/ ITPEBOL{NIECKAArEHIJ.M5"AJiB CTY,II;HO" EOO,II; ~~ rp. Co<Pmi 000, yn. 'Tpa<P IrHaTHeB"N2 5, et. 2, o<phc 209 Ten.: (02) 9 505 345; Ten./<PaKc: (02) 9 505 346, E-mail: abv studio@yahoo.com etiiall~-_, TRANSLATION AGENCY ABV STUDIO LTD Bulgaria, Sofia 000, 5 Graflgnatiev Str., Fl. 2, office 209 tel.:(+ 359 2) 9 505 345; tel./fax: (+ 359 2) 9 505 346, E-mail: abv _studio@abv.bg Translation from Bulgarian BULGARIAN ASSOCIATION OF THE CEMENT INDUSTRY ACTIVITY REPORT for the year 203 Bulgarian Association of the Cement Industry (BACI) is a non-profit organisation registered in July 2002 in order to promote the widest possible use of cement in various fields and to develop technologies and methods of production that most protect the environment. In 203 members of BACI are the following three Bulgarian companies- manufacturers of cement:. DEVNYA CEMENT AD 2. ZLATNA PAN EGA CEMENT AD 3. HOLCIM BULGARIA AD Majority shareholders in the companies that are members of BACI are the world's largest ma nufacturers of cement- DEVNYA CEMENT AD is part of the ltalcementi Group, HOLCIM BULGARIA AD is part of the Swiss group Holcim Group, owner of ZLATNA PAN EGA CEMENT AD is the Greek company Titan Cement. Members of the Association participate in all its activities, take part in the General Meeting with voting right, exercise control over the work of the association and its management bodies, inform themselves about the Association's activity. Members are required to pay membership fees, to comply with the Statute and to work for the achievement of its objectives, to work to increase the prestige of the Association. The Management Board of BACI consists of the following members:. Alexander Nakov Chakmakov - Chairperson of the MB 2. Todor Donchev Kostov - Member of the MB 3. Serge Winston Dominique Louis Schmidt - Member ofthe MB /
By decision of Sofia City Court of August 5, 203, Nabil Paul Francis is deleted as a member of the Management Board and Serge Winston Dominique Louis Schmidt is entered. Members of the Management Board of BACI do not receive remunerations. The Association can also accept associate members- legal persons who meet the requirements of Article 8 of the Statute of BACI. Associate members participate in the work of the General Assembly only with an advisory vote. PRESENTATION OF ACTIVITY DEVELOPMENT Main source for funding the activities of BACI in 203 was the income based on the Framework Service Agreements, concluded with its members, as well as the membership fees, paid by them. The Association is registered under the Value Added Tax Act. In 203 the Association has earned revenues to the amount of 244 thousand BGN, of which 208 thousand BGN from commercial activity and 36 thousand BGN from membership fees. Income in thousand BGN in 203 202 -from commercial activity 208 225 -from membership fees 36 36 The ratio of distributable costs in percentage is determined based on the ratio between total income in relation to income from commercial activity and in relation to income from non-commercial activity. Services provided by the European Cement Association (CEMBUREAU), of which BACI is a member, are reported as expenses for commercial activity, all other expenses are reported as distributable costs. The Association started undertaking commercial activity in April 2009. The ratio between commercial and non-commercial activity is as follows: 203 202 For commercial activity 85,25% 86,2% For non-commercial activity 4,75% 3,79% Services received from CEMBUREAU are as follows: 203 202 in thousand BGN 02 Q.5... 2
_/ Cost allocation for commercial activity by economic elements is the following: 203 202 in thousand BGN materials external services incl. - CEMBUREAU, GM - office rentals - legal_ services - audit - others -for accountancy services - for remunerations and social security - depreciation - others (business trips) Total expenses 3 40 05 5 7 5 5 8 64 6 224 3 63 07 9 7 5 4 2 62 5 7 240 Cost allocation for non-commercial activity by economic elements is the following: 203 202 in thousand BGN materials external services for remunerations and social security depreciation - others (business trips) Total expenses 0 7 2 2 9 0 22 In the income statement for non-commercial activity they are reported as administrative expenses. Operating result The result from commercial activity for 203 is loss to the amount of 6 thousand BGN. The result from commercial activity for 202 is loss to the amount of 5 thousand BGN. The result from non-commercial activity for 203 is gain to the amount of 2 thousand BGN. The result from non-commercial activity for 202 is gain to the amount of 4 thousand BGN. - " 3 c n:'r" r. op... ~~~.~-... ~..., " ''!/'; (y)' ~~c..., ~ \ '7 '"'.~ 4:J <,'. ~ia "\\\."-~"..,!..:. _,.,v '~ ~ ;. ~ \ '""I\_.:\,.
,/ Budget Implementation Implementation of the 203 budget is within the approved draft budget. The budget revenues in 203 are 330 599 BGN and include: income from services, membership fees, the transitional balance from 202, interest income and VAT refunded by the EU. The expenditure side includes expenses are 283 537 BGN, with the set amount being 292 905 BGN. Key elements of the Association's operating costs are as follows: For services received from CEMBUREAU For remunerations and social insurance contributions For rentals and other office expenses Accountancy services, audit For taxes (VAT) Others - 02 thousand BGN - 74 thousand BGN - 9 thousand BGN - 5 thousand BGN - 39 thousand BGN - 35 thousand BGN The transitional balance of the budget account for 204 amounts to 47 thousand BGN. In 203 the Association has not carried out research and development. In the ordinary course of business activity the Association can be exposed to various financial risks, most importantly foreign currency risk, credit risk and liquidity risk. The general risk management is focused on forecasting the results of certain areas of financial markets in order to minimize the potential adverse effects that could affect the financial results and position ofthe Association. Foreign currency risk The Association is not exposed to significant foreign currency risk since all of its operations and transactions are made in Bulgarian levs and/or euros. Credit risk In carrying out its activities the Association is exposed to credit risk, which is associated with the risk that any of its contractors will not be able to meet fully and in due time their obligations to the Association. Collectability and concentration of receivables is controlled on an ongoing basis. 4 ~,,, l... ~~~ ;. \ \ j. ;''""" \\, r- ~,#." -, ~,i', ~b-lr J!,b ~t: '.l J"lo.,. ( "': ~ """"' '-l '-9- }'~ f.q ~.-:; c., ~ ' 4 ', f::. l ",;r-fa,.,... B\\\~.,.r ~......_,.. "' ~"" ~.t::j "'. sn;~\\)
_/ Liquidity risk Liquidity risk is the adverse situation when the Association is not able to meet unconditionally all its obligations according to their maturity. The Association has the liquid funds to meet its current obligations. BACI Association has not concluded any contracts outside the scope oftheir ordinary activity. BACI does not utilize bank loans and credits to carry out its activity. Important events occurring after the balance sheet date After completing the annual financial statements important events, affecting the Association's activity and position, have not occurred. Members of the Management Board of BACI carry out their activity in accordance with the Commercial Law, the Statute of the Association and the resolutions of the General Meeting. Regular Management Board meetings are held in case of ongoing problems, which require the taking of urgent decisions. For all meetings held, minutes have been drawn up, which reflect the opinions expressed and decisi~ns taken. The minutes are signed by all members of the Management Board. On April 22, 203 was held an ordinary annual general meeting of the members, where the following decisions were taken: Adopts the report of the Management Board on the Association's activity in 202. Adopts the annual financial statements and auditor's report for 202. Releases of liability the members of the Management Board for their activity in 202. Adopts the budget for 203. Nominates Mr. Stefan Damyanov as registered auditor to audit and certify the annual financial statements of the Association for 203. The following decision was taken at the Extraordinary General Meeting of the Members, held on July 3, 203: Nabil Paul Francis is released from the Management Board and Serge Winston Dominique Louis Schmidt is elected in his place. In 203 BACI performed the following main activities to protect the interests of its members:. The active participation of representatives of BACI was continued in the interdepartmental working group on climate change and the system for greenhouse gas emissions trading pursuant to Directive 2003/87EC. 2. For the purpose of better awareness and protection of the interests of its members, the Association has joined through its representative the activities of the newly formed Public Council at the Ministry of Environment and Water. 5. < '.~.0 fn J,.. ~. ""'.. ""'),, '<.,.',IA.P t~ '-..._"t-',. ~.-Y Q) C') :.n (,)..:-::. ' ~.,...0 ' ~ -... I' < """" 0~\ ~\\\,; ~ v s',u''"
3. At meetings with experts of MOEW we have reasoned BACI's view on the process for recovery of waste tires as an alternative fuel for clinker production, as well as material recovery of the metallic thread in the tires. 4. BACI participates regularly in the activity of working groups and management bodies of CEMBUREAU. 5. In connection with periodically required by CEMBUREAU statistical information on activities in the cement sector in the country, on February 8, 203 in a letter BACI renewed its request to NSI to provide relevant statistical information. 6. On February 4, 203, in a letter to the Minister of Environment and Water Nona Karadzhova, BACI requested that it would be checked whether and in what way companies performing imports and distribution of cement from third countries (imported packaged and/or bulk and packaged in the country), meet the specific requirements under the Waste Management Act and the Ordinance on packaging and packaging waste with regards to the products placed on the market, and also with regards to information concerning the results of completed inspections. 7. On May 3, 203, with a letter to NSI BACI requested information, on the basis of what documents and from what sources is data on imports/arrivals and export/shipments of cement and clinker from Greece and Romania compiled. 8. On October 7, 203, in a letter to the Minister of Environment and Water Iskra Mihaylova and Vice Minister Chavdar Georgiev BACI presented its opinion on the discussed changes in legislation related to waste management. 9. On November, 203, in a letter to the Director of Directorate "Labor law, social security and working conditions" at MOEW, Mr. Emil Miroslavov BACI presented its request for assistance so that the Association's view to be reflected in the position of Bulgaria in the negotiations for the adoption of European regulatory decision on the treatment of fine quartz dust at the workplace. 0. On December 2, 203, in a letter to the Minister of Environment and Water Iskra Mihaylova and to the Minister of Economy and Energy Dragomir Stoynev, BACI provided the Ministers with information on Association's view on the forthcoming revision of the list of sectors vulnerable to carbon leakage, for which there are planned discussions in the forthcoming meetings of the European Parliament and the Council of Ministers on Climate Change and Energy, as well as the common position of the European Cement Association (CEMBUREAU). In this letter BACI asked for a meeting, on which to explain the crucial importance of keeping the status of the cement industry as subjected to risk of carbon leakage.. On December 8, 203, the Members of the Management Board of BACI met on two consecutive meetings with the Vice Ministers of Environment and Water Atanas Kostadinov and of Economy and Energy Anna Yaneva, on which they presented the Association's view on the forthcoming revision of the list of sectors vulnerable to carbon leakage. They stressed the need to keep the existing criteria for inclusion of sectors in the list of thos~ exposed to carbon leakage, by which to ensure the stability of investment climate in the cement industry. 6 'b :.a; ; L"~ ~
2. BACI has taken several actions to reduce the adverse impact on its members of the deterioration in economic environment for the cement industry due to the impact of the global economic crisis, which was still ongoing in 203, and in particular the crisis in the construction sector, whereby according to preliminary data from NSI, received by the end of February 204, local consumption of cement in Bulgaria in 203 has slightly increased by around.8% compared to 202 (according to data from NSI for 203 sales in the country by local producers are.55 million tons and for 20 they are,524 million tons). Under the conditions of this symbolic increase in the demand of locally produced cement, in the year production of Bulgarian cement plants almost maintained its level of 202 (.792 min. tons in 202 and.790 min. tons in 203 according to data from NSI). In 203 the significant imports of cements from neighboring states remained, which subsequently in a number of cases were subject to additional unauthorised mixing with other components, and the majority of end products. on the market did not meet important regulatory requirements of Bulgarian and European legislation and applicable standards. According to provisional data from NSI, the imports of cement in 203 is 0.375 min. tons- about 9.5 %of the total market volume in the country for the year. In its contacts with representatives of relevant government agencies, BACI has continued to express its concern about the risks to which the health of construction workers is exposed, as well as the possible risks to the quality of constructions, when working with products that do not comply with regulatory requirements, as well as its views on the necessary actions that should be taken for suspension and prevention of infringing the applicable requirements of the relevant regulations of Bulgaria and the EU. 3. On the basis of the framework service agreements concluded with its members, BACI has provided the latter, in their capacity of customers, regularly and/or upon request, with the services provided for therein. In conclusion it can be summed up that 203 was a difficult year with many challenges for producers of cement in Bulgaria, but the overall activity of BACI was at a good level. The intentions of the Management Board of BACI on most important future activities in 204 include mainly:. Continuing the interaction with Bulgarian government agencies in order to attract their attention to the need for active involvement of the state in the efforts to stimulate and support the national economy and in particular the construction industry and cement production; 2. Continuing the participation in the working groups and management bodies of CEMBUREAU. 3. Continuing the participation in the Public Council at MOEW and the working groups thereto; 4. Continuing the participation in the interdepartmental working group on climate change at MOEW; 5. Involvement in the preparation of the periodic national and European report on the implementation of the obligations of the management of cement plants under the European Agreement on Social Dialogue on health protection of workers from diseases associated with using fine quartz dust (silicosis), using the European automated reporting system- NEPSI. 7 f) it;,~{~, ~-.r..,., ~> ~ '
""""" In summary, while safeguarding the interests of its members, BACI will seek to achieve its objectives by informing the competent state authorities of the problems in the production and marketing of cement and to improve the working conditions in this industry. Furthermore, BACI will endeavor to develop the production and marketing of cement, for strict compliance with quality requirements and trading rules. Sofia, February 20, 204 CHAIRMAN OF THE MANAGEMENT BOARD: (ALEXANDER CHAKMAKOV- SGD. ILL) Round seal of the Bulgarian Association of the Cement Industry I, the undersigned Una Deyvidova Santo, certify the correctness of the translation of the enclosed document (Activity Report for the year 203, dated February 20, 204} made by me from Bulgarian into English. The translation contains 8 pages. / / ~.~ ~ \'.<..-! Translator: /Liria Deyvidova Santo/ 8