the following services: insurance services; health insurance services; financial and operating leasing; financial intermediary; new cars sale; used cars sale; servicing; spare parts sale; rent-a-car; management of investment real estate. During 2010 the Group possessed stakes in other companies as well, offering services, deemed as nonstrategic. Due to this reason in September 2010 these companies were sold. The sold companies offered the following services: introducing GPS applications for control, security and logistics of car fleets; management of tourist real estate; production of disposable medical articles; 14

15 production of instrumental equipment for plastic articles; laboratory geochemist examinations and researches in geology, chemistry and ecology. Current business structure include three main sub-holdings EuroIns Insurance Group AD, Avto Union AD and EuroLease Group, specialized respectively in insurance, car sales and leasing, the investment intermediary Euro-Finance AD and a real estate company EuroHold Imoti EOOD. EuroIns Insurance Group EuroIns Insurance Group AD (EIG) is set up at the end of 2007 as 100% owned subsidiary of EuroHold Bulgaria AD, where the insurance business of the holding structure is concentrated. As of the date of the Prospectus Eurohold Bulgaria AD owns 80.82% of the EIG s capital. During the last few years the Group expands its activity by acquisition of insurance companies in Romania, Macedonia, Serbia and Turkey. The insurance companies in the Group have more than 300 regional offices and more than 1 million clients in the region. The past 2010 was very important period for the development and establishment of EIG as regional leader in general insurance. The efforts and investments made during the last few years ensure stabilization of market positions of the companies in Bulgaria, Romania and Macedonia. As of the end of 2010, EIG possesses majority shareholding in the companies in Bulgaria, Macedonia, Turkey and Romania and minority share in Serbian company. EIG s share in the capital of the respective company is % in EuroIns AD, % in EuroIns Insurance Skopje AD, % in EuroIns Romania Asigurare Reasigurare S.A., 100% in EuroIns Health Assurance EAD, % in Inter Sigorta AS, Turkey and 8.1 % in Takovo Osiguranje AD, Serbia. The main goal of EIG is achieving 10% market share in medium term for the Balkan region in general insurance sector. The subject of activity of EIG s subsidiaries is general insurance and health assurance. The offered product include Multiple Third Parties Liability, Auto Casco, Property Insurance, Cargo Insurance, General Third Parties Liability Insurance, Crops and Livestock Insurance, Vessels Insurance, Aircraft Insurance, Financial Risks Insurance, Travel Assistance Insurance, Accident and Sickness Insurance. The main competitors of EIG are international insurance groups such as Allianz, Vienna Insurance Group, Generali, Uniqa, etc., which operate on multiple markets, where EIG s subsidiaries operate as well. EuroLease Group - The leasing sub-holding BG AutoLease Holding B.V. and its subsidiary BG AutoLease Group B.V. are holding companies incorporating Eurohold s investment in the leasing sector in the Balkans. The companies were established in the Netherlands and acquired by Eurohold in 2008 and later the shares of individual companies in Bulgaria, Romania and Macedonia were contributed into the capital of the Eurolease Group. The companies are registered in the Netherlands in order to ensure easier access to financial resources from the international financial markets. The leasing sub-holding BG AutoLease Holding B.V. and its subsidiary BG AutoLease Group B.V. are united under the trade name Eurolease Group (ELG). The structure of ELG includes Eurolease Auto Bulgaria (100%), Eurolease Auto Romania (74.93%) and Eurolease Auto Macedonia (100%). Eurolease Auto Bulgaria on the other hand owns 51% of Euromobil Leasing and 100% of Eurolease Auto Finance. The companies part of the group of ELG offer financial leasing of new and used vehicles, of new passenger cars and light commercial vehicles, trucks and buses. Competitors of the subsidiaries of ELG are all leasing companies in the region, especially the ones that are specialized in the leasing of new passenger cars Interlease, BM Leasing, Raiffeisen Leasing, UniCredit Leasing, EFG, as well as importers that offer captive leasing. Their competitive strengths are related to their belonging to a financial group and the use of cheap financial resources. On the other hand, the participation of a leasing company in a bank structure restricts the free lending due to the need of compliance with the relevant bank regulations about lending to related parties. The full name of the company is BG AutoLease Holding B.V. It was established in the Netherlands as part of the long term strategy of EuroHold to segregate its core business lines in separate stand-alone sub-holdings. EuroLease Group has a key role in EuroHold s overall strategy it connects car dealers and insurers to pack a product with common added value. 15

16 The shares of the individual leasing companies in Bulgaria, Romania and Macedonia were contributed in the capital of EuroLease Group in Upon completion of integration of all leasing subsidiaries the newly created holding company "EuroLease Group" turned into one of the largest leasing groups in the region with significant potential for future development, equity and significant financial resources. Avto Union AD - Avto Union AD is a holding which aggregates EuroHold Bulgaria s investments in the automobile business. Avto Union sells 11 car brands in Bulgaria. Avto Union also has franchise contracts for the brands AVIS and Budget. Avto Union (AU) is the undisputed market leader in sales of new cars in Bulgaria. AU manages the largest portfolio of car brands in Bulgaria. The unique multi-brand strategy is supported by constant improvements of the facilities, quality of the products and services, education of the employees and new packages of products in combination with leasing and insurance. Main business lines of AU are: Sale of new cars, motorcycles and scooters; Sale of original spare parts, lubricants and accessories; Rent-a-car (long and short-term); Car buy-backs; Avto Union, through its subsidiaries, is: An exclusive importer for Bulgaria of the following brands: Mazda, FIAT, Lancia, Alfa Romeo, Maserati, SAAB, and Vespa, Piaggio and Gilera scooters; An authorized dealer of Opel, Nissan, Renault, Dacia and Chevrolet; An exclusive franchisee of Budget Rent-a-Car and Avis Rent-a-Car for Bulgaria. For every model that is sold by Avto Union customers, can test-drive the vehicle. Assistance is also provided for registration of every newly vehicle bought. Customers can use the following additional services: 5 years of Extended warranty extends the warranty by 1 or 2 years according to customers preferences; covers mileage of up to km; Substitute vehicle in case of car accident or damage; Internal and external car wash, etc.; Warranty and after warranty service; Vehicle buyback; Avto Union s main competitors have different business model which provides only part of the services that Avto Union has. Biggest competitors with similar business models appear to be: Toyota Balkans AD (Toyota and Lexus), Moto-Pfohe (Ford, Volvo Jaguar and Land Rover), and Porsche Bulgaria (Volkswagen and Audi). The only company that comes close to Avto Union s business model and sells more than one not related to each other car brands is Balkan Star AD. Balkan Star sells: Mercedes, Mitsubishi, Chrysler, Dodge, Jeep and at the same time is a dealer for Renault and Dacia. However Balkan Star has a smaller market share than Avto Union around 5%. Euro-Finance AD - Euro-Finance is part of the strategic portfolio of Eurohold Bulgaria since Euro-Finance is one of the first licensed investment intermediaries in Republic of Bulgaria with almost 18 years of history. The company is the only local member of the Deutsche Börse Group and through its network and longstanding relations with international broker-dealers offers a wide range of investment products equity trading, fixed income trading, derivatives trading, foreign exchange trading, contracts for differences (CFDs), REPOs, domestic and international SWIFT payments. Euro-Finance is a leading nonbanking financial institution in Bulgaria which aims to provide quality investment products and services with an individual approach to each customer. Euro-Finance provides investment and financial services to individuals, corporate and institutional clients. Among the clients of 16

17 Euro-Finance are leading insurance companies in the country, pension funds, foreign investment funds, etc. Euro-Finance is a member of the Bulgarian Stock Exchange Sofia AD since its establishment and is also the first and only Bulgarian investment intermediary that is a full member of Frankfurt Stock Exchange, as well as the only nonbank financial intermediary that is participant in the international payment system S.W.I.F.T. Real estate The real estate business of Eurohold Group is presented by three companies Eurohold Imoti EOOD with its subsidiary Eurohold Imoti V.Tarnovo EOOD and Avto Union Properties EOOD. EuroHold Imoti EOOD is a company specialized in management of investment real estate. The company owns the showroom and body shop used by Nissan Sofia. In addition, it owns a commercial plot of land, located along Europe Blvd., in Sofia designated for a new showroom and a repair shop of Nissan Sofia AD, which sells Nissans, Renaults and Dacias. EuroHold Imoti EOOD administers EuroHold Business Centre, where the headquarters of EuroHold Bulgaria AD and its subsidiaries, including several automotive showrooms. Avto Union Properties EOOD owns real estate in Sofia, Gorni Lozen, Plovdiv, Bourgas etc. and down the road aims to build showrooms and repair-shops for Avto Union AD. Several land plots were sold in 2010 as part of the plan to divest of several non-core businesses. EuroHold invested the proceeds of these divestitures into its three core business lines. 5. Operating and financial review and prospects a. Research and development, patents and licences, etc. EuroHold Bulgaria has not made expenses on research and development activity. Such an activity is not conducted by the companies in the Group. Limited development activity was conducted solely by the company Etropal AD prior to its sale in 2010 but those expenses were not material. EuroHold Group does not own patents. A large part of its business activities are regulated by licenses fully described in IV.8. Main markets in Section Two. b. Trends In 2010 and the current 2011 the main efforts of EuroHold Bulgaria are concentrated towards the business of the main strategic lines: Car sales Leasing Insurance Financial intermediary Real estate After the completion of the sale of the non-strategic assets in September 2010, EuroHold Bulgaria is fully focused on its main business lines. Insurance Like most of the sectors in the Bulgarian economy, the insurance sector dropped by 5% during In 2011 a smaller decrease is observed. There is a positive tendency in the investment results of the insurers due to the stabilization of the capital markets. During the first half of 2011 EuroIns Insurance Group realized consolidated insurance premiums in the amount of BGN 95.4 million compared to BGN million for the same period of The main reason for the drop in revenues is the decrease in the written premiums for MTPL insurance in Romania by about 40% which is due to the decrease in the market prices in Romania. During the first half of the year there was a significant increase in the written premiums in non-motor related insurance compared 17

18 to the previous year Property, Accident and Liability increased by 41%, 18% and 77%, respectively. The written premiums for CASCO and CARGO for the period decreased by 34% and 37% mainly due to the stagnation in the economy as a whole. During the first half of 2011 EuroIns reports gross written premiums of BGN 36 million or 4.9% growth compared to the same period in 2010 when they were BGN 34.4 million. The achieved result is mainly due to the increased gross premiums for the MTPL insurance by BGN 4.7 million or 38.8% compared to the previous year while preserving the company policy for maintaining the insurance premiums at reasonable level. During the period the average risk insurance premium increased from BGN 131 to BGN 175 coupled with a considerable decrease in the acquisition expenses. During the first six months of 2011 EuroIns reports net income of BGN 1.5 million compared to a loss of BGN million for the same period in For the first half of the year EuroIns Romania reports gross written premiums of BGN 53.1 million or 39% drop compared to the same period in For the last reporting period the net loss is BGN 0.8 million, compared to a loss of BGN 0.9 million in For the first six months of 2011 EuroIns Macedonia reports gross written premiums of BGN 6.8 million or a 7% growth compared to the same period in The realized net loss for the first half of 2011 is BGN 0.4 million, compared to a loss of BGN 0.2 million for the same period of The realized consolidated loss of EuroIns Insurance Group for the first six months of 2011 is in the amount of BGN 0.39 million, compared to a loss of BGN 1.2 million for the same period of The main tendencies in the development of the insurance market during the next 1-3 years are: The price of the MTPL insurance will continue to increase, which will lead to an improvement in the technical result; Car insurance will remain a main driver of the market; New insurance products will be introduced on the market; The market will begin growing together with the economic revival, which is expected to begin in According to the described tendencies EuroIns Insurance Group expects an overall growth in the insurance premiums in the Group together with the market growth and a gradual decrease in the exposure to car related products. Car sales During the period the automotive market in Bulgaria grew over four-fold. In 2009 due to the impact of the global economic crisis the car market dropped by over 50%. This tendency remained in 2010, when the drop was in excess of another over 25% compared to As of the end of 2010 and the first half of 2011 the new car market grew moderately, which is a sign of a gradual revival. During the first six months of 2011 the car market in Bulgaria grew by about 12.5% compared to the same period in 2010 and Avto Union s maintained its market share. For H Avto Union had revenues in the amount of BGN 47.3 million, which is an evidence for a stable revival of the automotive sector. The net loss of Avto Union as of June 30, 2011 decreased by about 40%, compared to the reported loss over the same period last year. The improved result is achieved due to the larger margin and cost optimizations. During 2011, the tendency for a growth of the market will be sustained as a whole except for the first half of 2012 when a slight drop of about 5% is expected as a result of the expected regulatory changes in the VAT Law regarding the right for a deduction for vehicles and limiting the export of vehicles (reexport). For the second six months of 2012 the expectations are for a stable growth of about 8-10%, tracing the similar annual growth over the next 3 years. Avto Union forecasts its market share to increase as a result of: Excellent opportunities for developing the existing client base of individual and corporate clients; Increasing the number of corporate clients; The expected regulatory changes limiting re-exports. 18

19 The expectations for the future development of the car market in Bulgaria are based on the projections for a recovery of the local economy as the first signs for the improvement are already present. This will be followed by swift recovery in all business sectors in the next years, which will inevitably lead to more fleet deals and recovery of the sales to corporate clients. Additionally, the recovery of the economic conditions and the improvement of the business environment in the Bulgaria will result in a higher employment rate and a higher disposable income. Also, financing will become readily available, which will further stimulate sales. Another important factor that will contribute to the growth of the new car market in Bulgaria is the currently very old and inefficient national car park. More than 85% of the cars are over 10 years old and more than 20% are above 20 years old. Thus, there is huge room for renewal of the car park. Leasing business Due to the global financial crisis most of the leasing companies in Bulgaria witnessed a drop in their volume of business and receivables. This was a result of the limited lending from the banks. The leasing business is financed mainly by bank loans and bonds. The stagnation in the credit markets in 2009 and 2010 made it harder to raise new funding for companies that are not connected to a bank. However, the leasing sub-holding succeeded in this difficult situation not only to maintain, but to significantly increase its market share after signing a loan agreement with the EBRD and several local banks across all three markets where it operates. Based on data provided by BNB, in 2010 EuroLease Auto was among the three largest leasing companies for cars and had 10% market share in the newly generated leasing business. The financing that EuroLease Auto managed to secure in 2010 continued in 2011 as well. Due to the developed dealer network and the active receivables management the company maintained delinquency rates and limited repossessions of cars compared to the rest of the market players. During the first half of the year, EuroLease Group contributed 1,550,000 of additional capital to EuroLease Auto Bulgaria, while also fully paying-in previously announced capital increases. EuroLease Auto will use the new funds to further grow its portfolio, while also complying with applicable financial ratios mandated by lenders. At the end of H EuroLease Auto Bulgaria kept the size of its portfolio static versus the end of brought a moderate revival of the local credit markets. Most of the leasing companies related to banks started to operate actively and offered attractive terms. Some of the banks started lending to external independent leasing companies again. There are signs of revival of the leasing market, resulting in stable monthly volumes of new deals especially in Bulgaria, a decrease in the share of bad leasing contracts and accelerated sale of repossessed assets. Most of the leasing companies owned by banks operating on the three markets started active marketing campaigns, which included significant reductions in interest rates and down-payments. Due to the relatively more expensive cost of funding for ELG compared to the bank-owned leasing companies, ELG and its subsidiaries could not participate actively in the price war; however they are focusing actively their efforts on improving the quality of services provided to clients. Since the beginning of 2011 EuroLease Auto reports a 7.43% market share in the newly generated business of cars leasing, ranking seventh in this segment. However the leasing portfolio decreased slightly down to BGN 95.7 million. Revival of leasing financing and demand for it is expected to materialize over the coming years. EuroLease Auto Romania has secured financing for its 2011 portfolio and is gradually expanding its operations among car dealers. During the first half of the year EuroLease Auto Romania realized a decrease in the net leasing receivables by 3% compared to the previous period and a small drop in the result of the new business that the company started to generate. EuroLease Group contributed 160,000 in order to increase the company s capital and support its growth. As of the end of the first six months of 2011 EuroLease Auto Macedonia reported a 46% growth in its leasing portfolio compared to the end of The company is financing new contracts using the funds from the newly generated credit lines. It is expected that continuing the current tendency the company will realize positive net income by the end of The positioning of the leasing sub-holding of EuroHold as a company with sufficient capital and high market share is extremely important at the beginning of the upcoming economic revival. The improved leasing financing will affect positively car sales as well as the insurance business. 19

20 Asset management and brokerage Over the last several years capital markets were directly influenced by the financial crisis from 2008 which brought a large drop in securities valuations and lead to a decrease in the risk appetite of various investors and 2011 brought a gradual normalization of the market situation coupled with a gradual increase in trading volumes. Still, market volatility remains significant. Euro-Finance expects a gradual increase in trading volumes as a result of the development of its inhouse proprietary internet platform EFOCS and the inclusion of all securities registered for trading on the Frankfurt Stock Exchange in it. The technical reserves of the companies in the insurance sub-holding which are managed by Euro-Finance are expected to increase as well. Real estate The world financial crisis from 2008 impacted significantly the real estate market all over the world which resulted in drop in overall demand and decrease in rental prices. During the first six months of 2011 the real estate market in Europe started gradually to revive from the crisis and with housing recovery leading the way, and only partially followed by offices and industrial properties. This trend is valid for Bulgaria, too. H brought only a slow recovery of office space occupancy rates, as a result of low rental price levels. Several new and large office buildings are coming to a completion in Sofia, making it a renters market at least for the next several years. EuroHold Imoti is only moderately affected by the negative trends in the real estate sector. Tenants of the company are companies from EuroHold that fill the capacity of the rented office areas and showrooms. 6. Directors, senior management and employees The directors and senior management are described in item 1 of the current Resume of the Prospectus. According to the Articles of Association, the Supervisory Board and the Management Board of EuroHold Bulgaria AD have a five year terms, whereas the members of the first supervisory board are elected for three year period. According to the Articles of Association, Board members can be reelected without limitation. In case the agreement of the members of the management board and supervisory board are not expressly terminated before the expiry of the term of office, the latter shall be deemed automatically renewed for a period until the termination of the duties of the respective member in compliance with the respective provisions of the Commerce Act. The formal end of mandates does not lead to dismissal and the latter under the provisions of Art. 231, par. 4 of the Commercial Code has effect from its registration in the Commercial Registry. The formal mandate of the first Supervisory Board expired on and the mandate of the current Management Board expires on At the next General meeting of shareholders the Management Board of the Issuer will include for discussion on the agenda of the general meeting the issue about the formal reelection of Board members with another 5 year mandates. The members of the Management Board and the Supervisory Board have their management agreements, respectively supervisory agreement. Current agreement of the members of the Management Board and the Supervisory Board are in effect until the termination of the duties of the respective member and this applies to the new members of the Management and Supervisory Board elected in June Number of Employees As of EuroHold Bulgaria AD had recruited no employees under permanent or temporary agreements. As of the date of drafting of the Prospectus EuroHold Bulgaria AD had 10 employees under term-labor agreements. There have been no syndicate organizations of employees in EuroHold Bulgaria AD since its incorporation. 20

21 As of the date of drafting of the Prospectus the number of all employees recruited under labor agreements in all companies of the Group are 1,707 where 1,008 employees are recruited in Bulgaria, 565 employees are recruited in Romania and 134 employees are recruited in Macedonia. In 2008 the employees under labor agreements in the Group were 2,178, of which 566 employees in Romania. In 2009 the employees amounted to 2,370, of which 581 employees in Romania and 144 in Macedonia. After the sale of the manufacturing business of EuroHold Bulgaria AD in the end of 2010 the overall number of employees in all its subsidiaries amounted to 1,746, of which 1,047 employees in Bulgaria, 565 in Romania and 134 in Macedonia. Unlike the insurance companies, the parent company does not employ persons under temporary agreements. The number of the insurance agents of EuroIns Insurance AD in the course of the annual MTPL campaign amounts to 6,000, while in EuroIns Romania Asigurare Reasigurare this figure amounts to approximately 5,800 and in EuroIns Osiguruvanje, Macedonia the respective number is around Major shareholders and related-party transactions As of the date of the Prospectus the share capital of EuroHold Bulgaria AD amounted to BGN 108,643,712, divided into 108,643,712 ordinary, registered, dematerialized voting shares with nominal value of BGN 1 per each share. All of the issued shares are of the same class and give 1 (one) voting right at the General Meeting of the Shareholders. All of the issued shares are fully paid-in. As of the date of the Prospectus shareholders of the Company are individuals and 143 legal entities, or a total of persons. The table below indicates the shareholding structure of EuroHold Bulgaria AD as of the date of the Prospectus, according to the information the Company has at its disposal. Shareholders structure Shareholder Business Address Number of voting rights % of the voting rights STARCOM HOLDING AD BULGARIA, 191, RUSKI BLVD, ETROPOLE ,399, % EXPAT CAPITAL AD BULGARIA, 1000 SOFIA, 96A GEORGI S. RAKOVSKI STR. 21,512, % LEO OVERSEAS LTD 27 GREGORY AFXENTIOU,LARNACA,CYPRUS 4,359, % THAMES CAPITAL PARTNERS LTD. 2, NEW SQUARE, LONDON WC2A 3RZ, UNITED KINGDOM 3,841, % SWEDBANK AS CLIENTS 8 LIIVALAIA STR, TALLINN, ESTONIA 4,239, % UNICREDIT BANK AUSTRIA AG A-1010 VIENNA,SCHOTTENGASSE 6-8 2,954, % SALINK LTD. NICOSIA, CYPRUS 1,847, % ING UPF BULGARIA, SOFIA, 49B BULGARIA BLVD. 1,505, % Other legal entities 4,118, % Other individuals 6,865, % TOTAL 108,643, % Source: EuroHold Bulgaria AD Majority shareholder of the Issuer is "Starcom Holding" AD. Starcom Holding AD is a holding company, registered in the Republic of Bulgaria and operates in compliance with the Bulgarian legislation in force. Starcom Holding AD currently owns a controlling interest of approximately 53% of all shares of "EuroHold Bulgaria". Starcom Holding AD is registered with the Commercial Registry, kept by Registry Agency of the Republic of Bulgaria with UIC , having its seat and business address in Etropole, 191, Ruski blvd. The registered capital of company is BGN 6,900,000, divided in 69,000 ordinary, registered, materialized shares with nominal value of BGN 100 each. The subject of activity of Starcom Holding AD is acquisition, management, evaluation and sale of shares in Bulgarian and foreign companies; acquisition, evaluation and sale of patents, concession of licenses for patents use to companies where the company has shares; 21

22 financing of companies where the company has shares. Starcom Holding AD has a one-tier management system including Board of Directors, consisting of three individuals Assen Milkov Christov Executive Director, Kiril Ivanov Boshov Chairman of the Board, and Velislav Milkov Christov Member of the Board. Starcom Holding AD is represented by its Executive Director Assen Christov. EuroHold Bulgaria is the main investment in the portfolio of Starcom Holding AD. In this context, the goal that the management of Starcom Holding follows is focused on the development of EuroHold Bulgaria and strengthening the market positions of its subsidiaries. The shares of the Majority Shareholder do not bear different voting rights. Majority shareholder in Starcom Holding AD is Assen Milkov Christov Bulgarian citizen, having his business address in Sofia 1592, Christopher Columbus blvd. 43. Assen Christov is a holder of 51% of the voting shares of Starcom Holding AD. Through this stake, Assen Christov has the possibility to exercise effective control over Starcom Holding AD as a majority shareholder in EuroHold Bulgaria. Expat Capital AD is the second main shareholder in EuroHold Bulgaria, in possession of a qualifying stake in the Issuer s capital. As of the date of this document Expat Capital AD controls the voting rights of approximately 20% of the issued and outstanding shares. The shares of Expat Capital AD do not bear different voting rights. Expat Capital AD is a joint stock company, duly incorporated and operating under the laws of the Republic of Bulgaria, entered into the Commerce register, kept by the Registry Agency of the Republic of Bulgaria with UIC The Company has its registered office in Sofia, 96A, G.S. Rakovski str. The company's capital amounts to BGN 1,124,000, divided into 1,124,000 shares with a nominal value of BGN 1 each. The company is managed by a Board of Directors consisting of three individuals Nikola Simeonov Yankov, Nikolay Vassilev Vassilev and Lyubomir Hristov Stoev. Expat Capital AD is the sole owner of a licensed management company Expat Asset Management "Ltd., which manages three mutual funds and many individual portfolios. Expat Capital SA is the management company of Expat Beta REIT that invests in real estate in Bulgaria. At present the voting rights of Expat Capital AD are distributed among its shareholders as follows: "Expat Group" EOOD, UIN (holding 46% of the voting rights), "Dextra Real Estate" AD, UIC (20.02% holding of the voting rights) and "Dar Finance" EOOD, UIN (33.98% holding of the voting rights). None of the afore-mentioned persons shareholders of Expat Capital AD falls under the hypotheses for possession of indirect ownership stake described in Art. 146 of the POSA. As of the date of the Prospectus there are no transactions or proposed transactions with related parties that are essential for the Issuer or its subsidiaries and of unusual types and conditions. Transactions and balances with subsidiaries Regular transactions between the Issuer and its subsidiaries are carried out within the Group arising from the nature of their core business. An important objective of EuroHold Bulgaria is to realize significant synergies between the three segments of the Group - EuroIns Insurance Group, EuroLease Group and Avto Union. Types of transactions between related parties in the Group are purchase and sale of vehicles, leasing vehicles, insurance and health insurance services, office rentals, rent-a-car services, etc. All transactions are made on "arm s length" principle. Typical for the Group are transactions between the parent company and its subsidiaries in which, by intra-group loans the liquidity of individual companies is managed and the investment policy of the Group is conducted. All loans provided and received by EuroHold Bulgaria are concluded without requiring collateral and interest rates which are consistent with prevailing market conditions in the country. The related party transactions do not constitute a significant part of the total consolidated turnover of EuroHold Bulgaria. Consolidated revenues of the Issuer are free from intra-group transactions and represent sales to parties outside the Group. Transactions with the majority shareholder The only significant transaction that the Issuer has entered into outside the subsidiaries in the Group is a loan agreement signed in March 2007, whereby StarCom Holding extended up to BGN 15 million in a 5 year loan to EuroHold at a fixed rate 5 (five) percent per annum, which is well in line with prevailing market interest rates. The loan did require collateral. EuroHold Bulgaria could use the amounts granted to finance the activities of its subsidiaries, to acquiring shares in new companies, thus facilitating new investment projects. Further information about the related party transactions can be found in Chapter XVII. Related party transactions in Section Two. 22

23 8. Financial information a. Consolidated statement and other financial information The historical annual financial information is audited and prepared according to IFRS. The annual audited consolidated financial reports for 2008, 2009 and 2010 are part of the current Prospectus and include: Balance sheets; Income statement; Statement for changes in the shareholders equity Cash flow statement; Notes to the financial statements; Annual activity report; Independent auditor s report. The annual financial reports are available on the following web sites: the information agency X3news Financial Supervision Commission BSE-Sofia EuroHold Bulgaria AD where they are published by EuroHold Bulgaria as an Issuer of shares admitted to trading on BSE-Sofia with a ticker 4EH. The Issuer has signed a contract with the financial information agency X3news for a regular publication of financial and other information. The interim consolidated financial statements as of June 30, 2011, deemed an integral part of the current Prospectus, are not audited and include: Balance sheets; Income statement; Statement for changes in the shareholders equity Cash flow statement; Notes to the financial statements; Accounting policies; The interim financial reports are not audited. The interim financial reports are available for the investors at the described places. b. Significant changes After the approval of the interim financial statements as of June 30, 2011 and until the date of this document, the following significant changes in financial and trading position of the Issuer occurred: Avto Union AD, subsidiary of EuroHold Bulgaria AD, has submitted an application to the Commission for Protection of Competition for approval of acquisition of Daru Car AD. Daru Car AD is a dealer of BMW in Bulgaria. The company has an authorized workshop for the repair of BMW, Mini, Rover, Land Rover and Mahindra vehicles. The company also offers replacement parts for the brands it offers. Daru Car has a showroom and a repair workshop in Sofia, Druzhba. The transaction is a part of the automotive segment strategy to expand its market share in the premium car segment market and the acquisition of the repair workshops is viewed as a major source of profitability. The final acquisition of the company will complete upon the approval of the transaction by the CPC. On August, the automotive sub-holding Avto Union acquired 51% representing 5,100 stakes of the capital of Auto 1 OOD with a nominal value of BGN 100 each. The main activity of the company Auto 1 OOD is import and sale of spare parts for motor vehicles. By this investment Avto Union supplements and helps its servicing activity as a main profitability source. 23

24 On August 24, 2011, EuroLease Group BV the sole owner of EuroLease Auto EAD decided to increase the share capital of EuroLease Auto AD with the retained earnings, through the issuance of 4,500,000 shares with voting rights with a nominal value of BGN 1 each. As a result of the new increase, the capital of EuroLease Auto AD increased by BGN 4.5 million from BGN 15.5 million to BGN 20 million. On August 31, 2011, the Commercial Register at the Registry Agency registered the capital increase of EuroLease Auto AD On July, Avto Union became a sole owner of 100% of the capital of Nissan Sofia AD after purchasing the minority share of 2% representing 43,584 number of shares with a nominal value of BGN 1.00 each. The change in the legal form of Nissan Sofia EAD is registered in the Commercial Register on 15 August On September 1, 2011 the Commercial Register at the Registry Agency registered the merger of Bulvaria Rent-a-Car EOOD and EuroLease Rent-a-Car EOOD. As a result of the merger all the assets of Bulvaria Rent-a-Car EOOD moved to EuroLease Rent-a-Car EOOD, which became the universal successor. The transferring company is terminated without liquidation. The main objective of this restructuring is achieving better optimization and utilization of fleets of Budget and AVIS, while preserving quality service and client satisfaction. This is a prerequisite for strengthening the market positions of Avis and Budget in Bulgaria and increasing their market share. The merger of the two companies resulted in optimization of the resources, reduction of rental expenses and optimized usage of the car fleet. The expected annual decrease in the costs is about BGN 500 thousand. The merger has no impact its ownership, legal standing or on the place of business and representation of EuroLease Rent-a-Car EOOD. 9. Details on the offer and admission to trading a. Offer and admission to trading No offering of the Issuer s shares shall take place before their admission to trading on WSE applying with the current Prospectus. Before the admission of the shares from the registered capital of Eurohold Bulgaria AD to trading on the organized by the Warsaw Stock Exchange Main List, shares will not be offered in any way for sale and/or other type of acquisition on the territory of the Republic of Poland and there will not be a placing, allotment and/or underwriting of the shares and/or other actions, related to them, respectively. New shares will not also be offered for subscription on the territory of the Republic of Poland. Investors should note that in the present Prospectus will not be described information, which otherwise will be relevant and required in the indicated cases of a public offering. At its meetings held on September 16 and 26, 2011 the Management board of EuroHold Bulgaria AD took respective decisions for starting a procedure for admission of all its existing shares from the registered capital of the company to trading on regulated market in the Republic of Poland, namely the organized by the Warsaw Stock Exchange (Giełda Papierów Wartościowych w Warszawie) Main Market (Główny rynek GPW) and for applying for admission to trading using the prepared Prospectus as of September 19, All existing shares of Eurohold Bulgaria AD, namely: 108,643,712 (one hundred and eight thousand six hundred forty three thousand seven hundred twelve) ordinary, dematerialized, freely transferable shares, representing all registered capital of the Issuer will be requested for admission to trading on the regulated market, organized by the Warsaw Stock Exchange. The nominal value of shares is 1.00 (one) BGN each. All the shares will be subject to trading on the WSE upon approval by the Financial Supervision Commission of the Republic of Bulgaria of the prepared by EuroHold Bulgaria AD Prospectus on admission of its shares to trading on a regulated market, respective notification of the competent Polish regulatory institution Polish Financial Supervision Authority (Komisja Nadzoru Finansowego or KNF) in accordance with the legal framework, as well as the subsequent decision of the Management Board of the Warsaw Stock Exchange on admission of the EuroHold Bulgaria AD shares to trading on the organized by the WSE Main Market GPW. 24

25 The admission to trading shall take place in the Republic of Poland in accordance with the relevant Polish rules and regulations as well as with the respective European regulations with direct effect on the territory of the Republic of Poland. After the confirmation of the present Prospectus, within one working day of its confirmation, the Financial Supervision Commission of the Republic of Bulgaria shall direct to the Polish Financial Supervision Authority (Komisja Nadzoru Finansowego, KNF) a certificate, attesting that the Prospectus has been prepared in accordance with Directive 2003/71/EC of the European Parliament and Council and amending Directive 2001/34/EC, as well as a copy of the approved Prospectus in English. After the passportization of the Prospectus, EuroHold Bulgaria AD will undertake appropriate steps in relation to the registration of its shares in the Polish National Depository of Securities (National Depository for securities, NDS). After the registration of its shares in NDS, the Issuer will apply for the shares to be admitted to trading on the organized by the Warsaw Stock Exchange Main List. Based on the application for admission, the Management Board of the WSE shall grant permission for admission of the EuroHold Bulgaria shares to trading on the requested market, to provide an individual exchange code for the shares and to determine the introduction date for exchange trading of the shares according to 38.1 and 38.3 of the Warsaw Stock Exchange Rules. The Issuer expects this permission of the Management Board of WSE to be granted till the end of November, All of the EuroHold Bulgaria shares can be traded on the organized by the WSE Main Market. The shares of the Issuer can be offered for sale freely with equal conditions to the different categories of potential investors on the territory of the Republic of Poland. From the date of the Listing of the shares on the organized by the Warsaw Stock Exchange Main Market, every shareholder will be able to submit buy/sell orders through a licensed investment intermediary, member of the stock exchange, with parameters determined at their own discretion. After the admission of the shares to trading on the WSE, all investors will have equal opportunities to buy and sell shares under conditions, determined by the free demand and supply on the stock exchange. Price at which EuroHold Bulgaria AD will introduce its shares for trading on the regulated market in Poland will be their par value of BGN 1.00 (PLN according to the National Bank of Poland exchange rate as of the date of the Prospectus). Subsequently the offer price on the regulated market will be determined by the demand and supply for the shares. Shareholders and investors will decide what will be the price at which they will sell or buy the Issuer s shares. In accepting the buy and sell orders for securities, investment intermediaries inform investors and shareholders about the order types, reached price levels of the closed transactions, valid and active as of the moment orders and transaction expenses. Since the shares of EuroHold Bulgaria AD are currently traded on the organized by the Bulgarian Stock Exchange - Sofia regulated market, the admission of Issuer s shares to trading on the Warsaw Stock Exchange will mean dual listing of existing shares of the Issuer. The main depository institution for the shares of EuroHold Bulgaria AD, existing in a book-entry form, is the Bulgarian Central Depository AD, thatmanages the Book of Shareholders of the Issuer and issues theindividual registered depositcertificates for the Issuer s shares held. The investors, who have bought EuroHold Bulgaria shares in the secondary trading on the organized by the Warsaw Stock Exchange Main market shall be able to obtain the relevant certification documents confirming the acquisition of the shares by the respective investment firms brokerage houses, conducting brokerage operations within the Republic Poland, through which the transactions for the acquisition of such shares have been concluded. All the terms and conditions on the submission, withdrawal, modification and execution of orders for the sale or purchaseof the Issuer s shares in the secondary trading organized by the Warsaw Stock Exchange Main market shall be regulated by the internal rules and policies of the investment firms whose services the investors use, in accordance with the Warsaw Stock Exchange Rules, and investors shall be aware of the provisions of such rules and policies while performing every particular operation. b. Markets EuroHold Bulgaria AD made its debut on the Bulgarian capital market in February Company s shares attracted serious investors interest as on the very first trading day were traded 3,357,591 shares at an average price of BGN 2.79 per share. Until the end of the year the price reached its peak of 25

26 BGN Nevertheless the subsequent global financial turmoil affected the global markets and did not miss Bulgarian Stock Exchange, which registered serious drop, mirrored by the main market indicator SOFIX losing 79% compared to its level peak levels from During this period, the negative trend hit EuroHold Bulgaria AD as well and a serious correction followed. For the last two and a half years the share price has remained pretty much unchanged swinging within the range of BGN 0.67 to BGN 1.80 per share. Currently EuroHold Bulgaria s shares are traded only on the Bulgarian Stock Exchange Sofia AD, on the unofficial market, segment A. In September 2009 the company was included in the main Bulgarian Stock Exchange indicator SOFIX. Currently EuroHold is part of all three equity benchmarks indices on the Bulgarian capital market - SOFIX, BG40 and BGTR30. As of the date of this Prospectus Company s market capitalization amounted to BGN mn. Indicator Value Last price (in BGN) as of September 19, P/E (price of one share divided by annual net income per share)* 10.5 P/B (price of one share divided by balance value per share)* 0.33 Current shares outstanding (mn) Market cap (in BGN mn) as of September 19, week high week high date week low week low date Price change year to date % Source: Bloomberg *Bulgarian Stock Exchange Sofia AD 26

27 Bulgarian Stock Exchange In compliance with the Public Offering of Securities Act, trading with shares of public companies is carried out on the Bulgarian Stock Exchange, which as of today is the only regulated market for securities in Bulgaria. On September 19, 2011 the market capitalization of the companies listed on the BSE reached BGN 12.2 bn. Market segments and financial instruments BSE Sofia organizes different markets depending on qualitative and quantitative criterion of issuers and their issues. Some of the markets are divided to different segments depending on the securities type, as well as to specific requirements to the issuers regarding their shareholding structure, financial indicators, liquidity and disclosure of information. BSE comprises the following markets: 1. Official Market of Equities; a) Segment А b) Segment В 2. Official Market of Bonds; 3. Unofficial Market of Equities; a) Segment А b) Segment В 4. Unofficial Market of Bonds; 5. SPVs Market; 6. Compensatory Instruments Market; 7. UCITs Market; 8. Subscription Rights Market; 9. IPO Market; 10. Privatization Market 11. Structured Products Market. In general terms, the Official market welcomes large public companies with high market capitalization and high volume of trading in their shares, while the Unofficial market is oriented towards smaller and developing companies. BSE also organizes IPO market for initial public offerings and Privatization market for the sale of residual state-owned shares. As of September 12, share issues are registered for trading on the Bulgarian Stock Exchange, 16 companies of them are registered for trading on the Official market and 351 on the Unofficial market. Only dematerialized financial instruments whose transfer is not subject to restrictions or special conditions can be traded on a regulated market. Currently, on BSE-Sofia are traded stocks, corporate and municipal bonds, units of UCITs, compensatory Instruments (a special type of securities issued by various public bodies to persons who did not receive restitution of nationalized assets after 1990, have been listed on the on the Bulgarian Stock Exchange since 2002), subscription rights and warrants. As of September 19, 2011 market capitalization of the companies traded on the BSE Official market amounted to BGN 3 bn and BGN 7.7 bn on the Unofficial market. BSE total turnover for the year ended on December 31, 2010 was BGN 10.8 bn. Financial instruments Only financial instruments for the transfer of which no restrictions or conditions are imposed may be traded on a regulated market. Currently on BSE are being traded shares, corporate and municipal bonds, shares of mutual funds, compensating instruments, rights and warrants. As of September 19, 2011, the market capitalization of the companies traded on the Official Market of the Bulgarian Stock Exchange amounted to BGN 3 billion and BGN 7.7 billion leva on the Unofficial market. The total turnover of the Bulgarian Stock Exchange for the year ended December 31, 2010 was BGN 10.8 billion euro. Trading System 27

28 The BSE trading system is Deutsche Böerse s electronic trading system - Xetra, launched in Bulgaria in The current participants of the trading by Xetra have a direct access to Bulgarian market, while Bulgarian participants, in compliance with the membership requirements, have the opportunity to trade in more than 17,000 financial instruments listed on Xetra. Xetra is one of the most powerful trading platforms for cash market securities and is a synonym for the digitalization and globalization of securities trading. COBOS System BSE-Sofia is the only exchange in the region of South-eastern Europe that has developed its own system for electronic submission of buy-sell orders of financial instruments via internet - COBOS (Client Order- Book Online System). Orders for transactions with securities are transferred to the trading system through COBOS and are identical to all other orders. The use of COBOS is limited to investment intermediaries, their clients and COBOS administrators. Bulgarian market investors can use other systems for trading on the BSE as well. These systems have been developed mainly by investment intermediaries and during the last years investors showed serious interest in them due to the significantly larger possibilities, which they offer (EFOCS, DeltaBroker, BenchMark BG Trader, U-Broker, etc.). Trading Bulgarian Stock Exchange is an electronic market and trading is carried out through its automatic trading system XETRA. XETRA is an order driven system. Trading with financial instruments admitted to some of the markets organized by BSE-Sofia is based on the orders placed by the market participants as well as on the quotes of the Market-makers (exchange trades). The orders and the quotes represent a firm commitment for buying or selling securities on a given price and other specific conditions and parameters. Orders might be market, limit, market-to-limit, stop orders and iceberg. The maximum validity of the orders is 90 days (i.e. 90 calendar days, including the present day (=T+89) from the date of the submitting. XETRA's market model includes the trading forms auction and continuous trading for on-exchange trading. XETRA provides also IPO and OTC-entry functionalities. Given issue can be traded under the conditions of continuous trading or only on auctions. Continuous trading starts with opening auction and can be interrupted by one or several auctions (intraday auctions) and closes with closing auction. After the end of the intraday auction, continuous trading resumes. Each auction consists at least of the following phases in the described order: Call phase Price determination phase The auction price is the price with the highest order volume and the lowest surplus for each limit in the order book. Continuous trading is started after the termination of the opening or the intraday auction. Each new order is immediately checked if it is executable against orders on the other side of the order book and its execution during continuous trading is effected according to price/time priority. Client orders have priority over brokers` own account. If the possible price of a transaction lies outside preliminary determined price range around the last traded price of an equity determined in an auction or the closing price from the previous day (static price range) or the reference price (dynamic price range), continuous trading is terminated and auction is initiated. Continuous trading resumes after the price is determined. Static and dynamic price ranges varies according to the different markets and the different financial instruments. For equities admitted to trading on the Official Market the "dynamic" price range is 5% of the reference price and the "static" price range is 10% of the last auction price. For equities admitted to trading on the Unofficial Market that are traded in continuous trading including the equities issued by the Special Investment Purpose, the "dynamic" price range is 10% of the reference price and the "static" price range is 20% of the last auction price. For equities admitted to trading on the Unofficial Market that are traded in auctions and for the units issued by collective investment schemes, the "dynamic" price range is 30% of the last auction price. The trading is anonymous, i.e. market participants do not have information who exactly submits the order for execution. 28

29 Confirmations for closed transaction are announced immediately after the respective transaction, including information about the counter party. Settlement Transactions executed on the Bulgarian Stock Exchange are considered finalized after the securities have been transferred and the payments have been received. The settlement is carried out by the Central Depository and is certified by a document issued by it. The transactions are finalized on a gross basis. Since June 2003 when the Real-time Interbank Gross Settlement System (known as RINGS ) was introduced, the settlement cycle has been carried out on T+2 bases. RINGS is a computerized accounting system working on the delivery versus payment principle which means that the transfer of securities and the payment are done simultaneously. Indices The first index of BSE Sofia AD is SOFIX and its calculation started in 2006 with base value of 100. SOFIX is based on the market capitalization of companies included in it, adjusted by the free-float of each. SOFIX is the first index on which structured products have been developed. The index includes only the most liquid companies on the Bulgarian capital market. As of the end of the first half of the year 2011 SOFIX comprises 15 companies, including EuroHold Bulgaria AD. The other BSE indices are BG40 (covers 40 issues of common shares of the companies with the greatest number of transactions and the highest median value of the daily turnover during the last 6 months), BG TR30 (based on the price performance of the common shares included in the index portfolio) and BG REIT (covers 7 issues of common shares of special investment purpose companies that operate in the field of securitization of real estate and/or land, i.e. real estate investment trusts (REITs), with the largest market value of the free-float and the highest median value of the weekly turnover during the last 6 months). Warsaw Stock Exchange The WSE operates one of the two regulated markets in Poland within the meaning of the MiFID. The other regulated market (BondSpot, the subsidiary of the WSE) concentrates mainly on bond trading and OTC transactions. The WSE is a private joint-stock company and is controlled by the Polish State. Members of the WSE include, in particular, banks and Polish and international brokers. Shares listed on the WSE may be traded in a continuous price-setting system or in the single-price auction system, depending on capitalization and intensity of trading. In addition, there are two markets for shares: Basic and parallel, the latter being for smaller, less liquid issuers. Listed companies are classified into four segments according to their capitalization: MINUS 5, 5 PLUS, 50 PLUS or 250 PLUS. To be traded in a specific market and segment, certain non-statutory criteria must be met by the securities in addition to the statutory listing criteria. Shares of companies which have high price volatility, or which are under bankruptcy proceedings may be classified into the Alert List segment and then moved to listing under the single-price auction system. The electronic trading system used by the WSE is WARSET, a trading system similar to the system used in Paris, Brussels, Amsterdam, Chicago, and Singapore. As of September 1, 2011, shares of more than 400 companies were listed on the WSE. Stock Exchange Trading Mechanisms As of the date of this Prospectus, WSE sessions are held regularly from Monday to Friday from 8:00 a.m. to 5:35 p.m., Warsaw time, unless the Management Board of the WSE decides otherwise. Depending on the market on which the relevant securities are listed, quotations are made in a continuous trading system (the main floor) or in a single-price system with one or two auctions (the parallel market). In addition, for large blocks of securities, so-called block transactions outside of the public order book in the continuous trading system or a single-price system are possible. Information as to price, trading volume and any specific rights (i.e. pre-emptive or dividend rights) attached to the relevant securities, is available on the WSE s official website at Brokerage commissions in Poland are not fixed by the WSE or other regulatory bodies and are set by the brokerage house executing the transaction. Settlement 29

30 Settlement of all transactions executed on the WSE is handled by the NDS, a joint-stock company in which the WSE has a 33.3% stake (with the remaining shares held by the National Bank of Poland and the State Treasury of the Republic of Poland). Under current regulations, all transactions on the regulated WSE market are on a delivery versus payment basis, with the transfer of rights to securities occurring upon settlement on a T+3 basis. In principle, each investor must hold a securities account and a cash account with an investment firm or a custodian in Poland, and each investment firm and custodian must hold relevant accounts with the NDS and a main cash account with a clearing bank. In accordance with the rules and regulations of the WSE and the NDS, the NDS is required to arrange, based on a list of transactions provided by the WSE (compiled post-session), the settlement of transactions effected by WSE members. In turn, WSE members co-ordinate settlement with the investors on whose account the transactions were executed. c. Selling shareholders Neither the controlling, nor the rest of the shareholders of Eurohold Bulgaria AD declared or expressed in any way specific intentions to sell or purchase Issuer s shares after their admission to trading to the organized by the Warsaw Stock Exchange Main Market. They, however, reserve their right to buy or sell company s shares based on demand and supply on the Warsaw Stock Exchange and in the presence of appropriate market conditions for that. d. Dilution Shares of EuroHold Bulgaria AD are subject to admission to trading on a regulated market and funds will not be raised with this action, respectively. In this case there is no risk from dilution of the company s capital. Trading conditions for all investors will be equal and determination of the price for closing the deals will depend on the will of market participants who will set company s market value. e. Expenses of the issue EuroHold Bulgaria expects that total expenses arising from this Listing will amount to approximately PLN 210,000 (two hundred and ten thousand Polish zloty), including the IPO prospectus approval fee of Financial Supervision Commission in the amount of BGN 5,000 (five thousand Bulgarian lev) PLN 11,000 (eleven thousand Polish zloty according to the National Bank of Poland exchange rate as of the date of the Prospectus). The aforesaid expenses consist also of costs of preparation of the Prospectus, advisors fees, the fee of the Polish Depository of Securities for the registration of the issue, as well as the fee of Warsaw Stock Exchange for the admission of the shares to trading on the Main Market. The following fees would be applicable and borne by EuroHold Bulgaria with respect to shares admission to trading on the organized by the Warsaw Stock Exchange Main List: (i) the Polish National Depositary of Securities registration fee, i.e. 0,01% of the shares value, but not less than PLN 3,000 (three thousand Polish zlotys) and not more than PLN 100,000 (hundred thousand Polish zlotys), (ii) the Warsaw Stock Exchange fee for the shares admission to trading, i.e..e. 0,03% of the shares value, but not less than PLN 8,000 (eight thousand Polish zlotys) and not more than PLN 96,000 (ninety six thousand Polish zlotys). 10. Additional information a. Share capital Share capital As of the date of this Prospectus the share capital of the company amounts to BGN 108,643,712, divided into 108,643,712 ordinary, registered, non-privileged, dematerialized voting shares, with dividend right and liquidation quota, with nominal value of BGN 1 for each share. All of the issued shares are from the same class and are fully paid in. The entire capital of the company is paid in with cash. All the shares issued by the company are traded and are in circulation. The Issuer s shares are registered for trade with the unofficial market of Bulgaria Stock Exchange Sofia AD with stock index 4EH. 30

31 The Issuer hasn t bought and is not in a possession of its own shares. As of ,555 shares from the Issuer s share capital are owned by the related party EuroIns AD. The shares are with nominal value of BGN 1 each one and accountant value BGN 3,755. As of the day of this Prospectus there are no other subsidiaries and/ or related parties, who own shares in the Issuer s share capital. The Company hasn t issued shares which are not capital. All shares issued by EuroHold Bulgaria AD have voting rights in the general meeting of the shareholders of the Company. The share capital of the Company has not been increased by means of contribution in-kind. The Bulgarian legislation does not regulate the authorized but unissued capital, regarding the Issuer there are no acquisition rights and/ or obligations over authorized but unissued capital. As of the date of this Prospectus, there is a pending capital increase procedure regarding the Issuer (see IV.3. Information on ongoing IPO in Section Three), but besides this procedure there are no acquisition rights, with exception to the subscription rights which will be issued after the approval for an initial public offering of securities prospectus related to the current capital increase by the BG-FSC The Issuer hasn t undertaken actions related to issuance of warrants, convertible and exchangeable securities or rights. There are no persons who own options over shares from the capital of the Issuer or over the capital of other companies of the Group of EuroHold Bulgaria AD. There is no conditional or unconditional engagement toward such persons for issuance of such options in their favor. The body which is competent to adopt decision related to capital increase of the Issuer is the general meeting of the shareholders. As per Art. 13, paragraph 5 of the Articles of Association of the Issuer, the Management Board of the company is entitled to votes decisions for capital increase up to (four hundred million) leva for a period of 5 (five) years after the registration with the Commercial Registry of the amendment of the company s Articles of Association, voted with resolution of the general meeting of the shareholders dated , in compliance with the provisions of Art. 194, paragraph 1 and 2, Art. 196, paragraph 1 and 2 of the Commerce Act, as well as the provisions of the Public Offering of Securities Act. There are no parties, owning equity options on EuroHold capital or on the capital of any of its subsidiaries. Furthermore, the Issuer and its subsidiaries do not have any liabilities to issue such options. Changes in the share capital EuroHold Bulgaria AD was established on with a capital in amount of BGN 50,002,586, divided into 50,002,586 regular, registered, non-privileged, dematerialized voting shares, with divided rights and liquidation quota with nominal value of BGN 1 each one. Company s capital is formed by merger without liquidation between EuroHold AD and Starcom Holding AD. The amount of the capital is defined in the Reorganization agreement, approved by the general meetings of shareholders of the merging companies. During the period May June 2007 EuroHold Bulgaria AD executed a successful capital increase by means of issuance of 12,500,646 new shares with nominal value BGN 1 and issue value BGN 3.35 per share. During the course of the subscription 50,002,586 rights were issued and each right gave the right to purchase 0.25 new shares. The total amount of subscribed and paid in shares reached 12,495,050 or 99.96% of the offered amount. After completion of the said capital increase, the Company s capital amounted to BGN 62,497,636, divided into ordinary, registered, non-privileged, dematerialized voting shares, with divided right and liquidation quota with nominal value of BGN 1 each one. During the period March May 2011, with resolution of the Management Board of EuroHold Bulgaria AD, on grounds of the powers granted by Article 13, paragraph 5 of the Articles of Association of the Company, the capital of EuroHold Bulgaria AD was increased through the issuance of 46,146,076 new shares with 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. As of the date of this Prospectus the capital of the Company amounted to BGN 108,643,712, divided into 108,643,712 ordinary, registered, non-privileged, dematerialized voting shares, with divided right and liquidation quota with nominal value of BGN 1 each. On the Management Board of the Issuer, on grounds of its powers, granted by Art. 13, paragraph 5 of the Articles of Association in connection to the applicable provisions of the CA and Public Offering of Securities Act, voted a decision for a capital increase of EuroHold Bulgaria AD. As of the date of this Prospectus there is a pending procedure related to a capital increase of the Issuer. It is expected 31

32 that by the end of September 2011, the Financial Supervision Commission will approve the prospectus for initial public offering of 36,214,570 into regular, registered, non-privileged, dematerialized voting shares, with divided right and liquidation quota with nominal value of BGN 1 each. Regarding the Issuer there are no applicable actions which could lead to a change in the shareholders rights. There are no provisions which could lead to delaying, deferring or preventing a change in the control of the Issuer in the Articles of Associations and/or in the internal regulations of the Issuer. There are no provisions governing the ownership threshold above which shareholder ownership should be disclosed in the Articles of Associations and/or in the internal regulations of the Issuer. There are no provisions which define stricter rules than the ones required by the law about changes in the capital in the Articles of Associations of the Issuer. Reserves EuroHold Bulgaria AD forms Reserve Fund. The Reserve Fund has the following sources: at least 1/10 of the profit which is allocated up until Fund s proceeds reach 1/10 part or more of the capital as defined in the Articles of Association; the proceeds received above the nominal value of the shares and the bonds at the time of issuance; the amount of the additional payments made by the shareholders against granted privileges in relation to the shares; other sources, stipulated in the Articles of Association or by a shareholders meeting resolution. The proceeds in the Reserve Fund can be used only to cover any annual losses or to cover looses from previous years. When the proceeds of Reserve Fund exceed 1/10 or the bigger amount of the share capital stipulated in the Articles of Association, the bigger amount can be used for a capital increase. b. Memorandum and articles of incorporation EuroHold Bulgaria AD is a public company and its Articles of Association are in compliance with Public Offering of Securities Act and the respective laws. The information below regarding the Articles of Association is in compliance with Bulgarian legislation in force. According to Art. 4 paragraph 1 of the Articles of Association (AoA) of EuroHold Bulgaria AD its subject of activity is acquisition, management, evaluation and sale of shares of Bulgarian and foreign companies; acquisition, management and sale of bonds; acquisition, evaluation and sale of patents, concession of licenses for patent use to companies where the company has shares; financing of companies where the company has shares. The managing bodies of the Company are the General Meeting of the Shareholders, the Management Board and the Supervisory Board (Art. 19 of the AoA). The general meeting of the shareholders is the supreme management body of the company and is composed by all shareholders with voting rights. The General Meeting of the Shareholders (GMS) takes the ultimate decisions related to the holding s activity such as: resolution for amendment or supplementation of the AoA; reorganization and termination of the company; increase and decrease of the capital; election of the Supervisory Board s members etc. According to Art. 21, paragrpah1 of the AoA the general meeting of the shareholders is convened by the Management Board once a year to its ordinary session. The Management Board as well as the Supervisory Board may require convening of the GMS and of extraordinary GMS: at their own discretion; when the losses exceed ¼ (one forth) of the capital in the occasions stipulated by law. According to the same article of the AoA and as per Art. 223, paragraph 1 of Commerce Act, the general meeting of the shareholders may be convened per shareholders request, whereas the shareholders are in possession of company s shares which amount to least at 5 percent of the Issuer s capital for a period longer than three months. In case that the Management Board does not convene the GMS in one month term or in case the GMS is not held within the next three months after the request, the district court convenes the GMS or authorizes the shareholders who requested the convening or their representative to do so. In compliance with Art. 118, paragraph 2 of Public Offering of Securities Act, the persons who own jointly or severally at least 5% of Issuer s capital in case of vacancy of the management bodies which 32

33 threatens company s interests (regardless of the period they have owned the shares and regardless whether they made a request to the Management Board of the company), may request from the district court to convene the general meeting or they may empower their representative to convene the general meeting under an agenda defined by them, whereas the court must deliver a resolution immediately. The shareholders who own jointly or severally at least 5% of Issuer s capital may require the inclusion of additional matters in the agenda or propose draft decision to matters already included in the agenda of the General Meeting of Shareholders as per Art. 223a of the Commerce Act. The convening of the general meeting of the shareholders is made by an invitation, published at the Commercial Registry, observing the procedure described in Art. 22 and 23 of Issuer s Articles of Association. The provisions from Issuers Articles of Association, concerning the Management Board and the Supervisory Board are described in details in XIX.5. Management and supervisory board in Section Two of this document. Company s shares are from the same class, namely they are ordinary, registered, dematerialized shares. The nominal value of each share is BGN 1. Each share bears its holder voting right in the General Meeting of Shareholders, dividend right (part of company s profit) and right of liquidation quota. Besides, according to Art. 11, paragraph 3 of the AoA, each shareholder has the right to acquire preemptively newly issued shares in case of capital increase; to scrutinize the documents related to the agenda of a General Meeting of Shareholders; to authorize third party to exercise its rights towards the company; to be elected in the management bodies of the company and to exercise any and all rights granted by force of applicable Bulgarian legislation. The Company cannot issue privileged shares, which give more than one vote in the general meeting or additional liquidation quota. According to Art. 64, paragraph 1 of the Company s AoA, dividends are distributed and paid only once a year only if the following conditions are present: expiration of the respective financial year; presence of profit realized by the company for the respective year; remainder of the profit after the allocation of the needed proceeds for Reserve fund and other divisions, as stipulated by law; resolution of the general meeting of the shareholders for profit distribution or part thereof and namely distribution of dividends and definition of their amount. The dividends are distributed between the shareholders proportionally to the owned shares. The persons entitled to receive dividends are the persons registered in Central Depository AD s registers as shareholders on 14 th day after the date of the general meeting which has approved the annual financial statements and adopted the resolution for dividends distribution. The company must ensure the payment of the approved by the general meeting dividend within 3 months as of its session. The costs for dividends payment are in charge of the company. The trade with company s shares and the transfer of shares are performed in accordance with the provisions of Markets of Financial Instruments Act and the related by-laws, the Rules of Bulgarian Stock Exchange Sofia AD and the Rules of Central Depository AD, whereas Issuer s AoA do not stipulate limitations related to shares transfer. The issue and the disposal of Issuer s shares, as dematerialized shares, have effect as of their registration with the Central Depository AD. The Company s Articles of Association do not contain provisions which provide for a threshold of ownership, above which the shareholding should be disclosed, as well as provisions which would cause a delay, a postponement or a prevention of the change of control of the Issuer. c. Documents available for inspection During the period of validity THE INVESTORS MAY EXAMINE THE ORIGINAL OF THIS DOCUMENT, the remaining parts of the Prospectus, the constitutive documents, the Statutes of the Issuer, all letters, reports and other documents, historical financial information, appraisals and reports, as well as the other documents incorporated by reference, AND TO RECEIVE ADDITIONAL INFORMATION UNDER THE SHARES REGISTRATION DOCUMENT AND THE ENTIRE CONTENTS OF THE PROSPECTUS IN THE OFFICE OF: Christopher Columbus Blvd., Sofia 1592 Tel.: (+359 2) ; Fax: (+359 2) Contact person: Galya Georgieva, from 9.30 till g_georgieva@eurohold.bg 33

34 IV. SUMMARY OF THE PROSPECTUS IN POLISH (PODSUMOWANIE) Niniejsze podsumowanie powinno być rozumiane jako wprowadzenie do Prospektu i kaŝda decyzja o inwestycji w akcje, powinna być oparta na analizie Prospektu jako całości. W wypadku skierowania do sądu w państwie członkowskim Unii Europejskiej powództwa związanego z informacjami zawartymi w niniejszym Prospekcie, powód moŝe być, jeŝeli tak stanowi prawo państwa, w którym kierowane jest powództwo, zobowiązany ponieść koszty tłumaczenia niniejszego Prospektu przed rozpoczęciem postępowania. EuroHold Bulgaria AD ponosi odpowiedzialność cywilną w związku z treścią niniejszego podsumowania tylko wtedy, gdy niniejsze podsumowanie wprowadza w błąd, jest niedokładne lub sprzeczne z pozostałymi częściami Prospektu. PoniŜsze informacje i dane zostały uzyskane z informacji zawartych w innych częściach Prospektu. Niniejsze podsumowanie nie zawiera wszystkich istotnych informacji dla potencjalnych inwestorów. Przed podjęciem jakiejkolwiek decyzji inwestycyjnej, zachęca się potencjalnych inwestorów do przeczytania całego Prospektu, w tym w szczególności rozdziału Czynniki ryzyka, szczegółowych Informacji Finansowych i innych informacji. 1. Opis dyrektorów, kierownictwa wyŝszego szczebla, doradców i audytorów. EuroHold Bulgaria AD posiada następujący dwustopniowy system zarządzania: Zarząd, w którego skład wchodzą cztery osoby fizyczne i jedna osoba prawna oraz Rada Nadzorcza w której skład wchodzą trzy osoby fizyczne. Zarząd EuroHold Bulgaria AD składa się z pięciu członków: Prezesa Zarządu - Kiriła Iwanowa Boshova; Dyrektora wykonawczego (CEO) - Assena Mincheva Mincheva; oraz Członków Zarządu: Zlatoliny Ivanovej Mukovej; Assena Emanouilova Assenova oraz Expat Capital AD, którego reprezentują - Nikola Simeonov Yanev i Lubomir Christov Stoev. Rada Nadzorcza składa się z czterech członków: Przewodniczącego - Assena Milkova Christova; Wiceprzewodniczącego - Dimitara Stoianova Dimitrova; oraz Członków niezaleŝnych: Ivana Georgieva Munkova Nikolaya Vassileva Vassileva Kluczowym menedŝerem Emitenta jest Dyrektor Finansowy - Galya Alexandrova Georgieva i dyrektorzy wykonawczy poszczególnych działów sub-holdingu: Sub-holding ubezpieczeniowy - EuroIns Insurance Group AD - Kiril Iwanow Boshov i Zlatolina Ivanova Mukova (patrz XII.2 "Organy administracyjne, zarządzające i nadzorcze oraz kadra zarządzająca" w drugiej sekcji.). Sub-holding motoryzacyjny - Avto Union AD - Assen Emanouilov Assenov, który kieruje sub-holdingiem leasingowym, a takŝe - EuroLease Group (pod nazwą handlową BG Autolease Group B.V.) (patrz XII.2 Organy administracyjne, zarządzające i nadzorcze oraz kadra zarządzająca" w drugiej sekcji). Dla Euro-Finance AD kluczowymi menedŝerami są Kiril Iwanow Boshov (patrz XII.2. Organy administracyjne, zarządzające i nadzorcze oraz kadra zarządzająca" w drugiej sekcji) i Momchil Petkov Petkov. Więcej informacji na temat dyrektorów i kierownictwa wyŝszego szczebla znajduje się w XII.2. Organy administracyjne, zarządzające i nadzorcze oraz kadra zarządzająca" w drugiej sekcji. Polska kancelaria prawnicza Łuczyński i Wspólnicy Sp.k. została uprawniona przez EuroHold Bulgaria do wykonywania określonych czynności, zgodnie z polskim prawem, związanych z opracowaniem i paszportyzacją Prospektu, rejestracją akcji EuroHold Bulgaria w polskim Krajowym Depozycie Papierów Wartościowych oraz dopuszczeniem ich do obrotu na rynku regulowanym na terytorium Rzeczypospolitej Polskiej, tj. na Rynku Podstawowym prowadzonym przez Giełdę Papierów Wartościowych w Warszawie S.A. 34

35 Biegłym rewidentem EuroHold Bulgaria AD odnośnie sprawozdań finansowych za lata 2008, 2009 i 2010 została wybrana spółka BDO Bulgaria Ltd - specjalistyczna firma audytorska, zarejestrowana przez Instytut Biegłych Rewidentów w Bułgarii w ramach reg. Nr 16, z siedzibą w 51B Bulgarii Blvd., Piętro 4, Triaditsa District, Sofia 1404, reprezentowana przez partnera zarządzającego Stoyanka Apostolova, dyplom nr 0046/1991. Biegły rewident jest członkiem Izby Biegłych Rewidentów w Bułgarii. Podczas wspomnianego okresu biegły rewident nie zrezygnował z pełnionej funkcji, nie został zwolniony ani ponownie wybrany. 2. Statystyka i przewidywany harmonogram wprowadzenia akcji do obrotu RODZAJ AKCJI ISIN FORMA PAPIERÓW WARTOŚCIOWYCH WALUTA Akcje - zwykłe, zarejestrowane, zdematerializowane, swobodnie przenoszalne, z których kaŝda uprawnia do wykonywania jednego prawa głosu na walnym zgromadzeniu Spółki. Przedmiotem dopuszczenia do obrotu na rynku regulowanym jest zwykłych, zarejestrowanych, zdematerializowanych, swobodnie przenoszalnych, z których kaŝda uprawnia do wykonywania jednego prawa głosu na walnym zgromadzeniu, aktualnie stanowiących cały kapitał zakładowy EuroHold Bulgaria AD. Wszystkie akcje są tego samego rodzaju i dają równe prawa ich posiadaczom. BG Akcje są zarejestrowane i zdematerializowane. Główną instytucją depozytową jest Centralny Depozyt (Central Depository AD), adres: 1303 Sofia, 10 "Tri Ushi" Str., piętro 4. Centralny Depozyt (Central Depository AD) organizuje i prowadzi rejestr zdematerializowanych akcji w Republice Bułgarii, jak równieŝ księgi akcyjne zdematerializowanych akcji dla akcjonariuszy emitentów, takich jak EuroHold Bulgaria AD. Instytucją depozytową w Polsce jest Krajowy Depozyt Papierów Wartościowych S.A., Warszawa, 4 ul KsiąŜęca. Wszystkie akcje EuroHold Bulgaria AD są denominowane w lewach bułgarskich (BGN). Po wprowadzeniu tych akcji do obrotu na GPW, będą one denominowane w polskich złotych (PLN). Emitent Eurohold Bulgaria AD przewiduje, Ŝe wprowadzenie akcji spółki do obrotu na rynku regulowanym, zorganizowanym przez GPW na terytorium Rzeczypospolitej Polskiej, nastąpi do końca listopada 2011 roku. 3. Kluczowe informacje dotyczące wybranych danych finansowych; kapitalizacji i zadłuŝenia; przyczyn dopuszczenia do obrotu; czynników ryzyka. Zaprezentowane w poniŝszych tabelach kluczowe wskaźniki opierają się na zbadanych rocznych skonsolidowanych sprawozdaniach finansowych EuroHold Bulgaria AD za lata wraz z wybranymi informacjami ze skonsolidowanych sprawozdań finansowych za okres sześciu miesięcy, wg stanu na dzień 30 czerwca 2010 i 30 czerwca 2011 roku. Skonsolidowane sprawozdania finansowe zostały sporządzone zgodnie z obowiązującymi międzynarodowymi standardami sprawozdawczości finansowej. Wyciąg ze skonsolidowanych sprawozdań finansowych EuroHold Bulgaria AD: WSKAŹNIK Okres sprawozdawczy (BGN '000) * 2009* Wzrost 2010 Wzrost Wzrost 35

36 Przychody z działalności operacyjnej Przychody z działalności zaniechanej 412, , , % 416, % 194, , % - 22,466 19, % 10, % 12, % Dochody ogółem 412, , , % 426, % 206, , % Zysk/(strata) za okres 4,124 4, % % -5, % Wynik netto przypadający na akcjonariuszy 8,451 8,451 1, % 2, % -4, % Zysk na akcję (BGN) % % % *** Suma aktywów 705, , , % 603, % 658, , % Aktywa netto 188, , , % 207, % 226, , % Kapitał zakładowy** 62,239 62,239 59, % 59, % 62, , % Liczba akcji ('000 sh.) 62,498 62,498 62, % 62, % 62, , % * Dane są przeklasyfikowane do celów porównawczych zobacz waŝna uwaga na stronie 63. ** Kapitał zakładowy jest pomniejszony o liczbę akcji posiadanych przez spółki zaleŝne. *** Zmiana w wyodrębnionych danych z sytuacji finansowej na dzień 30 czerwca 2011 r. jest oparta na podstawie danych sprawozdania finansowego za okres zakończony dnia 31 grudnia 2010 roku śródło: EuroHold Bulgaria AD Dalsze informacje finansowe moŝna znaleźć w I. "Wybrane informacje finansowe" w sekcji drugiej. PoniŜsza tabela przedstawia dane dotyczące kapitalizacji i zadłuŝenia Grupy na podstawie zbadanych skonsolidowanych sprawozdań finansowych na dzień 31 grudnia 2008, 31 grudnia 2009 r. i 31 grudnia 2010 r. i niezbadanego śródrocznego skonsolidowanego sprawozdania finansowego na dzień 30 czerwca 2011: Kapitalizacja i zadłuŝenie (BGN 000) 1. Kapitał własny i udziały niesprawujące kontroli 188, , , ,784 Kapitał własny 175, , , ,451 Udziały niesprawujące kontroli 12,742 55,703 52,270 52, Zobowiązania długoterminowe 332, , , ,979 Kredyty i poŝyczki 227, , , ,492 Obligacje 77,601 63,267 33,580 24,813 Odroczone zobowiązanie podatkowe 14,088 13,363 13,211 13,210 Zobowiązania długoterminowe 13,604 12,561 43,219 29, Zobowiązania krótkoterminowe 184, , , ,087 Rezerwy na umowy ubezpieczenia 110, , , ,914 Zobowiązania krótkoterminowe 52,098 28,971 18,861 20,985 Zobowiązania handlowe i inne naleŝności 17,093 26,673 14,635 14,361 Zobowiązania wobec reasekuratorów 4,362 4,093 2,133 2, Zobowiązania ogółem, (2+3) 517, , , , Kapitał własny i zobowiązania, (1+4) 705, , , , Kapitał własny / Aktywa ogółem, (1/5) Kapitał własny / Pasywa ogółem, (1/4) Zobowiązania ogółem / Aktywa ogółem, (4/5) Zobowiązania krótkoterminowe / Zobowiązania ogółem, (3/4) 10. Zobowiązania długoterminowe / Kapitał własny, (2/1) Źródło: EuroHold Bulgaria AD 36

37 W okresie sprawozdawczym wskaźnik dźwigni finansowej pozostaje na stosunkowo stabilnym poziomie. Grupa poŝycza środki w oparciu o zgromadzone zyski i wzrost kapitału własnego. Osiągnięta stabilna niezaleŝność finansowa i wskaźniki dźwigni finansowej, ułatwiają dostęp do środków finansowych. Struktura kapitałowa EuroHold Bulgaria jest stabilna. Wysokość kapitału własnego wynosi 39% sumy aktywów Grupy, dzięki czemu spółka ma zapewnioną stabilną sytuację kapitałową. Zobowiązania (BGN 000) Zobowiązania krótkoterminowe 163,087 Zobowiązania długoterminowe 208,979 Zobowiązania ogółem 372,066 Zobowiązania gwarantowane - Zobowiązania niegwarantowane 372,066 Zobowiązania ogółem 372,066 Zobowiązania zabezpieczone 144,010 Zobowiązania niezabezpieczone 228,056 Zobowiązania ogółem 372,066 Zobowiązania bezpośrednie 372,066 Zobowiązania pośrednie - Zobowiązania ogółem 372,066 Zobowiązania warunkowe - Źródło: EuroHold Bulgaria AD Zobowiązania zabezpieczone stanowią krótkoterminowe i długoterminowe kredyty bankowe kapitału obrotowegom, które są zabezpieczone rzeczowo na gruntach i budynkach naleŝących do Grupy. Emitent nie jest gwarantem jego innych zobowiązań lub odpowiedzialności wobec osób trzecich. Przyczyny dopuszczenia do obrotu Niektórymi z głównych przyczyn, dla których Grupa chce dopuszczenia jej akcji do obrotu na rynku regulowanym w Polsce są: Dostęp do większego i bardziej rozwiniętego rynku kapitałowego; Dostęp do większej ilości i większych inwestorów instytucjonalnych, bardziej zróŝnicowanych (autonomicznych); takŝe przyciągnięcie uznanych międzynarodowych inwestorów uprawnionych do inwestowania w spółki dopuszczone do obrotu na rynku regulowanym w Polsce; Zwiększenie płynności i ilości akcji Eurohold Bulgaria AD pozostających w wolnym obrocie; Zapewnienie długoterminowej płynności dla wszystkich akcjonariuszy Eurohold Bulgaria AD; Szansa na realizację zwiększonego wolumenu obrotu i odpowiedniej wyceny akcji Grupy. Ryzyka Inwestowanie w Akcje objęte Prospektem niesie ze sobą ryzyko, które mogłoby wywrzeć istotnie niekorzystny wpływ na perspektywy Emitenta, wyniki i sytuację finansową lub mogłoby doprowadzić do spadku wartości akcji. Przed podjęciem decyzji o inwestycji w Akcje, potencjalni inwestorzy powinni uwaŝnie przeanalizować i rozwaŝyć czynniki ryzyka opisane w II. "Ryzyko" w sekcji drugiej. a. Ryzyka systemowe Wpływ światowego kryzysu gospodarczego i finansowego 37

38 Ryzyko związane z ogólną sytuacją makroekonomiczną, polityczną i społeczną oraz polityką rządu Ryzyko polityczne Ryzyko kredytowe Ryzyko inflacji Ryzyko walutowe Ryzyko stopy procentowej Wchodzące i rozwijające się rynki Ryzyka związane z bułgarskimi rynkami kapitałowymi b. Ryzyka niesystemowe Ryzyko związane z działalnością gospodarczą Emitenta Ryzyka rozwoju strategicznego Ryzyka związane z zarządzaniem Spółką Ryzyka związane z niezdolnością do przyciągnięcia i utrzymania kluczowych pracowników Ryzyko związane ze zmianami w otoczeniu regulacyjnym Ryzyka związane z integracją przyszłych przejęć Ryzyko finansowe Ryzyko walutowe Ryzyko związane z płynnością Ryzyko związane z ewentualnymi transakcjami pomiędzy spółkami w grupie, na warunkach róŝniących się od warunków rynkowych, jak równieŝ uzaleŝnionych od aktywności grupy EuroIns Insurance Group AD (EIG) Ryzyko związane z brakiem moŝliwości pozyskania funduszy Ryzyko ubezpieczeniowe i ryzyko związane z niewłaściwą wyceną produktów Ryzyko niedoszacowania rezerw technicznych Ryzyko walutowe Ryzyko wypowiedzenia przez ubezpieczonego umowy ubezpieczenia Ryzyko oszustw ubezpieczeniowych Ryzyko niedostepnej reasekuracji, polityka niewystarczającej reasekuracji i brak płatności ze strony reasekuratora Ryzyko kredytowe EuroLease Group (ELG) Ryzyko kredytowe Ryzyko związane z płynnością Ryzyko rynkowe (ryzyko stopy procentowej, ryzyko walutowe, itd.) Ryzyko ubezpieczeniowe braku płatności dostawcy za uszkodzony lub skradziony przedmiot leasingu Ryzyko braku finansowania zewnętrznego w rozsądnych stawkach Ryzyko koncentracji 38

39 Avto Union (AU) Ryzyka niedokonania dostawy przez dostawców lub inne zakłócenia Siła wyŝsza, poŝary, trzęsienia ziemi, powodzie UzaleŜnienie od bezwzględnie obowiązujących norm i przepisów Real Estate Rozwój rynku Dostep do środków finansowych i koszty finansowania Ryzyka wynikające z przepisów związanych z ochroną środowiska Klęski Ŝywiołowe Euro-Finance (EF) Ryzyko rynkowe i kredytowe Rozliczenia i ryzyko rozliczeniowe Ryzyko regulacyjne Komunikacja i ryzyko transmisji danych c. Ryzyko związane z rynkami papierów wartościowych, akcjami i notowaniem Ryzyka zbywalności i istotnych wahań kursu akcji Ryzyka wynikające ze sprzedaŝy znacznych pakietów akcji Eurohold Bulgaria AD w przyszłości Ryzyka obowiązków regulacyjnyc Ryzyka podatkowe Ryzyka związane z niezdolnością do notowania Ryzyko związane z przyszłym rynkiem akcji i jego płynnością Ryzyko zawieszenia obrotu akcji Ryzyko podwójnego notowania Ryzyko opóźnienia dopuszczenia do obrotu lub ryzyka braku wystąpienia o dopuszczenie do obrotu Ryzyko zagranicznych wahań walutowych Ryzyka rozmycia Ryzyko zwrotu z akcji 4. Informacje dotyczące Emitenta a. Historia i rozwój Emitenta Nazwa handlową Emitenta jest EUROHOLD BULGARIA AD. Nazwa handlowa jest zdefiniowana w art. 2, ust. 1 Statutu Spółki. Zgodnie z art. 2, ust. 3 Statutu Spółki, nazwa handlowa Spółki moŝe być pisana (uŝywana) w języku angielskim, w następujący sposób: "EUROHOLD BULGARIA S.A". EuroHold Bulgaria AD jest spółką holdingową, zarejestrowaną w Republice Bułgarii i działającą zgodnie prawem bułgarskim. EuroHold Bulgaria AD jest spółką publiczną w rozumieniu ustawy o ofercie publicznej. Pierwotnie rejestracja Spółki nastąpiła w Rejestrze Handlowym przy Sądzie Miejskim w Sofii, sygnatura akt nr 14436/2006, pod nr , tom 1509, strona 116 W dniu roku EuroHold Bulgaria AD zgodnie z wymogami ustawy o Agencji Rejestrowej została przerejestrowana do Rejestru Handlowego prowadzonego przez Agencję Rejestrową, gdzie nadany jej został numer rejestracyjny (UIC)

40 EuroHold Bulgaria AD jest utworzona na czas nieokreślony, to znaczy bez zastrzeŝenia jakiegokolwiek terminu czy warunku rozwiązującego. EuroHold Bulgaria AD to publiczna spółka akcyjna utworzona przez połączenie Eurohold AD, zarejestrowanej w Rejestrze Handlowym przy Sądzie Miejskim w Sofii pod nr 13770/1996 i Starcom Holding AD, zarejestrowanej w Rejestrze Handlowym przy Sądzie Miejskim w Sofii pod nr 6333/1995. Dzięki połączeniu, nowo powstały holding EuroHold Bulgaria AD umocnił swoją pozycję jako jedna z największych grup w Bułgarii, która posiada istotny potencjał rozwoju, znaczący kapitał własny i znaczące środki finansowe. EuroHold Bulgaria AD powstała z kapitałem początkowym w wysokości BGN, dzielącym się na zwykłych, zarejestrowanych, nieuprzywilejowanych, zdematerializowanych akcji z prawem głosu, z prawem do dywidendy i kwoty likwidacyjnej, o wartości nominalnej 1 BGN kaŝda. Od początku istnienia spółki do chwili obecnej, zostało dokonanych kilka podwyŝszeń kapitału zakładowego poprzez wniesienie wkładów pienięŝnych, natomiast na dzień sporządzenia niniejszego Prospektu, kapitał spółki wynosi BGN i dzieli się na zwykłych, zarejestrowanych, nieuprzywilejowanych, zdematerializowanych akcji z prawem głosu, z prawem do dywidendy i z prawem do kwoty likwidacyjnej, o wartości nominalnej 1 BGN kaŝda. Szczegółowy opis zmian w kapitale zakładowym moŝna znaleźć w rozdziale XIX.2. "Zmiany w kapitale zakładowym", Sekcja 2. W chwili powstania EuroHold Bulgaria AD posiadała wiele spółek zaleŝnych, które działały w zakresie ubezpieczeń, leasingu, nieruchomości i przemysłu. DąŜąc do optymalizacji kosztów i osiągnięcia większej synergii pomiędzy wszystkimi spółkami zaleŝnymi, EuroHold podzielił funkcjonalnie, na odrębne podmioty prawne, wszystkie swoje spółki zaleŝne. Dnia roku EuroHold Bulgaria AD załoŝył EuroIns Insurance Group EAD w celu konsolidacji działalności ubezpieczeniowej. Dnia roku na sesji Walnego Zgromadzenia Akcjonariuszy EuroHold Bulgaria AD, została podjęta decyzja o wniesieniu wkładu niepienięŝnego, posiadanego przez EuroHold Bulgaria AD w postaci spółek zaleŝnych EuroIns AD, EuroIns Romania Asigurare Reasigurare SA i Health Assurance company St. Nicolay Chudotvorets EAD (obecnie EuroIns Health Assurance EAD). W/w wkład niepienięŝny został wniesiony po wyraŝeniu zgody przez Bułgarską Komisję Nadzoru Finansowego oraz Rumuńską Komisję Nadzoru Ubezpieczeń. Następnie EuroIns Insurance Group EAD przejęła Macosped Osiguruvanje AD, Skopje (obecnie EuroIns Osiguruvanje AD, Skopje) po zatwierdzeniu tej operacji przez Ministerstwo Finansów Republiki Macedonii dnia roku. Tworzenie motoryzacyjnego sub-holdingu EuroHold Bulgaria AD - EuroHold Automotive Group EAD rozpoczęto pod koniec 2008 roku. Spółka została załoŝona w 2007 r. a jej początkowy kapitał zakładowy został utworzony porzez wniesienie wkładu niepienięŝnego z kapitału Cargoexpress EOOD (obecnie Bulvaria Varna EOOD) dealer Opla i Chevroleta w mieście Warna. Konsolidacja branŝy motoryzacyjnej działalności EuroHold Bulgaria AD została dokonana poprzez wniesienie wkładu niepienięŝnego Emitenta w postaci spółek zaleŝnych - Skandynawia Motors EAD - oficjalnego importera SAAB w Bułgarii, Nissan Sofia AD - największego dealera Renault Nissan w Bułgarii i EuroLease Rent-a-Car EOOD - wyłącznego partnera franczyzowego Budget Rent-a-car w Bułgarii. Walne Zgromadzenie Akcjonariuszy EuroHold Bulgaria AD zatwierdziło wniesienie powyŝszych wkładów niepienięŝnych na posiedzeniu w dniu roku, natomiast roku powstał sub-holding motoryzacyjny. W kwietniu 2009 roku EuroHold Automotive Group EAD przejęła kontrolę nad grupą Avto Union AD, która składała się z: Auto Italia EAD - oficjalnego importera marek Fiat i Lancia w Bułgarii, Bulvaria Holding EAD - dealera Opla i Chevroleta w Sofii, Gransport Auto EOOD - oficjalnego importera Maserati w Bułgarii, Milano Motors EOOD - oficjalnego importera marki Alfa Romeo i skuterów Piaggio, Vespa i Guillera, Star Motors EOOD - oficjalnego przedstawiciela Mazdy w Bułgarii i Bulvaria Rent-a-Car EOOD - oficjalnego franczyzodawcy Avis Europe w Bułgarii. Pod koniec 2010 roku EuroHold Automotive Group EAD (obecnie Avto Union Group EAD) przeniosła własność swoich akcji w Skandinavia Motors EAD, Nissan Sofia AD i EuroLease Rent-a-Car EOOD do Avto Union AD. Avto Union AD przejął Espace Auto EOOD - największego dealera Renault, co zakończyło proces tworzenia sub-holdingu motoryzacyjnego EuroHold Bulgaria AD. Na dzień sporządzenia niniejszego Prospektu, Bulvaria-Rent-a-Car EOOD został wchłonięty przez EuroLease Rent-a-Car EOOD, który po przejęciu stał się jego następcą prawnym. Ta transformacja zmniejszy wydatki Avto Union AD związane z biznesem rent-a-car o ponad BGN rocznie. Pod koniec 2008 roku EuroHold Bułgaria AD przejęła 100% kapitału zakładowego holenderskiej spółki BG Autolease Holding B.V. (poprzednia nazwa handlowa Wivotech B.V.), która z kolei wcześniej przejęła holenderską spółkę - BG Autolease Group B.V. (poprzednia nazwa handlowa to Doesign B.V.). EuroHold Bulgaria AD sfinalizowała proces wniesienia wkładu niepienięŝnego spółki zaleŝnej BG Autolease Holding B.V. z jego pakietu kontrolnego w EuroLease Auto EAD, Bułgaria, EuroLease Auto IFN SA, Rumunia, EuroLease Auto EAD, Macedonia. BG Autolease Holding B.V. wniosła przedmiotowy wkład niepienięŝny w sub-holdingu leasingowym BG Autolease Group B.V. do struktury EuroHold Bulgaria AD. 40

41 W 2007 roku EuroHold Bulgaria AD określiła swoje przedsiębiorstwa przemysłowe jako niestrategiczne, dlatego została podjęta decyzja o ich sprzedaŝy, która nastąpiła w sierpniu 2008 roku. Na dzień sporządzenia niniejszego Prospektu EuroHold Bulgaria AD posiada większość akcji pośrednika inwestycyjnego Euro-Finance AD, który jest częścią Grupy od 2006 roku. W obszarze sektora nieruchomości Grupa posiada dwie spółki operacyjne - EuroHold Imoti EOOD i Avto Union Prosperities EOOD. Statutowa działalność Emitenta i jego cele Działalnością statutową EuroHold Bulgaria jest nabywanie, zarządzanie, ocena i sprzedaŝ akcji spółek bułgarskich i zagranicznych; nabywanie, zarządzanie i sprzedaŝ obligacji; nabywanie, ocena i sprzedaŝ patentów, udzielanie licencji na prawa patentowe wykorzystywane w spółkach, w których spółka posiada akcje; finansowanie przedsiębiorstw, w których spółka posiada akcje. Spółka jest uprawniona do uczestniczenia w spółkach bułgarskich i zagranicznych, niezaleŝnie od prowadzonej przez nie działalności gospodarczej, zgodnie z warunkami określonymi przez prawo i Statut Spółki. Spółka nie moŝe uczestniczyć w spółce, która nie jest osobą prawną; nie moŝe nabywać licencji, które nie są przeznaczone do wykorzystania w spółkach zaleŝnych; nie moŝe nabywać nieruchomości, które nie są przeznaczone na własny uŝytek. Dozwolone jest nabycie udziałów w nieruchomościach spółek. Siedziba i adres rejestrowy Główne biuro i adres siedziby Zarządu Emitenta znajduje się w Republice Bułgarii, w Sofii 1592, w Dzielnicy Iskar, przy ulicy 43 Christopher Columbus Blvd. Adres rejestrowy siedziby Spółki jest toŝsamy. Jest to równieŝ oficjalny adres korespondencyjny Spółki. Z Emitentem moŝna się skontaktować w następujący sposób: Adres: 43 Christopher Columbus Blvd Telefon 02/ ; 02/ Fax 02/ Strona internetowa investors@eurohold.bg; office@eurohold.bg b. Działalność Emitenta EuroHold Bulgaria AD jest zarejestrowana w Republice Bułgarskiej. Jej główne działania to: nabywanie, zarządzanie, ocena i sprzedaŝ akcji w bułgarskich i zagranicznych spółkach; finansowanie spółek, w których Spółka partycypuje; partycypowanie w bułgarskich i zagranicznych spółkach. Przychody Eurohold Bulgaria AD są tworzone głównie dzięki działalności finansowej związanej z nabywaniem i zarządzaniem akcjami i finansowaniem powiązanych przedsiębiorstw. Na dzień Eurohold Bulgaria AD ma bezpośredni udział w pięciu spółkach zaleŝnych i dwóch powiązanych przedsiębiorstwach. Spółki z portfela Eurohold Bulgaria AD, działają na następujących rynkach: rynek ubezpieczeń i rynek ubezpieczeń zdrowotnych, rynek leasingowy, rynek finansowy, rynek motoryzacyjny, rynek nieruchomości. Ogólnie działalność skoncentrowana jest na osiąganiu maksymalnego efektu synergii z powiązanych w duŝej mierze segmentów: SprzedaŜy Samochodów Leasingu Ubezpieczeń. Zgodnie z danymi historycznymi spółki Grupy oferują następujące usługi: usługi ubezpieczeniowe; usługi w zakresie ubezpieczeń zdrowotnych; 41

42 leasing finansowy i operacyjny; pośrednictwo finansowe; sprzedaŝ nowych samochodów; sprzedaŝ uŝywanych samochodów; przegląd; sprzedaŝ części zapasowych; rent-a-car; zarządzanie nieruchomościami inwestycyjnymi. W 2010 roku Grupa posiadała udziały w innych spółkach, równieŝ oferujących usługi uznane za niestrategiczne. Z tego powodu we wrześniu 2010 roku te spółki zostały sprzedane. Sprzedane spółki oferowały następujące usługi: wprowadzanie aplikacji GPS do kontroli, bezpieczeństwa i logistyki parków samochodowych; zarządzanie nieruchomościami turystycznymi; produkcja jednorazowych artykułów medycznych; produkcja sprzętu instrumentalnego dla wyrobów z plastiku; geochemiczne badania laboratoryjne i badania geologiczne, chemiczne i ekologiczne. Obecna struktura działalności obejmuje trzy główne sub-holdingi: EuroIns Insurance Group AD, Avto Union AD i EuroLease Group, które specjalizują się odpowiednio w ubezpieczeniach, sprzedaŝy i leasingu samochodów, spółkę pośrednictwa inwestycyjnego - Euro-Finance AD i spółkę zajmującą się nieruchomościami - EuroHold Imoti EOOD. EuroIns Insurance Group EuroIns Insurance Group AD (EIG) została załoŝona w końcu 2007 roku, jako w 100 procentach spółka zaleŝna EuroHold Bulgaria AD, w której koncentruje się działalność ubezpieczeniowa struktury holdingowej. Na dzień sporządzania Prospektu, Eurohold Bulgaria AD posiada 80.82% kapitału EIG. Podczas ostatnich pięciu lat, Grupa rozszerzyła swoją działalność poprzez przejęcie spółek ubezpieczeniowych w Rumunii, Macedonii, Serbii i Turcji. Spółki ubezpieczeniowe w Grupie posiadają ponad 300 regionalnych biur oraz ponad 1 milion klientów w regionie. Miniony 2010 rok był bardzo waŝnym okresem dla rozwoju i stania się EIG regionalnym liderem w sektorze ubezpieczeń. Wysiłki i inwestycje dokonane w ciągu ostatnich kilku lat zapewniły stabilizację pozycji rynkowej spółek w Bułgarii, Rumunii i Macedonii. W końcu 2010 roku, EIG posiadała pakiet większościowy w spółkach w Bułgarii, Macedonii, Turcji i Rumunii i mniejszościowy udział w spółce serbskiej. Udział EIG w kapitale zakładowym spółek wynosi odpowiednio: % w EuroIns AD, 91.39% w EuroIns Insurance Skopje AD, % w EuroIns Romania Asigurare Reasigurare S.A., 100 % w EuroIns Health Assurance EAD, % w Inter Sigorata AS, Turcja, i 8.1 % w Takovo Osiguranje AD, Serbia. Głównym celem EIG jest osiągnięcie 10 % udziału w rynku w średnim horyzoncie czasowym w regionie bałkańskim w sektorze ubezpieczeń powszechnych. Przedmiotem działalności spółek zaleŝnych EIG są ubezpieczenia powszechne i zapewnienie ochrony zdrowia. Oferowany produkt mieści w sobie obowiązkowe ubezpieczenie OC kierowców, auto casco, ubezpieczenie mienia, cargo insurance, ogólną odpowiedzialność osoby trzeciej, ubezpieczenie upraw i zwierząt gospodarskich, ubezpieczenie statków, ubezpieczenie samolotów, ubezpieczenie od ryzyk finansowych, ubezpieczenie travel assistance, ubezpieczenie wypadkowe i chorobowe. Głównymi konkurentami EIG są międzynarodowe grupy ubezpieczeniowe jak Allianz, Vienna Insurance Group, Generali, Uniqa itd., które działają na wielu rynkach, na których takŝe działają spółki zaleŝne EIG. EuroLease Group Sub-holding leasingowy BG AutoLease Holding B.V. i jego spółka zaleŝna BG AutoLease Group B.V. są holdingami zajmującymi się inwestycjami Eurohold w branŝy leasingowej na Bałkanach. Spółki zostały załoŝone w Holandii i przejęte przez Eurohold w 2008 roku a później akcje poszczególnych spółek w 42

43 Bułgarii, Rumunii i Macedonii zostały wniesione aportem do Eurolease Group. Spółki zostały zarejestrowane w Holandii w celu zapewnienia łatwiejszego dostępu do środków finansowych międzynarodowych rynków finansowych. Sub-holding leasingowy BG AutoLease Holding B.V. i jego spółka zaleŝna BG AutoLease Group B.V. zostały połączone pod wspólną nazwą handlową Eurolease Group (ELG). Struktura ELG składa się z Eurolease Auto Bulgaria (100%), Eurolease Auto Romania (74.93%) i Eurolease Auto Macedonia (100%). Eurolease Auto Bulgaria posiada z kolei 51% Euromobil Leasing i 100% Eurolease Auto Finance. Część spółek grupy ELG oferuje leasing finansowy nowych i uŝywanych pojazdów, nowych samochodów osobowych i lekkich pojazdów dostawczych, cięŝarówek i autobusów. Konkurentami spółek zaleŝnych ELG są wszystkie spółki leasingowe w regionie, w szczególności takie, które specjalizują się w leasingu nowych samochodów osobowych Interlease, BM Leasing, Raiffeisen Leasing, UniCredit Leasing, EFG, równieŝ jako importerzy oferujący tani i wspomagany leasing (captive leasing). Ich konkurencyjna siła jest związana z ich przynaleŝnością do grupy finansowej i wykorzystywania tanich środków finansowych. Z drugiej strony, uczestniczenie spółki leasingowej w strukturze bankowej, ogranicza swobodne kredytowanie ze względu na konieczność zgodności z odpowiednimi przepisami bankowymi odnośnie kredytowania podmiotów powiązanych. Pełna nazwa spółki to BG AutoLease Holding B.V. Została załoŝona w Holandii w ramach długoterminowej strategii EuroHold polegającej na uporządkowaniu swoich podstawowych branŝ działalności spółki w osobne autonomiczne sub-holdingi. EuroLease Group odgrywa kluczową rolę w ogólnej strategii EuroHold to łączy dealerów samochodowych i ubezpieczycieli do oferowania pakietowych produktów ze wspólną wartością dodaną. Akcje poszczególnych spółek leasingowych w Bułgarii, Rumunii i Macedonii były wniesione aportem do EuroLease Group w 2009 roku. Po zakończeniu integracji wszystkich zaleŝnych spółek leasingowych, nowo utworzona spółka holdingowa EuroLease Group stała się jedną z największych grup leasingowych w regionie ze znaczącym potencjałem do dalszego rozwoju, znaczącym kapitałem własnym i znaczącymi środkami finansowymi. Avto Union AD Avto Union AD jest holdingiem, który łączy inwestycje EuroHold Bulgaria z działalnością motoryzacyjną. Avto Union sprzedaje 11 marek samochodów w Bułgarii. Avto Union takŝe zawarło umowę franczyzy pod markami AVIS i Budget. Avto Union (AU) jest niekwestionowanym liderem na rynku Bułgarii w sprzedaŝy nowych samochodów. AU zarządza największym portfelem marek samochodów w Bułgarii. Unikalna strategia zarządzania portfelem wielu marek jest wspomagana przez stałą poprawę udogodnień, jakości produktów i usług, edukacji pracowników i nowych pakietów produktów w połączeniu z leasingiem i ubezpieczeniem. Głównym kierunkiem działalności AU jest: SprzedaŜ nowych samochodów, motocykli i skuterów; SprzedaŜ oryginalnych części zamiennych, smarów i akcesoriów; Rent-a-car (na krótki lub dłuŝszy okres); Buy-back samochodów; Avto Union, dzięki spółkom zaleŝnym, jest: Wyłącznym importerem na Bułgarię następujących marek: Mazda, FIAT, Lancia, Alfa Romeo, Maserati, SAAB, i skuterów Vespa, Piaggio i Gilera; Autoryzowanym dealerem Opla, Nissana, Renault, Dacia i Chevrolet; Wyłącznym franczyzobiorcą Budget Rent-a-Car i Avis Rent-a-Car na Bułgarię. KaŜdy model, który jest sprzedawany klientom przez Avto Union, moŝna przetestować. Przewidziana jest takŝe pomoc dla klienta przy rejestracji kaŝdego nowo zakupionego pojazdu. Ponadto klienci mogą skorzystać z następujących dodatkowych usług: 5 lat Rozszerzonej gwarancji rozszerzenia gwarancji moŝna dokonać na 1 lub 2 lata zgodnie z preferencjami klientów; obejmuje przebieg do km; Samochód zastępczy w przypadku wypadku lub uszkodzenia samochodu; Wewnętrzne i zewnętrzne mycie samochodu, itd.; 43

44 Gwarancja i serwis pogwarancyjny; Wykup pojazdu; Główni konkurenci Avto Union mają róŝne profile biznesowe, które stanowią tylko część usług, jakie wykonuje Avto Union. Największymi konkurentami z podobnymi profilami biznesowymi wydają się być: Toyota Balkans AD (Toyota i Lexus), Moto Pfohe (Ford, Volvo Jaguar i Land Rover) i Porsche Bulgaria (Volkswagen i Audi). Jedyną spółką, która zbliŝa się do modelu biznesowego Avto Union i sprzedaje więcej niŝ jedną niepowiązaną ze sobą właścicielsko markę samochodów jest Balkan Star AD. Balkan Star sprzedaje marki takie jak Mercedes, Mitsubishi, Chrysler, Dodge, Jeep i jednocześnie jest dealerem Renault i Dacii. JednakŜe Balkan Star ma mniejszy udział w rynku niŝ Avto Union około 5 %. Euro-Finance AD Euro-Finance jest częścią strategiczną portfela Eurohold Bulgaria od 2006 roku. Euro-Finance jest jednym z pierwszych licencjonowanych pośredników inwestycyjnych w Republice Bułgarskiej legitymującym się prawie z 18 letnią historią działalności. Spółka jest jedynym lokalnym członkiem Deutsche Börse Group i poprzez jej sieć i długotrwałe relacje z międzynarodowymi brokerami, oferuje szeroki zakres produktów inwestycyjnych obrót akcjami, instrumentami dłuŝnymi, instrumentami pochodnymi, zagraniczny obrót giełdowy, obrót kontraktami róŝnicowymi (CFD), transakcje typu REPO, krajowe i zagraniczne płatności S.W.I.F.T. Euro-Finance jest wiodącą niebankową instytucją finansową w Bułgarii, która ma na celu zapewnienie wysokiej jakości produktów inwestycyjnych i usług mając na uwadze indywidualne podejście do kaŝdego klienta. Euro-Finance świadczy usługi inwestycyjne i finansowe dla indywidualnych klientów, korporacji oraz klientów instytucjonalnych. Do klientów Euro-Finance naleŝą krajowe spółki ubezpieczeniowe, fundusze emerytalne, zagraniczne fundusze inwestycyjne itd. Od załoŝenia Euro-Finance jest członkiem Bułgarskiej Giełdy Papierów Wartościowych Sofia AD a takŝe pierwszym i jedynym bułgarskim pośrednikiem inwestycyjnym, który jest pełnoprawnym członkiem Frankfurt Stock Exchange, jak równieŝ jedynym niebankowym pośrednikiem finansowym, który uczestniczy w międzynarodowym systemie płatniczym S.W.I.F.T. Nieruchomości BranŜa nieruchomości Eurohold Group jest reprezentowana przez trzy spółki Eurohold Imoti EOOD łącznie z jej spółką zaleŝną Eurohold Imoti V. Tarnovo EOOD i Avto Union Properties EOOD. EuroHold Imoti EOOD jest spółką specjalizującą się w zarządzaniu nieruchomościami inwestycyjnymi. Spółka jest właścicielem salonu samochodowego i sklepu motoryzacyjnego części zamiennych wykorzystywanych przez Nissan Sofia. Jest takŝe właścicielem komercyjnej działki, połoŝonej wzdłuŝ Europe Blvd. w Sofii przeznaczonej na nowy salon i warsztat spółki Nissan Sofia AD, sprzedającej się Nissany, Renault i Dacie. EuroHold Imoti EOOD administruje Eurohold Buniness Centre, gdzie ma siedzibę EuroHold Bulgaria AD i jej spółki zaleŝne, wliczając w to kilka motoryzacyjnych salonów. Avto Union Properties EOOD jest właścicielem nieruchomości w Sofii, Gorni Lozen, Płowdiw, Burgas itd. oraz planuje budowę salonów i warsztatów samochodowych dla Avto Union AD. Kilka działek zostało sprzedanych w 2010 roku jako część planu wyzbycia aktywów niepotrzebnych dla podstawowej działalności. EuroHold zainwestował wpływy z tych sprzedaŝy w trzech branŝach podstawowej działalności. 5. Perspektywy finansowe i operacyjne a. Badania i rozwój, patenty i licencje, itd. Eurohold Bulgaria nie dokonała nakładów na działalność badawczo-rozwojową. Taka działalność nie jest prowadzona przez spółki z Grupy. Ograniczony działalność rozwojowa była prowadzona wyłącznie przez spółkę Ettropal AD przed jej sprzedaŝą w 2010 roku, ale skala tej działalności nie była istotna. EuroHold Group nie posiada własnych patentów. DuŜa część działalności spółki jest prowadzona z wykorzystaniem licencji w pełni opisanych w IV.8. Główne rynki w sekcji drugiej. 44

45 b. Trendy W 2010 roku i obecnym 2011 roku główne wysiłki EuroHold Bulgaria są skoncentrowane w następujących głównych biznesowych liniach strategicznych: SprzedaŜ samochodów Leasing Ubezpieczenia Pośrednictwo finansowe Nieruchomości Po zakończeniu sprzedaŝy niestrategicznych aktywów we wrześniu 2010 roku, EuroHold Bulgaria jest całkowicie skoncentrowana na głównych liniach strategicznych. Ubezpieczenia Podobnie jak większość działów bułgarskiej ekonomii, takŝe sektor ubezpieczeń odnotował w 2010 roku spadek o 5%. W 2011 roku zanotowano mniejszy spadek. Istnieje pozytywna tendencja w wynikach inwestycyjnych ubezpieczycieli ze względu na stabilizację rynków kapitałowych. W pierwszej połowie 2011 roku EuroIns Insurance Group udało się zainkasować skonsolidowane składki ubezpieczeniowe w wysokości 95.4 milionów BGN w porównaniu z milionami BGN za analogiczny okres w 2010 roku. Głównym powodem spadku przychodów było obniŝenie składki obowiązkowej OC kierowców w Rumunii o 40 %, związane ze spadkiem cen rynkowych w Rumunii. W pierwszej połowie roku nastąpił znaczący wzrost niekomunikacyjnych składek ubezpieczeniowych w porównaniu do minionego roku ubezpieczenia majątkowe, wypadkowe i odpowiedzialności cywilnej wzrosły o odpowiednio 41 %, 18% i 77%. Składki ubezpieczeniowe CASCO i CARGO w tym okresie zostały obniŝone o 34% i 37% głównie z powodu stagnacji gospodarki. W pierwszej połowie 2011 roku EuroIns odnotowała przychód w wysokości 36 millionów BGN składek ubezpieczeniowych brutto lub 4.9 % wzrostu w porównaniu za ten sam okres w 2010 roku, kiedy kształtowały się one na poziomie milionów BGN. Osiągnięty wynik był głównie spowodowany wzrostem obowiązkowej składki ubezpieczeniowej OC kierowców o 4.7 miliony BGN lub o 38.8 % w porównaniu do poprzedniego roku, przy jednoczesnym zachowaniu polityki spółki dąŝącej do utrzymania wzrostu składki brutto na rozsądnym poziomie. Podczas tego okresu średnia składka od ubezpieczenia z tytułu ogólnego ryzyka wzrosła z 131 BGN do 175 BGN w połączeniu ze znacznym obniŝeniem kosztów pozyskania klientów. Podczas pierwszych sześciu miesięcy 2011 roku EuroIns odnotowała przychody netto w wysokości 1.5 miliona BGN w porównaniu ze stratą opiewającą na miliona BGN za ten sam okres w roku W pierwszej połowie roku EuroIns Romania odnotowała przychód ze składek ubezpieczeniowych brutto na poziomie milionów BGN lub 39% spadku w porównaniu z tym samym okresem w roku Za ostatni okres sprawozdawczy strata netto kształtowała się na poziomie 0.8 miliona, w porównaniu do straty 0.9 milion BGN w 2010 roku. Za sześć pierwszych miesięcy 2011 roku EuroIns Macedonia odnotowała przychód ze składek ubezpieczeniowych brutto na poziomie 6.8 milionów BGN lub 7% wzrostu w porównaniu do tego samego okresu w 2010 roku. Strata netto za pierwszą połowę 2011 roku wynosi 0.4 miliona BGN w porównaniu ze stratą 0.2 miliona BGN w tym samym okresie w 2010 roku. Skonsolidowana strata EuroIns Insurance Group za sześć pierwszych miesięcy 2011 roku wynosi 0.39 miliona BGN w porównaniu ze stratą 1.2 miliona BGN za ten sam okres w roku Główne tendencje w rozwoju rynku ubezpieczeń podczas następnych 1-3 lat przedstawiają się następująco: Wysokość (cena) obowiązkowego ubezpieczenia OC kierowców będzie wzrastać, co przyczyni się do poprawy wyniku technicznego; Ubezpieczenie samochodowe pozostanie główną siłą napędową rynku; Nowe produkty ubezpieczeniowe zostaną wprowadzone na rynek ubezpieczeń; Rynek będzie wzrastał wraz z oŝywieniem ekonomicznym, które ma się rozpocząć w 2011 roku. 45

46 Zgodnie z opisaną tendencją EuroIns Insurance Group spodziewa się ogólnego wzrostu składek ubezpieczeniowych w Grupie, rozwojem rynku ubezpieczeń i stopniowego obniŝania ekspozycji na produkty komunikacyjne. SprzedaŜ samochodów W okresie rynek motoryzacyjny w Bułgarii wzrósł ponad czterokrotnie. W 2009 roku z powodu wpływu kryzysu światowego, rynek samochodowy obniŝył się o 50%. Taka tendencja utrzymała się do 2010 roku, kiedy spadek był nadmierny i wyniósł ponad 25 % w porównaniu do 2009 roku. Na koniec 2010 roku i w pierwszej połowie 2011 roku nowy rynek samochodowy wzrósł umiarkowanie, co jest oznaką stopniowego oŝywienia. Podczas pierwszych sześciu miesięcy 2011 roku rynek samochodowy w Bułgarii wzrósł o 12.5 % w porównaniu z tym samym okresem w 2010 roku i Avto Union utrzymał swój udział w rynku. W pierwszej połowie 2011 roku Avto Union miało przychody w kwocie 47.3 milionów BGN, co jest dowodem na stabilne oŝywienie w sektorze motoryzacyjnym. Strata netto Avto Union na dzień 30 czerwca 2011 roku obniŝyła się o około 40 % w porównaniu do analogicznego okresu w poprzednim roku. Poprawiony wynik został osiągnięty ze względu na większy margines i optymalizację kosztów. W roku 2011 tendencja wzrostowa rynku utrzyma się w całości, z wyjątkiem pierwszej połowy 2012 roku, gdzie prognozuje się niewielki spadek o około 5 %, co jest spodziewane jako rezultat zmian prawnych w ustawie o podatku VAT. Zmiana dotyczy prawa do odliczenia podatku naliczonego od pojazdów i ograniczenia eksportu pojazdów (reeksport). W ciągu drugiej połowy 2012 roku naleŝy spodziewać się stabilnego wzrostu o około 8-10%, a takŝe analogicznego rocznego wzrostu w ciągu najbliŝszych 3 lat. Avto Union prognozuje zwiększenie jego udziału w rynku jako rezultat: Doskonałych moŝliwości rozwoju istniejącej klienteli opartej na klientach indywidualnych i korporacyjnych; Wzrostu liczby klientów korporacyjnych; Spodziewanych zmian regulacyjnych ograniczających reeksport. Oczekiwania przyszłego rozwoju rynku motoryzacyjnego Bułgarii są oparte na prognozach oŝywienia gospodarki lokalnej, którego pierwsze oznaki moŝna juŝ zaobserwować. W następnych latach nastąpi szybkie oŝywienie we wszystkich sektorach biznesu, co nieuchronnie doprowadzi do zwiększenia transakcji dotyczących klientów flotowych i korporacyjnych. Uzdrowienie warunków ekonomicznych i poprawa warunków prowadzenia działalności gospodarczej w Bułgarii spowodują wzrost wskaźnika zatrudnienia oraz tym samym więcej środków z przeznaczeniem na konsumpcję. TakŜe finansowanie stanie się wówczas bardziej dostępne, co przełoŝy się na wyniki sprzedaŝy. Innym waŝnym czynnikiem, który przyczyni się do rozwoju nowego rynku samochodowego w Bułgarii jest obecnie bardzo stary i niewydajny krajowy park samochodowy. Ponad 85% samochodów to samochody ponad 10-letnie. Ponad 20% to samochody ponad 20-letnie. Tak więc istnieje duŝe zapotrzebowanie na odnowienia istniejącego parku samochodowego. Leasing Ze względu na globalny kryzys finansowy większość spółek leasingowych w Bułgarii dotknął spadek skali ich działalności oraz przychodów. Było to konsekwencją ograniczenia finansowania bankowego. Leasing jest finansowany głównie z kredytów bankowych i obligacji. Stagnacja na rynkach kredytowych w 2009 roku i 2010 roku utrudniła pozyskiwanie środków finansowych podmiotom niezwiązanym z sektorem bankowm. JednakŜe, sub-holdingowi leasingowemu udało się w tej trudnej sytuacji nie tylko utrzymać, ale znacząco zwiększyć udział w rynku po podpisaniu umowy z EBOR i kilkoma lokalnymi bankami na wszystkich trzech rynkach, na których działa. Na podstawie danych prowadzonych przez Narodowy Bank Bułgarii, w 2010 roku EuroLease Auto było jednym z trzech największych spółek leasingowych samochodów osobowych i posiadało 10 % udziału w rynku w tej nowoutworzonej linii biznesowej. 46

47 Model finansowania, z którego EuroLease Auto korzystał w 2010 roku było kontynuowane równieŝ w roku Ze względu na rozbudowaną sieć dystrybutorów i aktywne zarządzanie naleŝnościami, spółka utrzymała dotychczasowy współczynnik zaległych płatności i ograniczyła przejęcia samochodów w porównaniu do pozostałych uczestników rynku. W pierwszej połowie roku, EuroLease Group wniosła Euro dodatkowego kapitału do EuroLease Auto Bulgaria, a takŝe wcześniejszych podwyŝszeń kapitału zakładowego. EuroLease Auto będzie korzystać z nowych funduszy do dalszego wzrostu jego portfela, zgodnie jednak z obowiązującymi wskaźnikami finansowymi narzuconymi przez poŝyczkodawców. W końcu pierwszego półrocza 2011 roku EuroLease Auto Bulgaria zdołał utrzymać rozmiar dynamiki swojego portfela w porównaniu do końca 2010 roku. Rok 2011 przyniósł umiarkowane oŝywienie lokalnych rynków kredytowych. Większość spółek leasingowych związana z bankami zaczęła działać aktywnie i oferować atrakcyjne warunki leasingowe. Niektóre z banków zaczęły ponownie kredytować zewnętrzne niezaleŝne spółki. Istnieją oznaki oŝywienia rynku leasingowego w wyniku stabilnego miesięcznego zwiększania zawierania nowych umów w szczególności w Bułgarii, a takŝe spadku udziału złych umów leasingowych i przyspieszenia sprzedaŝy przejętych aktywów. Większość ze spółek leasingowych, które są w posiadaniu banków prowadzących działalność na trzech rynkach, rozpoczęła aktywną kampanię marketingową, która obejmuje znaczące obniŝki stóp procentowych i udziału własnego. Ze względu na relatywnie większe koszty finansowania w porównaniu z bankowymi spółkami leasingowymi ELG oraz spółki zaleŝne ELG nie mogły aktywnie uczestniczyć w wojnie cenowej. Ich wysiłki są jednak skoncentrowane na poprawie jakości usług świadczonych klientom. Od początku 2011 roku EuroLease Auto odnotowała 7.43% udział w rynku w nowo wygenerowanej działalności leasingu samochodowego. Zajęła siódme miejsce w tym segmencie. Jednak portfel leasingu zmalał nieznacznie do 95.7 miliona BGN. OŜywienie leasingu finansowego i zapotrzebowanie na niego ma się urzeczywistnić w nadchodzących latach. EuroLease Auto Romania uzyskała finansowanie dla swojego portfela na rok 2011 roku i stopniowo rozszerza działalność wśród dealerów samochodowych. W pierwszej połowie roku, EuroLease Auto Romania odnotowała spadek przychodów netto o 3 % w porównaniu do poprzedniego okresu i niewielki spadek w wyniku rozpoczęcia nowej działalności. EuroLease Grup wsparła ją kwotą Euro w celu zwiększenia kapitału i umoŝliwienia jej rozwoju. Na koniec pierwszego półrocza 2011 roku EuroLease Auto Macedonia odnotowała 46% wzrost portfela leasingu w porównaniu z końcem 2010 roku. Firma finansuje nowe kontrakty przy uŝyciu środków z nowo wygenerowanych linii kredytowych. Oczekuje się kontynuowania obecnej tendencji, co przyniesie dodatni wynik netto na koniec 2011 roku. Pozycjonowanie sub-holdingu leasingowego EuroHold jako spółki z wystarczającym kapitałem i wysokim udziałem w rynku jest bardzo waŝne z punktu widzenia nadchodzącego oŝywienia gospodarczego. Poprawa finansowania leasingu wpłynie pozytywnie na sprzedaŝ samochodów, jak równieŝ na działalność ubezpieczeniową. Zarządzanie aktywami i działalność brokerska W ciągu ostatnich kilku lat rynki kapitałowe miały bezpośredni wpływ na kryzys finansowy z 2008 roku, który przyniósł duŝy spadek wyceny papierów wartościowych oraz doprowadził do zmniejszenia chęci podejmowania ryzyka przez róŝnych inwestorów. Rok 2010 i 2011 przyniósł stopniową normalizację sytuacji na rynku w połączeniu ze stopniowym wzrostem ilości transakcji na akcjach. Mimo to zmienność na rynku pozostaje znacząca. Euro-Finance oczekuje stopniowego wzmoŝenia ilości transakcji na akcjach jako rezultat posiadanej platformy internetowej EFOCS oraz włączenia wszystkich papierów wartościowych zarejestrowanych na Giełdzie Papierów Wartościowych we Frankfurcie nad Menem. Oczekuje się, Ŝe rezerwy techniczne spółek w sub-holdingu ubezpieczeniowym, które są zarządzane przez Euro-Finance równieŝ ulegną wzrostowi. Nieruchomości Światowy kryzys finansowy z 2008 r. wpłynął znacząco na rynek nieruchomościami na całym świecie, czego rezultatem był spadek ogólnego popytu i spadek wysokości czynszu. W ciągu pierwszych sześciu miesięcy 2011 roku na rynku nieruchomości w Europie rozpoczęło się 47

48 stopniowe oŝywienie przede wszystkim rynku mieszkaniowego, a po części takŝe rynku lokali biurowych i rynku nieruchomości przemysłowych. Ten trend dotyczy równieŝ Bułgarii. W pierwszej połowie 2001 roku odnotowano powolny wzrost obłoŝenia powierzchni biurowej, co było wynikiem niskiego poziomu wysokości czynszów. Kilka nowych i duŝych budynków biurowych ma być oddanych do uŝytkowania w Sofii. W konsekwencji będzie to rynek najemcy przynajmniej w ciągu kilku najbliŝszych lat. EuroHold Imoti jest tylko pod umiarkowanym wpływem negatywnych tendencji w sektorze nieruchomości. Najemcami spółki są spółki z EuroHold, które zapełniają dostępną na wynajem powierzchnię biurową i powierzchnię z przeznaczeniem na salony samochodowe. 6. Dyrektorzy, kadra kierownicza i pracownicy Dyrektorzy i kadra kierownicza są opisani w punkcie 1 niniejszego Podsumowania Prospektu. Zgodnie ze Statutem, Rada Nadzorcza i Zarząd EuroHold Bulgaria AD są powołani na 5 letni okres czasu, podczas gdy członkowie pierwszej rady nadzorczej zostali wybrani na okres trzech lat. Zgodnie ze Statutem, członkowie Zarządu mogą być ponownie wybrani bez ograniczeń. W tym przypadku brak wyraźnej zgody członków zarządu i rady nadzorczej o zakończeniu mandatu przed upływem kadencji, uwaŝa się automatycznie za przedłuŝenie mandatu, na okres do zakończenia pełnienia obowiązków poszczególnych członków, zgodnie z odpowiednimi przepisami Prawa Handlowego. Formalne zakończenie mandatu nie prowadzi do zwolnienia, zgodnie z warunkami określonymi na podstawie art. 231, par. 4 Kodeksu Spółek Handlowych i wywiera skutek z chwilą ujawnienia w Rejestrze Handlowym. Formalny mandat pierwszej Rady Nadzorczej wygasł w dniu , a mandat obecnego zarządu wygasa z dniem roku. Na kolejnym walnym zgromadzeniu akcjonariuszy, Zarząd Emitenta zamieści w porządku obrad walnego zgromadzenia punkt dotyczący reelekcji członków Zarządu na kolejne 5-letnie okresy sprawowania funkcji. Członkowie Zarządu i Rady Nadzorczej podpisali umowę o odpowiednio zarządzaniu i nadzorze. Obecne umowy członków Zarządu i Rady Nadzorczej pozostają w mocy do czasu zakończenia pełnienia obowiązków poszczególnych członków i odnoszą się takŝe do nowych członków Zarządu i Rady Nadzorczej wybranych w czerwcu 2011 roku. Liczba zatrudnionych Na dzień roku EuroHold Bulgaria AD nie rekrutowała pracowników na podstawie umów o pracę lub umowy o pracę tymczasową. Na dzień sporządzania Prospektu EuroHold Bulgaria AD zatrudnia 10 pracowników na podstawie umowy o pracę na czas określony. W EuroHold Bulgaria AD nigdy nie zostały utworzone związki zawodowe skupiające pracowników. Na dzień sporządzania Prospektu liczba wszystkich pracowników zatrudnionych na podstawie umowy o pracę we wszystkich spółkach Grupy wynosi 1707 osób, gdzie 1008 pracowników jest zatrudnionych w Bułgarii, 565 pracowników zatrudnionych w Rumunii oraz 134 pracowników jest zatrudnionych w Macedonii. W 2008 r. w Grupie było zatrudnionych 2178 pracowników na podstawie umowy o pracę, z czego 566 pracowników w Rumunii. W 2009 roku liczba pracowników wyniosła 2.370, z czego 581 pracowników było zatrudnionych w Rumunii oraz 144 w Macedonii. Po sprzedaŝy przedsiębiorstwa produkcjego w końcu 2010 roku, ogólna liczba pracowników we wszystkich spółkach zaleŝnych EuroHold Bulgaria AD wyniosła 1746 osób, z czego 1047 pracowników było zatrudnionych w Bułgarii, 565 w Rumunii oraz 134 w Macedonii. W przeciwieństwie do spółek ubezpieczeniowych, spółka dominująca nie zatrudnia osób na podstawie umów o pracę tymczasową. Liczba agentów ubezpieczeniowych EuroIns Insurance AD w trakcie corocznej kampanii promującej obowiązkowe ubezpieczenie OC kierowców wyniosła około 6000 osób, w EuroIns Rumunia Asigurare Reasigurare liczba ta wynosi około osób, a w EuroIns Osiguruvanje, Macedonia około 350 osób. 7. Główni akcjonariusze i transakcje z powiązanymi podmiotami Na dzień sporządzenia Prospektu kapitał zakładowy EuroHold Bulgaria AD wynosi BGN i 48

49 dzieli się na zwykłych, zarejestrowanych, zdematerializowanych akcji z prawem głosu o wartości nominalnej 1 BGN kaŝda akcja. Wszystkie wyemitowane akcje są tej samej klasy i dają po 1 (jednym) prawie głosu na Walnym Zgromadzeniu Akcjonariuszy. Wszystkie wyemitowane akcje są w pełni pokryte. Na dzień sporządzenia Prospektu akcjonariat stanowi osób fizycznych i 143 osób prawnych, co łącznie daje akcjonariuszy. PoniŜsza tabela wskazuje strukturę akcjonariatu EuroHold Bulgaria AD na dzień sporządzenia Prospektu, zgodnie z informacjami, którymi dysponuje Spółka. Struktura akcjonariatu Akcjonariusz Adres Liczba głosów %Udział prawa głosu STARCOM HOLDING AD BULGARIA, 191, RUSKI BLVD, ETROPOLE ,399, % EXPAT CAPITAL AD BULGARIA, 1000 SOFIA, 96A GEORGI S. RAKOVSKI STR. 21,512, % LEO OVERSEAS LTD 27 GREGORY AFXENTIOU,LARNACA,CYPRUS 4,359, % THAMES CAPITAL PARTNERS LTD. 2, NEW SQUARE, LONDON WC2A 3RZ, UNITED KINGDOM 3,841, % SWEDBANK AS CLIENTS 8 LIIVALAIA STR, TALLINN, ESTONIA 4,239, % UNICREDIT BANK AUSTRIA AG A-1010 VIENNA,SCHOTTENGASSE 6-8 2,954, % SALINK LTD. NICOSIA, CYPRUS 1,847, % ING UPF BULGARIA, SOFIA, 49B BULGARIA BLVD. 1,505, % Inne podmioty 4,118, % Other individuals 6,865, % OGÓŁEM 108,643, % Źródło: EuroHold Bulgaria AD Największym akcjonariuszem Emitenta jest "Starcom Holding" AD. Starcom Holding AD jest spółką holdingową, zarejestrowaną w Republice Bułgarii i działającą zgodnie z prawem bułgarskim. Starcom Holding AD aktualnie jest właścicielem pakietu kontrolnego wynoszącego ok. 53% wszystkich akcji spółki "EuroHold Bulgaria". Starcom Holding AD jest zarejestrowany w Rejestrze Handlowym, prowadzonym przez Agencję Rejestrową Republiki Bułgarii pod numerem UIC , z siedzibą i adresem w Etropole 191, Ruski blvd. Zarejestrowany kapitał zakładowy spółki wynosi BGN i podzielony jest na zwykłych, zarejestrowanych, akcji o wartości nominalnej 100 BGN kaŝda. Przedmiotem działalności Starcom Holding AD jest nabywanie, zarządzanie, ocena i sprzedaŝ udziałów w spółkach bułgarskich i zagranicznych; nabywanie, ocena i sprzedaŝ patentów, udzielanie licencji na prawa własności przemysłowej udzielane spółkom, w których spółka posiada udziały; finansowanie spółek, w których spółka posiada udziały. Starcom Holding AD posiada monistyczny system zarządzania. Zarząd składa się z trzech osób Pana Assena Milkova Christova - Dyrektora Wykonawczego, Pana Kiriła Iwanowa Boshova - Prezesa Zarządu i Pana Velislava Milkova Christova - Członka Zarządu. Starcom Holding AD jest reprezentowany przez jego Dyrektora Wykonawczego Pana Assena Christova. EuroHold Bulgaria jest główną inwestycją w portfelu Starcom Holding AD. W tym znaczeniu, Ŝe celem zarządzania Starcom Holding jest skoncentrowanie się na rozwoju EuroHold Bulgaria i wzmocnienie pozycji rynkowej swoich spółek zaleŝnych. Akcje akcjonariusza większościowego nie są w Ŝaden sposób uprzywilejowane co do głosu. Większościowym udziałowcem Starcom Holding AD jest Pan Assen Milkov Christov - obywatel Bułgarii, adres Sofia 1592, Christopher Columbus Blvd. 43. Pan Assen Christov jest posiadaczem 51% akcji z prawem głosu Starcom Holding AD. Dzięki temu, Pan Assen Christov ma moŝliwość sprawowania skutecznej kontroli nad Starcom Holding AD będącego większościowym akcjonariuszem EuroHold Bulgaria. 49

50 Expat Capital AD jest drugim głównym akcjonariuszem EuroHold Bulgaria, który posiada istotny udział w kapitale zakładowym Emitenta. Według stanu na dzień sporządzenia niniejszego dokumentu Expat Capital AD kontroluje około 20% prawa głosu i wyemitowanych akcji. Akcje Expat Capital AD nie są w Ŝaden sposób uprzywilejowane co do głosu. Expat Capital AD jest spółką akcyjną, naleŝycie załoŝoną i działającą zgodnie z prawem Republiki Bułgarii, wpisaną do Rejestru Handlowego, prowadzonego przez Agencję Rejestrową Republiki Bułgarii pod numerem UIC Spółka ma siedzibę w Sofii 96A, G.S. Rakovski str. Kapitał zakładowy spółki wynosi BGN i podzielony jest na akcji o wartości nominalnej 1 BGN kaŝda. Spółka zarządzana jest przez Radę Dyrektorów składającą się z trzech osób, tj. Nikola Simeonov Yankov, Nikolay Vassilev Vassilev i Lubomir Hristov Stoev. Expat Capital AD jest wyłącznym właścicielem spółki zarządzającej aktywami Expat Asset Management "Ltd., która zarządza trzema funduszami inwestycyjnymi i wieloma indywidualnymi portfelami. Expat Capital SA jest spółką zarządzającą spółki Expat Beta REIT, która inwestuje w nieruchomości na terenie Bułgarii. Obecnie prawa do głosowania Expat Capital AD są rozdzielane pomiędzy akcjonariuszy w następujący sposób: "Expat Group" EOOD, UIN (posiadająca 46% praw głosu), "Dextra Real Estate" AD, UIC (posiadająca 20,02% praw głosu) i "Dar Finance" EOOD, UIN (posiadająca 33.98% praw głosu). śaden z wyŝej wymienionych akcjonariuszy Expat Capital AD nie spełnia przesłanek posiadania zaleŝnego w rozumieniu Art. 146 ustawy o spółkach publicznych i ofercie publicznej. Na dzień sporządzenia Prospektu nie istnieją Ŝadne transakcje ani propozycje transakcji związane z podmiotami powiązanymi, które są istotne dla Emitenta lub jego spółek zaleŝnych i odbiegających od warunków rynkowych. Rozliczenia i transakcje ze spółkami zaleŝnymi Regularne transakcje pomiędzy Emitentem oraz jego spółkami zaleŝnymi są prowadzone w ramach Grupy i wynikają z charakteru ich podstawowej działalności. WaŜnym celem EuroHold Bulgaria jest realizacja znaczących synergii pomiędzy trzema segmentami Grupy - EuroIns Insurance Group, EuroLease Group i Avto Union. Rodzajami transakcji pomiędzy podmiotami w Grupie są: umowa kupna i sprzedaŝy pojazdów, leasing pojazdów, ubezpieczenia i ubezpieczenia zdrowotne, wynajem biur, usługi rent-a-car itp. Wszystkie transakcje są dokonywane na warunkach rynkowych. Typowe dla Grupy są transakcje pomiędzy spółką dominującą i jej spółkami zaleŝnymi, w oparciu o które zarządza się płynnością spółek i ich strategią inwestycyjną. Wszystkie poŝyczki udzielone i otrzymane przez EuroHold Bulgaria nie wymagają stosowania zabezpieczeń, a ich odsetki nie odbiegają od standardów rynkowych. Transakcje z podmiotami powiązanymi nie stanowią znaczącej części całkowitych skonsolidowanych obrotów EuroHold Bulgaria. Skonsolidowane przychody Emitenta nie pochodzą z transakcji wewnątrz Grupy. Pochodzą z transakcji zawieranych z podmiotami spoza Grupy. Transakcje z akcjonariuszem większościowym Jedyną istotną transakcją, którą Emitent zawarł poza swoimi spółkami zaleŝnymi w ramach Grupy jest umowa kredytowa z marca 2007 roku, zgodnie z którą StarCom Holding udzielił EuroHold kredytu do 15 mln BGN na 5 letni okres kredytowania o stałym oprocentowaniu 5 (pięć) procent rocznie, co jest zgodne z obowiązującymi na rynku oprocentowaniem. Kredyt wymagał zabezpieczenia. EuroHold Bulgaria mogła korzystać z kwot przyznanych na finansowanie działalności spółek zaleŝnych, nabycia akcji nowych spółek. W ten sposób mógł realizować nowe projekty inwestycyjne. Dalsze informacje na temat transakcji z podmiotami powiązanymi moŝna znaleźć w rozdziale XVII. "Transakcje z podmiotami powiązanymi" w sekcji drugiej. 8. Informacje finansowe a. Bilans zbiorczy i inne informacje finansowe Historyczne roczne dane finansowe są zbadane przez biegłego rewidenta i były sporządzone zgodnie z MSSF. Roczne zbadane skonsolidowane sprawozdania finansowe za lata 2008, 2009 i 2010 są częścią bieŝącego Prospektu i obejmują: 50

51 Bilans; Rachunek zysków i strat; Oświadczenie dotyczące zmian w kapitale własnym; Rachunek przepływów pienięŝnych; Informację dodatkową do sprawozdania finansowego; Roczne sprawozdanie z działalności; Raport niezaleŝnego biegłego rewidenta. Roczne sprawozdania finansowe są dostępne na następujących stronach internetowych: agencji informacji X3news Bułgarskiej Komisji Nadzoru Finansowego Bułgarskiej Giełdy Papierów Wartościowych w Sofii EuroHold Bułgaria AD gdzie są one publikowane przez EuroHold Bulgaria jako emitenta akcji dopuszczonych do obrotu i oznaczonych jako 4EH. Emitent podpisał umowę z agencją informacji finansowej X3news o regularnym publikowaniu informacji finansowych i innych informacji. Śródroczne skonsolidowane sprawozdania finansowe na dzień 30 czerwca 2011r., stanowią integralną część bieŝącego Prospektu, nie są zbadane i obejmują: Bilans; Rachunek zysków i strat; Oświadczenie dotyczące zmian w kapitale własnym; Rachunek przepływów pienięŝnych; Informację dodatkową do sprawozdania finansowego; Zasady rachunkowości. Śródroczne sprawozdania finansowe nie są zbadane przez biegłego rewidenta. Śródroczne sprawozdania finansowe są dostępne dla inwestorów w wyŝej opisanych miejscach. b. Znaczące zmiany Po zatwierdzeniu śródrocznych sprawozdań finansowych wg stanu na dzień 30 czerwca 2011 roku, do daty sporządzenia tego Prospektu, nastąpiły następujące znaczące zmiany sytuacji finansowej i pozycji handlowej Emitenta: Avto Union AD, spółka zaleŝna EuroHold Bulgaria AD, złoŝyła wniosek do Komisji Ochrony Konkurencji o zatwierdzenie nabycia Daru Car AD. Daru Car AD jest dealerem BMW w Bułgarii. Spółka ma autoryzowany warsztat naprawy BMW, Mini, Rover, Land Rover i pojazdów Mahindra. Spółka takŝe oferuje części zamienne do tych marek. Daru Car AD ma salon i warsztat naprawczy w Sofii, Druzhba. Transakcja jest częścią strategii motoryzacyjnej w celu zwiększenia swojego udziału w klasie premium i przejęcia warsztatów, co jest postrzegane jako główne źródło zysków. Ostateczne przejęcie spółki zakończy się po zatwierdzeniu transakcji przez Komisję Ochrony Konkurencji. 6 sierpnia 2011 roku sub-holding motoryzacyjny Avto Union przejął 51% udziału reprezentującego 5,100 akcji w kapitale Auto 1 OOD o wartości nominalnej 100 BGN kaŝda. Główną działalnością spółki Auto 1 OOD jest import i sprzedaŝ części zamiennych do pojazdów mechanicznych. Dzięki tej inwestycji Avto Union uzupełnia i wspomaga działalność usługową, która stanowi główne źródło zysku. W dniu 24 sierpnia 2011 roku, EuroLease Group BV wyłączny właściciel EuroLease Auto EAD podjął decyzję o podwyŝszeniu kapitału zakładowego EuroLease Auto AD z zysku przeznaczonego do podziału w drodze emisji akcji z prawem głosu o wartości nominalnej 1 BGN kaŝda. W wyniku nowego podwyŝszenia kapitał zakładowy EuroLease Auto AD wzrósł o 4.5 miliona BGN, z 15.5 miliona do 20 mln BGN. W dniu 31 sierpnia 2011 r. Agencja Rejestrowa zarejestrowała w Rejestrze Handlowym podwyŝszenie kapitału zakładowego EuroLease Auto AD. 29 lipca 2011 roku Avto Union stał się jedynym właścicielem 100% kapitału zakładowego Nissan Sofia AD po zakupie akcji mniejszościowych, tj akcji o wartości nominalnej 1,00 BGN kaŝda stanowiących 2% kapitału zakładowego. Zmiana formy prawnej Nissan Sofia EAD została zarejestrowana w Rejestrze Handlowym w dniu 15 sierpnia 2011 roku. W dniu 1 września 2011 r. Agencja Rejestrowa zarejestrowała w Rejestrze Handlowym połączenie Bulvaria Rent-a-Car EOOD i EuroLease Rent-a-Car EOOD. W wyniku połączenia cały 51

52 majątek spółki Bulvaria Rent-a-Car EOOD został przeniesiony do EuroLease Rent-a-Car EOOD, który stał się uniwersalnym następcą prawnym. Spółka połączona zakończyła zatem swój byt prawny bez konieczności przeprowadzenia likwidacji. Głównym celem tej restrukturyzacji jest osiągnięcie lepszej optymalizacji i wykorzystania parku samochodowego Budget i AVIS, zachowując jednocześnie wysoką jakość usług i zadowolenie klienta. Jest to warunek wstępny dla wzmocnienia pozycji rynkowej Avis i Budget w Bułgarii i zwiększenia jej udziału w rynku. Rezultatem połączenia obu spółek jest optymalizacja zasobów, zmniejszenie kosztów czynszu i zoptymalizowania uŝycia parku samochodowego. Oczekiwany roczny spadek kosztów to około 500 tys. BGN. Połączenie nie ma wpływu na prawo własności, status prawny czy na miejsce prowadzenia działalności i reprezentację EuroLease Rent-a-Car EOOD. 9. Szczegóły dotyczące oferty oraz dopuszczenia do obrotu a. Oferta i dopuszczenie do obrotu Oferowanie akcji nie moŝe mieć miejsca przed ich dopuszczeniem do obrotu na GPW na podstawie niniejszego Prospektu. Przed dopuszczeniem istniejących akcji Eurohold Bulgaria AD do obrotu na Rynku Głównym GPW, akcje nie będą oferowane na sprzedaŝ w jakikolwiek sposób. Oferowane innego rodzaju prowadzące do nabycia akcji na terytorium Rzeczypospolitej Polskiej równieŝ nie będzie miało miejsca. Nie będzie teŝ miało miejsca ich plasowanie, przydział czy subemisja, jak teŝ inne działania z nimi związane. Nowe akcje równieŝ nie będą oferowane w drodze subskrypcji na terytorium Rzeczypospolitej Polskiej. Inwestorzy powinni zwrócić uwagę, Ŝe w niniejszym Prospekcie nie zostaną opisane informacje, które są istotne i wymagane w przypadkach wskazanych w ofercie publicznej. Na posiedzeniach w dniach 16 i 26 września 2011 roku Zarząd EuroHold Bulgaria AD podjął odpowiednie decyzje do rozpoczęcia procedury dopuszczenia wszystkich istniejących akcji z kapitału zakładowego spółki do obrotu na rynku regulowanym na terytorium Rzeczypospolitej Polskiej, tj. na zarządzanym przez GPW (Giełda Papierów Wartościowych w Warszawie) Rynku Głównym (Główny Rynek GPW) i o ubieganiu się ich o dopuszczenie do obrotu na mocy niniejszego Prospektu przygotowanego 19 września 2011 roku. Na wszystkie istniejące akcje Eurohold Bugaria AD, a mianowicie: (sto osiem milionów sześćset czterdzieści trzy tysiące siedemset dwanaście) zwykłych, zdematerializowanych, przenoszalnych bez ograniczeń, reprezentujących cały kapitał zakładowy Emitenta akcji zostanie złoŝony wniosek o dopuszczenie ich do obrotu na rynku regulowanym zarządzanym przez GPW. Wartość nominalna akcji wynosi 1,00 (jeden) BGN kaŝda. Wszystkie akcje staną się przedmiotem obrotu na GPW po zatwierdzeniu przez Komisję Nadzoru Finansowego Republiki Bułgarii przygotowanego przez EuroHold Bulgaria AD Prospektu o dopuszczenie akcji do obrotu na rynku regulowanym, odpowiednio dokonanej jego notyfikacji, zgodnie z właściwymi przepisami do polskiej Komisji Nadzoru Finansowego (Komisja Nadzoru Finansowego lub KNF), jak równieŝ po podjęciu przez Zarząd GPW uchwały o dopuszczeniu akcji EuroHold Bulgaria AD do obrotu na Rynku Głównym zarządzanym przez GPW. Dopuszczenie do obrotu odbywa się w Rzeczpospolitej Polskiej, zgodnie z odpowiednimi przepisami polskiego prawa, jak równieŝ z odpowiednimi przepisami Unii Europejskiej mającymi bezpośrednie zastosowanie na terytorium Rzeczypospolitej Polskiej. Po zatwierdzeniu niniejszego Prospektu, w ciągu jednego dnia roboczego od jego zatwierdzenia, Komisja Nadzoru Finansowego Republiki Bułgarii, prześle do polskiej Komisji Nadzoru Finansowego (KNF) zaświadczenie potwierdzające, Ŝe niniejszy Prospekt został sporządzony zgodnie z Dyrektywą 2003/71/WE Parlamentu Europejskiego i Rady zmieniającą Dyrektywę 2001/34/WE, a takŝe kopię zatwierdzonego Prospektu w języku angielskim. Po paszportyzacji Prospektu, EuroHold Bulgaria AD podejmie odpowiednie kroki w celu rejestracji swoich akcji w polskim Krajowym Depozycie Papierów Wartościowych (KDPW). Po rejestracji akcji w KDPW, Emitent złoŝy wystąpi z wnioskiem o dopuszczenie akcji do obrotu na Rynku Głównym zarządzanym przez GPW. Na podstawie wniosku o dopuszczenie do obrotu, Zarząd GPW w formie uchwały wyrazi zgodę na 52

53 dopuszczenie akcji EuroHold Bulgaria do obrotu na wybranym rynku notowań. We wniosku zostanie wskazany kod pod jakim będą notowane akcje Emitenta. Zgodnie z zgodnie z 38.1 oraz 38.3 Regulaminu Giełdy Emitent wystąpi takŝe z wnioskiem o wyznaczenie pierwszego dnia notowań akcji. Po złoŝeniu takiego wniosku Zarząd Giełdy wprowadzi instrumenty finansowe objęte wnioskiem do obrotu giełdowego określając w szczególności sesję giełdową, na której nastąpi pierwsze ich notowanie. Emitent oczekuje podjęcia przez Zarząd GPW stosownych uchwał do końca listopada 2011 roku. Wszystkie akcje EuroHold Bulgaria mogą być przedmiotem obrotu na Rynku Głównym GPW. Akcje Emitenta mogą być oferowane na sprzedaŝ róŝnym kategoriom potencjalnych inwestorów na terytorium Republiki Polskiej z zachowaniem tych samych zasad ich sprzedaŝy. Od dnia notowania akcji na Rynku Głównym zarządzanym przez GPW, kaŝdy akcjonariusz będzie mógł złoŝyć zlecenie "kupna/sprzedaŝy" poprzez licencjonowany dom maklerski, członka giełdy, z parametrami określonymi według jego własnego uznania. Po dopuszczeniu akcji do obrotu na GPW, wszyscy inwestorzy będą mieli równe szanse na zakup i sprzedaŝ akcji na warunkach określonych przez zasady wolnego popytu i podaŝy na giełdzie. Cena, po której EuroHold Bulgaria AD wprowadzi swoje akcje do obrotu na rynku regulowanym w Polsce, będzie odpowiadać ich wartości nominalnej 1,00 BGN ( 2,2957 PLN według kursu Narodowego Banku Polskiego wg stanu na dzień sporządzenia Prospektu). Następnie cena akcji na rynku regulowanym zostanie określona przez ich popyt i podaŝ. Akcjonariusze i inwestorzy będą mogli zadecydować, jaka będzie cena, po której będą sprzedawać lub kupować akcje Emitenta. Przyjmując zlecenia kupna i sprzedaŝy papierów wartościowych, pośrednicy inwestycyjni informują inwestorów i akcjonariuszy o typach zleceń, osiągnięciu poziomu ceny zamknięcia transakcji, waŝnych i aktywnych na moment składania zleceń i kosztach transakcji. Z uwagi na okoliczność, Ŝe akcje EuroHold Bulgaria AD są aktualnie przedmiotem obrotu na rynku regulowanym Bułgarskiej Giełdy Papierów Wartościowych w Sofii, dopuszczenie ich do równoległego obrotu na Rynku Głównym GPW będzie oznaczać notowanie akcji Emitenta na dwóch róŝnych rynkach (dual listing). b. Rynki EuroHold Bulgaria AD zadebiutowała na bułgarskim rynku kapitałowym w lutym 2007 roku. Akcje Spółki wzbudziły zainteresowanie powaŝnych inwestorów; pierwszego dnia przedmiotem obrotu było akcji po średniej cenie 2,79 BGN za akcję. Do końca roku cena osiągnęła swój szczyt wynosząc 9,05 BGN za akcję. Kolejne globalne zawirowania na rynkach finansowych uderzyły takŝe w Bułgarską Giełdę Papierów Wartościowych, która zarejestrowała powaŝne spadki, czego odzwierciedleniem jest główny wskaźnik rynku SOFIX, który stracił 79% w porównaniu do poziomu szczytowego z 2007 roku. W tym okresie, negatywna tendencja uderzyła takŝe w EuroHold Bulgaria AD, co spowodowało istotną korektę. Przez ostatnie dwa i pół roku cena akcji pozostała praktycznie bez zmian oscylując w przedziale 0,67 BGN do 1,80 BGN. Obecnie akcje EuroHold Bulgaria są przedmiotem obrotu tylko na Giełdzie Papierów Wartościowych w Bułgarii - Sofia AD, na tzw. nieoficjalnym rynku określonym jako segment A. We wrześniu 2009 roku spółka została włączona do głównych bułgarskich indeksów SOFIX BSE. Obecnie EuroHold jest częścią wszystkich trzech indeksów akcji na bułgarskim rynku kapitałowym - SOFIX, BG40 i BGTR30. Według stanu na dzień sporządzenia niniejszego Prospektu, kapitalizacja rynkowa spółki wyniosła 139,06 mln BGN. 53

54 Wskaźnik Wartość Ostatnia cena (w BGN) na dzień 19 września 2011 roku 1.28 P/E (cena jednej akcji podzielona przez roczny zysk na akcję)* 10.5 P/BV (cena jednej akcji podzielona przez wartość księgową akcji)* 0.33 Liczba akcji w obrocie (mln) Kapitalizacja rynkowa (w BGN mln) na 19 września 2011 roku Kurs maksymalny za 52 tygodni 1.52 Kurs maksymalny za 52 tygodni Kurs minimalny za 52 tygodni Kurs minimalny za 52 tygodni Zmiana kursu od początku roku % Źródło: Bloomberg *Bulgarian Stock Exchange Sofia AD Bułgarska Giełda Papierów Wartościowych Zgodnie z ustawą o ofercie publicznej i papierach wartościowych, obrót akcjami spółek publicznych jest prowadzony przez Bułgarską Giełdę Papierów Wartościowych, który na dzień dzisiejszy jest jedynym rynkiem regulowanym papierów wartościowych w Bułgarii. W dniu 19 września 2011 r. kapitalizacja rynkowa spółek notowanych na BSE osiągnęła 12,2 mld BGN. Segmenty rynku i instrumenty finansowe BSE - Sofia zarządza róŝnymi rynkami mając na uwadze kryterium jakościowe i ilościowe emitentów i ich emisji. Niektóre rynki są podzielone na róŝne segmenty w zaleŝności od rodzaju papierów wartościowych, a takŝe specyficznych wymagań co do emitentów w zakresie struktury ich akcjonariatu, wskaźników finansowych, płynności i ujawniania informacji. BSE składa się z następujących rynków: 1. Oficjalny Rynek Akcji; a) Segment А 54

55 b) Segment B 2. Oficjalny Rynek Obligacji; 3.Nieoficjalny Rynek Akcji; a) Segment А b) Segment B 4. Nieoficjalny Rynek Obligacji; 5. Rynek spółek specjalnego przeznaczenia; 6. Rynek Instrumentów Kompensacyjnych; 7. Rynek Funduszy Inwestycyjnych; 8. Rynek Praw Poboru; 9. Rynek IPO; 10. Rynek Prywatyzacji; 11. Rynek Produktów Strukturyzowanych. W ujęciu ogólnym, Oficjalny Rynek jest zorientowany na duŝe spółki publiczne o wysokiej kapitalizacji rynkowej i wysokim wolumenie obrotu ich akcjami, podczas gdy Nieoficjalny Rynek jest zorientowany na mniejsze i rozwijające się spółki. Bułgarska Giełda Papierów Wartościowych ( BSE ) prowadzi równieŝ Rynek IPO dla pierwszych ofert publicznych i "Rynek Prywatyzacji" dla sprzedaŝy akcji naleŝących do bułgarskiego spółek Skarbu Państwa. Na dzień 12 września 2011 roku na BSE zostało zarejestrowanych 367 emisji akcji dla celów obrotu, przy czym 16 spółek w obrocie na Rynku Oficjalnym, a 351 na Rynku Nieoficjalnym. Tylko zdematerializowane instrumenty finansowe, których przeniesienie nie podlega ograniczeniom lub warunkom szczególnym, mogą być przedmiotem obrotu na rynku regulowanym. Obecnie na BSE-Sofia znajdują się w obrocie akcje, obligacje samorządowe i korporacyjne, jednostki uczestnictwa funduszy UCITs, instrumenty kompensacyjne (specjalny rodzaj papierów wartościowych emitowanych przez róŝne organy publiczne dla osób, które które nie otrzymały zwrotu znacjonalizowanego majątku po roku 1990, notowane na Bułgarskiej Giełdzie Papierów Wartościowych od 2002 roku), prawa poboru i warranty. Wg stanu na dzień 19 września 2011 kapitalizacja rynkowa spółek notowanych na Rynku Oficjalnym BSE wyniosła 3 mld BGN, a 7,7 mld BGN na Rynku Nieoficjalnym BSE. Łączna wartość obrotu na BSE za 2010 roku odpowiadała poziomowi 10,8 mld euro. Instrumenty finansowe Tylko instrumenty finansowe, których przeniesienie nie podlega ograniczeniom lub warunkom szczególnym, mogą być przedmiotem obrotu na rynku regulowanym. Obecnie na BSE przedmiotem obrotu na rynku regulowanym są akcje, obligacje samorządowe i korporacyjne, akcje funduszy inwestycyjnych, instrumenty kompensacyjne, prawa i warranty. Wg stanu na dzień 19 września 2011 kapitalizacja rynkowa spółek notowanych na Rynku Oficjalnym BSE wyniosła 3 mld BGN, a 7,7 mld BGN na Rynku Nieoficjalnym BSE. Łączna wartość obrotu na BSE za 2010 roku odpowiadała poziomowi 10,8 mld euro. System Obrotu Systemem obrotu BSE jest elektroniczny system Deutsche Böerse - Xetra, uruchomiony w Bułgarii w 2008 roku. Obecni uczestnicy obrotu dzięki Xetra posiadają bezpośredni dostęp do rynku bułgarskiego, a bułgarscy uczestnicy obrotu, zgodnie z wymogami członkostwa, mają moŝliwość handlu ponad instrumentami finansowymi notowanymi w systemie Xetra. Xetra jest jednym z najbardziej zaawansowanych platform obrotu na rynku papierów wartościowych i jest synonimem digitalizacji i globalizacji obrotu papierami wartościowymi. COBOS System BSE-Sofia jest jedyną giełdą w regionie Europy Południowo-Wschodniej, która opracowała własny system elektronicznego składania zleceń kupna-sprzedaŝy instrumentów finansowych przez internet

56 COBOS (Client Order-Book Online System). Zlecenia transakcji papierów wartościowych są przekazywane do systemu obrotu poprzez COBOS i są jednakowe dla wszystkich innych zleceń. Korzystanie z COBOS jest ograniczone do pośredników inwestycyjnych, ich klientów i administratorów COBOS. Bułgarski rynek inwestorów moŝe wykorzystywać takŝe inne systemy do obrotu na BSE. Systemy te zostały opracowane głównie przez pośredników inwestycyjnych i w ostatnich latach inwestorzy wykazali powaŝne zainteresowanie nimi ze względu na znaczące moŝliwości, które one oferują (EFOCS, DeltaBroker, BenchMark BG Trader, U-Broker, itp.). Obrót BSE jest rynkiem elektronicznym i obrót jest dokonywany poprzez automatyczny system obrotu - XETRA. XETRA jest systemem obrotu kierowanym zleceniami. Obrót instrumentami finansowymi, dopuszczonymi na niektóre rynki prowadzone przez BSE-Sofia, dokonuje się w oparciu o zlecenia złoŝone przez uczestników rynku, jak równieŝ kwotowania pochodzące od animatorów rynku. Zlecenia i kwotowania stanowią zobowiązania do kupna lub sprzedaŝy papierów wartościowych po określonej cenie, z uwzględnieniem innych parametrów i warunków szczególnych. Zlecenia mogą być typu market, might be market, limit, market-to-limit, stop orders i iceberg. Maksymalna waŝność zleceń wynosi 90 dni (tj. 90 dni kalendarzowych, uwzględnia się przy tym dzień złoŝenia zlecenia (= T +89). Architektura XETRA umoŝliwia dokonyanie obrotu w systemie aukcji oraz notowań ciągłych. XETRA obsługuje takŝe IPO i transakcje typu OTC. Określona emisja moŝe wprowadzona do obrotu na warunkach notowań ciągłych lub tylko po ustalonej cenie (fixing). Notowania ciągłe zaczynają się od ustalenia kursu otwarcia, po czym sesja moŝe być przerwana przez jedną bądź kilka aukcji (intraday auctions) i kończy się ona aukcją zamykającą (fixingiem zamykającym). Po zakończeniu sesji w ciągu dnia obrót jest wznawiany. KaŜda aukcja składa się co najmniej z następujących dwóch faz w opisanej kolejności: Faza przyjmowania zleceń Faza ustalania ceny Cena aukcji jest ceną zapewniającą realizację największego wolumenu zlecenia przy jak najmniejszej nadwyŝce limitu w arkuszu zleceń. Notowania ciągłe rozpoczynają się po zakończeniu otwarcia aukcji w ciągu dnia. KaŜde nowe zlecenie jest natychmiast sprawdzane pod kątem wykonania, tj. porównywane ze zleceniami figurującymi po drugiej stronie arkusza zleceń. Przy realizacji zleceń obowiązują dwa priorytety: cena i czas. Zlecenia klientów maja pierwszeństwo przed zleceniami własnymi brokerów. Jeśli moŝliwa do ustalenia cena transakcji znajduje się poza wstępnie określonym jej zakresem uwzględniającym ostatnią cenę transakcyjną, cenę na fixingu z poprzedniego dnia (static price range) albo kurs odniesienia (dynamic price range), notowania ciągłe podlegają zakończeniu i rozpoczyna się aukcja. Notowania ciągłe są wznawiane po tym, jak cena zostanie ponownie ustalona. Statyczne i dynamiczne zakresy cen wahają się w zaleŝności od róŝnych rynków i róŝnych instrumentów finansowych. W przypadku akcji dopuszczonych do obrotu na Rynku Oficjalnym dynamiczny zakres cen to 5% ceny odniesienia, a statyczny zakres cen to 10% ceny ostatniej aukcji. W przypadku akcji dopuszczonych na Rynek Nieoficjalny, które są notowane w notowaniach ciągłych włączając w to akcje emitowane przez Spółki Specjalnego Przeznaczenia (SPVs), dynamiczny zakres ceny to 10% ceny odniesienia, a statyczny zakres ceny to 20% ostatniej ceny aukcji. W przypadku akcji dopuszczonych na Rynkek Nieoficjalny, które są przedmiotem aukcji i dla jednostek uczestnictwa typu UCITs, dynamiczny zakres cen to 30% ostatniej ceny aukcji. Obrót jest anonimowy, tzn. uczestnicy rynku nie mają informacji kto właściwie składa zlecenia do wykonania. Potwierdzenia zamknięcia transakcji są ogłaszane natychmiast po odpowiedniej transakcji, włączając w to informację o drugiej stronie transakcji będącej uczestnikiem ryku. Rozliczenia Transakcje zawarte na BSE są uwaŝane za sfinalizowane po tym jak papiery wartościowe zostaną 56

57 przeniesione, a płatności zostaną dokonane. Rozliczenia są prowadzone przez Centralny Depozyt Papierów Wartościowych, co jest potwierdzane stosownym dokumentem. Transakcje są finalizowane w ujęciu brutto. Do czerwca 2003 r., kiedy to został wprowadzony Real-time Interbank Gross Settlement System (znany jako RINGS ), rozliczenia były przeprowadzane na podstawie D + 2. RINGS to skomputeryzowany system rachunkowości pracujący na zasadach "delivery versus payment", co oznacza, Ŝe przeniesienie papierów wartościowych jest dokonywane jednocześnie. Indeksy Pierwszym indeksem giełdowym BSE - Sofia AD jest SOFIX, jego obliczenia rozpoczęto w 2006 r. z wartością bazową 100. SOFIX opiera się na kapitalizacji rynkowej spółek wchodzących w jego skład, skorygowany przez free float kaŝdej z nich. SOFIX to pierwszy indeks, w oparciu o który zostały opracowane produkty strukturyzowane. Indeks obejmuje tylko najbardziej płynne spółki na bułgarskim rynku kapitałowym. Na koniec pierwszego półrocza 2011 roku SOFIX składał się z 15 spółek, w tym EuroHold Bulgaria AD. Inne wskaźniki BSE to BG40 (obejmuje akcje 40 spółek o największej liczbie transakcji i najwyŝszej średniej wartości dziennych obrotów w ciągu ostatnich 6 miesięcy), BG TR30 (opiera się o kształtowanie się cen akcji stanowiących portfel inwestycyjny tego indeksu) i BG REIT (obejmuje akcje 7 spółek specjalnego przeznaczenia, które działają w obszarze sekurytyzacji nieruchomości, tj. fundusze nieruchomości (REITs), z największą warością rynkową free-floatu i najwyŝszej medianą tygodniowych obrotów w ciągu ostatnich 6 miesięcy). GPW GPW prowadzi jeden z dwóch rynków regulowanych w Polsce w rozumieniu dyrektywy MiFID. Drugi rynek regulowany (BondSpot, spółka zaleŝna GPW) koncentruje się głównie na obrocie obligacji i transakcji OTC. GPW jest prywatną spółką akcyjną i jest kontrolowana przez państwo polskie. Członkowie GPW to szczególności banki oraz polscy i międzynarodowi brokerzy. Akcje notowane na GPW mogą być przedmiotem obrotu w systemie notowań ciągłych (price-setting system) lub w systemie kursu jednolitego (single-price aucion system), w zaleŝności od kapitalizacji i intensywności obrotu. Ponadto, istnieją dwa rynki akcji: podstawowy i równoległy, ten ostatni jest dla mniejszych, mniej płynnych emitentów. Spółki giełdowe są sklasyfikowane według czterech segmentów zgodnie z ich kapitalizacją: MINUS 5, 5 PLUS, 50 PLUS i 250 PLUS. Aby być przedmiotem obrotu na danym rynku i segmencie, oprócz wymogów rangi ustawowej naleŝy spełnić równieŝ inne kryteria. Akcje spółek, które wykazują duŝą zmienność cen lub w stosunku do których prowadzone jest postępowanie upadłościowe mogą trafić na Listę Alertów, po czym przeniesione do notowań w systemie kursu jednolitego. Elektronicznym systemem handlu stosowanym przez GPW jest WARSET, system handlowy podobny do systemu stosowanego w ParyŜu, Brukseli, Amsterdamie, Chicago i Singapurze. Na dzień 1 września 2011, akcje ponad 400 spółek są notowane na GPW. Mechanizmy GPW Na dzień sporządzenia niniejszego Prospektu, sesje na GPW odbywają się regularnie od poniedziałku do piątku w godzinach od 8:00 do 17:35 czasu warszawskiego, chyba Ŝe Zarząd Giełdy postanowi inaczej. W zaleŝności od rynku, na którym właściwe papiery wartościowe są notowane, notowania odbywają się w systemie notowań ciągłych (rynek podstawowy) lub w systemie notowań jednolitych z dwoma fixingami (rynek równoległy). Dla duŝych pakietów akcji przewidziane są ułatwienia. MoŜliwe jest zawieranie tzw. transakcji pakietowych poza systemem notowań ciągłych oraz kursu jednolitego. Informacje o cenie, wolumenie obrotu i wszelkich szczególnych prawach (tj. prawach poboru lub prawach do dywidendy) przypisanych do określonych papierów wartościowych są dostępne na oficjalnej stronie internetowej GPW Prowizje maklerskie w Polsce nie są ustalane przez GPW lub inne organy regulacyjne; są one ustalane przez dom maklerski, który obsługuje transakcje. Rozliczenia 57

58 Rozliczenie wszystkich transakcji zawartych na GPW jest dokonywane przez KDPW, spółkę akcyjną, w której GPW posiada 33,3% akcji (pozostałe akcje są w posiadaniu Narodowego Banku Polskiego i Skarbu Państwa). Na podstawie dotychczasowych przepisów, wszystkie transakcje na rynku regulowanym GPW dokonywane są w oparciu o zasadę delivery versus payment, przy czym ich rozliczenie ma miejsce zgodnie z zasadą D+3, a więc następuje po trzech dniach sesyjnych od momentu zawarcia transakcji. W zasadzie, kaŝdy inwestor musi posiadać rachunek papierów wartościowych i rachunek pienięŝny w firmie inwestycyjnej lub u powiernika w Polsce oraz kaŝda firma inwestycyjna i powiernik muszą posiadać rachunek w KDPW oraz rachunek pienięŝny w banku rozliczającym. Zgodnie z zasadami i przepisami GPW oraz KDPW, KDPW jest zobowiązany do przeprowadzenia rozliczeń transakcji dokonanych przez członków GPW w oparciu o wykaz transakcji dostarczonych przez GPW (zebranych po sesji). Członkowie GPW przeprowadzają z kolei rozliczenie transakcjo inwestorami, w imieniu i na rzecz których transakcje te były realizowane. c. SprzedaŜ akcji przez dotychczasowych akcjonariuszy Akcjonariusze posiadający znaczące pakiety akcji Eurohold Bułgaria AD, ani teŝ inni akcjonariusze nie składali oświadczeń i nie wyraŝali intencji odnośnie sprzedaŝy lub zakupu akcji Emitenta po ich dopuszczeniu do obrotu na Rynku Głównym prowadzonym przez GPW. Zastrzegają sobie oni jednak prawo do kupna lub sprzedaŝy przedmiotowych akcji na podstawie kształtowania się ich popytu i podaŝy na GPW oraz warunków rynkowych. d. Rozmycie Akcje EuroHold Bulgaria AD podlegają dopuszczeniu do obrotu na rynku regulowanym. Z przedmiotowej operacji Ŝadne środki nie zasilą kapitału zakładowego tytułem jego podwyŝszenia. W tym przypadku nie występuje ryzyko rozmycia kapitału zakładowego. Warunki obrotu dla wszystkich inwestorów będą równe. Kształtowanie się ceny akcji zaleŝeć od woli uczestników rynku, którzy będą wpływali wartość rynkową spółki. e. Koszty emisji EuroHold Bulgarii spodziewa się, Ŝe łączna kwota wydatków wynikających z dopuszczenia akcji do obrotu na GPW wyniesie ok PLN (dwieście dziesięć tysięcy złotych), w tym opłata bułgariskiej Komisji Nadzoru Finansowego za prospekt emisyjny w wysokości 5,000 BGN (pięć tysięcy bułgarskich leva) zł PLN (jedenaście tysięcy złotych według kursu Narodowego Banku Polskiego na dzień sporządzenia Prospektu). Na wyŝej wymienione koszty składają się równieŝ koszty przygotowania Prospektu, koszty usług doradców, opłaty KDPW związane z rejestracją emisji, jak równieŝ opłata GPW za dopuszczenie akcji do obrotu na Rynku Głównym. Następujące opłaty będą miały zastosowanie i zostaną poniesione przez EuroHold Bulgaria w aspekcie dopuszczenia akcji do obrotu na Rynku Głównym GPW: (i) opłata rejestracyjna KDPW, tj. 0,01% wartości akcji, ale nie mniej niŝ zł (trzy tysiące złotych ) i nie więcej niŝ zł (sto tysięcy złotych), (ii) opłata GPW za dopuszczenie akcji do obrotu, tj. 0,03% wartości akcji, ale nie mniej niŝ zł (osiem tysięcy złotych) i nie więcej niŝ zł (dziewięćdziesiąt sześć tysięcy złotych). 10. Dodatkowe informacje a. Kapitał zakładowy Kapitał zakładowy Na dzień sporządzenia niniejszego Prospektu kapitał zakładowy Spółki wynosi BGN i podzielony jest na zwykłych, zarejestrowanych, nieuprzywilejowanych, zdematerializowanych akcji z prawem głosu, z prawem do dywidendy i prawem do kwoty likwidacyjnej, o wartości nominalnej 1 BGN za kaŝdą akcję. Wszystkie wyemitowane akcje są tej samej klasy i są w pełni opłacone. Cały kapitał spółki jest opłacony 58

59 gotówką. Wszystkie wyemitowane akcje są przedmiotem obrotu giełdowego. Akcje Emitenta są notowane na Nieoficjalnym Rynku BSE Sofia AD. W obrocie figurują pod oznaczeniem 4EH. Emitent nie nabył i nie jest w posiadaniu akcji własnych. Wg stanu na dzień roku akcji z kapitału zakładowego Emitenta jest własnością podmiotu zaleŝnego, którym jest EuroIns AD. Akcje posiadają wartość nominalną 1 BGN kaŝda, a ich wartość księgowa wynosi 3755 BGN. Na dzień sporządzenia niniejszego Prospektu, nie istnieją Ŝadne inne spółki zaleŝne i/lub podmioty zaleŝne, które posiadałyby akcje w kapitale zakładowym Emitenta. Spółka nie wyemitowała akcji, które nie mają pokrycia w kapitale zakładowym. Wszystkie akcje wyemitowane przez EuroHold Bulgaria AD mają prawo głosu na walnym zgromadzeniu akcjonariuszy Spółki. Kapitał zakładowy Spółki nie został podwyŝszony poprzez wniesienie wkładu niepienięŝnego. Ustawodawstwo bułgarskie nie przewiduje instytucji kapitału warunkowego. W odniesieniu do Emitenta nie istnieją Ŝadne prawa i/lub zobowiązania odnoszące się do kapitału warunkowego. Na dzień sporządzenia niniejszego Prospektu, toczy się postępowanie w sprawie podwyŝszenia kapitału zakładowego Emitenta (patrz IV.3. "Informacje na temat bieŝącej oferty publicznej" w części III). Z wyjątkiem tej procedury i przewidzianą nią emisją praw poboru nie występują inne prawa, które będą emitowane po zatwierdzeniu przez bułgarską Komisję Nadzoru Finansowego prospektu emisyjnego związanego z tym podwyŝszeniem kapitału zakładowego. Emitent nie podjął działań związanych z emisją warrantów, obligacji zamiennych lub z prawem pierwszeństwa. Nie ma osób, które posiadają opcje na akcje z kapitału zakładowego Emitenta lub na kapitał zakładowy innych spółek Grupy EuroHold Bulgaria AD. Nie istnieje warunkowe lub bezwarunkowe zobowiązanie wobec takich osób do wydawania takich opcji na ich korzyść. Organem właściwym do podejmowania decyzji dotyczących podwyŝszenia kapitału zakładowego Emitenta jest walne zgromadzenie akcjonariuszy. Zgodnie z art. 13, ust. 5 Statutu Emitenta, Zarząd Spółki jest uprawniony do głosowania nad sprawami dotyczącymi podwyŝszenia kapitału zakładowego do wysokości (czterysta milionów) leva w ciągu 5 (pięciu) lat od daty zarejestrowania w Rejestrze Handlowym zmiany Statutu Spółki, przegłosowanej uchwałą walnego zgromadzenia akcjonariuszy z dnia roku, zgodnie z postanowieniami art. 194 ustęp 1 i 2, art. 196, ustęp 1 i 2 ustawy Prawo Handlowe, a takŝe przepisami ustawy o ofercie publicznej i papierach wartościowych. Nie ma podmiotów posiadających opcje własne na kapitał EuroHold lub na kapitał jego spółek zaleŝnych. Ponadto, Emitent i jego spółki zaleŝne nie mają Ŝadnych zobowiązań do emisji takich opcji. Zmiany w kapitale zakładowym EuroHold Bulgaria AD powstała roku z kapitałem w wysokości BGN, dzieli się na zwykłych, zarejestrowanych, nieuprzywilejowanych, zdematerializowanych akcji z prawem głosu, prawem do dywidendy i prawem do kwoty likwidacyjnej, o wartości nominalnej 1 BGN kaŝda. Kapitał zakładowy Spółki jest utworzony poprzez połączenie EuroHold AD i Starcom Holding AD bez przeprowadzenia likwidacji. Wysokość kapitału jest określona w umowie reorganizacji (Reorganisation agreement), zatwierdzonej przez walne zgromadzenia akcjonariuszy połączonych spółek. W okresie maj - czerwiec 2007 EuroHold Bulgaria AD przeprowadziła udane podwyŝszenie kapitału w drodze emisji nowych akcji o wartości nominalnej 1 BGN za akcję, o wartości emisyjnej 3,35 BGN za akcję. W trakcie subskrypcji zostało wyemitowane praw poboru i kaŝde prawo upowaŝniało do nabycia 0,25 nowych akcji. Łączna liczba subskrybowanych i opłaconych akcji wyniosła , tj. 99,96% oferowanych akcji. Po zakończeniu wspomnianego podwyŝszenia kapitału zakładowego Spółki, kapitał zakładowy wyniósł BGN, dzielił się na zwykłe, zarejestrowane, nieuprzywilejowane, zdematerializowane akcje z prawem głosu, z prawem do dywidendy i prawem do kwoty likwidacyjnej, o wartości nominalnej 1 BGN kaŝda. W okresie marzec - maj 2011 r., uchwałą Zarządu EuroHold Bulgaria AD, na podstawie uprawnień określonych przez art. 13 ustęp 5 Statutu Spółki, kapitał EuroHold Bulgaria AD został podwyŝszony przez emisję nowych akcji o wartości nominalnej 1 BGN i wartości emisyjnej 1 BGN za jedną akcję. Spółka wyemitowała praw, natomiast proporcja liczby praw poboru i nowych akcji wyniosła 1: akcji zostało subskrybowanych, tj. 73,84% oferowanych akcji. Na dzień sporządzenia niniejszego Prospektu, kapitał zakładowy Spółki wynosi BGN i dzieli się na 59

60 zwykłych, zarejestrowanych, nieuprzywilejowanych, zdematerializowanych akcji z prawem głosu, z prawem do dywidendy i z prawem do kwoty likwidacyjnej o wartości nominalnej 1 BGN kaŝda. Na dzień r. Zarząd Emitenta, na podstawie uprawnień określonych w art. 13, ust. 5 Statutu Spółki w związku z zastosowaniem przepisów ustawy Prawo Handlowe i ustawy o ofercie publicznej i papierach wartościowych, podjął uchwałe w sprawie podwyŝszenia kapitału zakładowego EuroHold Bulgaria AD. Na dzień sporządzenia niniejszego Prospektu toczy się postępowanie dotyczące podwyŝszenia kapitału zakładowego Emitenta. Oczekuje się, Ŝe do końca września 2011 r. Bułgarska Komisja Nadzoru Finansowego zatwierdzi prospekt dotyczący oferty publicznej zwykłych, zarejestrowanych, nieuprzywilejowanych, zdematerializowanych akcji z prawem głosu, prawem do dywidendy i prawem do kwoty likwidacyjnej o wartości nominalnej 1 BGN kaŝda. Nie występują czynniki w odniesieniu do Emitenta, które mogłyby prowadzić do zmiany praw akcjonariuszy. Nie istnieją Ŝadne postanowienia w Statucie i/lub w przepisach wewnętrznych Emitenta, które mogłyby prowadzić do opóźnienia, odroczenia lub uniemoŝliwienia zmiany w sposobie sprawowania kontroli nad Emitentem. Nie ma Ŝadnych postanowień regulujących próg, powyŝej którego własność praw akcjonariuszy powinna być ujawniona w Statucie i/ lub w przepisach wewnętrznych Emitenta. Nie ma surowszych postanowień w Statucie Emitenta niŝ te określone przez prawo o zmianach w kapitale zakładowym. Fundusz Rezerwowy EuroHold Bulgaria AD utworzyła Fundusz Rezerwowy. Jego źródłami jest: co najmniej 1/10 zysku, które lokuje się do Funduszu aŝ do osiągnięcia 1/10 części lub więcej określonego w Statucie kapitału zakładowego, nadwyŝka z agio emisyjnego ponad wartość nominalną akcji i obligacji w dacie ich emisji; wysokość dodatkowych świadczeń pienięŝnych dokonanych przez akcjonariuszy w związku z nadanymi im uprawnieniami w stosunku do akcji; inne źródła, przewidziane postanowieniami Statutu lub w drodze uchwały walnego zgromadzenia akcjonariuszy. Wpływy z Funduszu Rezerwowego mogą być wykorzystane jedynie na pokrycie strat bieŝących lub na pokrycie strat z lat ubiegłych. Gdy wpływy Funduszu Rezerwowego przekroczą 1/10 lub większą wysokość kapitału zakładowego przewidzianą w Statucie, tym większa kwota moŝe być wykorzystana na podwyŝszenie kapitału. b. Memorandum i statut spółki EuroHold Bulgaria AD jest spółką publiczną i jej statut jest zgodny z ustawą o ofercie publicznej i papierach wartościowych oraz odpowiednimi przepisami prawa. PoniŜsze informacje dotyczące Statutu są zgodne z obowiązującymi bułgarskimi przepisami prawa. Zgodnie z art. 4 ust. 1 Statutu Spółki (AoA) EuroHold Bulgaria AD, przedmiotem działalności spółki jest nabywanie, zarządzanie, ocena i sprzedaŝ akcji spółek bułgarskich i zagranicznych; nabywanie, zarządzanie i sprzedaŝ obligacji; nabywanie, ocena i sprzedaŝ patentów, udzielanie licencji na prawa patentowe wykorzystywane w spółkach, w których spółka posiada akcje, finansowanie przedsiębiorstw, w których spółka ma udziały. Organy zarządzające Spółki to: Walne Zgromadzenie Akcjonariuszy, Zarząd i Rada Nadzorcza (art. 19 z AoA). Walne zgromadzenie akcjonariuszy jest najwyŝszym organem zarządzającym spółki i składa się z wszystkich akcjonariuszy posiadających prawo głosu. Walne Zgromadzenie Akcjonariuszy (WZA) podejmuje ostateczne decyzje dotyczące działalności holdingu, takie jak: uchwała o zmianie lub uzupełnieniu Statutu; reorganizacji i rozwiązaniu spółki, podwyŝszenia i obniŝenia kapitału zakładowego spółki, wybór członków Rady Nadzorczej itd. Zgodnie z art. 21, ust. 1 Statutu walne zgromadzenie akcjonariuszy zwoływane jest przez Zarząd raz do roku na sesję zwyczajną. Zarząd oraz Rada Nadzorcza moŝe Ŝądać zwołania WZA i nadzwyczajnego WZA: według własnego uznania; natomiast gdy straty przekroczą ¼ (jedną czwartą) kapitału 60

61 zakładowego w przypadkach przewidzianych przez prawo. Zgodnie z tym samym artykułem Statutu i Art. 223, ust. 1 ustawy Prawo Handlowe, walne zgromadzenie akcjonariuszy moŝe być zwołane na wniosek akcjonariuszy, gdy akcjonariusze posiadają akcje spółki stanowiące co najmniej 5 procent kapitału zakładowego Emitenta przez okres dłuŝszy niŝ trzy miesiące. W przypadku, gdy Zarząd nie zwoła WZA w ciągu jednego miesiąca lub w przypadku gdy WZA nie jest zwołane w ciągu najbliŝszych trzech miesięcy od otrzymania wniosku, sąd rejonowy zwołuje WZA lub uprawnia akcjonariuszy, którzy zaŝądali zwołania lub ich przedstawicieli do zwołania WZA. Zgodnie z art. 118 ust. 2 ustawy o ofercie publicznej i papierach wartościowych, osoby, które posiadają wspólnie lub indywidualnie, co najmniej 5% kapitału Emitenta w przypadku wakatu w organach zarządzających, który zagraŝa interesom spółki (niezaleŝnie od okresu, w którym posiadali oni akcje i niezaleŝnie od tego czy skierowali oni wniosek do Zarządu spółki), mogą wystąpić do sądu rejonowego o zwołanie walnego zgromadzenia lub mogą upowaŝnić swoich przedstawicieli do zwołania walnego zgromadzenia z punktem porządku obrad określonym przez siebie, natomiast sąd musi niezwłocznie wydać stosowne orzeczenie. Akcjonariusze, którzy posiadają wspólnie lub indywidualnie, co najmniej 5% kapitału zakładowego Emitenta mogą wymagać włączenia dodatkowych spraw do porządku obrad lub zaproponować projekt decyzji w sprawach juŝ uwzględnionych w porządku obrad Walnego Zgromadzenia zgodnie z art. 223a ustawy Prawo Handlowe. Zwołanie walnego zgromadzenia akcjonariuszy jest dokonywane przez zaproszenie, opublikowane w Rejestrze Handlowym, z zachowaniem procedury określonej w art. 22 i 23 Statutu Emitenta. Postanowienia Statutu Emitenta, Zarządu i Rady Nadzorczej są szczegółowo opisane w XIX.5. "Zarząd i Rada Nadzorcza" w sekcji drugiej niniejszego dokumentu. Akcje Spółki są tej samej klasy, a mianowicie są one zwykłe, zarejestrowane, zdematerializowane. Wartość nominalna kaŝdej z akcji to 1 BGN. KaŜda akcja daje jej posiadaczowi prawo głosu na Walnym Zgromadzeniu Akcjonariuszy, prawo do dywidendy i prawo do kwoty likwidacyjnej. Poza tym, zgodnie z art. 11, ust. 3 Statutu, kaŝdy akcjonariusz ma prawo do nabywania akcji nowej emisji w przypadku podwyŝszenia kapitału; do kontroli dokumentów związanych z porządkiem obrad Walnego Zgromadzenia; do upowaŝnienia osób trzecich do korzystania ze swoich praw wobec spółki; prawa bycia wybranym i pełnienia funkcji w organach zarządzających spółki oraz do wykonywania wszelkich praw przyznanych przez obowiązujące ustawodawstwo bułgarskie. Spółka nie moŝe emitować akcji uprzywilejowanych, które dają więcej niŝ jedno prawo głosu na walnym zgromadzeniu lub zwiększają udział akcjonariusza w majątku likwidacyjnym. Zgodnie z art. 64 ustęp 1 Statutu Spółki, dywidendy są rozdzielane i płacone tylko raz w roku tylko wtedy, gdy spełnione są następujące warunki: upływ danego roku budŝetowego; osiągnięcie zysku przez spółkę za dany rok budŝetowy; część zysku pozostała po alokacji niezbędnych przychodów do funduszu rezerwowego i innych funduszów, określonych przez prawo; zostanie podjęta uchwała walnego zgromadzenia akcjonariuszy o podziale zysku lub jego części, a mianowicie o wypłacie dywidendy i określaniu jej wysokości. Dywidendy podlegają podziałowi pomiędzy akcjonariuszy proporcjonalnie do posiadanych akcji. Osobami uprawnionymi do otrzymania dywidendy są osoby zarejestrowane w rejestrach Centralnego Depozytu Papierów Wartościowych jako akcjonariusze na 14 dni po dniu walnego zgromadzenia, które zatwierdziło roczne sprawozdanie finansowe i podjęło uchwałę o wypłacie dywidendy. Spółka musi zapewnić wypłaty dywidend zatwierdzone przez walne zgromadzenie w ciągu 3 miesięcy od dnia podjęcia uchwały. Koszty wypłaty dywidendy obciąŝają Spółkę. Obrót akcjami spółki i przeniesienie akcji są wykonywane zgodnie z przepisami bułgarskiej ustawy o obrocie instrumentami finansowymi oraz rozporządzeniami wydanymi w oparciu o przedmiotową ustawę, Regulaminem BSE Sofia AD, Regulaminem Centralnego Depozytu Papierów Wartościowych. Statut Spółki nie przewiduje ograniczeń związanych z przenoszeniem akcji. Emisja i zbycie akcji Emitenta jako akcji zdematerializowanych jest skuteczne z chwilą stosownej rejestracji dokonanej przez Centralny Depozyt Papierów Wartościowych. Statut Spółki nie zawiera postanowień, które przewidują próg własności, powyŝej którego akcje powinny zostać ujawnione, a takŝe postanowień, które mogłyby spowodować opóźnienie, odroczenie lub zapobieŝenia wprowadzenia zmian dotyczących kontroli nad Emitentem. c. Dokumenty do wglądu W okresie waŝności INWESTORZY MOGĄ BADAĆ ORYGINAŁ TEGO DOKUMENTU, pozostałe części 61

62 Prospektu, dokumenty konstytutywne, Statut Emitenta, wszystkie listy, sprawozdania i inne dokumenty, archiwalne informacje finansowe, ekspertyzy i raporty, a takŝe inne dokumenty włączone przez odniesienie i otrzymać DODATKOWE INFORMACJE O DOKUMENCIE REJESTRACJI AKCJI I CAŁĄ ZAWARTOŚĆ PROSPEKTU W BIURZE: Christopher Columbus Blvd., Sofia 1592 Tel: (+359 2) ;. Fax: (+359 2) Osoba kontaktowa: Galya Georgieva, od 9.30 do g_georgieva@eurohold.bg 62

63 SECTION TWO: REGISTRATION DOCUMENT I. SELECTED FINANCIAL INFORMATION IMPORTANT NOTE: The presentation of revenues and expenses in the audited annual report for 2010 has been altered to reflect their functional nature and to achieve consistency and comparability with other-periods accounting information presentation. The presented in the same financial report information for 2009 is reclassified according to main revenues and expenses as per lines of business: insurance, car sales, leasing, asset management and brokerage, real estate and parent company. In 2010, Eurohold Bulgaria AD divested of its non-core manufacturing businesses and the 2009 net income from this non-core activities is reclassified in discontinued operations line. For comparability s and consistency s sake, the audited consolidated information for 2008, presented in this Prospectus, has also been reclassified as per the functionality principle for revenues and expenses and is presented in additional column, signified by * symbol. Information extracted from the audited consolidated financial reports for 2008 and 2009 of Eurohold Bulgaria AD before reclassification: In thousand BGN Note in the financial statements Revenue from insurance and health assurance 3 227, ,237 Expenses for insurance and health assurance 4-247, ,398 Net income from insurance and health assurance -20,278-4,161 Revenue from financial services 5 28,591 27,830 Expenses for financial services 6-28,911-25,649 Net income from financial services ,181 Revenues from car sales 7 89,293 82,843 Expenses for car sales 8-85,180-81,507 Net income from car sales 4,113 1,336 Revenues from services-real estates 9 2,389 1,162 Expenses for services-real estates 10-2,278-2,473 Net income from services-real estates 111-1,311 Revenues from sale of finished goods 11 20,080 17,097 Expenses for sale of finished goods 12-18,205-15,499 Net income from sale of finished goods 1,875 1,598 Financial revenues 13 5,138 13,211 Financial expenses 14-9,657-5,

64 Net financial revenues -4,519 7,511 Revenues from the company-parent 15 39,174 13,718 Expenses for the company-parent 16-7,399-12,160 Net income from the company-parent 31,775 1,558 Other revenues/expenses 17-2, Expenses for depreciation 18-6,438-9,422 Share of the income of associated companies Net income/(loss) before taxes 4, Expenses for income taxes ,003 Expense/(income) for deferred corporate taxes Net income/(loss) for the period 45 4, Source: EuroHold Bulgaria AD Information from the consolidated financial statement of Eurohold Bulgaria AD is presented in the table, which is audited by BDO Bulgaria OOD as of the end of the reporting periods 2008 and In these consolidated income statements and the relevant notes the revenues and expenses of the Group are presented and grouped according to their economic origin. Please visit for full access to the reports of 2008 and Information extracted from the consolidated financial statements of Eurohold Bulgaria AD after reclassification according to the audited consolidated financial statement for 2010: In thousand BGN Note in the financial statements Revenues from operating activities 3 231, , ,822 Insurance revenues 5 87,119 89, ,979 Revenues from car sales 6 16,042 17,794 14,293 Leasing revenues 8 12,549 10,036 9,822 Revenues from financial and investment activities 11 39,071 13,715 14,187 Revenues from the activities of the parent company 10 2,182 1,012 3,547 Revenues from services with real estates 388, , ,650 Expenses for operating activities 4 Insurance expenses -256, , ,030 Cost of cars and spare parts sold 7-74,648-59,645-72,091 Leasing financial expenses 9-12,890-11,611-11,734 Financial expenses for financial and investment activities 12-10,587-8,143-8,243 Financial expenses for the activities of the parent company -5,537-10,059-8, , , ,130 Gross profit 28,982 65,255 66,520 Other income/expenses ,

65 Other expenses for the activity 14-17,442-53,719-52,615 Share of the net income of associated companies ,072 EBITDA 12,052 11,267 13,685 Financial expenses 15-2,010-3,379-3,437 Financial income FX expenses EBTDA 10,234 8,117 10,324 D&A 17-4,790-7,779-9,117 EBT 5, ,207 Taxes Net income from continuing operations 5, ,200 Net income from discontinued operations Net income/(loss) for the period Source: EuroHold Bulgaria AD In 2010 Eurohold Bulgaria changes the way of presenting the information in the income statement to the so called method of expenses according to their functional purpose or cost of goods sold and groups the expenses according to their function as a part of the cost of goods sold, general, sale and administrative costs. The Group considers that this method ensures more significant information about the readers compared to the classification according to the expense origin. For increasing the comparability of information between the periods and for helping the readers to take economic decisions the Group reclassifies the comparable information. The reclassified information for 2008 and 2009 is presented in the table above together with the consolidated income statement of Eurohold Bulgaria AD for A full description of the values which are reclassified in 2009 is presented in note 47 from the consolidated financial report for The description of the reclassified values for 2008 can be seen from the Report for the reclassifications of the separate components form the consolidated income statement for Please visit for a full access to the statement for 2010 and the Report for In the following tables key indicators are presented from the audited annual consolidated financial statements of EuroHold Bulgaria AD for the period 2008 to 2010 along with selected information from the interim consolidated financial statements for the six months ending on 30 June of 2010 and The consolidated financial statements are prepared in accordance with the applicable international financial reporting standards. Extracts from the consolidated financial statements of EuroHold Bulgaria AD: INDICATOR Reporting period (BGN '000) * 2009* Growth 2010 Growth Growth Revenue from operating activities Revenue from discontinued operations 412, , , % 416, % 194, , % - 22,466 19, % 10, % 12, % Total revenue 412, , , % 426, % 206, , % Profit/(Loss) for the period 4,124 4, % % -5, % Net result attributable to the 8,451 8,451 1, % 2, % -4, % 65

66 Shareholders Earnings per share (BGN) % % % *** Total assets 705, , , % 603, % 658, , % Net assets 188, , , % 207, % 226, , % Share capital ** 62,239 62,239 59, % 59, % 62, , % Number of shares ('000 sh.) 62,498 62,498 62, % 62, % 62, , % * The figures are reclassified for comparison purposes see the important note on page 63. ** The share capital is deducted with the amount of shares owned by subsidiaries *** The change in the extracted figures from the statement of financial position ended on 30 June 2011 is based on the figures from the financial statements for the period ended on December 31, 2010 Source: EuroHold Bulgaria AD The consolidated revenue of the Group as of June 30, 2011 amounts to BGN 180,111 thousand, compared to BGN 206,399 thousand for the same period of The main factor for the decrease of 12.7% in revenue is the discontinued operations of the Group amounting to BGN 12,225 thousand. Additional cause for the decrease is the drop in the written premiums for the car insurance in Romania in the first quarter of This is a result of the reduction in the market prices in Romania and the refocusing of the insurance companies towards non-motor insurance. The Group reports loss for the period in the amount of BGN 0.4 million compared to loss of BGN 4.7 million for the comparable previous period. Consolidated revenue from operating activities (BGN '000) 389, , ,132 Consolidated result attributable to the Shareholders (BGN '000) 8, , ,111 1,293 2,491-4, /30/2010 6/30/ /30/2010 6/30/2011 Source: EuroHold Bulgaria AD In the first half of 2011 EuroHold Bulgaria AD decreases its consolidated loss 11 times. The consolidated net result of the Group as of June 30, 2011 is a loss in the amount of BGN 417 thousand, compared to loss of BGN 4,697 thousand for the prior period. In 2010 the Group reported annual net profit of BGN 2,491 thousand, compared with a net profit of BGN 1,293 thousand for The sale of non strategic investments had an effect on the consolidated amount of the Group s assets. As of the end of 2010, net assets decreased, compared to 2009, with about 10%. In the last two reporting periods ended and there is a slight increase of 2% in the total assets, when the consolidated amount of the net assets rose by 17%. Consolidated total assets (BGN '000) Consolidated net assets (BGN '000) 705, , , , , , , , , , /30/2010 6/30/ /30/2010 6/30/2011 Source: EuroHold Bulgaria AD 66

67 In the following tables selected information is presented for the operating segments of EuroHold Bulgaria AD, showing the development of the Group in the Insurance, Leasing, Automotive, Asset management and brokerage, Real estate and Production activities. Extracts from the consolidated financial statements of insurance business: INDICATOR Reporting period (BGN '000) Change 2010 Change Change* Gross premiums written 186, , % 233, % 126,241 95, % Current year paid claims -71, , % -136, % -73,181-61, % Acquisition expenses -40,518-56, % -63, % -30,767-26, % Premiums ceded to reinsurers -29,928-17, % -16, % -4,144-2, % Change in the gross provision for unearned premiums -34, % % -15,028 3, % Change in the outstanding claims provision -20,161-14, % -7, % 4,606-2, % Administrative expenses -24,340-25, % -20, % -8,259-8, % Net profit/(loss) -21,760-5, % -3, % -1, % Equity 258, , % 247, % 250, , % Technical reserves 110, , % 126, % 121, , % Other liabilities 19,344 13, % 9, % 14,161 9, % * The change in the extracted figures from the statement of financial position ended on 30 June 2011 is based on the figures from the financial statements for the period ended on December 31, 2010 Source: EuroHold Bulgaria AD Extracts from the consolidated financial statements of leasing services: INDICATOR Reporting period (BGN '000) Change 2010 Change Change* Number of leased vehicles 6,115 7, % 6, % 6,709 6, % Net profit 350 2, % % % Financial lease receivables 152, , % 110, % 120, , % Cash and cash equivalents 2,558 2, % 3, % 2,603 2, % Equity 15,820 18, % 19, % 19,843 22, % Non-current liabilities 159, , % 124, % 134, , % Current liabilities 18,506 6, % 4, % 5,976 8, % * The change in the extracted figures from the statement of financial position ended on 30 June 2011 is based on the figures from the financial statements for the period ended on December 31, 2010 Source: EuroHold Bulgaria AD Extracts from the consolidated financial statements of asset management and brokerage: INDICATOR Reporting period (BGN '000) Change 2010 Change Change* Revenue from financial services 12,603 10, % 10, % 4,446 7, % Net profit % % % Equity 15,837 15, % 16, % 15,752 15, % * The change in the extracted figures from the statement of financial position ended on 30 June 2011 is based on the figures from the financial statements for the period ended on December 31,

68 Source: EuroHold Bulgaria AD Extracts from the consolidated financial statements of automotive business: INDICATOR Reporting period (BGN '000) Change 2010 Change Change* Revenue from sales 94,022 86, % 101, % 51,125 52, % EBITDA 6,442 11, % 12, % 2,634 3, % Net profit 1,818 3, % % -3, % Total assets, incl.: 46, , % 99, % 101, , % Fixed assets 17,840 34, % 39, % 45,435 39, % Inventory 17,674 27, % 16, % 26,460 16, % Cash and cash equivalents 2,380 2, % 1, % 3,072 1, % Equity 8,058 14, % 7, % 10,524 6, % Non-current liabilities 8,642 39, % 56, % 45,453 57, % Current liabilities 30,080 49, % 35, % 45,763 37, % * The change in the extracted figures from the statement of financial position ended on 30 June 2011 is based on the figures from the financial statements for the period ended on December 31, 2010 Source: EuroHold Bulgaria AD Extracts from the consolidated financial statements of real estate: INDICATOR Reporting period (BGN '000) Change 2010 Change Change* Revenue from sales 3,140 3, % 8, % 2,885 2, % EBITDA % 1, % % Net profit % % % Total assets, incl.: 14,616 30, % 13, % 13,263 14, % Fixed assets 12,293 11, % 12, % 11,236 11, % Cash and cash equivalents % % % Equity 2,703 4, % % 41-1, % Non-current liabilities 6,368 10, % 13, % 12,167 14, % Current liabilities 5,545 16, % 1, % 1, % * The change in the extracted figures from the statement of financial position ended on 30 June 2011 is based on the figures from the financial statements for the period ended on December 31, 2010 Source: EuroHold Bulgaria AD Extracts from the consolidated financial statements of manufacturing*: INDICATOR Reporting period (BGN '000) Change 2010 Change Change* Revenue from sales 20,720 17, % 11, % EBITDA 2,492 2, % % Net profit % % Total assets, incl.: 37,226 29, % % Fixed assets 16,060 11, % % Cash and cash equivalents 1, % %

69 Equity 14,138 12, % % Non-current liabilities 11,143 6, % % Current liabilities 11,375 11, % % * All subsidiaries from Production segment have been disposed as of ** The change in the extracted figures from the statement of financial position ended on 30 June 2011 is based on the figures from the financial statements for the period ended on December 31, 2010 Source: EuroHold Bulgaria AD Results by segments prior to consolidation adjustments: (BGN '000) H H REVENUE Insurance and health insurance 234, , , , ,594 Financial services 31,490 31,015 29,220 13,081 14,813 Automotive business 94,185 94, ,582 49,126 52,851 Real estate 3,237 3,429 8,617 2,895 2,992 Production 21,332 20,348 11,322 12,814 - Parent company, incl. dividends received 42,874 17,253 16, ,261 Total revenue 427, , , , ,511 EXPENSES Insurance and health insurance 260, , , , ,979 Financial services 30,634 27,957 28,286 11,825 14,428 Automotive business 92,129 91, ,010 52,010 53,850 Real estate 3,299 3,724 8,312 3,704 3,582 Production 21,409 20,291 11,662 11,178 - Parent company 17,838 15,200 12,691 4,759 3,749 Total expenses: 426, , , , ,588 NET PROFIT/(LOSS) Insurance and health insurance -26,387-6,135-4,290-1, Financial services 712 3, , Automotive business 1,818 3, , Real estate Production ,635 0 Parent company 22,099 2,053 3,978-3,257 1,512 Total net profit/(loss): -1,932 1,759 1,159-5, Source: EuroHold Bulgaria AD 69

70 II. RISKS Before investing in the Shares, potential investors should carefully analyze and consider the Risk Factors as described in the section herein below, which is an integral part of the Prospectus. If any of the risks occurs, partially or fully, or in combination with other risks, it may have a material adverse impact on the firm s outlook, results or financial situation. Should this lead to a drop in the stock price of the Company, investors could lose partially or fully their initial investment. Additional risk, along with other currently unidentified or deemed minor uncertainties, may also have a material adverse impact on the firm s outlook, results or financial situation. Hereby, we advise potential investors that future results of the Company may vary substantially from previously achieved results, as a result of the effects of the risks described above or other extrinsic risk factors. *** Risks can be a serious threat to the financial position of the Company, while they also can be deemed as an opportunity to capture a strategic advantage over the competition. Risk inherent in any investment impacts the value of that investment (i.e. asset). Financial theory divides risk two broad categories unsystematic (diversifiable) and systematic (un-diversifiable). The risks which a firm is specifically exposed to in its operations are called non-systematic risks (specific to the firm). For example: management and strategic development of the firm; risk arising from the structure of the firm, risk in attracting and retaining qualified personnel, etc. Other risks that permeate the whole economy and influence all participants are the so-called systematic risks (market risks). Examples are: increases in general interest rates that impact all market participant, etc. Certain risks exist which can be deemed both non-systematic and systematic depending on the breadth of their impact on the market participants. The most common definition of risk is that it is an undesired deviation from the expected outcome of a given event. The order in which the following risk factors are presented does not indicate their significance, likelihood or potential impact on the Group s outlook, results and financial situation. 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. 70

71 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. 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. In comparison with comparable countries, the major credit 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 longrun 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 open-market 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. 71

72 In light of this, every investor should carefully review and take into account current inflation levels, as well as future implications and impact of inflation expectations. Currency risk 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. Emerging and developing markets Investors in emerging markets such as Romania, Bulgaria, Macedonia and Serbia should be aware that emerging markets are subject to greater risk than more developed markets. In addition, adverse political or economic developments in other countries could have a significant negative impact on GDP in the region, and the economy of these countries as a whole. Investors should exercise caution in evaluating the risks involved and must decide for themselves whether these risks warrant an investment in the Company and whether it is suitable for them. Investing in emerging markets is only suitable for qualified and sophisticated investors who fully comprehend the significance of those risks. Investors should also note that market conditions in emerging markets change rapidly and therefore information contained in this document may become outdated relatively quickly. Risks associated with Bulgarian capital markets It is possible that investors have less information on the Bulgarian equity capital market than is available for other public securities markets. There are differences in the prevailing regulations and supervision of the Bulgarian securities market, as compared to markets in Western Europe and the USA. The Bulgarian Financial Supervision Commission monitors disclosure and other regulatory standards of the Bulgarian securities market, including full compliance with laws and regulations and on occasions, issues guidance on corporate obligations regarding disclosure of information, securities trading on insider information and other matters. However, there may be less publicly available information about Bulgarian companies than is regularly made available to investors by public companies in other securities markets and that in return could influence the price of the Shares. 72

73 2. Unsystematic risks Risk relating to the business operations of the Issuer 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. 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 73

74 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; Possible information system errors; Possible external control failures; Departure of key employees and inability to retain and hire qualified personnel; Possible jump in SG&A expense, leading to shrinkage in overall margins and profitability levels. Risks arising from inability to attract and retain key employees The launching of entirely new business models in recent years requires specific qualifications and skill sets from employees. At the same time competition among employers, further limits the already limited pool of well-educated and skilled new hires. The problem is additionally influenced by the demographic crisis in the region driven by an aging population and low birth rates. As a result of these and other factors, competition for skilled labor between employers is very intensive. EuroHold s business is also very much dependent on the individual contribution of a particular group of senior executives, high and mid-level managers across all of the Company s subsidiaries. There can be no assurances as to the continuity in their employment contracts with the Company in the future. The Company s overall success is greatly dependent upon its ability to retain and motivate such key officers and employees. Inability of the Company to retain a team of loyal, experienced, qualified and welltrained staff may have an adverse effect on the Company as a whole, its operating results and financial position. Risk related to changes in the regulatory environment The results of the Group are influenced by changes in legislation and regulatory environment, as this is most valid for the large insurance subsidiaries in Bulgaria, Romania, Macedonia and Serbia. Regulatory changes in the respective countries are relevant for all insurance companies and therefore more likely to impact the final price of insurance products which in return influences the net profitability of these companies. The possibility of radical changes in the regulatory framework in any given country where the Group is active may have adverse effect on the Company's overall operating results and financial position. Risks related to the integration of future acquisitions Currently, EuroHold is actively pursuing business opportunities in Bulgaria, Romania, Macedonia and Serbia including the search for promising acquisition opportunities of assets and specific companies. One risk is that the Group may not be able to identify promising future acquisition targets, or if such are identified whether they will be able achieve the expected returns. In any event, acquisitions and large asset purchases are subject to unforeseeable events, appearance of hidden liabilities and problems with the smooth operational integration of the acquisition targets. Financial risk Financial risk is the additional level of risk and uncertainty that an investor is willing to take, when is taking on financial indebtedness, i.e. leverage. This level of financial uncertainty adds an extra layer of risk business. When a part of the capital which a company uses to finance its development is borrowed, the company has taken on predictable and/or fixed financial obligations for periodic payments. The larger the proportion of long-term indebtedness to equity, the greater will be the probability of default in the payment of future financial obligations. An increase in this proportion (leverage ratio) implies an increase in overall financial risk. Another group of indicators are related to the flow of revenues through which the payment of the company s obligations is possible. Another indicators is the so called debt-service coverage ratio, which is an indication of the free cash flow before interest and taxes, which in turn can be used to repay and service the currently due interest components of debt. This ratio is a good indicator of a firm s ability to service its financial liabilities. 74

75 Acceptable or normal level of financial risk is generally highly dependent on the business risk. In a low business risk environment, investors should generally be willing to take higher levels of financial risk. Currency risk EuroHold operates in several Balkan countries (Bulgaria, Romania, Macedonia and Serbia), as the national currency of each of the countries, except Bulgaria, is a freely convertible currency, whose value relative to other currencies is determined by free markets forces. In Bulgaria, since 1996 the local currency has been pegged to the EURO. Abrupt change in macro-framework of any of the countries, where the Company actively pursues business opportunities, may have a negative effect on its consolidated results. Ultimately, however, EuroHold reports consolidated Financial Results in Bulgaria in Bulgarian leva (BGN), which in turn is pegged to the Euro, which also changes its value against other global currencies, but is significantly less exposed to dramatic price fluctuations. Liquidity Risk Liquidity risk is linked to the ability of the Company to service its maturing financial liabilities fully and on time. Low financial indebtedness and capitalization alone do not guarantee uninterrupted debt servicing capacity. Liquidity risks can also arise from a substantial delay in customer payment of amounts due. EuroHold aims to manage this risk through an optimal allocation of internal resources on a consolidated basis. The Group seeks adequate liquidity levels in order to meet liabilities coming due, both under normal and unexpected market conditions, in a way that minimizes bearing of extra costs or losses, and that takes away reputation risk from non-payment of obligations due. All subsidiaries exercise proper financial planning and forecasting, taking into account amounts due within the next 90 days, including servicing of financial liabilities. This format of detailed planning minimizes or even completely eliminates the effects of unexpected events happening. Company s senior management endorses use of financial leverage by the subsidiaries to the extent it is used for new business development or as working capital facilities. The level of such borrowed money is strictly controlled and is kept within pre-approved limits, after careful consideration of the needs of the specific business segment and the economic effect of such leverage. The general policy of EuroHold is to raise capital in the form of debt and equity financing on a centralized basis and then distribute it to the respective subsidiaries either in form of equity or debt. Risk related to the possible transactions between companies in the group with terms different from the market terms as well as related to the dependence on the group activity The relations with the related parties arise from contract for temporary financial aid to the subsidiary companies and regarding transactions related to the normal business activity of the subsidiary companies. The risk from the possible transactions between the companies in the Group under terms that are different from the market terms is a risk from achieving low profitability from the provided inter-group financing. Another risk which can be taken in inter-group transactions is failing to realize enough revenues and therefore good profit for the relevant company. On a consolidated level this can reflect negatively on the profitability of the whole group. Transactions between the parent company and the subsidiary companies are constantly done inside the Holding which arise from their normal activity. All transactions with related parties are conducted under terms that are no different from the normal market prices, complying with IAS 24. Eurohold Bulgaria AD operates through its subsidiary companies which means that its financial results are directly dependant on the financial results, the developments and the perspectives of the subsidiary companies. One of the main objectives of Eurohold Bulgaria AD is to realize significant synergies between its subsidiary companies due to the integration of the three business lines insurance, leasing and car sales. Bad results of one or several subsidiary companies could lead to worsening of the consolidated financial results. This is related to the Issuer s share price which can change as a result of the expectations of the investors about the perspectives of the company. a. EuroIns Insurance Group AD (EIG) 75

76 Risk related to the lack of possibility to raise funds The Group s possibility to grow and continue to implement its strategy depends greatly on the possibility to raise financing. Raising funds for further development was one of the important aims of the recent issuance of new shares of EuroHold AD. The current lack of stability on financial markets and the noticeable lack of trust between financial institutions significantly hinder the possibility of raising longterm financing on favorable terms. The upcoming implementation of the Solvency II Directive and its still uncertain implication on the insurance industry, mandate that management prudently prepares for what is expected to be a more stringent and capital intensive regulatory environment starting in Insurance risk and risk related to incorrect product pricing Insurance companies assume risks concerning losses which may be caused to property or to the insured person as a result of an event covered by insurance. Some events may entail the obligation to pay out significant claims and some insurance events may lead to multiple damage caused to many insured persons and may entail the obligation to pay significant claims. Before assuming insurance risks under particular insurance contracts, an insurance company analyzes the risk of danger and adjusts the insurance premium to a level of acceptable risk and, if needed, reinsures the risk with other insurance companies. Therefore, the Group s basic insurance risk is related to inappropriate pricing, i.e. the risk of a discrepancy between the actual claims and the assumptions made based on statistical estimates which are made at the time the insurance company creates the product. Due to the inevitable uncertainty underlying the above estimates, the final value of the damage may differ from the assumptions. Thus, a given insurance product may not generate the assumed profit and the premium amount obtained may be insufficient to cover insurance obligations. Incorrect pricing could have a material adverse impact on the Group s outlook, results or financial situation. Ineffective pricing policy and insurance risk management procedures, risk mismanagement and inappropriate control of the insurance risk could have a material adverse impact on the Group s outlook, results or financial situation. Risk of underestimation of technical reserves In order to cover current and future obligations arising from executed insurance contracts, the Group companies are required to create technical reserves. The technical reserves reflect the estimates of the management boards of the Group s insurance subsidiaries of losses and damages suffered due to submitted claims and claims which resulted from events which occurred but which were not reported (IBNR). In calculating technical reserves, the management boards of the Group s insurance companies take into account applicable legal requirements, actuarial surveys, loss adjusters indications and experts opinions, as well as projections regarding the final costs of satisfying and handling claims in the future based on a review of historical settlements, estimates of tendencies related to damage reporting materiality and frequency, and the anticipated interpretation of legal regulations in this respect. Also, estimates of technical reserves are subject to many variables which may depend both on internal and external events, e.g. changes in damage reporting procedures, inflation and legislative changes. Due to the inevitable uncertainty underlying the evaluation of reserves, the final amounts of claims paid and handling costs may differ significantly from estimates. If the resources of the Group insurance companies are insufficient to cover their insurance obligations and if amounts of claims paid significantly exceed the reserves for the payment of claims, this could have a material adverse impact on the Group s outlook, results or financial situation. Foreign exchange risk The Group implements a universal policy throughout its subsidiaries which aims to minimize and even completely eliminate currency risks in every country of operation, by matching the currency of both assets and corresponding liabilities. While in Bulgaria the local currency (Bulgarian lev - BGN) has been pegged to the Euro for 15 years now, Romania and Macedonia have floating exchange rates which at time fluctuate substantially, particularly over the last several turbulent years. Still, prudent fiscal management by the governments of all countries where the Group operates have somewhat minimized the effect of short term fluctuations in exchange rates. Major fluctuations though, could have a significant adverse impact on the Group s outlook, results and financial situation. Risk of insurance contracts being terminated by the insured The Group estimates the risk of insurance contracts being terminated by the insured. The limitation of the consumers buying power affected also by the deteriorated economic conditions may result in a 76

77 greater number of customers ceasing to use the insurance products offered by the Group. If this phenomenon turns out to be greater than anticipated, the Group may not achieve the planned revenues from insurance contracts which could have a material adverse impact on the Group s outlook, results or financial situation. Risk of insurance fraud The Group is exposed to the risk of insurance fraud, typical for such business activity, involving the fraudulent obtaining of insurance or undue benefits, in particular based on false documents or untrue circumstances or due to actions of employees and cooperating parties. The Group applies mechanisms to protect itself against such abuse, in particular by an internal system of control and by introducing multi-level powers to approve declarations of intent in cases regarding payment of claims. Cases of suspected fraud are reported to the competent authorities. If insurance fraud phenomenon persists in this financially stagnant environment, this could have a material adverse impact on the Group s outlook, results or financial situation. Risk of reinsurance being unavailable, insufficient reinsurance policy and reinsurer s default As part of the general risk management strategy, the Group assigns and transfers insurance risks to other insurance and reinsurance companies. The aim of reinsurance contracts is to diversify the risk of an insurance event and to minimize the losses arising from it. The Group transfers the insurance risk from certain risk categories to the reinsurance company. Subject to the provisions of individual reinsurance contracts, the reinsurance company commits to pay claims if the reinsured event occurs. The insurance company will still, however, be liable for paying claims irrespective of whether the reinsurance company pays claims in accordance with the reinsurance contract. A default in or the nonpayment by a reinsurance company, which has a significant share in the reinsurance contracts executed by the Group companies, also due to its insolvency, could have a material adverse impact on the Group s outlook, results or financial situation. Market conditions which are beyond the Group s control determine the reinsurance availability and costs. Therefore, there is a risk that due to market changes the Group will have to allocate additional funds for reinsurance or will not be able to obtain reinsurance coverage on acceptable terms which, in turn, could have a material adverse impact on the Group s outlook, results or financial situation. There is no guarantee that the Group s reinsurance policy will always provide sufficient protection against the effects of insurance events covered by reinsurance which, in such case, could have a material adverse impact on the Group s outlook, results or financial situation. Credit risk Credit risk in the insurance business includes: the risk of investment concentration, i.e. a risk arising from low diversification of the asset portfolio, where such portfolio concentration could lead to depositing funds in only a few banks or acquiring securities in only a few Issuers; and collecting subrogation claims from the persons who caused the insurance damage. In the case of insolvency of the other party to the transaction, the Group companies may suffer losses which could have a material adverse impact on the Group s outlook, results or financial situation. b. EuroLease Group (ELG) Credit risk Credit risk is the risk of loss resulting from the failure of a lessee to discharge its liabilities. ELG is exposed to credit risk through its leasing loans portfolio and as such management of credit risk is carried out at the customer level. Naturally, ELG is exposed to credit risk in respect of various industry sectors in each country of operation. Deterioration in the performance of any industry sectors in respect of which it has significant credit exposure may adversely impact its business, which mandates that it constantly monitors and identifies the risk of a specific debtor and establishes impairment of financial assets, while also defining internal exposure limits by individual debtors, associated companies, individual industry sectors or market segments. 77

78 Any form of material deterioration of the overall credit quality of the leasing portfolio could have a material adverse impact on the ELG s and respectively the Group s outlook, results or financial situation. Liquidity risk ELG is exposed to the risk of losing financial liquidity due to the inconsistency of asset and liability maturity dates, i.e. duration. A proper risk management policy guarantees the ability to optimally perform current and future obligations. The evaluation of this risk means comprehensive monitoring and projecting of cash flows. In order to ensure the desired liquidity level, the Group structures its assets taking into account the structure of maturity of its outstanding bonds and bank loans and other planned cash out-flows. Ineffective liquidity risk management procedures, risk mismanagement and improper control with regard to liquidity risk could have a material adverse impact on the Group s outlook, results or financial situation. Market risk (interest rate risk, currency risk, etc.) The financial results of the Group companies are exposed to market risk due to the fact that the assumed level of interest rates or currency exchange rates and other financial instruments held by ELG will differ from that originally assumed, and also due to the fact that their behavior is generally unpredictable and their future value cannot be precisely estimated. If this risk materializes, it could lead to unexpected profits or losses related to position maintenance. The Group companies apply a market risk management policy which aims at matching the duration of both assets and liabilities, the interest rates and the currencies in which ELG borrows and lends, respectively. Any inefficiency of the adopted market risk management procedures, mismanagement of risk and improper control with regard to market risk may have a material adverse impact on the Group s outlook, results or financial situation. Risk of insurance provider not paying for damaged or stolen leased assets The vast majority of all leased out assets, which are mostly various classes of passenger and cargo vehicles, has historically been insured with the insurance companies, part of EuroIns Insurance Group. Though historically EIG group companies have fully honored outstanding insurance policies, it is possible that due to future financial dislocations they may not be in a position to fully cover insured manages and thus cause financial losses to ELG, which could have a material adverse impact on the Group s outlook, results or financial situation. Risk of lack of external financing at reasonable rates Access to financial leverage is critical for the profitable business development of the Group s leasing business. Historically leverage has been sourced from local banks and through the issuance of locally placed and traded public bonds. Yet turbulence over the last several years has shifted the Group s focus to seek long-term leveraged financing from larger international banks and financial institutions (like EBRD), whose balance sheets can accommodate the growing capital needs of ELG. Long-term growth and profitability of the leasing portfolio in all countries of operation is prejudiced upon the Group s ability to source reasonably priced leverage, the lack of which could have a material adverse impact on the Group s outlook, results or financial situation. Concentration risk The risk is defined as overdependence on one client or supplier of financing. This risk is minimized by allocation of the leasing portfolio over a large pool of clients, with maximum single exposure of not more than 5% of the total portfolio value. c. Avto Union (AU) Risks of non-performance of delivery by suppliers or other disruptions Selling new cars and spare parts by Avto Union through its national network of dealerships and repair shops can be adversely impacted by non-performance of supply and delivery contracts by suppliers. Such difficulties could arise from legal considerations, from technical problems in performing delivery and other reasons and they could consequently seriously decrease sales and profitability levels of Auto- Union respectively. The devastating earthquake in Japan in March 2011 demonstrated the risk for Avto 78

79 Union from serious delays in car deliveries from Japanese manufacturers, assembling cars in Japan, which in this instance interrupted deliveries for 3-4 months, following the near total destruction of assembly plants of Nissan and Mazda. Force Majeure circumstances fires, earthquakes, floods Several force majeure events, like the one described above, could have a severely adverse effect on the firm s business, depending on the magnitude and impact of such events, as this could cause a halt in deliveries and thus sales. Dependence on prevailing norms and regulations The ever increasing environmental and safety standards for passenger cars and cargo vehicles within the European Union drive sales of new vehicles, which at all times have to comply with the changing regulatory and administrative environment (technical requirements, environmental, tax implications, etc.). Any form of non-compliance with strict norms and regulations could lead to loss of sales by Avto Union. d. Real Estate Market development EuroHold Imoti EOOD is dependent on the development of the real estate market, the demand, prices, rent levels, cost to build. All these factors affect the profitability of the Company. Access to sources of financing and cost of financing EuroHold Imoti is a relatively new company. The development and execution of investment projects is to a certain extent dependent on access to external financing. The opportunities for fast access to credit financing at acceptable cost (interest rates) will directly impact the investment return of the projects, and respectively the amount of annual net income of the Company and the return to shareholders. Over the last 3 years, the financial institutions lent less and less. The main reasons behind this slowdown in credit expansion is the decline in the prices of real estate and the smaller financed percentage of the value of any project or real estate purchase. In order to develop and execute its projects, EuroHold Imoti is dependent on availability of credit and affordable interest rates on them. The current turmoil on the global credit and financial markets negatively impacts real estate business around the globe. The lack of availability of credit financing hampers some companies to grow their businesses. As they are a major customer pool for real estate companies, the lack of growth transfers to the sector. Furthermore, the inability to leverage also adversely impacts the development of new real estate projects or the completion of such, as well as the process of acquisition and divestiture of real estate holdings. The global recession over the past years resulted in high unemployment rates across the board, as well as negative growth rates for almost all economies and sectors. Many businesses were forced to downsize their work forces and operations, and as a result witnessed long-period of slow growth and unsatisfactory financial results. Delinquent payments on rent contracts, as well as existing such properties for cheaper locations, had severely negative impact on the real estate business. The expected protracted period of slow growth over the medium term poses a continued downside risk for the whole real estate business and squeeze on profitability and revenues. Drop in rental levels Over the last years, the misbalance between demand and supply of office space continued to weigh on land lords and reaffirmed the tendencies for decline in rental levels. In 2010, the inclination of firms to optimize expenses through relocation and renegotiation of rental agreements became evident. The significant share of unoccupied spaces on the market led to big discounts in rent levels and to offering of various stimuli such as grace period, finishing works and maintenance bills at the expense of the land lord and others. The demand is primarily focused on small and medium-sized offices. Over the next 1-2 years, clear differentiation of prime project is expected on the market and increase in the gap of the rent levels and levels of occupancy between them and second-class offices. 79

80 Upon decline of real estate prices over the short term, EuroHold Imoti might not have the ability to realize the expected return on its investments. To manage and minimize risks relating to rental levels of the real estate, the effective management of real estate investments is of paramount importance, as well as the collection of receivables, quality of tenants and duration of agreements. EuroHold Imoti manages this risk by contracting agreements only with related parties from the group of EuroHold and with credible third party tenants. Construction and repair of real estate The company faces risk related to the capabilities of hired construction companies to finish projects or repairs within forecasted expenses at the required level of quality and negotiated periods. The lack of good infrastructure is among the common risk in developing real estate locations, which in turn could hamper sales and revenues of real estate companies, as well as force tenant to leave the premises due to unsatisfactory infrastructural access to the location. Regulatory risks, related to the environment Risk of adverse regulatory changes or implementation of new environment rule and regulations might adversely impact real estate businesses by forcing them to make significant financial outlays to meet the new regulations and thus witness deterioration in financial state and profitability levels. Natural disasters EuroHold Imoti could be impacted by any natural disasters, fires, terrorist attacks, which can lead to significant losses. The company manages these risks by insuring against them. EuroHold controls the risks, related to its real estate business by signing long-term contracts with its tenants and implementing of careful pre-selection procedures that evaluate the creditworthiness of its partners, thus ensuring predictability of cash flows and limiting downside risks. Furthermore, EuroHold real estate holdings are tightly associated with its main businesses and development of any real estate is done only in line with the development of the main businesses of the Group. That is why EuroHold selects the right moments to develop any of its real estate assets by ensuring their long-term utilization. e. Euro-Finance (EF) Market and credit risk The financial results of Euro-Finance are dependent upon and exposed to market risk and respectively credit risk due to the fact that the large majority of the firm s assets are invested in various mostly publicly traded fixed income financial instruments, across a group of currencies, whose fair market value fluctuates on a daily basis. EF is particularly well capitalized, given prevailing capital requirements, yet sudden and wide market deterioration and worsening of the credit quality of securities Issuers in which EF has invested may have a material adverse impact on the Group s outlook, results or financial situation. Settlement and clearing risk As a leading and active local broker-dealer with asset management and brokerage activity servicing both retail and institutional clients, Euro-Finance needs to settle various types of trades on a daily basis with multiple counterparties and clearing houses. The risk of miscommunication while settling multiple trades, while in practice fully minimized, exists and could hamper the firm s ability to effectively serve clients, which in turn may have a material adverse impact on the firm s outlook, results or financial situation. Regulatory Risk Euro-Finance operates in a strongly regulated environment and is required to carry out its activity in full compliance with strict legal regulations and under the supervision of the corresponding national authority in Bulgaria (FSC). As such, the firm needs to implement and fully comply with every new rule and requirement or else faces the scrutiny of local regulators. Any form of non-compliance or even delay 80

81 in complying with mandatory regulations may have a material adverse impact on the firm s outlook, results or financial situation. Communication and data transmission risk Euro-Finance conducts all its trading, asset management, FX trading and settlement activities electronically and thus is exposed to the risk of loss of information and theft of confidential and proprietary information. Inability to secure uninterrupted and secure communication flow could compromise the integrity of the firm s electronic trading platforms, databases and deal-flow, thus hurting its credibility in front of clients and counterparties. Any such loss of full control of information may have a material adverse impact on the firm s outlook, results or financial situation. 3. Risk related to securities markets, shares and listing Marketability and share price fluctuations risks The Issuer cannot give any assurance that the marketability of its shares will improve or remain consistent. Shares listed on regulated markets, such as the BSE and the WSE, have from time to time experienced, and may experience in the future, significant price fluctuations in response to developments that are unrelated to the operating performance of particular companies. The market price of the shares may fluctuate widely, depending on many factors beyond the Issuer s control. These factors include, amongst other things, actual or anticipated variations in operating results and earnings by the Issuer and its subsidiaries and/or its competitors, changes in financial estimates by securities analysts, market conditions in the industry and in general the status of the securities market, governmental legislation and regulations, as well as general economic and market conditions, such as recession. These and other factors may cause the market price and demand for the shares to fluctuate substantially and any such development, if adverse, may have an adverse effect on the market price of the shares which may decline disproportionately to the operating performance of the Issuer and its subsidiaries. Risks, arising from future sales of substantial amount of EuroHold s shares There can be no assurance as to whether or not issues or sales of substantial amounts of the shares will take place on the market in the foreseeable future. Additional issues of substantial amounts of EuroHold s ordinary shares, or the perception that such sales could occur, could adversely affect the market price of the shares and could adversely affect EuroHold s ability to raise capital through future capital increases. In addition, any subsequent equity offering by EuroHold may dilute the percentage of ownership of persons who become shareholders in the Offering. Regulatory obligations risks EuroHold is a company organized and existing under the laws of Bulgaria, EuroHold s shares are listed on the BSE and it is expected that the shares will be listed on the regulated market in Poland. The EU directives, such as Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonization of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC, Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids, Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider dealing and market manipulation (market abuse), provide different competencies for home Member State and host Member States with respect to rights and obligations of the investors in public companies, depending on the subject of regulations. In addition, EU directives are not always implemented or interpreted in a consistent manner at the EU and national level. Consequently, investors in the shares may be forced to seek legal advice in order to comply with all applicable laws and regulations when exercising shareholder rights or when fulfilling shareholder related obligations. If an investor fails to fulfill its obligations or violates any laws or regulations when exercising rights from or regarding the shares, he or she may be fined or sentenced for such non-compliance or may be unable to exercise his or her rights in respect of the shares. Tax treatment risks EuroHold is a company organized and existing under the laws of Bulgaria and, as such, the Bulgarian tax regime applies to the distribution of profit and other payments from the Group to its investors. The 81

82 taxation of income from such payments as well as other income, for instance, from the sale of shares, may vary depending on the tax residence of particular investors as well as the existence and the provisions of double tax treaties between an investor s country of residence and Bulgaria. Tax provisions applying to particular investors may be unfavorable and/or may change in the future in a way which has an adverse effect on the tax treatment of an investor s holding of shares. Risks related to inability to list The admission of the Group s shares to trading on the WSE requires, inter alia, that (i) the shares are registered with the clearing and settlement system of the NDS and (ii) the management board of the WSE approves the listing and trading of the shares on the WSE. To obtain the WSE management board s approval the Group has to meet certain requirements provided for in the respective regulations of the WSE and other applicable laws. Such requirements include, but are not limited to: (i) the appropriate free float of the shares; (ii) no restriction on transferability of the shares; and (iii) the preparation and publication of the audited financial statements for the past three accounting years. Furthermore, while examining the application for admission of the shares to trading on the WSE, the management board of the WSE will take into consideration: (i) the Group s financial situation and its economic forecasts; (ii) EuroHold s development perspectives, in particular, the chances for the successful completion of its investment plans; (iii) the experience and qualifications of the members of the Management Board; and (iv) the security of public trading on the WSE. Some of the conditions mentioned above are discretionary in nature and, therefore, the Group cannot provide any assurance that the management board of the WSE will conclude that the Group meets any or all of them. Risk related to the future market of the shares and its liquidity The Group s shares are listed on the BSE. However, the past performance of the Group s shares on the BSE cannot be treated as indicative of the likely future development of market and future demand for the Group s shares. The lack of liquid public market for the Group s shares may have a negative effect on the ability of shareholders to sell their shares, or adversely affect the price at which the holders are able to sell their shares. There can be no assurance as to the liquidity of any trading in the Group s shares, or that the Group s shares will be actively traded on the WSE or the BSE in the future. Risk of shares trading suspension The WSE management board has the right to suspend trading in EuroHold s shares for up to three months (i) at the request of the Group, (ii) if the Group fails to comply with the respective regulations of the WSE (such as specific disclosure requirements), or (iii) if it concludes that such a suspension is necessary to protect the interests and safety of market participants. Furthermore, the WSE management board shall suspend trading in shares for up to one month upon the request of the PFSA, if the PFSA concludes that trading in the Group s shares is carried out in circumstances which may impose a possible threat to the proper functioning of the WSE or the safety of trading on that exchange, or may harm investors interest. Moreover, the BSE must suspend trading in shares if (i) suspension has been ordered by the FSC as a supervisory measure under the Bulgarian Market in Financial Instruments Act; (ii) the shares cease to meet the requirements for trading on the BSE (as a result of merger or bankruptcy, among other things) provided that such delisting would not be materially adverse to the interests of investors or to the ordinary functioning of the market; (iii) suspension is required because of changes with respect to the shares effected in the CD (such as a merger, share split or similar event); or (iv) the Group so requests. The BSE may also suspend trading in the shares if it concludes that suspension is necessary to protect the interests of investors. The Group will use all endeavors to comply with all applicable regulations in this respect. However, there can be no assurance that trading in the Group s shares will not be suspended. Any suspension of trading could adversely affect the Group s share price. Dual listing risks The Group s existing shares are listed on the BSE. Application will be made to list the shares on the WSE. Therefore trading and liquidity of the shares will be split between those two exchanges. Furthermore, the price of the shares may fluctuate and may at any time be lower on the BSE than the price at which the shares are traded on the WSE and vice versa. Differences in settlement and clearing systems, trading currencies, transaction costs and other factors may hinder the transferability of shares between the two exchanges. In addition, it is uncertain which exchange will be the principal trading 82

83 place of the shares by value or volume. This could adversely affect the trading of the shares on these exchanges and increase their price volatility and/or adversely affect the price and liquidity of the shares on these exchanges. The shares are quoted and traded in BGN on the BSE and will be quoted and traded in PLN on the WSE. The shares traded on the BSE are settled and cleared through the CD. The shares traded on the WSE will be settled and cleared through NDS. The transfer of the shares between the BSE and the WSE will be effectuated through a direct settlement link between the CD and the NDS. Although the Polish and Bulgarian settlement systems operated by the NDS and the CD have agreed to establish a settlement procedures allowing transfers of shares between NDS and CD participants, they are under no obligation to perform or to continue to perform such procedures and such procedures may be discontinued at any time, which may limit the liquidity of the shares and have a negative impact on the efficiency of the pricing mechanisms of the secondary market of the shares. Admission delay or non-realization risks The carrying out of the admission and introduction of EuroHold s shares on the main market of the WSE is conditional on this Prospectus being approved by the FSC and PFSA. An additional condition for the admission and introduction of the Group s shares to trading on the WSE is the signing of an agreement by the Company and the NDS on the registration in the securities depository of the shares which are to be listed on the WSE, and the adoption by the WSE s Management Board of a resolution to admit and introduce the Group s shares to trading on the WSE, setting a quotations market for those shares and the first quotation date. The adoption by the WSE s Management Board of a resolution to admit the Group s shares to trading on the WSE s main market will depend on fulfillment of the conditions set out in paragraph 19 items 1, 2 of the Stock Exchange Rules and the conditions set out in paragraph 2 and 3 of the Regulation on Markets and Issuers. A delay or refusal of any of the above authorities to issue a decision or ruling may postpone the dates on which the shares are introduced to trading on the WSE or may result in the process of the introduction of the Group s shares to stock exchange trading being abandoned. The Company will use its best efforts to procure that its shares are admitted and introduced to stock exchange trading as soon as possible. Foreign exchange rate fluctuations risk The Group s shares will be quoted in BGN or PLN. Any payments related to the shares, including amounts disbursed as dividend and the share purchase and sale price on the regulated market will be made in BGN or PLN. Any appreciation of PLN or BGN against foreign currencies may have a negative impact on the equivalent in foreign currencies of the amount disbursed in connection with the shares, including the dividend paid on the shares and the share purchase and sale price on the regulated market. Dilution risks The holding and voting rights of the shareholders may be diluted as a result of the issuance by the board of directors of the Group of additional shares within the authorized capital with exclusion of the existing shareholders pre-emptive rights. Returns of shares risk The distribution of dividends is subject to the discretion of the General Meeting of the Shareholders. If the majority of the shareholders present or represented at the General Meeting decides not to declare and pay dividends, then returns on investments in the shares in the foreseeable future will be limited to capital appreciation, if any, and the ability of shareholders to realize any such returns may be limited by illiquidity in the trading market for the shares. 4. Risk management The elements through which the Group manages risks, are directly related to specific procedures for prevention and solving any problems in the operations of EuroHold in due time. These include current analysis in the following directions: Market share, pricing policy and marketing researches for the development of the market and the market share; 83

84 Active management of investments in different sectors; Comprehensive policy in asset and liabilities management aiming to optimize the structure, quality and return on assets; Optimization of the structure of raised funds aiming to ensure liquidity and decrease of financial expenses for the group; Effective management of cash flows; Administrative expenses optimization, management of hired services; Human resources management. Upon occurrence of unexpected events, the incorrect evaluation of current market tendencies, as well as many other micro- and macroeconomic factors could impact the judgment of management. The single way to overcome this risk is work with experienced professionals, maintain and update of fully comprehensive database on development and trends in all markets of operation. The Group has implemented an integrated risk management system based on the Enterprise Risk Management model. The risk management process covers all the Group s organizational levels and is aimed at identifying, analyzing and limiting risks in all areas of the Group s operations. In particular, the Group minimizes insurance risk through proper selection and active monitoring of the insurance portfolio, matching the duration of asset and liabilities as well as minimizing F/X exposure. An effective risk management system allows the Group to maintain stability and a strong financial position despite the ongoing crisis on the global financial markets. All major risks facing the Group have been described in detail under Section Risks above and the purpose of this section is to elaborate on the steps and measures taken by Management to ensure smooth business environment, where risks are duly identified and their impact is managed in a way that minimizes impact on profitability and business continuity. Risk management in the Group aims to: identify potential events that could impact the Group s operations in terms of achieving business objectives and achievement related risks; manage risk so that the risk level complies with the risk appetite specified and accepted by the Group; ensure that the Group s objectives are attained with a lower than expected risk level. a. Insurance risk management Insurance risk is the risk of discrepancies between actual amounts of losses and planned amounts of claims estimated by actuarial (statistical) methods. The Group companies, before taking on insurance risks under individual insurance contracts, analyze the probability of damage occurring, adjusting the amount of the insurance premium to the level of projected risk and the expected claim. Managing insurance risk, therefore, involves making the best possible estimates of the claims ratio. Additionally, insurance risk management in the Group is based on the reliable development and application of risk assessment standards and the application of control mechanisms with respect to compliance with risk assessment standards. Moreover, one of the ways of limiting the claims risk applied in the Group is to create products involving a large number of insured risks, provided that the insurance selection procedure (underwriting) eliminates the accumulation of insurance in one insured entity or in a small territorial area. If it is deemed that there are significant insurance risks, they are limited by reinsurance contracts being signed with other insurance companies. The insurance products offered by the Group are sensitive to factors variable over time, and particularly to changes in the overall GDP levels and respective disposable income levels, coupled with changes in the demographic structure within the countries of operation Erroneous or incorrect assumptions for products, in particular as to the level of future claims, could lead to there being insufficient assets to cover liabilities in the future, though they will mainly affect the Group s financial result. The Group companies are secured against the above effects through the use of experience to date with product pricing, proper financial management carried out. Thanks to the Group s sales strategy of continuous diversification of the product offer, insurance risk is dispersed and thus significantly reduced. 84

85 b. Specific risks related to insurance risk management Risk of insurance crime management Insurance crime involves fraudulent claims or obtaining undue benefits (e.g. based on false documents). Methods of combating insurance crime are, e.g. preventative measures taken by the insurance sector (registers, etc.), building-up of industry-wide black list helping against negative portfolio selection and internal audit procedures. The Group also limits this risk by maintaining experienced insurance loss adjustment staff which constantly raises its qualifications. Managing risk related to dependence on the new car-sales market Car-related insurance policies dominate all countries where the Group offers insurance products, as on average these policies represent 60 to 70% of the overall general insurance market. Being part of EuroHold, EuroIns Insurance Group benefits from being able to cross sell its products through EuroHold s leasing and new-car sales subsidiaries. As such, the volume of business in these two divisions is an important aspect in overall revenue generation and respectively growth. The sizeable drop in new car sales in the region over the last 3 years has caused contraction in the number of newly issued CASCO and MTPL policies, yet recent indications of a pick-up in new car sales and registrations, coupled with the availability of lease financing for new vehicles, should indicate a decent recovery over the next 6 to 18 months. Managing risk related to dependence on the real estate market A large portion of the Group s property insurance policies have been originated through the solid relationship it has with multiple regional banks. As a result of the ongoing global financial turbulence, new bank mortgage origination has slowed significantly and the property insurance policies have followed suit. Still, the renewal rate of current policies is very high, as property insurance is kept mandatory for all mortgage borrowers, making the absolute volume of policies underwritten relatively stable. Reinsurance risk management Reinsurance risk is related to inadequate insurance risk reinsurance or insolvency of the reinsurer. This risk can be minimized by adapting the scope of the reinsurance to the Group s requirements and by selecting renowned reinsures. In order to manage the reinsurance risk, the Group applies a specific reinsurance policy. Market risk management Market risk is related to financial instruments that are subject to price fluctuations, i.e. the risk that the level of interest rates, currency exchange rates or prices of securities and other financial instruments held by the Group will differ from that originally assumed and also due to the fact that these instruments are by their nature unpredictable and their future value cannot be precisely established. This risk could lead to unexpected profits or losses related to certain investments. Managing market risk in the group involves: constantly monitoring macro-economic indicators and changes; diversifying and carefully selecting financial instruments compliant with the Group s risk appetite; and applying financial models to regularly measure and manage the risk. Market risk management in the Group is based on internal investment regulations. Market risk management involves managing interest rate risk, securities price risk and foreign exchange risk. Managing market risk (including interest rate risk, currency risk and securities risk) generally falls within the scope of Euro-Finance AD ( the fully owned brokerage and asset management arm of Group. Interest rate risk management Interest rate risk involves the possibility of interest rates changing in a direction or to a degree that leads to changes in the value of financial instruments and the expected rate of return on the capital 85

86 invested. Sources of interest rate risk are market conditions and constantly changing yield curve, and the level of market interest rates. The instruments generating the greatest exposure to interest rate risk are mainly fixed rate treasury bonds valued at fair value. While investments in State Treasury debt securities are deemed the safest instruments, the Group is still exposed to the risk of changes in their current value. The Group has a reasonable percentage of assets invested in these instruments. Investment structure is based on expected fluctuations in interest rates. Interest rate risk is limited to the share of investments exposed to the risk and also by setting the investment duration at a level that does not lead to a significant loss in the event of unfavorable changes in interest rate. The main tool used to evaluate interest rate risk is the duration of the treasury securities portfolio. Duration is calculated and analyzed monthly. Maintaining low duration is one of the assumptions applied in the Company s investment policy. Securities price risk management The risk relating to securities is that they will be subject to price fluctuations, i.e. the risk that the value of the securities held by the Group companies will differ from that originally assumed and also the risk arising from the fact that these instruments are by their nature unpredictable and their future value cannot be precisely determined. This risk could lead to unexpected profits or losses. Managing securities price risk in the group mainly involves: constantly monitoring macro-economic indicators and changes; diversifying financial instruments; and applying financial models to regularly measure and manage risk. The securities price risk is managed within the Group s investment policy, which is based on investment rules that specifically regulate the issue of daily transaction limits for employees and allocations for each asset class. These limits are set at Investment Committee meetings. Other financial instrument price risk management The other financial instrument price risk relates to fluctuations in their prices. Most commonly, such instruments shall be publicly traded financial derivatives, whose investment purpose will be to protect the underlying value of another investment. Given the highly volatile nature of these instruments, coupled with generally lower liquidity levels, the Group is reluctant to use them widely in its asset and liability management. As of the end of 2010 and as of 30/6/2011 the Group did not hold any derivatives contracts on its books and as such is not exposed to material swings in their market prices. Foreign exchange risk management Foreign exchange risk is a risk arising from investments in financial instruments denominated in a currency other than that used in the investor s country. This risk is basically eliminated through the use of appropriate investment techniques. Generally, the Group minimizes the risk that arises upon the execution of insurance contracts bearing a foreign exchange risk by investing funds in the currency in which the reserves are denominated, which is usually tied to the Euro. The Group offers insurance products in BGN, RON and MCD. The amount and number of claims paid could increase in the event of any of these three depreciating and vice versa. The Group minimizes such risks by shortening the insurance period and charging premiums on the insurance sum translated each time into the respective currency, so any weakening of the respective currency unfavorable to the claims level is compensated by increased premiums written. Additionally, in the risk management process, foreign exchange exposure is monitored quarterly broken down into individual assets, liability and off-balance sheet liability types. Liquidity risk management Liquidity risk arises from the impossibility of obtaining funds to cover insurance company s liabilities on time without incurring additional losses. The overriding aim of liquidity management is therefore to minimize the risk of the Group losing liquidity by ensuring the capability to meet current and future liabilities in the optimum manner. Liquidity risk is evaluated through comprehensive monitoring and 86

87 forecasting of cash inflows related to individual insurance groups mainly in order to minimize the probability and size of unexpected payouts. To ensure the desired level of liquidity the Group shapes the structure of its assets (particularly those covering technical reserves) based on the maturity structure of reserves created and other planned financial flows. Part of the term deposit contracts may be terminated before maturity with a loss of only a small part of interest. Credit risk (counterparty risk and concentration risk) management Credit risk in the insurance business comprises: counterparty risk reflecting losses related to the non-performance of obligations by business partners or deterioration of their ability to meet obligations; and concentration risk, i.e. risk arising from the low diversification of the asset portfolio and the relevant concentration. As part of credit risk management, the Group applies a conservative investment policy. This means that funds are mainly invested in term deposits in banks, State Treasury debt securities, municipal bonds and high grade corporate. In the Group s investment operations counterparty risk is evaluated based on: rating assessments made by rating agencies such as Standard & Poor s, Moody s Investors, Service and Fitch Ratings, including local credit rating agencies; value of equity, net results and solvency ratio. Counterparty risk also exists in collecting subrogation amounts due from the insured (mainly under MTPL). The risk of not fully effective collection is taken into account and included in the insurance premium calculation and in prudent estimates of future subrogation related to receivables. c. Operating risk management and internal audit departments The Internal Audit Department s task in the risk management process is to guarantee that the process is adequate and that it functions properly and in accordance with assumptions. The Internal Audit Department specifically deals with identifying risks in operations, examines and evaluates whether risk management is conducted properly and whether the internal control systems are adequate and effective. This Department provides independent information on the quality of the risk management process and evaluates process implementation and functioning quality. The Management Board of the Group can recommend specific actions to the Group companies and drive the risk management process by exercising its statutory rights. The Risk Committee meets periodically and its purpose is specifically to analyze unfavorable events affecting the achievement of the Group s business objectives and planned actions and to assess whether the risk management process is effective. At the operating level, the appropriate professional department participates in the risk management process in cooperation with the organizational units responsible for managing individual risk types. As regards the insurance risk, the organizational units responsible for sales cooperate at the product creation stage with the Actuarial and Reinsurance Departments. These Departments deal specifically with pricing insurance products and developing new products with sales departments as regards setting insurance premiums, analyzing insurance financial risks, claims levels, costs and profitability of insurance products, and assessing general terms and conditions of insurance from an actuarial and reinsurance perspective. 87

88 1. History III. ISSUER INFORMATION The trade name of the Issuer is EUROHOLD BULGARIA AD. Its trade name is stipulated in Art. 2, paragraph 1 in its Articles of Association. According to Art. 2, paragraph 3 of the Articles of Association, the trade name of the company may be spelled in English language, as follows: EUROHOLD BULGARIA S.A.. EuroHold Bulgaria AD is a holding Company, registered in the Republic of Bulgaria and operates in compliance with Bulgarian legislation in force. EuroHold Bulgaria AD is a public company by meaning ascribed in POSA. The initial registration of the Company is with the Commercial Registry at Sofia City Court, under file 14436/ 2006, under , volume 1509, page 116. On EuroHold Bulgaria is registered with the Commercial Registry at the Registry Agency in compliance with the requirements of the Commercial Registry Act. The unique identification code (UIC) of the Company is EuroHold Bulgaria AD is set up for indefinite term, namely the Company is not limited by certain term or other preclusive condition. EuroHold Bulgaria AD is a public limited company formed through the merger of EuroHold AD, registered under file 13770/ 1996 of Sofia City Court and Starcom Holding AD, registered under file 6333/ 1995 of Sofia City Court. The performed merger, established a new holding company EuroHold Bulgaria AD and strengthened its positions as one of the biggest Groups in Bulgaria with important potential for development, significant equity and financial resources. EuroHold Bulgaria AD was established with capital in amount of BGN 50,002,586, divided into 50,002,586 regular, registered, non-privileged, dematerialized voting shares, with divided rights and liquidation quota with nominal value of BGN 1 each one. As of company s establishment up to this moment a several capital increases by cash contributions have been performed, whereas as of the date of this Prospectus the capital of the company amounts to BGN 108,643,712, divided into 108,643,712 into regular, registered, non-privileged, dematerialized voting shares, with divided rights and liquidation quota with nominal value of BGN 1 each one. Detailed description of the changes in the share capital can be found in XX.2. Changes in the share capital. When EuroHold Bulgaria AD was established, it had multiple direct subsidiaries in its structure, which operated in the field of insurance, leasing, real estate and manufacturing. Aiming at optimization of costs and at achieving higher synergies between subsidiaries, EuroHold s management adopted a decision to separate the business in to separate legal entities, based on their business segmentation. On EuroHold Bulgaria AD founded EuroIns Insurance Group EAD aiming at consolidating its insurance operations. On a session of the general meeting of the shareholders of EuroHold Bulgaria AD was held and a decision was taken that approved a contribution in-kind of the shares, held by EuroHold Bulgaria AD in its subsidiaries EuroIns Bulgaria AD, EuroIns Romania Asigurare Reasigurare SA and Health assurance company St. Nicolay Chudotvorets EAD (currently EuroIns Health Assurance EAD). The described in-kind contribution was completed after the Bulgarian Financial Supervision Commission and the Romanian Commission on Supervision of Insurance have granted their approvals. Subsequently EuroIns Insurance Group EAD acquired Macosped Osiguruvanje AD, Skopje (currently EuroIns Osiguruvanje AD, Skopje) and the transaction has been approved by the Ministry of Finances of Republic of Macedonia on The formation of the automotive sub-holding of EuroHold Bulgaria AD EuroHold Automotive Group EAD started at the end of The company was founded in 2007 and its initial share capital was formed by contribution in-kind of the shares from the capital of Cargoexpress EOOD (currently Bulvaria Varna EOOD) Opel and Chevrolet dealer for the city of Varna. By analogy of EuroIns Insurance Group AD, the consolidation of automotive operations of EuroHold Bulgaria AD was made by means of contribution in kind of the Issuer s shares in its subsidiaries Scandinavia Motors EAD official importer of SAAB for Bulgaria, Nissan Sofia AD the biggest dealer of Renault Nissan Bulgaria and EuroLease Rent-a-Car EOOD exclusive franchise partner of Budget Rent-a-car for Bulgaria. The general meeting of the shareholders of EuroHold Bulgaria AD approved the above contribution in-kind at its session held on and on the automotive sub-holding was founded. Meanwhile, in April 2009 EuroHold Automotive Group EAD which was renamed to Avto Union Group EAD acquired control over the Avto Union AD s group, which comprised of: 88

89 Auto Italia EAD official importer of Fiat and Lancia for Bulgaria; Bulvaria Holding EAD dealer of Opel and Chevrolet in Sofia; Gransport Auto EOOD official importer of Maserati for Bulgaria; Milano Motors EOOD official importer of Alfa Romeo and scooters Piaggio, Vespa and Gillera; Star Motors EOOD official representative of Mazda for Bulgaria; and Bulvaria Rent-a-Car EOOD official franchiser of Avis Europe for Bulgaria. At the end of 2010 EuroHold Automotive Group EAD (currently Avto Union Group EAD) transferred its shareholdings in Scandinavia Motors EAD, Nissan Sofia AD and EuroLease Rent-a-Car EOOD to Avto Union AD. In 2010 Avto Union acquired Espace Auto EOOD the biggest Renault dealer which completed the process of formation of automotive sub-holding of EuroHold Bulgaria AD. As of the date of this Prospectus Bulvaria-Rent-a-Car EOOD has merged with EuroLease Rent-a-Car EOOD, which became its universal assignee. This transformation will decrease Avto Union AD s expenses related to the rent-a-car business with over BGN a year. At the end of 2008 EuroHold Bulgaria AD acquired 100 % of the share capital of the Dutch company BG AutoLease Holding B.V. (with former trade name Wivotech B.V.), which on the other hand acquired another Dutch company BG AutoLease Group B.V. (with previous trade name Doesign B.V.). EuroHold Bulgaria AD decided to make a contribution in-kind in the share capital of its subsidiary company BG AutoLease Holding B.V. of its shareholdings in the capitals of EuroLease Auto EAD, Bulgaria, EuroLease Auto IFN SA, Romania, EuroLease Auto EAD, Macedonia. BG AutoLease Holding B.V. contributed in-kind the said shareholdings in the capital of BG AutoLease Group B.V. the leasing sub-holding in the structure of EuroHold Bulgaria AD. EuroHold defined its industrial companies as non-strategic, and subsequently sold them in August As of the date of this Prospectus EuroHold Bulgaria AD owns majority shareholding in the investment intermediary Euro-Finance AD, which is part of the Group since In the real estate area the Group has two operating companies EuroHold Imoti EOOD and Avto Union Properties EOOD. Issuer s statutory business activity and goals The statutory subject of activity of EuroHold Bulgaria is acquisition, management, evaluation and sale of shares of Bulgarian and foreign companies; acquisition, management and sale of bonds; acquisition, evaluation and sale of patents, concession of licenses for patent use to companies where the company has shares; financing of companies where the company has shares. The Company is entitled to participate in Bulgarian and foreign companies, regardless of their subject of activity, complying with the conditions set by the law and the Articles of Association of the Company. The Company is not allowed to participate in a company which is not a legal entity; to acquire licenses, which are not intended for use in its subsidiaries; to acquire real estate which is not intended for its servicing. The acquisition of shares in real estate companies is allowed. The Company operates in compliance with the Bulgarian legislation and the main acts which regulate its operation are Commerce Act, Public Offering of Securities Act, Financial Supervision Commission Act, Measures against Money Laundering Act, Additional Supervision towards Financial Conglomerates Act and by-laws such as Regulation 2 dated regarding initial public offering and admission to trading at regulated market prospectus and disclosure of information by public companies and other Issuers of securities, Regulation 39 dated regarding disclosure stockholding in public company, Regulation regarding the minimal content of a power-of-attorney for representation of shareholder at a General Meeting of a company, which shares have been subject to public offering etc. Headquarters and address of management The headquarters and the address of management of the Issuer is Republic of Bulgaria AD, Sofia, 1592, Iskar district, 43 Christopher Columbus Blvd. The head office of the Company is located at the same address. This is the official correspondence address of the Company. The Issuer may be contacted as follows: Business address: 43 Christopher Columbus Blvd 89

90 Telephone 02/ ; 02/ Fax 02/ Web site Since the initial registration of EuroHold Bulgaria AD as a company until the date of this Prospectus there has been no change in the trade name of the Company. The company is not limited by time or other termination condition. As of the date of this Prospectus the Company has not performed transfer or pledge of its enterprise and has not acquired or made disposal with assets of significant value outside its normal course of business. The Issuer is not aware of any raised against it or its subsidiary company claim for opening of insolvency procedure. Intellectual property The Issuer has registered a combined trade mark CTM EUROHOLD on covering services from class 36 according to the Nice Classification which contains the image element word element EUROHOLD. and the Some companies from the Group of EuroHold Bulgaria AD, such as EuroIns Insurance AD, EuroLease Auto AD, have also registered and use currently trade marks in their day-to-day business. Several companies from the automotive sub-holding are entitled to use in their business the trademarks of car manufacturers exclusively in respect of performance of distribution agreements signed with such manufactures and in strict compliance with the manufacturers instructions in relation to the use of the trade marks indicated in the agreements signed by the parties. There are no other intellectual property rights, such as patents, utility models, geographic indications, etc. used by the Issuer or within its Group. 2. Investments The main investments of EuroHold Bulgaria from 2008 until today are related to the implementation of its investment program and plans for restructuring of the investment portfolio. In 2009 the process of consolidating the Group activities was completed through the creation of the three core segments "Insurance", "Leasing" and "Automotive" and their full integration. In 2010 the process of building an organizational and management structure with differentiated units, functions and positions, and the selection of highly qualified specialists in the fields of marketing, finance, insurance, car sales and leasing has been finally completed. For the period September 2011 EuroHold Bulgaria has made over BGN million of direct investments in shares of subsidiaries and the investments made by its subsidiaries amounted to BGN million. Investments: Description % ownership Number of shares Investments (BGN) Method of financing Investor Investments of EuroHold Bulgaria in 2008 EuroLease Auto Skopje EAD Incorporation EuroIns Insurance Group AD Capital increase EuroLease auto EAD Capital increase EuroLease auto IFN Romania Share purchase EuroLease auto IFN Romania Capital increase 100% Own funds EuroHold Bulgaria AD 100% Borrowings EuroHold Bulgaria AD Own funds EuroHold Bulgaria AD 51% Own funds EuroHold Bulgaria AD 66,92% Own funds EuroHold Bulgaria AD 90

91 EuroLease auto IFN Romania Share purchase Eurohotels AD Capital increase Geoenergoproekt AD Share purchase BG AutoLease Holding, the Netherlands, Share purchase EuroLease Rent-a-car EOOD Capital increase 70.54% Own funds EuroHold Bulgaria AD 91.21% Own funds EuroHold Bulgaria AD 80% Own funds EuroHold Bulgaria AD 100% Own funds EuroHold Bulgaria AD 100% Own funds EuroHold Bulgaria AD Autoplaza EAD 50% Own funds EuroHold Bulgaria AD Total Investments of the subsidiaries in 2008 EuroIns Macedonia Share purchase 83,25% Own funds EIG AD EuroIns Macedonia Capital increase 8,10% Distributed dividends EIG AD EuroIns Macedonia Capital increase Takovo, Serbia Share purchase EuroIns AD Capital increase EuroIns AD Capital increase EuroIns Romania Capital increase EuroIns Romania Capital increase EuroIns Health insurance EAD Capital increase EuroIns Health insurance EAD Capital increase EuroIns Macedonia Share purchase 47,48% Own funds EIG AD 10% Own funds EIG AD 14,92% Own funds EIG AD 1,84% Own funds EIG AD 29,21% Own funds EIG AD 0,70% Own funds EIG AD 10,63% Own funds EIG AD 44,68% Own funds EIG AD 83,25% Own funds EIG AD Total Investments of EuroHold Bulgaria in 2009 Euro-Finance AD Share purchase EuroLease Auto Skopje EAD Capital increase 99,99% Own funds EuroHold Bulgaria AD 100% Own funds EuroHold Bulgaria AD Autoplaza EAD 100% Own funds EuroHold Bulgaria AD BG AutoLease Holding, the Netherlands, Capital increase EuroLease auto EAD Share purchase 100% Own funds EuroHold Bulgaria AD 22,46% Own funds EuroHold Bulgaria AD Total Investments of the subsidiaries in 2009 Avto Union Holding, BVI Share purchase Kamalia Limited Share purchase Inter Sigorta Share purchase EuroIns AD Share purchase 100% Own funds Avto Union Group AD 100% Own funds Avto Union Group AD 90,75% Own funds EIG AD 2,61% Own funds EIG AD 91

92 EuroIns Romania Capital increase EuroIns Romania Capital increase Star Motors EOOD Capital increase 36,96% Own funds EIG AD 1,55% Own funds EIG AD 100% Own funds Avto Union AD Total Investments of EuroHold Bulgaria in 2010 Geoenergoproekt AD Share purchase 99,47% Own funds EuroHold Bulgaria AD Total Investments of the subsidiaries in 2010 EuroIns Romania Capital increase Milano Motors EOOD Capital increase Gransport auto EOOD Capital increase Auto Italia EAD Capital increase Avto Union AD Capital increase EuroLease Auto Skopje EAD Capital increase Own funds EIG AD Own funds Avto Union AD Own funds Avto Union AD Own funds Avto Union AD Own funds Kamalia Trading Ltd Own funds BG AutoLease Group BV Total Investments of EuroHold Bulgaria in 2011 up to the Prospectus date Avto Union AD Capital increase BG AutoLease Holding, the Netherlands, Capital increase Scandinavia Motors AD Capital increase 100% Own funds EuroHold Bulgaria AD 100% Own funds EuroHold Bulgaria AD 0.46% Own funds EuroHold Bulgaria AD Total Investments of the subsidiaries in 2011 up to the Prospectus date Scandinavia Motors EOOD Capital increase Nissan Sofia EAD 99.54% Own funds Avto Union AD Own funds Avto Union AD Capital increase Eurotruck EOOD 100% Own funds Avto Union AD Incorporation Auto 1 OOD 51% Own funds Avto Union AD Share purchase EuroIns Romania Capital increase BG AutoLease Group, the Netherlands, Capital increase EuroLease Auto Skopje EAD Capital increase EuroLease Auto Romania Capital increase EuroLease Auto EAD Capital increase Nissan Sofia EAD 90.45% Own funds EIG AD 100% Own funds BG AutoLease Holding- Netherlands 100% Own funds BG AutoLease Group-Netherlands 74.93% Own funds BG AutoLease Group-Netherlands 100% Own funds BG AutoLease Group-Netherlands 100% Own funds Avto Union AD Share purchase 92

93 Total Source: EuroHold Bulgaria AD From its incorporation to date EuroHold Bulgaria AD and its subsidiaries have invested in the following fixed assets: Investments in fixed assets: INDICATOR (BGN '000) Land plots 6,101 5,103 3,580 5,319 4,183 Buildings 15,859 16,067 3,671 18,656 2,805 Machinery 5,081 5,894 1,851 5,556 1,518 Equipment 530 1, ,494 4 Vehicles 12,997 23,752 23,047 25,162 25,420 Furniture and fittings 1,535 2,374 1,782 2,356 1,589 Assets under construction 1,536 7,178 1,551 5,168 1,663 Other assets 1,552 1, Investment property 11,440 22,451 22,967 22,463 24,818 Total fixed assets 56,631 85,988 58,670 86,672 62,202 Source: EuroHold Bulgaria AD The table above contains information about the balance value of the fixed assets and investment property owned as of the end of each reporting period. At the end of 2010 the consolidated fixed assets decreased compared to the end of 2009, as a result of the disposal of the manufacturing subsidiaries of the Group. During the last reporting period ending on June 30, 2011, the Group had invested BGN 3.5 million in new fixed assets. Fixed assets structure as at 2010, % Fixed assets structure as at H1 2011, % Land plots - (6.1%) Buildings - (6.26%) Machinery - (3.15%) Equipment - (0.01%) Vehicles - (39.28%) Furniture and fittings - (3.04%) Assets under construction - (2.64%) Other assets - (0.37%) Investment property - (39.15%) Land plots - (6.72%) Buildings - (4.51%) Machinery - (2.44%) Equipment - (0.01%) Vehicles - (40.87%) Furniture and fittings - (2.55%) Assets under construction - (2.67%) Other assets - (0.32%) Investment property - (39.9%) Source: EuroHold Bulgaria AD a. Investments in progress As of the date of the Prospectus, EuroHold Bulgaria AD is not in the process of making other capital investments or acquisitions. Capital investments on behalf of subsidiaries: Avto Union AD has submitted an application to the Commission for Protection of Competition (BG-CPC) for the approval of the acquisition of Daru Car AD. Daru Car AD is a dealer of BMW in Bulgaria. The company has an authorized workshop for repair of BMW, Mini, Rover, Land Rover and Mahindra vehicles. The company also offers replacement parts for the brands it offers. Daru Car has a showroom and a repair workshop in Sofia, Druzhba district. 93

94 The deal is part of the automotive segment strategy to expand its market share in the premium vehicles market and the acquisition of repair workshops as main source of profitability due to the lower margins on sales of new cars in the current market situation. Deal closing will occur upon receiving approval of the transaction by the BG-CPC. b. Investment commitments Based on a loan contract agreement signed between EuroLease Auto Ltd and the European Bank for Reconstruction and Development (EBRD) a commitment is in place that stipulates that ELA maintains a debt / equity ratio of 7.5 to 1.0, calculated based on EuroLease s consolidated financial statements, and if necessary, ELA to make appropriate capital investments to maintain the ratio within the agreed limits. According to the latest consolidated report of EuroLease Auto EAD as of June 30, 2011, this ratio is 5,94:1 and therefore there are no obligations for additional capital investments on behalf of EuroHold Bulgaria AD. EuroHold Bulgaria AD and its subsidiaries have not undertaken other commitments for future investments. 94

95 1. Main activities IV. BUSINESS ACTIVITY REVIEW EuroHold Bulgaria AD is registered in the Republic of Bulgaria. Its main activities include: acquisition, management, evaluation and sell of participations in Bulgarian and foreign companies; financing of companies, where the company participates; participation in Bulgarian and foreign companies. EuroHold Bulgaria AD s revenues are formed mainly by its financial activity, related to acquisition and management of participations and financing of related companies. As of EuroHold Bulgaria AD has direct participation in five subsidiary and two associated companies. The companies from EuroHold Bulgaria AD s portfolio operate on the following markets: insurance and health insurance market, leasing market, financial, automotive, real estate. The overall business is focused on extracting maximum synergies from the largely intertwined segments of Cars sales Leasing Insurance. During the period covered by historical information Group s companies offer the following services: insurance services; health insurance services; financial and operating leasing; financial intermediary; new cars sale; used cars sale; servicing; spare parts sale; rent-a-car; management of investment real estate. During 2010 the Group possessed stakes in other companies as well, offering services, deemed as nonstrategic. Due to this reason in September 2010 these companies were sold. The sold companies offered the following services: introducing GPS applications for control, security and logistics of car fleets; management of tourist real estate; production of disposable medical articles; production of instrumental equipment for plastic articles; laboratory geochemist examinations and researches in geology, chemistry and ecology. Business lines Current business structure of Eurohold Bulgaria AD include three main sub-holdings EuroIns Insurance Group AD, Avto Union AD and EuroLease Group, specialized respectively in insurance, car sales and leasing, as well as the investment intermediary Euro-Finance AD and the companies from the real estate business line. a. EuroIns Insurance Group EuroIns Insurance Group AD (EIG) is set up at the end of 2007 as 100% owned subsidiary of EuroHold Bulgaria AD, where the insurance and health assurance business of the holding structure is concentrated. As of the date of the Prospectus Eurohold Bulgaria AD owns 80.82% of EIG. 95

96 During the last few years the Group expands its activity by acquisition of insurance companies in Romania, Macedonia, Serbia and Turkey. The insurance companies in the Group have more than 300 regional offices and more than 1 million clients in the region. The past 2010 was very important period for the development and establishment of EIG as regional leader in general insurance. The efforts and investments made during the last few years ensure stabilization of market positions of the companies in Bulgaria, Romania and Macedonia. As of the end of 2010, EIG possesses majority shareholding in the companies in Bulgaria, Macedonia, Turkey and Romania and minority share in Serbian company. EIG s share in the capital of the respective company is % in EuroIns AD, % in EuroIns Insurance Skopje AD, % in EuroIns Romania Asigurare Reasigurare S.A., 100% in EuroIns Health Assurance EAD, % in Inter Sigorta AS, Turkey and 8.1 % in Takovo Osiguranje AD, Serbia. The main goal of EIG is achieving 10% market share in medium term for the Balkan region in general insurance sector. The subject of activity of EIG s subsidiaries is general insurance and health assurance. The offered product include Multiple Third Parties Liability, Auto Casco, Property Insurance, Cargo Insurance, General Third Parties Liability Insurance, Crops and Livestock Insurance, Vessels Insurance, Aircraft Insurance, Financial Risks Insurance, Travel Assistance Insurance, Accident and Sickness Insurance. The main competitors of EIG are international insurance groups such as Allianz, Vienna Insurance Group, Generali, Uniqa, etc., which operate on multiple markets, where EIG s subsidiaries operate as well. The main advantage of EIG is well developed placement net, covering the territory of each country, where the Group s subsidiary companies operate. The net includes combination of different sell channels (agencies, brokers, franchisers and insurance agents), which permits maximum flexibility and access to the final clients. Another material advantage of EIG is its cooperation with other two Eurohold Bulgaria AD s sub-holdings Eurolease Group and Avto Union AD. This collaboration favors the development of mutual products unique for the respective regional market. Important aspect of EIG s competitiveness is the centralization of reinsurance and investment management activities after the differentiation of the insurance business as independent sub-holding. Potential for development and driving forces: EIG has significant growth potential fueled by fundamental, market-specific and company-specific drivers. Fundamental - Gradual convergence of East European countries to Western European standards, increase in disposable income, growth in credit expansion (contingent upon normalization of global financial markets) and demand for big-ticket items, growth in demand for all insurance products in parallel with growth in wealth of individuals and economic revival. Market-specific increase in premium rates and profitability levels across the board, gradual shift to more technically profitable insurance products, deeper insurance penetration and density (still very low in these countries compared to West Europe). Company-specific - EIG has already implemented or plans to enact the following initiatives, which will improve its market position and financial metrics: o Limited MTPL exposure price policies in upper market range; o Further gradual development of non-motor insurance products; o Further implementation of deductibles and Bonus-Malus pricing; o Improve receivables collection; o Remuneration of sales units based on balanced scorecard; o Decrease of acquisition costs and commission levels; o Claims handling costs optimization; o Administrative costs optimization. Key success factors: Capital utilization optimizing reinsurance, ensuring adequate reserves; 96

97 Insurance risk management strict underwriting procedures, risk based pricing and product design; Optimizing asset performance by balancing quality, diversification, liquidity and returns, asset/liability matching; Efficient claims processing and claims management; Utilization of integrated management information system; Business process optimization; Product development based on innovation, tailored to the needs of the targeted segments; Identifying of valuable customer segments, competitive pricing; Distribution channels management by consistently steering distribution metrics, effective incentive schemes, training of sale force; Effective advertising, building an appealing brand; Establishment of long-term partnerships cooperation with leasing and auto dealership companies, bank institutions. History and development of EuroIns insurance group AD EuroIns Insurance Group (EIG) is a leading independent general insurance group in the Balkans with more than 1 million customers in three countries from the region Bulgaria, Romania and Macedonia. In 2010, EIG registered GWP of BGN 233 million, which is an annual growth of 5% over Net consolidated income for 2010 improved to a loss of BGN 4.3 million compared to a loss of BGN 6.1 million for 2009 and a loss of BGN 26.4 million for Whereas the larger part of this growth is generated by MTPL in Romania, the Group registers solid growth in non-motor insurance products property, liabilities and accidents, which respectively grew by 12%, 17% and 17% y-o-y. Casco GWP decreased by 17% over the period as a result of the deteriorated economic environment in the region. The technical results also improved. It stood at a loss of BGN 7.8 million which compared favorably to a loss of BGN 11.1 million for Claims and acquisition ratios also improved versus As a result, combined ratio stood at 103.5%, which is an annual improvement of 2.9%. Investment income was also stable and net investment income reached BGN 5.3 million. Bulgaria-general insurance The GWP of EuroIns Bulgaria for 2010 was BGN 71.9 million, which is a drop of 3% versus The Group s performance is better than that of the market, which declined by 5.2% for The decline is mainly attributable to the drop in Casco insurance product, which is still heavily influenced by ongoing regional economic stagnation. Technical result was a loss of BGN 2.9 million, as combined ratio reached 105.5%, where the growth in claims ratio is compensated by a decline in expenses ratio. The growth in claims ratio was mainly due to increase in IBNR reserve for MTPL products in line with market calculations by FSC. The technical loss for the whole market stood at BGN 42.4 million. Net income for the period was BGN 2.1 million, which includes a positive investment income of BGN 751 thousand. During Q1 2010, the Group undertook certain steps to select risk in MTPL insurances, where a new methodology for individual pricing was implemented based on claims history, mileage, driving experience and so on. The FSC s efforts and the new regulations implemented in November 2010 had positive effect on MTPL prices with declines in commission from 25% to 15%. The increase in average risk premium for the Group is 32% or BGN 39. Bulgaria-health assurance GWP for 2010 stood at BGN 2.5 million a growth of 97% versus 2009, mainly due to new large corporate clients such as METRO Cash&Carry, Practiker and UniCredit Bulbank. The market growth was only 5% y-o-y. 97

98 Technical result was a loss of BGN thousand. Positive investment income of BGN 258 thousand contributed to a positive net result of BGN 17.6 thousand for the period. Introduction of a new regulatory framework is expected to require the renewal of the registration of health assurance companies into general insurance entities. Romania-general insurance GWP stood at BGN million which is a growth of 10% over The growth was mainly driven by MTPL insurances, which registered an annual growth of 16%, as well as by 49% growth of property insurance after the launch of new products. Combined ratio was at 102.9% which resulted in a negative net technical income of BGN 3.7 million which is an improvement compared to a loss of BGN 7.0 million for Net loss for 2010 was BGN 2.1 million versus a loss of BGN 4.5 million for Main market trend for the period was the decline in MTPL prices due to dumping practices by Astra and VIG companies. Macedonia-general insurance GWP for 2010 was BGN 13.9 million - a growth of 5% versus This is a satisfactory performance given the overall slight market decline for the period. Combined ratio reached 100.3% after successful management effort across the board claims, acquisition and administration. Technical loss was BGN 1.17 million versus a loss of BGN 1.76 million for Net income was BGN 3.9 thousand which is a significant improvement versus a net loss of BGN 1.24 million for New Casco tariffs since 1 November New market regulations are expected, particularly in technical reserves. With 13 years of history, a complete range of general insurance products, one of the most developed sales networks in the region, comprehensive expertise in the local and regional markets and experienced personnel, EIG is a trustworthy partner of its corporate and individual clients. EIG and its subsidiaries successfully managed to improve their operations and to solidify their market presence in the midst of a strong completion from global insurance companies. The insurance companies of EIG have more than 300 regional offices and in excess of 1 million customers in the region The Group distributes its products through its own sales network of agencies, tied agents and other companies from the EuroHold Group such as Avto Union (EuroHold s car sales division) and EuroLease Group (EuroHold s leasing division). The Group has a stable capital base and covers all solvency and reserves coefficients. As of June 30, 2011, the Group s solvency margin stood at 122.4%. At the same time, the Group s reserves coverage ratio as of June 30, 2011, stood at 102%. The main goal of EIG in the medium term is to reach regional market share of 5-7% in the general insurance market in the Balkans. There are several factors that differentiate the Group from its regional rivals and are instrumental to its sustainable development. These include regional expertise, balance between risk and return, dedicated and experienced management team and personnel. The Group forecasts to reach gross written premiums of BGN 300 million by YE EIG possesses significant growth potential, which is fuelled by fundamental, market and companyspecific drivers. fundamental gradual convergence of Eastern Europe living standards to those of Western Europe, growth in disposable incomes, credit expansion (contingent upon normalization of global credit and financial markets) and growth in demand for big-ticket items and insurance products. market growth in premium rates and profitability, gradual shift to more technically profitable insurance products, deeper insurance penetration and higher density. company-specific EIG has already implemented or plans to implement the following initiatives, which will improve its market position and financial gauges: 98

99 o o o o o o o o lower exposure to MTPL insurance positioning at the upper part of the price segment; development of non-motor related insurance products lines; additional implementation of deductibles, bonus-malus and other types of pricing; improvement of receivables collection; remuneration based on balanced score cars; decrease of acquisition expenses and commissions; claims cost optimization; administrative expenses optimization. EIG total GWP for 2010: 119 million EuroIns Romania million EuroIns Bulgaria million EuroIns Macedonia million EuroIns Health million Takovo Serbia million (10% stake) Inter Sigorta Source: EIG Since its establishment, the Group has been executing aggressive strategy for outstanding development based on both organic growth and acquisitions in countries of the region of SEE with high growth potential and low insurance density and penetration. Through rational acquisitions over the past 4 years, EIG s portfolio has dramatically grown to include: EuroIns Bulgaria the 8th largest general insurer in Bulgaria (5% market share as of YE 2010 as per official FSC statistics); EuroIns Romania the 10th largest general insurer in Romania (4.5% market share as of YE 2010 as per Xprimm data EuroIns Macedonia the 6th largest general insurer in Macedonia (7.14% market share as of YE 2010 as per Xprimm data EuroIns Health Assurance one of the largest health assurance companies in Bulgaria; Takovo Osiguranje a 10% stake in the 6th largest general insurer in Serbia (4.8% market share as of YE 2010 as per Xprimm data Inter Sigorta a majority stake in a non-operational licensed general insurance company in Turkey (acquired at the beginning of 2009). 99

100 Company name Country of operation 2010 GWP ( million) 2010 market share Date of acquistion/establishment Euroins Bulgaria Bulgaria % Established in December 1996 Euroins Romania Romania % A cquired in June 2007 Euroins Macedonia Macedonia % A cquired in December 2007 Euroins Health A ssurance Bulgaria 1.3 n.a. Established in November 2004 Takovo O siguranje Serbia % 10% stake acquired in A ugust 2008 Inter Sigorta Turkey 0 n.m. A cquired at the beginning of 2009 Source: EIG Strategy EuroIns Insurance Group has focused on the Balkans, based on the region s grossly underdeveloped insurance markets and growth potential. Given the historic dominant role of motor-related insurance products across the region, the Group has been writing a large volume of such policies, yet the recent evolution of the regional markets has brought the need to introduce and offer a much wider range of general insurance products, in order to respond to the growing needs and spending habits of the ever more affluent local clients and improve company profitability. EuroIns Insurance Group s long-term strategic goal is to achieve sustainable 5% market share in its region of operation and gradually improve its profitability and return on equity. The Group plans to execute its strategy by achieving the following objectives: all regional companies have been re-branded under the name EuroIns and share common marketing strategies; a well-balanced portfolio of insurance products tailored to the specific features of the regional markets and focusing on non-motor business growth; development and consolidation of country-wide distribution networks of tied agencies with remuneration based on both financial and non-financial performance indicators; software and back office infrastructure fully harmonized with real-time reporting and riskmanagement software implemented. INACS software has been implemented in all insurance companies; centralized asset management by a reputable asset manager based on a balanced investment strategy; introduction of innovative products to meet evolving customer needs; closer cooperation with existing clients and acquisition of new ones through offering cross-selling products with the leasing and car sales division of EuroHold; optimization of acquisition and administrative costs in line with achieving technical profitability at all offered business lines; centralized management of reinsurance. The positive effects of this step became obvious in 2009 and 2010 and resulted in a move to non-proportional treaties, increase of premium retention in the Group, increased underwriting capacity in property, cargo and marine hull while keeping prices at the same level, with higher ceding commissions, lower reinsurance rate for MTPL, treaty for liabilities line of business Competitive advantages EuroIns Insurance Group, the following competitive strengths that, taken together, positively differentiate it from its local and regional rivals: Highly qualified management staff and employees Members of both the Group s and its subsidiaries management and supervisory boards are very experienced professionals with years in the insurance and financial services sectors. The key management and personnel of the Group possess in-depth knowledge of the local and regional markets and have proven to be very successful in steering the Group toward gaining market share and integrating and streamlining operations across countries and within organizations. Moreover, the combination between local experience, intimate knowledge of cultural differences and traits in the region 100

101 and application of leading market and managerial practices, proves to be very effective in achieving long-term strategic goals of the Group. Access to effective sales channels within EuroHold Group Being part of EuroHold Group, enables EuroIns Insurance Group and its subsidiaries to directly access clients, who purchase or lease cars through Avto Union Group and EuroLease Group. The control over these channels secures a steady and long-term source of clients for the insurance Group. Furthermore, the close cooperation and cross-selling practices between the sub-holdings of EuroHold facilitates the offering of unique, customer-tailored and innovative products. Strong brand awareness EuroIns Insurance Group has common branding strategy, which generates strong brand awareness across the region and the Group s countries of operation. The Group is truly recognized as a solid business partner and the largest independent insurance group in the Balkans. Strong cooperation with leading reinsurers and centralized reinsurance activity The Group has a centralized reinsurance strategy whereby all reinsurance contracts are concluded at the central levels thus achieving volume discounts and better terms of each reinsurance contracts. The positive effects of this step became obvious in 2009 and 2010 and resulted in a move to nonproportional treaties, increase of premium retention in the Group, increased underwriting capacity in property, cargo and marine hull while keeping prices at the same level, with higher ceding commissions, lower reinsurance rate for MTPL, treaty for liabilities line of business. User-friendly integrated software for insurance business management The Group has a group-wide proprietary IT system that is used to streamline operations and created to offer maximum level of analytics, supervision and reporting. Web-based policy generation The Group is among the pioneers on the local markets in offering electronic policies that limit fraud and paperwork, as well as lead to operation and managerial efficiency. Prudent investment strategy The investment of financial assets is outsourced to the leading Bulgarian assets manager/broker Eurofinance which ensures high professional assets management and allocation within predetermined investment mandates, as well as enables EIG s management to maintain focus on truly insurance operations and day-to-day running of the Group and its companies. Legal information EuroIns Insurance Group AD (EIG) EuroIns Insurance Group AD is a joint-stock company, registered under court decision No. 1302/2007 in Sofia City Court, Identification number , with head office and registered office 1797 Sofia, Izgrev region, 16 G. M. Dimitrov Blvd. The Group has business activity: Consulting, commercial representation and factoring, and any other business that is not expressly prohibited by law. The Parent company of the Group is EuroHold Bulgaria AD with head office and registered office at 1592 Sofia, 43 Christopher Columbus Blvd. The Company is managed by a Board of Directors and is represented by Kiril Ivanov Boshov and Zlatolina Ivanova Mukova, together and separately

102 EuroIns Insurance Plc (EuroIns Bulgaria) This is EIG s Bulgarian general insurer with head office and registered office at Sofia, 43 Christopher Columbus Blvd. The company is registered under court decision No. 9078/1998 in Sofia City Court and has a license for performing insurance activity No. 8/ EuroIns Insurance Group AD directly owns 9,076,247 (nine million seventy-six thousand two hundred forty-seven) shares, which represents 77.22% of the company share capital. EuroIns Bulgaria is a public company, traded on the official segment of the Bulgarian Stock Exchanges (ticker: 5IC). EuroIns Romania Insurance-Reinsurance Llc The company is EIG s general insurance subsidiary in Romania. It is registered in the Commercial Registry of Bucharest under No. J40/2241/09 February 1994, insurance license No. 13/23 October 2001, registered in the insurance register under No. RA-010/ Its head office and registered office is at 10A Dimitrie Pompeiu str., Sector 2, Bucharest, Romania. EuroIns Insurance Group AD directly owns 90.45% of the share capital of EuroIns Romania or 75,511,598 (seventy-five million five hundred and eleven thousand five hundred and ninety eight) shares. EuroIns Osiguruvanje AD Skopje The company is the general insurance subsidiary of EIG in Macedonia. It is registered in the Ministry of Finance of the Republic of Macedonia under court case No.9126/ and has a license from the Ministry of Finance for performing insurance activity No /15-02 dd Its head office and registered office is at Skopje, 19 Macedonia str. EuroIns Insurance Group AD directly owns 91.39% of the share capital of EuroIns Osiguruvanje AD Skopje, Macedonia, or 5,363 (five thousand three hundred and sixty-three) shares. EuroIns Health Assurance Llc EIG owns one of the largest health assurance companies in Bulgaria EuroIns Health Assurance with head office and registered office: Sofia, 43 Christopher Columbus Blvd. The company is registered under court case No.12203/2004 in Sofia City Court and has a license from the Financial Supervision Commission No.7-ZOD/ for performing supplementary voluntary health assurance. EuroIns Insurance Group AD directly owns 100% of the share capital of EuroIns Health assurance llc, or 2,100,000 (two million one hundred thousand) shares. Inter Sigorta Llc, Republic of Turkey At the beginning of 2009, EIG acquired a general insurance company with a dormant license in Turkey. The company is registered in Commercial registration office in Commercial chamber Istanbul under No Its head office and registered office is at Istanbul, 22 Keskingil Blvd., Talatpasa, Kagithane. EuroIns Insurance Group AD directly owns 90.75% of the share capital of Inter Sigorta plc Turkey, or 90,750,500 (ninety million seven hundred fifty thousand and five hundred) shares. Equity holders structure of EuroIns Insurance Group AD During 2011 the registered share capital of EuroIns Insurance Group has not been increased. The last share capital increase was on 10 August 2008, when the share capital reached the amount of BGN 268,262,791. The increase was performed by cash consideration as a result of minority stake sale to the leading SEE private equity fund Global Finance for a cash injection of BGN 48,181,800. The registered capital is fully paid and consists of 268,262,791 shares each with nominal value of BGN 1, as follows: materialized, registered, unprivileged shares - 191,281,000, each with nominal value of 0.51; 102

103 materialized, registered, privileged shares - 76,981,791, each with nominal value of Shareholders structure As of December 31, 2010 As of 31 December 2009 No. of shares Percentage No. of shares Percentage EuroHold Bulgaria plc 216,809, ,809, Basildon Holding SaRL (Global Finance s investment vehicle) 51,452, ,452, ,262, ,262, Subsidiary As of As of % of equity % of equity EuroIns Insurance plc 77.22% 77.22% EuroIns Health assurance llc 100% % EuroIns Romania Insurance Reinsurance llc 90.45% 89.71% EuroIns Osiguruvanje AD Skopje 91.39% 91.39% Inter Sigorta llc 90.75% 90.75% Source: EIG Legal framework The business, conducted by EuroIns Insurance Group and its subsidiaries, is regulated by both local (Bulgarian, Romanian and Macedonian) and European laws. Being full members of the European Union since the beginning of 2007, Bulgaria and Romania have harmonized their legal frameworks to comply with EU laws and regulations and under the Freedom of Services act general insurers in both Bulgaria and Romania can sell freely their products in all EU member states. European law EU authorities have passed a number of directives aimed at harmonizing the norms governing the insurance activity in the scope of vehicle, property and casualty insurance, life insurance and reinsurance activities. These regulations guarantee the compliance with three key principles: The right to freely establish branches, agencies and representative offices in other Member States; The right to provide a full range of services in the territories of all Member States, without the need to open branches, agencies or representative offices; and The right of a free flow of capital and services permitting citizens and entrepreneurs from Member States to transfer capital and use services and financial instruments available in these states. The implementation and the choice of methods, as well as compliance with these common principles and standards are left at the discretion of individual Member States. The insurance-related laws and regulations passed by EU bodies focus on issues such as licensing and supervision, securing adequate technical reserves and solvency margins of insurance companies. The Insurance Codes/Ordinances/Laws in both Bulgaria and Romania aim at reflecting the requirements, posed by relevant EU directives. There is an ongoing process of creating and implementing new solvency system reflecting more adequately the risks, inherent to conducting insurance business. The main assumption here is that the insurance and reinsurance companies are subject to effective solvency requirements, protective to the insured and the overall system. Current and past events point that the present framework is not sufficient to address the various risks faced by insurance and reinsurance companies. These new changes are encompassed by a new Solvency ІІ Directive, that must be adopted by all Member States by October 31, According to the assumptions of Solvency ІІ system, capital adequacy requirements should better address specific risk profile of the insurance and reinsurance 103

104 company, reflecting the required level of its own funds, necessary to guarantee the ability to absorb and ensure significant payment of benefits to policy holders and beneficiaries. The Solvency ІІ system is based on three pillars. Pillar І covers quantifiable types of risks related to the operation of insurance companies. Pillar ІІ covers risks of the insurance companies not included in Pillar І, as well as all standard supervision procedures. Pillar ІІІ covers self-regulatory market tools by creating conditions for transparency, determining the disclosure requirements and developing appropriate accounting standards. The aim of Pillar І is to determine adequate capital requirements taking into account the indicated types of risks related to the operation of insurance company and to determine the principles and scope of application of so-called internal models of risk evaluation in the insurance company. The applicable quantitative capital requirements should be structured in two levels: authorized capital and minimum capital. The work carried out in Pillar ІІ is intended to develop effective monitoring tools and to control the risk, carried by insurance companies. Such tools include both internal tools of the company as well as external, hence supervisory tools. Pursuant to the assumptions of Pillar ІІ, the solvency analysis should take into account individual features of a given insurance company, including the qualitative ones. Pillar ІІ of Solvency ІІ system is also focused on the quality of a company s management, internal controls and audit. Additionally, it regulates the principles of practicing supervision and introduces harmonization of standards, as well as cooperation among supervisors. The companies that employ proper risk management will be able to decrease the required capital levels, compared to present requirements under the binding European Law regulation. The insurance companies which inadequately manage their risk, or insurance companies which properly manage risk but are nevertheless characterized by high risk level, will be forced as a consequence of the implementation of Solvency ІІ system, to increase their capital resources in order to secure the satisfaction of policy holders claims. Consequently, the Solvency ІІ system will contribute to improving internal audit systems in insurance companies. Bulgaria (source: Financial Supervision Commission) EuroIns Bulgaria and EuroIns Health Assurance (EIG s insurance subsidiaries in the country) are local insurer and health assurance companies, licensed to operate as general insurance entities. Permit No. 8/ for the performance of insurance activity has been issued in favor of EuroIns Bulgaria by the National Insurance Council before the entering into force of the Insurance Code. The above permit has been subsequently amended by virtue of some decisions of the Financial Supervision Commission (the FSC ). The permit (as amended) entitles EuroIns Bulgaria to perform the following type of insurances: accident insurance; insurance for sickness ; road vehicles insurance, without railcar vehicles; railcar vehicles for all damages or losses caused to the railcar vehicles; aircraft insurance - for all damages or losses caused to the aircraft devices; cargo insurance; fire insurance and natural disaster insurance; insurance for loss of property; MTPL insurance related to the ownership and usage of motor vehicles - any liability for damages connected to the usage of road vehicles; liability insurance related to the ownership and usage of aircraft devices - any liability for damages connected to the usage of aircraft devices; civil liability of the carrier in connection with the aircraft devices; general civil liability insurance; bank credits insurance; travel assistance insurance; insurance for various financial losses; insurance for legal expenses; marine insurance; liability insurance related to the ownership and usage of marine devices, bank guarantees insurance. EuroIns Health Assurance performs its activity based on License No. 07-ЗОД/ issued by the Financial Supervision Commission. The license includes the following health-assurance packages: Health Promotion and Disease Prevention; Out-Patient Medical Assistance; In-Patient Medical Assistance. The operation of insurance companies in Bulgaria is regulated and prescribed in the Bulgarian Insurance Code, which settles: insurance and reinsurance; insurance and reinsurance intermediation; terms and conditions for commencement, performance and termination of the activities; insurance contracts; obligatory insurance; and 104

105 insurance supervision. The main goals of the Code are to guarantee protection of the interests of insurance services customers and establish conditions for the development of a stable, transparent and efficient insurance market. Insurance shall be the activity of providing insurance cover against risks by virtue of a contract, comprising of raising and spending funds designated for indemnities and other cash amounts upon occurrence of contract- or law-envisaged events, or materialization of circumstances, as well as directly related activities such as: Assessment of insurance risk; Determination of insurance premiums; Establishment of the occurrence of an insured event; Determination of the amount of damages incurred; Management of own funds and assets, serving as cover of an insurer s technical reserves; (Suppl. SG, iss. 97 in 2007) Transfer of all, or part, of insurance risks covered by an insurer to a reinsurer or to other insurer (outward reinsurance); Provision of services on Travel Assistance Insurance under Section II, Letter A, item 18 of Annex No. 1 by an insurer, through persons engaged by the insurer and insurer s own technical means. Reinsurance is: Art. 4. (Suppl. and am. SG, iss. 97 in 2007) Reinsurance shall be the activity of assuming, by virtue of a reinsurance contract, all, or part, of the risks covered by an insurer or another reinsurer, in exchange for an insurance premium (inward reinsurance) and activities directly related to this. As per the Insurance Code, two general categories cover all insurance risks: life and non-life, divided respectively into Section І and Section ІІ. An insurance company cannot simultaneously engage in activities falling in both sections (one-branch principle). The insurance activity has a voluntary nature: Art. 6. (1) Insurance shall be performed on the principle of voluntary participation. (2) Obligatory insurance shall be settled by an act or an international treaty ratified under the constitutional procedure, duly promulgated and enforced in the Republic of Bulgaria. Insurance Supervision: Art. 7. (1) Regulation and supervision exercised over the activities under Art. 1, para. (1) shall be performed by the Financial Supervision Commission, hereinafter referred to as The Commission, as well as by the Deputy Chairperson, Head of Insurance Supervision Division, hereinafter referred to as The Deputy Chairperson. Persons Who May Perform the Activities under the Present Code Art. 8. (1) An insurer shall be: a joint-stock company, a co-operative society, as well as an insurer from a third country; through a branch, duly registered under the Commerce Act, and having been granted a license under the terms and conditions, and the procedure set by the present Code; (Suppl. SG, iss. 97 in 2007) an insurer from other Member State under the terms and conditions of the right of establishment or of the freedom to provide services. A license for insurance or reinsurance under this Code may also be granted to a person established as a European company (SE). A European company insurer or reinsurer shall be established, shall carry out its activity, transform itself and be wound up in accordance with Council Regulation (EC) No. 2157/2001 on the Statute for a European company (SE) and this Code. In respect of a European company insurer the provisions of the joint-stock insurance companies under this Code shall apply. Each licensed insurer must have a responsible actuary who is a natural person with recognized legal capacity and who organizes, manages and is responsible for the actuarial service of the insurer or reinsurer. An actuary may carry out his/her activity after being granted permission from the Financial Supervisory Commission. The main responsibilities of the actuary are: Working out sufficient premiums, in terms of amount, with the exception of the premiums for high risk insurances; 105

106 Setting up sufficient technical provisions, in terms of amount; proper calculation of the solvency margin, as well as the correct utilization of the actuarial methods in the insurer or reinsurer s practice; Notification to the Financial Supervision Commission for any violation of the present code and set up by the FSC rules and norms. In addition to voluntary insurance, legislation has been introduced to make certain insurance obligatory: compulsory third party and accident insurance of passengers and civil liability insurance of motorists (owners, users, holders and drivers of motor vehicles). Any person that is member of a managing or supervisory body of the insurance joint-stock company, as well as any person, empowered to manage or represent the insurance joint-stock company has to comply with very strict restrictions regarding education, experience, legal and financial status. The Bulgarian Insurance Code also regulates matters related to the freedom of providing insurance services both with regard to domestic insurance companies which intend to engage in insurance operations in the territory of another Member State, and foreign insurance companies from EU Member States which plan to engage in insurance activity in the territory of the Republic of Bulgaria. The Insurance Code states that the insurance and reinsurance premiums shall be sufficient, calculated on the basis of a reasonable actuarial assumption, so as to ensure fulfillment of all obligations of an insurer or reinsurer, the set-up of adequate technical reserves included. In order to ensure long-term solvency and meet ongoing claims from insured parties, each insurers should set up general and technical reserves. As per Insurance Code s stipulations, the amount of the technical reserves shall be calculated on the basis of the value of the obligations assumed by an insurer or reinsurer, which are expected to be fulfilled in the future by virtue of insurance or reinsurance contracts having entered into force, the expenses related to fulfillment of these obligations, as well as the value of the possible unfavorable deviation from that expectation. A non-life insurance company should set up the following types of technical provisions: An equalization reserve; An outstanding claims provision; An unearned premium reserve; An unexpired risk provision; A bonuses and rebates provision; Other provisions as approved by the Deputy Chairperson of FSC or created under his/her supervision. An insurer is obliged to hold assets eligible under the prevailing local Insurance Code which shall not be lower than the gross amount of technical reserves and equalization provisions. Only the following types of assets could be utilized to cover technical reserves: Securities admitted to trading on a regulated securities market or a multilateral trading facility (MTF) in the Republic of Bulgaria or in a Member State, as well as shares, qualified bonds and other qualified debt securities, admitted to be traded on internationally recognized and liquid regulated securities markets or a multilateral trading facility in a third country; Securities issued or guaranteed by the Republic of Bulgaria or by other Member State, as well as qualified debt securities (having an investment rating by an internationally recognized rating agency) issued or guaranteed by third countries, their central banks or international organizations a member of which is the Republic of Bulgaria or another Member State; Shares and units issued by investment companies and contractual funds that perform operations under the terms and conditions and following the procedure of the Law on Public Offering of Securities, as well as shares and units of collective investment schemes whose legal seat is located in a Member State; Property rights over land and buildings; Receivables from reinsurers, including the reinsurers' share in technical reserves, and from special purpose vehicles for alternative insurance risk transfer; Deposits and receivables from assignors; 106

107 Receivables from insured persons and intermediaries ensuing from insurance and reinsurance contracts; Receivables on loans against Life Insurance Policies; Cash in hand and on payment accounts or deposits with banks having the right to pursue bank activity in the Republic of Bulgaria or in another Member State; Deferred acquisition costs; Indisputably established receivables in relation to tax refunding. The value of all assets is calculated according to the principle of prudence, after deduction of the value of liability resulting from obtaining such assets. The Insurance Code also governs the investment policy of an insurer. The main goal of the investment activity of an insurance company is to attain the highest degree of security and return while maintaining sufficient liquidity of funds. Individual categories of assets covering technical reserves are also within certain limits to achieve diversification of risk: Up to 20 per cent in real estate, but not more than 10 per cent in a single property or in a group of properties that may be regarded as one investment due to their location; Up to 80 per cent in securities under Art. 73, para. (1), items 1 and 3 from the Insurance Code, but not more than 30 per cent in other assets, different from qualified bonds and other qualified debt securities; Without any restriction whatsoever in assets under Art. 73, para. (1), item 2 from the Insurance Code; Up to 5 per cent in securities issued by a single issuer, where the restriction shall not apply to the assets under Art. 73, para. (1), item 2 from the Insurance Code; Up to 50 per cent in bank deposits, but not more than 25 per cent of the gross amount with one bank; Up to 3 per cent in cash in hand and on payment accounts; The maximum amount of investments in real estate under Art. 74 para. (1), item 1 may not exceed 30 per cent of the difference between the gross amount of the technical provisions set up and the receivables from reinsurers transformed under the procedure established by Art. 75, para.s (1) and (2). The maximum amount under Art. 74 para. (1), item 4 may be 10 per cent in the case where an insurer invests not more than 40 per cent of the technical provisions gross amount in securities of issuers, the above insurer s exposure to each of which exceeds 5 per cent of its assets. The maximum amount under Art. 74 para. (1), item 4 may be 20 per cent in the case where an insurer invests the technical provisions in debt securities issued by a credit institution having a legal seat in a Member State, and subject to special supervision within the meaning of the law for the purpose of protecting the holders of such securities. More specifically, the contributions received in return for issuance of securities under sentence two shall be invested pursuant to the provisions of the law in assets that throughout the whole validity period of the securities may cover the receivables. The detailed principles of establishing technical provisions, including the methods of establishing the provisions, the amount of provisions and the indices applying to the establishment of the same are defined in Ordinance No. 27 of 29 March, 2006 on the procedure and methodology of formation of the technical reserves by insurers and reinsurers, and of the health insurance reserves. Bulgarian Insurance Code regulates all issues regarding own funds, solvency margin and guarantee capital. The own funds of an insurer or reinsurer, reduced by the intangible assets, shall be at any time at least equal to the solvency margin or to the minimum amount of the guarantee capital in the case where it is higher than the solvency margin. The own funds consist of the company s assets, reduced by the foreseeable liabilities. The elements included in the calculation of the own funds amount are determined by Ordinance No. 21 of 16 March, 2005 on the own funds and solvency margin of insurers. The solvency margin shall be the minimum amount of the insurer's or reinsurer's own funds, reduced by the intangible assets, requisite for ensuring performance of the insurer s contractual obligations in the long-term aspect, in accordance with the total volume of its operations. Each insurer shall be under the obligation to maintain adequate own funds necessary for ensuring performance of its contractual obligations in the long-term aspect in accordance with the total volume of its operations. The solvency margin and the methods for its calculation shall be specified by the 107

108 Ordinance No. 21 of 16 March, 2005 on the own funds and solvency margin of insurers. For the purposes of solvency margin calculation of a branch of an insurer, respectively a reinsurer from a third country, only the operations performed by the branch shall be considered. Health insurance Conditions and the scope of providing and funding healthcare services from the public funds as well as the responsibilities of public authorities with regard to ensuring access to them are defined in the Health Insurance Act. As per this Act, every insured person, regardless of the amount of insurance premium paid by him/her, is entitled to the same health care services. The Bulgarian National Health Assurance Institute is the government body that ensures access to and financing of the majority of healthcare services in the country. There is an ongoing debate about liberalizing the health assurance sector in the country that is currently dominated by the state, but due to its political aspect, it is currently not feasible to predict the directions of the future development of this market in Bulgaria. Romania (source: CSA, National Association of Insurance and Reinsurance Companies in Romania) EuroIns Insurance Group operates in Romania through its subsidiary EuroIns Romania, which is a fully licensed general insurance company, operating under the laws and regulations of Republic of Romania and under the supervision of the Romanian Insurance Commission. The Romanian insurance law is also in compliance with EU rules and norms, as the country has been part of the European Union since January Law No. 32 from year 2000, amended and completed by Law No. 76 from 2003 and Emergency Government Ordinance No. 201 from 2005 and Law No. 113 from 2006 govern and define the insurance and reinsurance activities in the Republic of Romania. As per Romanian Insurance Law, the insurance activity is divided into two major functionally different activities: Life insurance; and General insurance. Any insurer may carry out only one of these two activities, but not both at the same time. The application of this law, supervision and control are delegated to the Insurance Supervision Commission, which aims to protect the insured persons rights and to promote the stability and efficiency of the insurance business in Romania. The Commission consists of 7 members, including one president and two vice-presidents. The Romanian Insurance Supervision Commission continuously cooperates with the European Commission with respect to improving the insurance supervision activity. Insurance or reinsurance activity may be carried out by a legal entity which has been granted official authorization by the Insurance Supervisory Commission or is carrying out such activity in a Member State of the European Union as per the right of establishment and freedom of services. Moreover, in order to receive an authorization to carry out insurance activity and during the whole process of ongoing insurance activity, each insurer must have working relations with at least one actuary (depending on the type of activity). The actuary s obligations include: Determining the technical reserves; Control of the assets admitted to cover the technical reserves; Calculation of the insurance premiums; Calculation of the required solvency margin; The calculation of the available solvency margin of the insurer; Calculation of the benefits obtained by fructification of the assets admitted to cover technical reserves for life assurance; Drawing up, certifying and submission to the Insurance Supervisory Commission of the yearly actuarial report, the content and form of which are established through Regulations issued in the application of the present Law; Certifying all reports submitted to the Insurance Supervisory Commission which include the calculation; The notification, according to the provisions of paragraphs (3) and (4), of any irregularities found out or of situations that indicate or lead to the breaching of the provisions of the present Law and of the regulations issued in its application

109 As per the Romanian Insurance Law, each insurer must maintain: Paid-up share capital, or after Romania joining the European Union, the guarantee fund or, in case of mutual insurance undertakings, the paid up free reserve fund; The minimum solvency margin; The paid-up capital or, according to case, the paid-up free reserve fund cannot be less than: RON 7 billion for general insurance business, compulsory insurance exempted; RON 14 billion for general insurance business; RON 10 billion for life insurance business; The insurer should hold in any moment the available solvency margin for the carried on activities. The available solvency margin, as well as the adjusted solvency margin for the supplementary supervision, are calculated and reported according to the provisions of the regulations laid down by the Insurance Supervisory Commission. Based on the classes of insurance offered, the insurance undertakings should calculate the minimum solvency margin, the calculation method and the reporting to be established by regulations issued by the Insurance Supervisory Commission. 1/3 of the minimum solvency margin must represent the guarantee fund. The elements of the guarantee fund shall be established by Regulations issued for applying the present law. The amount of the guarantee fund cannot be less than the amount mentioned in the European insurance legislation and shall be updated through Regulation issued according to the provisions of this legislation. Pending on the classes of underwritten risks, the minimum amount of the guarantee fund is established by Regulations issued for applying the present Law. In the case of the mutual association, the guarantee fund represents at least 3/4 of the minimum amount of the guarantee fund set up for the insurance undertakings. The assets, admitted to represent the technical reserves must be located in Romania or in another Member State, for the risks underwritten in Romania and after joining the European Union - for risks underwritten in Romania or in another Member State. The assets, admitted to represent the technical reserves cannot be pledged and cannot be the object of any kind of guarantees to third parties. The non-pledged assets admitted to represent the technical reserves set up by the branches established in Romania, belonging to the insurers having the head offices in a non-member country, should be kept in Romania up to the minimum amount of the guarantee fund and the surplus may be kept in a Member States. The insurer, performing general insurance activity, must establish and maintain the following technical reserves: The premium reserve is calculated monthly by adding together the quota-shares of the gross premiums written due to the unexpired period of the insurance contracts in such a way that the difference between the volume of the gross premiums written and this reserve to reflect the gross premiums allocated to the part of the expired risks at the date of calculation; The claim reserve: is created and updated monthly based on estimations for reported but unsettled claims, in order for the fund created to be sufficient for settling these claims; The unreported claim reserve: is created and adjusted at least at the end of the financial year, if the insurer's internal regulations do not mention otherwise, based on its estimations, on statistical data or actuarial calculations for the existing but not-reported claims; The catastrophe reserve: is created by the monthly application of a percentage of minimum 5 % to the gross written premium volume afferent to contracts that cover catastrophe risks, until the reserve fund amounts to least to the level of the own retention, or 10 % of liabilities accumulated from contracts covering catastrophe risks; this reserve is to cover the indemnity payments afferent to catastrophe claims; The reserve for non-expired risks: is calculated based on the estimation of claims to occur after the closing of the financial year, afferent to insurance contracts issued before that date, to the extent to which their estimated value is higher than the amount between the premium reserve and the premiums to be further collected for these contracts; The equalization reserve: is created in the years with favorable technical results in order to create claim covering sources for the years with non-favorable technical results

110 When investing the assets admitted to cover the gross technical reserves, the type of activity carried on by the insurance entity shall be taken into account, in order to ensure the yield, the safety and the marketability of the investments and the allocation of the mentioned assets. The insurance company shall cover its gross technical reserves with matching assets according to the provisions of the article 6 of Order No from For activities pursued in the Member States, the assets admitted to cover the gross technical reserves must be located on the territory of the mentioned Member States. The categories of assets admitted to cover gross technical reserves are: Investments: o o o o o o o o Debts: o o o o o o o Others: o o o state bonds and treasury bonds issued by the member states; bonds issued by authorities of the local public administration; bonds and other instruments of the monetary and capital market, traded on a supervised market; shares and other variable-yield participations, traded on a market that is not supervised; units in entities for collective investment in securities and other investment funds; deposits and current accounts at credit institutions; lands, buildings owned by undertakings; loans. debts owned by policyholders and intermediaries arising out of direct insurance operations and reinsurance acceptances; the part of the technical reserves inherent to the contracts ceded in reinsurance; interests to cash inherent to the assets admitted to cover the gross technical reserves. Others: tangible assets, other than land and buildings; deferred acquisition costs; cash on hand. tangible assets, other than land and buildings; deferred acquisition costs; cash on hand. In the evaluation of the assets admitted to cover the gross technical reserves, the compliance with the following principles shall be in place: Assets admitted to cover gross technical reserves shall be valued at their net value, without including the acquisition costs; Assets admitted to cover the gross technical reserves shall be valued on a prudent basis, taking into account any future failures. Tangible assets, other than lands or buildings, may be admitted to cover gross technical reserves only if they are valued on the basis of prudent amortization; The loans granted, according to the provisions of the law, to entities, to the state or to international organizations, local or regional authorities and to natural persons may be admitted to cover the gross technical reserves only if there are enough guarantees as to their security, based on the status of the borrower, mortgages, bank guarantees or guarantees, granted by insurance companies or other forms of guarantees; The value of any debts admitted to cover the gross technical reserves must be calculated on a prudent basis, taking into account any future losses. Debts from policyholders and intermediaries arising from direct insurance operations and reinsurance acceptances may be accepted to cover the gross premium reserves, up to their level and only if they have been outstanding for not more than three months; 110

111 In case that a subsidiary of the insurance undertaking manages all or part of the insurer s investments, when applying the provisions of the art. 1-4, the assets of the subsidiary shall be taken into account; the assets of other subsidiaries may be treated in the same way; Deferred acquisition costs may be accepted to cover the technical reserves only if their calculation method is consistent with the calculation of the premium reserves; Lands and buildings may be accepted to cover the gross technical reserves only if the insurance undertaking proves that they are in its property and are free of any foreseeable liabilities. The proving act of the property shall be submitted together with the financial reports for the financial year 2006; at each subsequent reporting the insurer shall declare on its own responsibility whether there are any amendments regarding the status of the property. The buildings admitted to cover the gross reinsurance technical reserves shall be insured against all the risks they are exposed to, at least at the level of the value taken into consideration for covering the gross technical reserves, on the basis of a distinctive insurance contract with another insurer, or they shall be self-insured, provided that at least 70% of the risk is ceded in reinsurance, to reinsurance undertakings on the international market. Rules regarding the allocation of the assets admitted to cover gross technical reserves are as follows: The insurance undertaking carrying on the non-life insurance activity may invest no more than: o o o o o o o o Liquidity ratio 50% of the gross technical reserves in shares, bonds and other instruments of the capital market traded on a regulated and supervised market, as well as debt securities in schemes for collective investment in securities; 5% of the total gross technical provisions in shares and other negotiable securities treated as shares, bonds, debt certificates and other money and capital market instruments, as well as debt securities in companies for collective investment in securities issued by the same companies; 40% of the gross technical reserves in lands and buildings; 10% of the gross technical reserves in any piece of land or building or in a number of lands or buildings close enough to each other to be considered effectively as one investment; 90 % of the gross technical reserves in deposits and cash with credit institutions, but no more than 25% of the gross technical reserves in one credit institution; 10% of the gross technical reserves in tangible assets, other than lands and buildings; 3% of the gross technical reserves in the form of cash in hand; 1% of the gross technical reserves for every loan, others than the loans granted to credit institutions, insurance undertakings or investment undertakings from a Member State, but no more than 5% of the gross technical reserves in the total of loans. The Liquidity ratio represents the ratio between liquid assets and short term liabilities of the insurance companies towards insured parties. The liquid assets are: state securities and bonds issued by the local public administration authority; bank deposits; cash availabilities in bank and in hand; securities traded on supervised and regulated markets, according to the following conditions: o o in the limit of 5% of the total of securities issued by the same entity; in the calculation of the liquid assets, the bounds shall be weighted with a coefficient of 0.75; o in the calculation of liquid assets, the shares shall be weighted with a coefficient of 0.50; debt securities to the undertakings for collective investment in securities, weighted with a coefficient of 0.90, in the limit of maximum 20% of the net asset for each fund. The insurance companies have the obligation to maintain a liquidity ratio for the non-life insurance business of at least

112 The minimum limit of the solvency margin is regulated by Ordinance No. 10 from 27 December As per this Ordinance, the evaluation of the assets and related liabilities that will be taken into consideration for the establishment of the solvency margin is based on their balance sheet values. The result of the difference between the assets and the liabilities taken into account at the establishment of the solvency margin represents the insurer's net assets and demonstrates his capacity to cover the liabilities without relying on his own funds. For the calculation of the solvency margin, total assets should be decreased by intangible assets, subscribed but not paid-in capital, subordinated liabilities and assets related to the part of technical reserves related to outward reinsurance. The liabilities that are taken into consideration to establish the insurer's solvability margin are: The subordinated debts up to 50% of their value; The net technical reserves that must be set up according to the provisions of the article 21 of the Law no.32/2000 and the Insurance Supervision Commission's Norm no.5/2001, regarding the calculation method and the evidencing the minimal technical reserves for general insurances, with the exception of the equalization reserve and the catastrophe reserve. Provisions for risks and expenses; Deposits received from the reinsurers; Debts, with the exceptions of loans from issuing of bonds. Thus the difference between the assets and the liabilities that is going to be taken into account according to the definitions above represents the solvency margin that the insurer has. The insurer is obliged to annually determine its solvency margin based on the balance sheet data and to send a form of a report regarding the solvency margin to the Insurance Supervision Commission together with the balance sheet concluded for the end of each financial year, according to the form presented in annex to it and which is an integral part of the Norms. Macedonia (source: Insurance Supervision Agency) The Macedonian insurance sector is regulated by the Insurance Supervision Law from 2002 and last updated in April The Insurance Supervision Law regulates the conditions of carrying out insurance, reinsurance and coinsurance activity in the Republic of Macedonia. The Macedonian Insurance Supervision Agency is the main regulatory body that oversees and regulates the sector. All insurance companies should be established as joint-stock entities, located in Macedonia and conducting their activities in compliance with the Insurance Supervision Law and Commercial Entities Law. Each insurance company is allowed to carry out only insurance and/or reinsurance activity and non else. Insurance activities could be carried out within the following lines of business: accident insurance (including industrial injuries and occupational illness), in the event of death or health deterioration as a result of injury; health insurance; Casco; railway rolling stock insurance; aircraft insurance; water vessels insurance; cargo insurance; fire and peril; other property insurance; MTPL; aircraft third party liability; water vessels third party liability; general liability; credit insurance; surety insurance; financial insurance; legal aid insurance; travel assistance; life insurance; marriage or birth insurance; life insurance linked with shares in investment funds; tontine insurance; insurance of funds of payment. Each company can either perform life insurance or non-life insurance activities, but not both at the same time. Insurance activity could be carried out only by the following parties: Insurance company, based in Macedonia, which has received a permission for insurance operation from the Insurance Supervision Agency; A branch of foreign insurance company, which has received a permission for insurance operations from the Insurance Supervision Agency; A branch of a foreign entity which is based in a member of the European Union. Shareholders in insurance and/or reinsurance companies should be qualified and must comply with the requirements of Insurance Supervision Law. As per current law, the shareholders capital of an insurance company should not be less than the guarantee funds as specified in Article 77, paragraph 2 from the Insurance Supervision Law. Cash contributions to the share capital should not be raised through debt or 112

113 be in any other way encumbered. The Articles of Association of each insurance entity determine the amount of shareholders equity, necessary for establishment and operation of insurance company. The domestic legal entities and natural persons shall pay the denar equivalent value of the shareholders capital, calculated upon the exchange rate of the National Bank of Republic of Macedonia on the day of payment, on a separate interim account of a payment operations bearer. The foreign legal entities and natural persons shall pay the assets in foreign currency account held with the National Bank of Republic of Macedonia. As per law, there are two types of shareholding in an insurance company: Direct or indirect stake of at least 20% from the shareholder s equity or voting rights of other persons; Qualified shareholding means direct or indirect stake of at least 10% from the total number of shares or from all shares outstanding with voting rights. The Insurance Supervision Law also stipulates rules and regulations regarding the establishment of management and supervisory board in an insurance company, the prerequisites for becoming member of these board and responsibilities. The Insurance Supervision Agency and this law also regulates issues ranging from licensing, revocation of licenses, contents and risk covered of insurance contracts and all other aspects of the insurance activity aiming to promote an efficient and transparent insurance market. Prior to act upon the following issues, an insurance entity should receive approval from the Insurance Supervision Agency: Modification of the statute; Modification of Articles of Association; Investments of the insurance company in shares or stakes in another legal entity of an amount in excess of 10% of the capital of the insurance company; Appointing members in the Management Board; Changing the name and location of the insurance company; Transfer of insurance contracts as per article 199 of the Insurance Law. As per law, the insurance company is obliged to maintain sufficient capital with respect to the volume and lines of business, as well as the risks imbedded in these activities. The company also must act in a manner that will ensure all risk underwritten by the company will not exceed the limits defined in this law. The company must also maintain sufficient liquidity and maintain its solvency to cover needs as they arise. As per this law, an insurance company entity comprises main capital and additional capital. Main capital includes: Paid-in capital with the exception of paid-in capital from cumulative preferred shares; Reserves (legal and statutory) which do not arise from insurance policies; Retained earnings; Profit for the current period as confirmed by registered auditor. The insurance entity must also set aside the so called safety reserves which are used to cover the insurance policies liabilities for a longer period of time. Each company must set aside at least 1/3 of the profit as per annual accounts, unless the profit is used to cover previous years losses. Still, if an insurance company has already set aside more than 50% of the average insurance premiums over the last two years, including the year for which the profit is distributed, it does not have the obligation to set aside any portion of the profit for safety reserves. Additional capital is also part of the capital calculation of a given insurance company. The additional capital includes: Paid-in shareholders capital from cumulative preferred shares; Subordinate debt instruments; Securities with unlimited maturity. When calculating the capital of the insurance entity, the additional capital shall be taken into consideration only up to the amount not higher than 50% of the basic capital explained in Article 69 of this Law

114 Subordinate debt instruments are securities and other financial instruments which, in the event of bankruptcy or liquidation of the issuer, are collectable only after other debts of the issuer have been satisfied, or with regard to their maturity and other characteristics, are appropriate for covering any losses that might have occurred as a result of risks to which the insurance undertaking is exposed. When calculating the capital of the insurance undertaking, the amounts of the basic and the additional capital shall be reduced by the following items: Investments made by the insurance undertaking into shares or subordinate debt instruments issued by another insurance undertaking or other financial institution in which the insurance undertaking holds a share 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; Investments made by the insurance undertaking into shares or subordinate debt instruments issued by another insurance undertaking or other financial institution, other than those referred to in item 1 of this paragraph, which exceed 10% of the capital of the insurance undertaking calculated prior to the deduction of the items listed in item 1 of this paragraph and this item. There are certain restrictions for investing the capital in terms of allocation percentage and asset classes. The capital of insurance companies should be at all times equal or higher than the required solvency margin as prescribed by the Insurance Supervision Law. Both methods for calculation are acceptable premium rate and claims rate and the company should apply the one that produces the higher score. In addition, the company should also establish a guarantee fund which shall not be less than 1/3 of the required solvency margin. For the purpose of covering insurance liabilities, a company should establish the following technical reserves: Unearned premium reserve; Bonuses and discounts reserves; Claims reserves; Other technical reserves; Equalization reserves; The following categories of investments are admitted to cover technical reserves: Bank accounts and deposits in banks licensed by the National Bank of the Republic of Macedonia, provided that they bear interest. Bonds or other securities issued or guaranteed by the National Bank of the Republic of Macedonia. Certificate of deposits and other securities issued by banks licensed by the National Bank of the Republic of Macedonia. Mortgage securities issued by banks licensed by the National Bank of the Republic of Macedonia. Bonds and other securities issued or guaranteed by the Republic of Macedonia. Shares issued on the basis of an approval granted by the Securities and Exchange Commission, listed on the primary or the secondary market of the Macedonian Stock Exchange, or on some other recognized exchange supervised by the Commission. Bonds and other securities issued by joint stock companies in the Republic of Macedonia, on the basis of an approval granted by the Securities and Exchange Commission listed on the primary or the secondary market of the Macedonian Stock Exchange, or on some other recognized exchange supervised by the Commission; Commercial notes issued by blue chip joint stock companies in the Republic of Macedonia. Documents confirming holding of shares and share units of investment funds in the Republic of Macedonia, operating in compliance with the Law on Investment Funds; Bonds and other securities issued by foreign governments and central banks of the EU member states, Japan or the USA; Bonds and other securities with fixed income issued by foreign non-governmental foreign companies or banks from the EU member states, Japan or the USA; 114

115 Shares and other securities traded on the main stock exchanges in the EU member states, Japan or the USA; Documents confirming holding of shares and share units of licensed investment funds with main offices in an EU member state, Japan or the USA which have invested mainly in (listed) registered shares on respective stock exchanges; Forward contracts denominated in foreign currency and financial derivatives, provided that those types of investment are made for risk hedging purposes; Other types of investment in line with the rules specified by the Ministry of Finance, provided that they are not contrary to paragraph (2) of Article 89 of this Law; Investments in certain types of instruments referred to Article 88, paragraph (1) of this Law are subject to the following restrictions: Not more than 20% of the assets covering technical provisions may be invested in instruments of a foreign issuer outside the Republic of Macedonia. This restriction applies to all provisions of this Article; Not more than 80% of the assets covering technical provisions may be invested in instruments referred to in Article 88, paragraph (1), items 2 and 5 of this Law; Not more than 60% of the assets covering the technical provisions may be invested in instruments referred to in Article 88, paragraph (1), items 1, 3 and 4 of this Law; Not more than 40% of the assets covering technical provisions may be invested in instruments explained in Article 88, paragraph (1), items 7 and 8 of this Law; Not more than 30% of the assets covering technical provisions may be invested in instruments explained in Article 88, paragraph (1), item 6 of this Law; Not more than 20% of the assets covering technical provisions may be invested in instruments explained in Article 88, paragraph (1), item 9 of this Law. In addition to the restrictions listed above, investments of assets covering technical provisions shall be subject to the following limitations: Not more than 5% of the value of assets covering technical provisions may be invested into shares, bonds or other securities of a single issuer; Not more than 3% of the value of assets covering technical provisions may be cash-in-hand investments. Assets covering the technical provisions shall not be invested in: Shares, bonds and other securities not listed on a recognized exchange or not publicly traded; Instruments which cannot be legally disposed with (which cannot be legally alienated); Tangible assets which are rarely registered on recognized markets and with unreliable appraisal, such as antiques, works of art and motor vehicles; Real estate or any share in a real estate, other than securities issued against a mortgage and indirect investment through investment funds; Shares, bonds and other securities issued by: o o a shareholder of an insurance undertaking; individuals and entities associated with those listed in sub-item 1 of this item; Futures contracts, options and other derivatives, with exception of forward foreign currency contracts and other financial instruments used only for risk hedging purposes. b. History and development of BG AutoLease Holding B.V. EuroLease Group - The leasing sub-holding BG AutoLease Holding B.V. and its subsidiary BG AutoLease Group B.V. are holding companies incorporating Eurohold s investment in the leasing sector in the Balkans. The companies were established in the Netherlands and acquired by Eurohold in 2008 and later the shares of individual companies in Bulgaria, Romania and Macedonia were contributed into the capital of the Eurolease Group. The companies are registered in the Netherlands in order to ensure easier access to 115

116 financial resources from the international financial markets. The leasing sub-holding BG AutoLease Holding B.V. and its subsidiary BG AutoLease Group B.V. are united under the trade name Eurolease Group (ELG). The structure of ELG includes Eurolease Auto Bulgaria (100%), Eurolease Auto Romania (74.93%) and Eurolease Auto Macedonia (100%). Eurolease Auto Bulgaria in turn owns 51% of Euromobil Leasing and 100% of Eurolease Auto Finance. The companies part of the group of ELG offer financial leasing of new and used vehicles, of new passenger cars and light commercial vehicles, trucks and buses. Competitors of the subsidiaries of ELG are all leasing companies in the region, especially the ones that are specialized in the leasing of new passenger cars Interlease, BM Leasing, Raiffeisen Leasing, UniCredit Leasing, EFG, as well as importers that offer captive leasing. Their competitive strengths are related to their belonging to a financial group and the use of cheap financial resources. On the other hand, the participation of a leasing company in a bank structure restricts the free lending due to the need of compliance with the relevant bank regulations about lending to related parties. The main advantages of ELG are flexibility, loyalty to clients and partners, fast and high quality service, introduction of new products and services. This ensures high quality service and professionalism for the offered services consultation during the selection of vehicle, negotiating lease terms according to the needs of the client and selecting favorable insurance package offered by the subsidiaries of EIG. ELG offers a simplified application procedure and fast service. Another main advantage of the company on the Bulgarian market results from the cooperation with Avto Union and all dealerships inside it. All Avto Union s offices are used as points of sales for the products of ELG and EIG creating opportunities for development and marketing of unique combinations of products that easily meet customer needs. Potential for development and driving forces: The markets which EuroLease Group currently operates on are quite dynamic and underdeveloped, opening opportunity for growth for experienced players like ELG, which have a well-defined business strategy and extensive local market knowledge. EuroLease Auto Bulgaria commenced commercial operations in 2004 and since then has managed to reach one of the leading positions on the market. The company is continuing to improve its operations and to develop its product range and is expected to continue to grow further as the market starts to revive from the current economic downturn. The most significant opportunity for growth comes from the underdeveloped new car market, which has enormous potential for development and is expected come back in The Romanian market is more developed, but it is mostly dominated by the bank-owned leasing companies. Currently, there is no independent leasing company in the top ten, after the collapse from Thus, EuroLease Auto Romania has the potential to use the knowhow and operation practices the Group has developed successfully on its home market and use them to gain market share and sustainable profitability. The company is expected to grow rapidly in the next few years. The Macedonian market is relatively small and underdeveloped. Currently, the banks are still offering car loans limiting the opportunities for business for leasing companies. However, the general tendency is for banks to stop offering such products, turnings the leasing companies as the main providers of financing for car purchases. The bank sector of the country, as a whole, is underdeveloped, offering room for significant growth in the years to come. It is expected that the leasing market will develop in parallel to the banking sector, offering excellent opportunities for growth. Key success factors: The growth story of EuroLease Auto is predicated on the following drivers: Achieving broad synergies with the other subsidiaries of EuroHold; Comprehensive services offering; Product flexibility that meets client needs and expectations; Quick and high quality service. History 116

117 The full name of the company is BG AutoLease Holding B.V. (with a trade name EuroLease Group). It was established in the Netherlands as part of the long term strategy of EuroHold to segregate its core business lines in separate stand-alone sub-holdings. EuroLease Group has a key role in EuroHold s overall strategy it connects car dealers and insurers to pack a product with common added value. BG AutoLease Holding B.V. was established on 1 July 2003 and has been registered at Amsterdam Commercial Registry under company file N: , as a private limited liability company. Currently its headquarters and registered office is at 104EJ Amsterdam, 140 Teleport boulevard, the Netherlands. The share capital of the company is 11,823,000. The shares of the individual leasing companies in Bulgaria, Romania and Macedonia were contributed in the capital of EuroLease Group in Upon completion of integration of all leasing subsidiaries the newly created holding company "EuroLease Group" turned into one of the largest leasing groups in the region with significant potential for future development, equity and significant financial resources. History of subsidiaries EuroLease Auto Bulgaria was created to support the insurance business of EuroHold in Over the years it not only supported, but also became the single biggest business generator of insurance premiums for EuroIns Insurance Group. Along with that, the company has proved to be sustainably profitable and cash generative, which logically makes the leasing operations one of EuroHold s strategic lines. During the years of high economic development and growth the leasing market in Bulgaria grew with high rates in line with the growth of new car sales market. During this period EuroLease Auto Bulgaria managed to take its place among the most successful companies and built itself as a new modern company using sophisticated software systems, having a small and efficient team and applying its motto take your key in just a day. EuroLease Auto focuses predominantly on leasing of vehicles. Cooperation with dealers within the group of Avto Union and outside of it is constantly bringing new deals, which are increasing on a monthly basis. As a result, the company has created healthy portfolio of clients, mostly small and medium sized enterprises and private individuals, ensuring stable and predictable business flow. In 2007, EuroLease Group crossed the borders of Bulgaria and opened a new company in Romania. During the last three years the Romanian company remained relatively small, compared to EuroLease Auto Bulgaria. However, the growth potential of this company is considerable due to the large scale of the Romanian market and its underdeveloped state. EuroLease Auto Romania was created initially as U.N.T.R.R. Leasing to support the needs of the Romanian cargo carriers. The company did not achieve its goal and in 2006 it was acquired by Asitrans Leasing. The new goal of the company was to generate business for Asitrans Insurance, one of the biggest players on the Romanian insurance market. The first real leasing contract was signed by the company in September During 2007, according to the new local laws regarding the activities of non-banking financial institutions, the company started the process of obtaining an official license from the National Bank of Romania. The process ended in August 2007 by listing in National Bank of Romania records under the number RG-PJR / In the end of 2007, the company was acquired by EuroHold Bulgaria through a capital increase. In 2010, the company changed its main shareholder. The new major shareholder became BG AutoLease Group B.V. due to the new EuroHold holding structure, described above. During the period the company had to adjust several times its goals according to the economic growth and decline. The main targets remain maintaining the health of the portfolio and generating new long-term insurance premiums for EuroIns Romania. In 2008, EuroLease Group also entered the Macedonian leasing market through a start-up company. Although recently established, during its first year of operation it became one of the leading leasing companies in the small and very underdeveloped Macedonian market. EuroLease Auto Macedonia was registered in May 2008 and started operations at the end of There were only 5 leasing companies on the Macedonian market at that time (in the meantime MAK LEASE and TOTO Leasing are no longer operational)

118 Since then, the number of leasing companies has been increasing. Key players are Porsche Leasing, ELA MK, S Leasing, Leasing one, VBI bus leasing, Master Leasing, etc. Currently, the total number of leasing companies is 9 out of which 4 are bank-owned leasing companies: NLB, HYPO, EUROLIZING and S Leasing. During its short life EuroLease Auto Macedonia has established excellent business relations with car dealers in Skopje, offering clients full support from fast review of applications, car-registration and insurance. Full service with high quality at one place is something that the company will try to give its clients. Business activity The company operates in the light vehicles segment, characterized by lower risk and higher liquidity of the assets. Its scope of activities is to participate, to finance or to have any other interest in, or to conduct the management of other companies and enterprises; to furnish guarantees, provide security, warrant performance or in any other way assume liability, whether jointly and severally or otherwise, for obligations of group companies and third parties. The leasing activity of the company involves rental of vehicles, industrial equipment, real estate and others, mainly under finance lease contracts. Headquarters and address of management Currently the headquarters and registered office of BG AutoLease Holding B.V. is at 104EJ Amsterdam, 140 Teleport boulevard, the Netherlands. The official business address for correspondence is 1592 Sofia, 43 Christopher Columbus Blvd. The contact information of the company is: Business address: 1592 Sofia, 43 Christopher Columbus Blvd. Telephone Fax Site office@eurohold.bg Shareholders equity BG AutoLease Holding B.V. has been established for an unlimited term. Initially, the share capital of the Company was in the amount of 18,000, divided into 180 ordinary shares with a nominal value of 100 each. The authorized share capital of the Company was 90,000, divided into 900 ordinary shares with a nominal value of 100 each, before the in-kind contribution discussed below. On November 10, 2009 the sole shareholder of BG AutoLease Holding B.V. EuroHold Bulgaria AD increased the share capital of the Company by means of an in kind contribution of shares of its subsidiaries. The stakes of EuroHold Bulgaria AD in its three subsidiaries were contributed to the Company, specifically: 15,500,000 shares, with nominal value 1 each one, representing 100 % of the share capital of EuroLease Auto EAD, UIC , headquarters and address of management: 43 Christopher Columbus Blvd, Sofia, Bulgaria; 270,600 shares, with nominal value RON 10 each one, representing % of the share capital of EuroLease Auto IFN S. A., UIC , subsequent number at the Commercial Registry J40/ 12947/ 2004, headquarters and address of management 2 Daniel Danielopolu Str, sector 1, Bucharest, Romania; 118

119 2,000 shares, with nominal value 50 each one, representing 100 % of the share capital of EuroLease Auto Skopje, UIC , headquarters and address of management 1/1/2 Maxim Gorki Str., Skopje, Macedonia. On 17th of November 2009, the date of the contribution, the fair value of the in-kind contribution was 11,600,000. Therefore a decision of capital increase by issuance of shares has been voted by the sole shareholder EuroHold Bulgaria AD and as of November 30, 2009 the issued share capital of the Company amounts to 11,618,000, divided into 116,180 ordinary shares with a nominal value of 100 each. The authorized share capital of the Company is in the amount of 58,090,000, divided into 580,900 ordinary shares with a nominal value of 100 each. The issued share capital of BG AutoLease Holding B.V. is paid in full. On January 16, 2009 BG AutoLease Holding B.V. acquired its subsidiary BG AutoLease Group B.V. (formerly Doesign B.V.) - a private limited liability company (besloten vennootschap met beperkte aansprakelijkheid) set up and validly existing under the laws of the Netherlands, having its corporate seat at 1043EJ Amsterdam, Teleport boulevard 140, Commercial Registry number The scope of activity of BG AutoLease Group B.V. is identical to the scope of activity of its parent company. In 2011 BG AutoLease Holding B.V. s capital was increased by 205,000 through issuing new shares, subscribed and paid by EuroHold Bulgaria. As of the date of this Prospectus, the share capital of BG AutoLease Holding B.V. was 11,823,000, consisting of 118,230 ordinary shares with a nominal value of 100 each. All of BG AutoLease Holding s registered shares are fully paid up. Currently, a capital increase of the company by 1,710,000 is in process but it is not finalized. The following table outlines all changes in BG AutoLease Holding s issued share capital up to date: Date Description Total number of shares Share Capital Share capital increase 116,180 11,618, Share capital increase 118,230 11,823,000 in process Share capital increase 135,330 13,533,000 Source: EuroLease Group BG AutoLease Group B.V. As of the date of this Prospectus, the share capital of BG AutoLease Group B.V. was 11,806,000, consisting of 118,060 ordinary shares with a nominal value of 100 each. All of BG AutoLease Group s registered shares are fully paid up. Currently, a capital increase of the company by 1,710,000 is in process but is not finalized. In 2011 BG AutoLease Group B.V. s capital was increased by 205,000 through issuing new shares, subscribed and paid for by BG AutoLease Holding B.V. The following table outlines all changes in BG AutoLease Group s issued share capital up to date: Date Description Total number of shares Share Capital Share capital increase 116,180 11,618, Share capital increase 118,060 11,806,000 in process Share capital increase 135,160 13,516,000 Source: EuroLease Group EuroLease Auto Bulgaria The company has been established for an unlimited term, with initial share capital of BGN 600,000, divided into 600,000 ordinary registered shares with a nominal value of BGN 1 each. The initial shareholders were EuroHold Bulgaria AD (successor of Starcom Holding) 540,000 shares and EuroIns Bulgaria AD 60,000 shares

120 A capital increase of the company to BGN 1,500,000 was registered with a court decision 11 as of 4th of October A new capital increase from BGN 1,500,000 to BGN 4,500,000 through issuing 3,000,000 new registered ordinary materialized shares with voting rights and a nominal value of BGN 1 each was registered with a court decision 15 as of 4th of May The capital is divided into 4,500,000 shares with a nominal value of BGN 1 each. On July 18, 2007 an extraordinary General Meeting of the Shareholders of EuroLease Auto AD was held, which decided to increase the capital of the company with the retained earnings in 2006 from BGN 4,500,000 to BGN 4,867,200 through issuing 367,200 new indivisible registered ordinary materialized shares with voting rights and a nominal value of BGN 1 each. The general shareholder meeting of EuroLease Auto AD on September 5, 2007 decided to increase the company s capital from BGN 4,867,200 to BGN 9,000,000 through issuing 4,132,800 new indivisible registered ordinary materialized shares with voting rights and a nominal value of BGN 1 each. During the ordinary General Meeting of Shareholders, held on May 30, 2008, it was decided to increase the capital of the company through the funds from the retained earnings in The increase amounts to BGN 1,444,195 through issuing 1,444,195 new indivisible registered ordinary materialized shares with voting rights and a nominal value of BGN 1 each. The general meeting of shareholders of EuroLease Auto AD held on September 19, 2008 decided to increase the capital of the company from BGN 10,444,195 to BGN 15,500,000 through issuing 5,055,805 new indivisible registered ordinary materialized shares with voting rights and a nominal value of BGN 1 each. On March 27, 2009 Thames Capital Partners Limited, London sold its % share in EuroLease Auto EAD to EuroHold Bulgaria AD. EuroHold Bulgaria AD became the sole shareholder. On November 30, 2009 according to the decision of the general meeting of shareholders of EuroHold Bulgaria AD, an Act was signed for the issuance of 15,500,000 shares from the capital of BG AutoLease Holding B.V. listed in the Commercial Registry of the Netherlands under number through an in-kind contribution. As of November 30, 2009 BG AutoLease Group B.V. is the sole shareholder of EuroLease Auto EAD. As of September 19, 2011 the subscribed capital of the company is fully paid up. June 30, 2011 December 31, 2010 Number of shares % Number of shares % BG AutoLease Group B.V. 15,500, ,500, Total 15,500, ,500, Source: EuroLease Group Since August 31, 2011 the capital of EuroLease Auto EAD amounts to BGN 20,000,000. The retained earnings in 2008, 2009 and part of 2010 are used for the capital increase. The rest of the retained earnings in 2010 are transferred to the reserves of the company. The following table outlines all changes in EuroLease Auto Bulgaria s issued share capital up to date: Date Description Total number of shares Share Capital Share capital increase 1,500,000 1,500,000 BGL Share capital increase 4,500,000 4,500,000 BGL Share capital increase 4,867,200 4,867,200 BGL Share capital increase 9,000,000 9,000,000 BGL Share capital increase 10,444,195 10,444,195 BGL Share capital increase 15,500,000 15,500,000 BGL Share capital increase 20,000,000 20,000,000 BGL Source: EuroLease Group 120

121 EuroLease Auto Romania As of the date of this Prospectus, the share capital of EuroLease Auto Romania was RON 4,508,500, consisting of 450,850 ordinary shares with a nominal value of RON 10 each. All of EuroLease Auto Romania s registered shares are fully paid up. On EuroHold Bulgaria AD acquired 108,000 shares of EuroLease Auto Romania representing 51 % of the capital. In 2008 EuroLease Auto Romania s capital was increased by RON 2,756,500 through the issuance of new shares, partially subscribed and paid for by EuroHold Bulgaria. After the capital increase EuroHold Bulgaria s stake was increased to %. In 2011 the company s capital was increased by RON 672,000 through issuance of new shares, partially subscribed and paid by BG AutoLease Group B.V. After this capital increase EuroHold Bulgaria s stake was increased to %. The following table outlines all changes in EuroLease Auto Romania s issued share capital up to date: Date Description Total number of shares Share Capital Share capital increase 383,650 3,836,500 RON Share capital increase 450,850 4,508,500 RON Source: EuroLease Group EuroLease Auto Macedonia As of the date of this Prospectus, the share capital of EuroLease Auto Macedonia was 299,891, consisting of 229,891 ordinary shares with a nominal value of 1 each. All of EuroLease Auto Macedonia s registered shares are fully paid up. On EuroHold Bulgaria AD registered EuroLease Auto Romania with 1,000 shares with par value of one share of 50. In 2009 EuroLease Auto Macedonia s capital was increased by 50,000 through issuing new shares, subscribed and paid by EuroHold Bulgaria. In 2011 the company s capital was increased by 149,891 through issuing new shares, subscribed and paid by BG AutoLease Group B.V. The par value of one share was decreased to 1. In 2011 the company s capital was again increased by 50,000 through issuing new shares, subscribed and paid for by BG AutoLease Group B.V. The following table outlines all changes in EuroLease Auto Macedonia s issued share capital up to date: Date Description Total number of shares Share Capital Share capital increase 2, , Share capital increase and decrease of the par value of one share 249, , Share capital increase 299, ,891 Source: EuroLease Group Main scope of business EuroLease Group is a leasing company offering financial leasing to small and medium sized enterprises and private individuals. The company operates in the light vehicles segment, characterized by lower risk and higher liquidity of the assets. EuroLease Auto Bulgaria is the oldest (established in 2004) and most developed company of the three leasing subsidiaries. It is the fastest developing non-bank affiliated leasing company in the country and in H the company ranked seventh in terms of newly generated financial leasing business. The Romanian and Macedonian companies are still relatively small, but poised to grow significantly over the medium term. The Group achieved net result of BGN 219 thousand in 2010, generated by more than 4,000 clients in the three countries, more than 6,500 leased assets and portfolio of BGN 110 million. As of EuroLease Group has direct ownership in one subsidiary and indirect ownership in five subsidiaries. The companies from the group operate in the financial leasing sector

122 Competitive advantages EuroLease Group has several competitive advantages compared to its competitors that drive the company s future growth and success: Comprehensive service offering (financing, vehicle registration, insurance, etc.); Flexibility and innovative products, that can meet client expectations; High quality and quick service; Synergies between EuroLease Auto and the other companies from EuroHold s structure. Main objectives EuroLease Group aspires to become one of the leading leasing providers in all its countries of operation through building strong and sustainable brand awareness, enhance its reputation as an innovative and flexible partner to a diverse pool of clients and continuously offer new, client-specific products and services in cooperation with EuroHold s insurance and car dealership businesses. The mission of EuroLease Group is to provide high quality, wide-ranging services and to offer individual solutions to every client. The company is aiming to offer well-balanced mix of quality products and services at competitive price, as well as offering more innovative products delivered in cooperation with Avto Union and EuroIns Insurance Group. Mid-term objectives and strategies ELG s philosophy is based on the following principles: Offering fast and flexible approval of client applications (being one of the biggest advantages over bank-owned leasing companies); Simplicity in dealing with dealers, easy document processing, payment and registration of vehicles; Offering a well-balanced product package (insurance, registration, extended warranty, etc.) and thus better responding to the customer needs; Working closely with EuroIns Insurance Group and Avto Union (only in Bulgaria for the moment) and benefiting from combinations of products that could be offered together. Based on these general principles ELG has developed its specific strategy for each market on which it currently operates. Bulgarian leasing market The strategy for this market is to grow organically based on the good operating practices and know-how obtained until the moment, the newly developed tailored-made operating software, the secured financing of the operations, and the highly motivated and experienced management team of the company. The aim is the company to be perceived as innovative, flexible and customer oriented. The most important goal of the company is to remain a top industry player in terms of new leasing business of cars and light commercial vehicles. This is to be achieved by: Capturing 75% of all car-sales in Avto Union dealerships; Continuing and further developing the cooperation with external dealers offering mid-range carbrands; Distinctive products for each brand tailored to its specific characteristics; Expanding the office network in the country in conjunction with the recovery of the car market; Continuing improvements in the software, adding new solutions allowing more flexibility in the repayment plans, in the credit risk management and the back office procedures; Further optimization of the operations of the sale force in the car dealers, achieving more efficient operations of the front office and better invoice control

123 Legal framework of lease activities in Bulgaria Leasing companies in Bulgaria are non-banking financial institutions as defined in the Credit Institutions Act. Leasing companies need to comply with a number of mandatory requirements and to be registered in a public registry administered by the National Bank of Bulgaria, Leasing companies need to have at any time a registered and effectively paid-in share capital in the amount of at least BGN The managers of these companies have to meet certain requirements in respect of qualification, professional experience and good reputation. The registration certificates are issued by the National Bank of Bulgaria which is entitled to refuse registration in certain cases provided by law. There are certain requirements to the business activities of leasing companies acting as non-banking financial institutions. The volume of the core activity related to financial lease calculated on the basis of the net incomes from sales should be at least 50 per cent from the overall business activities of the company according to its financial statements. Leasing companies should adopt and comply with internal rules for their activities which are in conformity with the consumer protection requirements and laws. They are subject to liabilities under the Measures against Money Laundering Act and adopt and comply with internal rules concerning the measures against money laundering and funding of terrorism. The National Bank of Bulgaria is authorized to remove a leasing company from the registry of nonbanking financial institutions under certain conditions, including in case of non-observance of mandatory requirements to business activities. The National Bank of Bulgaria exercises regulatory control on compliance with the aforesaid legal framework. The Commission for the Protection of Consumers also exercises control within its specific scope of authority. Romanian leasing market The current operations of EuroLease Group in Romania are relatively small due to the limited access to clients and lack of steady financing. Thus the Group s strategy for this market is to: Secure better and long-term financing, which will allow it to offer new products (similar to those offered already in Bulgaria) and will ensure the sustainable growth of the company; Further develop the management team, which will have to create stable relations and to develop the business cooperation with dealers; Start implementing extensively the know-how and operating efficiencies successfully developed in Bulgaria; Acquire sizable existing leasing portfolios. Legal framework of legal activities in Romania Leasing companies in Romania are also classified as non-banking financial institutions in the meaning of Ordinance No 20 of 13 October 2009 issued by the National Bank of Romania to ensure implementation of Law No 93 of 2009 on the Non-banking Financial Institutions. The registration of leasing companies with an official registry is within the powers of the National Bank of Romania following a check of certain qualification requirements. Leasing companies in Romania need to possess at any time a registered and effectively paid-in capital in the amount of EUR or an equivalent amount in national currency. There are also requirements to the management team which are similar to those in force in Bulgaria. It s obligatory to form an audit committee of at least two members who are elected directly by the General Meeting of the Shareholders. The legislation lays down the contents of the mandatory internal rules concerning the internal control, the risk management, the measures against money laundering, as well as the requirements to the software systems in order to facilitate submission of the requisite reporting forms to the controlling state authority. Ordinance No 20 of 13 October 2009 regulates in details the rules for calculation of the equity capital of leasing companies in compliance with the generally accepted accounting principles. There are also mandatory provisions in respect of the large exposures. The National Bank of Romania exercises control on the observance of the outlined legal framework

124 Macedonian leasing market Macedonia is a small and rather underdeveloped market, where leasing is just becoming a major source for financing of car purchases. The current strategy for Macedonia is to: Continue to increase the existing leasing portfolio and gain higher market share; Improve interest rate conditions on funding, allowing the company to become more competitive and profitable; Expand cooperation with local car dealers enabling the company to offer more flexible and customer specific products; Continue to give clients fast and quality service in information, registration and insurance of the vehicles. Legal framework of legal activities in Macedonia (FYROM) According to the laws of Macedonia the leasing business is subject to regulatory approval. Licenses are granted by the Minister of Finance. Macedonian legislation provides for maintenance of a minimal effectively paid-in capital in the amount of EUR In the course of the license procedure the applicant for license business presents standard documentation so as to identify the main shareholders and their financial stability, to provide information about the members of the management board and their professional qualifications and to furnish certain internal documents in connection with the procedures for approval of lessees, the measures against money laundering, personal data protection. In the course of leasing business the regulatory authority monitors the compliance with the fundamental capital requirements. The aggregate amount of the receivables under the lease agreements may not exceed the amount of the sum of the registered capital and the allocated reserves. The financial standing of the leasing companies is subject to control by means of submission of periodical breakdown forms of the lease portfolio and standard audited financial statements. The Minister of Finance exercises control on the observance of the outlined legal framework. c. Avto Union AD - Avto Union AD is a holding which aggregates EuroHold Bulgaria s investments in the automobile business. Avto Union sells 11 car brands in Bulgaria. Avto Union also has franchise contracts for the brands AVIS and Budget

125 Source: Avto Union The automobile companies part of the Avto Union structure are: Auto Italia official importer of Fiat and Lancia for Bulgaria; Bulvaria Holding dealer of Opel and Chevrolet for Sofia; Bulvaria Varna dealer of Opel and Chevrolet for Varna; Gransport Auto official importer of Maserati for Bulgaria; Milano Motors official importer of Alfa Romeo and scooters Piaggio, Vespa и Gilera; Star Motors official representative of Mazda for Bulgaria; Scandinavia Motors official importer of SAAB for Bulgaria; Nissan Sofia biggest dealer of Renault Nissan in Bulgaria; EuroLease Rent-a-car franchise partner of Budget and Avis for Bulgaria; Espace Auto biggest dealer of Renault and Dacia in Bulgaria; operates the largest repair shop in the structure repair shop Perfect ; Auto Plaza sale of used cars; Auto 1 sale of spare parts; Eurotruck sale ot trucks; Ita Leasing subsidiary of Auto Italia; Cargoexpress Imoti subsidiary of Bulvaria Varna. For every model that is sold by Avto Union customers can test drive the vehicle. Also assistance is provided with the registration of every newly bought vehicle. Customers can use the following additional services: 5 years of Extended warranty extends the warranty by 1 or 2 years according to customers preferences; covers mileage of up to km; 125

126 Substitute vehicle in case of car accident or damage; Internal and external car wash, etc.; Warranty and after warranty service; Vehicle buyback. Products Extended warranty and Substitute vehicle are provided through EuroIns AD. Customers who want to use these services need only to pay additional premium to their car s insurance. One of Avto Union main activities is warranty and after warranty service. Avto Union owns multiple repair shops. The car repair business is not a cyclic business which somewhat compensates for the lower car sales in the last 2 years. The other main business line of Avto Union is rent a car service, used under long-term contracts by corporate customers and short-term basis by travelers. Avto Union s rent-a-car offices of Avis and Budget are located nearby key places such as airports and resorts. Avto Union s main competitors have different business model which provides only part of the services that Avto Union has. The largest competitors with similar business models appear to be: Toyota Balkans AD (Toyota and Lexus), Moto-Pfohe (Ford, Volvo Jaguar and Land Rover), and Porsche Bulgaria (Volkswagen and Audi). The only company that comes close to Avto Union s business model and sells more than one not related to each other car brands is Balkan Star AD. Balkan Star sells: Mercedes, Mitsubishi, Chrysler, Dodge, Jeep and in the same time is a dealer for Renault and Dacia. However Balkan Star has a smaller market share than Avto Union around 5%. One of the main advantages of Avto Union compared to its competitors is the broad number of brands sold under the slogan All you need for your car automobile, insurance and leasing. One of the main advantages of Eurohold Bulgaria AD, strongly presented on Bulgarian market is the tight cooperation between its divisions generating increasing and stable source of income. As consequence of integration of its three business lines insurance, leasing and car sales, Eurohold Bulgaria AD realizes significant synergy. EuroHold AD strategy is to increase the market shares of its subsidiaries by bringing new cross sales products with added value. This is just the opposite to what competitors are doing by trying to provide services at lower prices. Providing several services as a package greatly reduces costs for advertising and marketing. Services that complement each other give greater opportunities for quick market expansion. Internal business model is based on the concept that every business line should achieve its own profitability, optimize costs and serve as a referral source for other business lines. Potential for development and driving forces: The expectations for the future development of the car market in Bulgaria are based on the projections for the recovering of the local economy as the first signs for the improvement are already present. This will be followed by swift recovery in all business sectors in the next years, which will inevitably lead to more fleet deals and recovery of the sales to corporate clients. Additionally, the recovery of the economic conditions and the improvement of the business environment in the country will result in higher employment rate and higher disposable income. Also, financing will become readily available, which will further stimulate sales. Another important factor that will contribute to the growth of the new car market in Bulgaria is the currently very amortized national car park. More than 85% of the cars are over 10 years old and more than 20% are above 20 years old. Thus, there is huge room for renewal of the car park. Key success factors: Diversified product portfolio with a wide range of brands offered (11 car brands, 3 moped, and 2 rent-a-car brands) Avto Union covers all segments of the car market in Bulgaria, offering adequate solutions to both its corporate and individual customers; diversification in brand ownership also prevents the group from being vulnerable to force majeure situations that might hit certain brands (e.g. 2009/2010 Toyota global crisis ); Operational leasing and fleet management with Avis and Budget operating as operational leasing and fleet management companies for corporate customers, Avto Union enhances its portfolio with services in addition to just vehicle sales; 126

127 Joint products the strong relations with EuroIns and EuroLease Auto, allows Avto Union to offer an exclusive and unmatched packaged product to its customers (e.g. Casco 4x4 insurance, Mazda Cash Leasing, etc.); Optimized group spending shared budgets for multi-brand purposes like marketing research, group purchase of advertising space/airing time, etc.; Drastic reduction in annual CapEx by integrating the short-term fleets of AVIS and Budget which share a smaller fleet and achieve higher utilization rates of fleet vehicles. History Avto Union is a holding company and was incorporated in compliance with the Bulgarian legislation under UIC Currently its headquarters and registered office is at 43 Christopher Columbus, Sofia 1592, Bulgaria. The company s share capital is BGN 22,971,500. Avto Union was established in January 2005 with core business areas: strategic management of the companies in the structure of the holding providing financial, marketing and business-specific resources. In June 2009 EuroHold Bulgaria acquired indirect stake of 100% in Avto Union. Before that Avto Union Group (with an initial name Kargomotors) was the holding entity, consolidating EuroHold s investments in the automotive sector. The Company was established in March In 2007 the name of the company was Kargomotors and in 2008 it was renamed to EuroHold Automotive Group and in 2009 to Avto Union Group EAD. At the end of 2010 EuroHold Bulgaria made changes in the automotive business. The aim was to optimize the operations in the automotive field especially in terms of more efficient cash management, optimizing the structure of borrowings of automotive companies, optimizing the cost of administration, management, and other external services. At the end of 2010 EuroHold Bulgaria decided all companies operating in the automotive field to be consolidated by Avto Union. Therefore, Avto Union Group sold all of its subsidiaries to Avto Union, which currently is directly owned by EuroHold Bulgaria. After the transformation of Avto Union, the new mega-structure became one of the largest car retail structures in Bulgaria with more than 12% market share for the first six (6) months of The change aimed to centralize management of the Company and to provide easier access to financial resources. Scope of business Main business lines of Avto Union are: Sale of new cars, motorcycles and scooters; Sale of original spare parts and accessories; Rent-a-car (long and short-term); Car buy-backs; Leasing services (together with EuroLease Group); Insurance services (together with EuroIns Insurance Group). Headquarters and address of management The headquarters and the address of management of the company is Republic of Bulgaria, 1592 Sofia, 43 Christopher Columbus Blvd. This is the official business address for correspondence with the company. Contact information of the company is: Business address: 1592 Sofia, 43 Christopher Columbus Blvd. Telephone Fax

128 Site Share capital As of the date of this Prospectus the share capital of the company is in the amount of BGN 22,971,500 divided into 45,943 ordinary registered dematerialized shares with voting rights and a nominal value of BGN 500 each. In June 2009 EuroHold Bulgaria acquired 100% of the capital of the two previous shareholders of Avto Union Kamalia Trading Ltd. and Avto Union Holding BVI. In June 2010 the capital of Avto Union was increased by an in-kind contribution by Kamalia Trading Ltd. in the amount of BGN 2,563,000. The inkind contribution was receivables of Kamalia Trading Ltd. from Avto Union in the amount of BGN 2,563,000 arising from a shareholder loan contract. The share capital was BGN 22,121,500, consisting of 44,243 ordinary registered shares with voting right and a par value of BGN 500 each. In December 2010 both Kamalia Trading Ltd. and Avto Union Holding BVI transferred 100% of their shares in Avto Union in the following way: 44,236 shares to EuroHold Bulgaria and 7 shares to Mr. Kiril Boshov. In July 2011 the share capital of Avto Union was increased by BGN 850,000, subscribed and paid by EuroHold Bulgaria. The following table outlines all changes in Avto Union s issued share capital: Date Description Total number of shares Share Capital Share capital increase 44,243 BGN 22,121, Share capital increase 45,943 BGN 22,971,500 Source: Avto Union Main scope of business AU is the market leader in sales of new cars in Bulgaria. The new car market has been increasing significantly during the last decade and only because of the financial crisis and the corresponding freeze in the credit markets, there was a dramatic drop in sales in 2009 and Yet fundamentally, the automotive business has huge growth potential. The average age of the fleet in Bulgaria is over 16 years and requires gradual renewal in the next years. The revival of the economy will further boost sales and will increase demand for both cars and related services. 100% Age distribution of car fleet in EU and Bulgaria units 800,000 Average age of Bulgarian car park % 35% 80% 700, ,000 30% 25% 60% 40% 500, , ,000 20% 15% 20% 200,000 10% 0% Bulgaria CEE EU-core 0-5 years 6-10 years 10 + years 100, years 6-10 years years number of cars years % of all cars over 20 years 5% 0% Source: The European Automobile Manufacturing, Ministry of Interior AU manages the largest portfolio of car brands in Bulgaria. The unique multi-brand strategy is supported by constant improvements of the facilities, quality of the products and services, education of the employees and new packages of products in combination with leasing and insurance

129 Main business lines of AU are: Sale of new cars, motorcycles and scooters; Sale of original spare parts and accessories; Rent-a-car (long and short-term); Car buy-backs; Leasing services (together with EuroLease Group); Insurance services (together with EuroIns Insurance Group). As of September 19, 2011 Avto Union owns a direct stake with control of 14 subsidiaries: Auto Italia 100%; Milano Motors 100%; Star Motors 100%; Gransport Auto 100%; Bulvaria Holding- 100%; Avto Union Properties 100%; Autoplaza 100%; Espace Auto 100%; Scandinavia Motors 100%; Nissan Sofia 100%; Bulvaria Varna 100%; EuroLease Rent-A-Car 100%; Eurotruck 100%; Auto 1 51%. In addition, as of the date of the Prospectus Avto Union owns indirect control stake on two subsidiaries: Ita Leasing EOOD 100% through Auto Italia EAD; Cargoexpress Imoti EAD 100% through Bulvaria Varna EOOD. Parent company Avto Union has a stake in one associated company Motobul EOOD with stake of 49%. Avto Union, through its subsidiaries, is: An exclusive importer for Bulgaria of the following brands: Mazda, FIAT, Lancia, Alfa Romeo, Maserati, SAAB, and Vespa, Piaggio and Gilera scooters; An authorized dealer of Opel, Nissan, Renault, Dacia and Chevrolet; An exclusive franchisee of Budget Rent-a-Car and Avis Rent-a-Car for Bulgaria. To ensure its everyday operations, the member companies of AU have entered into two (2) types of trade contractual relations: sales contracts, which allow the companies to sell certain brands; after-sales (AFS) contracts, which allow servicing and maintenance of vehicles already sold. Sales contracts are split in also two (2) types. The first one is a distribution contract (or official brand representation in the country), which grants the rights to market the brand, develop dealership networks, implement marketing campaigns and activities, define pricing, trade conditions, and act as an ambassador for the brand. The second type is the dealership agreement, which empowers the company to sell and service certain brands, imported officially through an independent representative office. The former type of agreements of AU are those with Fiat, Lancia, Alfa Romeo, Mazda, SAAB, Maserati, Piaggio, Vespa, and Gilera, while the latter apply to Opel, Chevrolet, Renault, Nissan, and Dacia. In this second instance AU is bound to accept the pricing and marketing policies of the local brand representatives General Motors Bulgaria and Renault-Nissan-Dacia Bulgaria. AU has recently renewed all contracts with the aforementioned car producers and representatives to secure the future development of its multi-brand business model

130 Avto Union is in the process of acquiring of Daru Car AD which is an official dealer of the brand Mahindra and BMW. A preliminary binding agreement for purchase is signed, which is expected to be approved from Commission on Protection of Competition. Plans are Daru Car AD to continue to be an authorized dealer of the aforementioned brands. As of Daru Car owns land plots and buildings with balance sheet value of BGN thousand. Daru Car was the first ever dealer of new BMW cars in Bulgaria. From to 1992 to 2003 the company was an official representative of the brand and then a dealer. Between 1994 and 2004 the company also sold new cars such as Rover and Land Rover. Daru Car owns an authorized automobile repair shop for repairing BMW, Mini and Mahindra and a showroom in Drujba district, Sofia. This is also the place where Rover and Land Rover are serviced. Daru Car also sells original automobile parts for these brands. Since March 2008 Daru car has been the official representative of the Indian brand Mahindra in Bulgaria. Between 2006 and 2008 the company sold motorbikes Moto Guzzi, Husqvarna, Cagiva, Augusta and small trucks Multicar. Competitive advantages The main advantage of Avto Union is its diversified portfolio of car brands which makes it possible to be competitive in big corporate and public tenders as well as to attract retail customers. Optimized fixed costs closure of inefficient premises, as well as relocation of showrooms to EuroHold s HQ in Sofia, aggregating and concentrating showrooms in Sofia. This effort has materially lowered rental expenses; New locations were opened during 2009 a new showroom and service centre for Renault, Nissan, and Dacia in Veliko Tarnovo; an additional service centre for Nissan Sofia, additional showroom and service centre for Fiat in Sofia (western part); Introduction of new improved warranty conditions (5 years for Mazda and 3 years for Fiat), which will further boost the brands image and increase the number of serviced vehicles with 20-25%, therefore significantly increasing after-sales revenues; Completed restructuring and consolidation of AU: Headcount has been reduced and optimized to reflect market conditions and cars sales expectations and projected after-sales workload. All supplies and services procurement, advertising, etc. have been centralized achieving significant cost reductions. New professionals (marketing, after sales, etc.) have joined AUG. All relevant top talent within AU was retained after the merger; New cross-company product launches, together with EuroIns and EuroLease AutoCard (saving money to loyal customers on insurance, fuel, and repairs), fixed rate 4-year Auto-Casco insurance, Mazda Cash Leasing (when buying a new car from AU); Secured financing for EuroLease new funding commitments signed with EBRD and other leading Bulgarian banks (including UniCredit), which in turn finances car purchases from Avto Union dealerships; Contracted new large fleet deals for operational leasing with Avis and Budget, which indicates recovery of the corporate market some of the largest key-account customers will continue to renew their car fleets (Coca-Cola, Zagorka, Kamenitza, Nestle, etc.); The joint operation and integration of Avis and Budget has led to an integration of the car fleet of both companies and reducing the total number of cars needed by around 110 vehicles for airport rental (short-term). Additionally, the front-office rented premises were reduced almost in half by joining the two brands together. Main objectives The vision of AU is based on the following key drivers: To extend its portfolio of products in the mid-segment cars - the main reasons are the easier access to fleet deals, quality leasing clients with lower rates of delinquencies and low theft ratio helping to keep insurance profitability; Offer a great variety of brands and models in order to achieve high customer satisfaction and create a new business model offering a car mall environment with multiple brands under the same roof; 130

131 To achieve market recognition and popularity of its products and services as well as its skilled sales and repair professionals; To constantly improve the quality of services by creating new competitive products and customized solutions to clients. AU was built over the years as stand-alone growth platform that supports the growth of the leasing and insurance businesses of EuroHold. The car showrooms are a very important channel for selling additional services like leasing and insurance, especially effective when offering a one-stop-shop package of products and services. Consumers trust the car sellers and usually accept the whole range of products and services offered and recommended by them. The incremental accumulation of critical mass over the last five years culminated with the acquisition of Avto Union which helped establish the largest and most diversified car-sales and servicing structure in Bulgaria. Mid-term objectives and strategies AU is the undisputed market leader in sales of new cars in Bulgaria. The new car market has been increasing significantly during the last decade and only because of the financial crisis and the corresponding freeze in the credit markets, there was a dramatic drop in sales in 2009 and Yet fundamentally, the automotive business has huge growth potential. The average age of the fleet in Bulgaria is over 16 years and requires gradual renewal in the next years. The revival of the economy will further boost sales and will increase demand for both cars and related services. AU manages the largest portfolio of car brands in Bulgaria. The unique multi-brand strategy is supported by constant improvements of the facilities, quality of the products and services, education of the employees and new packages of products in combination with leasing and insurance. Legal Framework of new car sales, service activities and sales of original spare parts The activities concerning new car sales, service and sale of original spare parts are performed in compliance with Commission Regulation (EU) No 330/2010 of 20 April 2010 on the Application of Article 101 (3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices, Commission Regulation (EU) No 461/2010 of 27 May 2010 on the Application of Article 101 (3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices in the sector of the motor vehicles, and Commission Regulation (EU) No 1400/2002 of 31 July 2002 on the Application of Article 101 (3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices in the sector of the motor vehicles. The aforesaid legal documents are part of the national law and regulate the rights and obligations of the companies from the automotive sub-holding of the Issuer in respect of observance the fair competition rules. Being parties to authorized new car dealer agreements signed with dealers acting on the territory of the Republic of Bulgaria, the companies from the automotive sub-holding are bound to make the clauses in the dealer agreements consistent with the conditions for the block exemption of these vertical agreements so that they comply with the requirements of art. 101, 3 of the Treaty on the Functioning of the European Union. This legal framework aims at elimination of the negative anti-competition consequences of given restrictions which are contained in the vertical agreements. These negative consequences may be minimized at the expense of increased economic efficiency of the distribution network by means of optimization of the sales and investments, the decrease of some transactional costs and other economic effects. The block exemption under the previous paragraph is applied to vertical agreements signed by the companies from the automotive sub-holding and authorized service centers for guarantee service and sale of original spare parts. The administrative control on the observance of the aforesaid framework on a national level is within the powers of the Competition Protection Commission in the Republic of Bulgaria. In the course of business the companies from the automotive sub-holding of the Issuer do not need a license or an approval by a state regulator. In the field of ecological law they act in accordance with the permit for performance of activities related to deactivation of waste products which are discharged during the service works on cars within the guarantee period and they abide by adopted programs for management of processing of waste products and by all necessary permits in line with the Waste Management Act in force on the territory of the Republic of Bulgaria

132 The administrative control on the observance of the Waste Management Act on a national level is within the powers of the Minister of Environment and Water and the directors of the regional inspectorates for the environment and water, respectively. d. Euro-Finance AD - Euro-Finance is part of the strategic portfolio of Eurohold Bulgaria since Euro-Finance is one of the first licensed investment intermediaries in Republic of Bulgaria with almost 18 years of history. The company is the only local member of the Deutsche Börse Group and through its network and longstanding relations with international broker-dealers offers a wide range of investment products equity trading, fixed income trading, derivatives trading, foreign exchange trading, contracts for differences (CFDs), REPOs, domestic and international SWIFT payments. Euro-Finance is a leading nonbanking financial institution in Bulgaria which aims to provide quality investment products and services with an individual approach to each customer. Euro-Finance provides investment and financial services to individuals, corporate and institutional clients. Among the clients of Euro-Finance are leading insurance companies in the country, pension funds, foreign investment funds, etc. Euro-Finance is a member of the Bulgarian Stock Exchange Sofia AD since its establishment and is also the first and only Bulgarian investment intermediary that is a full member of Frankfurt Stock Exchange, as well as the only nonbank financial intermediary that is participant in the international payment system S.W.I.F.T. Currently, 76 investment intermediaries operate on the Bulgarian market, including 25 banks and the rest 51 are nonbanking financial institutions. The main advantages of Euro-Finance are related to its full license and the ability to provide the full range of investment services and activities within the united European capital market and are also related to its long experience on the local capital market and highly qualified staff. Key success factors: Full license for offering the complete range of financial products existing in the financial markets of the EU; 17 years of experience on the financial markets; Highly qualified management and operational personnel brokers and investment consultants licensed by the FSC, BSE and FSE; Access to every important international securities market; The only Bulgarian financial institution member of the FSE; The only Bulgarian non-bank financial institution SWIFT participant; Among the three non-bank financial institutions participants in ESROT (Electronic System for Registration and Servicing of Trade in Government Securities); Advanced software systems applied; High capitalization, acting as a guarantee in periods of economic downturns. Company profile history, ownership, company s legal form, competitive advantages History Euro-Finance Ltd. (Euro-Finance) is an investment intermediary based in Sofia, Bulgaria. Established in 1993 as a joint-venture between the biggest Bulgarian bank Bulbank and IC Orel, Euro- Finance became in shortly a well-known company on the Bulgarian financial market. A year later Euro- Finance was approved by Ministry of Finance and Bulgarian National Bank (BNB) as primary dealer of government securities. Since the establishment of Bulgarian Stock Exchange-Sofia (BSE) and Bulgarian Central Depository (CD) in 1997, Euro-Finance became a shareholder and a member of the two institutions. In 1999 Euro

133 finance Ltd. was granted a license for performing activities as an investment intermediary abroad, which brought new perspectives to the future development of the company. In 2001 Euro-Finance launched its first in-house developed software products - Eurosys - operational software intended especially for financial companies investment intermediaries and asset management companies. In 2005 Euro-Finance launched the first on-line platform for trading on the BSE - EFOCS (Euro-Finance On-line Customer Service). In 2004 Euro-Finance became SWIFT participant (EUFCBGSF) In 2006 Euro-Finance became a co-founder of SENTINEL an asset management company. On 23 rd of July, 2009 Euro-Finance became the first Bulgarian investment intermediary, member of the Frankfurt Stock Exchange (FSE). A month later all the stocks traded on FSE became available for investors trading through the on-line platform EFOCS. In September 2011 Euro-Finance launched the platform for trading on the international financial markets MetaTrader 5. Currently, Euro-Finance is the only investment intermediary in the country that provide this latest version of one the popular platforms for trading. Euro-Finance is a co-founder of the Bulgarian Association of the Licensed Investment Intermediaries (BALIP) and of the ICC-Bulgaria (The National Committee of the International Chamber of Commerce). Ownership Euro-Finance is a part of EuroHold Bulgaria AD. Eurohold Bulgaria AD owns 99.99% of Euro-Finance. Euro-Finance in turn owns 100% of Eurosys EOOD. As a member of EuroHold, Euro-Finance serves the group in the field of brokerage, asset management and financing by public and private offerings of securities. Company s legal form Euro-Finance is a Private Stock Company. Product/service being offered Transactions in securities on local and international markets Transactions in government securities Portfolio management Investment banking and research Foreign exchange transactions As an investment intermediary dealing with financial instruments for own and for clients account, Euro- Finance is strictly regulated by the Bulgarian Financial Supervision Commission (FCS) and complies with recent MiFID regulations. The operations with government securities and foreign exchange transactions of Euro-Finance are authorized/licensed by the Bulgarian National Bank (BNB) and Ministry of Finance (MinFin). The goal of Euro-Finance is to cover the complete range of investment services and activities and to provide opportunities for investments in the capital markets of Bulgaria and abroad. Company s product portfolio includes: Brokerage services, including transactions in stocks, debt securities and money market transactions. Euro-Finance is member of the Bulgarian Stock Exchange and executes orders for buying/selling securities in real time. Euro-Finance acts on OTC market as a broker for securities transactions of companies that are not listed on the BSE. Euro-Finance Ltd. offers excellent terms for stocks and bonds transactions on the international markets. In 2009 Euro-Finance obtained a direct access to FSE

134 The company operates with extended working time covering all basic European and US markets. Through company s on-line trading platform EFOCS the company provides simultaneous, real-time access to the variety of financial instruments trading on the BSE, forex, CFD s. It offers also real-time integrated statement of accounts, withdrawing of fund (wire transfers), etc. Euro-Finance acts as a broker for buying/selling Government securities of all issues. The company buys/sells Government securities for/from its own portfolio and executes market orders for buying/selling Government securities of issues traded on the BSE. Euro-Finance offers deposits, repo-agreements, swap transactions and other instruments, according to the specific requirements of the customers. The global financial turmoil led to restructuring of investment portfolios, mirrored by the considerable transfer of funds from riskier assets to investments with low risk profile. Euro-Finance offers the following forex transactions - cash transactions - buying, selling and arbitrage of foreign exchange in the company's office; account transactions company operates with all major currencies and the company's exchange rates are based on the local interbank market and the international forex markets, hedging operations by forex arbitrage, swap and forward transactions; margin trade - transactions are executed in real time on the international forex markets. Portfolio management Euro-Finance offers management of financial assets without the special instructions of the customer. The company offers three types of individual investment portfolios - conservative, balanced and aggressive, that differ on their risk characteristics and assets structure. Investment banking Since 2003 investment banking activities have became quite popular, boosted by the rapid development of Bulgarian capital market. Stocks attracted a huge amount of the free funds, generated by the robust economic growth. Euro-Finance performs the following services: Management and placement (public offering) of stocks Management, underwriting and placement (public/private offering) of debt instruments Management and placement of derivative securities. Tender offers for purchasing of securities Preparing of prospectus for public offering of securities in accordance with Regulation EC 809/2004 Preparing of company and industry research Advisory services, including business company valuations, restructuring, mergers and acquisitions, financial analysis, debt analysis, capital structure, investment projects, credit consulting Market-making Euro-Finance provides its clients services for implementation of the new SPV projects. The basic stages for creation and listing the SPV are identical with the IPO stages. Euro-Finance offers up-to-date information and draws up various analyses on customer's request, as well as advice and consultation on various matters regarding public companies, securities issues, company financing, etc. Software development In 2004 Euro-Finance established a new company named EUROSYS EOOD. The new company was assigned the right to distribute Eurosys. Eurosys is intended especially for the needs of the investment intermediaries, asset management companies and mutual funds. It covers the entire aspects of their activity dialing, settlement, accounting, reporting

135 Currently, Eurosys is implemented in 15 non-bank investment intermediaries, representing 33% market share in BSE trading, and 9 asset management companies, which manage 23 mutual funds, accumulated 20% of the total assets of the mutual funds. EFOCS (Euro-Finance On-line Customer Services) is a software product for direct trading on the Bulgarian Stock Exchange, Frankfurt Stock Exchange, as well as forex and derivatives on the international capital markets. Every client can trade simultaneously on different markets and monitor in real-time the status of their assets. It offers also real-time integrated statement of accounts, withdrawing of fund (wire transfers), etc. EFOCS was launched in the mid of 2005 as the only on-line platform for trading on the BSE. Description of the industry The modern Bulgarian capital market originates in 1996 with the special legislation for the sector and establishing of the state supervisory body Financial Supervision Commission (FSC). After the admission of Bulgaria in the EU on January 1st, 2007 Bulgarian capital market legislation was equalized with the European one. Bulgarian Stock Exchange implemented an up-to-date trading platform XETRA, operated by Deutsche Boerse, which is a precondition for the better visibility of the Bulgarian market in international aspect. The stable macroeconomic environment, backed by the sustainable currency board and restrictive fiscal policy, along with the Bulgarian integration in the EU seriously reduced the political risk of Bulgaria and helped the country to receive investment rating in The followed economic crisis reflected extremely negative on the economic environment and created serious challenges for the state finance and moreover for the economic entities survival. The main BSE index dropped more than 7 times. Bulgarian capital market has well-appointed legal framework with clearly marked structure regarding the division of the roles of the different financial entities - investment intermediaries (including most of the banks), publicly traded companies, SPVs, mutual funds, pension funds, insurance companies (life and non-life), health insurance companies, leasing companies. There is one registered stock exchange on the market Bulgarian Stock Exchange (BSE) and one clearing house Central Depository (CD). Most of the participants are supervised by the Bulgarian Supervision Commission (FSC). Banks and leasing companies (credit institutions) are supervised by the Bulgarian National Bank (BNB) as well as forex dealers. Bulgarian non-banking financial institutions such as Euro-Finance, as well as all non-banking financial institutions in the member-countries, can offer services on the territory of the whole EU under the single European passport rule. Currently the tax regime of securities investments is very favorable. The capital gains from the stock exchange transactions with shares of the public companies executed on regulated EU markets are taxed with zero rate. The corporate governance was synchronized with the modern international practices. However, along with the positive steps towards the modern capital market, Bulgarian market remains small, illiquid and lags behind the most developing capital markets. BSE cannot provide double listings and trans-border settlement. Financial services range and investment techniques are still limited. Derivatives market for local financial instruments does not exist. Investment intermediaries Out of 76 investment intermediaries existing on the market, 25 are banks and 51 are non-banking financial institutions. Despite the fact that only half of them are real active on the market, we consider all of them as direct competitors of Euro-Finance OOD. Investment intermediaries - banks Generally, 34 banks operate in Bulgaria and they are the main pillar of the Bulgarian financial system. 25 banks are licensed by FSC as investment intermediaries but the active banks on the capital market are ones. The Bulgarian banks are important players on the local capital marked, although they are not very active on BSE - the local stock exchange. Bulgarian banks gained significant part of the capital market in the period after 2005, when were placed several local IPOs and many foreign investors reached the local capital market. At present banks took part mainly in the transfer of big share packages. Banks are the main player on the market of local government bonds. Since the end of 2007 all primary dealers of government bonds were banks only. Euro-Finance, as primary dealer till 2007, had important role on the market with a market share of about 3%. In 2007 BNB change criterions for selections of 135

136 primary dealers and left all the three non-bank players out of the primary market. Euro-Finance remains an ESROT participant and continues to maintain its both security and cash accounts in BNB, but acts only on the secondary market. Non-bank Investment intermediaries Out of 51 non-banking financial institutions only 21 have full license, offering the full range of financial services in the EU. The rest 30 non-banking financial institutions could act only as brokerage houses without dealing for own account. Competition is huge. The main clients of the non-bank investment intermediaries are individual investors, mutual funds and some pension funds. Individual investors, speculators and mutual funds trade mainly through the intermediaries - non-bank financial institutions, since they offer more flexible conditions and lower commission fees compared to the banks. During the last years pension funds are not very active on the BSE. The low liquidity on the Bulgarian market seriously limited the possibilities for investments and speculations of individual investors. The decreased stock exchange volumes lowered investment intermediaries revenues from commission fees. SOFIX drop led to significant losses from the management of own securities portfolios. As a result several nonbanking investment intermediaries, which operate only on the Bulgarian Stock Exchange, were forced to stop operations. During the last two years the activity of 4 non-banking investment intermediaries was terminated, and some other companies searched for new owners. Major customers Euro-Finance s products are oriented to individual investors as well as to big institutional investors. Company s clients are the leading insurance companies in the country, pension assurance funds, foreign investment funds, etc. According to their social status Euro-Finance clients can be divided to the following groups: Natural persons, which as a result of the restitution and privatization processes in the country acquired securities and intend to sell them. The social status of these clients is diverse, but relying on the experience, the bigger part of these natural persons has low investment culture. Respectively, Euro-finance is responsible for their prevention of the market risks. Natural persons with good financial resources investors willing alone or assisted by investment intermediary to manage more actively and more effectively their own financial assets. Companies - commercial entities, which according to their activity can use specific financial services in order to minimize the company risk, aiming at more effective cash flow management, gaining control on other companies, as well as for direct speculative transactions. Institutional investors mutual funds, insurance companies and other entities, that receive information, brokerage and custody services, investment consulting. Among the major customers of Euro-Finance are the parent-company Eurohold Bulgaria AD and related entities mainly the insurance companies in Bulgaria, Romania and Macedonia. Currently the client base of Euro-Finance includes over 30 thousand clients. Positioning in the market Euro-Finance offers the whole range of financial services authorized on the Bulgarian capital market to all types of clients. Euro-Finance is the most capitalized investment intermediary among all Bulgarian investment intermediaries, excluding banks. In addition the company is among the 21 intermediaries that have full license for investment services. Among the investment intermediaries except the banks Euro-Finance s position is one of the leading in terms of market turnover. This ranking is subject to serious fluctuations due to the low liquidity of the Bulgarian market where one big transaction can seriously rearrange positions. Mission, vision, philosophy, rationale Mission 136

137 Euro-Finance provides professional financial solutions, building lasting value for its clients, shareholders, staff and global investment community. Our mission gives our business a clear purpose and direction. Vision Euro-Finance aims at sustainable growth through time by diversifying its business base and increasing its presence in markets and segments that are growing rapidly. This is driven by the company s ambition to become one of leading investment intermediaries on the Bulgarian capital market, accelerating the growth of Bulgarian financial services industry. Philosophy There are three hallmarks of the way Euro-Finance approaches business - innovation, solidity and client focus. The company puts quality as a main drive, enabling the achieving of profitable, long-term growth. Thanks to this long-term and far-sighted strategy, the company has fared well in a difficult capital market environment. As a result, it builds lasting value for our clients, shareholders and staff. Euro-Finance targets at: Welded team - developing talented colleagues to reach their full potential, to ensure the company to achieve a leading position in the Bulgarian financial services industry Customer and client focus - understanding customers and serving them the best way Pioneering driving new ideas, adding diverse skills and improving operational excellence Trusted acting with the highest integrity to retain the trust of customers, shareholders and colleagues. Rationale Euro-Finance earns the trust of its customers and other shareholders by offering the highest level of expertise, integrity and sustainability. Expertise - Its services need to set the standard in the markets on which the company operates. Its qualified employees enjoy the respect of the customers and competitors. Euro-Finance is successful in its efforts to achieve continuous improvement through a combination of international capabilities and local entrepreneurship. Integrity - Euro-Finance continues to maintain a strong focus on securing its financial stability in all circumstances, which is especially important in the current environment. In addition, the company reviews its services regularly to ensure an appropriate balance between the needs of the customers and the interests of the stockholders. Sustainability - Euro-Finance achieves long term success by taking advantage of the major growth opportunities. The current environment is confirmation that the need for robust and highly ethical investment services will continue to grow strongly. Personnel During the years after company s establishment, Euro-Finance selected and built up a team of young and experienced professionals, fully devoted to their job. The staff members are experts in their specific fields and have numerous years of experience in the field they are engaged. Euro-Finance encourages its staff to expand their functional and personal skills. Functional and specialist training and development programs, job rotations and lateral moves enable its people to follow their professional path. Clients are serviced by highly qualified professionals. Brokerage services are provided by licensed by FSC brokers, while orders on Frankfurt Stock Exchange are executed by licensed by FSE brokers. Investment banking activities are performed by investment consultants licensed by FSC. All employees in Sales and Clients Relations department are registered in FSC and are authorized to receive current client orders

138 Corporate governance Euro-finance is extremely prudent in investing its own resources and does not take significant risks. The company directed its investments mainly to low-risk securities debt instruments, money market instruments and derivatives for their hedging. Euro-finance uses short-term speculative positions on the different markets, including leverage techniques, but their share in the total speculative investments is not an essential part of company s risk profile. Investments of the own funds is strictly made following the requirements of Ordinance 35 on the Capital Adequacy and the Liquidity of Investment Intermediaries. e. Real estate The real estate business of Eurohold Group is presented by three companies Eurohold Imoti EOOD which owns 100% of Eurohold Imoti V.Tarnovo EOOD and Avto Union Properties EOOD which is 100% owned by Avto Union AD. EuroHold Imoti EOOD is a company specialized in management of investment real estate. The company owns the showroom and body shop used by Nissan Sofia. In addition, it owns a commercial plot of land, located along Europe Blvd., in Sofia designated for a new showroom and a repair shop of Nissan Sofia AD, which sells Nissans, Renaults and Dacias. EuroHold Imoti EOOD administers EuroHold Business Centre, where the headquarters of EuroHold Bulgaria AD and its subsidiaries, including several automotive showrooms. Avto Union Properties EOOD owns real estate in Sofia, Gorni Lozen, Plovdiv, Bourgas etc. and down the road aims to build showrooms and repair-shops for Avto Union AD. Several land plots were sold in 2010 as part of the plan to divest of several non-core businesses. EuroHold invested the proceeds of these divestitures into its three core business lines. Key success factors: Increase in rental prices; Cost reduction by using a property manager; Solicitation of new external customers outside of the EuroHold Group. 2. Competitive advantages a. The Balkans EuroHold Bulgaria operates in the Balkans region, leading to the following strategic advantages: Strategic location on the cross-road between Western Europe and the Middle East; Huge development potential as local economies quickly catching up with their Western European counterparts; Stable political outlook. b. Competitive advantages by business segments EuroHold Bulgaria A successful track record of acquisitions of regional companies in the insurance and leasing business EuroHold and EuroIns are public companies listed on the Bulgarian Stock Exchange with transparent corporate policies and several successfully completed capital increases Insurance 138

139 Common proprietary software instrumental for real-time reporting and risk management Common reinsurance policies and lowered overall reinsurance costs for the whole group Proprietary know-how on optimal claims handling procedures, resulting in overall lower carrepair expenses Centralized coherent asset management of financial/technical reserves Extensive regional market experience and profound market knowledge Strong ongoing relations with the regulatory bodies in the target countries Excellent relationship with the leading banks in the region The main advantage of EIG is a well developed distribution network, covering the territory of each country, where the Group s subsidiaries operate. The net includes combination of different sales channels (agencies, brokers, franchisers and insurance agents), which permits maximum flexibility and access to the end-clients. Another material advantage of EIG is its cooperation with other two EuroHold Bulgaria AD s sub-holdings EuroLease Group and Avto Union AD. This collaboration favors the development of joint products unique for the respective regional market. Important aspect of EIG s competitiveness is the centralization of reinsurance and investment management activities after the differentiation of the insurance business as independent sub-holding. Leasing Centralized and optimal financial resource planning Operating efficiency Lean decision making structure Maximization of the synergetic loop among leasing, insurance and car dealing businesses Exposure to liquid and mid-segment assets (cars and light commercial vehicles) The main advantages of ELG are flexibility, loyalty to clients and partners, fast and high quality service, realization of ideas for new products and services. This ensures high quality service and professionalism for the offered services from consultation during the selection of vehicle, through negotiating lease terms according to the needs of the client to selecting favorable insurance package offered by the subsidiaries of EIG. ELG offers a simplified application procedure and fast service that could facilitate clients. Another main advantage of the company on the Bulgarian market results from the cooperation with Avto Union AD and its subsidiaries. All Avto Union AD s offices are used as points of sales for the products of ELG and EIG creating prerequisites for development and marketing of unique combinations of products that could meet customer needs. Cars Exclusive importer/representative of many brands The leading diversified car dealership in Bulgaria Focused on popular mid-range cars The main advantage of Avto Union AD over its competitors is the broad range of brands, offered under the principle everything at One Place automobiles, insurance and leasing. Euro-Finance Full license as an investment intermediary, which includes the complete range of financial products, offered in the EU Almost 18-year experience on the financial markets Highly qualified management and operational personnel brokers and investment consultants licensed by the FSC, BSE and FSE. Access to every important international securities market The only Bulgarian financial institution member of FSE 139

140 The only Bulgarian non-bank financial institution SWIFT participant Among the three non-bank financial institutions ESROT participants Advanced software systems High capitalization, which acts as a guarantee in the period of economic crisis The main advantages of Euro-Finance AD are related to its license and the opportunity to offer the full scope of financial services on the territory of entire European Union, with the long-term experience on the local market and highly-skilled staff. 3. Main goals The main goals of EuroHold Bulgaria AD are related to the investments of the Group in its subsidiaries, their development and recognition of uniform policy, namely: satisfying its clients needs by offering innovative and competitive products and services; increasing the sales volume in combination with high profitability; securing the proper environment for stable improvement of the synergies between subsidiaries; expansion of the markets, where it operates and increase of the market shares of each of its subsidiaries; involving highly skilled management and officers; providing greater opportunities for professional development and growth of each officer of the Group. Medium term goals and strategies The main strategic goals are: Achieving an adequate return on capital; Domination of the main subsidiaries as leaders in their industries in the region; Achieving a minimum of 10% market share in the region in the three sectors in which the Group invests - insurance, leasing and automotive; Establishing a loyal and diversified client base. In order to achieve these strategic goals, the company has put forward current goals and development policies. They are mainly focused on improvement of the integration, profitability and financial condition of the Group: Establishing of common goals at each sub-holding structure level, concerning the negotiation of better supplier conditions, advertising and participation in public tenders, which materially decreases expenses in the divisions; Realizing synergies from centralization and optimization of the operations, marketing and any other business process in the Group s structure; Optimization of inventory management, thus lowering associated costs ; Optimization of fixed expenses; Optimization of financial expenses; Consolidation of all sources of financing aiming at minimization of expenses and administration; Implementing payment scheme for the key management personnel based on performance; Launch of new and competitive products across all three main business divisions insurance, automotive and leasing. 4. Strategy by business segments Insurance Achieving EUR 300 million Gross Written Premium by YE

141 5-6 markets in SEE 8-10% regional market share million customers Introduce a system of additional incentives to insurance companies of EuroIns Bulgaria to refer customers to the car dealers and leasing companies rebalancing of the insurance portfolio resulting in a decrease in the share of car insurance and overall decrease of acquisition costs Achieving a stable market share of the insurance subsidiaries across all markets Following conservative investment strategies in managing the insurance reserves Leasing Achieving leasing portfolio of EUR 300 million Securing new and long-term lines of financing Organic growth in several markets Acquisition and development of leasing companies Cars EUR 200 million revenue from the sale of cars 15 thousand cars sold annually Market leader in Bulgaria, including acquisition of a leading truck dealership Acquisition of selected dealerships Acquisition of selected body shops in Romania and Macedonia Opening of new showrooms and body-shops in strategic new locations; Optimization of staff and facilities in the body-shops; Introduction of improved warranty conditions for cars sold. Euro-Finance Build a leading investment intermediary in Bulgaria Accelerate the growth of the local business Develop activities in selected segments and target groups Developing and maintaining long-standing relationships with the clients based on trust Enhance operational excellence 5. Synergies One of the main advantages of EuroHold is the tight cooperation between its divisions generating increasing and stable source of income. As a consequence of the integration of its three business lines insurance, leasing and car sales, EuroHold realizes significant synergies. The Group has exceptional opportunities for increasing the market share of its subsidiaries through the introduction of new products with a lot of value added for the customer. The integration of the three businesses allows One-Stop- Shop type of services automobiles, insurance and leasing. The cross-offering of products to the clients of insurance, leasing and auto-dealers companies decreases the total costs of advertising and marketing. Mutually supplementary activities give higher opportunities for fast growth of market share and profitability. The internal model of work is based on the idea of stand-alone financial profitability of each segment and optimization of costs of each business division, while also serving as a source of business for other divisions

142 Leasing Insurance Cars Synergy advantages Solid competitive advantages, derived from the strong integration of EuroHold s three core business lines Sustainable and continuously expanding synergies and cross selling capabilities Claims cost control synergies and repair fraud prevention Control over sales channels resulting in client retention and loyalty Competitive advantage over bank-owned leasing companies which lack sales channels and access to showrooms 6. New products Operational companies of EuroIns Insurance Group AD (EIG) follow a marketing policy, targeting the development and offering of innovative and diverse products and services. During the first half of 2011 several changes in the activity of the companies have been made aiming to comply with the new regulations and to improve the client servicing. Recently, EuroIns Bulgaria developed several new product like Auto Casco 4x4 and the combined policy Home, car and health. At the end of month of March 2011, EuroIns AD started a program aiming at stimulating the sales by voucher system, orientated towards individual clients, including discounts for loyal clients, which program will function during the entire year. This program is applied to MTPL Insurance, Personal Accident and Sickness Insurance, Travel Assistance Insurance, Property Insurance and Auto Casco. New services were offered to the clients, including new procedures of Property Insurance claims handling, new ways of payment by credit card (icard EuroIns Mastercard) and through the Internet using epay.bg or ebg.bg, and the issuance of electronic insurance policies by webinacs. On Euroins started issuing electronic insurance policies for MTPL. This kind of insurance can be bought in 750 places in the whole country with the necessary special equipment and trained personnel. For the convenience of the company s customers an electronic calculator was created for calculating the insurance premium due for MTPL which is available on the Euroins web site. On 21 July 2011 automatic tariff for electronic policy CASCO was introduced. A new practice is introduced - the companies customers receive SMS for policies due within two weeks before the termination date. During the same period EuroIns Romania extended the range of its insurance portfolio with some new products (Property Insurance Three Risks, Tourist Insurance by SMS, Home Assistance Insurance) which were specifically developed for the Romanian market. The new products were created in response to the increased demand of the fast developing insurance market. EuroIns Romania S.A. works on amelioration of conditions of existing products, such as Medical Expenses when Travelling Abroad Insurance. Important accent in insurance policies selling activity is the start of issuing electronic policies and application of bonus-malus system for pricing of Motor Third Parties Liability Insurance. In 2011 Euroins Health Assurance continued to develop innovative product policy and to offer new and various packages of voluntary health assurance for the Bulgarian market as follows: 142

143 Package 1. Individual and family health assurance for individuals. Package 2. Prevention and occupational health for corporate clients. With this package the employer receives a full range of services in the area of health and safety during working, occupational health service and social audit. Prophylactic examinations are carried out by specialized mobile equipment in the client s place, which makes the service unique and offered until now on the Bulgarian market only by Euroins Health Assurance. In March the online service Virtual clinic was launched in cooperation with Medical Center St. Panteleimon. Virtual clinic is a web site where the customers of Euroins Health Assurance can receive consultation from doctors and specialist 24 hours a day from all over the world in the following areas: traditional medicine medical logistics maintaining of personal health records. Since the beginning of the year a new procedure was introduced for informing clients through SMS when filing a claim and payment of amounts. Most of the leasing companies in Bulgaria are focused on providing only standard leasing products to their clients, while EuroLease Auto Bulgaria has developed several more innovative products offering flexible repayment plans and special interest rates directly linked to the client s risk profile. In this way, the company is more flexible than its competitors on the market and is able to offer wider range of products, tailored to the specific needs of its clients. EuroLease Group plans to develop similar types of products for the two companies in Romania and Macedonia, which will allow them to replicate the success of EuroLease Auto in Bulgaria. The new products of leasing business are related to offering of more favorable and flexible schemes for future and present clients of EuroLease Group. One of the most popular products is Tailor Made Interest Rate which gives every client the opportunity to determine the amount of the down payment all by himself and to receive special interest rate the higher is the down payment of client, the lower will be the effective interest rate of the leasing contract. Another successful product is Seasonally adjusted installments which gives every client the opportunity to determine by himself his own strong and weak months of the year and thus making the monthly payment during the weak months half the payments in the strong months. Avto Union (AU) is a holding entity, consolidating EuroHold s investments in the automotive sector in Bulgaria and is the only truly multi-brand car-dealer representing as many as 11 automobile brands and 3 scooter brands. The Group sells new cars, mopeds, and rent-a-car services. After the completion of the acquisition of Avto Union from Equest in mid-2009, all contracts with car manufacturers (Fiat Group, Mazda, and GM) were renewed under improved financial and commercial terms. AU s main activities during 2010 are aimed at increasing car sales and after-sale revenues, further solidifying its portfolio of brands, increasing client satisfaction, and selected openings of new client service centers. AU finalized building the largest Car Mall in Bulgaria located in EuroHold s HQ. Being the only (real) multi-car brand company, AU has a great chance to further capture market share, as its versatile and rich brand portfolio makes it possible to be competitive in all big corporate and public tenders, as well as to attract retail customers. The portfolio of brands isolates AU from possible brand specific product quality failures (Toyota s 2010 global recall). The good achievements of the automotive group are a combination of the release on the market of new models, price discounts and advertising campaigns including 20 % VAT waiver for Mazda, new models of Fiat Punto Evo, Dacia Duster, Opel Astra and Chevrolet Cruize, the profitable packages of Renault and Nissan equipment. Fiat, Opel, Chevrolet, Mazda, Nissan and Renault have the biggest impact on Avto Union s success for the current year. In 2010 attractive promotional conditions for the insurance policy Auto Casco 4x4 with guaranteed tariff rate of 4% for a period of 4 years were announced, a joint marketing effort between Avto Union AD and EuroIns Bulgaria. For each automotive brand, offered by Avto Union AD a leasing product is developed jointly with EuroLease Auto EAD meeting clients requirements Mazda Cash Leasing, Mazda Lease 6 Months (with opportunity of spreading the payments up to 6 months), Fiat Leasing along with other forthcoming releases of innovative products for the other brands

144 Another successful product developed jointly by the three business lines of EuroHold is the club card Auto Card with three modifications - Classic, Premium and Family. The card is issued for a period of three years and its owner benefits from various discounts in insurance, leasing, purchase of car, service, rent-a-car, car wash, tyres change as well as in refueling at the Lukoil petrol stations. The percent of the discount depends on the type of card that the client has chosen. 7. Impact of macroeconomic environment The operations of EuroHold are dependent on the general macroeconomic environment in the Balkans and Bulgaria in particular. The macroeconomic situation in the country is stable and shows clear recovery trend from the downturn of 2008/ 2009, which came as a result of the financial and economic global crises, which started in In 2009 the Bulgarian economy registered drop in the GDP of 5%, whereas this is the most serious economic crises after the recession of During 2010 there was a tendency of recovery and growth of GDP compared to the previous year of 6.4 %. In H1 of 2011 the GDP of the country brew by 3.4% compared to the same time period of This is the highest growth registered since 2010, and the forecasts are for gradual acceleration during The financial system of the country is stable and operates normally. Inflation may influence company costs, because a part of the company s liabilities are interest bearing. Their payment is related to the current interest levels, which reflect the inflation levels for the country. For this reason the maintenance of low interest levels in the country is considered as important factor for EuroHold s overall standing. The average annual inflation based on consumer price index for 2010 is 2.4% compared to 2.8% for The forecast of the Bulgarian National Bank for expected average annual inflation in 2011 is that it will be half of 2010 levels. Fluctuations in exchange rates did not have important impact on the Issuer s activity until the moment, when large controlling investments were made in neighboring Romania. The financial results of these companies are reported in local currency Romanian lei (RON), which in turn has freely floating exchange rate. The consolidated results of EuroHold Bulgaria will be exposed to currency risk until the introduction of the uniform European currency in Romania. Group s results are affected by changes in the legal framework, applicable to the insurance companies in Bulgaria. In November 2010, the Regulation on formation of MTPL technical reserves was amended, which lead to an increase of the reserves and respectively the insurance price. The Premium Tax Law has been in force since January 1 st 2011 and it mandates the levy of 2% tax over the insurance premiums. There are no other know governmental, economic, fiscal, monetary or political factors which have materially affected the Issuer s main activity over the last years. a. Europe 144

145 Selected European economies: real GDP, consumer prices, CA balance, and unemployment Annual percentage change unless stated otherwise Real GDP Consumer prices 1 CA balance 2 Unemployment P 2012P P 2012P P 2012P P 2012P Advanced Europe Euro A rea 5,6, Germany France Italy Spain Netherlands Belgium A ustria Greece Portugal Finland Ireland Slovak Republic Slovenia Luxembourg Estonia C yprus Malta United Kingdom Sweden Switzerland C zech Republic Norway Denmark Iceland Emerging Europe Turkey Poland Romania Hungary Bulgaria Serbia C roatia Lithuania Latvia Movements in consumer prices are shown as annual averages 2 Percent of GDP 3 Percent. National definitions of unemployment may differ 4 Includes Estonia 5 Current account position corrected for reporting discrepancies in intra-area transactions 6 Based on Eurostat s harmonized index of consumer prices 7 Excludes Estonia 8 Inlcudes Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Montenegro and Serbia Source: IMF Over the first half of 2011, Europe s recovery proceeded with modest pace and overall economic activity remained below potential. Furthermore, we witnessed an uneven recovery throughout the different European countries, with the peripheral economies registering negative growth rates as opposed to core European countries such as Germany and France. Unemployment remains relatively high further 145

146 hampering economic growth. Over Q , the recovery in Europe has been gaining traction despite renewed concern over the sovereign debt crisis contagion from peripheral countries. Still strong policy response on both national and EU levels managed to limit the damage to economic activity and calm markets. Still lack of unanimous and coordinated policy response still weighs on investors perception about the viability of the feeble economic recovery in the region. Concerns about bank sovereign debt losses and fiscal imbalances led to widening sovereign spreads and speculations that some of the larger economies such as Italy and France will be next to be engulfed by speculative attacks and inability to refinance maturing debt. In Q , Europe has sustained unexpected economic slowdown which increased the risk of another recession, forcing ECB to renew bond purchases on a larger scale to prevent liquidity squeezes in the system. The 17-nation euro area economy has struggled to gain sustainable momentum after growing a mere 0.2% in the second quarter, which takes any rate hikes off the table for now. Europe s weakness may persists in light of the spending cuts across the region as governments try to rein in growing deficits and reassure markets in their ability to stay liquid and solvent, which will have depressing effects on economic activity. German GDP rose a mere 0.1% in the second quarter of 2011, while French economy practically ground to a halt. With the two largest economies Europe experiencing weak growth rates, the picture for the larger European region remains bleak. Still economic activity is expected to resume its upward growth trajectory in the second half of the year with elevated downside risks. The mid-term outlook is for gradual, still uneven expansion across different regions in the European region. Advanced Europe real GDP is expected to grow by 1.7% in 2011 and around 2% in Emerging Europe s growth is forecasted at 3.7% in 2011 and another 4% in As a result of differences in the state of public and private sector balances, as well as growth fundamental among different countries, economic prospects will remain divergent. Germany s economic expansion is expected to slow down to around 3.2% in 2011 and 2% in 2012 as a result of subdued demand for its exports from other Euro-zone countries, as well as withdrawal of fiscal support. In Q , France recorded zero growth in economic activity. Current projections consensus is for 1.5% growth on 2011 and 1.8% in 2012 as consumption growth remains subdued as a result of withdrawal of fiscal stimulus and weakening external demand. Furthermore, French government announced it will embark on an aggressive multibillion spending cuts program to slash its deficit down to EU target of below 3% of GDP. This will additionally weigh on feeble economic recovery. Italian economic growth is expected to remain subdued as a result of announced spending cuts, structural economic weaknesses as well as sluggish competitiveness and relatively weak labor productivity. Furthermore, the recent spike in Italian sovereign spreads proves to be detrimental to Italian government s ability to refinance maturing debt. ECB intervention in terms of buying Italian and French sovereign debt instruments over the past weeks has temporarily limited negative spill-lover effects from the still ongoing sovereign debt crisis in European peripheral countries. Growth is projected to be much lower in the periphery of the euro area because these economies are suffering a sharp and protracted contraction in public and private balance sheets which is needed to resolve fiscal and competitiveness imbalances and also face more severe structural unemployment problems. In advanced economies outside the euro area, recovery prospects are similarly differentiated. For instance, growth in the United Kingdom is projected at 1.5% in 2011 as necessary frontloaded fiscal consolidation dampens domestic demand. But in Sweden, real activity is expected to expand by 3¾ percent this year amid rapidly improving financial conditions and nascent signs of overheating in the real estate sector. In Emerging economies, the relatively strong recovery is projected to continue, with countries such as Turkey and Poland forecasted to expand at rates of between 3% and 5%. Still, the recovery of some economies such as Romania and Bulgaria, which are dependent on the recovery of core EU countries, will remain subdued. Still, downside risks continue to prevail. The close interconnectedness between sovereigns and financial institutions, coupled with higher global risk aversion, lower equity prices and risk from spike in commodity prices, could generate a slowdown in growth and further feed into global risk aversion. In the medium term, the main risk remains that deep-rooted fiscal and competitiveness imbalances in peripheral economies and incomplete action to address banking sector vulnerabilities in many euro area economies could lead to a long period of slow growth. The immediate priority is to reassure markets that sufficient resources are available from the euro-wide safety net to deal with downside risks. European leaders committed at the March EU summit to substantially increase the effective lending capacity of the EFSF. While this should bolster market confidence, the mechanism by which this is secured should be 146

147 clarified as soon as possible, and a decision on adjusting the interest rate charged on EFSF loans is urgently needed to help support fiscal sustainability. Beyond 2013, the proposed permanent European Stability Mechanism provides a robust and orderly framework to assist euro area members, with strict conditionality to support discipline. Some additional flexibility on these instruments would be helpful to deal more directly with the interdependence of national banking systems and sovereign risks. Beyond crisis-management measures, the crisis has highlighted the need to improve EU policy coordination on fiscal and structural issues. Shared responsibility for fiscal burdens needs to come with shared responsibility for fiscal policies. b. CEE CEE outlook GDP growth yoy (%) GDP per capita (EUR) Unemployment rate (%) E 2012F E 2012F E 2012F Turkey , , , , , Poland , , , , , C zech Republic , , , , , Romania , , , , , Hungary , , , , , Ukraine , , , , , Slovakia , , , , , C roatia , , , , , Slovenia , , , , , Bulgaria , , , , , Serbia , , , , , Budget balance (% of GDP) Gross foreign debt (% of GDP) CPI (period avg) E 2012F E 2012F E 2012F Turkey Poland C zech Republic Romania Hungary Ukraine Slovakia C roatia Slovenia Bulgaria Serbia Source: CEE Quarterly by UniCredit Group 147

148 Public debt/gdp (2011E) 100% 75% 76% 50% 40% 41% 41% 42% 42% 44% 44% 49% 54% 25% 18% 0% Bulgaria Turkey Romania Serbia Ukraine Czech Rep Slovenia Slovakia Croatia Poland Hungary Source: UniCredit Group, National Bureaus of Statistics The correlation in developments between CEE and global environment is very strong. The global slowdown (though deemed temporary) is also affecting CEE countries as evident in PMI data, with indices recording downward movement, coupled with increasingly deteriorating consumer sentiment. Domestic demand in the region has hardly posted any gains as a result of supply-side accelerating inflation in combination with stubbornly high unemployment rates across the board. Growing commodity prices over the past 12 months have gradually affected food and end-users energy prices which has reduced consumer purchasing power. In most of the CEE countries real wage growth was hovering around 1% or negative. Over the summer, inflation has gradually stabilized and is not expected to gain momentum in H (even decline), which in turn is expected to boost purchasing power and consumer demand over the coming quarters. Credit in most countries still remains constrained, with credit stock expansion expected to remain subdued in light of recent market turbulence and ongoing uncertainty around European sovereign debt crisis. Despite stronger headwinds in Q , more and more portfolio capital flows into the countries from the region. Still bank inflows and FDI lag and remain weak. Having peaked at EUR 76.3 bn in 2007, FDI flows last year reached EUR 16.5 bn. Foreign bank lending to entities in the CEE region also remains muted, though it is moving in the right direction. This divergence between portfolio flows and more medium to long term FDI and bank/non-bank borrowing is unlikely to persist indefinitely. Policy decisions on both the monetary and fiscal side will be important in determining in which direction the 'convergence' occurs. In a moment where major economies such as Italy and France have embarked on fiscal consolidation path, it is unlikely that CEE governments will increase interest rates any time soon. Nominal interest rates on average across the region remain at record lows while many countries are running negative real interest rates

149 c. Bulgaria Bulgaria data and forecasts C redit rating Baa2 stable/bbb stable/bbb- positive E 2012F GDP (EUR bn) P opulation (mn) GDP per capita (EUR) 4, , , , ,575.0 Real economy yoy (%) GDP P rivate consumption Fixed investment P ublic consumption Exports Imports M onthly wage, nominal (EUR) Unemployment rate (%) Fiscal accounts (% of GDP) Budget balance P rimary balance Domestic recovery is still sluggish, with growth mainly driven by exports. Private consumption still remains weak, with growing private savings. Recent financial market turbulence and growing fears of double-dip recession in the European zone (primary trading partner to Bulgaria), as well as slowing European core economies suggest economic pace will lose some momentum. Nevertheless, easing inflationary pressures, coupled with private consumption recovery and improving labor market, will result into a positive growth in the coming months. Improving EU funds absorption rates and decisive resolution of the Greek sovereign debt crisis, which currently generates regional risk aversion, will further boost economic activity and attract FDI inflows into the country. Exports are the main contributor P ublic debt External accounts to GDP growth over the past quarters, while domestic demand C A balance/gdp (%) Net FDI (% of GDP) components of GDP remain weak. Individual consumption was down 0.1% qoq in 1Q11, after adding a Gross foreign debt (% of GDP) Inflation/monetary meager 0.3% in 4Q10, but is still 8.5% lower relative to its precrisis C P I (pavg) level. Moderation in the speed of household consumption C entral bank reference rate (eop) recovery arguably reflects higher Source : UniCredit, NSI inflation and a weak labor market, which has made households more cautious about their spending decisions. After a 7.9% qoq surge in 4Q10, GFCF was up just 0.9% in 1Q11, bringing its volume 42% below where it was when the crisis began. Various factors were at play, but weak foreign capital inflow seems to be the key, as deepening Greek economic troubles cast a shadow over the flow of capital channeled toward the entire Balkans region. On the positive side, export posted a solid 4.6% qoq gain (18.8% higher than its precrisis level), while import was down 1% (7.9% below its pre-crisis benchmark). Looking ahead, we see qoq growth dynamic losing some steam this year as the boost from export and upturn in inventories is set to fade. At the same time, policy makers have only limited room for maneuver. Credit conditions remain tight due to the pro-cyclical nature of the currency board arrangement; while front loaded fiscal consolidation looks the right policy response to the Greek sovereign debt crisis. Next year we expect moderate acceleration of GDP growth to 3.3% yoy. There are no indications for recovery in the portfolio and FDI flows to Bulgaria so far in 2011, in contrast with the rest of the CEE region. We see some scope for recovery later this year though, similar to the dynamics seen in 2009 and 2010, while also noting that FDI and portfolio investment data are usually subject to potentially large scale upward revisions. Stabilization of capital flows will also draw support from privatization efforts this year, which should culminate in the sale of a major tobacco processing company in September, and floating one/third of the shares of electricity generation utilities on the local stock market. Instead, there is some positive momentum in the C/A dynamics so far in C/A turned positive for the first 3M of the current year for the first time since the start of the transition (EUR 253mn or 0.6% of GDP), mostly thanks to a constantly improving trade balance. It should be noted though that export also drew support from some temporary factors, such as the re-export of cars and other consumer durables which due to weak household sector recovery were difficult to sell on the local market. Looking ahead to the rest of the year we expect some deterioration (to 0.5% of GDP deficit), as 149

150 higher energy and food costs should put some negative pressure on the foreign trade balance (Source: UniCredit, NSI). d. Romania Romania data and forecasts C redit rating Baa3 stable/bb+ stable/bb+ stable E 2012E GDP (EUR bn) P opulation (mn) GDP per capita (EUR) 6, , , , ,703.8 Real economy yoy (%) GDP P rivate consumption The Country has registered positive GDP gains, driven by export growth. Nevertheless, domestic demand remains weak on the backdrop of still high unemployment and budget cuts. Exports are also expected to slow down as core EU countries experience slower than expected growth rates. Real revenue growth is unlikely to turn positive before 4Q 2011 and consumer lending could decline further, curbing consumption (+0.5% yoy in 2011) and retail sales. Fixed investment P ublic consumption Exports Imports M onthly wage, nominal (EUR) Unemployment rate (%) FDI inflows are weak as well. Other investment flows shrunk 61% yoy in 1Q11 to EUR 1.44bn (excluding IMF money, inflows net of FDI fell 57.1% yoy to EUR 0.54bn). The biggest inflows came from foreign companies granting long-term loans to local Fiscal accounts (% of GDP) subsidiaries (EUR 0.78bn in Budget balance P rimary balance Q11). Despite improved investor sentiment (as reflected by falling CDS spreads and investment P ublic debt inflows in CEE), portfolio External accounts C A balance/gdp (%) Net FDI (% of GDP ) Gross foreign debt (% of GDP ) Inflation/monetary C P I (pavg) investment inflows in Romania have been tepid at best (EUR 0.45bn in 1Q11, 65.9% less than in 1Q10), curtailed by the local capital market being illiquid and underdeveloped in terms of size and products. Faced with high inflation and slow economic C entral bank reference rate (eop) recovery, the National Bank of Source : UniCredit, NBR, CSO Romania is likely to leave the monetary policy rate unchanged at least until 1Q12, favouring money market liquidity and RON nominal appreciation as policy instruments. Alongside Bulgaria, Romania is the EU country with one of the largest presence of Greek banks (approx. 15% of bank assets). Greek subsidiaries had an aggregate solvency ratio of 15.7% at the end of March 2011, above the banking system s average of 14.75% (according to NBR Deputy Governor Georgescu) and the NBR has repeatedly stressed the soundness of all Romanian banks with Greek shareholders. Local subsidiaries of Greek banks accounted for 25% of their groups profits in Any contagion risks are likely to affect the whole Romanian banking sector, since the public doesn t differentiate among ownership and the bank crisis at the end of the 90s is still vividly remembered. Still, Romania is among the countries which did most of the progress in terms of correcting its macro imbalances, which has already paved the way for outperformance in terms of growth and FDI inflows compared to regional peers (Source: UniCredit, NBR, CSO)

151 e. Macedonia Macedonia main macroeconomic data C redit rating BB stable GDP real growth rate (%) Inflation (pavg) Unemployment rate (%) Budget balance (%) Gross external debt (% of GDP) Source : National Bank of Macedonia After claiming its independence in 1991, Macedonia has faced several challenges in its political and economic life. The country has successfully achieved a climate of political and macroeconomic stability and has paved the path toward sustainable economic growth. FDI inflows remain low in comparison with neighboring countries. Households purchasing power is also limited, relying heavily on transfer payments from expatriates. In contrast, fiscal policy in the country is stable. 8. Main markets As of , the Group has the following market share standing: General insurance in Bulgaria GWP of BGN 36.0 million and market share of 5.0% General insurance in Romania GWP of BGN 53.1 million and market share of 3.7% General insurance in Macedonia GWP of BGN 6.9 million and market share of 5.9%* Health assurance in Bulgaria GWP of BGN 1.5 million and market share of 6.0% Leasing of new motor vehicles in Bulgaria including interest income of BGN 6,010 thousand; commissions and fees income of BGN 761 thousand; net investments in financial leasing of BGN 95,738 thousand, market share in the sector of leasing of new cars and light commercial vehicles of 5,68% as per the latest report from the Bulgarian Leasing Association. Leasing of new motor vehicles in Romania including interest income of BGN 163 thousand; net investment in financial leasing of BGN 2,312 thousand. Leasing of new motor vehicles in Macedonia including interest income of BGN 106 thousand; fees and commissions income of BGN 8 thousand; net investments in financial leasing of BGN 2,961 thousand. Sale of new cars and light commercial vehicles including revenues from sale of cars of BGN 39,588 thousand, repair and other services of BGN 7,927 thousand and other revenues of BGN 5,009 thousand and market share of 12.3% The described market shares are based on public sources of information, disseminated by regulatory bodies such as Financial Supervision Commission, Bulgarian National Bank, the Agency of Car Manufacturers and their Representatives. * The information of the market share in general insurance in Macedonia is based on official data as of , as of the current moment, there is no available information for the Macedonian general insurance market for H period. As for the rest of EuroHold s sectors of operation such as real estate, securities trading and asset management, there is either no existing market information or the market shares of the respective companies are immaterial. Market shares development Market shares H H EuroIns Bulgaria MTPL 7.08% 6.08% 6.06% 5.11% 6.23% Casco 5.47% 5.39% 5.51% 5.53% 4.78% Other 3.80% 3.64% 3.52% 4.16% 4.43% EuroIns Romania MTPL 5.44% 10.75% 11.34% 11.10% 8.56% 151

152 Casco 0.90% 1.07% 0.87% 1.30% 1.22% Other 0.63% 0.78% 0.56% 0.71% 1.1% EuroIns Macedonia MTPL 5.81% 8.82% 8.62% 8.97% 8.92%* Casco 5.74% 6.24% 4.61% 5.82% 6.56%* Other 5.60% 5.17% 6.98% 5.70% 2.74%* EuroLease Auto Bulgaria Leasing portfolio 5.00% 5.28% 5.83% 5.28% 5.79% New business 4.20% 5.26% 7.39% 5.54% 5.68% Avto Union Renault 1.1% 0.8% 1.5% 1.6% 1.6% Nissan 1.3% 1.5% 1.8% 1.6% 1.6% Dacia 1.0% 0.7% 0.8% 0.7% 1.4% Saab 0.1% 0.0% 0.1% 0.0% 0.0% Fiat 2.6% 1.9% 2.6% 2.9% 1.9% Alfa Romeo 0.1% 0.1% 0.1% 0.1% 0.1% Lancia 0.0% 0.0% 0.0% 0.0% 0.0% Mazda 1.7% 1.9% 2.0% 1.9% 2.1% Opel 2.8% 2.4% 1.8% 1.8% 2.3% Chevrolet 2.1% 2.0% 1.7% 2.2% 1.3% Maserati 0.0% 0.0% 0.0% 0.1% 0.0% Total market share for car sales 12.4% 11.5% 12.3% 12.9% 12.3% * The information for market shares in specific insurance products in Macedonia is per official data as of and currently there is no comparable information for the H period. Source: EuroHold Bulgaria AD The presented information is affected by factors related to the formation of the Group mainly through acquisitions of new companies, described in detail in III.2. Investments in Section Two of this document. The operations of the Group do not depend on any patents, licenses and other special contracts. However, the operations and businesses of some subsidiaries are subject to licensing or could be carried out only at the availability of certain permits, described in the table below. Company EuroIns Bulgaria License, permit, patent License for general insurance activity EuroIns Romania License for general insurance activity EuroIns Macedonia Euro-Finance AD License for general insurance activity Full license for investment intermediary in Bulgaria and abroad EuroIns Health Assurance License for health assurance activity EuroLease Rent-a-Car EOOD Nissan Sofia EOOD Scandinavia Motors AD Cargoexpress EOOD Bulvaria Holding EAD Star Motors EOOD Auto Italia EAD Milano Motors EOOD Franchise contract with Zodiac Europe Limited, UK, for car rental and operating leasing under the trade mark «Budget» Dealership contract with Renault Nissan, France, for sale of Renault, Nissan and Dacia car brands Official representative of Polar Mobil for Saab, for imports and sale of Saab car brand in Bulgaria Dealership contract with General Motors, for sale of Opel and Chevrolet car brands Dealership contract with General Motors, for sale of Opel and Chevrolet car brands, spare parts and their servicing Contract with Mazda Austria, for import and sale of Mazda car brand, spare parts and their servicing Contract with FIAT Auto SPA for import and sale of FIAT, FIAT Professional and Lancia car brands, spare parts and their servicing Contract with FIAT Auto SPA, for import and sale of Alfa Romeo car brand 152

153 Gransport Auto EOOD EuroLease Auto EAD Contract with FIAT Auto SPA, for import and sale of Maserati car brand, spare parts and their servicing Registration with Bulgarian National Bank as non-bank financial institution EuroLease Auto Romania Registration in the National Bank of Romania register as non-bank financial institution Source: EuroHold Bulgaria AD The business activity of the separate entities in the Group may be dependent on separate contracts for supply and sale of products and services, as well as on specific contracts for usage of trademarks or rights on them The business of EuroHold is generally not seasonal in character and is linked to the management, acquisition and sale of shares in subsidiaries. As for the business activities of the Group s subsidiaries, only the insurance business could be considered somewhat seasonal in nature due to the annual underwriting of the mandatory MTPL insurance. a. Insurance market Western Europe Non-life premiums in Western Europe increased only slightly in The market witnessed growth in Germany, Italy and the Netherlands, while registered declines in UK, Spain, Switzerland, Belgium and Denmark. The average combined ratio increased further to 100.4% in 2010 as opposed to 98.3% in Still some of the largest markets witnessed significant increases in the premium rates, which should result in better technical results in the coming periods. As the low interest rate environment will likely prevail in the coming quarters, investment results should also remain under strain. In 2011, the insurance market in Western Europe is expected to grow in 2011 despite the turmoil in Southern Europe and Ireland as many of the core economies recover to a better shape. Many of the countries have also implemented premium rates hikes in order to address the problem with unprofitable motor-related products. Still many of the other lines demonstrate slow recovery of demand and no upward price adjustments. Investment incomes are also expected to remain relatively low due to low interest rate environment. Insurance penetration Premiums as % of GDP in 2010 Insurance density Premiums per capita in USD in 2010 Country Global ranking Total business Life business Non-life business Country Global ranking Total business Life business Non-life business United Kingdom Netherlands France Switzerland Portugal Finland Ireland Denmark Belgium Sweden Italy Germany A ustria Slovenia Spain Luxembourg Malta C yprus Noway C zech Republic Poland Hungary Slovakia C roatia Bulgaria Russia Greece Ukraine Serbia Romania Liechtenstein Lithuania Turkey Total Switzerland 1 6, , ,966.9 Netherlands 2 5, , ,333.5 Luxembourg 3 5, , ,954.9 Denmark 4 5, , ,655.0 United Kingdom 5 4, , ,060.3 Ireland 6 4, , ,082.9 France 7 4, , ,249.1 Finland 8 4, , Sweden 9 4, , Belgium 10 3, , ,156.9 Norway 13 3, , ,454.9 Germany 18 2, , ,501.6 Italy 20 2, , A ustria 21 2, , ,456.3 Liechtenstein 22 2, , Portugal 25 2, , Spain 27 1, Slovenia 29 1, C yprus 30 1, Malta C zech Republic Greece Slovakia Poland Hungary C roatia Russia Lithuania Bulgaria Romania Turkey Serbia Ukraine Total 1, , Source: Swiss Re 153

154 CEE CEE non-life insurance sector Non-life GWP Regional market share (%) Paid claims C ountry 2010 (EUR mm) 2009 (EUR mm) % in total GWP yoy % change (EUR mm) 2009 (EUR mm) yoy % change A lbania % 2.5% 0.3% 0.3% % Bosnia and Herzegovina % 2.3% 0.8% 0.8% n.a. n.a. n.a. Bulgaria % -5.2% 4.0% 4.4% % C roatia % -3.0% 5.2% 5.5% % C zech Republic 3, , % 6.0% 19.0% 18.6% 1, , % Estonia % 4.2% 1.4% 1.4% % Hungary 1, , % -6.6% 8.0% 8.9% % Kosovo Territory % 5.0% 0.4% 0.4% % Latvia % -19.5% 1.3% 1.6% % Lithuania % -4.3% 1.7% 1.8% % Macedonia % 3.6% 0.6% 0.6% % Montenegro % -4.6% 0.3% 0.3% n.a. n.a. n.a. P oland 5, , % 17.0% 32.2% 28.5% 3, , % Romania 1, , % -6.7% 9.0% 10.1% 1, , % Serbia % -6.1% 2.5% 2.8% % Slovakia % -1.7% 5.3% 5.6% n.a n.a. Slovenia 1, , % -0.3% 8.1% 8.5% , % Total 17, , % 3.7% 100.0% 100.0% 9, , % Source: Xprimm CEE motor insurance market Motor hull (EUR mm) MTPL (EUR mm) Country GWP Claims paid GWP Claims paid GWP Claims paid GWP Claims paid A lbania Bosnia and Herzegovina 27.1 n.a n.a n.a n.a. Bulgaria Croatia Czech Republic Estonia Hungary Kosovo Territory n.a. n.a. n.a. n.a Latvia Lithuania Macedonia Montenegro 6.0 n.a. 7.1 n.a n.a n.a. Poland 1, , , , , ,192.6 Romania Serbia Slovakia n.a n.a Slovenia Source: Xprimm CEE property insurance market Fire and allied perils (EUR mm) Damages to property (EUR mm) Country GWP Claims paid GWP Claims paid GWP Claims paid GWP Claims paid A lbania Bosnia and Herzegovina 11.2 n.a n.a. 9.4 n.a. 9.2 n.a. Bulgaria Croatia Czech Republic Estonia Hungary Kosovo Territory n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Latvia Lithuania n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Macedonia Montenegro 3.4 n.a. 3.4 n.a. 3.6 n.a. 3.0 n.a. Poland Romania Serbia Slovakia n.a n.a. n.a. n.a. n.a. Slovenia Source: Xprimm 2010 GWP for the whole market stood at 33.1 billion which is 7.4% growth yoy. Still the growth was not across the board with some of the markets in the region registering decreases compared to The strongest recovery was witnessed in Estonia, Poland and the Czech Republic. Both life and non-life sectors in Poland registered annual gains, with an impressive increase of 16% yoy. The rest of the countries have registered modest gains or declines yoy. The increase in the volume of underwritten 154

155 policies was accompanied by a significant increase in claims (especially in the motor insurance sector), proving the increasing competition in the non-life sector in the region. Despite the declines over the past 2 years, the CEE market remains fundamentally poised for growth, given its underdeveloped status, as well as growth in economic activity and household s purchasing power, as well as sophistication in utilization of financial products. Domestic demand should become more broadly based with private consumption and investments picking up in the coming periods, supporting growth of insurance industry in the CEE region. In some markets, there are signs of premium rates improvements, but others still remain unprofitable due to cut-throat competition and unfair market practices. Source: Swiss Re Economic Research and Consulting 155

156 Bulgaria For the first 5 months of 2011, non-life insurance sector gained 0.4% yoy in terms of GWP volume. Motor-related insurance products accounted for 73.2% of total non-life GWP, followed by property insurance with 16.8% of total general insurance premiums for the period gross written premiums declined by 3.1% yoy to 0.83 billion gross written premium from non-life insurance products declined by 5.2% to 0.70 billion. Bulgarian market is dominated by non-life insurance products, in particular car-related products. Motor hull (Casco) insurance business occupied 36.2% of non-life premiums in 2010, followed by MTPL with 35.1% of the total non-life market GWP. Taken together, both product lines represent more than 71% of the whole non-life insurance sector. Both products still remain unprofitable as the current premium rates are still not commensurate with the imbedded risk these types of policies cover witnessed an increase of around 20% in MTPL premium rates; still the product s profitability was poor as the price levels remain suboptimal. Furthermore, the intensive completion in the sector further hampers optimal price adjustments as participants engage in price wars and unfair market practices. These features are also characteristic for all underdeveloped insurance markets in CEE and SEE. General insurance incurred claims amount to 384 million, which represents a decline of 1.4% yoy. Total assets for the market for 2010 grew by 5.2% yoy, reaching 1.5 billion, with 64% part of general insurance companies balance sheets total equity reached 501 million, out of which 271 million comes from general insurance companies. Total non-life technical reserves grew by 8% yoy, reaching 0.7 billion as of YE General insurers registered technical loss of 21.7 million for 2010, compared to a loss of 3.9 million for Net loss for the period stood at 7.3 million, compared to a profit of 13.7 in The Bulgarian non-life insurance sector is highly fragmented with the top 5 insurance companies holding less than 15% of the market each. Many of the large multinationals are present in the market VIG, KBC, Allianz, Uniqa and Generali. Competition is very intensive and unfair market practices remain a major obstacle toward achieving significant improvement of profitability. Although hitting the market with a 6-8 months time lag, global financial and credit crisis over the past 3 years has negatively affected the local insurance market, driving down investment profits and premiums growth, positively correlated to disposable income of households. The market has witnessed a gradual recovery in 2011 and is expected to gain momentum in 2012 and the medium term. Fundamentally, the Bulgarian insurance market is poised for above-average market growth in both volume and profitability as its lags significantly behind more developed market from Western Europe. Furthermore, gradual increase in households welfare and financial products sophistication should additionally boost the market growth and generate outperformance rates over the medium term

157 Bulgaria non-life insurance market Premiums (EUR mm) Claims paid (EUR mm) Market share C ompany m m m 2011 Bulstrad V IG % 14.4% 13.1% 13.0% DZI (KBC Group) % 13.9% 12.5% 11.9% A llianz Bulgaria % 9.7% 10.3% 10.6% Lev Ins % 11.5% 9.8% 9.7% Bul Ins % 9.0% 9.9% 12.3% A rmeec % 10.2% 11.3% 10.4% Uniqa % 4.3% 5.2% 5.1% Euroins % 5.1% 5.2% 5.0% Generali % 3.9% 3.9% 3.7% Energia % 4.6% 3.8% 2.0% Bulgarski Imoti % 3.4% 3.2% 4.7% V ictoria % 3.4% 3.6% 3.4% Interamerican Bulgaria % 2.1% 2.5% 3.5% HDI % 1.3% 1.7% 1.2% AIG Bulgaria % 0.0% 0.0% 0.0% Municipal insurance company % 2.0% 2.5% 2.2% DSK Garantzia % 0.0% 0.0% 0.0% OBB insurance % 0.5% 0.5% 0.5% Bulgarian A gency for export insurance % 0.2% 0.4% 0.6% Grawe Bulgaria % 0.0% 0.0% 0.0% Groupama % 0.5% 0.4% 0.3% Total % 100% 100% 100% Source: Financial Supervision Commission (Bulgarian insurance regulator) Romania Overall insurance market contracted by some 5% in euro terms. This resulted in decrease in insurance penetration and density: insurance penetration dropped to 1.63% from 1.81% in 2009, while density declined by some 4 to 92 per capita. Non-life insurance companies underwrote 1.6 billion premiums in 2010, which is a decline of 6.75%, which led to the decrease of non-life business in total insurance business to 80.46%. The main contributor to the decline of the non-life market in 2010 was motor hull insurance which registered a drop of 23% yoy. At the same time, the market witnessed positive gains in MTPL, property and credit and warranty insurance products. Although declining over the past 2 years, claims paid related to motor hull insurance policies still represented 45.5% of all non-life market claims paid or 588 million. MTPL is the second largest contributor to non-life GWP and it is the product that recorded the largest yoy increase of 12% in euro terms in the Romanian insurance market for Property insurance recorded a positive gain of 3% yoy for 2010, reaching 226 million in total premiums

158 Romania non-life insurance market Premiums (EUR mm) Claims paid (EUR mm) Market share C ompany A llianz Tiriac % 16.5% 14.0% O mniasig % 15.3% 13.6% A stra % 11.0% 16.3% Groupama % 11.1% 11.0% BC R A sigurari % 7.9% 8.5% A sirom % 7.7% 7.1% Uniqa % 6.8% 6.4% Generali % 5.8% 5.2% A rdaf % 4.5% 3.2% Euroins % 3.9% 4.7% C arpatica A sig % 2.7% 4.5% Garanta % 1.7% 1.4% C redit Europe % 0.6% 0.6% Fata % 0.5% 0.3% C ertasig % 0.5% 0.3% A sito Kapital % 0.5% 0.6% C ITY % 0.4% 0.9% A lico Romania n.a. 0.3% 0.3% 0.4% A BC A sigurari % 0.2% 0.3% O ther % 2.3% 0.8% Total 1, , , , , , % 100% 100% Source: Xprimm Macedonia There are 14 insurance companies operating in the Macedonian insurance market, 11 of which are nonlife insurers density and penetration indicators did not record any dynamics compared to insurance density stood at 51.3, while insurance penetration was of 1.52%. Total insurance GWP reached million for 2010, which is a growth of 4.3% yoy. Non-life insurance business generated 94.5% of total market revenues or 99.6 million in GWP. The total insurance sector also realized positive net results for 2010 of 1.2 million compared to a loss of 2.8 million in 2009, mainly as a result of faster economic recovery of the country compared to other countries from the region

159 Macedonia non-life insurance market Premiums (EUR mm) Claims paid (EUR mm) Market share C ompany V ardar % 22.3% 21.7% Q BE % 15.4% 13.4% SavaT abak % 17.3% 15.2% Eurolink % 10.4% 10.9% Insurance P olicy % 8.6% 9.0% Euroins % 7.0% 7.1% Sigal (Uniqa) % 6.1% 6.7% A lbsig % 4.2% 4.6% Sigma (V IG) % 5.2% 6.1% Insig % 2.9% 2.9% C roatia % 0.6% 2.3% Total % 100% 100% Source: National Insurance Bureau of Macedonia b. Leasing market The company in Bulgaria aims to capture at least 75% of the clients of Avto Union. EuroLease Auto is also working with third party dealers which historically have been its main source of business. Having successfully serviced clients over the last 6 years, the company is able to tap into its large database and solicit new business. EuroLease Auto works along with Avis and Budget Bulgaria, which are owned by Avto Union, in their continuous efforts to service large quality customers like Coca Cola, Nestle, Heineken, ImBev, etc. by offering customized financing that matches the needs of these first-class clients. The company tries to broadly use the sales network of EuroIns and Avto Union in order to reach the maximum audience of potential clients. Overview of Bulgaria s leasing sector As of June 30, 2011, there were 92 leasing companies operating in Bulgaria, 8 of which were subsidiaries of banks. The financial leasing market is dominated by three (3) major types of leasing companies: bank-owned, captive and independent. In the three countries in which EuroLease Group operates, the market leaders are bank-owned leasing companies providing financial leasing in all segments including real estate. The banking leasing companies have the advantage of access to cheaper funding and thus are able to offer lower interest rates to clients. Captive leasing companies are firms offering pre-packaged leasing products for cars sold from their parent car-dealer companies. However, the financing reach of these leasing companies is usually limited and they are able to strike one-off deals rather than generate continuous business. The independent leasing companies like EuroLease Auto usually work with multiple car dealers. EuroLease Auto has significant competitive advantage, as it uses the branch network of EuroIns Insurance Group in Bulgaria, Romania and Macedonia, and the dealerships of Avto Union in Bulgaria as points of sales. As a result of this cooperation between the three core businesses of EuroHold, EuroLease Auto Bulgaria ranked seventh in terms of market share of a newly generated leasing business in the vehicle segment for the first six months of The operations in Romania and Macedonia are relatively smaller, compared to those in Bulgaria, where EuroLease Auto has achieved a market share of 8.5% in new leasing business for the first six months of As a whole, the leasing market in the Balkans lacked financing during 2009 and exhibited sharp increase in delinquencies and repossessions

160 Most of the financial leasing companies witnessed the volume of new deals decrease along with tighter lending standards and stricter approval criteria. A lot of the repayment plans had to be rescheduled because of the increased number of troubled clients. Moreover, repossessed vehicles had to be sold on depressed market prices, usually lower than their residual accounting value, bringing significant losses to the leasing companies. As per official information published by Bulgarian National Bank, net lease receivables dropped by 14.6% during 2009 and 19.2% during Net leasing receivables (mil. BGN) H Net Lease Reseivables / GDP H ,025 2,000 3,831 3,662 4,027 4,980 5, % 8.0% 6.0% 4.0% 2.0% 0.0% 8.7% 7.7% 6.5% 5.7% 4.6% 2.8% 0.3% 0.6% 0.8% 1.0% Source: BNB, Bulgarian Association for Leasing As of December 31, 2010, the total lease portfolio of the Bulgarian leasing system amounted to BGN 4,027 million, representing a decrease of almost 19.2%, or BGN 953 million compared to Bulgarian leasing companies total portfolio as a proportion of GDP decreased in 2010 (to 5.7% from 7.7% as of the end of 2009). Assets and liabilities of leasing companies BGN '000 12/31/ /31/2010 6/30/2011 ASSETS 6,299,364 5,185,226 4,979,438 Loans 4,926,323 3,963,722 3,775,614 Sec urities other than shares Shares and other equity 6,264 5,761 7,558 O ther as sets 1,366,208 1,215,671 1,196,186 LIABILITIES 6,299,364 5,185,226 4,979,438 Loans 5,630,336 4,499,395 4,159,385 Debt sec urities is sued 65,717 41,989 27,004 O ther liabilities 351, , ,039 T otal equity 251, , ,010 Number of reporting leasing companies Source: BNB At the end of December 2010 leasing companies liabilities amounted to BGN 5,185 million. They decreased by 17.6% compared to December In the structure of liabilities, received loans prevailed and their relative share decreased from 89.4% at the end of December 2009 to 86.7% at the end of December The total amount of debt securities issued by leasing companies was BGN 42 million at the end of December It decreased by 36.1% compared to December The Bulgarian market is mainly dominated by bank-owned leasing companies, which had been very active till the end of The main competitors of EuroLease Auto Bulgaria are: 160

161 Market share in cars and LCV by total portfolio for Q Market share in newly generated business for Q Interlease UniCredit Leasing Raiffeisen Leasing Allianz Leasing Piraeus Leasing Eurolease Auto DSK Leasing EFG Leasing 9.42% 9.27% 7.28% 6.94% 5.32% 5.15% 19.37% 23.42% 7% 3% 4% 5% 8% 20% 13% 12% Interlease Raifeisen Leasing Sogelease UniCredit Leasing Allianz Leasing Porsche Leasing EuroLease Piraeus Leasing Porsche Leasing Sofia Leasing 4.85% 3.20% 8% 9% 11% Sofia Leasing DSK Leasing Other Source: Bulgarian Association for Leasing The Bulgarian leasing sector remains highly concentrated: the market share of the two largest leasing companies (Interlease and UniCredit Leasing), accounted for 42.8% of total financial leasing portfolio as of June 30, 2011, the top three leasing companies accounted for 52.2% and the top four leasing companies accounted for 61.5% as of the same date. Overview of Romania s Leasing Sector After the booming years of , all leasing companies in Romania tried to readjust their goals, targets and strategies to the new economic realities. Because of the dramatic decrease in the automotive sector and auto sales in Romania, the largest leasing companies tried to develop new products and new businesses in the agricultural sector, equipment, medical sector and IT (software and hardware financing). Due to the lack of new loans provided by banks, most of the bank owned leasing companies acted as banks and gave loans for sale-lease back deals with equipment and real-estate. The Romanian market is well developed, but it is mostly dominated by the bank-owned leasing companies. Currently, there is no independent leasing company in the top ten, after the collapse from The Romanian leasing market experienced a severe downturn during 2009, following 10 years of booming market with relaxed credit terms. Most companies halted lending completely as a result of dramatic losses and portfolio reviews. During this period delinquencies increased dramatically to around 20%. Repossessions jumped as well and the increased interest margin (due to the precipitous decrease of Euribor) could not alone compensate the sizable losses. Currently, most companies are severely undercapitalized and seeking new equity to support their balance sheets. The leasing market in Romania dramatically decreased in the last years and the volumes of new business are comparable with levels: EUR '000 6,000 Leasing market evolution (new deals) 5,000 4,000 3,000 2,000 1, Source: Financial Companies Association in Romania ALB 161

162 The share of vehicles in total new business decreased from 70-80% in the booming years to 63% in The share of real estate in total business increased from 5-7% to 16% in 2010: EUR '000 6,000 5,000 4,000 3,000 2,000 1,000 0 Romanian leasing market by financed assets ,948 4,818 3,268 3,361 2,016 3,384 2,449 1, ,082 1,654 1,300 1,126 1,121 1, Cars Equipment Real estate Total leasing market Source: Financial Companies Association in Romania ALB 100% Asset classification 80% 60% 40% 20% 0% Vehicles Equipment Real estate Source: Financial Companies Association in Romania ALB Independent leasing companies almost disappeared from the market after 3 years of sky-high volumes

163 Romanian leasing market by type of leasing companies ,000,000 4,000,000 euro 3,000,000 2,000,000 1,000, Captives 380, , , , , , , ,620 Independents 130, , , , , , , ,940 Banks subsidiares 442, ,998 1,098,829 1,925,583 3,145,452 3,035, , ,440 Total market 954,197 1,384,080 2,015,521 3,269,003 4,945,671 4,817,654 1,299,000 1,121,000 Source: Financial Companies Association in Romania ALB Market share by type of leasing company % 14% 17% 15% 19% 20% 18% 13% 14% 80% 60% 40% 34% 30% 22% 16% 19% 25% 22% 40% 20% 46% 49% 55% 59% 64% 63% 62% 64% 0% Bank subsidiaries Captives Independents Source: Financial Companies Association in Romania ALB Overview of Macedonia s Leasing Sector As a small and rather closed market Macedonia has not been so negatively affected by the global financial crisis. The financing institutions have not stopped lending, however they became more conservative and selective in their approvals. The Macedonian market is relative small and underdeveloped. Currently, the banks are still offering car loans limiting the opportunities for business for leasing companies. However, the general tendency is for banks to stop offering such products, turning the leasing companies as the main providers of financing for car purchases. The bank sector of the country, as a whole, is underdeveloped, offering room for significant growth in the years to come. EuroLease Auto Macedonia was registered in May 2008 and started operations at the end of 2008, as of that time there were only 5 leasing companies (in the meantime MAK LEASE and TOTO Leasing are no longer operational). Since then the number of leasing companies has increased. The most popular are: Porsche Leasing, ELA MK, S Leasing, Leasing one, VBI bus leasing, Master Leasing

164 Currently, the total number of leasing companies is 9, out of which 4 are bank-owned leasing companies: NLB, HYPO, EUROLIZING, and S Leasing. For the short period since its creation EuroLease Auto Macedonia has established excellent business relations with the car dealers in Skopje, offering clients full support from fast review of applications, car registration and insurance. Full service at one place is something that the company tries to provide clients with. c. Car sales market AU has concentrated its efforts on the Bulgarian market, by building a portfolio of mid-class car brands. No new large-scale acquisitions are expected in Bulgaria in the near future, and the company is focused on optimizing its sales performance to achieve substantial growth. Next steps in targeting new markets include the acquisition of well-established dealerships in Romania and Macedonia as the preferred targets would be companies that sell brands already in AU s portfolio. Large corporate customers are a vital part of the business of AU, accounting for a significant part of new cars sales volumes. The most significant clients of AU include big international and national companies like Coca-Cola, Kamenitza, Globule, Viacom, Zagorka, Nestle, and others. AU s philosophy to build a portfolio consisting mainly of mid-class brands, turns into one of its greatest advantages, enabling the company to present broad and extensive offers to both its corporate and individual customers. AU has nation-wide coverage of showrooms and repair shops in most major cities, thus offering its large corporate clients fast and competitive service across the country. The following figure shows the geographical coverage of the showrooms in the country: Sofia Largest cities in Bulgaria, concentrating 70% of population Opel & Chevrolet Renault/Dacia/Nissan Saab Fiat/Alfa /Lancia Maserati Mazda Renault Nissan Dacia Fiat Lancia Alfa Opel Chevrolet Mazda Saab Maserati Piaggio Gilera Vespa Showroom coverage (small bubble 1 showroom; larger bubble 2 showrooms) 164

165 Overview of Bulgaria s Car Sales Market EU car density (cars per 1,000 inhabitants) LU IT CY MT SI AT FI DE LT FR ES BE UK EU SE NL EL IE CZ PL PT LV EE DK BG HU SK RO % change in new registration of cars in CEE & Bulgaria 120% 100% CEE Bulgaria 80% 60% 40% 20% Source: The European Automobile Manufacturers Association (ACEA) Bulgarian car market is poised for growth due to the dramatic drop in new registrations larger than Central & Eastern Europe, low car density, old and largely obsolete and fuel inefficient national fleet. GDP growth recovery along with credit availability will drive further national sales. The car park in Bulgaria is still far from reaching its potential new cars penetration is still rather low, and the average car park age is around 16 years. Historically, this is mainly a result of the vast number of used cars being sold about 5 times that of new cars. On one hand this is a result of the relatively low purchasing power, but on the other hand it creates an opportunity for new car market growth, once the economy starts growing and stricter regulatory guidelines are finally implemented which limit the import and registration of high emissions old cars and introduce minimum safety and fuel efficiency standards. The new car business in Bulgaria has exhibited double-digit growth each year between 1997 and 2007, but the global recession in 2008 overturned this trend and the market plummeted by more than 50% in 2009 and by an additional 38% in For the first six months of 2011 there has been an increase in car sales by 20%. AU managed to outperform the market in 2010, keeping its sales decrease to only 26.2%, versus 38.6% for the overall market, which lead to an increase in its market share to 13.1%. The market in 2010 was dominated by sales to individual buyers, as the economic downturn stalled sales of light commercial vehicles and trucks to corporate customers. As of the end of 2010 and the first half of 2011 the new car market has been growing which is a sign of a gradual revival

166 During the first six months of 2011 the car market in Bulgaria grew by about 12.5% compared to the same period in 2010 and Avto Union s sales maintained its market share. For the period from the beginning of the year till the end of June 2011 the companies from the group of Avto Union have revenue from the sale of cars and after-sales in the amount of 24 million which is an evidence for a stable and gradual revival of the automotive sector. The net loss of the companies in the group of Avto Union as of June 30, 2011 decrease by about 40% compared to the reported loss for the same period last year. The result was achieved due to wider margins and cost optimization. The car market is expected to grow further this and next year, except for a temporary slowdown in H , when certain tax brakes for the recovery of VAT shall be eliminated.. For the second six months of 2012 the expectations are for a stable growth of about 8-10% annually for the next 3 years. BG PC&LCV market 60,000 52,009 53,812 50,000 42,625 40,000 33,434 30,000 24,908 25,705 20,000 10,000 14,361 17,220 18,820 8,604 10, Q Q * Data for 2002 and 2003 is about total auto market (incl. motorcycles, buses and trucks). Source: Association of Car Manufacturers and Their Authorized Representatives for Bulgaria (ACM) Avto Union ended 2010 as the undisputed market leader with 12.3% market share in new car sales in Bulgaria and took the number one position, outstripping its biggest rivals Toyota Balkans (Toyota and Lexus), Moto Pfohe (Ford, Volvo, Range Rover and Jaguar) and Porsche Bulgaria (VW and Audi). Currently, Avto Union retained its market share in the first 6 months of 2011, taking second position with 12.3% market share (YTD June 2011), with a total of 1,270 PC & LCV sold. The target is to end 2011 with a market share of about 13.5% and increase this even more in forthcoming periods

167 BG Car Sales % 12% Avto Union Porsche BG Moto Pfohe BG 11% Toyota Balkans 3% Sofia France Auto 6% 6% 6% 7% 8% 10% 11% Eurotec Avtomotor Corp Opel Southeast Europe Chevrolet Southeast Europe BMW Verttriebs GMBH Other Source: Association of Car Manufacturers and Their Authorized Representatives for Bulgaria (ACM) The main competitors on the Bulgarian market use a slightly different business model than AU, concentrating their businesses on related brands, like Toyota Balkans (Toyota+Lexus) with 10.4% market share, Moto Pfohe (Ford, Volvo, Jaguar, Land Rover) 10.4% market share, Porsche Bulgaria (VW+Audi) % market share. There is only one other multi-brand competitor, which uses a similar model Balkan Star, the official importer of Mercedes Benz, Mitsubishi, Chrysler, Dodge, and Jeep, and is also a dealer of Renault and Dacia. However, Balkan Star s combined market share is only about 5%. The automotive market has no legal or administrative entry barriers, yet it has always required sizeable investments in infrastructure and working capital and inventory. The last couple of years also proved that profitability is achieved once a critical sales volume is achieved, which is a tough proposition for marginal regional players, particularly in today s environment of shrinking sales and very selective buyers. The market is dominated and will continue to be dominated by the top integrated multi-brand players and it will be very difficult for newcomers to position themselves and develop their own sales network. V. GROUP S ORGANIZATIONAL STRUCTURE The Issuer is a holding company and it forms an economic group together with its subsidiaries. The Group s structure as of the date of this Prospectus is presented in the diagram below. Starcom Holding AD is the largest and controlling shareholder of EuroHold. On the other side Starcom Holding AD is controlled by three individuals, described in detail in XVII. Principal Shareholders in Section Two

168 Source: EuroHold Bulgaria AD Insurance and health assurance Country of registration Main activity % of participation in the main capital EuroIns Insurance Group AD Bulgaria Acquisition, management, evaluation and divestiture of stake in Bulgarian and foreign companies The company operates actively in Bulgaria, Romania and Macedonia EuroHold Bulgaria AD 80.82% Basildon Holding SaRL, Luxembourg 19.18% The change of the shareholders structure is reflected in the Shareholders book of EIG. EUROINS AD Bulgaria General insurance services EuroIns Insurance Group 77.22% EUROINS ROMANIA Romania General insurance services EuroIns Insurance Group 90.45% EUROINS INSURANCE AD Macedonia General insurance services EuroIns Insurance Group 91.39% INTER SIGORTA AS Turkey General insurance services EuroIns Insurance Group 90.75% EUROINS HEALTH ASSURANCE EAD Bulgaria Voluntary health assurance EuroIns Insurance Group 100% Leasing of motor vehicles Country of registration Main activity % of participation in the main capital BG AUTOLEASE HOLDING B.V. The Netherlands Financial leasing EuroHold Bulgaria AD 100% BG AUTOLEASE GROUP B.V. The Financial leasing BG AutoLease Holding B.V. 100% 168