CENTRAL DEPOSITORY AD Board of Directors (BD ......The Company is represented by Vasil Golemanski – Executive Director. As at 31 December 2015, the total number of Company's personnel

CENTRAL DEPOSITORY AD

Board of Directors (BD):

Chairman of BD: Apostol ApostolovMember of BD: Vasil GolemanskiMember of BD: Ivan TakevMember of BD: Teodora AngelovaMember of BD: Angel Rabadzhiyski

Executive Director: Vasil Golemanski

Director Finance and Administration: Iskren Nikolov

Chief Accountant: Galina Beleva

Registered Address: 6, Tri Ushi St., floor 4, Sofia

Auditors: AFA OOD

CENTRAL DEPOSITORY AD ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 D ECEMBER 2015

STATEMENT OF COMPREHENSIVE INCOME 1

STATEMENT OF FINANCIAL POSITION 2

STATEMENT OF CASH FLOWS 3

STATEMENT OF CHANGES IN EQUITY 4

NOTES TO THE ANNUAL FINANCIAL STATEMENTS

1. BACKGROUND CORPORATE INFORMATION 5

2. SUMMARY OF THE SIGNIFICANT ACCOUNTING POLICIES O F THE COMPANY 7

3. OPERATING REVENUE 31

4. OTHER OPERATING INCOME 31

5. MATERIALS AND CONSUMABLES USED 31

6. HIRED SERVICES EXPENSE 32

7. EMPLOYEE BENEFITS EXPENSE 32

8. OTHER OPERATING EXPENSES 33

9. FINANCE INCOME AND COSTS 33

10. INCOME TAX EXPENSE 34

11. MACHINERY AND EQUIPMENT 35

12. INTANGIBLE ASSETS 36

13. AVAILABLE-FOR-SALE INVESTMENTS 37

13. AVAILABLE-FOR-SALE INVESTMENTS 37

14. INVESTMENTS IN ASSOCIATES 38

15. OTHER LONG-TERM RECEIVABLES 38

16. DEFERRED TAX ASSETS 40

17. TRADE RECEIVABLES 41

18. OTHER CURRENT ASSETS 42

19. CASH AND CASH EQUIVALENTS 42

20. EQUITY 43

21. GOVERNMENT GRANTS 44

22. RETIREMENT BENEFIT OBLIGATIONS 44

23. TRADE PAYABLES 47

24. PAYABLES TO THIRD PARTIES 47

25. GUARANTEE FUND PAYABLES 48

26. PAYABLES TO PERSONNEL AND FOR SOCIAL SECURITY 48

27. TAX PAYABLES 49

28. OTHER CURRENT LIABILITIES 49

29. FINANCIAL RISK MANAGEMENT 49

30. RELATED PARTIES AND RELATED PARTY TRANSACTIONS 55

31. CONTINGENT LIABILITIES AND COMMITMENTS 56

32. EVENTS AFTER THE REPORTING PERIOD 57

CENTRAL DEPOSITORY AD NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YE AR ENDED 31 DECEMBER 2015

This is a translation from Bulgarian of the financial statements of Central Depository AD for year 2015. 5

1. BACKGROUND CORPORATE INFORMATION

Central Depository AD is a business entity established in 1996 to maintain the national registration

system and the system for settlement of corporate dematerialised securities. Company's seat and

registered address is: 6, Tri Ushi Street, Sofia. It was registered by Decision No. 1/29 August 1996 of

the Corporate Department at Sofia City Court under Company File No. 109211 of 1996 Registry.

1.1. Ownership, legal status and governance

Central Depository AD (the Depository/the Company) is a non-public joint-stock company.

Company’s capital as at 31 December 2015 was distributed in 10,000 dematerialised registered shares

with par value of BGN 100 each. By a decision of the General Meeting of Shareholders, held on 22

June 2009, by virtue of Art. 246, par. 4 of the Commercial Act, the capital was increased from BGN

100,000 to BGN 1,000,000 through an increase of the par value of shares from BGN 10 to BGN 100.

The capital increase is part of the Reserve Fund amount.

The structure of the joint-stock (share) capital is as follows:

31.12.2015 31.12.2014

% interest % interest

Ministry of Finance 43.70 43.70 Bulgarian Stock Exchange – Sofia AD 6.61 6.61 Banks 37.01 37.01 Other 12.68 12.68 100.00 100.00

The special functions (Note 1.2) assigned to the Central Depository designate also the specific

characteristics of its legal status stipulated in the Public Offering of Securities Act (POSA) as follows:

• The Reserve Fund shall be set aside following the general procedure of the Commercial Act;

• The Company shall make profit for taxation purposes (as from 30 July 2011) and for distribution to its shareholders;

• Funds for the Guarantee Fund shall be raised as deductions from the operating revenue (as from 30 July 2011) in line with the terms and procedures set out in the Rules and Regulations

of the Central Depository;

• Up to 10% of the Central Depository capital may be held by shareholders other than the Ministry of Finance; Bulgarian National Bank; regulated markets, respectively, market

operators in cases where they are persons other than regulated markets; foreign depository or

clearing institutions.



No insolvency proceedings may be started with regard to the Central Depository and the latter may not

be wound-up solely based on a decision of the General Meeting.

Central Depository AD has a one-tier management system with a Board of Directors. As at 31

December 2015 the Board of Directors was composed as follows:

Apostol Apostolov – Chairman;

Vasil Golemanski – member;

Ivan Takev – member;

Teodora Angelova – member;

Angel Rabadzhiyski – member.

The Company is represented by Vasil Golemanski – Executive Director.

As at 31 December 2015, the total number of Company's personnel was 26 employees (31December

2014: 26 employees).

1.2. Principal activities

The Central Depository maintains the national registration system for dematerialised securities and

performs:

• registration of dematerialised financial instruments and transfers of dematerialised financial instruments as well as storing and maintaining of data about dematerialised financial

instruments by opening and keeping accounts of their issuers and holders;

• clearing and settlement of transactions in dematerialised financial instruments including keeping of cash settlement accounts and making payments in relation with transactions in

dematerialised financial instruments;

• administration of dematerialised financial instruments including maintenance of a register of holders of dematerialised financial instruments, distribution of dividends, interest and other

payments;

• registration of special pledges on dematerialised financial instruments;

• blocking and unblocking of dematerialised financial instruments;

• other services provided for in its Rules and Regulations.

In accordance with the amendments to Ordinance No 8 of the Financial Supervision Commission

(FSC) on the Central Depository (SG, issue 24 of 12/03/2014), the Depository shall assume the

functions of an operator of the system with settlement finality of transactions in financial instruments



within the meaning of the Payment Services and Payment Systems Act (PSPSA) in order to ensure the

settlement of transactions in dematerialised financial instruments.

The Central Depository shall ensure the efficient functioning of the national registration system for

dematerialised financial instruments and the operated thereby settlement system in an environment of

reliability and security of transactions performance and information storage as well as full transparency

of the terms and conditions of the services it provides.

1.3. Main indicators of the economic environment

The main economic indicators of the business environment that have affected the Company’s activities

throughout the period 2013 – 2015, are presented in the table below:

Indicator 2013 2014 2015

GDP in million levs* 81,971 83,612 86,650

Actual growth of GDP ** 1.3% 1.6% 3%

Year-end inflation (0.9)% (2.0)% (0.9)%

Average exchange rate of USD for the year 1.47 1.47 1.76

Exchange rate of the USD at year-end 1.42 1.61 1.80

Basic interest rate at year-end 0.02 0.02 0.01

Unemployment rate at year-end 11.8% 10.7% 10.0%

Source: BNB * Preliminary data for year 2015 ** Preliminary data as at 30 September 2015

2. SUMMARY OF THE SIGNIFICANT ACCOUNTING POLICIES O F THE COMPANY

2.1. Basis for preparation of the financial statements

The financial statements of Central Depository AD have been prepared in accordance with all

International Financial Reporting Standards (IFRS), which comprise Financial Reporting Standards

and the International Financial Reporting Interpretations Committee (IFRIC) interpretations, approved

by the International Accounting Standards Board (IASB), as well as the International Accounting

Standards (IAS) and the Standing Interpretations Committee (SIC) interpretations, approved by the

International Accounting Standards Committee (IASC), which are effectively in force beginning from

1 January 2015 and have been accepted by the Commission of the European Union.

For the current financial year the Company has adopted all new and/or revised standards and

interpretations, issued by the International Accounting Standards Board (IASB) and respectively, by

the International Financial Reporting Interpretations Committee (IFRIC), which have been relevant to

its activities.



The adoption of these standards and/or interpretations, effective for annual periods beginning on 1

January 2015, has not caused changes in Company’s accounting policies, neither in the adopted

disclosures and the classification or valuation of individual reporting items and transactions.

These standards and interpretations include:

• Annual Improvements to IFRSs 2011-2013 Cycle (December 2013) – improvements to IFRS 1, IFRS 3, IFRS 13, IAS 40 (in force for annual periods beginning on or after 1

July 2014 – endorsed by EC as of 1 January 2015). These improvements introduce

partial amendments to and editions of the respective standards primarily with a view to

remove the existing inconsistency or ambiguities in the application rules and

requirements of individual standards as well as to set out more precise terminology.

These amendments are basically focused on the following items or transactions: (a)

clarification that a first-time adopter of IFRS may apply standards that are not yet

effective provided that the standards themselves permit early application (IFRS 1); (b)

clarification that IFRS 3 excludes from its scope the accounting for the formation of a

joint arrangement in the financial statements of the joint arrangement itself (IFRS 3);

(c) clarification regarding the scope of contracts that fall within the scope of the

exception for a group of financial assets and financial liabilities with offsetting

positions in market and credit risk (IFRS 13); (d) clarification that in the treatment of a

transaction, which simultaneously meets the criteria of IFRS 3 and refers to investment

properties under IAS 40, requires the separate application of both standards

independently of each other (IAS 40).

• IFRIC 21 "Levies" (in force for annual periods beginning on or after 1 January 2014 – endorsed by EC for annual periods as of 17 June 2014) – regarding levies imposed by

a government. This interpretation provides guidance about the criteria for recognising

a liability to pay a levy (charge, tax or other similar amount) imposed by the

government in accordance with laws and regulations that are outside the scope of IAS

12.

At the date when these financial statements have been approved for issue, there are several new

standards and interpretations as well as amended standards and interpretations, issued but not yet in

force for annual periods beginning on or after 1 January 2015, which have not been adopted by the

Company for early application. The management has decided that out of them the following are likely

to have a potential impact in the future for changes in the accounting policies, and in the classification

and value of reporting items in Company's financial statements for subsequent periods, namely:

• IFRS 9 "Financial Instruments" (in force for annual periods beginning on or after 1 January 2018 – not endorsed by EC);



• IFRS 7 (amended) "Financial Instruments: Disclosures" – regarding the relief from the requirement to restate comparatives and the related thereto disclosures when

applying IFRS 9 (in force for annual periods beginning on or after 1 January 2018 –

not endorsed by EC);

• Annual Improvements to IFRSs 2010-2012 Cycle (December 2013) – improvements to IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24, IAS 38 (in force for annual periods

beginning on or after 1 July 2014 – endorsed by EC for annual periods as of

1 February 2015).

• IFRS 15 "Revenue from Contracts with Customers" (in force for annual periods beginning on or after 1 January 2018 – not endorsed by EC). IAS 7 (amended)

"Statement of Cash Flows" – regarding disclosure initiative (in force for annual

periods beginning on or after 1 January 2017 – not endorsed by EC).

• IAS 12 (amended) "Income Taxes" (in force for annual periods beginning on or after 1 January 2017 – not endorsed by EC) – recognition of deferred tax assets for

unrealised losses.

• IAS 1 (amended) "Presentation of Financial Statements" – regarding disclosure initiative (in force for annual periods beginning on or after 1 January 2016 – endorsed

by EC).

In addition, with regard to the stated below new standards, amended/revised standards and new

interpretations, issued but not yet in force for annual periods beginning on 1 January 2015, the

management has judged that they are unlikely to have a potential impact for changes in the accounting

policies, and in the classification and value of reporting items in Company's financial statements,

namely:

• IAS 19 (as revised in 2011) "Employee Benefits" (in force for annual periods beginning on or after 1 July 2014 – endorsed by EC for annual periods as of 1 February 2015);

• IFRS 14 "Regulatory Deferral Accounts" (in force for annual periods beginning on or after 1 January 2016 – EC has postponed the endorsement process for this interim

standard until the issue of the final standard);

• IFRS 16 "Leases" (in force for annual periods beginning on or after 1 January 2019 – not endorsed by EC);

• Annual Improvements to IFRSs 2012-2014 Cycle (September 2014) – improvements to IFRS 5, IFRS 7, IAS 19, IAS 34 (in force for annual periods beginning on or after 1

January 2016 – endorsed by EC);



• IFRS 10 (amended) "Consolidated Financial Statements" and IAS 28 (amended) "Investments in Associates and Joint Ventures" – regarding the sale or contribution of

assets between an investor and its associate or joint venture (in force for annual

periods beginning on or after 1 January 2016 – the EC endorsement procedure has

been postponed for an indefinite period).

• IAS 27 (amended) "Separate Financial Statements" – regarding the equity method in separate financial statements (in force for annual periods beginning on or after

1 January 2016 – endorsed by EC);

• IAS 16 (amended) "Property, Plant and Equipment" and IAS 41 (amended) "Agriculture" – regarding bearer plants (in force for annual periods beginning on or

after 1 January 2016 – endorsed by EC);

• IAS 16 (amended) "Property, Plant and Equipment" and IAS 38 (amended) "Intangible Assets" – regarding the acceptable methods of depreciation and amortisation (in force

for annual periods beginning on or after 1 January 2016 – endorsed by EC);

• IFRS 11 (amended) "Joint Arrangements" – regarding acquisitions of interests in joint operations (in force for annual periods beginning on or after 1 January 2016 –

endorsed by EC);

• IFRS 10 (amended) "Consolidated Financial Statements", IFRS 12 (amended) "Disclosure of Interests in Other Entities" and IAS 28 (amended) "Investments in

Associates and Joint Ventures" – regarding exemptions from consolidation for

investment entities (in force for annual periods beginning on or after 1 January 2016 –

not endorsed by EC);

The financial statements of the Company have been prepared on a historical cost basis.

The Company keeps its accounting books in Bulgarian Levs (BGN), which is accepted as being its

presentation currency. The data in the financial statements and the notes thereto is presented in

thousand Bulgarian Levs (BGN'000) except where it is explicitly stated otherwise.

The presentation of financial statements in accordance with International Financial Reporting

Standards requires the management to make best estimates, accruals and reasonable assumptions that

affect the reported values of assets and liabilities, the amounts of income and expenses and the

disclosure of contingent receivables and payables as at the date of the financial statements. These

estimates, accruals and assumptions are based on the information, which is available at the date of the

financial statements, and therefore, the future actual results might be different from them (whereas in

the conditions of financial crisis the uncertainties are more significant). The items presuming a higher

level of subjective assessment or complexity or where the assumptions and accounting estimates are

material for the financial statements, are disclosed in Note 2.20.



2.2. Comparatives

In these financial statements the Company presents comparative information for one prior year. Where

necessary, comparative data is reclassified (and restated) in order to achieve comparability in view of

the current year presentation changes.

2.3. Functional currency and recognition of exchange differences

The functional and presentation currency of the Company is the Bulgarian Lev. Starting from 1 July

1997, the Bulgarian Lev was fixed under the Bulgarian National Bank Act to the German Mark at the

ratio of BGN 1 : DEM 1, and with the introduction of the Euro as the official currency of the European

Union, it was fixed to the Euro at a ratio of BGN 1.95583 : EUR 1.

Upon its initial recognition, a foreign currency transaction is recorded in the functional currency

whereas the exchange rate to BGN at the date of the transaction or operation is applied to the foreign

currency amount. Cash and cash equivalents, receivables and payables, as monetary reporting items,

denominated in a foreign currency, are recorded in the functional currency by applying the exchange

rate as quoted by the Bulgarian National Bank (BNB) for the last working day of the respective month.

At 31 December, these amounts are valued in BGN at the closing exchange rate of BNB.

The non-monetary items in the statement of financial position, which have been initially denominated

in a foreign currency, are accounted for in the functional currency by applying the historical exchange

rate at the transaction date and are not subsequently revalued at the closing exchange rate.

Foreign exchange gains or losses arising on the settlement or recording of foreign currency commercial

transactions at rates different from those, at which they were converted on initial recognition, are

recognised in the statement of comprehensive income (within profit or loss for the year) in the period

in which they arise and are presented under 'other operating income or losses, net'.

2.4. Revenue

Revenue is recognised on accrual basis to the extent, and in the way, the economic benefits flow to the

Company and respectively, the business risks are born thereby, and as far as revenue can be reliably

measured.

Upon rendering of services, revenue is recognised by reference to the stage of completion of the

transaction at the end of each reporting period, if this stage as well as the transaction and completion

costs, can be measured reliably. Service revenue usually includes: fees for maintenance of the registry

of shareholders/bond holders; annual membership fees for the Depository; fees for

registration/deregistration of securities issue; fees for investment intermediary services, etc. and are

recognised for the period of service rendering.



Upon sale of non-current assets, revenue is recognised when all significant risks and rewards of

ownership have passed to the buyer.

Finance income is included in the statement of comprehensive income (within profit or loss for the

year) when earned and is comprised of interest income on placed investment-purpose deposits. foreign

exchange gains on foreign currency transactions and loans, net. They are presented separately from

finance costs in the statement of comprehensive income (within profit or loss for the year). Interest

income is recognised as accrued and is included in current profit or loss proportionally with the time of

the existence of the respective interest-bearing asset based on the effective interest method.

Interest income on current accounts is included in the statement of comprehensive income (within

profit or loss for the year) when earned and is presented in the item 'other operating income or losses,

net'.

Net foreign exchange differences related to cash, trade receivables and payables, denominated in

foreign currency, are recognised in the statement of comprehensive income (within profit or loss for

the year) when they arise and are presented net under 'other operating income or losses, net'.

Dividend income is recognised in current profits or losses and is presented in the statement of

comprehensive income on the date that the Company’s right to receive payment is established as a

result of a decision taken by shareholders for the distribution of accumulated profits and reserves.

Dividends and interest from investment in shares and securities are treated and presented in the

statement of comprehensive income (within profit or loss for the year) as 'finance income'.

2.5. Expenses

Expenses are recognised as they are incurred, following the accrual and matching concepts (to the

extent that this would not cause items unsatisfying the definitions of assets and liabilities to be

recognised in the statement of financial position).

Deferred expenses are put off and recognised as current expenses in the period when the contracts,

whereto they refer, are performed.

Finance costs are included in the statement of comprehensive income (within profit or loss for the year)

when incurred and are comprised of interest expense, including bank charges and other direct expenses

on loans and bank guarantees, exchange differences from foreign currency loans (net).

Expenses related with deductions from Company's operating revenue for setting aside a Guarantee

Fund are presented on the line 'other expenses' in the statement of comprehensive income (within profit

or loss for the year).



2.6. Machinery and equipment

Machinery and equipment (tangible fixed assets) are presented in the financial statements at historical

cost of acquisition (cost) less the accumulated depreciation and any impairment losses in value.

Initial measurement

Upon their initial acquisition machinery and equipment are valued at cost, which comprises the

purchase price, including customs duties and any directly attributable costs of bringing the asset to

working condition for its intended use. Directly attributable costs include the cost of site preparation,

initial delivery and handling costs, installation costs, professional fees for people involved in the

project, non-refundable taxes etc.

The Company has set a value threshold of BGN 700, below which the acquired assets, regardless of

having the features of non-current assets, are treated as current expense at the time of their acquisition.

Subsequent measurement

The chosen by the Company approach for subsequent measurement of machinery and equipment, is the

cost model under IAS 16, i.e. acquisition cost (cost) less any accumulated depreciation and any

accumulated impairment losses in value.

Subsequent costs

Repair and maintenance costs are recognised as current expenses as incurred. Subsequent expenses

incurred in relation to machinery and equipment having the nature of replacement of certain

components, significant parts and aggregates or improvements and restructuring, are capitalised to the

carrying amount of the respective asset whereas the residual useful life is reviewed at the capitalisation

date. At the same time, the non-depreciated part of the replaced components is derecognised from the

carrying amount of the assets and is recognised in the current expenses for the period of restructure.

Depreciation methods

The Company applies the straight-line depreciation method for tangible fixed assets. Depreciation of

an asset begins when it is available for use. The useful life per group of assets has been determined

considering: the physical wear, the characteristic features of the equipment, the intentions for future

use and the expected obsolescence, and is as follows:

•computer hardware, mobile phones – from 2 to 4 years;

• motor vehicles – 4 years;

• furniture and fixtures – 7 years.



The useful life, set for any tangible fixed asset, is reviewed at the end of each year and in case of any

material deviation from the future expectations on the period of use, the latter is adjusted prospectively.

Impairment of assets

The carrying amounts of machinery and equipment are reviewed for impairment when events or

changes in circumstances indicate that they might significantly differ from their recoverable amount. If

any indications exist that the estimated recoverable amount of an asset is lower than its carrying

amount, the latter is adjusted to the recoverable amount of the asset. The recoverable amount of an

item of tangible fixed assets is the higher of the fair value less costs to sell or the value in use. In

assessing value in use, the estimated future cash flows are discounted to their present value using a pre-

tax discount rate that reflects current market conditions and assessments of the time value of money

and the risks, specific to the particular asset. Impairment losses are recognised in the statement of

comprehensive income (within profit or loss for the year).

Gains and losses on disposal (sale)

Tangible fixed assets are derecognised from the statement of financial position when they are

permanently disposed of and no future economic benefits are expected therefrom or on sale. The gains

or losses arising from the sale of an item of machinery and equipment are determined as the difference

between the consideration received and the carrying amount of the asset at the date of sale. They are

stated net under 'other operating income or losses, net' in the statement of comprehensive income

(within profit or loss for the year).

2.7. Intangible assets

Intangible assets are stated in the financial statements at acquisition cost (cost) less accumulated

amortisation and any impairment losses in value. They include mainly licences for the software used

by the Company.

Amortisation methods

The Company applies the straight-line amortisation method for the intangible assets with determined

useful life from 3 to 7 years.

Impairment of assets

The carrying amount of the intangible assets is subject to review for impairment when events or

changes in the circumstances indicate that the carrying amount might exceed their recoverable amount.

Then impairment is recognised in the statement of comprehensive income (within profit or loss for the

year).



Gains and losses on disposal (sale)

Intangible assets are derecognised from the statement of financial position when they are permanently

disposed of and no future economic benefits are expected therefrom or on sale. The gains or losses

arising from the sale of an item of intangible assets are determined as the difference between the

consideration received and the carrying amount of the asset at the date of sale. They are stated net

under 'other operating income or losses, net' on the face of the statement of comprehensive income

(within profit or loss for the year).

2.8. Available-for-sale investments

Long-term investments in available-for-sale financial assets are non-derivative financial assets, which

represent (a) debt securities with fixed or determinable payments and fixed maturity, and (b) shares of

other companies (minority interest).

Initial measurement

Available-for-sale investments (financial assets) are initially recognised at cost, being the fair value of

the consideration given including the direct expenses associated with the investment (financial asset)

acquisition.

Subsequent measurement

The available-for-sale investments (financial assets), held by the Company, are subsequently measured

at fair value (Note 2.19).Long-term investments, representing debt securities with fixed or

determinable payments and fixed maturity, are subsequently measured and presented in the statement

of financial position at fair value while complying with the following policy: setting up the fair value

directly on market price basis (dealer prices) – 'last bid price' at the last business day of the respective

reporting period (year), i.e. direct (unadjusted) prices (Level 1).

As an exception, for closed-end companies/entities for which it is difficult to find analogous market

transactions data and/or due to the circumstance that the future operation of these companies is related

to certain doubts so that reasonable and justifiable long-term assumptions are not possible for the

calculation of the fair value of their shares through other alternative valuation methods, the

measurement is made at cost.

The effects of subsequent revaluation of securities to fair value are presented in a separate component

of the statement of comprehensive income (within other comprehensive income) and are recognised in

the statement of comprehensive income (within profit or loss for the year) on disposal (sale) of the

respective investment by being stated as ‘finance income’ or 'finance costs'.



Interest income, associated with long-term available-for-sale investments (financial assets)

representing debt securities with fixed or determinable payments and fixed maturity, is recognised and

presented based on the effective income in the statement of comprehensive income (within profit or

loss for the year) within the item 'finance income'.

Dividend income associated with long-term investments (financial assets) representing shares in other

companies (minority interest) is recognised as current income and presented in the statement of

comprehensive income (within profit or loss for the year) within the item 'finance income'.

The available-for-sale investments are reviewed at the end of each reporting period and if conditions

for permanent impairment are identified, the impairment is recognised in the statement of

comprehensive income (within profit or loss for the year) under 'finance costs'.

Where conditions for impairment are identified, the latter is determined as the difference between the

carrying amount and the recoverable value of the investment and is recognised in the statement of

comprehensive income (within profit or loss for the year) unless a positive reserve for this investment

was formed in prior periods – then the impairment is at first covered at the account of this reserve and

is presented net in the statement of comprehensive income (within other comprehensive income).

2.9. Investments in associates

Long-term investments representing shares in associates are presented in the financial statements at

acquisition cost (cost) being the fair value of the consideration paid for the investment including any

directly attributable costs incurred on the acquisition less accumulated impairment.

The investments in associates, held by the Company, are subject to review for impairment. Where

conditions for impairment are identified, the impairment is recognised in the statement of

comprehensive income (within profit or loss for the year) under 'finance costs'.

In purchases and sales of investments in associates the trade date (conclusion of the deal) is applied.

Dividend income associated with investments in associates is recognised as current income and

presented in the statement of comprehensive income (within profit or loss for the year) within the item

'finance income' when the entitlement thereto is identified..

Investments are derecognised when the rights related thereto are transferred to third parties as a result

of occurrence of legal grounds for that and thus the significant influence of the specific investment type

over the economic benefits is being lost. Gain/(loss) on disposal is presented respectively as 'finance

income' or 'finance costs' in the statement of comprehensive income (within profit or loss for the year).



2.10. Trade and other receivables

Trade receivables are accounted for and recognised in the financial statements at fair value based on

the original invoice amount (cost) less any allowance for uncollectable debts.

An estimate allowance for doubtful and bad debts is made when significant uncertainty exists as to the

collectability of the full amount or a part of it. Bad debts are written-off when the legal grounds for this

are available. When a particular receivable is assessed as uncollectable, it is written-off against the

allowance account (Note 2.16.1).

2.11. Cash and cash equivalents

Cash and cash equivalents include cash in hand, current accounts and term bank deposits, or such with

original maturity of up to 3 months, the funds which are freely available to the Company in accordance

with the terms and conditions agreed with the banks within the deposit term regardless of the original

maturity of the respective deposit. (Note 2.16.1).

Bank deposits represent receivables from banks under invested free cash resources placed as term

deposits with original maturity of up to 3 months, the funds of which are not freely available to the

Company during the term of the respective deposit and/or the conditions are restrictive.

Deposits are valued and presented in the statement of financial position at amortised cost.

The Settlement Guarantee Fund includes available amounts at accounts of the Central Depository,

which are due to the settlement system participants upon membership termination. (Notes 2.11 and 19).

The following rules are applied for the purposes of the statement of cash flows:

• the following are excluded from cash and cash equivalents: (a) interest accrued on term deposits placed with banks if and as far as on eventual earlier termination of a contract with a

bank, the Company would lose the interest accrued as at 31 December; (b) cash in term bank

deposits with original maturity of more than 3 months for which the Company has limits or

significant penalties and restrictions for free access over the deposit term; as well as (c) cash in

permanently blocked accounts;

• cash proceeds from customers and cash paid to suppliers are presented at gross amount, including value added tax (20%) under the movements in assets and liabilities participating in

operating activities;

• paid refundable VAT amounts paid on supply of machinery and equipment and intangible assets are presented as cash paid to suppliers within the changes of trade and other payables

under the movements in assets and liabilities participating in operating activities;

• interest received on current accounts are presented under the movements in assets and liabilities participating in operating activities;



• interest received on term deposits with banks is presented under investment activities as far as in their substance these operations represent investment of Company's free resources;

• the cash flows of the Settlement Guarantee Fund are included in the cash flows from operating activities and respectively, their change is presented also separately from the change in the

total cash flows.

2.12. Guarantee funds

Guarantee Fund for Compensation of Damages

The Central Depository sets aside a specific guarantee fund to compensate damages arising in the

course of its operation and caused to issuers and holders of securities as a result of culpable actions or

inactivity on the part of its employees as well as damages caused by loss of data on dematerialised

securities. This fund is set aside based on the provisions of the Public Offering of Securities Act

(POSA, Art. 132).

The resources of the guarantee fund are as follows:

• up to 29 July 2011: from (a) contributions from Central Depository members; and (b) 50% of the excess of revenue over the expenses for the respective period; and

• for the period 30 July 2011 – 31/12/2015: from (a) contributions from Central Depository members; and (b) 1% of the operating revenue earned for the respective period.

Each member of the Central Depository shall be obliged to make an initial (entry) contribution to this

guarantee fund as well as an annual cash contribution at an amount set by the Rules and Regulations of

the Depository. The amounts of the guarantee fund, resultant from contributions made by Depository

members, have the nature of and are presented as a liability as far as they are payable and reimbursable

to the Depository members at the time of their voluntary membership termination (Note 25).

Other sources added to this guarantee fund of the Central Depository include loans, donations, foreign

aid, etc. These amounts as well as the deductions from Company's income/revenue (as per item "b"

above) are not refundable to Depository members and are therefore presented as a separate component

of equity (Note 19).

The amounts of this guarantee fund are invested mainly in bank deposits and in securities issued or

guaranteed by the Bulgarian state. The current control on the investment of these funds is performed by

the Board of Directors of the Depository and the decisions thereof are operationally executed by the

Executive Director of the Company.



Guarantee Fund for Settlement of Financial Instruments

The Central Depository also establishes a Guarantee Fund for Settlement of Financial Instruments

(Settlement Guarantee Fund - SGF), which to ensure the net settlement of liabilities under transactions

in financial instruments concluded in a regulated market of financial instruments. It is set aside within

the Company on the grounds of an amendment to Ordinance No 8 of FSC, promulgated in State

Gazette, issue 24 of 12 March 2013, leading to a relevant amendment to the Rules and Regulations on

the operation of the Central Depository, approved by FSC – Decision No 537 of 10 July 2014.

The sources of find raising include the initial (entry) and monthly contributions of the participants to

the settlement system, the amounts imposed under transactions in financial instruments as penalties for

delay and other sources.

The amounts of the guarantee fund, resultant from contributions made by Depository members, have

the nature of and are presented as a liability (Note 25). In case of fund liquidation, after the payment of

its obligations, if any, the remaining assets are distributed between the fund members, which are

participants in the settlement system, in accordance with their monthly contributions and the

accumulated investment income after deducting the incurred maintenance costs.

The amounts in this guarantee fund may be invested only in securities, issued or guaranteed by the

Bulgarian state, in bank deposits and in debt securities, issued by member states of the Eurozone with a

credit rating not less than the highest credit rating of the Republic of Bulgaria. There are specific

requirements to the investment approach:

(a) not less than 50 (fifty) percent of the fund assets shall be maintained in a separate current

account with the depository bank;

(b) up to 50 (fifty) percent of the fund amount shall be kept in separate bank deposits; whereas,

(c) up to 20 (twenty) percent may be invested in securities (in a separate portfolio); and

(d) not less than 10 (ten) percent of the fund assets should be cash placed in bank deposits (on

demand or at 3–month term) or debt securities issued or guaranteed by the Bulgarian state with

residual term to maturity of up to 90 (ninety) days.

The investment income from accumulated amounts shall be used to cover direct administrative or other

expenses related with the activities of the fund. The total annual amount of administrative expenses

may not exceed the income from fund management for the same period.

The control on the process of investing the fund resources is performed currently by the SGF

Governance Committee and the decisions thereof are operationally executed by Company’s Executive

Director.



2.13. Trade and other payables

Trade and other current amounts payable are accounted for and presented in the financial statements at

original invoice amount (acquisition cost), which is the fair value of the consideration to be paid in the

future for goods and services received. In case of payments deferred over a period exceeding the

common credit terms, where no additional interest payment has been envisaged or the interest

considerably differs from the common market interest rates, the payables are initially valued at their

fair value and subsequently – at amortised cost, after deducting the interest incorporated in their

nominal value and determined following the effective interest method (Note 2.16.2).

2.14. Pensions and other payables to personnel under the social security and labour legislation

The employment and social security relations with the workers and employees of the Company are

based on the provisions of the Labour Code and the effective social security legislation in Bulgaria.

Short-term benefits

Short-term benefits in the form of remuneration, bonuses and social payments and benefits (due for

payment within 12 months after the end of the period when the employees have rendered the service or

have satisfied the required terms) are recognised as an expense in the statement of comprehensive

income (within profit or loss for the year) for the period when the service thereon has been rendered

and/or the requirements for their receipt have been met, unless a particular IFRS requires capitalisation

thereof to the cost of an asset, and as a current liability (less any amounts already paid and deductions

due) at their undiscounted amount.

At the end of each reporting period, the Company measures the estimated costs on the accumulating

compensated absences, which amount is expected to be paid as a result of the unused entitlement. The

measurement includes the estimated amounts of employee's remuneration and the statutory social

security and health insurance contributions due by the employer thereon.

Long-term retirement benefits

Defined contribution plans

The major duty of the Company as an employer in Bulgaria is to make the mandatory social security

contributions for the hired employees to the Pensions Fund, the Supplementary Mandatory Pension

Security (SMPS) Fund, to the General Diseases and Maternity (GDM) Fund, the Unemployment Fund,

the Labour Accident and Professional Diseases (LAPD) Fund, the Guaranteed Receivables of Workers

and Employees (GRWE) Fund and for health insurance. The rates of the social security and health

insurance contributions are defined annually in the Law on the Budget of State Social Security and the

Law on the Budget of National Health Insurance Fund for the respective year. The contributions are



split between the employer and employee in line with rules of the Social Security Code (SSC) at the

ratio 60:40 (2014: 60:40).

These pension plans, applied by the Company in its capacity as an employer, are defined contribution

plans. Under these plans, the employer pays defined monthly contributions to the government funds as

follows: Pensions Fund, GDM Fund, Unemployment Fund, LAPD Fund as well as to universal and

professional pension funds – on the basis of rates fixed by law, and has no legal or constructive

obligation to pay further contributions if the funds do not hold sufficient means to pay the respective

individuals the benefits they have worked-out over the period of their service. The obligations referring

to health insurance are analogous.

There is no established and functioning private voluntary social security fund at the Company.

The contributions, payable by the Company under defined contribution plans for social security and

health insurance, are recognised as a current expense in the statement of comprehensive income

(within profit or loss for the year) unless a particular IFRS requires this amount to be capitalised to the

cost of an asset, and as a current liability at their undiscounted amount along with the accrual of the

respective employee benefits to which the contributions refer and in the period of rendering the

underlying service.

Defined benefit plans

In accordance with the Labour Code, the Company in its capacity as an employer in Bulgaria is obliged

to pay an indemnity to its personnel when coming of age for retirement, at an amount which,

depending on the length of service with the entity, varies between two and six gross monthly salaries at

the employment termination date. In their nature these are unfunded defined benefit schemes.

The calculation of the amount of these liabilities necessitates the participation of qualified actuaries in

order to determine their present value at the date of the financial statements, at which they shall be

presented in the statement of financial position, and respectively, the change in their value – in the

statement of comprehensive income as follows: (a) current and past service costs, interest costs and the

gains/losses on a curtailment and settlements are recognised immediately when incurred and are

presented in current profit or loss under 'employee benefits expense'; and (b) effects from

remeasurement of obligations that in substance represent actuarial gains and losses are recognised

immediately when occurred and are presented to other comprehensive income in the item

'remeasurements of defined benefit pension plans'. Actuarial gains and losses arise from changes in the

actuarial assumptions and experience adjustments.

At the end of each reporting period, the Company assigns certified actuaries who issue a report with

their calculations about the long-term retirement benefit obligations to personnel. For this purpose,

they apply the Projected Unit Credit Method. The present value of the defined benefit obligation is

determined by discounting the estimated future cash flows, which are expected to be paid within the



maturity of this obligation, and using the interest rates of long-term government bonds of similar term,

quoted in Bulgaria where the Company itself operates.

Termination benefits

In accordance with the local provisions of the employment and social security regulations in Bulgaria,

the Company as an employer is obliged, upon termination of the employment contracts prior to

retirement, to pay certain types of indemnities.

The Company recognises employee benefit obligations on employment termination before the normal

retirement date when it is demonstrably committed, based on a publicly announced plan, including for

restructuring, to terminating the employment contract with the respective individuals without

possibility of withdrawal or in case of formal issuance of documents for voluntary redundancy.

Termination benefits due more than 12 months are discounted and presented in the statement of

financial position at their present value.

2.15. Share capital and reserves

Central Depository AD is a joint-stock company and is obliged to register with the Commercial

Register a specified share capital, which should serve as a security to the Company's creditors. The

shareholders are liable for the obligations of the Company up to the amount of the share of the capital

held by each of them and may claim refunding of this share only in case of winding-up of the

Company (specific legal status – Note 1.1).

The Company reports its share capital at the nominal value of the shares registered in the court.

According to the requirements of the Commercial Act and the Articles of Association, the Company is

obliged to set aside a Reserve Fund by using the following sources:

for the period 1 January 2011 – 29 July 2011:

• 50% of the excess of revenue over expenses for the period;

• other sources as provided for by the Articles of Association or under a decision of the General Meeting.

for the period 30 July 2011 – 31 December 2015:

• at least one tenth of the profit, which should be allocated to the Fund until its amount reaches one tenth of the share capital or any larger amount as may be decided by the General Meeting

of Shareholders;

• any premium received in excess of the nominal value of shares upon their issue (share premium reserve);



• other sources as provided for by a decision of the General Meeting.

The Reserve Fund may be used to cover the losses incurred in the current or prior years. When the

amount of the Fund reaches the minimal value specified in the Articles of Association the excess may

be used for increasing the share capital.

The Guarantee Fund is a specific component of equity set aside until 29 July 2011 at the account of

mandatory distribution of the generated by the Company gains/income (excess of revenue over

expenses – 50%) and as from 30 July 2011 – 1% of (based on) Company's operating revenue.

Other reserves are set aside at the account of generated profit distribution – by virtue of the General

Meeting of Shareholders decision.

Until 29 July 2011, according to the law, Central Depository AD did not distribute dividends to its

shareholders.

2.16. Financial instruments

2.16.1. Financial assets

The Company classifies its financial assets in two categories: (a) 'loans and receivables', which

represent trade and other receivables, bank deposits and cash and cash equivalents, and (b) 'available-

for-sale financial assets'. The classification depends on the nature and purpose (designation) of the

financial assets at the date of their acquisition. The management determines the classification of

Company's financial assets at the time of their initial recognition on the statement of financial position.

The Company usually recognises its financial assets on the statement of financial position on the trade

date, being the date on which the Company commits (undertakes an ultimate engagement) to purchase

the respective financial assets. All financial assets are initially measured at their fair value plus the

directly attributable transaction costs.

Financial assets are derecognised from the Company's statement of financial position when the rights

to receive cash (flows) from these assets have expired or have been transferred, and the Company has

transferred substantially all the risks and rewards of ownership of the asset to another entity (person). If

the Company retains substantially all risks and rewards associated with the ownership of a particular

transferred financial asset, it continues to recognise the transferred asset in its statement of financial

position but also recognises a secured liability (a loan) for the consideration received.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are

not quoted in an active market. They are measured in the statement of financial position at their

amortised cost using the effective interest method less any allowance for impairment. These assets are

included in the group of current assets when having maturity within 12 months or within a common



operating cycle of the Company while the remaining ones are carried as non-current assets. This group

of financial assets includes: trade receivables, other receivables from counterparts and third parties,

cash and cash equivalents from the statement of financial position. Interest income on loans and

receivables is recognised on effective interest basis except for short-term receivables with maturity of

less than 3 months where the recognition of such interest is unjustifiable as being immaterial and

within the common credit terms. It is presented in the statement of comprehensive income (within

profit or loss for the year) under ‘other operating income’ (Notes 2.9 and 2.10).

At the end of each reporting period, the Company assesses whether events and circumstances have

occurred that indicate the existence of objective evidence necessitating loans and receivables to be

impaired (Note 2.20).

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative assets, representing (a) debt securities with fixed

or determinable payments and fixed maturity (government securities); and (b) shares in the capital of

other companies (minority interest), and are included within non-current assets, except where the

Company intends to sell them in the following 12 months and is actively searching for a buyer (Note

2.8).

Available-for-sale financial assets are usually measured at fair value – for securities quoted in a stock

exchange. The fair value of these securities is determined by applying stock exchange bid price for the

last day of the month at the date of the statement of financial position unless the volume of transactions

with them is very limited – then stock exchange prices are adjusted by applying other valuation

methods. As an exception, shares in the capital of other companies (minority interest) are measured at

acquisition cost – for closed-end companies for which it is difficult to find analogous market

transactions data or due to the circumstance that the future operation of these companies is related to

certain doubts so that reasonable and justifiable long-term assumptions are not possible for the

calculation of the fair value of their shares through other alternative valuation methods.

The effects, gains or losses, of revaluation to fair value of the available-for-sale investments are

included in the statement of comprehensive income (within other comprehensive income) under the

item 'net change in fair value of available-for-sale financial assets' and are accumulated to a separate

equity component – 'available-for-sale financial assets reserve'.

Where subsequent permanent impairment of an available-for-sale investment is identified, the amount

of impairment loss is recognised in the statement of comprehensive income (within profit or loss for

the year) as 'finance costs'.

On each sale of investments of this type, the realised gains or losses are recognised in the statement of

comprehensive income (within profit or loss for the year) as 'finance income' or respectively, 'finance

costs'.



The recycling of accumulated effects from change in the fair value of available-for-sale investments

are presented with other comprehensive income (in the item 'net change in fair value of available-for-

sale financial assets'), net of those resulting from new revaluations for the period.

Dividends on shares, classified as available-for-sale financial assets, are recognised and accounted for

under the item 'finance income' in the statement of comprehensive income (within profit or loss for the

year) when the Company's right to such dividends is established.

The available-for-sale investments are reviewed at each reporting date for events or circumstances

indicating the existence of objective evidence for impairment of a particular financial asset or group of

assets. They are impaired if their carrying amount is higher than the expected recoverable amount. The

recognised impairment loss is equal to the difference between the acquisition cost less the repayments

and their recoverable amount, which is accepted to be equal to the present value of the expected future

cash flows, discounted at the current interest rate or through the yield for similar financial assets or

determined by applying another valuation method and model appropriate for the instrument.

2.16.2. Financial liabilities and equity instruments

The Company classifies debt and equity instruments either as financial liabilities or as equity

depending on the substance and the conditions of the contractual arrangements with the respective

counterpart regarding these instruments.

Financial liabilities

The financial liabilities include loan, payables to suppliers and other counterparts, including payables

related to initial and subsequent contributions of investment intermediaries to the Guarantee Fund.

They are initially recognised in the statement of financial position at fair value net of the directly

attributable transaction costs and are subsequently measured at amortised cost using the effective

interest method (Note 2.13).

2.17. Income taxes

Current income taxes are determined in accordance with the requirements of the Bulgarian tax

legislation – the Corporate Income Taxation Act. The first tax period for the Company is 30 July –

31 December 2011 in line with the changed tax status of the Central Depository with the amendments

of POSA (Note 1.1). The nominal income tax rate for year 2015 was 10 % (2014: 10%).

Deferred income taxes are determined using the liability method on all of Company's temporary

differences between the carrying amounts of the individual assets and liabilities and their tax bases,

existing at the reporting date.



Deferred tax liabilities are recognised for all taxable temporary differences, with the exception of those

originating from recognition of an asset or liability, which has not affected the accounting and the

taxable profit/(loss) at the transaction date.

Deferred tax assets are recognised for all deductible temporary differences and the carry-forward of

unused tax losses, to the extent that it is probable they will reverse and a taxable profit will be available

or taxable temporary differences might occur, against which these deductible temporary differences

can be utilised, with the exception of the differences arising from the recognition of an asset or

liability, which has affected neither the accounting nor taxable profit/(loss) at the transaction date.

The carrying amount of all deferred tax assets is reviewed at each statement of financial position date

and reduced to the extent that it is probable that they will reverse and sufficient taxable profit will be

generated or taxable temporary differences will occur in the same period, whereby they can be

deducted or set-off.

Deferred taxes, related to items that are accounted for as other components of comprehensive income

or an equity item in the statement of financial position, are also reported directly in the respective

component of the comprehensive income or the equity item in the statement of financial position.

The deferred tax assets of the Company are presented net against its deferred tax liabilities when and as

much as it is the tax payer for them in the respective jurisdiction, and this is only in cases where the

Company is legally entitled to perform or receive net payments of current tax liabilities or income tax

receivables.

Deferred tax assets and liabilities are measured at the tax rates and on the bases that are expected to

apply to the period and type of operations when the asset is realised or the liability – settled (repaid) on

the grounds of the tax laws that have been enacted or substantively enacted, and at tax rates of the

country under the jurisdiction of which the respective deferred asset or liability is expected to be

realised or settled.

The deferred income tax liabilities of the Company as at 31 December 2015 were assessed at a rate,

valid for 2016, at the amount of 10 %.

2.18. Government grants

Gratuitous aids from public institutions (municipal, government and international, including under the

procedure of using the European funds and programmes) are initially recognised as deferred income

(financing) in the statement of financial position when there is reasonable assurance that they will be

received by the Company and that the latter has complied and complies with the associated thereto

requirements. They are included in current or non-current liabilities depending on which future

reporting periods they refer or cover expenses.



Government grants that compensate the Company for expenses incurred are recognised in the

statement of comprehensive income (within profit or loss for the year) on a systematic basis in the

same period in which the expenses are recognised – within 'other operating income'.

Government grants that compensate investment expenses incurred to acquire an asset are recognised in

the statement of comprehensive income (within profit or loss for the year) on a systematic basis over

the useful life of the asset usually at the amount of the recognised depreciation charge – within 'other

operating income'.

2.19. Fair value measurement

Some of Company's assets and liabilities are measured and presented and/or just disclosed at fair value

for financial reporting purposes. Such are the available-for-sale financial assets and certain trade and

other receivables and payables, which are measured on a recurring basis.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between independent market participants at the measurement date. Fair value is an exit

price and is based on the assumption that the sale transaction will take place either in the principal

market for this asset or liability or in the absence of a principal market – in the most advantageous

market for the asset or liability. Both the designated as a principal market and the most advantageous

market are markets to which the Company must have an access.

Fair value is measured from the perspective of using the assumptions that potential market participants

would use when pricing the respective asset or liability assuming that market participants act in their

economic best interest.

The Company applies various valuation techniques that would be relevant to the specific features of

the respective conditions and for which its has sufficient available inputs while trying to use at a

maximum the publicly observable information, and respectively, to minimize the use of unobservable

information. It uses mainly the income approach and the valuation technique predominantly applied is

that of the discounted cash flows method.

All assets and liabilities that are measured and/or disclosed in the financial statements at fair value, are

categorised within the following fair value hierarchy, namely:

• Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities;

• Level 2 — Valuation techniques that use inputs other than directly quoted prices but are observable, either directly or indirectly, including where the quoted prices are subject to

significant adjustments; and

• Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.



The Company applies mainly Level 1 and Level 3 fair value.

The investments in the form of available-for-sale financial assets, held by the Company, representing

debt securities with fixed or determinable payments and fixed maturity (government securities –

bonds), are measured and presented in the statement of financial position at fair value (Level 1) as far

as there is an active market for them – with sufficient volumes and frequency of transactions as well as

currently observable market and price data.

Company's measurement policy includes a choice of the lower of both levels for the respective type of

bonds issue:

(a) for global bond issues:

- last 'bid price' of the respective issues of bonds, published by international information

agencies in the field of financial instruments Bloomberg, for the last business day of the

reporting period (year), and

- 'median value' of at least three additional quotations of last 'bid price' for the last business day

of the reporting period (year), obtained from actively trading dealers (Bulgarian banks and

investment intermediaries) of the respective issue of bonds.

(b) for domestic bond issues (traded on the local market):

- last 'bid price' of the respective issues of bonds, published by international information

agencies in the field of financial instruments (Reuters or Bloomberg), for the last business day

of the reporting period (year), and

- 'lowest value' of at least three additional quotations of last 'bid price' for the last business day

of the reporting period (year), obtained from actively trading dealers (Bulgarian banks and

investment intermediaries) of the respective issue of bonds.

For assets and liabilities that are recognised at fair value in the financial statements on a recurring

basis, the Company determines at the end of each reporting period whether transfers between levels in

the fair value hierarchy are deemed to be made for a particular asset or liability depending on the inputs

available and used at that date.

The Company has developed internal rules and procedures for measuring the fair value of various

types of assets and liabilities.

In accordance with Company's accounting policy, at the end of each reporting period the designated

individual performs a general analysis of collected in advance information about the movement in the

values of assets and liabilities that are subject to valuation or to a disclosure at fair value, the type of

available data and the possible factors for the observed changes, and proposes for approval to the

Executive Director of the Company, the approach for measuring the fair value of the respective assets

and liabilities at that date. Where necessary, this is explicitly consulted with external appraisers.



The results from the process of fair value measurement are presented to the independent auditors of the

company.

For the purposes of fair value disclosures, the Company has grouped the respective assets and

liabilities on the basis of their nature, basic characteristics and risks as well as of the fair value

hierarchical level.

2.20. Critical accounting judgments on applying the Company's accounting policies. Key

estimates and assumptions of high uncertainty.

2.20.1. Recognition of fees for maintenance of update information in register of shareholders/bond

holders

In line with the objectives of its activities, the Company is entitled to collect a monthly fee for

registered issues of dematerialised financial instruments the collectability of which is related to high

uncertainties. The management performs a special examination and analysis to assess the probability

for collection of this revenue for each reporting year by grouping its counterparts in three categories.

In the cases where high uncertainty is identified for receipt of cash inflows and economic benefits due

to significant difficulties of the companies-payers especially when they are in liquidation and/or

insolvency proceedings, the revenue is recognised partially or is deferred in full to the date of its

eventual actual collection (payment by the respective company – liable entity).

These supporting fees, not recognised as revenue for year 2015, amounted to BGN 285 thousand

(2014: BGN 303 thousand).

2.20.2. Impairment of receivables

A provision for impairment of trade receivables is established when there is an objective evidence that

the Company will not be able to collect all amounts due thereto according to the original terms of the

receivables. Significant financial difficulties of the debtor, probability that the debtor will enter

insolvency proceedings or other financial reorganisation, default or payment more than 180 days past

due, are considered by the management when it defines and classifies a particular receivable as

impaired. The impairment amount is the difference between the carrying amount of the receivable and

the present value of the estimated future cash flows, discounted at the original effective interest rate.

The usual impairment rate varies between 25%, 50% and 100%. They are subject to annual detailed

analysis by following the trends and measuring the effects of the changes in the current conditions and

factors that influence collectability and assessing the need in adjustment. The carrying amount is

adjusted through the use of an allowance account for accumulating all impairments (Notes 2.10, 2.16.1

and 17) and the amount of the impairment loss for the period is recognised in the statement of

comprehensive income (within profit or loss for the year) under 'other expenses'. In case of subsequent



reversal of impairment loss, it is stated as a negative figure under 'other expenses' against a decrease in

the allowance account.

The recognised amount of losses and impairment of uncollectable trade receivables for 2015 was BGN

32 thousand, while for 2014 it was BGN 37 thousand.

2.20.3. Cash amounts of the Settlement Guarantee Fund placed in a bank under special supervision

At 31 December 2015, the resources of the Settlement Guarantee Fund available at bank accounts

amount to BGN 1,071 thousand (Note 19.1). Part of these resources, amounting to BGN 633 thousand,

is with a bank, which has been declared bankrupt. The risk of investing the resources of the Settlement

Guarantee Fund is assumed by its members, the obligations to which amount to BGN 1,081 thousand

at 31 December 2015 (Notes 2.11 and 25). The status of the account at the bank in bankruptcy, where

these amounts have been deposited, and the possibilities for their recovery are still in a process of

clarification with the assignees in bankruptcy of the bank. In addition, the status and security of the

money in the Settlement Guarantee Fund are also in a process of clarification with the Bulgarian

Deposit Insurance Fund and the assignees in bankruptcy of the bank. Therefore, the Depository

management has decided to not start the netting of this amount against liabilities to Fund members as

at 31 December 2015 including in its presentation in the statement of financial position.

In addition, the SGF Governance Committee of the Depository has taken a decision and has informed

its members for temporary suspension of the recovery of amounts to the individual accounts of the

fund members in case of their membership termination.

2.20.4. Provisions

With regard to the pending private actions against the Company for which judicial cases have not yet

been initiated, the management, jointly with Company's lawyers, has decided that at this stage the

probability and risks of a negative outcome from such cases is very low and therefore, it has not

included provisions for litigation payables in the statement of financial position as at 31 December

2015 (Note 31).



3. OPERATING REVENUE

The revenue earned on rendering of services includes:

2015 2014 BGN '000 BGN '000 Fees for register maintenance 900 957

Registration of special pledges 229 214 Fees for performing services of investment intermediaries – members of Central Depository AD

225

320

Annual membership fee in the Central Depository AD 140 143

Fees for agency services performed as a Central Depository 140

136

for interest and dividends transfer Fees for registration and deregistration of security issues 112 139 Fees for closing of issuers’ accounts 31 49

Registration Agent fees 14 14

Reference information and other services 56 81

Total 1,847 2,053

4. OTHER OPERATING INCOME

Other operating income includes:

2015 2014 BGN '000 BGN '000 Grant income 25 25 Written-off liabilities with expired limitation period 6 47 Training courses 5 -

Total 36 72

5. MATERIALS AND CONSUMABLES USED

Expenses on materials include:

2015 2014 BGN '000 BGN '000 Stationery materials and consumables 14 16

Assets below value threshold 4 7

Fuel 6 5

Total 24 28



6. HIRED SERVICES EXPENSE

Hired services expense includes: 2015 2014 BGN '000 BGN '000 Rentals and security 133 126 Information services 69 67 Communications on information transfer 56 46 Annual membership fees 22 26 Telecommunication services 21 25 Electric energy and heating 20 21 RINGS fee 20 20 Current repairs 25 14 Maintenance and cleaning 18 16 Audit services 13 12 Legal services 11 3 Annual fee for performance of general financial control by FSC

8

8

Insurance 7 6 Postal services 5 7 Bank fees and charges 7 5 Consulting services 4 5 Other services 37 53

Total 476 460

7. EMPLOYEE BENEFITS EXPENSE

Personnel costs include: 2015 2014 BGN '000 BGN '000 Wages and salaries 912 990

Social security/health insurance contributions 119 121

Social benefits and allowances 29 30 Accrued/(recovered) amounts for retirement benefit obligations (Note 22)

3

3

Accruals for outstanding paid leaves 23 24

Social security/health insurance contributions on leaves 3 3

Total 1,089 1,171



8. OTHER OPERATING EXPENSES

Other operating expenses include: 2015 2014 BGN '000 BGN '000 Value added tax 77 74

Training 41 33

Business trip costs 37 33

Deductions for the Guarantee Fund (Note 19) 18 20 Impairment of receivables, net (Note 17)

16

3

Entertainment allowances 5 5

Other 10 17

Total 204 185

9. FINANCE INCOME AND COSTS

Finance income and costs include: 2015 2014

BGN '000 BGN '000

Finance income 146 151Interest income on bank accounts 104 151Interest income on available-for-sale investments 22 -Interest income on ceded receivables 20 - Finance costs (3) (258)Foreign currency exchange losses (3) -Discount on ceded bank deposit (Note 15) - (258) Total 143 (107)



10. INCOME TAX EXPENSE

Statement of comprehensive income 2015 2014 (profit or loss for the year) BGN '000 BGN '000

Taxable profit for the year under tax return 137 55

Current income tax expense for the year 13 5 Deferred income taxes related to: Origination and reversal of temporary differences (5) (3)

Total income tax expense carried to the statement of comprehensive income (within profit or loss for the year) 8 2

Reconciliation of income tax expense applicable to the accounting profit or loss Accounting profit for the year 78 19 Income taxes – 10% (2014: 10%) 8 2

Total income tax expense carried to the statement of comprehensive income (within profit or loss for the year) 8 2



11. MACHINERY AND EQUIPMENT

Computer hardware

Motor vehicles

Office furniture and equipment

Total

2015 2014 2015 2014 2015 2014 2015 2014

BGN '000 BGN '000 BGN '000 BGN '000 BGN '000 BGN '000 BGN '000 BGN '000

Book value Balance at 1 January 465 544 95 95 45 45 605 684

Additions 5 - 26 - - 31 -

Disposals (1) (79) - (2) - (3) (79)

Balance at 31 December 469 465 121 95 43 45 633 605

Accumulated depreciation Balance at 1 January (391) (425) (36) (12) (37) (35) (464) (472)

Depreciation charge for the year

(40) (45) (29) (24) (2) (2) (71) (71) Depreciation written-off 1 79 - 2 3 79 Balance at 31 December (430) (391) (65) (36) (37) (37) (532) (464)

Carrying amount at 31 December 39 74 56 59 6 8 101 141

Carrying amount at 1 January 74 119 59 83 8 10 141 212

The book value of fully depreciated machinery and equipment presented in the statement of financial

position as at 31 December 2015 is BGN 338 thousand in BGN (31 December 2014: BGN 324

thousand).



12. INTANGIBLE ASSETS

Software Assets

in progress Total

2015 2014 2015 2014 2015 2014

BGN '000 BGN '000 BGN '000 BGN '000 BGN '000 BGN '000

Book value Balance at 1 January 525 529 - 6 525 535 Additions - 6 66

66 6

Transfer from assets in progress - 6 - (6) - -

Disposals - (16) - - - (16)

Balance at 31 December 525 525 66 - 591 525

Accumulated amortisation

Balance at 1 January (307) (239) - - (307) (239) Amortisation charge for the year (84) (84) - - (84) (84)

Written-off amortisation for the year - 16 - - - 16

Balance at 31 December (391) (307) - - (391) (307)

Carrying amount at 31 December 134 218 66 - 200 218

Carrying amount at 1 January 218 290 - 6 218 296

The book value of fully amortised intangible assets, used in Company's activities, amounted to

BGN 62 thousand as at 31 December 2015 (31 December 2014: BGN 62 thousand).

The intangible assets in progress include expenses on the development of Information Platform for

online holding of General Meetings.



13. AVAILABLE-FOR-SALE INVESTMENTS

As at 31 December 2015, the carrying amount of the available-for-sale investments (financial assets)

covers:

2015 2014 BGN '000 BGN '000 Investments in debt securities 2,027 - Investments in shares of th

Documents

CENTRAL DEPOSITORY AD Board of Directors (BD ......The Company is represented by Vasil Golemanski – Executive Director. As at 31 December 2015, the total number of Company's personnel