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INDUSTRIAL HOLDING BULGARIA PLC PUBLIC NOTIFICATION FOR FINANCIAL POSITION ON A CONSOLIDATED BASIS

30 September 2016

INDUSTRIAL HOLDING BULGARIA PLC Public notification for financial position on a consolidated basisFor the period ending 30 September 2016

CORPORATE INFORMATION

Industrial Holding Bulgaria PLC is a joint stock company (PLC), registered in the Republic of Bulgaria under Company File nr. 13081 / 1996 with headquarters and registered office at 42 Damyan Gruev Str., Sofia, Bulgaria. The financial year of the Company ends on 31 December.

Initially, the Company has been established as a Privatisation Fund according to the Privatisation Funds Act under the company name Privatisation Fund Bulgaria PLC.

The General Meeting of Shareholders held on 27 February 1998 passed a decision to reorganize the activities of Privatisation Fund Bulgaria PLC into a holding company and to change its name from Privatisation Fund Bulgaria PLC to Industrial Holding Bulgaria PLC. The Company’s registered capital amounted to BGN 77,400,634 at 30 September 2016. The company has a two-tier system of governance, comprising Supervisory Board and Management Board.

As of 30 September 2016 Industrial Holding Bulgaria PLC had 10 direct subsidiaries (2015: 11), no associates (2015: Nil), and 12 indirect subsidiaries (2015: 13 indirect subsidiaries), collectively referred to as “the Group”.

The scope of activity of the Group includes production and trading activities in the area of heavy machinery, shipbuilding, ship repair and maritime transportation, port services, support services from/to vessels and road motor vehicles, maintenance and repair, and other services.

The Company is registered with the Register kept by the Registry Agency under unified identification code (UIC) 121631219. It is registered pursuant to the Value Added Tax Act. Industrial Holding Bulgaria and its subsidiary IHB Eclectic PLC are listed on the Bulgarian Stock Exchange, Sofia.

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NOTES

Operating results

The results are presented in the following table:

Indicators/on a consolidated basis/

BGN’00030 September 2016 30 September 2015

Operating income 62,341 70,138

Operating expenses 60,818 63,721

Operating profit (loss) 1,523 6,417

Net finance income/costs (4,770) (6,944)

Profit (loss) before taxes (3,247) (527)

Tax expenses (795) (646)

Profit (loss) after taxes (4,042) (1,173)

incl. for majority owners (4,176) (1,335)

The breakdown of revenue by activities is as follows:In BGN’000 30 September 2016 30 September 2015

Sale of services 22,686 29,952 Including chartering services 19,757 26,768Sale of machine building and other products 20,196 22,263Construction of sections for ships 4,195 1,848Ship repairing 5,215 7,180Port activity 7,805 6,652Sale of goods and materials 365 533

60,462 68,428Other operating income comprises:

In BGN’000 30 September 2016 30 September 2015

Rental income 1,476 1,300Income from financing 144 132Gain on sale of fixed assets 74 110Other income 185 168

1,879 1,710

The Group’s revenue for the nine months of 2016 decreased compared to revenue amounts reported for the same period of 2015. The dynamics in income is primarily due to:

- lower revenue from services relating to ship charting. The reduction is mainly due to the decline in freight rates at the global shipping market to unexpected low levels. The factors influencing the market dynamics are described in detail in section „Non-systematic group specific risks“. The reorientation of some of the ships from voyage to time charter has had an additional effect on revenue.

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- lower sales revenue of products due to the lower volumes of sales of electrical machinery. The volume of sales of universal and lathes using software for digital management remains relatively constant, regardless of the still unstable economic and political situation.

- higher revenue from construction of section parts for ships and port operations. In 2015, a contract was signed with Daewoo – Mangalia Heavy Industries S.A for construction of superstructures to a series of newly built ships. The contract was completed successfully in 2016.

- freight market decline has an adverse impact on the ship repair activity as well. The reason for this development is the unwillingness on the part of the ship owners to invest additional funds in the maintenance of the vessels.

Finance income and finance costs for the reporting period are as follows:

In BGN’000 30 September 2016 30 September 2015

Finance incomeIncome from valuation at fair value of forward contracts 75 26Interest income 7 19Gain on sale of investments 4 -Other finance income 6 -

92 45

Finance costs

Interest expenses (3,838) (4,264)Foreign currency losses, net (767) (2,743)Other financial costs (251) (382)Revaluation of cash flow hedge (6) (29)

(4,862) (7,418)

The interest expenses for the period ended 30 September 2016 amounting to BGN 3,838 thousand (30 September 2015: BGN 4,264 thousand) originate primarily from cash loans from banks and non-financial institutions amounting to BGN 1,678 thousand (30 September 2015: BGN 2,030 thousand), interest on debenture loan issued by Industrial Holding Bulgaria PLC amounting to BGN 1,886 thousand (30 September 2015: BGN 1,793 thousand), interest on deferred payments to suppliers relating to the purchase of shares, interest rate swap and other amounting to BGN 274 thousand (30 September 2015: BGN 411 thousand).

Aiming at managing the currency risk and in view of the Company’s exposure denominated in US dollars, management concluded forward transactions to hedge the fluctuations in the exchange rate of USD/EUR and to better manage its cash flows. Industrial Holding Bulgaria PLC signed two contracts in February and March 2016, by virtue of which it undertook to replace EUR 884 thousand against a fixed amount of US dollars, and Privat Engineering AD signed three contracts, by virtue of which it undertook to replace EUR 870 thousand against a fixed amount of US dollars. The fair value measurement is based on information provided by the counterparty bank. Level 2 of the fair value hierarchy has been used to assess the fair value of assets and liabilities that are stated at fair value.

The financial result before taxes as at 30 September 2016 is a loss amounting to BGN 3,247 thousand vs. a loss amounting to BGN 527 thousand for the same period of 2015. The result after taxes is a loss amounting to BGN 4,042 thousand vs. a loss amounting to BGN 1,173 thousand for the same period of the previous year. The deteriorated result – an increase in the loss compared to that reported in the same period of the previous year – is mainly due to the activity of the ship companies as a result of the decreased revenue.

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Bank loans

Short-term In BGN’000

Currency Interest rate, % Maturity

30 September

2016 2015

Short-term portionSecured bank credit amounting to BGN 19,345 thousand (JPY 1,122,594 thousand)- short-term portion JPY JBIC +2.5%

2018 2,427 2,085

Secured investment credit amount of BGN 814 thousand - short-term portion BGN

1 М SOFIBOR +3.70 %

2019 26 103

Secured bank credit amounting to USD 11,000 thousand - short-term portion USD

1 М LIBOR + 2.5% but min 2.95%

2017 2,756 2,308

Secured bank credit amounting to USD 37,300 thousand* USD 3 М LIBOR + 2.25%

2017 48,790 52,162

Finance lease amounting to EUR 744 thousand: short-term portion EUR

1 М EURIBOR + spread 5.89-6%

2016 - 470

Finance lease amounting to EUR 170 thousand: short-term portion EUR

Annual interest rate-4%

2017 42 98

Finance lease contract for delivery of equipment – BGN 65 thousand EUR

1 М EURIBOR + spread 3.89-4%

2017 14 27

Finance lease contract for purchase of laser machine for EUR 518 thousand EUR

3.9% annual interest rate

2020 129 126

Secured investment loan amounting to EUR 400 thousand – short-term portion EUR

2.90% annual interest rate

2020 197

54,381 57,379

Long-term In BGN’000

Currency Interest rate, % Maturity30 September

2016 2015

Long-term portionCredit line for working capital amounting to BNG 3,000 thousand BGN

1 М SOFIBOR +3.2 % 2016 2,714 1,690

Secured bank loan amounting to BGN 19,345 thousand (JPY 1,122,594 thousand) JPY JBIC +2.5% 2018 2,427 3,126

Secured bank credit amounting to USD 11,000 thousand USD

1 М LIBOR + 2.5%, (min 2.95%) 2017 1,963 4,129

Secured investment credit amount of BGN 814 thousand - long-term portion BGN

1 М SOFIBOR +3.70 % 2019 252 252

Secured investment loan amounting to EUR 400 thousand – long-term portion EUR

2.90% annual interest rate 2020 503 -

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Finance lease contract for delivery of equipment – BGN 65 thousand EUR

1 М EURIBOR + spread 3.89-4% 2017 - 7

Finance lease amounting to EUR 170 thousand: long-term portion EUR

Annual interest rate-4% 2017 - 17

Finance lease contract for purchase of laser machine for EUR 518 thousand EUR

3.9% annual interest rate 2020 517 614

8,376 9,835

In November, by a contract IHB Electric was substituted as a lessee under a finance lease contract for purchase of laser machine; as a result, the outstanding portion of the lease liability amounting to EUR 646 thousand was assumed by the substituting party.In November, an instalment amounting to JPY 70,162 thousand was paid. After the payment of this instalment, the liability of Bulyard Shipping Industry AD as of 25 November 2016 under a bank loan contract amounts to JPY 210,486 thousand.The bank loans are secured by mortgages on land and buildings, and registered pledges on plant, equipment and motor vehicles, including ships owned by the Group companies, with total carrying amount as at 30 September 2016 of BGN 219,519 thousand (31 December 2015: BGN 231,691 thousand). Also, KRZ Port Bourgas AD has been pledged as an entity.

Plant and equipment under finance leasesFixed tangible assets with net book value as of 30 September 2016 of BGN 1,097 thousand (2015: BGN 2,772 thousand) have been acquired under finance lease terms. As at the date of the consolidated financial statements the outstanding portion of the finance lease contract amounted to BGN 702 thousand (2015: BGN 1,359 thousand).

The unutilised limits under concluded bank loans of the Group as at 30 September 2016 amount to BGN 286 thousand.

Debenture loan

In BGN’000 30 September 2016 2015Debenture loan 50,000 50,000Transaction costs (29) (43)Interest charged 1,189 567

51,160 50,524incl. long-term portion 47,464 47,450incl. short-term portion 1,189 567incl. equity component of convertible bonds issued (equity component) 2,507 2,507

The terms and conditions of the debenture loan with ISIN code BG 2100003156 require compliance with certain financial ratios to the maturity date of the bond issue. Issuer is obliged to maintain Liabilities / Assets ratio not higher than 65%, Interest Coverage ratio not lower than 1.2. and Interest-bearing Debt / Assets ratio not higher than 50%. These financial indicators are calculated and reported quarterly, on an individual basis. If the specified financial ratios are not complied with, IHB PLC should take actions to bring the ratios according to the parameters set within a six-month period.

The financial ratios were complied with by the issuer as at 30 September 2016, in accordance with its commitments.The second interest payment on the issue of convertible bonds ISIN code BG2100003156 was made on 08 April 2016 and on 10 October 2016 the third interest payment was made.

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Trade and other payables

Trade payables consist of liabilities amounting to BGN 17,908 thousand (2015 : BGN 19,546 thousand), which were incurred in connection with the purchase of shares in Odessos PBM AD and Bulport Logistics AD, as also shares of the capital of Odessos PBM AD, purchased subsequently, which have been deferred and are to be paid by the end of 2017. The long-term portion thereof amounts to BGN 8,160 thousand (2015: BGN 9,803 thousand) and the short-term portion amounts to BGN 9,748 thousand (2015 : BGN 9,743 thousand), including interest accrued amounting to BGN 279 thousand (2015 : BGN 105 thousand).

Restatement of comparative information Due to the significant fluctuations of the USD exchange rate vs. the BGN exchange rate, with such development being confirmed as a sustained upward trend, in 2015 the Group conducted a review of all significant USD exposures as at 31 December 2015 and in particular, of those occurring as a result of translation of the financial statements of the entities – part of the Maritime transportation segment, the functional currency of which is USD (other than the Group’s presentation currency – the Bulgarian lev). The Group has not followed-up and reported separately all assets and liabilities of these entities. However, the exchange rate fluctuations for the last three years have been investigated in order to determine the time origin of this cumulative translation effect.

In view of the significance of the so-calculated effects, the comparative information as at 1 January 2014 and 31 December 2014 has been restated. The following table presents details about each item of the financial statements for the previous periods, which has been affected by the restatement:

Effect on the equity ( increase / (decrease) of equity)

BGN’000 31 December 2014 1 January 2014

Property, plant and equipment 14,329 (8,854)Total assets 14,329 (8,854)Net effect on equity 14,329 (8,854)

Effect on the statement of other comprehensive income (increase / (decrease) of other comprehensive income)

BGN’000 31 December 2014

Foreign currency differences from translation of financial statements of foreign operations 23,183

Income tax effect -Net effect on other comprehensive income 23,183Attributable to:

Equity holders of the parent 23,183Non-controlling interest -

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These effects have been taken into account when preparing the financial statements for the year ended 31 December 2015; however, they have not been quantified by quarters and therefore, the comparative data should have been restated by quarters as well. The effects for the first six months of 2015 are as follows:

Effect on the equity ( increase / (decrease) of equity)

BGN’000 30 September 2015 31 December 2014

Property, plant and equipment 29,041 14,329Total assets 29,041 14,329Net effect on equity 29,041 14,329

Effect on the statement of other comprehensive income (increase / (decrease) of other comprehensive income)

BGN’000 30 September 2015

Foreign currency differences from translation of financial statements of foreign operations 15,305

Income tax effect -Net effect on other comprehensive income 15,305Attributable to:

Equity holders of the parent 15,305Non-controlling interest

-

Effect on the income statement (increase / (decrease) in profit /(loss))

BGN’000 30 September 2015

Exchange differences on translation of financial statements of foreign operations 429

Costs of depreciation of ships* (1,023)Net effect on the income statement (594)Attributable to: Equity holders of the parent (594) Non-controlling interests -

* In 2015, in view of the global trends in Maritime transportation, the Group reconsidered the useful lives of fixed assets and changed the useful life of ships from 30 to 25 years. The effect for the nine months of 2015 was an increase of the depreciation charges amounting to BGN 1,023 thousand.

The change has not affected the Group’s cash flows from operating, investing and financing activities.

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Related party disclosures

The consolidated financial statements of the Group include the following companies:

Equity interestCountry of registration 30 September 2016 2015

% %Industrial Holding Bulgaria PLC Bulgaria Parent company Parent company

Private Engineering EAD Bulgaria 100.00 100.00ZMM Bulgaria Holding AD Bulgaria 100.00 100.00ZMM Sliven AD Bulgaria 95.98 95.98ZMM Nova Zagora AD Bulgaria 93.57 93.57IHB Metal Castings AD* Bulgaria 100.00 100.00IHB Electric AD Bulgaria 87.31 85.18KRZ Port Bourgas AD Bulgaria 99.65 99.65KLVK AD Bulgaria 100.00 100.00International Industrial Holding Bulgaria AG Switzerland 100.00 100.00Maritime Holding AD Bulgaria 61.00 61.00Bulgarian Register of Shipping EAD Bulgaria 61.00 61.00Bulyard AD Bulgaria 98.00 98.00Bulyard Shipping Industry AD Bulgaria 99.98 99.97Bulkari EAD Bulgaria 100.00IHB Shipping Co EAD Bulgaria 100.00 100.00Emona LTD Marshal Islands 100.00 100.00Karvuna LTD Marshal Islands 100.00 100.00Odria LTD Marshal Islands 100.00 100.00Tirista LTD Marshal Islands 100.00 100.00Rekolta 2011 EAD Bulgaria 100.00Serdika LTD Marshal Islands 100.00 100.00Bulport Logistics AD Bulgaria 100.00 100.00Odessos PBM AD Bulgaria 90.00 90.00IHB Shipdesign AD Bulgaria 75.00 75.00

In July 2016 management of Privat Engineering AD passed a decision to increase the capital of each one of its subsidiaries, namely: Emona Ltd. By USD 2,000 thousand; Karvuna Ltd. By USD 3,000 thousand, and Tirista Ltd. By USD 2,000 thousand, through capitalization of loans granted.

In July 2016 management of KLVK AD passed a decision to increase the capital of each one of its subsidiaries, namely: Odria Ltd. and Serdika Ltd. by USD 4,000 thousand, through capitalization of loans granted.

The operations of the subsidiary Rekolta 2011 EAD have been discontinued without liquidation through its merger with Bulyard Shipping Industry AD, with the latter company becoming the universal successor of the transforming company’s activity and assets. The merger of Bulkari EAD, an indirect subsidiary of Industrial Holding Bulgaria PLC, with Bulyard Shipping Industry AD was effected at the same time and by following the same procedure. The merger and obliteration of the discontinued companies Rekolta 2011 EAD and Bulkari EAD were registered with the Commercial Register on 25 August 2016. Thus, the capital of the successor Bulyard Shipping Industry AD was increased through the issue of new 10,048,759 ordinary voting shares, of which 8,167,873 were acquired by Industrial Holding Bulgaria PLC.

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At the General Meeting of Shareholders, held on 12 October 2016, of the subsidiary of Industrial Holding Bulgaria PLC, Bulyard AD, Sofia, a shareholder holding directly 1.19% of the capital of Bulyard Shipping Industry AD, Varna, a decision was passed to discontinue the company’s activity and to open a liquidation procedure. The deadline set for the company’s liquidation is six months as of the date of registration of the notice to its creditors with the Commercial Register.

In November 2016, ZMM Bulgaria Holding AD, a subsidiary of Industrial Holding Bulgaria PLC, increased its investment in IHB Electric AD by acquiring 38,419 shares, or 3.17% of the company’s capital. Thus, the Group’s shareholding reached 90.48% of the capital of IHB Electric AD.

Bulls AD is a shareholder with significant influence of Industrial Holding Bulgaria PLC. According to IAS 24, paragraph 9b) ii) and iv) Bulls AD and all its subsidiaries, associates and joint ventures are related parties to Industrial Holding Bulgaria PLC.

DZH AD is a related party to Industrial Holding Bulgaria PLC because the key management staff of Industrial Holding Bulgaria PLC owns 50% of the capital of DZH AD.

Related party transactions

Transactions with a shareholder with significant influenceIn BGN’000 30 September

201630 September

2015

Interest expenses on loans receivable 180 262Loan revaluation 1 163Monetary loans received 2,405 -Monetary loans repaid and interest paid 1,034 12843

In BGN’000 30 September 2016

30 September 2015

Transactions with other related partiesInterest expenses - 11Loan revaluation - 63Monetary loans repaid and interest paid - 848

Related party balancesPayables in connection with loans received (incl. interest)

In BGN’000 30 September 2016

2015

Shareholder with significant influence 6,608 5,0566,608 5,056

incl. long-term portion 925 1,709incl. short-term portion 5,683 3,347

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Terms and conditions of related party transactions

The sales to and purchases from related parties are made at contractual prices. Outstanding balances at the year-end are unsecured (except for loans), interest free (except for loans) and the settlement is made in cash. There have been no guarantees provided to or received for related party payables or receivables, except for the ones listed below. For the period ended 31 December 2015, the Group had not written down related party receivables (2014: Nil). A review for impairment is made every financial year through examining the financial position of the related party and the market in which the related party operates.

Commitments and contingencies

Legal claims

No significant legal claims have been initiated against the Group.

The subsidiary IHB Electric AD utilises good performance bank guarantees under contracts for the issuance of good performance bank guarantees. As of 30 September 2016 the bank guarantees issued in favour of customers amounted to BGN 399 thousand (2015: BGN 399 thousand) and are claimed. IHB Electric AD brought an action in Germany.

In 2015 and as of the date of these financial statements, no court ruling as to the substance was issued. Despite all the evidence collected and expectations that the court ruling will be in favour of IHB Electric AD, in view of the fact that in 2015 and to date no payments on the receivable have been made by the customer and considering the development of the case at the Berlin Regional Court, an allowance for doubtful debts amounting to BGN 246 thousand (31 December 2015: BGN 246 thousand) was recognised until 30 September 2016.

Guarantees

As per a contract signed with a commercial bank for granting a credit limit for issuance of bank guarantees, letters of credit and working capital financing of the Holding and/or Group entities with a limit of BGN 10,000 thousand, as at 30 September 2016 bank guarantees amounting to BGN 1,517 thousand (2015: BGN 1,101 thousand) were issued to the following Group companies: IHB Electric AD, IHB Metal Castings AD, KRZ Port Bourgas AD, ZMM Bulgaria AD, and Odessos PBM AD, as also letters of credits amounting to BGN 0 (2015: BGN 98 thousand) and a revolving credit line was opened for working capital financing amounting to BGN 3,000 thousand (2015: BGN 3,000 thousand). As at 30 September 2016 the amount utilised by the subsidiaries under this revolving credit line for working capital financing was BGN 2,714 thousand. As at 30 September 2016 the unutilised limit under this bank loan amounted to BGN 286 thousand. The contract with the bank is secured by a second ranking registered pledge on the commercial enterprise of KRZ Port-Bourgas AD.

In October 2016 the amount of the revolving credit line for working capital was increased to BGN 4,000 thousand.

Collateral

At the date of these financial statements, the shares acquired in November 2014 and January 2015 by Industrial Holding Bulgaria PLC in Odessos PBM AD and the shares acquired by KLVK AD in Bulport Logistics AS are pledged in order to secure payment of the price under the contracts until its full payment in 2017.

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Non-systematic group specific risks Risks associated with the structure of the Group’s portfolio

The Group’s investments are focused on industries characterised by slow rotation of funds invested (machine-building), dependency on energy and other resources (machine-building, ship repair, maritime transport) and high cyclicity (ship repair, shop design, maritime transport, port activity), thus reducing the level of return for the Group.

Risks arising from the development of the global economy and trade

Factors influencing the world economy, trade and all business subjects are heterogeneous. In 2016, the freight market reached new, unexpectedly low levels – levels witnessed 30-40 years ago. The first quarter was extremely difficult. There has been a slight increase over the second and third quarter, however, the market levelled off at a very low level due to the lost balance between the ship tonnage offered and the needs of exporters and importers. Despite having a relatively good speed of cutting old ships, the large number of cancelled and postponed orders for new construction and a few new orders accompanied by bankruptcies, closing down of shipyards and curtailment of their volumes, the existence of an over-tonnage (especially in the segment of bulk cargo and containers) is the main reason underlying the industry crisis and the lower freight and cargo carriage rates. The political instability in many places is another important cause of this development. The oil prices, summarising the fuel-related problems globally, also affect the situation. On the one hand, the oil may be a structural cause of conflicts, and on the other hand, its price and availability could cause ups and downs at the freight market, as the ship fuels are the main raw materials for the industry, as also a commodity. The weak freight market impacts adversely the ship repair industry by minimising the costs of repair to the levels required by law, dampening demand for ship design services and services provided by classification entities, and reducing cargo flows to port operators.

Risk of political instability in traditional markets and regions, military activities and/or penalties imposed

This risk arises from future changes in economic policies necessitated by objective economic or political circumstances. The mass exodus of refugees toward Europe and in particular, toward Bulgaria, as an EU external border, is a negative result of these processes as well. This risk affects primarily maritime and port businesses, as it leads to changes in trade flows and transport corridors, and makes access of registry inspectors to the inspected ships more difficult. In addition, the risk impacts the machine building industry, as it reduces the volume of sales in traditional markets (such as the Russian and the Turkish markets).

Risks relating to environment legislation

The legislation of the Republic of Bulgaria regulating environmental matters presumes compliance with a number of measures for prevention, control and reduction of various types of environmental pollution. It is a policy of the Group to comply with all legal requirements in this respect, which requires fixed costs for alignment and maintenance of the equipment and processes in accordance with the required standards and norms. All investment projects comply with the environmental protection requirements.

Risks relating to attracting and retaining experienced and qualified employees

Taking into account the problems concerning the effectiveness and applicability of the Bulgarian educational system, and the demographic collapse in the country, many sectors of the economy are experiencing a capacity crunch. Employees’ professional qualities affect directly entity’s financial results and innovation performance. The risk is reinforced by the convertible nature of some professions, their shortage and high worldwide demand for such staff (professionally trained and motivated seamen and officers, registry inspectors, Professional technical and engineering personnel and workers – welders, hull workers (hull fitters), pipe fitters, etc.). Competition among employers is high. The most affected segments are that of machine building, experiencing a serious shortage of mid-level specialists and engineers, maritime transport, ship repair, ship design, classification and certification segments. Management has taken a long-term approach to human resource management, which is related to preliminary and subsequent qualification of staff, as well as a close cooperation with the academic society in the country.

Credit risk

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The credit risk is the risk of possible financial loss if a client or a party to a financial instrument fails to perform its contractual obligations. The risk is mainly related to receivables from clients and investments in other financial assets.

Receivables from clients – The Group’s credit risk exposure depends on the customer’s individual characteristics that differ between sectors. The most affected segments are that of ship building, ship design, classification and certification, and port activities. The Group’s credit policy provides for that each new client shall be investigated for solvency before being offered the standard delivery and payment terms and conditions. Besides the price offered, when selecting a potential client or a charterer managers consider its credit rating, reputation, popularity, recommendations, etc.

Investments – The Group invests mainly in businesses and companies where the Holding holds the control and power to determine their development strategy. With respect to portfolio investments, the ambition is to invest in liquid securities. Part of investments are made over considerable periods of time, during which it is possible that the Group will receive a very limited yield, lower profits, and may even experience losses.

Guarantees - It is a policy of the Group to issue financial guarantees only to subsidiaries and only after obtaining the preliminary approval of the managing bodies. There is a risk that the guarantees may be utilised in the event of non-performance of the covered liabilities.

Liquidity risk

Liquidity risk is the probability that the Group will be unable to meet all its obligations when they become due. Such risk may arise in case of delayed payments by clients. The Group companies elaborate financial planning to cover their expenses and current payables for a period of 90 days, including settlement of financial liabilities. Where possible, a deferred payment to suppliers and subcontractors is applied in combination with the above measures, but without affecting negatively their businesses. The Holding’s management supports the Group companies’ efforts towards attracting bank financing for investments and capacity utilization in the form of revolving credits for working capital in support of production. The volumes of funds attracted are maintained at pre-determined levels and approved only after their economic effectiveness for each company has been proven.

In recent years, the management’s policy has been directed towards accumulation of fresh resource from the market – in the form of shares/stocks, debentures or other financial instruments, to be invested in the subsidiaries in two directions: granting of loans to Group companies to be used to finance their projects and acquiring shares of their capital, incl. subscribing shares from capital increases. With respect to the debenture issue of the Holding, there are terms and conditions set that, if violated, could result in making the loan early payable by the respective company, prior to its maturity.

Currency risk

Some of the Group companies are exposed to currency risk as they perform purchases and/or sales and/or receive loans in currencies, other than the functional currency. Aiming at minimising the Group’s exposure to currency risk, the Holding’s management minimised the payments in foreign currencies other than EUR in the operating activity of most companies. The goal is that transactions with customers and suppliers are agreed primarily in BGN and EUR. Nevertheless, there are contracts concluded for the supply of ship equipment in JPY and a Group company operates a loan denominated in JPY. The main currency, in which the ship business operates, is USD. The increase in the revenue share from foreign ships in total sales strengthens the impact of currency risk on the financial results of the Bulgarian register. The Group ship companies operate loans denominated in USD as well. There is a currency risk with respect to the contracts for purchase of shares of the capital of Odessos PBM AD and Bulport Logistics AD denominated in USD, a risk that management attempts to compensate by revenue in the same currency. This provides an economic hedge without derivatives being entered into and therefore, hedge accounting is not applied in these circumstances.

Interest rate risk

The Group companies are exposed to interest rate risk as the loans are agreed usually with floating interest rates corresponding to the current market prices. The interest risk management is directed towards increasing the loans bearing fixed interest rates.

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Systematic risksThe Holding and its subsidiaries are exposed to systematic risks relating to the market and macro-environment in which the companies operate and therefore, these risks cannot be managed and controlled by the management team. INFORMATION PURSUANT TO APPENDIX 9 TO ORDINANCE 2 ON THE PROSPECTUSES TO BE PUBLISHED WHEN SECURITIES ARE OFFERED TO THE PUBLIC OR ADMITTED TO TRADING ON A REGULATED MARKET AND ON DISCLOSURE OF INFORMATION Change in individuals exercising control over the company

As at 30 September 2016 Industrial Holding Bulgaria PLC had no information about person/persons exercising direct or indirect control over the Company within the meaning given by § 1, i. 14 of the Additional Provisions of POSA.

As at 30 September 2016 Industrial Holding Bulgaria PLC had information about the following shareholders holding more than 5% of the voting shares, as follows:

1. Venside Enterprises Ltd: Number of voting shares and their share of the votes at the General Meeting of Shareholders of the company:

As at 30 September 2016: 20,399,604 shares representing 26.36% of votes held directly

2. Bulls ADNumber of voting shares and their share of the votes at the General Meeting of Shareholders of the company:

As at 30 September 2016: 13,037,921 shares representing 16.84% of votes held directly

Bulls AD own 100% from the capital of Venside Enterprises Ltd and control its shares.

3. DZH ADNumber of voting shares and their share of the votes at the General Meeting of Shareholders of the company:

As at 30 September 2016: 4,732,574 shares representing 6.11% of votes

4. Daneta Angelova Zheleva

Number of voting shares and their share of the votes at the General Meeting of Shareholders of the company:As at 30 September 2016: 41,044 shares held directly, representing 0.05% of votes, directly and through related parties: a total of 4,774,264 shares representing 6.17% of votes.

5. Dimitar Georgiev Zhelev

Number of voting shares and their share of the votes at the General Meeting of Shareholders of the company:As at 30 September 2016: 646 shares held directly, representing 0.0008% of votes, directly and through related parties - a total of 4,774,264 shares representing 5.91% of votes, and controlled through Venside Enterprises Ltd and Bulls AD: a total of 33,437,525 shares, representing 43.20% of votes

Dimitar Georgiev Zhelev controls Bulls AD and Venside Enterprises Limited and the votes directly held by these entities.

Dimitar Zhelev and Daneta Zheleva are spouses.

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6. MUPF Allianz Bulgaria AD

Number of voting shares and their share of the votes at the General Meeting of Shareholders of the company:As at 30 September 2016: 5,274,666 shares held directly, representing 6.81% of votes

7. VPF Allianz Bulgaria AD

Number of voting shares and their share of the votes at the General Meeting of Shareholders of the company:As at 30 September 2016: 5,202,314 shares held directly, representing 6.72% of votes

Initiation of bankruptcy proceedings in respect of the Company or its subsidiary and all significant stages relating to the proceedingsThere is no such circumstance.

Conclusion or performance of significant transactions N/A

Decision for conclusion, termination and cancellation of a joint venture contractThere is no such circumstance.

Change in the Company’s auditors and reasons for the changeThere is no such circumstance.

Initiation or termination of court or arbitration proceedings relating to liabilities or receivables of the Company or its subsidiary with a price of the claim of at least 10 per cent of the Company’s equityN/A

Purchase of, sale of or pledge imposed on shares of commercial companies by the issuer or its subsidiaryThere has been no such circumstance during the past quarter.

Other circumstances deemed by the Company as being of importance to the investors in taking a decision to acquire or to continue to hold publicly offered securitiesN/A

This notes have been prepared in accordance with the requirements of Art. 100о1, par. 4 with reference to par. 2 of POSA.

Daneta Zheleva

Chief Executive OfficerIndustrial Holding Bulgaria PLC

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Report v1.2 - bulgariaholding.com€¦ · Web viewIndustrial Holding Bulgaria and its subsidiary IHB Eclectic ... Fixed tangible assets with net book value as of ... (other than