Annual Report 2019

B u l g a r i a 2

FINLAN D

NO RWAY

Helsinki Oslo Stockholm Tallinn BALT IC SEA ESTO NIA SWEDEN Riga LATVIA DENMAR K Moscow NORTH SEA Co penhagen LITHUANIA RUSSIA Vilnius

Minsk RUSSIA Dublin IRELAND BELARUS UNITED KINGDOM Amsterdam Berlin POLAN D Warsaw Lo ndon NETHERLANDS G ERMA NY BELG IUM Brussels Frankfurt Kiev Prague LUXEMBOURG UKRAINE CZECH RE PUBLIC

Paris SLOVAKIA KA ZAKHSTAN Vienna Bratislava MOLDOVA SWITZERLAN D AUSTRIA Budapest Chisinau FRANCE Bern LIECHTEN - STEIN Ma ribor HUNGARY SLOVENIA ROMA NIA Zagreb CR OA TI A ARAL Belgrade SEA BOSNIA AND SERBIA Bucha rest HERZ EGOWINA Sarajevo

Pristina C UZBEKISTAN ITALY MONTEN EGRO So a BLACK SEA ASPIAN KOSOVO Co rsica Podgorica BULG ARI A Skopje GEORGIA Rome Tbilisi Tirana MACEDONIA Istanbul PORTUGAL Madrid ALBANIA ARME NIA Baku Sardinia Yerevan ASERBAIJAN SE

Lisbon GREECE Ankara A TURKMENISTA N SPAIN Athens TURKE Y Asgabat MEDITERRANEAN SEA Sicily

Tunis Algiers IRAN SYRI A IRAQ Tehran ALGERIA TUNISIA MOROCCO CYPRUS Nico sia www.rbinternational.com HEAD OFFICE AND NE TW ORK BANKS BRANCHES, REPRESENTATIVE OFFICES AN D OTHER UNITS 3

FINLAN D

NO RWAY

Helsinki Oslo Stockholm Tallinn BALT IC SEA ESTO NIA SWEDEN Riga LATVIA DENMAR K Moscow NORTH SEA Co penhagen LITHUANIA RUSSIA Vilnius

Minsk RUSSIA Dublin IRELAND BELARUS UNITED KINGDOM Amsterdam Berlin POLAN D Warsaw Lo ndon NETHERLANDS G ERMA NY BELG IUM Brussels Frankfurt Kiev Prague LUXEMBOURG UKRAINE CZECH RE PUBLIC

Lisbon GREECE Ankara A TURKMENISTA N SPAIN Athens TURKE Y Asgabat MEDITERRANEAN SEA Sicily

Tunis Algiers IRAN SYRI A IRAQ Tehran ALGERIA TUNISIA MOROCCO CYPRUS Nico sia www.rbinternational.com HEAD OFFICE AND NE TW ORK BANKS BRANCHES, REPRESENTATIVE OFFICES AN D OTHER UNITS 4

Financial Highlights

Monetary values in BGN Thousand 2019 Change 2018 2017 Income Statement Net interest income after provisioning for possible loan losses 208,934 8% 194,061 203,154 Net commission income 93,199 13% 82,398 75,492 Trading profit (loss) 21,039 (1%) 21,254 18,620 Administrative and other operating expenses (194,531) 13% (171,679) (165,446) Profit / (loss) before income tax 142,929 (1%) 144,526 147,963 Profit / (loss) for the financial year 129,682 (1%) 131,549 134,465 Balance Sheet Loans and advances to banks 342,342 54% 221,752 345,268 Loans and advances to customers 5,680,903 17% 4,845,064 4,185,576 Deposits from banks 70,502 (27%) 96,140 59,907 Deposits from customers 7,258,722 17% 6,214,181 5,391,470 Equity 913,830 0% 910,473 922,699 Total assets 8,817,765 13% 7,777,437 6,998,905 Regulatory own funds Total own funds 1,115,801 (1%) 1,123,303 1,150,292 Own funds requirement / According to Local Regulations 390,282 24% 315,674 281,772 Excess cover 725,519 (10%) 807,629 868,520 Core capital ratio (TIER I) 15.94% (15%) 18.82% 21.41% Own funds ratio 22.87% (20%) 28.47% 32.66% Performance Return of equity (ROE) before tax 17.3% 0% 17.4% 17.7% Cost/income ratio 53.1% (2%) 54.1% 55.3% Return on assets (ROA) before tax 1.7% (14%) 2.0% 2.2% Provisions for possible loan losses/risk-weighted assets/ According to Local Regulations 144,168 (4%) 150,220 173,668 Resources Number of staff on balance-sheet date 2,784 3% 2,711 2,711 Banking outlets on balance-sheet date 134 1% 133 134 Official Exchange Rate (BNB) 1 EUR BGN BGN BGN 1,95583 1,95583 1,95583

Source: Audited Separate Financial Statements of Raiffeisenbank (Bulgaria) EAD as at 31 December 2019. 5

Contents

General Information 6 The Bank’s Management 8 Statement by the Chairman of the Supervisory Board 10 Statement by the Chairman of the Management Board 12 Vision and Mission 14 Raiffeisen Bank International at a Glance 16 Economic Growth in Bulgaria in 2019 19 Activity of Raiffeisen Group in Bulgaria in 2019 23 Corporate Banking and Capital markets 25 Financial Institutions and Sovereigns 26 Retail Banking 28 Micro Business 29 Sales and Distribution Channels 29 Human resources 31 Risk management 32 Information Technology 33 Operations 34 Raiffaisen Group in Bulgaria 35 Raiffeisen Leasing Bulgaria OOD 35 Raiffeisen Asset Management (Bulgaria) EAD 36 Raiffeisen Insurance Broker 38 Corporate Governance Statement 40 Notes to the Financial Statements 59 Addresses 168 6

General Information

Establishment of the Bank

Raiffeisenbank (Bulgaria) EAD is the first greenfield foreign investment in the Bulgarian banking sector made in 1994.

Main Shareholder

Raiffeisenbank (Bulgaria) EAD is indirectly a 100 per cent subsidiary of Raiffeisen Bank International AG, Vienna. With this regard, there were no acquired and transferred own shares in 2019.

The capital of Raiffeisenbank (Bulgaria) EAD can be increased upon decision of the sole shareholder through the means provided by the Commercial law:

• Issuance of new shares;

• Increasing the face value of shares already issued, or

• Converting bonds into shares.

The Articles of association of Raiffeisenbank (Bulgaria) EAD do not provide for rights of the Supervisory board and the Management Board, related to the increase of the bank's capital or acquisition of own shares. Banking License Raiffeisenbank (Bulgaria) EAD has a full banking license with the right to operate in the country and abroad.

Business profile

Raiffeisenbank (Bulgaria) EAD is a universal commercial bank, providing services to large corporate customers, small and medium-sized enterprises, retail clients, financial institutions and institutional clients. The bank also performs operations on the domestic and international money and capital markets of bonds, shares, asset management, etc. The bank is well integrated into the local financial and banking infrastructure and is licensed by the BNB, the primary and secondary dealer of Government Securities. The bank is also an investment intermediary, licensed by the Securities and Exchange Commission.

The bank's activities do not cause harm to ecology and the environment.

Raiffeisenbank (Bulgaria) EAD is a credit institution and as such does not support a research and development unit. 7

The rating of Raiffeisenbank (Bulgaria) EAD

Assigned by Fitch Ratings as follows:

• Long Term Rating: BBB

• Short Term Rating: F2

• Outlook: stable.

Correspondent Relations

As part of an international banking group, Raiffeisenbank (Bulgaria) EAD uses a broad network of correspondent banks, which provides a fast and efficient access to the global financial markets (USA, Western Europe, Asia).

Branch Network

At the end of 2019, the branch network of Raiffeisenbank (Bulgaria) EAD consists of 134 offices. 8

The Bank’s Management

Shareholders

Raiffeisen SEE Region Holding GmbH, Austria – 100 per cent.

Supervisory Board

Chairman: Martin Gruell

SB Members: Helmut Breit

Gerda Lottersberger-Roschitz

Monika Ruch

Robert Wagenleitner

Fabian Stenzel (on 22.08.2019 – deleted from the CR) Management Board Chairman: Oliver Roegl

Members of the Board: Dobromir Dobrev

Ani Angelova

Martin Pytlik

Nedialko Mihaylov 9

In 2019, the bank paid to the members of the Management Board and the Supervisory Board remunerations amounting to BGN 3,530 thousand.

The members of the Management and Supervisory Board of the bank do not hold participating interests in commercial companies as unlimited liability partners and do not own more than 25 percent of the capital of another company.

The Chairman of the Management Board, Oliver Roegl, is a member of the Supervisory Board of Raiffeisen Banka a.d. Beograd. He is also a member of the Management Board of the Association of the Banks in Bulgaria.

Until 30.09.2019 (Date of deletion in CR), Nedialko Mihaylov was a member of the Board of Directors of Cash Services Company AD.

As of 17.06.2019, Dobromir Dobrev is a member of the Management Board of the “Atanas Burov” Foundation.

In the past year, the board members or their respective related parties have not concluded with the bank contracts that go beyond the ordinary activity or significantly deviate from the market conditions.

At present, there is no option which entitles members of the Supervisory and Management Board to acquire shares or debentures of the bank.

Financial instruments and risk management policies used

The bank's business mainly involves the creation, acquisition, and disposal of financial instruments. As a result, the bank is exposed to credit, liquidity, market, and capital risk. The risk management policies applicable to those risks are further disclosed in note 4 of the accompanying annual financial statements of the bank.

Additional Audit Services

The auditing companies auditing the annual financial statements of the bank (individual and consolidated) also issue a Report on factual findings regarding the reliability of the internal control systems under Art. 76, para. 7, item 1 of the Law on Credit Institutions and Ordinance 14, Art. 5 on the content of the audit report for supervisory purposes as of 31 December 2019. Ernst & Young Audit also provides audit services and reviews of historical financial information requested by the auditors of the Parent Company.

In 2019, the auditing company Ernst & Young Audit also conducted a review of the condensed interim individual financial statements of the bank as of 30 September 2019.

Events after the date of the annual financial statements

The spread of COVID-19 is already assessed as an event with a significant impact on the global demand and supply of economic and financial resources, as there is significant uncertainty in the economic activity of many businesses and economic entities. For the purposes of the consolidated financial statements for 2019, the management assesses that it is a non-adjusting event that occurred after the balance sheet date. At this stage of the spread of the coronavirus and the dynamics with which it develops, it is practically impossible to make a reliable assessment and to measure the possible effects of the pandemic on the activity, assets and economic development of the Group. 10

Statement by the Chairman of the Supervisory Board

Ladies and Gentlemen,

RBI has had another successful financial year in Bulgaria. In 2019, Raiffeisenbank (Bulgaria) achieved very good results in the private individuals and in the corporate segments with credit growth above the market average. 2019 also developed positively in terms of efforts for reducing the NPL ratio, which is well below the average for the Bulgarian market. Further progress has been made in improving customer experience and by introducing innovation through the launch of the digital wallet RaiPay, new features in digital banking and in the process for digital onboarding of new clients.

In the 2019 financial year, the members of the Supervisory Board held 4 ordinary meetings. The overall attendance rate for Supervisory Board meetings was 100 per cent.

The Supervisory Board regularly and comprehensively monitored the business performance and risk developments at Raiffeisenbank (Bulgaria). Discussions were regularly held with the Management Board on the adequacy of capital and liquidity, as well as on the direction of the bank’s business and risk strategies. The Supervisory Board also dealt at length with further developments within corporate governance and monitored the implementation of corresponding policies. In the course of its monitoring and advisory activities, the Supervisory Board maintained direct contact with the responsible Management Board members, the auditor and heads of the internal control functions. It also maintained a continuous exchange of information and views with representatives from supervisory authorities on topical issues. Martin Gruell Chairman of the Supervisory Board of Moreover, the Management Board provided the Supervisory Board Raiffeisenbank (Bulgaria) EAD with regular and detailed reports on relevant matters concerning performance in the respective business areas. Between meetings, the Supervisory Board maintained contact with the Chairman and members of the Management Board. The Management Board was available when required for bilateral or multilateral discussions with members of the Supervisory Board, where applicable with the involvement of experts on matters being addressed.

The work undertaken together with the Management Board was based on a relationship of mutual trust and conducted in a spirit of efficient and constructive collaboration. Discussions were open and critical, and the Supervisory Board passed resolutions after fully considering all aspects. If additional information was required in order to consider individual issues in more depth, this was provided to members of the Supervisory Board without delay and to their satisfaction.

The focus in the 2019 financial year was on the topics of: Digitalization and Innovation; Adaptive transformation, incl. agile projects; Customer and portfolio growth; Leasing; IT Strategy; Risk Management; Retail; HR; Cost and Efficiency. In addition, the Supervisory Board reviewed the annual financial statements, the Annual Report, as well as the proposal for profit distribution prepared by the Management Board. 11

I would like to take this opportunity to thank our customers for their continued trust and all the employees of Raiffeisenbank and its Bulgarian subsidiaries for their hard work and unwavering efforts in 2019, as well as to ask for their continued commitment in tackling any challenges going forward.

On behalf of the Supervisory Board Martin Gruell Chairman of the Supervisory Board 12

Statement by the Chairman of the Management Board

Dear ladies and gentlemen,

In 2019, Raiffeisenbank (Bulgaria) EAD outpaced the growth of the market for a number of indicators, thus consolidating its successful development in recent years.

Thanks to our wide product portfolio, the constant implementation of innovations and the personal attitude towards our customers, we have established as a leader in the Bulgarian banking market in terms of customer satisfaction. According to independent marketing survey that measures customers’ inclination to recommend their bank (the so called NPS), Raiffeisenbank is in first place among its competitors, which is a major step towards fulfilling our vision 2025 to be the most recommended financial group.

In the conditions of a slowing economy, in 2019 the loan portfolio increased by 17 per cent on an annual basis and reached BGN 5.8 billion.

We increased our market share in lending – for households by 1 percentage point to 10.8 per cent, and in the corporate segment – by almost half a point to 7.7 per cent. We have significantly improved our market positions in the retail banking segment, and we are now in the third place in terms of market share, which is an increase of one position compared to 2018.

The bank's assets reached BGN 8.8 billion as of December 31, 2019.

Oliver Roegl In the environment of low interest rates, we achieved a sustainable Chairman of the Management Board profit after tax of BGN 129.7 million.

The stable capital results and the excellent quality of our loan portfolio (the NPL ratio reached 2.5 per cent at the end of 2019) give us confidence that we will cope with the economic downturn and the upcoming challenging times.

Our good performance in 2019 was awarded several prestigious international and national awards, including "Bank of the Year" by The Banker magazine for the fourth consecutive year, "Best Bank" of Euromoney and the "Secret Client" of the Association Bank of the Year.

In 2019, we launched a large-scale process of digital and adaptive transformation, which affects not only improvements in IT infrastructure, but also optimizing work processes and the approach to finding solutions in teams. This will help us become even more efficient and respond even faster and more flexibly to the market, as well as to the expectations of our individual and corporate clients.

At the end of the year we launched our digital wallet RaiPay, we are constantly improving our mobile banking. We are also making great efforts towards the process for entirely digital acquisition of new clients. We continue to work hard to find innovative solutions both among the teams in the bank and through external partnerships with fintech companies, startups and universities, thanks to the initiatives Elevator Lab, Think tank and Innovation Garden. 13

We continued the tradition of being socially responsible, supporting important health, social, cultural and eco causes across the country through our "Choose to help" donation campaign. For the past 11 editions (2009 – 2019), Raiffeisenbank, its employees and the general public supported a total of 280 socially significant projects with over BGN 3.2 million and dozens of volunteer actions.

These results, we are proud of, became possible thanks to the professionalism and responsibility of the employees of the Raiffeisen Group in Bulgaria, as well as the trust and high expectations of our customers and partners, which give us an incentive for development. Thank you on behalf of the Management Board and on my own behalf.

Oliver Roegl Chairman of the Management Board 14

Vision, Mission and Main values

Vision 2025 Vision and mission We are the most recommended financial services group.

Mission

We transform continuous innovation into superior customer experience.

Customers Raiffeisen BankRaiffeisen

International We constantly strive to improve customer experience and enable our clients to achieve more in their lives and businesses.

Employees

We value expertise and create a working environment which promotes collaboration, creativity and entrepreneurial spirit.

Shareholders

Raiffeisen GroupRaiffeisen We aim to generate solid and sustainable shareholder value. in Bulgaria General public

We act in a socially responsible manner, fostering the long-term welfare of the people and businesses in our markets.

Main values Economic growth

Collaboration

We work together.

When we work with each other, talk to each other, listen to each other and support each other, we can achieve so much more. We are creating an environment of mutual understanding, respect and trust.

We encourage diversity. Together with our colleagues, with our partners and with our customers we achieve more than Segment reports individually.

Proactivity

We are proactive.

We believe in looking ahead. We drive change. Concentrating on the possibilities rather than the impossibilities. Replacing indecision with decision. Action instead of reaction. auditors` report

Independent By being courageous and determined, we can make a difference. Even a little progress every day leads to big results.

Learning

We are eager to learn.

Learning means personal progress. We learn from experience, education and sharing. Experimenting and applying new knowledge may involve failure. Failing can be a great teacher if we learn from it. Addresses

Curiousity and learning help us innovate. We areresponsiblemembersofsociety andbuildsustainablebusiness. accountable forthe resultsofourwork. We always thinkaboutthe consequencesofouractions. When each ofustakes responsibility, we canchange alot. Individually andtogether, we own ourdecisions. We are We act responsibly. Responsibility 15

Independent Raiffeisen Group Raiffeisen Bank Addresses auditors` report Segment reports Economic growth in Bulgaria International Vision and mission 16

Raiffeisen Bank International at a Glance Vision and mission RBI regards Austria, where it is a leading corporate and investment bank, as well as Central and Eastern Europe (CEE) as its home market. Subsidiary banks cover 13 markets across the region. In addition, the Group includes numerous other financial service providers active in areas such as leasing, asset management and M&A.

In total, almost 47,000 RBI employees serve 16.7 million customers in more than 2,000 business outlets, the vast majority of which are in CEE. RBI AG shares have been listed on the Vienna Stock Exchange since 2005.

At year-end 2019, RBI’s total assets stood at €152 billion. The regional Raiffeisen banks hold approximately 58.8 per cent of RBI shares, with the remaining approximately 41.2 per cent in free float. Raiffeisen BankRaiffeisen International Raiffeisen GroupRaiffeisen in Bulgaria

Economic growth Segment reports auditors` report Independent Addresses 17

Group Companies

This consolidated report covers the activities of the bank and its subsidiaries and associates (hereinafter referred to as the Group) in 2019. As of 31 December 2019, the bank holds the following investments in subsidiaries and associates:

Subsidiaries

Subsidiaries are the companies controlled by the bank. Control is the power to manage an entity's financial and operating and mission Vision policies so as to derive benefits as a result of its activities.

The income and expenses of a subsidiary are included in the consolidated financial statements from the date of acquisition to the date on which the bank ceases to control the subsidiary.

Intra-group balances, transactions, income and expenses arising from transactions between the Group's companies are fully eliminated in the preparation of consolidated financial statements. Gains and losses arising from intragroup transactions that are recognized in the assets, such as loans and receivables, are eliminated altogether. International Raiffeisen Bank Raiffeisen Bank

The subsidiaries controlled by the bank as of 31 December 2019 are as follows:

Raiffeisen Leasing Bulgaria EOOD

Raiffeisen Leasing Bulgaria OOD was founded in 2004, with shareholders Raiffeisenbank (Bulgaria) EAD (24.5 per cent) and Raiffeisen Leasing International GmbH (75.5 per cent). Since July 2016, the sole owner of Raiffeisen Leasing Bulgaria in Bulgaria

EOOD is Raiffeisenbank (Bulgaria) EAD. Raiffeisen Group

Raiffeisen Leasing Bulgaria EOOD was actively present on the Bulgarian leasing market for 15 years. The main products offered to clients are leasing of new and used vehicles, construction and agricultural machinery, light and heavy trucks, trailers and forklifts, machinery and equipment and leasing of real estate. From 2017 the company offers its new service – Fleet Management.

Broker EOOD. The assessment of the participation was made by an expert, according to the requirements of art. 72 of the Economic growth Commercial Code.

As of 31 December 2019, Raiffeisen Leasing Bulgaria OOD reached a market share of 11.09 per cent on a leasing portfolio basis (Bulgarian National Bank statistics). The total volume of the leasing market as of 31 December 2019 amounts to BGN 4,293 mln., an increase of BGN 255 mln. compared to 31 December 2018.

As of 31 December 2019, Raiffeisen Leasing Bulgaria EOOD reached total assets of BGN 495 mln.

At the end of 2019, the net receivables of Raiffeisen Leasing Bulgaria EAD under leasing contracts amount to BGN 464 mln. Segment reports Segment The leasing assets are split as follows: vehicles – 75.3 per cent, equipment – 18.6 per cent and real estates – 6,1 per cent.

The customer base of Raiffeisen Leasing Bulgaria EOOD consists of corporate customers, representing 62.4 per cent of the total portfolio, followed by small and medium enterprises – 24.9 per cent and private individuals – 12.7 per cent.

In 2019, the attracted and utilized medium-term and long-term financial resources reached BGN 442 million, of which BGN 157 million from international financial institutions. Independent Independent

Raiffeisen Leasing Bulgaria EOOD has 12 registered branches on the territory of Bulgaria. report auditors` Addresses Addresses 18

Raiffeisen Service EOOD

Raiffeisen Service EOOD is registered in the Commercial Register with a capital of BGN 4,220 thousand. The company’s scope of activities includes real estate management, financial and accounting consultancy, legal advisory and accounting services, valuation of movable and immovable property, financial assets and enterprises, electronic data processing and information analysis, information services, rental of safes, leasing. As at 31 December 2019, the net assets of the company

Vision and mission amount to BGN 4,741 thousand. Raiffeisen Asset Management (Bulgaria) EAD

Raiffeisen Asset Management (Bulgaria) EAD was licensed in 2005 by the Financial Supervision Commission to conduct activities under Article 202, paragraph 1, items 1, 2 and 3 of the Public Offering of Securities Act (POSA), namely management of the activities of collective investment schemes (CIS) and of closed-end investment companies, as well as activities under Article 202, paragraph 2 of POSА – management of individual portfolios at own discretion, without special client orders and providing investment advice on securities. As of 31 December 2019, RAM is managing six local funds, providing investors with both conservative solutions and riskier products. As of 31 December 2019, the assets under Raiffeisen BankRaiffeisen

International management in the six funds exceed BGN 215 mln., i.e. a market share of 12.7 per cent. The registered capital of the company amounts to BGN 250 thousand and its net assets as of 31 December 2019 amount to BGN 1,427 thousand.

Raiffeisen Insurance Broker EOOD

Raiffeisen Insurance Broker EOOD is a company founded in 2006, 100 per cent owned by Raiffeisenbank (Bulgaria) EAD. By decision №250-ZB dated 30 March of the same year, the Financial Supervision Commission (FSC) entered Raiffeisen Raiffeisen GroupRaiffeisen Insurance Broker in the register of the insurance brokers, thus enabling the start of the insurance intermediation activities in Bulgaria provided by the company.

In August 2019, the bank transferred its participation in the company to its subsidiary, Raiffeisen Leasing Bulgaria EOOD.

In order to meet the high standards set for servicing its clients, Raiffeisen Insurance Broker EOOD carries out various activities, some of which are related to tracking and researching trends, preparing comprehensive analyzes, modeling of specific insurance products, administering insurance contracts and last but not least, assistance in case of insurance events. Raiffeisen Insurance Broker EOOD provides highly qualified insurance intermediation in servicing private individuals and legal entities. Economic growth The broker's clients are borrowers of Raiffeisenbank (Bulgaria) EAD in the corporate segment, lessees of Raiffeisen Leasing Bulgaria EOOD, as well as clients outside the Raiffeisen Group.

The goal of Raiffeisen Insurance Broker EOOD is to carry out insurance intermediation, while focusing mainly on the needs and interests of the client.

The data as of 31 December 2019 shows that for the considered one-year period Raiffeisen Insurance Broker has realized premium income in the amount of BGN 15,267 million.

Segment reports Raiffeisen Insurance Broker, as an insurance intermediary, offers its clients products of 12 insurance companies with which it has concluded contracts.

As of June 30, 2019, the company has a 1.05 per cent market share based on premium income in favor of insurers based in the Republic of Bulgaria. auditors` report Independent Addresses result during the year. increase of3.8percent in2019,driven by the buildingconstructionsegment, whilecivilengineeringshowed anegative cent inthe previous year. Similar tothisdynamic,the growth ofconstruction2.2percent in2018was replaced by an On the production side, the increaseditsproduction industry by only0.9 percent in2019,after anincreaseof1.1per dynamics ofgross domestic product. due tothe drop ofpetroleum inthe imports products andmetal oresfrom thirdcountries, whichhad onthe apositive effect growth ofother suppressedthe further majortrading national partners exports. Onthe other hand, the weaker was import unfavorable situationtheon international markets goods ofour andservices.exports of terms in The weaker than projected was acumulative resultofastronger domestic demand, by supported cheap moneyandgrowth insalaries, aswell asthe by 0.2percent. fellby Imports 1.1percent, again yoy, didnotgrow whileexports (0.0percent). The growth in2019 final consumptionrecorded the largest increaseof5.6percent yoy in2019,followed by gross fixed capital formation, 0.4 percentage points increasecomparedto2018(3.1percent). Outofthe GDPcomponents, onthe demand side, the In 2019,the realGDPgrewby 3.5percent yoy, data ofthe according National topreliminary Statistical Institute, ora Economic Growth in 2019 The Bulgarian Economy clothing andfootwear. contributed tothisinflation. Onthe other hand, there isadecrease onlyinconsumergroups –telecommunications and entertainment andculture, restaurants andhotels, education, transport, healthcare, housing, alcohol andtobacco, etc. inflation of3.8percent was achieved. The riseinfood prices(mostnotablyinmeat andvegetables) andsoftdrinks, Inflation developed at amoderate pace, reaching 3.1percent (average) in2019.BasedonDecember-December data, Inflation average permonth. Against thisbackground, the average alsosteppedupduring monthly the salary year by 12.0percent toBGN1258on and reached 54.2percent. The decline inthe unemployment was apositive fact, whichcorrespondstothe economy growth. unemployment rate in2018.Onthe other hand, the average annualemployment rate increasedsignificantly by 1.7p.p. yoy The unemployment rate decreased again in2019,reaching 4.3percent (average), whichis0.9p.p. lower thanthe Labour Market 19

Independent Raiffeisen Group Raiffeisen Bank Addresses auditors` report Segment reports Economic growth in Bulgaria International Vision and mission 20

Fiscal sector

The revenues of the consolidated state budget reached BGN 44.0 bn in 2019 or BGN 4.4 bn more than their volume in

Vision and mission 2018. On the other hand, expenditures, including Bulgaria's contribution to the EU budget, increased to BGN 44.0 bn, i.e. with BGN 5.6 bn more than in the previous year. Due to this dynamic, a deficit of BGN 1.1 bn was recorded in 2019, compared to a surplus of BGN 0.1 bn at the end of the previous year. The cost of purchasing fighter jets contributed to this deficit.

The total amount of the tax revenues in the state budget was BGN 35.3 bn, which was by BGN 3.0 bn more than 2018. Revenues from grants (mainly from EU funds and programs) increased by BGN 352.8 mn and reached BGN 2.5 bn. On the expenditure side, the most significant growth was realized by the capital expenditures – with BGN 2.2 bn yoy (including the cost of acquiring fighter jets), as well as, the subsidies and social expenditures by BGN 1.2 bn each, while the most significant decline was observed in interest costs by BGN 39.1 mn compared to 2018. Raiffeisen BankRaiffeisen International Public Debt

At the end of 2019, the public debt amounted to EUR 12.0 bn (19.9 per cent of GDP), which was by EUR 0.2 bn yoy lower remaining at one of the lowest levels in the EU. Raiffeisen GroupRaiffeisen in Bulgaria Balance of Payments

The current account balance of the balance of payment in 2019 was again positive at EUR 5.9 bn (9.7 per cent of GDP), Economic growth reporting a higher value than in 2018, when the surplus reached EUR 3.0 bn (5.4 per cent of GDP). With regard to the elements of the current account, in 2019 the trade balance was expectedly negative (EUR -0.1 bn) but was offset by the positive balance of services (EUR 4.0 bn). The primary income registered a positive balance of EUR 14.6 mn, supported by a surplus in secondary income of EUR 2.0 bn. During the year, the capital and financial accounts also reported surpluses of EUR 1.0 and 3.5 billion, respectively. Segment reports auditors` report Independent Addresses EUR 0.6bnin2019 Foreign directinvestment inthe registeredanincreaseduring country the year, from EUR0.5bnin2018toavolume of Foreign DirectInvestment FDI/Current accountbalance(%) FX reserves(EURbn) Source: NationalStatisticalInstitute,BulgarianBank,RaiffeisenRESEARCH Trade balance(EURbn) Inflation (annualaverage,%) Foreign directinvestment(net,EURbn) Unemployment rate(annualaverage,%) Current account(%ofGDP) Inflation (end-of-year,%) GDP percapita(EUR) Nominal GDP(EURbn) Real GDPgrowth(%) Selected macroeconomicindicators

6 ( 23.1% (0.8%) 2 5.3% 0.1% 7.6% 3.9% 2016 23.9 ,777 48.1 1.0) ( 0.6 41.2% 7,101 6.5% 5 2.8% 6.2% 5 3.8% 2017 23.7 50.4 0.8) ( .1% 1.4 2 7 3

16.6% 2.8% 3 2018 25.1 ,772 55.2 1.9) ( .7% .4% .2% .1% 0.5 10.2% 8,571 3.8% 9.7% 4.3% ( 3.5% 2019 24.8 60.6 0.1) ( .1% 0.6 ( 1 4 0

2019/2018 6.4 p.p.) 0.9) p.p. 0.3 p.p. (20.0% Change 94.7% .1 p.p. .3 p.p. .4 p.p. 10.2% (1.2%) 9.8% ) ) 21

Independent Raiffeisen Group Raiffeisen Bank Addresses auditors` report Segment reports Economic growth in Bulgaria International Vision and mission 22

Banking Sector Development in 2019 Vision and mission

In 2019, the banking sector achieved excellent results. Increased credit activity and a decrease in the share of non-performing exposures were reported. The steady increase in deposits, mainly from domestic sources, continued and contributed to preserving the good level of capitalization and high liquidity of the sector.

The banks in Bulgaria continued to carry out their inherent activities, striving to increase their effectiveness in an environment of slightly decreasing interest margins, volatile markets, and unpredictable external political environment.

At the end of 2019, the total number of the banks operating in Bulgaria was 24, out of which 18 licensed banks and 6

Raiffeisen BankRaiffeisen branches of foreign banks. The share of the local banks in the total assets of the banking system decreased by 1.2 p.p. International compared to the end of 2018, to 21.1 per cent (data as of September 2019). Against this background, the share of EU banks subsidiaries increased by 1.1 p.p. up to 72.7 per cent. The branches of EU banks hold a share of 3.0 per cent.

The assets of the banking industry recorded again growth under the impact of the increase in loans as well as, of the "cash" position. Thus, by the end of December 2019, the total balance sheet value of the sector reached BGN 114.2 bn, or by BGN 8.6 bn (8.2 per cent) more compared to the end of 2018.

Over the past year, the gross credit portfolio amounted to BGN 66.3 bn, which is 8.8 per cent above its level at the end of

Raiffeisen GroupRaiffeisen 2018. By segments, this growth was decomposed as an increase in household loans by BGN 2.1 bn (9.6 per cent) and in

in Bulgaria loans to the corporate segment by BGN 3.3 bn (8.4 per cent yoy).

Households’ saving attitude was still a determining factor for the growth of deposits that went up at the end of the year by BGN 7.3 bn yoy (8.6 per cent) up to BGN 91.9 bn. Rise was also registered in the household deposits – by BGN 4.2 bn (7.9 per cent), as well as, in those of the corporate clients – by BGN 3.0 bn (9.8 per cent).

The equity in the banking system increased by BGN 0.5 bn (3.9 per cent) reaching BGN 14.1 bn as of the end of the year. The banking sector profit decreased by 0.2 per cent to nearly BGN 1.7 bn (BGN 2.9 mn less than in 2018), and the return

Economic growth on assets (ROA) and return on equity (ROE) indicators were 1.5 per cent and 11.8 per cent, respectively, decreasing slightly compared to the previous year, when 1.7 per cent and 13.3 per cent were reported.

In 2019, the sector was again characterized by a decrease in the total amount of non-performing loans and advances (NPLs) in the portfolio of the banks. At the end of the year, the NPLs gross amount dropped to BGN 6.1 bn (6.5 per cent of gross loans and advances), which is by BGN 0.7 bn less compared to the exposure as of the end of 2018 exposure (7.6 per cent).

In 2019, the banking sector reported not only good financial indicators, but it continued the process of consolidation. Thus, Eurobank (Postbank) bought the shares of Piraeus Bank, and in 2020 the deal between DSK Bank and Expressbank is expected to be finalized, which will again shift the market positions of the players in the sector. An invitation to join the Segment reports Banking Union and ERM II is also expected to give some impetus to the consolidation in the sector. auditors` report Independent Addresses Total Assets Bank Key Financial Indicators of the in 2019 The Group’s Activity in the amount ofBGN19million. During the year, the bankwrote from off itsbalancesheet against provisions forimpairment exposuresclassified as“loss” grewsignificantlyIn 2019,the loanportfolio inallcustomersegments, whilemaintaining good quality. growth inthe deposit base. Thegrowth intheassetsbank's mainly dueis the to generated fromnew business the activity,lending by thesupported Source: Audited Separate Financial Statements (Bulgaria) EAD ofRaiffeisenbank in BGNTh ousand 6,459,55 0 6,323,96 4 6,998,90 5 7,777,43 7 8,817,76 5 Credit portfolio in BGNTh ousand 3,834,128 4,030,438 4,359,243 4,995,283 5,825,071 23

Independent Raiffeisen Group Raiffeisen Bank Addresses auditors` report Segment reports Economic growth in Bulgaria International Vision and mission 24

Deposits from Customers Equity

in BGN Thousand in BGN Thousand 7,258,722 7,000,000

6,214,181 Vision and mission

5,391,470 4,759,9014,748,602 922,699 913,830 910,327 910,497 910,473 Raiffeisen BankRaiffeisen International

Source: Audited Separate Financial Statements of Raiffeisenbank (Bulgaria) EAD

In 2019, the bank reports growth in customer deposits in all segments. Raiffeisen GroupRaiffeisen

in Bulgaria The equity also includes the profit after taxes realized for the year. In 2019, a dividend was paid to the sole owner of the capital in the amount of BGN 131.5 million

Net Profit

in BGN Thousand 132,641 134,465 131,549 129,682 Economic growth

61,615 Segment reports

Source: Audited Separate Financial Statements of Raiffeisenbank (Bulgaria) EAD

Return on assets before tax Return on equity before taxSource:

in % in % 2.3 2.2 2.0 1.7 auditors` report Independent

1.1 18.6 17.4 17.7 17.3

7.9 Addresses

Audited individual financial statements of Raiffeisenbank (Bulgaria) EAD 7.7 percent. place The intermsofdeposits bankisinfourth from legal entities, withamarket shareof8.8percent. (Bulgaria) EADistheAs of31December2019,Raiffeisenbank fifthlargest creditortolegal entities, withamarket shareof regarding the Net Promoter Score. 2019, the bankscoreditshighest customersatisfaction TRI*Mindex onthe Bulgarian market, aswell asaleadership position with bothlendingandnon-lendingclients inorder toconstantly improve andcontinuously boostcustomersatisfaction. In The customersatisfaction enablesthe survey banktoreceive regularfeedback from itscustomers. Itisconducted regularly LEAN projects andadaptive initiatives tooptimizeinternal processes andimprove staff. for innovative andadaptive solutionsbothinthe localmarket Group. andinthe Raiffeisen Inaddition, the bankimplements become fullycompatible withthe customer’s expectations. The bankisactively involved inthe development ofbestpractices (Bulgaria) EADinvestsRaiffeisenbank significantly inthe modernization ofthe ITinfrastructureanditssystemsinorder to leading tothe improvement ofthe competitiveness ofthe Bulgarian economy. InnovFin), thus beingasustainablemediator between the programs forEuropean financingandthe Bulgarian business, Guarantee Fund andthe European Investment Fund (withwhichitcurrently works on2guarantee lines–COSME and (Bulgaria) EADisakeyRaiffeisenbank ofthe national partner andsupranational financialinstitutions, includingthe National web-based platform, aswell asinnovative onlineapplications forordering bank guarantees andletters ofcredit. innovative services, awide range offering ofweb solutionsthrough itsonlinemobileandInternet platform, FXExchange derivatives designed forsmall,mediumandlarge companies. The bankcontinues todevelop itsfunctionasaprovider of lending, factoring, cashmanagement, documentary operations, deposits, foreignexchange transactions, andfinancial andconstantly (Bulgaria)As auniversal EADoffers bank,Raiffeisenbank improves itsrange ofbankingproducts including participant inseveral syndicated loans. technology andothers. (Bulgaria)formany EADisareliablepartner Raiffeisenbank international companiesandisa growing sectorsofthe andexport-oriented economy: agribusiness, manufacturing, wholesale, pharmaceuticals, information added anew5percent toitsclient base. The bankhasawell-balanced portfolio, includingleading representatives from all (Bulgaria) EADcontinuedIn 2019,Raiffeisenbank tosuccessfullydevelop good relations withitscorporate clients and Corporate Banking Capital Markets Corporate Bankingand 25

Independent Raiffeisen Group Raiffeisen Bank Addresses auditors` report Segment reports Economic growth in Bulgaria International Vision and mission 26

Capital Markets

Raiffeisenbank (Bulgaria) EAD is a leading market participant in the foreign exchange and debt markets in the country. The

Vision and mission financial institution, in service of its clients, maintains a wide portfolio of currencies and provides access to foreign exchange and interest rate risk management tools.

The bank is a licensed investment intermediary and a respected primary dealer in the country. The institution cooperates closely with the Ministry of Finance by participating efficiently in development projects organized by the Ministry and/or the Bulgarian National Bank.

In 2019, Raiffeisenbank (Bulgaria) EAD achieved growth in its capital market performance, backed by the expansion of the customer base and wider access to innovative products and services for our customers. In the course of the year, the financial institution also participated as a consultant in significant corporate transformation and acquisition transactions together with Raiffeisen Bank International AG – an activity that gained a wider local presence earlier in 2018. Raiffeisen BankRaiffeisen International As part of an international banking group, Raiffeisenbank (Bulgaria) EAD successfully implements the experience of the other sister network banks in the region and offers alternative solutions based on a wide range of instruments.

Custodian services

Raiffeisenbank (Bulgaria) EAD provides a wide range of custodian and depository services to banks, non-bank financial Raiffeisen GroupRaiffeisen institutions, corporate and individual clients in more than 60 markets worldwide, through Raiffeisen Bank International as our in Bulgaria exclusive global sub-depository.

Raiffeisenbank (Bulgaria) EAD is a custodian bank of pension funds in accordance with the provisions of the Social Insurance Code (SIC) and BNB Ordinance № 36 on Custodian Banks under SIC.

The policies of the bank, regulating its activity as an investment intermediary, providing custodian services, are in full compliance with the requirements of Art. 28-31 of Ordinance №38 of 25.07.2007 of the Financial Supervision Commission and Ordinance №58 of 28.02.2018 of the Financial Supervision Commission. Economic growth

Client financial instruments are kept in individual accounts of the clients and are reported separately from the assets of the bank. Client assets in the accounting systems of the bank are reported as assets held in custody in the off-balance sheet accounting system of the bank, and as such are not subject to allocation in bankruptcy or liquidation proceedings of the bank. It has been established (1) the existence of control over the separation of the transactions performed, between the bank's own activity and the custodial activity, (2) the presence of automatic reconciliation on a daily basis of client financial assets in the bank's accounting systems and registers of the bank with information from the relevant local and foreign central depositories / securities registers and (3) the existence of reconciliation of the records in the accounting system with the statements / confirmations sent to clients. Segment reports In 2019, a steady growth of client assets under custody was reported, which strengthened the bank's position among the leading financial institutions in Bulgaria in the field of custody services.

During the year, significant investments were made in the technological development of the systems used to provide custody services. The trend for digitalization and a higher degree of automation will continue in future.

In recognition of the satisfaction of its customers for the high quality of custodial and depository services provided, the Raiffeisen Group, including Raiffeisenbank (Bulgaria) EAD, continues to receive prestigious awards from the surveys of the

auditors` report leading specialized publications for the trends in asset management and administration. Independent

Financial Institutions and Sovereigns

Relationship with Banks, Non-Bank Financial Institutions and Sovereigns

Addresses Raiffeisenbank (Bulgaria) EAD develops its relations with first-class banking and non-banking financial institutions in the country and abroad, as well as with international organizations and public institutions subordinated to the central authorities. The bank is one of the few on the Bulgarian market that has a specialized unit for servicing clients, financial institutions and sovereigns. The team consists of professionals with many years of experience and knowledge of the specific regulatory and regulatory requirements for this type of clients. 27

The number of the banks with which Raiffeisenbank (Bulgaria) EAD has established correspondent relations continues to grow, as well as the number of the accounts in various currencies maintained by the bank. The bank serves and offers a full range of services to over 300 non-bank financial institutions, state budget and international organizations.

Thanks to the excellent quality of the services provided in accordance with the specific requirements of the financial institutions, as well as the trust of the international financial community in the bank, about 40 foreign banks – mainly from Europe and North America, and more than 20 international non-banking organizations maintain accounts with the bank in local and foreign currency.

The bank continues to be among the preferred partners with an increasing number of serviced local Insurance companies, Pension insurance companies, Fund management companies, Investment intermediaries, leasing and factoring companies, exchange offices, etc. Raiffeisenbank (Bulgaria) EAD is among the leaders in servicing the central government authorities, sovereigns, and international organizations, providing comprehensive banking services and a full range of banking products. Vision and mission Vision Relationship with International Financial Institutions

Raiffeisenbank (Bulgaria) EAD is one of the market leaders in attracting medium-term and long-term financing from International Financial Institutions (IFIs). For the last 16 years, the total amount of funds under credit lines and guarantee agreements agreed with institutions such as the European Bank for Reconstruction and Development, the European Investment Bank, the European Investment Fund (EIF), KfW, the European Fund for Southeast Europe, the Development Bank of Europe, the National Guarantee Fund and others is over EUR 950 million. International Raiffeisen Bank Raiffeisen Bank

in Bulgaria Raiffeisen Group Economic growth Segment reports Segment Independent Independent auditors` report auditors` Addresses Addresses 28

Retail Banking

Private Individuals Vision and mission In 2019, Raiffeisenbank continues to create and develop innovative and digital banking products and services in line with the dynamic expectations and needs of customers in their day-to-day.

At the end of the year the total amount of the assets amounted to BGN 2.61 billion. The significant growth of BGN 446 million contributed for reaching third place in terms of market share (10.8 per cent). The total amount of the household deposits is BGN 4.24 billion. The number of clients for whom Raiffeisenbank is the main bank exceeds 302 000, and the ratio to the active client base reached 56 per cent.

The clients choose the bank as their preferred partner when looking for a housing loan. The market share reached 8.6 per

Raiffeisen BankRaiffeisen cent in 2019 compared to 6.7 per cent in 2018 and the new business grew by 34 per cent for the second consecutive

International year. Favorable conditions, combined with an individual and transparent approach, expert and professional consultation, contributed to achieving excellent results.

The positive customer experience also had an effect on the consumer lending. The market share reached 11.8 per cent at the end of 2019, reporting growth for the fourth consecutive year. The positive trend led to a rise of one position to 3rd place on the new loans market.

Customers have the opportunity to apply for a digital consumer loan through three channels – through mobile banking, online

Raiffeisen GroupRaiffeisen banking and directly on the bank's website. The provided automations allow the utilization of the approved financing within one hour. in Bulgaria

The bank meets the needs of the largest social groups in the country. This year Raiffeisen provided access to its youngest customers, students aged between 14 and 18, to more services – passive online banking and e-mail notifications. Retirees can now take advantage of a Consumer Loan with a fixed interest rate for the entire period.

In October 2019, the Raiffeisenbank's new digital portfolio – RaiPay – was launched. This is a mobile application for phones, where the cards issued by Raiffeisenbank are "digitized" and contactless payments and withdrawal can be executed directly with the phone. In just 3 months, more than 15,000 customers have downloaded RaiPay and are now making payments in Economic growth a modern, convenient and secure manner.

The Mobile banking continued its development with the introduction of new, modern design and functionalities. The clients can now take advantage of the convenience of ordering bank transfers only by using their phone number.

Elevator Lab Bulgaria 2019 was held for the consecutive third year – a program of Raiffeisen Bank International for partnership with fintech companies and startups, which effectively helps the best entrepreneurs to develop their startups. The Bulgarian companies applied with projects in the areas of Data Analysis, Artificial Intelligence, Corporate Banking, Payments and Transactions, Retail Banking, Cyber Security, Foreign Exchange Solutions and Regulatory related technologies. Segment reports

In 2019, the credit cards issued were 10 per cent more than in the previous year, as their activity increased, and the funds used on them have also increased by 12 per cent.

May 2019 was the start for the sale of the unique debit card with a Game of Thrones design, created in partnership with HBO. Due to the good match, the campaign saw 15 per cent growth in new clients.

The volume of the card payments continues to grow at a steady pace – 18 per cent on an annual basis. The migration of ATM terminals to a new and modern card platform has been completed, which provides an even better service for the cardholders. auditors` report Independent In 2019, the bank strengthened its position in self-sold insurance and recorded about 15 per cent growth in income from commissions from the bancassurance business.

During the year, the range of self-sold insurance products was enriched with a digital E2E mountain insurance and insurance for diagnosing critical illness, we also optimized the process of issuing Property policies in the offices of RBBG.

The sale of the NN pension to realized 175 per cent growth or over 8,300 subscriptions in 2019. Addresses 29

Micro Business

IIn 2019, Raiffeisenbank (Bulgaria) EAD further strengthened its leading position in the Micro segment, servicing a growing base of more than 64,900 customers. The bank added new attractive services to its broad lending and non-lending product portfolios, to provide better service for the micro companies, as well as for the start-up companies.

The main priorities during the year were focused on:

• Increasing customer satisfaction by providing complex and competent service, constant improvement of service quality, development of customer-tailored products;

• Providing micro companies with access to local and EU guarantee programs and credit lines by maintaining strong partnership with the European Investment Fund and the National Guarantee Fund;

• Facilitating the exchange of information and the direct interaction with the micro companies. For this purpose, 5

regional business forums were organized, and business breakfasts were held, where information was presented and mission Vision about the work of the bank under the operational programs, as well as the new opportunities for financing the development of the clients’ business;

• Providing modern and innovative banking services, launching remote consulting to support micro companies and selling credit and non-credit products, upgrading the Internet and mobile banking platform, providing the opportunity to apply for a loan online, providing fast and convenient 24/7 access;

• Further expansion of the bank’s presence in the agricultural sector through active financing of the agricultural International

producers’ needs; Raiffeisen Bank

• Conducting attractive CRM and promotional campaigns aimed at customers in the segment and increasingly tangible use of alternative communication channels.

Special attention is paid to the development of the employees in the segment, which continues to contribute to its better performance. in Bulgaria

Sales and Distribution Channels Raiffeisen Group

The branch network of Raiffeisenbank (Bulgaria) EAD has national coverage and by the end of 2019 consists of 134 offices positioned in over 60 cities throughout the country.

For additional convenience and flexible customer service, the bank continued to invest in its network and infrastructure. Investments were made for 2 more offices in Sofia, renovated in line with the new concept, developed according to the design thinking methodology and with an emphasis on customer and employee expectations and experiences.

A new office was opened in Sofia, providing access to products and services, and ensuring full banking services to our Economic growth customers in Ovcha Kupel and the surrounding area.

We will continue to develop the new concept aiming to increase the satisfaction of our customers and employees, which is our top priority.

The ATMs were replaced with new BNA machines with deposit functions in over 90 per cent of the offices, which is in line with the "Branches to foster digital" initiative.

In order to meet the expectations of the clients for good service and quality, and for their convenience, 14 offices of the bank reports Segment work with extended working hours on all weekdays, and some of them serve the clients on weekends as well. Independent Independent auditors` report auditors` Addresses Addresses 30

A map with the distribution channels positioned in the country is attached below: V i s i o n a n d m i s s i o n R a I n i f t e f e r i n s a e t n i o

B n a a n l k

R a i i f n f e

B i s u e l n g

In all of the134 offices, the clients can be consulted and serviced by each one of the specialists, including for cash a G r i

r transactions. In the Flexi offices, which are currently 45, the clients can also be consulted and serviced for credit products a o

u by the same specialist. p

Raiffeisenbank (Bulgaria) EAD continues to invest in specialized centers for individual clients and small enterprises. Mortgage zones operate in the big cities – Sofia, Plovdiv, Varna and Burgas. There are 23 Microbusiness Centers in 13 cities, where

E qualified specialists provide comprehensive financial advice to companies and various products and services according to c o the needs of each business. n o m i c For over 15 years, Raiffeisenbank (Bulgaria) EAD continues to develop its agent network of mobile bankers and external g

r partners. Clients can take advantage of completely free personal counseling from Mobile Banking Consultants at a time and o w place convenient for them on the main products and services for individual clients, incl. consumer loans, credit and debit t h cards, packages. The mobile bankers network saves the bank’s clients time and effort, incl. the preparation of the necessary documents for applying for a desired banking service. The network of external partners is also an important sales channel, helping to meet the set business volumes for individual customers and micro companies, as at the end of 2019 the bank cooperates with a large number of partners and credit intermediaries registered by the BNB under the Law on mortgage S e loans to consumers. g m e n

t Raiffeisenbank (Bulgaria) EAD has its own Call Center, which is servicing customer inquiries around the clock, seven days r e a week. The center handles a wide range of inquiries related to the products and services of the bank and is accessible p o through various communication channels – both the traditional way by phone and more and more different digital channels r t s such as E-mail, Webchat on the bank's website – www.rbb.bg, Facebook Messenger, as well as through the contact forms on the official website, the online banking Raiffeisen Online and the mobile application RaiMobile. The bank now uses an official Viber channel to inform its customers about special and individual offers. Raiffeisenbank is currently in the process of implementing its own Chatbot channel, which will meet the most frequently asked customer inquiries and will be available a

u to customers in all current communication channels. I n d d i t e o p r s The Call center actively participates in programs and initiatives for sales, servicing and reporting of customer satisfaction, e ` n

d r aimed at current and potential customers of the bank. e e p n o t r t The employees of the Call Center are specialized in servicing inquiries for products and services offered to individuals, MICRO companies, Premium customers, merchants with POS terminals, as well as those related to card payments and digital banking. A d In response to digitalization in the banking sector, Raiffeisenbank is enhancing its digital channels and is constantly d r e developing and maintaining up-to-date website, internet and mobile banking as sales channels. A digital loan project was s s

e launched together with the design of a fully automatic process. The project was transformed into a Scrum team, based on s needs and expectations for better results. A minimal product from the customer's point of view was successfully delivered – 31

digital signing of loan agreements by clients for pre-approved consumer loans for private individuals. Positive feedback was collected from the clients. Improvements have been made in the mobile banking. New authentication mechanisms have been provided to the client in connection with the current trends in the client experience.

With its wide branch network and its various sales and distribution channels, in 2019 the bank achieved growth in the volume of loans and in the sales of non-credit products, as well as an increase in the loan portfolio in all retail segments.

Raiffeisenbank (Bulgaria) EAD has achieved a reputation of a bank focused on the best customer experience and customer care. The bank uses various sources to help understand and anticipate the customer expectations. To this end, the indicators for the achieved customer satisfaction are carefully monitored through all points of contact – offices, website, electronic channels, Call Center and others.

Raiffeisenbank strives not only to provide quality customer service according to internally accepted corporate standards, but

also to exceed customer expectations. The bank invests in many activities and initiatives for continuous improvement of the and mission Vision customer experience through all channels and points of communication.

Human Resources International Raiffeisen Bank Raiffeisen Bank

At the end of 2019, the headcount of Raiffeisenbank (Bulgaria) EAD totaled to 2,784 employees, 49 per cent of which were employed in the branch network of the bank; 82 per cent of the employees are university graduates and the average age is 38 years.

In 2019, the main focus in human resources management was the development of the managers’ and employees’ competencies, the development of the employer's brand, as well as enhancing the employees’ engagement and building a culture of learning and instant feedback. We also worked actively to support the process of Digital Transformation by developing flexible thinking and mastering the principles of Adaptive Organization. in Bulgaria Raiffeisen Group The main focus in the employee development programs was on customer experience through gamification, digitization and innovation, soft skills with a focus on employee well-being, health and happiness, Agile and adaptive organization, and others.

Managers at various management levels participated in trainings on topics for increasing the employee engagement, Diversity and Inclusion in the workplace, Dress Code. Several training programs were conducted for different groups of employees on topics related to digitalization and innovation: "Data Science" and "Digital Transformation for Retail".

In 2019, the training and development system, "cHaRlie", was enriched with new digital content, as well as a new functionality for instant feedback was introduced in order to be used as a tool in the performance management process. The Economic growth number of employees who use the system has increased significantly, as well as the positive feedback from them.

Also, additional efforts were invested in upgrading HR practices such as: mentoring, coaching, training and consulting, structured career paths for different positions. In 2019, the bank invested again in increasing the team effectiveness, sports and teambuilding initiatives. Raiffeisenbank (Bulgaria) also participates in a variety of international HR initiatives such as the International Program for the Development of Young Talents, etc.

In 2019, the bank continued to work on the development of the Employer Brand of Raiffeisenbank Bulgaria through the implementation of several initiatives, which resulted in receiving the first employer awards: reports Segment

• Best employer – Banking – 1st place;

• The most socially responsible company – 1st place;

• Best team building – 2nd place;

• Best training program "Employee experience with gamification" – 2nd place; Independent Independent auditors` report auditors` • HR Manager / Director – Rada Yosifova. Addresses Addresses 32

Risk Management

Vision and mission Risk Controlling

The Risk Governance Committee, set up in 2017, continues its quarterly meetings. The Committee reviews the policies, procedures, rules and practices related to the bank's economic capital and stress testing models, as well as reviews and approves the stress test results and scenarios and also reviews and approves the validation results of all models throughout their life cycle.

In 2019, Raiffeisenbank Bulgaria continued its work towards regulatory compliance with Standard 239 of the Basel Committee on Banking Supervision – Principles for effective risk data aggregation and risk reporting. The standard addresses the data aggregation within the bank and sets principles in carrying out regulatory reporting. Raiffeisen BankRaiffeisen International The bank builds and maintains a database ("dictionary") of key regulatory concepts. During the year, a project was launched to ensure regular automatic data reconciliation in the preparation of various reports.

During the past year, the used non-retail (group) models used were validated, as well as the local models in the Retail Banking segment.

Two new application scorecards (for mortgages and consumer loans) were successfully implemented during the year. Raiffeisen GroupRaiffeisen In November 2019, the bank introduced the new default definition in accordance with EBA/GL/2017/16 and EBA/ in Bulgaria RTS/2016/03 – Upcoming in 2020 and 2021 is the first stage for updating and validating of the parameters of the models in the Retail Banking segment in order to implement the new default definition.

The NPE strategy of the bank was also updated together with the operational plans in the individual segments, in connection with the requirements of ECB, the so-called ECB guidelines for NPL Management.

After the introduction of IFRS 9, the bank continued with the annual review and the update of the parameters of IFRS 9 models and the quarterly update of the macro models. The macro models apply the group macro environment development Economic growth scenarios for the purposes of IFRS 9, which are limited to several macro environment scenarios and the corresponding statistically significant parameters. In parallel, the bank continues to apply the group impairment models under IFRS 9, which are formulated at the head office in Vienna, where the key point is empirical monitoring of default exposures, as well as impairment of financial instruments with embedded element of credit risk. The bank successfully applies the group methodology for classification and measurement at fair value of financial instruments in accordance with IFRS 9.

In 2019, the bank performed the regular update of the profiles for withdrawal of deposits and attracted funds, as well as the annual review of the market risk limits in accordance with the risk appetite of the institution. The bank successfully maintains adequate risk / return levels in a low-interest environment. Also, during the year a number of activities related to

Segment reports the implementation of best practices for data management for the purposes of monitoring and control of market and liquidity risk were carried out and thus the first phase of an important project in the field was successfully completed, both on group and local level.

In 2019, the bank has successfully completed the renewal and improvement of models for measuring the fair value of debt securities, based on the best practices and methods in cooperation with internationally recognized data providers, fully complying with the requirements of IFRS 13. A two-tier approach is used, based on a combined sequence of use of the market information – Direct observations and Observed comparable. The determined price is a combination of modern quantitative and qualitative approaches and methodologies. auditors` report

Independent Raiffeisenbank (Bulgaria) EAD and its subsidiaries, as part of the RBI Group, consider the operational risk as a separate category of risk and adhere to the group policies, rules and procedures. The RBI Group encourages the development of an open and risk-sensitive environment and culture in order to support the identification, measurement, management and monitoring of exposures resulting from inadequate or poorly functioning internal processes, people and systems, or from external events. Operational risk is managed within a Risk Management Cycle through various tools and approaches, such as Risk Assessment, Scenario Analyzes, Early Warning Indicators, Operational Event Data Collection, and Reporting. These tools and measures provide, as a whole, an overview of the exposure to the Operational Risk and ensure its maintenance within the risk appetite set by the Management. The bank applies the Three lines of defense model, which defines the respective

Addresses responsibilities in the management of the Operational Risk.

The bank has an Operational Risk and Controls Committee. The Committee is a specialized internal body, part of the management of Raiffeisenbank (Bulgaria) EAD in the field of operational risk management and internal controls (ICS). 33

In 2019, the main activity of the Operational Risk Control Unit was focused on ensuring high quality of operational risk management in Raiffeisenbank and in compliance with the Group Standards and Practices, as well as on the further increase of the level of understanding of the operational risk by all employees of the bank.

Risk Management Corporate Banking

During 2019, the Corporate Risk management continued to support the portfolio growth while maintaining excellent quality оf the credit portfolio. Together with the business new market opportunities in certain areas and industries have been monitored and identified. The defined in the Corporate Credit Policy portfolio indicators and caps were strictly observed.

Main objective in the Corporate risk activity was to support the existing bank’s clients in their business expansion strategy as

well as acquiring new perspective borrowers with acceptable risk profile and stable market position while applying a proven and mission Vision credit practices: pre-alignment of larger scale credit deals, adherence to approved credit principles in specific industries (Real estate, construction), avoidance of aggressive loan structures, as well as the single ticket and industry concentration risk and keeping the main focus on cash-flow based debt service ability of the customers.

Following the proactive steering of the customers with indications for worsened financial standing or increased credit risk, the excellent risk profile of the credit portfolio was successfully maintained.

A lot of initiatives for optimization of the credit process were introduced aiming at increased process efficiency and the credit International application system was fully implemented. Raiffeisen Bank

Risk Management Retail Banking

One of the main functions of Retail Risk Management Department is the preparation of Lending Policies for PI (Private Individual) and Micro segments. in Bulgaria In 2019, the Division continues the consistent course of smart portfolio growth and preserving of excellent quality of loans Raiffeisen Group in accordance with the approved strategic goals of Raiffeisenbank

The main focus of the improvement of risk infrastructure was the upgrade of Decision Engine, the application used for automatic decisions. Lending process was improved and optimized as a result of the increased level of automatically handled loan applications.

At the end of 2019, Retail NPЕ portfolio dropped down to levels far below the average for entire banking sector due to proactive management of delinquent exposures and consistent appliance of collection strategy of legal loans. Economic growth Information Technology In 2019, the Information Technology Division continued to pursue its vision of turning IT into a strategic business partner, contributing to Raiffeisenbank's position as a leader in the banking sector in terms of customer experience, innovation and efficiency.

In the field of data management, new initiatives were launched in order to organize the work in a faster and more efficient reports Segment manner – establishing a DWH Cross-functional Kanban team together with the Finance Division. Several innovative solutions for the bank were completed, such as Data Lake, a platform for direct feedback for the bank's customers, implementation of new web services, as well as the new RaiPay application.

RBBG's ATMs have been migrated to a new management center in order to provide higher quality ATM services, new functionalities and cost optimization. New specialized technological solutions in the field of information were introduced. The IT Division supported the pursuit of an improved customer experience by improving and expanding the Wi-Fi connectivity for all of the bank's offices and building a system for customer flow analysis with 3D cameras. Independent Independent auditors` report auditors` In 2019, the Information Technology Division proved to be an active participant in the implementation of the organization's mission for turning continuous innovation into an exceptional customer experience. Addresses Addresses 34

Operations

Customer payments in foreign currency increased by over 30 per cent for incoming payments and by over 6 per cent for outgoing and interbank transfers. The share of electronic transfers continued to increase and reached about 90 per cent.

Customer payments in BGN (outgoing and intrabank) increased by nearly 13 per cent. The share of the electronic local Vision and mission transfers remained stable with levels around 92.00 per cent at the end of the year. Stable market share of payments through BISERA, with an average level for the year of 10 per cent. The number of the transfers broadcast through RINGS maintains a market share for 2019 of close to 11.00 per cent.

The bank is constantly working towards automation of customer payments and achieving higher quality and speed of processing.

The tendency for digitization and a high degree of automation is maintained, with efforts aimed at continuously improving the services provided in the field of Retail Banking and reducing the time for loans approval and utilization (less than 1 day). Following the bank's strategy aimed at improving the customer experience and offering leading products and services, the

Raiffeisen BankRaiffeisen time for card and PIN delivery to a customer has been reduced, the services related to bank card servicing were digitalized International and, easy access was provided via the bank’s online and mobile banking. Since the end of 2018, our customers can also benefit from electronic signing of documents, thus we had created a fully digitized remote service, accessible from anywhere in the country.

The bank has invested in various innovative approaches in different areas of Operations, robotic processes have been implemented in the processing of bank cards and the administrative processes related to PI loans, we have experimented with new communication channels such as Viber, advanced analytical models were used in the field of bad debts collection.

Raiffeisen GroupRaiffeisen The bank develops and renews its ATM network with machines of the latest generation (touch screen, contactless) by

in Bulgaria increasing the number of the deposit ATMs (BNAs) that will be available in all offices of the bank.

Economic growth Segment reports auditors` report Independent Addresses 35

Group Companies

Raiffeisen Leasing Bulgaria ЕOOD

Raiffeisen Leasing Bulgaria OOD was founded in 2004, with shareholders Raiffeisenbank (Bulgaria) EAD (24.5 per cent) and Raiffeisen Leasing International GmbH (75.5 per cent). and mission Vision

Since July 2016, the sole owner of Raiffeisen Leasing Bulgaria EOOD is Raiffeisenbank (Bulgaria) EAD.

Raiffeisen Leasing Bulgaria EOOD has been actively present on the Bulgarian leasing market for 15 years. The main products offered to clients are leasing of new and used vehicles, construction and agricultural machinery, light and heavy trucks, trailers and forklifts, machinery and equipment and leasing of real estate. From 2017 the company offers its new service – Fleet Management. International Raiffeisen Bank Raiffeisen Bank As of 31 December 2019, Raiffeisen Leasing Bulgaria EOOD reached a market share of 11.09 per cent based on the leasing portfolio (statistics of the Bulgarian National Bank). The total volume of the leasing market as of 31 December 2019 amounts to BGN 4.293 million, which is an increase of BGN 255 million compared to 31 December 2018.

As of 31 December 2019, the assets of Raiffeisen Leasing Bulgaria EOOD reached BGN 495 million.

As of 31 December 2019, the net receivables of Raiffeisen Leasing Bulgaria EOOD under leasing agreements amount to BGN 464 million. The leasing assets are distributed as follows: vehicles – 75.3 per cent, equipment – 18.6 per cent and real estate – 6.1 per cent. in Bulgaria Raiffeisen Group

The clients of Raiffeisen Leasing Bulgaria EOOD are corporate clients, holding a share of 62.4 per cent of the entire portfolio, followed by small and medium enterprises – 24.9 per cent and private individuals – 12.7 per cent.

In 2019, the attracted and utilized medium-term and long-term financial resources reached BGN 442 million, of which BGN 157 million from international financial institutions.

Raiffeisen Leasing Bulgaria EOOD has 12 registered branches on the territory of Bulgaria. Economic growth Segment reports Segment Independent Independent auditors` report auditors` Addresses Addresses 36

Raiffeisen Asset Management (Bulgaria) EAD Vision and mission

Market Share/Assets under Management

The extremely favorable market situation on the international financial markets in 2019 had a positive impact on the performance of the funds of Raiffeisen Asset Management (Bulgaria) EAD.

Assets under management of Raiffeisen Asset Management increased from BGN 196,8 million. at the end of 2018 to BGN

Raiffeisen BankRaiffeisen 215,9 million at the end of 2019, while the company's market share decreased from 13.7 per cent to 12.7 per cent at International the end of 2019. By increasing the relative share of retail customers' investments at the expense of large institutional and corporate investors, the company seeks to reduce the concentration risk, which will lead to greater sustainability of its cash flows.

in % in BGN Thousand 27.5 250,000

Raiffeisen GroupRaiffeisen 215,900 206,870 in Bulgaria 22 200,000 196,780 203,200

16.5 150,000 14.9% 13.7% 13.1% 12.7% 11 100,000

5.5 50,000 Economic growth 30.06.2018 31.12.2018 30.06.2019 31.12.2019 30.06.2018 31.12.2018 30.06.2019 31.12.2019

RAM Market Share Assets under management in contractual funds

As of the end of 2019, RAM manages six local funds, providing investors with both conservative solutions and riskier products. As of 31 December 2019, the assets under management in the six funds exceed BGN 215 million, thus forming a 12.7 per cent market share. Segment reports

Within 2019, the company took part in the regular trainings of the employees of the branch network regarding the products of RAM, sales skills and techniques, as well as changes in the regulatory framework. Employees of the company regularly visit the branch network of RBBG. The trainings of the employees in the RBBG offices aim at continuous increase of the investment culture and the knowledge of the employees in the field of mutual funds, which in turn leads to higher awareness of these products among the clients of the bank.

New products and initiatives/Client base auditors` report

Independent In addition to the main product range of six mutual funds, RAM offers customers two additional products suitable for long-term savings – Deposit Mix and Individual Investment Plan (IIP).

In 2019, the company was entirely focused on the sale of low-risk funds with an emphasis on the retail segment. The sales results in the retail segment provided the largest contribution to the net assets increase.

In 2019, along with the direct sales of the RAM mutual funds, the main focus in the products was also the offering of an Individual Investment Plan as a form of long-term savings and investment of the funds of the company's clients. During the

Addresses year, the number of the Individual Investment Plans sold increased by 45 per cent. 37

At the end of 2019, the number of RAM clients reached 16,790, which is an increase of 25 per cent compared to 2018. The share of investments of institutional and corporate clients in the funds managed by RAM is approximately 15 per cent, and the share of the retail clients is 85 per cent.

The total assets under management in the local funds as of 31.12.2019 amount to BGN 215,9 million, which is an increase of 9.7 per cent compared to the end of 2018.

RCM Funds

As a result of a decision of the Management Board of RBBG, the distribution of RKM's funds was transferred from RAM to the bank. As of 31December 2019, the assets of the clients in RCM funds remaining in the RAM portfolio amount to EUR 0,349 million.

For a third consecutive year, in 2019, Raiffeisen Asset Management (Bulgaria) EAD took the award for "The Best Management and mission Vision Company" in Bulgaria of the international financial publication EMEA Finance.

Investment approach and achieved return

Raiffeisen Asset Management (Bulgaria) EAD applies the analytical, informational and professional expertise of the Raiffeisen Group in making investment decisions, constructing portfolios of local funds and their subsequent management. International The policies pursued by central banks in the United States and Europe have had an impact on the performance of their Raiffeisen Bank indices. For the period 31.12.2018 – 31.12.2019 in Europe, DJ STOXX 600 increased by + 23.1 per cent, and DJ STOXX 50 increased by + 24.8 per cent. In the US, the S&P 500 registered an increase of + 28.9 per cent.

In Bulgaria, the leading index of the BSE SOFIX ended with a decrease of -3.1 per cent in 2019 compared to 2018.

The assets under management in mutual funds managed by RAM at the end of 2019 are as follows:

• MF Raiffeisen Conservative Fund Bulgaria is the second largest mutual fund in Bulgaria with assets under in Bulgaria

management amounting to BGN 131,6 million; Raiffeisen Group

• MF Raiffeisen (Bulgaria) Active Protection in EUR reached a net asset value in the amount of EUR 20,6 million;

• MF Raiffeisen (Bulgaria) Active Protection in BGN reached a net asset value in the amount of BGN 3,8 million;

• MF Raiffeisen (Bulgaria) Global Mix reached a net value of the assets under management in the amount of BGN 13,8 million;

• MF Raiffeisen (Bulgaria) Global Balanced fund reached a net value of the assets under management in the amount

of BGN 5,7 million; Economic growth

• MF Raiffeisen (Bulgaria) Global Growth reached a net value of the assets under management in the amount of BGN 7,8 million.

The profitability of the local funds managed by RAM in 2019 is as follows:

• MF Raiffeisen Conservative Fund Bulgaria: +1,3 per cent р.а.;

• MF Raiffeisen (Bulgaria) Active Protection in EUR: +3,6 per cent р.а.; Segment reports Segment • MF Raiffeisen (Bulgaria) Active Protection in BGN: +3,16 per cent р.а.;

• MF Raiffeisen (Bulgaria) Global Mix: +6,9 per cent p.a.;

• MF Raiffeisen (Bulgaria) Global Balanced fund: +10,6 per cent;

• MF Raiffeisen (Bulgaria) Global Growth: +21,4 per cent р.а. Independent Independent auditors` report auditors` Addresses Addresses 38

Raiffeisen Insurance Broker

Raiffeisen Insurance Broker EOOD was founded in 2006 as a 100 per cent owned subsidiary of Raiffeisenbank (Bulgaria)

Vision and mission EAD. By decision №250-ZB dated 30 March of the same year, the Financial Supervision Commission (FSC) entered Raiffeisen Insurance Broker in the register of the insurance brokers, thus enabling the start of the insurance intermediation activities provided by the company.

Since August 2019, the sole owner of Raiffeisen Insurance Broker EOOD is Raiffeisen Leasing Bulgaria EOOD, which is a company owned 100 per cent by Raiffeisenbank (Bulgaria) EAD.

In order to meet the high standards, set for servicing its clients, Raiffeisen Insurance Broker EOOD carries out various activities, some of which are related to tracking and researching trends, preparing comprehensive analyzes, modeling of specific insurance products, administering insurance contracts and last but not least, assistance in case of insurance events. Raiffeisen Insurance Broker EOOD provides highly qualified insurance intermediation in servicing private individuals and Raiffeisen BankRaiffeisen

International legal entities. The broker's clients are borrowers of Raiffeisenbank (Bulgaria) EAD in the corporate segment, lessees of Raiffeisen Leasing Bulgaria EOOD, as well as clients outside the Raiffeisen Group.

We always strive to keep up with the latest trends in the insurance market and increase the satisfaction of our customers through maximum quality service and a diverse range of insurance products and solutions.

The goal of Raiffeisen Insurance Broker EOOD is to provide insurance intermediation, by focusing mainly on the needs and interests of the client. We are trying to find the balance between price and coverage for each client.

Raiffeisen GroupRaiffeisen For our clients, the lessees of Raiffeisen Leasing Bulgaria EOOD, we provide 24/7 service – upon occurrence of an insurance in Bulgaria event.

The data as of 31 December 2019 shows that, for the considered one-year period, Raiffeisen Insurance Broker has realized premium income in the amount of BGN 15.267 million.

Raiffeisen Insurance Broker, as an intermediary insurance company, offers its clients products of 12 insurance companies with which it has concluded contracts.

Economic growth As of 30 June 2019, the company has a 1.05 per cent market share based on premium income in favor of insurers based in the Republic of Bulgaria. Segment reports auditors` report Independent Addresses 39

Future Outlook

The main highlights for the Group in 2020 will be:

• Organic growth of the active customer base

• Increasing the loan portfolio and maintaining its high quality during the various stages of the economic cycle

• Accelerating the digital transformation; increasing the flexibility and adaptability

• Improving data management in line with the business needs Vision and mission Vision

• Fostering an innovative culture and improving efficiency

• Adapting the overall IT management and architecture to the business needs

• Strengthening the position of the bank as a preferred employer. International Raiffeisen Bank Raiffeisen Bank

in Bulgaria Raiffeisen Group Economic growth Segment reports Segment Independent Independent auditors` report auditors` Addresses Addresses 40

Corporate Governance Statement

Raiffeisenbank (Bulgaria) EAD considers good corporate governance as part of the modern business practice, a set of

Vision and mission balanced relationship between the management bodies of the bank, its sole shareholder, and all other stakeholders – employees, customers, partners, regulators and society as a whole.

In the pursuit of its activities, Raiffeisenbank (Bulgaria) EAD is guided by the principles of corporate governance recommended for adoption by the National Corporate Governance Committee.

Along with the aforementioned principles, which are of a recommendatory nature, Raiffeisenbank (Bulgaria) EAD, as part of the Raiffeisen Group, also applies corporate governance requirements established at the group level and which are binding for the management bodies and the employees of the bank, and for this purpose the Code of Conduct of the RZB Group has been adopted (information under Art. 100n, para. 8, item 1b) of the Public Offering of Securities Act (POSA)). Raiffeisen BankRaiffeisen

International Raiffeisenbank (Bulgaria) EAD and the companies of the entire Raiffeisen Group implement the Code of Conduct, recognizing that the effective implementation of good corporate governance practices contributes to high standards in the bank's operations, preserving and improving the reputation of the entire Raiffeisen Group, as well as for establishing a transparent relationship with all stakeholders (information under Art. 100n, para. 8, item 1b) of POSA).

Raiffeisenbank (Bulgaria) EAD hereby declares its commitment to:

1. Introduce procedures and principles to be followed by the bank's Management Bodies in order to create the necessary conditions and to enable the shareholders to exercise their rights in full. Raiffeisen GroupRaiffeisen in Bulgaria 2. Apply the principles of transparency, independence and accountability by the bank's Management Bodies (the Supervisory Board and the Management Board) in accordance with the established objectives and strategies of the Bank (information under Art. 100n, para. 8, item 5 of POSA) and the Policy on diversity in the executive, management and supervisory bodies (information under Article 100n, para 8, item 6 of POSA).

2.1. The Supervisory Board of Raiffeisenbank (Bulgaria) EAD consists of six (6) members elected by the Bank’s Sole Shareholder for a fixed term of office of no longer than five (5) years. Economic growth 2.2. The Supervisory Board performs its activities in accordance with the By-laws of the bank and the Rules of the Supervisory Board of Raiffeisenbank (Bulgaria) EAD.

2.3. The Management Board of Raiffeisenbank (Bulgaria) EAD consists of five (5) members elected by the Supervi- sory Board for a fixed term of office of no longer than five (5) years.

2.4. The Management Board performs its activities in accordance with the By-laws of the bank and the Rules of the Management Board of Raiffeisenbank (Bulgaria) EAD. Segment reports 2.5. In the performance of their tasks and responsibilities, the Supervisory and Management Boards are guided by the applicable law, the bank’s By-laws, the internal rules and procedures of the bank and the Raiffeisen Group, as well as by the principles of integrity and competence.

2.6. The Management Board acts independently on behalf of the bank and makes decisions on all matters unless the relevant activities are within the competence of the Sole Shareholder or the Supervisory Board. In the performance of its duties, the Management Board:

• manages and represents the bank; auditors` report Independent • manages the bank’s ongoing activities;

• sets the bank’s objectives, adopts plans, programs and strategies for the bank’s activities;

• adopts the bank’s organizational and management structure.

2.7. The Management Board is required to obtain prior consent from the Supervisory Board in the following cases:

Addresses a) definition of the general principles of the bank's corporate policy (including the corporate mission, the medium and long-term strategy and the business model); 41

b) annual budget of the bank and (when required) of its consolidated companies, prepared in accordance with the International Financial Reporting Standards (including the investment budget):

i. any additional investment for capital expenditures (“CAPEX") that exceeds 5 per cent of the annual budget of the bank, approved under this letter "b";

ii. the opening and closing of branches and representative offices, if they are not included in the annual budget or business plan (but in any case, the opening of such offices abroad); c) an annual plan of the bank for financing in foreign or local currencies with a maturity of more than one year (e.g. issue of bonds or other financial instruments, any kind of borrowing of funds, acceptance of a money market deposit) and any deviation therefrom; client deposits forming part of the normal business activity will not be considered as part of the bank's annual financing plan under this point "c"

d) the allocation of responsibilities between the members of the Management Board (Organizational Structure), and mission Vision any functional changes in the organizational structure of the Management Board and at Management Board level – minus 1, as well as the establishment of new and closing of the current departments subordinated to the Management Board and to Management Board level – minus 1; e) all matters submitted to the Sole Shareholder for their final resolution; f) decisions concerning participations of the bank (equity instruments excluding those held for trading) in relation to: International Raiffeisen Bank Raiffeisen Bank i. acquisition, creation, disposal or liquidation of a participation or part of a participation (whether the investment derives from normal business activity or debt restructuring) directly or indirectly through a subsidiary;

ii. holdings or the establishment of joint ventures with other companies, directly or indirectly through a subsidiary;

iii. decisions related to "Corporate Restructuring" (merger or separation) which relate directly to the bank

with respect to the disposition of its assets or are related to the assumption of control over the assets or in Bulgaria

assumption of the liabilities of the respective company participating in the restructuring, as well as any Raiffeisen Group restructuring measures involving subsidiaries;

iv. any measures related to the capital (e.g. an increase or decrease of capital) regarding the capital of any subsidiary

and

v. concluding or terminating consortium agreements and voting agreements with other shareholders, option agreements or similar agreements that could affect the value or the transferability of the shares of the bank

in each participation, unless the counterparty is part of the Group; Economic growth g) acquisition, incorporation or disposition of, or investment in any type of investment schemes (e.g. trusts, funds or the like) provided that they are not intended for sale (trading portfolio assets) or are not within the competence of an existing group-level risk management co-ordination body or are already included in the scope of letter f) above; h) conclusion or termination of agreements relating to profit-sharing or loss-taking, group tax agreements or similar agreements concerning the bank; i) acquisition and disposal, including the establishment of mortgages and encumbrances on real estate (or parts reports Segment thereof) owned by the bank or any of its subsidiaries and used by the bank as a Head Office, Regional Office or back office / operational center (including any reconstruction of already occupied premises) in case the value of the property (the price at which the relevant premises is offered for sale by the bank or a third person) exceeds EUR 1 000 000 /one million euro/ (excluding investment costs for adaptation or renovation) or the area of the property exceeds 1 000 sq.m. /one thousand square meters/ total usable area; j) conclusion of rental or leasing agreements related to real estate (or parts thereof) used by the bank as a Head

Office, Regional Office or back office / operational center (including any reconstruction of already occupied Independent premises), if the duration of the agreement is equal to or exceeds 5 years (in the case of several successive report auditors` agreements, the total duration of the agreements is relevant), or if the impact of total operating expenses ("OPEX") (total rent, including the VAT accrued, in cases where it cannot be deducted and, together with the proportional cost of adjusting the property, calculated over the entire period of the agreement) exceeds EUR 1 000 000 /one million euro/; Addresses Addresses 42

k) internal rules on the powers of the Management Board related to credit risk and risks assessment when granting credit limits by country (e.g. the Rules of the Credit Committee) governing which decisions require the approval of the Supervisory Board and any annual credit polices (affecting risks) for certain categories of assets or customers;

l) decisions for granting loans or other risk limits, contingent liabilities or other exposures to a client, a "group of economically related parties", as well as decisions concerning countries credit limits for which the approval of Vision and mission the Supervisory Board is required in accordance with letter "k" above;

m) internal rules on the powers of the Management Board concerning problem exposures (e.g. Rules of Procedures of the Problem Loan Committee) stipulating which decisions require the approval of the Supervisory Board;

n) decisions for limits, restructuring, allocation or release of provisions and write-offs of problem exposures to a single borrower or a “group of economically related parties” for which the approval of the Supervisory Board is required in accordance with letter "m" above;

o) granting or increasing loans, including limits on credit risk and contingent liabilities of members of the Supervisory or Management Board of the bank; Raiffeisen BankRaiffeisen International p) acquisition or sale of client portfolio, retail segment (e.g. loan portfolio), if the effect on the existing risk- weighted assets in the Retail Banking segment ( "RWAs") is equal to or exceeds 5 per cent, as well as the acquisition or sale of client portfolio in the corporate banking segment, if the effect on the existing risk-weighted assets for the corporate banking segment ("RWAs") is equal to or exceeds 10 per cent;

q) approval of the following matters relating to remunerations:

i. general principles of the remuneration policy (including salaries and discretionary pension bonuses) for

Raiffeisen GroupRaiffeisen all employees, including the members of the Management Board, senior management, risk-engaging

in Bulgaria employees, employees performing control functions and all employees whose remuneration is commensurate with the remuneration of senior management and employees engaged in risk-taking activities and whose activities have a material impact on the bank's risk profile ("Identified personnel");

ii. introduction or significant change in the compensation plan, of motivational schemes and other schemes

providing cash benefits (provided that the total annual cost of schemes providing cash benefits exceed 10 per cent of total annual payments of salaries or if such schemes deviate from the general principles of the remuneration policy approved by the Supervisory Board);

Economic growth iii. introduction or significant change in any pension plan, compensation plan upon termination of employment, insurance plan or another scheme for cash benefits to a member of the Management Board, employees or their families or others who have a contractual relationship with the bank during or after retirement or any termination of appointment or contractual relationship with the bank;

iv. introduction or significant change in any securities acquisition plan (e.g. securities options) or a profit- sharing plan that concerns a member of the Management Board, the employees or their families or other persons having a contractual relationship with the bank;

v. introduction or significant change in an employee retention program; Segment reports

vi. annual selection of employees classified as “Identified personnel“;

vii. defining the level of the maximum ratio between variable and fixed remuneration which can be paid for a reporting period to an employee of the "Identified personnel", if the maximum level of variable remuneration exceeds by 100 per cent the fixed one;

viii. decisions relating to remuneration, including regarding defined or paid annual remuneration to the members of the Management Board, as well as decisions in case of "malus" (reduction of deferred auditors` report remuneration) or "clawback" (reimbursement of paid or acquired remuneration) according to the meaning Independent of these terms under the Remuneration Policy for the year in which they occurred and the consequences that these events will have for determining and paying the remuneration of members of the Management Board;

r) the assumption of functions as members of controlling and managing bodies of companies which are not subsidiaries of the bank by members of the Managing Board of the bank;

s) any transactions (including their terms) between the bank, a Group company, a member of the Management Board or any other person or company closely associated with a member of the Management Board, except

Addresses for transactions made in the ordinary course of business; 43

t) agreements with a member of the Supervisory Board whereby this member of the Supervisory Board undertakes to provide services to the bank or to its subsidiary which are beyond his responsibility as a member of the Supervisory Board, if these services will be offered against significant remuneration; this rule also applies to agreements with companies where a member of the Supervisory Board has a significant economic interest;

The exercise of functions within the Group or the exercise of individual powers by a member of the Supervisory Board as a member of a management board or an executive director shall not result in the company concerned being considered for a „company where a member of the Supervisory Board has a significant economic interest“, unless the circumstances give reason to assume that the member of the Supervisory Board derives personal benefits from such a company.

u) The Supervisory Board has the power to determine other matters that require its approval.

2.8. In their work, the members of the Management Board are guided by the generally accepted principles of integrity, professionalism and confidentiality, and respect the ethical rules adopted by the bank. and mission Vision

2.9. The members of the Supervisory and Management Board apply in their work, the principle of avoidance and prevention of real or potential conflicts of interest, in accordance with the bank's Rules for Conflict of Interest Disclosure. Any conflict of interest is to be disclosed to the other Management Board members and to the Supervisory Board. The members of the Management Board inform the Supervisory Board whether, directly, indirectly or on behalf of third parties, they have a material interest in any transactions or issues that have a direct impact on the bank. All transactions between the bank and any of its affiliates and any Management International

Board member or person or company strongly associated with the Management Board member, are carried Raiffeisen Bank out under market conditions. The transactions and their terms and conditions must be approved in advance by the Supervisory Board, except for the standard bank transactions.

2.10. Raiffeisenbank (Bulgaria) EAD declares that it follows a diversity policy in the selection and evaluation of the members of the bank's executive, management and supervisory bodies, and believes that this policy contributes to ensuring a reliable management and monitoring system based on the principles of transparency and independence.

2.11. Main criteria and principles of the diversity policy in the selection and evaluation of members of the execu- in Bulgaria tive, management and supervisory bodies of Raiffeisenbank (Bulgaria) EAD (information under Art. 100n, Raiffeisen Group para. 8, item 6 of POSA):

• The members of the management bodies can only be able-bodied private individuals. Persons who are over 68 years of age may not be appointed as members of the Management Board and their term of office may not be renewed. Persons who have reached 75 years of age may not be appointed as members of the Supervisory Board and their term of office may not be renewed. All members of the management, respectively the supervisory board should meet the requirements of Ordinance No 20 of the Bulgarian National Bank (BNB) of 28 April 2009 on the Issuance of Approvals to the Members of the Management Board (Board of Directors) and Supervisory Board of a Credit Institution and Requirements for Performing their Duties. There are no other limitations on age, gender, Economic growth nationality or education imposed on Management and Supervisory Board members;

• Good reputation, professional experience and managerial skills, given the complexity and specifics of the activities conducted by the bank;

• Keeping the balance between experience, professionalism and knowledge of the activities, as well as independence and objectivity in the expression of opinions and decision-making;

• The members of the Management and Supervisory Board can be re-elected without any restrictions. Segment reports Segment 3. Internal Control System (information under Art. 100n, para. 8, item 3 of POSA)

Raiffeisenbank (Bulgaria) EAD has implemented an Internal Control System that both helps the bank achieve its objectives and:

• prevents losses;

• ensures reliable financial accountability; Independent Independent auditors` report auditors` • ensures compliance with the relevant statutory and internal regulations.

The bank’s internal control system is used to achieve the strategic goals, increase process efficiency, reduce risks.

The internal control system is based on the internal regulations applicable to the Raiffeisen Group, the Bulgarian legislation and the internal regulations of Raiffeisenbank (Bulgaria) EAD (policies, procedures, instructions, etc.), which govern all significant and strategically important topics. Addresses 44

Participants in the internal control system who carry out control activities at different levels are the bank’s management and the structural units’ heads. They are responsible for carrying out the Management Board’s decisions, including implementing strategies and policies, and creating an effective Internal Control System. The management team creates specific internal control policies and procedures.

4. Risk Management System (information under Art. 100n, para. 8, item 3 of POSA) Vision and mission 4.1. As a result of its activities, Raiffeisenbank (Bulgaria) EAD is exposed to the following risks: credit risk, market and liquidity risk, operational risk. А. Credit Risk

The bank has incorporated and observes organizational and operational independence of the risk control functions from the business lines, that it monitors and controls. The organizational structure and risk control and management processes are coordinated through a clear definition of responsibilities, through the bank's current policies and rules, as well as through the functional characteristics of the individual units. The bank's risk strategy is adhered to and subject to approval by the Management Board and the Supervisory Board. Raiffeisen BankRaiffeisen International Raiffeisenbank has a strategy for non-performing exposures, which is also subject to approval by the bank's Management Board and Supervisory Board. The strategy is subject to annual review in order to track the level of implementation of the planned measures and performance indicators for the process of non-performing loans collection.

A system of control processes has been put in place to identify measure, monitor and manage the risks documented in the risk management policies.

The bank applies rules and procedures approved by the Management and Supervisory Board for the internal control of the Raiffeisen GroupRaiffeisen overall process of lending and credit risk management. They are prepared in accordance with the requirements of the Law in Bulgaria on Credit Institutions, the BNB regulations and the rules of the Raiffeisen Group.

The credit policy, the specialized credit management bodies and the credit risk assessment are regulated by the credit rules. Apart from these rules, there are rules on the delegation of approval powers to departments under the Executive Director in charge of Risk Management and Finance by the bank’s Credit Committee. All executives and employees involved in the credit process are required to follow the approved credit policy and the credit process.

The bank's credit policy is determined by its Supervisory Board, which provides interpretations and clarifications regarding

Economic growth its implementation. It is based on the principles of profitability, liquidity and collateral.

The bank's credit policy is implemented by the Management Board, the Executive Directors, the Credit Committee, Internal Audit, and the Risk Management Division, at the bank's Head Office in Sofia.

The credit policy is implemented through the regulation and management of credit parameters, market niches, rules and procedures, including in the form of documents adopted by the bank’s Management Board.

The bank has collective management bodies for managing the credit process and regulating risk exposures. Segment reports The Credit Committee is a specialized body responsible for managing the credit process. Its main function is to conduct the bank’s credit policy, as determined by the Management Board, and to make decisions on credit transactions that exceed the powers of the departments under the Executive Director in charge of Risk Management and Finance. The Credit Committee operates at the bank's Head Office and is directly subordinated to the Management Board.

The assessment of the risk exposures, determination of the amount of the necessary individual impairment is performed by a specialized collective body in the Bank – the Problem Loans Committee. Its activity is carried out in compliance with the requirements of the Law on Credit Institutions and the bank’s internal regulations. The Problem Loan Committee prepares

auditors` report an assessment of the risk exposures, both on the basis of the International Financial Reporting Standards and the internal Independent directives of the Raiffeisen Group.

The credit risk assessment elements and the calculation of impairment for expected credit losses are regulated in the internal policies and procedures in line with the International Accounting Standards and International Financial Reporting Standards.

The bank also has Risk Governance Committee, authority for decision-making at Raiffeisenbank (Bulgaria) with regard to the risk management strategy, the risk management framework, as well as all matters related to the applied models for all material risks, including models at an account, group, or portfolio level. Addresses

The bank operates an Early Warning Signals System (EarlyWarningSignals), which role is to ensure the timely collection of data on indicators and their correct analysis and assignment of client risk statuses. 45

B.Market and Liquidity Risk

The bank has rules and procedures in place for the identification of the various types of market and liquidity risk, which have been developed in accordance with the Group’s directives, the regulatory requirements and the bank’s established practice. They also define the responsibilities of the Market and Liquidity Risk Management Sector at the Market, Liquidity and Operational Risk Control Department regarding the identification, measurement and management of market and liquidity risk of the bank, as well as its relationship with the Raiffeisen Bank International group and the supervising authorities.

The Asset and Liability Management Committee is responsible for the overall management of the bank’s balance sheet structure and acts as a decision body, supporting the Management Board in matters relating to the management of the bank. In particular, it manages the short-term and structural liquidity of the bank, the bank's interest rates, the internal pricing parameters and their effect on net interest income and the value of the assets and liabilities, opening of positions forming market risk, approvals of new products and more. Vision and mission Vision The activities of the Asset and Liability Management Committee are governed by the By-Laws prepared in accordance with the Law on Credit Institutions. These Rules set out the objectives of the Assets and Liabilities Committee, its delegated decision- making powers and the responsibilities of its members and the Committee as a whole.

The main objectives of the Asset and Liability Management Committee are:

• To manage the structure of the bank's Balance Sheet; International

• To manage the bank's exposure to interest and exchange differences; Raiffeisen Bank

• To manage the bank’s liquidity;

• To manage and take decisions for undertaking market risk bearing positions;

• To manage the internal funds, transfer pricing mechanism and the funding of the bank;

• To facilitate the exchange of information between the bank’s departments in order to optimize risk and liquidity

management. in Bulgaria Raiffeisen Group In addition to the objectives set out above, the Asset and Liability Management Committee also:

• analyses and discusses the current market development and the status of the bank’s competitors;

• analyses and discusses the macroeconomic environment and the development of the key market parameters;

• examines changes in the regulatory legal framework and their impact on the bank’s balance sheet structure and liquidity;

• approves new products related to market and liquidity risk, as well as the balance sheet risk; Economic growth

• examines the legal provisions and their impact on the bank’s open position.

The minutes of committee meetings are provided to RBI Vienna.

C. Operational Risk

Operational risk is the risk of loss resulting from inadequate or poorly functioning internal processes, people and systems, or Segment reports Segment from external events. The definition includes legal risk but excludes strategic and reputational risk.

Legal risk is the risk of loss resulting from non-compliance with legal or statutory requirements and / or improperly prepared contracts and their implementation due to ignorance, lack of diligence in applying the relevant law or delay in responding to changes in the legal framework. Non-observance due to ignorance is also considered to have occurred, if the real legal situation and the assessment of RBBG and its subsidiaries for the situation differ without fault or when it is inevitable, for example, unexpected changes in the jurisdiction or upon the entry into force of new legal provisions, either of which having retroactive effect on existing legal relations. Legal risk is a component of Operational Risk. Independent Independent auditors` report auditors` Model risk (the risk that the models used in the overall process of risk management of the bank or their application are not suitable for achieving the objectives) is covered completely in the subcategories of the Operational risk.

Reputational risk is the risk associated with the potential loss for the bank due to inappropriate, unethical or unlawful behavior (including cases of intentional or unintended behavior) in the process of providing financial services. Addresses Addresses 46

Raiffeisenbank (Bulgaria) EAD and its subsidiaries, as part of the RBI Group, consider the operational risk as a separate category of risk and adhere to the group policies, rules, procedures and principles set out in the document Sound Practices for the Management and Supervision of Operational Risk, published by the Basel Committee on Banking Supervision, adopting these principles as fundamental to the operational risk management. The aim is to implement into the bank a properly formulated and coherent methodology for the detection, assessment, monitoring, control and reduction of the operational risks faced by the Group’s companies in the course of their daily business activities.

Vision and mission Operational Risk Management consists of identifying, measuring, managing and monitoring exposures, resulting from inadequate or failed internal processes, human interaction and systems, or from external events.

The general framework for the operational risk management includes the processes, structures, controls and systems used for operational risk management within the Group and ensuring the availability of key elements of corporate governance and operational activities.

Operational Risk is managed within the risk management cycle which involves the identification, measurement, management and monitoring of risk using the following tools and approaches, which together give an overview of the exposure to the Operational risk and ensure its maintenance within the risk appetite of Raiffeisenbank (Bulgaria). Raiffeisen BankRaiffeisen International • Risk assessments aim to increase knowledge of Operational Risk, identify operational risks, simplify the environment in which these processes take place and reduce already identified operational risks. Risk assessments determine the net risk of a process, the unit from which the risk originated or the activity that can be referred to as a target value for quality risk management measures. The results of the RBBG risk assessments are the basis for the Raiffeisenbank (Bulgaria) Operational Risk profile.

• Early warning indicators (EWI) are used for ongoing control and reporting of Operational Risks. They provide an opportunity for early warning of potential issues or changes in the Operational Risk profile in order to generate appropriate timely action at the management level. Raiffeisen GroupRaiffeisen in Bulgaria • The scenario analysis is a process by which the Group recognizes the impact of events with low probability of occurrence but with serious consequences for the organization's activities, by assessing the probability and severity of possible consequences. The scenario analyzes aim:

–– To forecast events with an extremely low probability of occurrence but with significant losses that may have not occurred in the bank's history;

–– To increase knowledge and educate the bodies responsible for managing the specific risks by giving them a

Economic growth perspective on the different types of risk;

–– to initiate actions for treatment of the risks and the investment plans.

• The collection and analysis of data for internal operational events provides significant information for measuring the impact of the Operational Events and the effectiveness of the internal control.

• Reporting assists the operational risk management cycle by ensuring a continuous and timely information flow to the relevant decision-making bodies. In this way, the reporting of Operational Risk assists the transparency of the risk and the integration of the Operational Risk Management activities into the routine business operations. The

Segment reports Group defines the reporting standards in order to ensure the sound management of the Operational Risk on the basis of the risk strategy.

The bank operates an Operational Risk and Controls Committee. The Committee is a specialized internal body, part of the management of Raiffeisenbank (Bulgaria) EAD in the field of operational risk management and internal controls (ICS).

The Management Board of the bank, as the highest operational risk management body, determines the composition and members of the Operational Risk and Controls Committee, delegates functions and responsibilities. auditors` report 4.2. Regulatory Compliance Independent

The bank has a local Compliance unit. The Compliance Department has been set up according to the Group’s Compliance Requirements, which in turn are organized according to the requirements of the Basel Committee on Banking Supervision, titled “Guidelines for monitoring on the compliance with the regulatory requirements in the Banks”. The department monitors the compliance with the applicable laws, regulations and rules, as well as with the national and international standards (Best Practice) and the group and internal rules of the Raiffeisen Group. Compliance Department monitors the development of internal guidelines, procedures, and organizational rules to ensure that the bank, as well as its governing bodies and employees are familiar with the rules, work in accordance with them, and that the bank will not take advantage of illegal Addresses business practices.

The ongoing work regarding compliance with the regulatory requirements is to advise and assist the bank and its employees on all measures that may be useful for preliminary prevention of breach of the rules and even criminal activity. This also 47

includes managing conflicts of interest between the bank, the employees and the customers. Essentially, all these measures are necessary to protect the reputation and the good name of the bank. If there is a reasonable suspicion based on facts and information that a customer or transactions have an unlawful purpose or expose the bank at high risk for its reputation, the Compliance Unit clearly applies the necessary measures to protect the bank, which in extreme cases may even include reporting to the authorities.

5. Information on the existence of takeover / merger bids in 2019 (information under Art. 100n, para. 8, item 4 of POSA – respectively under Article 10, paragraph 1, letters (c), (d), (f), (h) and (i) of Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids)

As of 31.12.2019, Raiffeisenbank (Bulgaria) EAD has not received any takeover and/or merger bids.

5.1. IInformation under Article 10, paragraph 1, letter "c" of Directive 2004/25/EC on takeover bids – significant

direct and indirect shareholdings (including indirect shareholdings through pyramid structures and cross-share- and mission Vision holdings) within the meaning of Article 85 of Directive 2001/34/EC.

The bank is a part of the Austrian Raiffeisen Group. The bank's sole shareholder is Raiffeisen SEE Region Holding GmbH, Austria. The ultimate controlling entity is Raiffeisen Bank International, Austria.

Raiffeisenbank (Bulgaria) EAD is the sole shareholder of the following companies:

• RAIFFEISEN ASSET MANAGEMENT (BULGARIA) EAD; International Raiffeisen Bank Raiffeisen Bank • RAIFFEISEN SERVICE EOOD;

• RAIFFEISEN INSURANCE BROKER EOOD;

• RAIFFEISEN LEASING BULGARIA EOOD.

5.2. Information under Article 10, paragraph 1, letter "d" of Directive 2004/25/EC on takeover bids – the holders of any securities with special control rights and a description of those rights. in Bulgaria

The capital of Raiffeisenbank (Bulgaria) EAD is divided into 603 447 952 (six hundred and three million four hundred and Raiffeisen Group forty-seven thousand nine hundred and fifty two) shares with a par value of BGN 1 (one) each. The shares of the Company are registered, dematerialized and indivisible, and there are no separate classes of shares.

Each share gives the right to one vote in the General Meeting of Shareholders, the right to a dividend and a proportional liquidation dividend of the bank's assets.

The bank's shares may only be dematerialized.

5.3. Information under Article 10, paragraph 1, letter "f" of Directive 2004/25/EC on takeover bids – any restric- Economic growth tions on voting rights, such as limitations of the voting rights of holders of a given percentage or number of votes, deadlines for exercising voting rights, or systems whereby, with the company’s cooperation, the financial rights attached to securities are separated from the holding of securities.

The bank’s current Statute does not provide for such restrictions.

5.4. Information under Article 10, paragraph 1, letter "h" of Directive 2004/25/EC on takeover bids – rules governing the appointment or replacement of board members and the amendment of the articles of association. Segment reports Segment Raiffeisenbank (Bulgaria) EAD has a two-tier management system, consisting of a Supervisory Board and a Management Board.

The rules of procedure of the Supervisory Board are laid down in the Statute of Raiffeisenbank (Bulgaria) EAD and the By-laws of the Supervisory Board of Raiffeisenbank (Bulgaria) EAD.

The rules of procedure of the Management Board are laid down in the Statute of Raiffeisenbank (Bulgaria) EAD and the

By-laws of the Management Board of Raiffeisenbank (Bulgaria) EAD. Independent auditors` report auditors`

The bank’s Supervisory Board and Management Board are governed by the applicable law, the bank’s statutes and procedures, and the standards of integrity and competence in the performance of its duties and responsibilities.

According to Art. 5, para. 7 of the Statute of Raiffeisenbank (Bulgaria) EAD, the sole shareholder has exclusive competence to make decisions on the following matters: Addresses Addresses 48

• Amendments to the Statute;

• Capital increase and decrease;

• Bond issue authorizations;

• Selection and dismissal of Supervisory Board members; Vision and mission • Approval of the annual financial statements and profit distribution, as well as approval of the Supervisory Board and Management Board report;

• The amount of the remuneration of the members of the Supervisory Board;

• Selection of a specialized auditing company in order to verify and certify the annual financial statements;

• Company transformation and/or dissolution;

• Selection and dismissal of the head of the Specialized Internal Audit Service. Raiffeisen BankRaiffeisen International The functions and powers of the Supervisory Board are set out in Article 6 of the Bank’s Statute and in the By-laws of the Supervisory Board of Raiffeisenbank (Bulgaria) EAD and the By-laws of the Management Board of Raiffeisenbank (Bulgaria) EAD. In addition to the other competencies mentioned under Article 6 of the Statute of the Bank, the Supervisory Board: Elects and dismisses Management Board members;

• Elects and dismisses Management Board members;

• Adopts the By-laws of the Bank’s Supervisory and Management Board; Raiffeisen GroupRaiffeisen

in Bulgaria • Approves pre-defined actions and transactions of the Management Board.

Detailed information on the rules governing the appointment or replacement of the Supervisory or Management Board members is given under item 2 of this Statement and, respectively, in the Statute of Raiffeisenbank (Bulgaria) EAD and in the By-laws of the Supervisory Board and the Management Board of Raiffeisenbank (Bulgaria) EAD.

5.5. Information under Article 10, paragraph 1, letter "i" of Directive 2004/25/EC on takeover bids – powers of the board members and in particular the power to issue or buy back shares. Economic growth The capital of Raiffeisenbank (Bulgaria) EAD may be increased by decision of the Sole Shareholder by the methods provided in the Commercial Law:

• Issuance of new shares;

• Increase of the par value of shares already issued;

• Conversion of bonds into shares.

Segment reports The Statute of Raiffeisenbank (Bulgaria) EAD does not provide for special powers of the Supervisory or Management Board related to capital increase of the bank or to share buybacks.

6. Stakeholders

6.1. Raiffeisenbank (Bulgaria) EAD believes that effective interaction with stakeholders has a direct impact on corporate governance. Taking this into consideration, the bank identifies who are the stakeholders involved in the conduct of the bank's business based on their degree and spheres of influence, and on the basis of how their role and attitude directly affects the bank's sustainable development and operations, including sole owner/ auditors` report shareholders, regulatory and other authorities of state and local government, clients, employees, public groups Independent and others.

6.2. Raiffeisenbank (Bulgaria) EAD, recognizing the public significance of its activities, adheres to the principle of publicity of the information on its activities and strives to build and maintain sustainable, constructive relations with regulatory and other authorities of the state and local government. The bank conducts its activities in strict compliance with the laws and the other legal acts of the Republic of Bulgaria and the European Union. The bank's relations with state and local government authorities are based on the principles of responsibility, good faith, professionalism, partnership, mutual trust, as well as respect and fulfilment of its obligations. Addresses 49

Raiffeisenbank (Bulgaria) EAD publishes the Code of Conduct of the Raiffeisen Bank International Group and the present Corporate Governance Statement on the bank's website (https://www.rbb.bg) in compliance with Article 100n, para. 7 and 8 of the Public Offering of Securities Act, with regard to Article 40, para. 1 and 2 of the Accountancy Act. This Statement is also enclosed to the Annual Report on operations of Raiffeisenbank (Bulgaria) EAD.

This Corporate Governance Statement forms an integral part of the 2019 Annual Financial Statements of Raiffeisenbank (Bulgaria) EAD. Vision and mission Vision International Raiffeisen Bank Raiffeisen Bank

in Bulgaria Raiffeisen Group Economic growth Segment reports Segment Independent Independent auditors` report auditors` Addresses Addresses 50

Non-financial declaration

In compliance with the requirements of DIRECTIVE 2014/95/EU, transposed under art. 48-49 of the Bulgarian Accountancy

Vision and mission act, that the public interest entities have to include in their annual report a non-financial disclosure, Raiffeisenbank (Bulgaria) EAD has provided information on the activities undertaken in the field of ecology, social issues and those related to employees, human rights, the fight against corruption in the notes below.

Ecology

The Head Office of Raiffeisenbank Bulgaria EAD is housed in a building certified under the US standard for energy efficiency LEED. It has a modern building monitoring system that monitors all energy consumers and provides energy efficiency measures. The operation of the central air-conditioning system is assisted by built drainage water wells, thus increasing the Raiffeisen BankRaiffeisen

International efficiency of the system and optimizing the power consumption.

The bank is working to reduce electricity consumption. In 2017, a project to replace the lighting in the branch network with the latest generation of energy-efficient LED lighting has been launched, also gradual replacement of air conditioning systems in the branch network with new energy efficient ones is planned. All office equipment meets the ENERGY STAR energy standards.

Raiffeisen GroupRaiffeisen Social Responsibility and Commitment in Bulgaria

In 2019, Raiffeisenbank held the eleventh edition of the "Choose to Help" donation campaign, which supported 23 major public health, social, cultural and ecological causes. Since its establishment in 2009 to date, the charity initiative has helped to realize a total of 280 projects with over BGN 3 million.

The most vulnerable groups in society are supported by 1,718 employees of the bank, who donate personal funds to each cause. Under the initiative, Raiffeisenbank donates up to BGN 100 to every donation of its employees. The total amount raised in 2019 is BGN 259 842, while retaining the tendency for the general public to be involved in the initiative. Economic growth The projects included in "Choose to help" are selected in advance by the Raiffeisenbank Sponsorship and Donorship Commission, in accordance with the Principles of Sponsorship and Donations of the bank and its Subsidiaries, as well as the Rules on Regulatory Compliance. The projects are also evaluated for sustainability by external consultants – recognized experts in the field. The final approved causes are presented at the donation platform izberi.rbb.bg, through which those who wish can easily and conveniently make a direct donation until September of the following calendar year.

Raiffeisenbank supports its beneficiaries and the charitable organizations – clients, by providing them with banking services free of fees and commissions. Currently, the bank is servicing accounts of 23 organizations that are engaged in charity.

Segment reports 12 of them participate annually in the donation campaign "Choose to help", and 11 of them are exempt from all fees under the tariff.

Over the years, the campaign has maintained its main goals – to act in a socially responsible manner, supporting the long-term well-being of the people and society as a whole; to engage the employees of the Raiffeisen Group in Bulgaria in charitable initiatives that set a personal example of empathy. A total of 739 employees took part in the 11 volunteer actions in 2019, with 1,868 man-hours invested.

Proof of high public significance and recognition of "Choose to help" are the awards awarded to Raiffeisenbank in 2019:

auditors` report "Investor in the Society" from the 17th edition of the Responsible Business Awards of the Bulgarian Business Leaders Forum,

Independent "The most sustainable donation program" of the Bulgarian Donor Forum and the award from the SOS Children's Villages for a long-term corporate partnership.

Young people and their development is among the socially responsible priorities of Raiffeisenbank. For 7 years now, scholarships have been granted to students from the American University – Blagoevgrad and to graduates who are scholarship holders of the “Atanas Burov” Foundation. In 2019, the bank began a partnership with the University of Economics – Varna, in order to promote the profession of the banker and attract future staff.

Addresses Increasing the financial literacy among students is another cause to which the bank is committed to for a third year in a row. In 2019, 10 initiatives, called Bank Hours, were organized, involving a total of 470 students aged 12-18 from Sofia and the country. A team of bank experts presented the themes "Innovations in Banking", "Capital Markets", "Prevention of Fraud Risk", and "Entrepreneurship". 51

Raiffeisenbank is the traditional general sponsor of the Austrian Music Weeks, organized annually in Bulgaria. The cultural event enriches the Bulgarian audience with famous works of classical and contemporary music. The event provides an opportunity for the intercultural exchange to preserve old friendships and to establish new contacts in the field of education, economics and politics.

Apart from focusing on cultural and educational values, Raiffeisenbank also works to promote the sport among all age groups, supporting the basketball team of the Black Sea Ticha Sports Club – town of Varna and a cycling competition for the “Dolchini” Cup. Human Resources

Raiffeisenbank (Bulgaria) EAD organizes Anti-money laundering trainings to all employees, conducted in person for all new employees and remotely for all other employees (in order to refresh their knowledge). Vision and mission Vision

In terms of mental health, the company has hired a psychologist and a coach who provides free sessions for employees needing such support.

In the internal Training catalog, we provide trainings on "Stress Management", "Techniques and ways of balanced nutrition", "Skills for planning, goal setting and attitude to success", "Emotions management", "How to keep our energy" and "How to Keep Work-Life Balance". International

Raiffeisenbank (Bulgaria) EAD provides opportunity for working flexible working hours to all employees, both men and Raiffeisen Bank women.

The bank has introduced a sports program that gives employees access to a variety of sports and recreational activities used through a prepaid sports card.

Also, every year the bank organizes a sports day for all its employees in order to make the topic of work-life balance more tangible. Office massages are available. This year, gymnastics in the workplace has been introduced for the employees in the Head Office. in Bulgaria Raiffeisen Group The bank provides all employees with additional health insurance and annual prophylactic health checks. Economic growth Segment reports Segment Independent Independent auditors` report auditors` Addresses Addresses 52

Regulatory Compliance

Respect for human rights

Our Corporate Responsibility Vision and mission

We realize that our business can have an important impact on every pillar of sustainability: in the economic sphere, in the society and on the environment. This is incorporated in our Sustainability Strategy as a "Responsible Banker", "Loyal Partner" and "Engaged Corporate Citizen". That is why we strive to achieve long-term profitable business, while avoiding social and environmental damage. Furthermore, our desire is to contribute to the improvement of environmental protection and social standards.

We are aware of sensitive business fields (especially, but not limited to nuclear power, coal, military goods and technologies, gambling) which we handle with care and for which internal policies must be followed by our employees. Raiffeisen BankRaiffeisen

International Human rights

We respect and support the protection of human rights stipulated in the European Convention on Human Rights as well as the Universal Declaration of Human Rights. We aim to engage into business, which is in line with these principles.

We strive to not finance directly or indirectly transactions, projects or political parties, nor to collaborate with business partners (including customers, service providers and operators) that do not adhere to and do not comply with those standards or are suspected of human rights violations. Raiffeisen GroupRaiffeisen We seek not to be involved in business with products that are intended to restrict demonstrations, political unrest or other in Bulgaria violations of human rights. This applies in particular to countries where political unrest or military conflicts or other violations of human rights are ongoing or expected.

Environmental protection

We care about the environment and therefore we consider the environmental impact of our business activities. We focus on environmentally friendly businesses using technologies that protect the environment and we aim to choose suppliers, while

Economic growth taking into consideration the environmental balance and the related measurements.

We strive to conduct our operations in a safe manner that minimizes negative environmental impact and reduces carbon emission. We expect our service providers and subcontractors to adhere to our standards. We strive to work with sustainable companies. Funding or engaging in transactions or projects that endanger the environment in the long run (e.g. rain forest destruction, land, air or water pollution) does not comply with our principles of business conduct.

Our employees are taking into consideration the potential risks of adverse effects on the environment and the associated risk of undermining our reputation in any decision related to transactions or projects, especially when providing funding. Segment reports Contribution to society

We are aware of our role in society. We want to contribute to the development of the society to the better beyond our business activities and take action in line with our capabilities. We support non-profit and charitable organizations in line with our policy on sponsoring activities and donations. However, under no circumstances may donations for charitable causes be used as a condition or a means to influence decisions or public officials.

We encourage our employees to participate in volunteer initiatives that are part of our corporate volunteer programs. auditors` report Independent Anti-corruption and bribery matters

In the recent years, major changes in relation to bribery and corruption and the management of risks arising from them have been put in motion worldwide. Bribery (B) and / or corruption (C) are criminal offenses that are prosecuted by the law at an international and local level, both in the private and in the public sector. Measures to combat all forms of corruption are focused on the implementation of international and local laws. In this regard, a comprehensive approach is needed to engage all stakeholders in the process, which also includes assistance and support from financial institutions. Addresses 53

Every employee of the bank should be aware of:

• his/her personal responsibility in protecting the reputation of the bank and of him-/herself from the risks arising from B & C;

• that corporate and social responsibility, integrity and ethical behavior are the essence of the core values of Raiffeisenbank Bulgaria and its approach to business, in order to adequately respond to any situation.

The policy has two main objectives:

• The first is aimed at the Anti-Bribery and Corruption (ABC) policy and rules that apply to all employees;

• The second determines the relevant approach and the principles for its implementation in the bank.

As far as the ABC Program is concerned, the bank follows a "zero tolerance" policy towards illegal or unethical business and mission Vision conduct such as giving / receiving bribes and corruption.

In order to develop and implement the ABC program, the policy also addresses the following objectives:

• Discussion of the bank's strategy on managing the risk of bribery and corruption;

• Creating a clear and transparent ABC program, in order for all subsidiaries to have a unified and consistent

approach; International Raiffeisen Bank Raiffeisen Bank

• Outlining a common set of indicators and red flags that facilitate the members and the employees of the bank in the identification of different types of bribery and corruption.

ABC Program and Strategy

B&C (bribery and corruption) risks might have a substantial negative impact on the Group’s reputation and therefore affect, directly or indirectly, its profitability and the value for the shareholders. Hence, the ABC program addresses B&C risks as an integral part of the risk management strategy at both group and local level. in Bulgaria Raiffeisen Group

The strategy of the ABC policy includes the following approach and management principles:

• Comprehensive coverage and risk assessment of B & C situations in all relevant areas of business processes;

• A structured, well-documented and risk-based approach;

• Active management of potential Conflict of Interest (CoI) situations within the focus of corruption and bribery risks, in order to prevent and mitigate such situations / risks; Economic growth • Maximizing the efficiency and synergy through sharing of experience across the Group;

• Consolidation and concentration of resources for managing fraud and corruption within the Compliance department.

The ABC Group policy includes the following four key elements:

• Planning the structure of the ABC program;

• Prevention; reports Segment

• Opening;

• Resolving cases.

The starting point for planning the structure of the ABC program is the preparation of periodic risk assessments that serves to determine the appropriateness of the ABC approach. In some areas of business, there are more prerequisites for corrupt practices, so these areas need more frequent surveys or more rigorous monitoring. For example, in case of identified Independent Independent weaknesses, the most appropriate risk mitigation, control and monitoring measures should be implemented locally in order report auditors` to mitigate the residual risk.

For the purposes of risk assessment, as well as of training and awareness of the employees, a complete list of B/C indicators/ red flags and risks is available in the Risk Library on the Anti-Bribery and Corruption Measures in RBBG. This library is part of the bank's overall risk library and aims to raise awareness of potential B/C risks for better prevention and detection of bribery and corruption situations. Addresses Addresses 54

The suspicious cases must be managed appropriately based on the risk (probability of occurrence and potential impact), in combination with internal and/or potentially external due diligence, where the senior management (the Management Board) should be informed, if necessary (in case of loss for the bank/employee involvement and others).

Appropriate introductory training on corruption and bribery should be conducted for new employees and regularly repeated for all employees and third parties, the frequency being determined by the B/C risk assessment. Vision and mission The trainings must include explanations of the relevant definitions and references to the applicable internal policies, procedures, laws and regulations, case studies and / or practical examples with reference scenarios from the respective business sector. The main objective of the training is to clearly explain the duties and responsibilities of the employees and to provide information on the competent departments to which they can address their opinion and how to report any concerns or doubts about bribery and corruption.

The bank takes the following actions for effective prevention of bribery and corruption:

• Implementing procedures for preventing and solving conflicts of interest;

Raiffeisen BankRaiffeisen • Monitoring of the B&C focus areas, such as giving gifts or receiving invitations, paid hospitality expenses; International donations and sponsorship; management of third parties regarding contractual relations on the part of the bank and its structures (e.g. mandates, due diligence, monitoring, contract review, etc.);

• Applying appropriate employee vetting procedures in line with local laws and regulations;

• Managing committed corruption offenses or specific cases where there is a suspicion that a bank employee is involved in corrupt schemes, preparing appropriate risk mitigation measures;

• Compulsory training for all employees of the bank in order to make them aware of the rules and regulations on Raiffeisen GroupRaiffeisen Anti Bribery and Corruption. in Bulgaria

Risk Methodology

Credit Risk

Economic growth The bank has incorporated and observes organizational and operational independence of the risk control functions from the business lines that are monitored and controlled. The organizational structure and risk control and management processes are coordinated by clearly defined responsibilities, through the current policies and rules of the bank, as well as through the job descriptions of the individual units. The bank's risk strategy is respected and is subject to approval by the Management Board and the Supervisory Board.

Raiffeisenbank has a strategy for non-performing exposures, which is also subject to approval by the Management Board and Supervisory Board of the bank. This strategy is subject to renewal on annual basis and is monitored for the level of implementation of the measures and performance indicators related to the non-performing loans collection process. Segment reports A system of control processes is in place to identify, measure, monitor and manage the risks that are documented in the risk management policies.

The bank applies rules and procedures approved by the Management and Supervisory Board on the internal control of the overall lending and credit risk management process. They are prepared in accordance with the requirements of the Law on Credit Institutions, the BNB regulations and the rules of the Raiffeisen Group.

The credit policy, the specialized credit management bodies and the credit risk assessment are regulated in the lending rules. Apart from these rules, there are rules on the delegation of approval powers to the departments under the Executive Director auditors` report

Independent in charge of Risk Management and Finance by the bank’s Credit Committee. All executives and employees involved in the credit process are required to follow the approved credit policy and credit process.

The bank's credit policy is determined by its Supervisory Board, where it provides interpretations and clarifications regarding its application. The policy is based on the principles of profitability, liquidity and collateral.

The bank's credit policy is implemented by the Management Board, the Executive Directors, the Credit Committee, Internal Audit, Risk Management Division, Retail Banking Divisions and Corporate clients and Capital markets to the Head Office of

Addresses the bank in Sofia.

The bank operates collective bodies to manage the credit process and to regulate risk exposures.

The Credit Committee is a specialized body responsible for the lending process management. Its main function is to conduct the credit policy of the bank, determined by the Management Board, and to take decisions on credit transactions that exceed the competencies of the departments under the Executive Director in charge for "Risk Management and Finance". The Credit Committee functions in the bank's Head Office and is directly subordinated to the Management Board.

The risk exposures assessment, the determination of the amount of the necessary individual impairment is performed by a specialized collective body in the bank – the Problem Loans Committee. Its activity is carried out in compliance with the requirements of the Law on Credit Institutions, the internal banking documents. The Problem Credit Committee prepares an assessment of the risk exposures, both based on the International Financial Reporting Standards and the internal directives of the Raiffeisen Group.

The elements of the credit risk assessment and impairment calculation are regulated in the internal policies and procedures and mission Vision in line with the International Accounting Standards and the International Financial Reporting Standards.

The bank also has a Risk Governance Committee, a decision-making body in RBBG responsible for the risk management strategy, the risk management framework, as well as all for issues related to the applied models for all material risks, including models at an account, group, or portfolio level. The Committee reviews the policies, procedures, rules and practices related to the Raiffeisenbank (Bulgaria) models applied for Economic Capital and Stress Tests and reviews and approves the results and stress test scenarios, and reviews and approves the validation results of all models throughout their entire life cycle (initial validation, regular performance monitoring and periodic validation). The Committee assesses the bank compliance International with the Raiffeisen Group's regulations and analyzes the impact of the regulatory changes. The Committee provides for the Raiffeisen Bank comprehensive risk identification, measurement, monitoring and timely implementation of corrective actions. It is responsible for determining the risk parameters, assumptions, forecasts and trends.

The Risk Governance Committee is responsible for the control and management of all risks inherent to the bank's operations. Changes and developments in all related areas should be reviewed and approved by the Committee.

The bank has a system for early warning signals (EWS, EarlyWarningSignals), its role is to ensure the timely collection of data on indicators and their correct analysis and assignment of client risk statuses. in Bulgaria Raiffeisen Group Market and Liquidity Risk

The bank has rules and procedures in place for the identification of the various types of market and liquidity risk, which have been developed in accordance with the Group’s directives, regulatory requirements and the bank’s established practice. They also define the responsibilities of Market and Liquidity Risk Management Department regarding the identification, measurement and management of the bank’s market and liquidity risk, as well as its relationship with the Raiffeisen Bank International AG Group and the regulatory bodies.

The Asset and Liability Management Committee is responsible for the overall management of the bank’s balance sheet Economic growth structure and acts as a decision-making body, assisting the Management Board in matters relating to the functioning of the bank. In particular, it manages the bank’s short-term and structural liquidity, the interest rates applicable to the bank, the internal funds transfer pricing parameters and their effect on the net interest income, and the assets and liabilities value, undertaking market risk bearing positions, approval of new products, etc.

The activity of the Asset and Liability Management Committee is governed by rules prepared in accordance with the Law on Credit Institutions. Those rules set out the objectives of the Asset and Liability Management Committee, its delegated decision- making powers and the responsibilities of its members and the Committee as a whole.

The main objectives of the Asset and Liability Management Committee are to: reports Segment

• manage the bank’s balance sheet structure;

• manage the bank’s exposure to interest and foreign currency exchange rate differences;

• manage the bank’s liquidity;

• manage and take decisions for undertaking market risk bearing positions; Independent auditors` report auditors` • manage the funds transfer pricing mechanism and the funding of the bank;

• facilitate the exchange of information between the different departments of the bank in order to optimize the risk and liquidity management. Addresses Addresses 56

In addition to the objectives set out above, the Asset and Liability Management Committee also:

• analyses and discusses the current market development and condition of the bank’s competitors;

• analyses and discuss the macroeconomic environment and the development of the main market parameters;

• examines any legislative changes and their impact on the bank’s balance sheet structure and liquidity; Vision and mission • approves new products with impact on market, liquidity and balance sheet risk;

• reviews legal provisions and their impact on the bank’s open position.

The minutes of the Committee’s meetings are be provided to RBI Vienna.

Operational Risk

Operational risk is the risk of loss resulting from inadequate or poorly functioning internal processes, people and systems, or Raiffeisen BankRaiffeisen from external events. The definition includes legal risk but excludes strategic and reputational risk. International

Legal risk is the risk of loss resulting from non-compliance with legal or statutory requirements and / or improperly prepared contracts and their implementation due to ignorance, lack of diligence in applying the relevant law or delay in responding to changes in the legal framework. Non-compliance due to ignorance is also considered to have occurred if the actual legal situation and the assessment of Raiffeisenbank (Bulgaria) and its subsidiaries differ without fault or when this is unavoidable, for example in the event of an unexpected change in jurisdiction or upon the entry into force of new legal provisions, either of which having retroactive effect on existing legal relations. Legal risk is a component of Operational Risk.

Raiffeisen GroupRaiffeisen Model risk (the risk that the models used in the overall process of risk management of the bank or their application are not in Bulgaria suitable for achieving the objectives) is covered completely in the subcategories of the Operational risk.

Reputational risk is the risk associated with the potential loss to the bank due to inappropriate, unethical or unlawful behavior (including cases of intentional or unintended behavior) in the process of providing financial services.

Raiffeisenbank (Bulgaria) EAD and its subsidiaries, as part of RBI, consider the operational risk as a separate category of risk and adhere to the group policies, rules, procedures and principles set out in the document Sound Practices for the Management and Supervision of Operational Risk, published by the Basel Committee on Banking Supervision, adopting these

Economic growth principles as fundamental to the operational risk management. The aim is to implement into the bank a properly formulated and coherent methodology for the identification, assessment, monitoring, control and reduction of the operational risks faced by the Group’s companies in the course of their daily business activities.

Operational Risk Management consists of identifying, measuring, managing and monitoring exposures arising from inadequate or poorly functioning internal processes, people and systems, or from external events.

The overall operational risk management framework includes the processes, structures, controls and systems used for operational risk management within the Group and ensures the availability of key elements of corporate governance and

Segment reports operational activities.

Risk assessments aim to increase knowledge with regard to operational risk, to identify the operational risks, to simplify the environment in which these processes occur and to reduce the already established operational risks. Risk assessments identify the net risk of a process, the unit from which the risk or activity originated, which may be referred to as a target value for quality risk management measures. The results of the Raiffeisenbank’s risk assessments are the basis for the operational risk auditors` report

Independent profile of the bank.

Early warning indicators (EWI) are used for operational risks monitoring and reporting. They provide the opportunity for early warning of potential problems or changes in the Operational Risk profile that generate timely actions at the management level.

The scenario analysis is a process by which the Group recognizes the impact of events with low probability of occurrence but with serious consequences for the organization's activities, by assessing the probability and severity of possible consequences. Addresses 57

The scenario analyzes aim to:

• To forecast events with an extremely low probability of occurrence but with significant losses that may not have occurred in the bank's history;

• To increase knowledge and educate the bodies responsible for managing specific risks by giving them a perspective on the different types of risk;

• to initiate actions for treatment of the risks and the investment plans.

The collection and analysis of data for internal operational events provides significant information for measuring the impact of Operational Events and the effectiveness of internal control.

Reporting supports the operational risk management cycle by ensuring a continuous and timely information flow to the relevant decision-making bodies. In this way, the reporting of Operational Risk supports the transparency of the risk and and mission Vision the integration of the Operational Risk Management activities into the routine business operations. The Group defines the reporting standards in order to ensure the sound management of the Operational Risk based on the risk strategy.

The Management Board of the bank, as the highest operational risk management body, determines the composition and International

members of the Operational Risk and Controls Committee, delegates functions and responsibilities. Raiffeisen Bank

in Bulgaria Raiffeisen Group Economic growth Segment reports Segment Independent Independent auditors` report auditors` Addresses Addresses 58 Vision and mission Raiffeisen BankRaiffeisen International Raiffeisen GroupRaiffeisen in Bulgaria

Economic growth Independent Auditors’ Report Segment reports auditors` report Independent Addresses 59 Vision and mission Vision International Raiffeisen Bank Raiffeisen Bank

in Bulgaria Raiffeisen Group

Notes to the Financial Statements 74 Economic growth Segment reports Segment Independent Independent auditors` report auditors` Addresses Addresses F'NANCE

ACCOUNTING Building a better W working world LAW

Statutory Audit Firm it 108 Statutory Audit Firm # 015 Ernst & Young Audit OOD AFA OOD Polygraphia Office Center 38, Oborishte str. 47A, Tsarigradsko Shose Blvd., floor 4 1504 Sofia, Bulgaria 1124 Sofia, Bulgaria Statutory Audit Firm it 015

Independent auditors' report To the sole shareholder of Raiffeisenbank (Bulgaria) EAD

Report on the Audit of the Consolidated Financial Statements

Opinion We have audited the accompanying consolidated financial statements of Raiffeisenbank (Bulgaria) EAD and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at 31 December 2019, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2019, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Bank in accordance with the International Ethics Standards Board for Accountants' International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code) together with the ethical requirements of the Independent Financial Audit Act (IFAA) that are relevant to our audit of the consolidated financial statements in Bulgaria, and we have fulfilled our other ethical responsibilities in accordance with the requirements of the IFAA and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of matter We draw attention to Note 36 Events after the reporting date to the consolidated financial statements which discloses significant non-adjusting event related to coronavirus pandemic (COVID-19). The disruption of the normal economic activity in Bulgaria following COVID-19 may affect adversely the operations of the Group, in particular, its credit activity and the quality of its credit portfolio. Due to the unpredictable dynamic of C0VID-19, it is not practicable to provide a reliable estimate of the potential effects of the pandemic. Our opinion is not modified in respect of this matter.

Translation in English of the official Auditors' report issued in Bulgarian. fl r\ EY Building a better working world

Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a consolidated opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditors' responsibilities for the audit of the consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements.

Key audit matter______How our audit addressed the key audit matter Impairment of loans and advances to customers under the requirements of IFRS 9 "Financial Instruments" The Group's disclosures on impairment of loans and advances to customers are included in Note 3A. "Credit risk" and Note 25 B "Loans and advances to customers" to the consolidated financial statements.

Loans and advances to customers In this area, our key audit procedures included, represent a significant part (67%) of the among others: Group's total assets as at 31 December • Obtaining understanding of and 2019. The gross value of such loans as at assessing of the Group's impairment 31 December 2019 is BGN 6,022,480 policy for loans to customers, the models thousand and the accumulated loss applied thereby for calculation of ECL on allowance is BGN 151,219 thousand. The collective and individual basis, as well as Group has applied an impairment model of the key assumptions and judgments based on expected credited losses (ECL) in used therein in accordance with the accordance with the requirements of IFRS 9 requirements of IFRS 9. “Financial instruments". • Obtaining understanding and assessing The application of such impairment model the internal controls at organisation level is characterized with increased complexity with respect to the development and in calculations and higher degree of application of the impairment models, management judgements in the ECL including the model documentation and estimations, as disclosed in Note 3A. The the update frequency and key assumptions, judgments and reasonableness of the parameters and parameters in determining ECL relate to macro indicators applied. quantitative and qualitative indicators to • Obtaining understanding and walk monitor significant increase of credit risk through of the processes and internal (SICR) criteria for the staging of loans and controls of the Group over monitoring advances to customers (Stage 1: Exposures

Translation in English of the official Auditors' report issued in Bulgarian. 2 EY Building a better working world

with no SICR, Stage 2: Exposures with SICR and impairment of loans to corporate and but no objective evidence for impairment, retail clients in accordance with the and Stage 3: Exposures with objective requirements of IFRS 9. evidence for impairment); determining the Assessing the design and testing the probability of default (PD), the loss given operating effectiveness of key controls default (LGD) and the exposure at default over monitoring of loans and advances at (EAD), as well as imputing forward-looking the Group and the impairment information (FLI) on macro-economic factors considering multiple scenarios in calculation processes, focusing on the ECLs estimations. A higher degree of changes necessary in accordance with estimation uncertainty is inherent in the requirements of IFRS 9. We involved calculating ECLs for loans and advances to our Information Technologies (IT) customers in Stages 1 and 2, assessed for experts in the performance and impairment collectively in view of the assessment of IT controls of the Group's Group's availability of historical data for internal information system servicing back testing and calibrating the PD and LGD these processes. estimates in the impairment model. Further Performing analytical procedures based to this, significant management judgement on detailed data in order to assess the is also required in determining ECLs for interconnection of trends in the stated loans and advances to customers which are expenses and provisions for accumulated assessed for impairment individually depending on the customer's risk category impairment losses against the trend in and the credit product used, most of all, development of the Group's loan regarding the time allocation and amounts portfolio. of expected future cash flows, including Assessing the components of the Group's from the sale of the respective collaterals. impairment model as at the end of the reporting period in view of the Due to the significance of the loans and requirements of IFRS 9 and in the advances to customers as an item in the context of specifics of the Group's loan Group's consolidated financial statements, portfolios, the changes made therein and and the complexity, significant judgments the availability of internal historical and and high inherent estimation uncertainty forward-looking information. Assessing involved in the new impairment model as a result of IFRS 9 adoption, we have the consistency in the application and the considered this matter a key audit matter. continuing adequacy of the model components. We analysed the reasonability of SICR criteria set by the Group and the respective staging of individual credit exposures. In addition, we assessed for reasonableness the PD and LGD calculations used by examining supporting information on key assumptions and data inputs. Analysis of the reasonability of the received as a result changes in the ECL in the context of our understanding for the development of the different types of portfolios of the Group. We tested the mathematical accuracy of the formulas used in the impairment model.

Translation in English of the official Auditors’ report issued in Bulgarian. 3 t HANCE Building a better ACCOUNTING working world TAX LAW

• Performing tests of details and analyses, based on a sample of loans and advances to customers, for which the Group has not identified objective evidence of impairment, in order to assess their accurate classification in the respective risk category by the Group. • For a risk-based sample of loans and advances to customers that are subject to individual impairment assessment by the Group, by focusing on those with the most significant potential impact on the consolidated financial statements, we performed a specific analysis of the Group's assumptions on the expected future cash flows, including the realizable value of collaterals, also based on our expectations and the available market information. • Performing audit procedures on subsequent events aimed at monitoring the development of loans and advances to customers from the identified risk based sample after the reporting date in order to assess the consistency of the Group's assumptions for expected future cash flows. • We reviewed and assessed the management's assumptions applied in the calculation model for collective impairment on loans and advances to customers. We performed tests of the operating effectiveness of certain controls with respect to the proper and consistent application of these assumptions in the process of collective assessment of impairment of loans and advances for a sample of loans and advances. • Assessing the relevance and appropriateness of the Group's disclosures related to impairment losses from loans and advances to customers under the requirements of IFRS 9.

Translation in English of the official Auditors' report issued in Bulgarian. AUDIT EY FINANCE Building a better ACCOUNTING working world TAX A LAW

Information Other than the Consolidated Financial Statements and Auditors' Report Thereon

Management is responsible for the other information. The other information, which we have obtained prior the date of our auditors' report, comprises the management report, including the corporate governance statement and the non-financial declaration prepared by management in accordance with Chapter Seven of the Accountancy Act, but does not include the consolidated financial statements and our auditors' report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon, unless and to the extent explicitly specified in our report.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard. Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements Management is responsible for the preparation and presentation of the consolidated financial statements that give a true and fair view in accordance with IFRS, as adopted by the EU, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group's financial reporting process. Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

English of the official Auditors' report issued in Bulgarian. 5 FINANCE Building a better ACCOUNTING working world TAX LAW

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves true and fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for direction, supervision and performance of group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. *

Translation in English of the official Auditors’ report issued in Bulgarian. fHANCE Building a better ACCOUNTING working world ■AX LAW

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. We are jointly and severally responsible for the performance of our audit and for the expressed by us audit opinion as per the requirements of the IFAA applicable in Bulgaria. In accepting and executing the joint audit engagement, in connection with which we report hereby, we also have followed the Guidance on Performing a Joint Audit issued on 13 June 2017 by the Institute of Certified Public Accountants in Bulgaria and the Commission for Public Oversight of Statutory Auditors in Bulgaria.

Report on Other Legal and Regulatory Requirements

Additional Matters to be Reported under the Accountancy Act

In addition to our responsibilities and reporting in accordance with ISAs, described above in the Information Other than the Consolidated Financial Statements and Auditors' Report Thereon section, in relation to the management report, including the corporate governance statement and the non-financial declaration, we have also performed the procedures added to those required under ISAs in accordance with the Guidelines on New and Expanded Auditor's Reports and Auditor's Communication of the professional organisation of certified public accountants and registered auditors in Bulgaria, i.e. the Institute of Certified Public Accountants (ICPA). These procedures refer to testing the existence, form and content of this other information to assist us in forming opinions about whether the other information includes the disclosures and reporting provided for in Chapter Seven of the Accountancy Act and in the Public Offering of Securities Act applicable in Bulgaria.

Opinion in connection with Art. 37, paragraph 6 of the Accountancy Act

Based on the procedures performed, our opinion is that:

a) The information included in the management report referring to the financial year for which the consolidated financial statements have been prepared is consistent with those consolidated financial statements. b) The management report has been prepared in accordance with the requirements of Chapter Seven of the Accountancy Act. c) The corporate governance statement referring to the financial year for which the consolidated financial statements have been prepared presents the information required under Chapter Seven of the Accountancy Act and Art. 100 (m), paragraph 8 of the Public Offering of Securities Act. d) The non-financial declaration referring to the financial year for which the consolidated financial statements have been prepared is provided and prepared in accordance with the requirements of Chapter Seven of the Accountancy Act. .

hglish of the official Auditors' report issued in Bulgarian. IF"! AUDIT EY /| I FINANCE I ACCOUNTING Building a better working world / % LAW

Reporting in accordance with Art. 10 of Regulation (EU) No 537/2014 in connection with the requirements of Art. 59 of the Independent Financial Audit Act

In accordance with the requirements of the Independent Financial Audit Act in connection with Art. 10 of Regulation (EU) No 537/2014, we hereby additionally report the information stated below.

Ernst & Young Audit OOD and AFA OOD was appointed as statutory auditors of the consolidated financial statements of Raiffeisenbank (Bulgaria) EAD for the year ended 31 December 2019 by the general meeting of shareholders (session of the sole owner) held on 29 November 2019 for a period of one year. The audit of the consolidated financial statements of the Group for the year ended 31 December 2019 represents the fourth total uninterrupted statutory audit engagement for that entity carried out by Ernst & Young Audit OOD and the third total uninterrupted statutory audit engagement for that entity carried by AFA OOD. We hereby confirm that the audit opinion expressed by us is consistent with the additional report, provided to the audit committee of the Bank, in compliance with the requirements of Art. 60 of the Independent Financial Audit Act. We hereby confirm that we have not provided the prohibited non-audit services referred to in Art. 64 of the Independent Financial Audit Act. We hereby confirm that in conducting the audit we have remained independent of the Bank.

Audit Firm Ernst & Young Audit OOD: Audit Firm AFA OOD:

Registered Auditor in charge of the audit Registered Auditor in charge of the audit

Sofia, Bulgaria

29 May 2020

Translation in English of the official Auditors' report issued in Bulgarian. 8 RAIFFEISENBANK (BULGARIA) EAD Consolidated annual financial statements for the year ended 31 December 2019 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December 2019

In BGN '000 Note 2019 2018 Interest income 239,003 220,014 Interest expense (16,248) (16,293) Net interest Income 7 222,755 203,721 Fee and commission income 128,083 108,001 Fee and commission expense (34,522) (24,447) Net fee and commission income 8 93,561 83,554 Income from insurance brokerage 3,719 7,034 Dividend income 43 11 Net trading income 9 21,033 21,249 Net (loss) / gain from financial assets reported mandatorily at fair value through profit or loss 10 (65) 838 Net profit from investments 11 - 366 Other operating income 4,082 3,239 Operating income 345,128 320,012 Impairment (loss) / gains on financial assets 14 (4,042) 226 Staff expenses 12 (87,882) (78,365) Depreciation and amortisation 12 (27,526) (15,169) Other administrative expenses 12 (79,922) (82,093) Other operating expenses 13 (7,012) (3,535) Profit before tax 138,744 141,076 Income tax expense 15 (13,990) (14,137) Profit for the financial year 124,754 126,939 Other comprehensive income Items that will not be subsequently reclassified to profit or loss (incl. revaluation of capital instruments at fair value through OCI) 2,199 309 Items that are or may subsequently be reclassified to profit or loss (incl. revaluation of debt instruments at fair value through OCI 3,582 (295) Tax on OCI components (562) 30 Total other comprehensive Income 16 5,219 44 Total comprehensive income for the period 129,973 126,983

The accompanying notes from 1 to 36 are an integral part of these consolidated financial statements. Compiled byrA. Pane va Approved bn jtfeisenbank (Bulgaria) EAD pi I i

Martin PytliW ard, Member’oithe ent Board, Executive Dire Executive Director

Financial statements on whictTan auditors' report is issued dated: 29 May 2020.

Audit firm „Ernst 8 Young Audit" 000 Audit firm „AFA

Translation in English of the official consolidated financial statements issued in Bulgarian. RAIFFEISENBANK (BULGARIA) EAD Consolidated annual financial statements for the year ended 31 December 2019 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2019 In BGN ‘000 Note 2019 2018 Assets Cash and balances with the Central bank 17 1,217,910 1,288,461 Other demand deposits 18 126,200 122,187 Financial assets held for trading 19, 20 61,647 59,422 Financial assets mandatorily at fair value through profit or loss 21 26,268 28,383 Financial assets at fair value through other comprehensive income 22 522,461 561,714 Financial assets at amortized cost 23 6,870,664 5,813,641 Non-current assets held for sale - 1,900 Other assets 26 23,024 21,551 Property, plant and equipment 24 82,785 40,512 Intangible assets 25 45,038 36,456 Deferred tax assets 15 143 110 Total assets 8,976,140 7,974,337 Liabilities Financial liabilities held for trading 20 9,364 11,926 Financial liabilities at amortized cost TJ 8,007,568 7,006,959 Current tax liabilities 1,197 234 Other liabilities 28 12,499 8,952 Provisions for liabilities 29 34,563 33,682 Deferred tax liabilities 15 16 75 Total liabilities 8,065,207 7,061,828 Equity Share capital 603,448 603,448 Reserves 97,181 92,125 Retained earnings 210,304 216,936 Total equity 31 910,933 912,509 Total liabilities and equity 8,976,140 7,974,337

The accompanying notes from 1 to 36 are an integral part of these consolidated financial statements. Compiled by: A. Pancheva

Financial statements on which an auditors' report is issued dated: 29 May 2020.

Audit firm „Ernst & Young Audit" OOD Audit firm „AFA" OOD ..<

Reva Share Statutory luation Retained In BGN ‘000 capital reserves reserve earnings Total

Balance on 1 January 2018 603,448 86,443 5,947 224,153 919,991 Total comprehensive income for the year Net profit for the year - 126,939 126,939 Other comprehensive income - - (265) 309 44 Total comprehensive income for the year - - (265) 127,248 126,983

Transactions with owners, recorded directly in equity Dividends paid - - - (134,465) (134,465) Total transactions with owners, recorded directly in equity - - - (134,465) (134,465) Balance at 31 December 2018 603,448 86,443 5,682 216,936 912,509

Opening balance on 1 January 2019 603,448 86,443 5,682 216,936 912,509 Total comprehensive income for the year Net profit for the year - —r - 124,754 124,754 Other comprehensive income - - 5,056 163 5,219 Total comprehensive income for the p - 5,056 124,917 129,973 year

Transactions with owners, recorded directly in equity Dividends paid - r r- (131,549) (131,549) Total transactions with owners, - - - (131,549) (131,549) recorded directly in equity Balance at 31 December 2019 603,448 86,443 10,738 210,304 910,933

The accompanying notes from to 36 are an integral part of these consolidated financial statements. Compiled by: A. Pancheva

Approved drib (.Raiffeisenbank (Bulga April 2020:

Oliver'ROegl M Chairman of t anagem Soard, Me r of the Management Board, Executive Direc Executive Director

Financial statements o ors' report is issued dated: 29 May 2020.

Audit firm „Ernst & Young Audit" OOD Audit firm „AFA" QOD l------(Mj------i—

Translation in English of the official consolidated financial statements issued in Bulgarian. I RAIFFEISENBANK (BULGARIA) EAD Consolidated annual financial statements for the year ended 31 December 2019 CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2019

In BGN '000 Note 2019 2018 Cash flows from operating activities Profit before tax for the year 138,744 141,076 Adjustments: Depreciation and amortization 27,526 15,169 Net impairment losses on financial assets 12,757 9,738 Unrealized (gains) on foreign currency transactions (2,878) (3,999) Provision expense 14,211 10,207 Impairment on assets acquired from collateral 329 842 Change in investments in associates - (238) Net interest income (222,755) (203,721) Reclassification of assets used in operating activities as a result of the application of IFRS 9 - (26,265) (32,066) (57,191)

Changes in assets and liabilities arising from operating activities after adjustments for non-monetary items (lncrease)/decrease in financial assets held for trading, including: (4,850) 2,557 Decrease/(lncrease) in derivative financial instruments 4,954 (2,415) Decrease in financial assets mandatorily at fair value through profit or loss 2,115 - (Increase) in financial assets at amortized cost, including: (1,046,628) (554,936) Decrease in loans and advances to banks (200,429) 130,474 (Increase) in loans and advances to customers (843,564) (652,531) (Increase) in other receivables (785) (32,879) Decrease in other assets 1,399 16,144 Increase in financial liabilities at amortized cost, including: 1,025,265 932,735 (Decrease)/increase in deposits from banks (25,638) 36,233 Increase in deposits from customers 1,047,096 844,015 Decrease in other financial liabilities 3,807 52,487 (Decrease) in other liabilities and provisions (5,805) (85,407) Interest received 237,111 213,894 Interest paid (14,575) (15,888) Taxes paid (13,767) (13,419)

Net cash flows from operating activities 148,199 438,489

Financial statements on which an auditors' report is issued dated: 29 May 2020. RAIFFEISENBANK (BULGARIA) EAD Consolidated annual financial statements for the year ended 31 December 2019 CONSOLIDATED STATEMENT OF CASH FLOWS (continued) For the year ended 31 December 2019

In BGN '000 Note 2019 2018 Cash flows from investing activities (Purchases) / sales and maturity of investment securities, net, including: (69,535) (110,433) Financial assets at amortized cost (113,634) (180,351) Financial assets at fair value through other comprehensive income 44,099 69,918 Acquisition of property, plant and equipment and intangible assets (25,354) (23,580) Collections from assets held for sale 1,900 - Net cash used in investing activities (92,989) (134,013)

Cash flows from financing activities Payments on lease liabilities (11,148) - Repaid loans from banks (57,946) (50,367) Dividends paid (131,549) (134,465)

Net cash used in financing activities (200,643) (184,832)

Change in cash and cash equivalents (145,433) 119,644 Cash and cash equivalents on January 1 33 1,587,095 1,470,250 Net unrealized (gains) from currency revaluation of cash and cash equivalents (2,344) (2,799) Cash and cash equivalents at 31 December 33 1,439,318 1,587,095

The accompanying notes from 1 to 36 are an integral part of these consolidated financial statements. Compiled by: A. Pancheva ’

Approved ^ behajpof Raiffeisenbank (Bulgaria) E on 28 April 2020:

5| COOWH Oliver Roegl Mattifi Pytlik Chairman of anage Board, Member of the Management Board, Executive Dire Executive Director

Financial statements on which an auditors' report is issued dated: 29 May 2020.

Audit firm „Ernst & Young Audit" 000 Audit firm „AFA"

Translation in English of the official consolidated financial statements issued in Bulgarian. 73

Explanatory Notes

1. Basis of Preparation of the Financial Statements

(а) Reporting entity

Raiffeisenbank (Bulgaria) EAD (the bank), UIC 831558431, registered in the Commercial Register under company file N 14195/1994, is indirectly 100 per cent owned by Raiffeisen Bank International as an ultimate owner.

Raiffeisenbank (Bulgaria) EAD holds a full license issued by the Bulgarian National Bank for conducting banking activities Vision and mission Vision in the country and abroad and for performing all transactions and services as an investment intermediary under the Public Offering of Securities Act and regulations thereto.

The bank is a joint-stock company with a two-tier management system, being managed and represented by a Management Board, which carries out its activity under the supervision of a Supervisory Board.

The consolidated financial statements of the bank for 2019 represent the financial statements of the bank and its subsidiaries and associated companies as described in explanatory note 35, hereinafter referred to as the Group. International Raiffeisen Bank Raiffeisen Bank (b) Basis of accounting

These consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards, as adopted by the European Union (IFRS adopted by EU). The reporting framework “IFRS adopted by EU” in its essence is the adopted national accounting base IAS, as adopted by the EU, regulated by the Bulgarian Accountancy act and defined under item 8 of the Additional provisions thereof.

These financial statements are prepared on the historical cost basis except for the following:

• Financial assets and liabilities measured at fair value through profit or loss, or through other comprehensive income, (including derivative financial instruments);

• Liabilities under defined benefit employee plans, reported at their net present value, increased/decreased by the actuarial profit/loss.

(d) Presentation of the financial statements Economic growth

These consolidated financial statements are presented in thousands of Bulgarian levs, the functional currency of the Group.

The Group presents its statement of financial position according to the degree of liquidity. An analysis of the maturity structure up to 12 months from the date of the report and over 12 months is presented in the explanatory notes.

The Group's assets and liabilities are presented gross in the statement of financial position, unless there is a legal or contractual basis for netting them. Segment reports Segment (e) Comparable information

The financial statements include comparative information for a previous reporting period. The data disclosed for previous periods is adjusted, when necessary, in order to be consistent with the presentation for the current year, except for effects resulting from a change in an accounting policy due to the entry into force of new financial reporting standards where a modified retrospective application approach has been chosen (see Note 3). Independent Independent (f) Changes in the accounting policy report auditors`

In 2019, the Group has not changed its accounting policy, except for the adoption of new standards in force from 1 January 2019. The Group has not adopted early any standard, amendment or interpretation issued but not yet effective.

The Group is applying for the first time IFRS 16 Leases, which requires retrospective application. Addresses Addresses 74

IFRS 16 Leases – effective as of 01.01.2019.

IFRS 16 was issued in January 2016 and replaces the IAS 17 Leasing, IFRIC 4 Determining Whether an Arrangement Contains a Lease, SIC-15 Operating Leases – Incentives and SIC-27 Evaluating the Substance of Transactions in the Legal Form of a Lease. IFRS 16 establishes the principles for recognizing, measuring, presenting and disclosing leases, and requires lessees to report all leases under the same balance sheet model, similar to accounting for finance leases, in accordance with IAS 17. Vision and mission

The Group adopted IFRS 16 under the modified retrospective method of application with effect from 1 January 2019. Under this method, the standard is applied retrospectively, and the cumulative effect of its initial application is recognized on the date of initial implementation. The Group has chosen to use the transitional practical expedient measure and does not reassess whether a contract is or contains a lease on 1 January 2019. Instead, it applied the standard only to contracts that were previously identified as leases in application of IAS 17 and IFRIC 4 on the date of initial implementation.

The standard includes two exemptions from the recognition of leases - leases of ‘low value’ assets and short-term leases (leases with a lease term of 12 months or less). As of the start date of the lease, the lessee recognizes an obligation to make lease payments (i.e., the lease obligation) and an asset representing the right to use the underlying asset over the term of the

Raiffeisen BankRaiffeisen lease (i.e., an asset for the right of use). Lessees are required to recognize separately the cost of interest on the lease and International the cost of depreciating the asset for the right of use.

In adopting IFRS 16, the Group has applied a single recognition and measurement approach to all leases, except for short-term leases and leases of low-value assets. The standard provides for specific transitional requirements and practically appropriate measures that have been implemented / not implemented by the Group.

Leases that were previously classified as finance leases

Raiffeisen GroupRaiffeisen Also, lessees are required to reassess the lease liability when certain events occur (e.g., a change in the lease term, a in Bulgaria change in future lease payments resulting from a change in the index, or a revaluation used to determine those payments). In principle, the lessee will recognize the amount of the revaluation of the lease liability as an adjustment to the asset's right of use.

In accordance with IFRS 16, the lessor's accounting remains substantially unchanged from that applied in accordance with IAS 17. Lessors will continue to classify leases using the same classification principle as set out in IAS 17 and to distinguish between the two types of leases: operating and finance lease.

Economic growth The Group adopted IFRS 16 under the modified retrospective approach. The Group does not benefit from the given practical appropriate measure and will apply the definition under IFRS 16, whether contracts are or contain a lease, to all contracts.

The Group will benefit from the exemptions offered by the standard for leases where the lease terms ends within 12 months of the date of initial implementation, and leases where the underlying asset is of low value.

The group has also implemented the following practical appropriate measures:

• used a single discount rate to a portfolio of leases with similar characteristics; Segment reports • relied on its assessment of whether the leases were burdensome immediately before the date of the initial implementation;

• has applied the short-term lease exemption to leases with a term ending within 12 months from the date of the initial implementation of the standard;

• has excluded the initial direct costs from the valuation of the eligible asset at the date of the initial implementation;

• used the available information in determining the lease term, when the contract contains options for extension or auditors` report termination of the lease. Independent Addresses 75

Effect from the adoption of IFRS 16

Recognized liability under leasing contracts as of the date of the initial implementation, 01/01/2019

in BGN Thousand Operating lease liabilities as of 31/12/2018 (discounted) 48,589 Recognized liability under leasing contracts as of 01/01/2019 48,589

The weighted average differential interest rate applied to the obligations under leasing contracts as of 01/01/2019 is 2.2 per cent.

Assets with right of use Vision and mission Vision

Property, plant and equipment in BGN Thousand As of 01/01/2019 48,589 Depreciation (10,221) Increase in asset during the period 2,458 As of 31/12/2019 40,826 International Raiffeisen Bank Raiffeisen Bank The amount of the asset with the right of use in the amount of BGN 40,826 thousand is recognized as Property, plant and equipment in the statement of financial position of the Group as of 31 December 2019.

Lease liability

The table presents the maturity structure of the lease liabilities, including undiscounted lease payments due after the reporting date in Bulgaria

31/12/2019 in BGN Thousand Raiffeisen Group up to 1 year 10,817 over 1 up to 5 years 26,425 over 5 years 5,203 Total 42,445

Amounts recognized in profit for the period Economic growth

31/12/2019 in BGN Thousand Interest on lease liabilities (1,053) Variable lease payments not included in the measurement of the lease liability (8) Income from sub-leasing – Cost of short-term leasing contracts (1,405)

Total (2,466) reports Segment

Amounts recognized in the consolidated cash flow statement

31/12/2019 in BGN Thousand Lease cash flows 11,148 Independent Independent auditors` report auditors` Addresses Addresses 76

2. Significant Accounting Policies

These consolidated financial statements are prepared by applying one and the same accounting policy by the bank and its subsidiaries.

Vision and mission (a) Basis of consolidation

These consolidated financial statements are prepared in accordance with the requirements of IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in associates and joint ventures”, whereby participations with more than 50 per cent of the voting rights are fully consolidated and all participations with more than 20 per cent of the voting rights are consolidated using the equity method.

(b) Income and expense recognition

Income is recognized to the extent to which the Group assumes that the economic benefits will be realized, and income can

Raiffeisen BankRaiffeisen be measured reliably. International

Interest income and expense

The interest income / expense is recognized in profit or loss for all interest-bearing assets and liabilities on an accrual basis using the effective interest method.

Interest income and expense recognized in profit or loss include:

Raiffeisen GroupRaiffeisen • interest on financial assets and liabilities reported at amortized cost; in Bulgaria • interest on financial instruments, measured at fair value through profit or loss, excluding the interest on financial assets, held for trading; interest income from financial instruments held for trading is disclosed in net trading result;

• interest on financial instruments reported at fair value through other comprehensive income.

Interest income and expenses from all financial assets and liabilities held for trading are considered as part of the net trading result and are accounted for in the net trading result, together with any other changes in the fair value of the instruments. Economic growth In the current environment of negative market interest rates, the Group realizes interest expense on financial assets, such as cash with other banks or maintaining minimum reserves with the BNB above the required minimum. These costs are recognized in the interest expense, as set out in Explanatory Note 7.

Changes in the fair values

Changes in the fair values of derivative instruments are recognized in the net income from operations with derivative instruments in profit or loss. Changes in the fair values of financial assets held for trading are reported in the net trading result.

Segment reports Changes in the fair values of financial assets reported at fair value through other comprehensive income are recognized in the change in other comprehensive income. Changes in the fair value of financial assets reported mandatorily at fair value through profit or loss in accordance with IFRS 9 are presented in the net result from a change in the fair value of financial assets reported mandatorily at fair value through profit or loss.

Fees and commission

TThe Group recognizes Fee and commission income on services rendered which are not designated as an element of effective interest rate on contracts related to financial instruments in accordance with IFRS 15 - Revenue from contracts with customers. auditors` report

Independent The services provided usually result in a direct transfer of the rights over an asset to the client, and therefore the fees and commissions received are recognized in profit or loss at the time of providing the service. Such services include, for example, opening and maintenance of accounts, cash operations, execution of payment orders, bank card transactions, confirmation of documentary letters of credit, availing of bank guarantees.

In cases where a service is provided within a certain period of time, income is recognized proportionally over the period, depending on whether the price is paid in advance or is due at the end of the period, a counterpart financial liability or financial asset, a counterpart financial liability, respectively a financial asset, is recognized. Thus, the Group recognizes

Addresses the obligation to provide the service for the agreed period, or its receivable from the customer, which corresponds to the provided part of the service over time. Such services are related, for example, to the documentary letters of credit and the guarantees issued by the bank. 77

Commissions received for negotiating or participating in the negotiation of financial instruments to third parties - such as managing the acquisition of shares or other securities or the acquisition or sale of distinct activities - are recognized in profit or loss upon closure of the financial transaction. Agent commissions on syndicated loans are recognized in profit or loss after the syndication process has ended and the bank has recognized in the statement of financial position the respective contracted part of the syndicated loan. Advisory services commissions relating to portfolio investment or portfolio management are recognized in accordance with the applicable service contracts, usually when the service is deemed to be completed in its entirety. The rights to the asset are deemed to be transferred to the client at the time of termination of the service or the corresponding financial transaction, for all services listed above.

Fee and commission income and expense that are an integral part of the effective interest income of financial assets or liabilities are included in its calculation. Commitment fees on credit lines for which the expectation is to be fully utilized, are deferred and recognized as part of the effective interest income on the loan.

Other fee and commission expenses, which are not part of the effective interest expense, relate to transaction and service Vision and mission Vision commissions that are recognized in profit or loss when the Group receives the relevant service, i.e. the right to dispose of an asset. Compared to previous periods, no differences were found to be disclosed.

Dividends

Dividend income is recognized when the Group's right to receive the dividend is established.

Net trading income International Raiffeisen Bank Raiffeisen Bank

Net trading income represents gains less losses arising from financial assets and liabilities held for trading and includes interest, all realized and unrealized fair value changes, dividends and foreign exchange revaluation differences.

The Group as lessee in Bulgaria The Group applies IFRS 16 Leases for all contracts under which the right to control the use of an asset is transferred for a Raiffeisen Group certain period of time against payment of remuneration (for example, office space rented by the Group).

The Group does not apply IFRS 16 Leases to short-term contracts, leases of low-value assets and licenses granted by the lessor. Lease payments related to these contracts are recognized as an expense on a straight-line basis over the term of the lease or on another systematic basis.

The Group reports the non-leasing components of the contract separately from the leasing and in accordance with the applicable accounting standards.

The assessment of whether a contract contains elements of a lease is made at the beginning. The Group reassesses whether Economic growth a contract is or contains elements of a lease only when the terms and conditions of the contract change.

At the effective date of the contract, the Group recognizes a lease liability and a right of use asset.

The Group defines the term of the lease as an irrevocable lease term, together with:

• The periods in respect of which there is an option to extend the lease, if there is a sufficient degree of certainty that the Group will exercise that option; Segment reports Segment • The periods in respect of which there is an option to terminate the lease, if there is a sufficient degree of certainty that the Group will not exercise that option.

When assessing whether there is a sufficient degree of certainty that the Group will exercise the option to extend or not to exercise the option to terminate the lease, all facts and circumstances that create an economic incentive to exercise the option are taken into account.

The Group reassesses whether it is certain that it will exercise the option to extend or will not exercise the option to terminate, Independent in the event of a significant event or a material change in circumstances that: report auditors`

• is under the control of the Group and

• concerns the extent to which it is sufficiently certain that the Group will exercise an option that was not reflected upon the determination of the lease term or will not exercise an option that was previously reflected in the term of the lease. Addresses Addresses 78

The Group reviews the lease term in the event of a change in the irrevocable lease term. Examples of changes in the irrevocable lease term are:

• Exercising an option or occurrence of an event that obliges the Group to exercise an option that was not previously reflected in determining the term of the lease agreement;

• Failure to exercise an option or the occurrence of an event that contractually prohibits the Group from exercising

Vision and mission an option that was previously reflected in determining the lease term.

Initial valuation of the lease liability and the asset with the right of use

The Group initially measures the lease liability at the present value of the lease payments that have not been repaid to date.

Lease payments are discounted at the interest rate specified in the lease, if this rate cannot be determined directly, the Group uses a differential interest rate that reflects the period of the contract, the type of leased asset and the economic environment.

At the start date of the lease, the Group measures the asset at cost, which includes the amount of the initial measurement of

Raiffeisen BankRaiffeisen the lease liability, payments under the contract made before the start date of the contract, the initial direct contract costs and International an estimate of the costs that the Group will incur to restore the asset to the condition required under the terms of the contract.

Subsequent valuation of the asset with the right of use

After initial recognition, an asset with a right of use is measured at cost less any accumulated depreciation and any accumulated impairment losses and adjusted for any revaluation of the lease liability.

The Group applies the depreciation requirements under IAS 16 Property, Plant and Equipment when depreciating an asset Raiffeisen GroupRaiffeisen with a right of use. in Bulgaria

If under the lease, the ownership of the asset is transferred to the Group until the end of the term of this agreement or if the costs of the asset with the right of use reflect the exercise of a purchase option by the Group, then the asset with the right of use is depreciated from the initial date to the end of the useful life of the leased (underlying) asset. Otherwise, the Group depreciates the asset with the right of use from the initial date to the earlier of the date of expiration of the lease agreement or the end of the useful life of the asset with the right of use.

Subsequent assessment of the lease liability Economic growth

After the start date, the Group measures the lease liabilities as follows:

• Increases the book value to reflect the interest on the lease liability;

• Decreases the book value to reflect lease payments made and

• Revalues the book value to reflect revaluations or amendments to the lease, or to reflect substantially adjusted lease payments. Segment reports The interest on the lease liability for each period during the term of the lease agreement is the amount that is received if a fixed interest rate for the period is applied to the residual balance of the lease liability. The interest rate for the period is the discount rate used to determine the initial measurement of the liability.

After the start date, the Group recognizes in profit or loss the interest on the lease liability, as well as the variable lease payments, which are not included in the measurement of the lease liability in the period during which the event or circumstance that led to these payments occurred.

auditors` report The Group revalues its lease liabilities by discounting the adjusted lease payments when: Independent • There is a change in future lease payments resulting from a change in the index or rate used to determine those payments. The Group revalues its lease liabilities to reflect those adjusted lease payments only when there is a change in cash flows (i.e., when the lease adjustment takes effect). The Group determines the adjusted lease payments for the remainder of the lease term based on the adjusted contractual payments;

• There is a change in the amounts expected to be due under residual guarantees. The Group determines adjusted lease payments to reflect the change in the amounts expected to be due under the residual guarantees. Addresses 79

The Group revalues its lease liabilities by discounting the adjusted lease payments at an adjusted discount rate when:

• There is a change in the term of the lease agreement. The Group determines the adjusted lease payments based on the adjusted term of the lease agreement or

• There is a change in the valuation of a purchase option for the underlying asset. The Group determines the adjusted lease payments to reflect the change in the amounts due under the purchase option.

The Group determines the adjusted discount rate as the interest rate embedded in the lease for the remainder of the term of this contract, if this rate can be directly determined, or as a differential rate of the lessee at the date of the revaluation, if the interest rate embedded in the lease cannot be directly determined.

Upon revaluation of the lease liability after the starting date, the Group recognizes the amount of the revaluation of the lease liability as an adjustment to the asset with the right of use. When the book value of an asset is reduced to zero and there Vision and mission Vision is a further decrease in the measurement of the lease liability, the Group recognizes a residual amount of the revaluation in profit or loss.

Amendment to a lease

When the amendment in the lease increases its scope by adding the right to use one or more underlying assets and the remuneration under the lease increases by an amount commensurate with the independent price for the increase, the Group reports the change in the lease as a separate lease. International Raiffeisen Bank Raiffeisen Bank If an amendment to a lease is not accounted for as a separate lease at the effective date of the amendment, the Group revalues the lease liability by discounting the adjusted lease payments at an adjusted discount rate.

In the event of an amendment is reducing the scope of the lease as a partial or complete termination of the lease, the Group reduces the book value of the asset with the right of use and recognizes in profit or loss any income or loss related to the termination.

In the event of a change that increases the scope of the lease and not accounted for as a separate lease, the Group makes in Bulgaria the appropriate adjustments to the asset with the right of use. Raiffeisen Group

Policy applied until 31 December 2018 in accordance with IAS 17

Accounting for leases as a lessee

A finance lease is recognized when, in accordance with the bank's lease agreement, a significant portion of the risks and rewards of ownership of an asset are transferred. The leased asset is initially recognized at the lower of its fair value and the present value of the minimum lease payments. The asset is subsequently reported in accordance with the accounting policies applicable to the relevant asset category. Economic growth

Assets used by the Group under lease agreements that do not transfer a significant portion of the risks and rewards of ownership of an asset are not recognized in the bank's statement of financial position.

The minimum lease payments under a finance lease are allocated between the interest expense and the repayment of the residual liability to the lessor. The interest expense is recognized for the term of the contract so as to represent a fixed interest rate on the residual liability.

When the bank is a lessee under an operating lease agreement, lease payments are recognized in profit or loss on a straight- line basis over the term of the agreement. reports Segment

Accounting for leases where the Group is the lessor

Finance lease

The Group presents a finance lease as a lessor as a receivable equal to the net investment in a finance lease, which includes

the minimum lease payments due under the lease, together with the unguaranteed residual value, discounted at the interest Independent rate inherent to the lease. report auditors`

The lease is accounted for as a finance lease when the lessor transfers to the lessee all significant risks and rewards of the asset’s ownership. Addresses Addresses 80

Typical indicators that the Group considers in order to determine whether all significant risks and rewards have been transferred include:

• the present value of the minimum lease payments compared to the fair value of the leased asset at the beginning of the lease;

• the term of the leasing contract in comparison with the economic life of the leased asset; Vision and mission • as well as whether the lessee will acquire the right of ownership over the leased asset at the end of the financial lease agreement. All other leases that do not transfer substantially all the risks and rewards of the asset’s ownership are classified as operating leases.

Minimum lease payments

Minimum lease payments are those payments that the lessee will make or may be required to make during the term of the lease. From the Group's perspective, the minimum lease payments include the residual value of the asset guaranteed by a third party unrelated to the Group, where such an agreement exists. Raiffeisen BankRaiffeisen International Start of the lease and beginning of the lease term

A distinction is made between the beginning of the leasing contract and the beginning of the term under the leasing contract. The beginning of the lease contract is the earlier of the two dates – of the lease contract or of the commitment of the parties to the main terms of the lease contract. As of this date:

• the lease is classified as a finance or operating lease; and

Raiffeisen GroupRaiffeisen • in the case of a finance lease, the amounts to be recognized at the beginning of the lease term are determined. in Bulgaria The beginning of the lease term is the date from which the lessee can exercise its right to use the leased asset. This is also the date on which the Group initially recognizes the lease receivable.

Initial and subsequent evaluation

The Group recognizes a finance lease receivable at the time when the lease contract begins, at a value equal to the net investment in the lease. The initial direct costs are included in the calculation of the finance lease receivable. During the term

Economic growth of the lease, the Group accrues financial income (interest income on finance lease) on the net investment. The net investment in finance leases is presented in loans and receivables from customers net, after impairment, according to the policy for impairment of financial assets at amortized cost.

Operating lease

Assets leased by the Group under operating leases are classified as vehicles. The lessor continues to hold a significant portion of all the risks and rewards of ownership of the asset. Therefore, this asset continues to be included in its tangible fixed assets, and its depreciation for the period is included in the lessor's current expenses. Rental income from operating leases is

Segment reports recognized as such in profit or loss for the year on a straight-line basis over the term of the lease. Initial direct costs incurred in connection with the negotiation of an operating lease are added to the book value of the leased assets and recognized on a straight-line basis over the term of the lease.

(d) Foreign currency transactions

All foreign currency transactions are translated into BGN at the rate fixed by the Bulgarian National Bank on the day of the respective transaction. At each reporting date, the Group measures the foreign currency cash items at the Bulgarian National Bank's closing exchange rate for the day and the revaluation result is recognized in comprehensive income. auditors` report Independent (e) Financial instruments

Policy applied from 1 January 2018 in accordance with IFRS 9

The Group recognizes a financial asset in its statement of financial position when it becomes a party to the contractual terms of such instrument. When an entity first recognizes a financial asset, it must classify it in accordance with IFRS 9 Financial Instruments. Addresses 81

IFRS 9 Financial Instruments introduces a model of classification of financial assets in two steps/stages:

• determining the business model within which the instrument is held and managed;

• Analysis of contractual cash flows for debt instruments (only principal and interest payments).

Reported at amortized cost • Business model "Held to collect the contractual cash flows" • Solely the payments of principal and interest (SPPI)

Reported at fair value through other • Business model "Held to collect the contractual cash flows and for sale" comprehensive income • Solely the payments of principal and interest (SPPI) Vision and mission Vision

Reported at fair value • All other financial assets through profit / loss

The business model refers to the way the Group manages its financial in order to generate cash flows, i.e. the business model of the Group determines whether cash flows should be generated by collecting the contractual ones, selling financial assets, or both. This assessment is not carried out on the basis of scenarios which the Group does not expect in principle to arise, International such as the so-called "Worst case" or "stress" scenarios. Raiffeisen Bank

The business model does not depend on the Group's intentions with respect to a single instrument but is defined for a group of financial assets that are jointly managed to achieve a particular business objective.

The applicable business models for managing the Group's financial assets are as follows:

• Business model, the purpose of which is to hold assets in order to collect the contractual cash flows – the financial assets are managed in order to realize cash flows by collecting contractual payments over the life of the instrument. Although the objective of an enterprise's business model may be to hold the financial assets to collect in Bulgaria the contractual cash flows, an entity is not required to hold all of these assets to maturity. Therefore, the enterprise's Raiffeisen Group business model may be to hold the financial assets to collect the contractual cash flows even when there are sales of financial assets or such are expected in the future, for example when there is an increase in credit risk of the assets, when such sales are rare or their value - both individually and collectively, is insignificant.

• Business model, the purpose of which is both the collection of contractual cash flows and the sale of financial assets - for the financial assets managed under this type of business model it is considered that both the collection of contractual cash flows and the sale of financial assets are a major factor in achieving the objective of the business model. There are different objectives that can be compatible with this type of business model. For example, the business model's objective may be to manage daily liquidity needs, to maintain a certain interest rate profile, or Economic growth to match the duration of financial assets to the liabilities funded by these assets. To achieve such an objective, the entity collects contractual cash flows and sells financial assets at the same time. Compared to the business model, which aims to hold financial assets for contractual cash flows, this business model typically has a higher frequency and a higher value of sales. This is because sales of financial assets are not sporadic, but they are a major factor in achieving the objective of the business model.

• Business model, the purpose of which is financial assets trading - in this business model the Group's objective is to carry out an active buying and selling activity. The financial assets are managed to realize cash flows through the sale of the assets. The Group takes decisions on the basis of the fair values of the assets and manages the

assets in order to realize these fair values. Although the entity collects contractual cash flows while holding the reports Segment financial assets, the objective of this business model is not achieved by collecting contractual cash flows and selling financial assets. This is because the collection of contractual cash flows is not a major factor in achieving the objective of the business model.

• Other business models are as follows:

–– Long-term equity interests - in this business model the bank acquires less than 20 per cent of the capital of another enterprise and does not have significant influence on the enterprise. These interests are acquired in order to ensure Independent Independent

the performance of a particular activity of the Group which would not have been possible in the absence of such report auditors` participation. The term of holding such investments in equity instruments is indefinite.

–– Derivatives held to hedge risk - the Group maintains a portfolio of derivatives to manage foreign exchange and interest rate risk. Addresses Addresses 82

Analysis of contractual cash flows

The financial assets acquired and managed under the business model "Held to collect the contractual cash flows" or "Held to collect the contractual cash flows and for sale" are classified on the basis of the characteristics of the contractual cash flows. For debt assets, it should be analyzed from these two business models whether the contractual cash flows are solely the payments of principal and interest (SPPI), i.e., are in line with the Basic lending agreement. Vision and mission The following elements are in line with the basic lending agreement:

• reward for the value of money over time;

• credit risk and other major risks;

• profit margin.

Contractual features which expose the creditor to additional risks, or change the time or value of cash flows, do not meet the basic lending agreement and such loans should be measured at fair value. Raiffeisen BankRaiffeisen International Contractual cash flows are examined in two directions as follows:

• Element of time value of money;

• Other characteristics of the contractual cash flows that do not meet the SPPI criteria.

Amortized cost/ Basic lending fair value through agreement (SPPI) other comprehensive Raiffeisen GroupRaiffeisen BM "Held to collect income in Bulgaria the contractual cash Modified flows"/"Held to collect Comparative test element of time the contractual cash flows (BMT) and for sale" value of money Other cash flow

characteristics Other cash flow Fair value characteristics through profit/loss

Economic growth (non SPPI)

Element of time value of money

The element of time value of money is the element of interest that provides remuneration only for the elapsed time (no remuneration for other risks and expenses related to the holding of the financial asset is provided).

When assessing whether the element provides remuneration for the elapsed time only, an entity estimates and recognizes

Segment reports factors such as the currency in which the financial asset is denominated and the period for which the interest rate is determined.

In the case of an "imperfect" element of time value of money, the change has to be measured to determine whether the contractual cash flows represent solely the payments of principal and interest on the amount of the outstanding principal. Such features are:

• Reset Lag – the days from the fixing of the value of the base to its application on the loan (for the Retail segment, 6M EURIBOR, set on the 1st day of the month but applied on the loan depending on the agreed payment date); auditors` report

Independent • Smoothing Clause – when the base interest rate is calculated as a weighted average over a certain period of time;

• Reset Mismatch – the rate of fixation of the base interest rate does not correspond to its maturity (3M EURIBOR fixed monthly);

• Secondary Market Yield – the interest rate is updated periodically but the base rate is the average value of the secondary money market yield.

The quantitative estimate of whether the change in the element of time value of money is significant is carried out through Addresses the so-called Benchmark test, which consists of comparing the undiscounted contractual cash flows of the loan with the undiscounted cash flows that would arise in the absence of "Imperfect" element of interest. 83

The Group has adopted a threshold of 5 per cent variation in undiscounted cash flows for the entire duration of the contract OR a 10 per cent variation in undiscounted cash flows over a specified reporting period.

Other characteristics of the contractual cash flows that do not meet the SPPI criteria

Other characteristics of the contractual cash flows that do not meet the SPPI criteria are presented as follows:

Contractual terms that change the time or value of the contractual cash flows

If a financial asset contains a contractual term that may change the time or value of the contractual cash flows (for example, if the asset can be prepaid before maturity or its duration - extended), the entity shall determine whether the contractual cash flows that could arise over the entire term of the instrument as a result of this contractual condition, constitute solely payments of principal and interest on the amount of the outstanding principal. Vision and mission Vision

Characteristic of contractual cash flows that expose the exposure to risk or volatility of contractual cash flows

These are cases where cash flows (payments on the loan) depend on a particular index.

Leverage is a characteristic of the contractual cash flows of certain financial assets. The leverage increases the volatility of contractual cash flows with the result that they do not have the economic characteristics of interest. International

Regulated interest rates Raiffeisen Bank

The application of a regulated interest rate does not meet the SPPI criterion when its use is not imposed by regulatory or other authority requirements.

Contracts without recourse (Project finance)

In some cases, a financial asset may have contractual cash flows that are described as principal and interest, but these

cash flows do not represent SPPIs. For example, when the financial asset is an investment in specific assets (or cash flows), in Bulgaria

and therefore the contractual cash flows depend on the revenue / profitability of the financed project. This may be the case Raiffeisen Group where a creditor's claim is limited to certain assets of the debtor or cash flows of certain assets (a financial asset "without a right of recourse"). However, the fact that a financial asset is without a right of recourse, does not necessarily prevent the financial asset from meeting the SPPI criterion.

In these situations, the creditor is required to measure ("critically review") the specific underlying assets or cash flows in order to determine whether the contractual cash flows of the financial asset are classified as principal and interest payments on the amount of the outstanding principal.

In order to establish such type of contracts, the Group examines the following characteristics: Economic growth

• Capital characteristics - the loan has a characteristic of an equity instrument if the total amount of the payments under the contract depends on the amount of the capital, the profit of the company or the profit or the value of the funded site.

Examples:

–– When a special purpose enterprise (SPE) receives a loan from the bank that funds an investment in assets and the loan is a major source of financing for the SPE (the bank bears the main risks associated with the project). Segment reports Segment –– Expected payments on credit for real estate financing are mainly related to future changes in the value of the collateral (the loan represents an investment in the real estate market).

• Cash flow generation - when cash flows are generated from the funded site and not from the business of the company (borrower).

• Interest rate - the cost of financing may be an indicator of the risks inherent to the investment and thus contribute to the assessment of the SPPI. In the event that a higher risk premium is included in the financing price, which is higher than the margin on such loan, but with the right to full recourse, then the loan has to be reported at fair value. Independent auditors` report auditors` Addresses Addresses 84

• Coverage of contractual cash flows - should assess whether it is likely that the expected cash flows will cover the contractual ones. For this purpose, the following factors should be considered:

–– Interest Coverage Ratio (ICR)=EBIT/interest cost <120 per cent;

–– Loan To Value Ratio (LTV)=credit amount/market value of the financed asset >70-80 per cent.

Vision and mission The heavily variable fair value of the funded asset is an indicator of fair value measurement of the loan.

Contract-Related Instruments (Securitization)

For contract-linked instruments, it is necessary to make further assessments by the Group for the purposes of the classification of financial instruments.

Determination of the accounting category of financial assets in accordance with IFRS 9

Equity Raiffeisen BankRaiffeisen Debt instruments Derivatives

International instruments

Business model Business model Business model “Hold-to- no yes “Hold-to- “Held for collect and collect” trading” sale” Raiffeisen GroupRaiffeisen in Bulgaria yes yes no

no Solely payments of principal and ineterest

no Fair value yes throught OCI election

Fair value throught PL option applied yes Economic growth

yes no no

Fair value Fair value through Other Amortised through Other Fair value through comprehensive cost comprehensive Profit or Loss (PL) income (OCI) Segment reports income (OCI) (no recycling to PL)

The Group classifies each of its financial assets in one of the following accounting categories:

• Amortized cost - the cost at which the financial assets are measured at initial recognition minus principal repayments, plus or minus the amortization of the difference between that initial value and the maturity value, calculated using the effective interest method less provisions for impairment losses (IFRS 9 Financial Instruments, auditors` report Appendix A). Independent • Fair value through other comprehensive income - profit or loss on a financial asset, is recognized in other comprehensive income (except for impairment losses and gains and losses from foreign exchange revaluation) up to the date of derecognition of the financial asset. When a financial asset is derecognized, the cumulative profit or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss. Interest calculated using the effective interest method is recognized in profit or loss (IFRS 9 Financial Instruments, item 5.7.10.).

Addresses • Fair value in profit / loss - the profit or loss on the financial asset is recognized in profit or loss (IFRS 9 Financial Instruments, item 5.7.1). 85

• Fair value through other comprehensive income (not recognized in profit or loss) - applies to equity financial instruments for which this method of subsequent evaluation has been selected. In this method of measurement, the profit or loss on the financial asset is recognized in other comprehensive income (except for profit or loss impairment and profit or loss from foreign exchange revaluation) as a revaluation reserve at fair value. In the case of derecognition (for example, sale), the accumulated revaluation recognized in other comprehensive income does not recognize the profit or loss, but it is transferred to the equity (IFRS 9 Financial Instruments, item B5.7.1)..

Determination of an accounting category of debt instruments Business model „Held to collect the contractual cash flows“

Loans to customers

Loans granted to customers by the Group are determined in the Business Model "Held to collect the contractual cash flows".

Loans are reported at amortized cost when the contractual cash flows represent solely payments of principal and interest on and mission Vision outstanding principal.

When the cash flows on the loan are not solely payments of principal and interest on the outstanding principal, the loan is recognized at fair value through profit/loss.

Deposits with banks International

Deposits with banks are reported at amortized cost, since they are "plain vanilla" transactions in the money market, the cash Raiffeisen Bank flows of which are solely payments of principal and negotiated interest.

Debt Securities

The Group acquires Debt Securities in the Investment Portfolio. Assets in the Business Model "Held to collect the contractual cash flows" are reported at amortized cost when the contractual cash flows are solely principal and interest on principal (SPPI), i.e., are in line with the basic landing agreement. When the cash flow analysis shows flows other than principal and interest on the outstanding principal (SPPI), the assets are stated at fair value and the result is recognized in profit / loss. in Bulgaria Raiffeisen Group Transactions – reverse repo

Transactions in which the Group acquires securities at a certain price and has the obligation to sell them back to the counterparty at a certain future date. Transactions are conducted within the Business Model "Held to collect the contractual cash flows". The contractual terms of these instruments represent solely payments of principal and interest and the receivable that arises for the bank as a result of the transaction is reported at amortized cost.

Determination of an accounting category of debt instruments Business model „Held to collect the contractual cash flows and sale” Economic growth

The Group acquires Debt Securities in a Liquidity Portfolio in order to manage the fulfillment of liquidity requirements. The assets in this portfolio can also be sold.

Assets under the Business Model "Held to collect the contractual cash flows and sale" are reported at fair value in other comprehensive income when the contractual cash flows are only principal and interest on principal (SPPI), i.e., comply with the underlying business agreement. When the cash flow analysis shows flows other than principal and interest on the outstanding principal (SPPI), the assets are reported at fair value through profit/loss.

Determination of an accounting category of debt instruments and equity instruments Business model reports Segment „Held for trading” and derivative financial instruments

Financial assets acquired and managed by the Group in trading portfolio and derivative financial instruments held for risk hedging are measured at fair value and the result is recognized in profit or loss for the year.

Determination of an accounting category of equity instruments within the scope of IFRS 9 Independent Independent

“Strategic equity participations” portfolio – The group invests in other entities without significant influence. These report auditors` participations are necessary to carry out a specific activity of the Group (e.g. payment, card, intermediary services). These equity instruments are typically not traded freely but are intended for the participants in the respective system. Addresses Addresses 86

As a rule, the equity participations are classified and measured at fair value through profit / loss. At initial recognition, the Group may choose to classify the equity participations as measured at fair value in other comprehensive income. This choice is irrevocable and applies to a particular asset. Typically, the Group chooses to measure investments in the "Strategic equity participations" portfolio at fair value and the revaluation result is recognized in other comprehensive income.

Other financial liabilities – recognition and measurement Vision and mission Other non-derivative financial liabilities are initially recognized at fair value less direct transaction costs. Subsequently, these liabilities are measured at amortized cost using the effective interest method.

Deposits received from banks, bond loans and subordinated liabilities are the main sources of financing for the bank and are classified as other financial liabilities at amortized cost.

Fair values of financial assets and financial liabilities

"Fair value" is the price that would be obtained on the valuation date from the sale of a financial asset or would be paid for the transfer of a financial liability between participants in a regular market transaction in a core market or, in the absence of Raiffeisen BankRaiffeisen

International such market, on the most profitable market to which the Group has access on that date. The fair value of a financial liability also reflects the risk of default.

If possible, the Group estimates the fair value of a financial instrument using quoted prices in an active market. The market is considered active when the transactions for an asset or liability are carried out at a sufficient frequency and volume, so that continuous price information is provided.

In the absence of a quoted price in an active market, the Group applies valuation techniques that use maximum observable input data and minimize the use of unobservable ones. The chosen valuation technique includes all the factors that market Raiffeisen GroupRaiffeisen participants would take into account when assessing a transaction. in Bulgaria

The best evidence for the fair value of a financial instrument at its initial recognition is usually the transaction price, i.e. the fair value of the consideration. If the Group determines that the fair value at the initial recognition differs from the transaction price and the fair value cannot be proved either by quoting an active market for a similar financial asset or liability or by using an evaluation technique based solely on observable market data, then the financial instrument is initially recognized

at fair value adjusted by the difference between the fair value at initial recognition and the transaction price. Subsequently, that difference is recognized in profit or loss on an appropriate basis over the life of the instrument but no later than the time when the valuation can be supported by observable market data or the transaction can be realized. Economic growth

When there is "buy" and "sell" price for an asset or liability measured at fair value, then the Group measures these assets and the corresponding long position at "buy" price, and the liabilities and the corresponding short position at "sell" price.

The Group recognizes transfers between fair value hierarchies as of the date of the reporting period in which the transfers were made.

Derecognition

Segment reports The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire or it transfers the rights to receive the contractual cash flows from the financial asset through a transaction in which all the risks and rewards of ownership of the financial asset are transferred to a significant extent. All rights on transferred financial assets that have been incurred or maintained by the bank are recognized as a separate asset or liability.

The Group derecognizes a financial liability when its contractual obligations are terminated, canceled or expired.

For transactions where assets are transferred but all or part of the risks and rewards are retained, the Group does not derecognize the corresponding assets in the statement of financial position. Transfer of assets for which the Group retains auditors` report all or part of the risks and rewards, are, for example, repo transactions or securities lending transactions. Upon transfer of a Independent financial asset over which the Group retains control, the asset continues to be recognized in the statement of financial position and the Group assesses to what extent it is exposed to changes in the fair value of the asset.

For some operations, the Group reserves the right to service the transferred asset against an agreed remuneration. The financial asset is derecognized from the statement of financial position if it meets the derecognition criteria, and the Group recognizes a separate asset or liability that corresponds to the right to service. When the consideration received is sufficient to cover service costs, a financial asset is recognized, otherwise a financial liability is recognized. Addresses The Group also derecognizes a financial asset or part of it, where there is no reasonable expectation of recovering the contractual cash flows of the financial asset in whole or in part. 87

(f) Cash and cash equivalents

Cash and cash equivalents include cash and current accounts with other banks, unlimited cash balances with the Central bank and loans and advances to banks with an original maturity of up to 3 months.

Cash and cash equivalents are reported at amortized cost in the statement of financial position.

(g) Securities transactions

Securities borrowing and lending and repurchase agreements

(i) Securities borrowing and lending Vision and mission Vision Investments lent under securities lending agreements are accounted for in the statement of financial position and are measured in accordance with the accounting policy applied to financial assets at fair value through profit or respectively for assets held for sale or held-to-maturity. Cash received as collateral for securities lending is recorded as liabilities to banks and other customers. Investments hired under securities lease agreements are not recognized as an asset of the Group. Cash lent under securities leases is reported as loans and advances to banks and other customers. Income and expenses arising from securities lending or borrowing transactions are recognized when incurred for the period in which transactions are carried out, as interest income or expense. International (ii) Repurchase agreements Raiffeisen Bank

The Group concludes investment contracts under resale/purchase agreements for identical investments at a predetermined

future date at a fixed price. Purchased investments subject to re-sale at a certain future date are not recognized.

The amounts paid are recorded as repo transactions. The receivables are recorded as collateralized by the relevant securities. Investments sold under repurchase agreements continue to be reported in the statement of financial position and are measured under the accounting policy, as assets held for trading or as assets at fair value through profit or loss. The amounts received from the sale are recorded as repo transactions. in Bulgaria Raiffeisen Group The differences between the value of the asset sold and the value of the asset received is charged for the period of the transaction and is presented as income or Interest expense.

(h) Financial instruments offsetting

Financial assets and financial liabilities are offset and the net amount is presented in the statement of financial position when there is an established right to offset the recognized amounts and the Group intends either to settle in a net amount or to realize the asset and settle the liability simultaneously. Economic growth

Income and expenses are presented on a net basis only if permitted under IFRS, as adopted by the EU, or for profits and losses resulting from similar transactions, such as trading with financial instruments.

(i) Impairment

Impairment of financial assets

Policy applied from 1 January 2018 under IFRS 9 reports Segment

IFRS 9 introduces significant changes in the models for impairment of financial instruments, which consists in applying a model of expected losses compared to the currently used model of sustained loss (in accordance with IAS 39) as well as the application of a three-tier approach to classifying credit risk in the financial assets.

The three-tier approach for the classification of the financial assets subject to impairment is based on an assessment of the credit risk increase after the initial recognition and existence of a credit impairment: Independent Independent

–– Stage 1 - financial assets with no increase in the credit risk after initial recognition; report auditors`

–– Stage 2 – financial assets with a significant increase in credit risk after initial recognition, but without loans classified as loss;

–– Stage 3 – financial assets with credit impairment. Addresses Addresses 88

• Information on future economic conditions

In estimating the expected loss, the Group uses reasonable and substantiated information available without incurring unnecessary cost or effort at the reporting date, for past events, current conditions and projected future macroeconomic conditions.

• Discounting (time value of money) Vision and mission

The expected credit loss shows the time value of the money.

The following discount rates apply:

Instrument Discount rate IFRS 9 reference

Financial assets, Expected credit losses are discounted at the excluding lease receivables reporting date and not at the expected date of and POCI (Financial assets default or other date, using the effective

Raiffeisen BankRaiffeisen other than POCI assets and interest rate determined on initial recognition International lease receivables) or its approximate amount. If the financial IFRS 9.5.4.1(b), B5.5.44 instrument is a floating rate one, the expected credit losses are discounted at the current effective interest rate. Lease receivables Expected credit losses on lease receivables are discounted at the same discount rate used for the measurement of lease receivables IFRS 9 B5.5.46 in accordance with IFRS 16.

Raiffeisen GroupRaiffeisen Purchased or originally The credit-Adjusted Effective Interest Rate in Bulgaria created financial assets with (CAEIR) to the amortized cost of the financial IFRS 9.5.4.1(a), B5.5.45 credit impairment (POCI) asset at initial recognition. Undrawn loan commitments Expected credit losses under a loan commitment are discounted to the effective interest rate or its approximate amount which IFRS 9.B5.5.47

will be applied when recognizing the financial asset that arises from the credit commitment.

Economic growth • Period within which an estimate of expected credit losses is made

Depending on the risk classification of the financial assets by stages, the bank calculates the expected losses for a period of 12 months or for the entire duration of the instrument.

• Date of asset’s origination (recognition)

The Group recognizes a financial asset or financial liability in its statement of financial position only when it becomes a party to the contractual terms of that instrument. Segment reports • Defining the period for estimating expected loss for financial instruments that do not have a fixed term or repayment structure

According to IFRS 9 (B.5.5.40), when determining the period during which an entity expects to be exposed to credit risk but for which expected credit losses will not be impaired by normal credit risk management, the entity should recognize factors such as information on past periods and experience with regard to:

–– the period during which the entity was exposed to credit risk for similar financial instruments; auditors` report

Independent –– the duration of related defaults on similar financial instruments after a significant increase in credit risk;

–– the credit risk management measures that the entity expects to undertake after the credit risk of the financial instrument has increased, such as reducing or eliminating unused disposable amounts.

• Results weighted on a probability of occurrence

Estimates of expected credit losses are not intended to evaluate in the worst-case scenario or the most favorable scenario.

Addresses Instead, an estimate of the expected credit losses should always take into consideration the possibility of a credit loss, as well as the possibility that such a loss will not arise even when no credit loss is likely to occur. 89

Scope of the impairment under IFRS 9

The scope of the impairment under the IFRS 9 includes all financial assets, measured at amortized cost or at fair value through other comprehensive income.

All commitments and contingent liabilities under financial instruments that are not classified as FVPL are also subject to impairment under IFRS 9. This includes all related to credit risk undrawn but granted exposures as well as guarantees and letters of credit.

The group estimates, on the basis of progressive methodology, the estimated credit losses associated with the assets of debt instruments measured at amortized cost and measured at fair value through other comprehensive income, as well as exposures arising from credit transactions at amortized cost, lease receivables and contracts for financial guarantees. In such cases the Group charges provisions for impairment losses, at each reporting date. Vision and mission Vision The measurement of the expected credit loss represents an impartial and probability-weighted sum, determined by the calculation of a number of possible outcomes, the value of money over time and significant supporting information on past events at the reporting date, current conditions and forecasts of future economic conditions, and is provided without undue cost or effort.

(j) Property, plant and equipment International

Recognition and measurement Raiffeisen Bank

Property, plant and equipment are measured at cost less accumulated depreciation. Acquisition cost includes all direct costs attributable to the acquisition of the asset. The purchase of software that is an integral part of the functionality of the asset is capitalized as part of that asset.

Any portion of an asset, plant and equipment with a cost that is significant in relation to the total cost of the asset or which has a different useful life is depreciated separately. in Bulgaria

Subsequent costs Raiffeisen Group

Parts of certain property, plant and equipment items that need to be replaced are recognized in the book value of the asset if they meet the recognition criteria and their value can be reliably determined.

Depreciation

Property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives. Leased assets are depreciated over the shorter of the lease term and their useful lives. Land is not depreciated. Economic growth The annual depreciation rates are as follows:

Assets % Buildings 4 Plant and equipment 12 – 50 Fixtures and fittings and reconstructions 15 Vehicles 20 – 25 Segment reports Segment

The assets are not depreciated until they are put into operation and transferred from the cost of acquiring of fixed assets into the relevant asset category.

(k) Intangible assets

Recognition and measurement Independent Independent auditors` report auditors` Intangible assets acquired or internally created by the Group are stated at cost less accumulated amortization and impairment losses. Addresses Addresses 90

Subsequent costs

Subsequent costs associated with an intangible asset are recognized in the book value of the asset only if it increases its economic benefit. All other expenses are recognized in profit or loss.

Amortization Vision and mission Amortization is accrued on a straight-line basis over the useful life of the asset. The following are the annual amortization rates used:

Assets % Licences 15 – 33 Software 20 – 50

(l) Repossessed assets Raiffeisen BankRaiffeisen International Repossessed assets are measured at the lower of their book value and the net realizable value. Acquisition cost includes acquisition expenses, state fees for private enforcement agents, etc.

The net realizable value is the estimated selling price reduced by approximately evaluated expenses necessary for the sale.

(m) Impairment of non-financial assets

Raiffeisen GroupRaiffeisen At each reporting date, the Group reviews the book values of its non-financial assets to determine whether there are in Bulgaria indications of impairment. When there are indications of impairment, the Group determines the recoverable amount of the asset.

In order to perform the test for impairment of assets, which cannot be tested individually, they are grouped into the smallest possible group of assets that generate cash proceeds from continuing use, and which are largely independent of cash

proceeds from other assets or cash-generating units (CGUs).

The recoverable amount of an asset or CGU is the higher of its value in use and its fair value less costs to sell. Value in use

Economic growth is based on future cash flows discounted to their present value using a discount rate before tax corresponding to the current market assessments of time money and asset-specific or CGU risk.

An impairment loss is recognized if the book value of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognized in profit or loss. They are first allocated to decrease in the book value of the goodwill of CGU and, subsequently, in decrease in the book values of the assets in the CGU, in proportion.

Impairment loss of goodwill is not recovered. Impairment loss of other non-financial assets is recovered only to the extent that

Segment reports the book value of the asset does not exceed the book value that would have been determined after deducting depreciation, if an impairment loss had not been recognized.

(n) Provisions for liabilities

Provision are recognized in the statement of financial position when the Group has a legal or contractual obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows by using a pre-tax discounted return factor that reflects the market valuation of the cash value over time, where appropriate, the specific risk for the liability. Short-term auditors` report provisions are not usually discounted. Independent

(o) Employee benefits

(i) Short-term employee benefits

Short-term employee benefits include salaries, bonuses and benefits in kind and are recognized as an expense when the related services are provided. A liability is recognized for the amount expected to be paid if the Group has a present legal Addresses or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. 91

(ii) Defined contribution plans

Defined contribution plans are contributions to state-owned institutions or statutory pension funds managed by private management companies, where these contributions are in accordance with legal requirements or personal choice of the employee. Payables incurred in connection with defined contribution plans are recognized as an expense when the related services are provided.

(iii) Defined benefit plans

The Group’s obligation in respect of defined benefits is calculated separately for each plan and the amount of future benefits that employees have earned in the current and prior periods is estimated and that amount is discounted.

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. The Group determines the net interest rate on the net liability under a defined benefit plan by applying the discount and mission Vision rate used at the beginning of the period to discount the liability to a net defined benefit plan.

Changes in the net present value of the defined benefit obligation arising from changes in actuarial assumptions are actuarial profits or losses that are recognized in other comprehensive income. Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss. (p) Financial guarantees and loan commitments International Raiffeisen Bank Raiffeisen Bank With the financial guarantee contract, the Group undertakes to make a payment to compensate the holder for the loss suffered if the debtor fails to pay under the terms of the relevant debt instrument.

Loan commitments represent the Group's commitment to provide credit under pre-agreed terms and conditions.

(q) Taxation

Income tax for the year comprises current tax and changes in deferred tax. The tax is recognized in profit or loss only when in Bulgaria it does not relate to business combinations or items recognized directly in equity or in other comprehensive income. Raiffeisen Group

(i) Current tax

Current tax is the amount of tax that the Group has to pay on the expected taxable profit for the financial year based on the tax rate under current law on the date of preparation of the statement of financial position as well as any tax adjustments for past years. The current tax also reflects the effect of the dividends received by the Group.

(ii) Deferred tax Economic growth Deferred tax is recognized in respect of temporary differences between the book values of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for:

• temporary differences arising on the initial recognition of assets or liabilities as a result of a transaction that is not a business combination and does not affect either the accounting or tax profit or loss;

• temporary differences arising in connection with investments in subsidiaries or jointly controlled entities, in so far as these differences will not be reversed for the foreseeable future;

• taxable temporary differences arising on the initial recognition of goodwill. reports Segment

Deferred tax is measured using the tax rates that are expected to be effective at the time of their reversal, considering the provisions of the current tax legislation.

Deferred tax assets and liabilities are netted when there is a legal right to net current tax receivables and payables and they relate to income taxes collected by the same tax administration.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that Independent it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed report auditors` at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Addresses Addresses 92

In determining the amount of current and deferred tax the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of estimates about future events. If there is new information that will lead to a change in the assessment of the adequacy of the existing tax liability, that change will affect the tax expense for the period in which the change is established.

(r) Segment reporting Vision and mission The Group applies IFRS 8 "Operating Segments", which requires the Group to disclose its operating segments based on information regularly available to management.

(s) Transactions with financial instruments

The bank carries out the following transactions with financial instruments for customers:

• investment services in transactions with financial instruments;

Raiffeisen BankRaiffeisen • transfers from/to an account in the bank to/from an account in another bank and/or depository institution; International

• maintaining and servicing accounts for financial instruments;

• administering client portfolios of financial instruments;

• depository services for pension funds, collective investment schemes, investment funds and special investment purpose companies.

Raiffeisen GroupRaiffeisen Client financial instruments are kept in individual accounts of the clients and are reported separately from the assets of the bank. Client assets in the accounting systems of the bank are reported as assets held in custody in the off-balance sheet in Bulgaria accounting system of the bank, and as such are not subject to allocation in bankruptcy or liquidation proceedings of the bank. It has been established (1) the existence of control over the separation of the transactions performed, between the bank's own activity and the custodial activity, (2) the presence of automatic reconciliation on a daily basis of client financial assets in the bank's accounting systems and registers of the bank with information from the relevant local and foreign central depositories / securities registers and (3) the existence of reconciliation of the records in the accounting system with the

statements / confirmations sent to clients.

Fees and commissions received in respect of transactions with financial instruments are reported in profit or loss when Economic growth providing the service.

(t) Changes in accounting policy and disclosures

New and amended standards and interpretations

IFRIC 23 Uncertainty over Income Tax Treatments – effective for annual periods beginning on or after 1 January 2019

Segment reports The interpretation explains how the recognition and measurement requirements contained in IAS 12 should be applied when there is uncertainty about the tax treatment of income. In such circumstances, an entity recognizes and measures its current or deferred tax asset or liability by applying the requirements of IAS 12 based on taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates determined by applying this Interpretation. The adoption of the interpretations did not have an impact on the financial position or performance of the Group.

IAS 28 Investments in Associates and Joint Ventures - effective for annual periods beginning on or after 1 January 2019

The amendments clarify that an entity shall apply IFRS 9 - Financial instruments (including the provisions on impairment) to auditors` report long-term investments in associates and joint ventures that form part of the net investment in the associate or joint venture but Independent to which the equity method does not apply. Therefore, IFRS 9 takes precedence over IAS 28. The adoption of the amendments did not have an impact on the financial position or performance of the Group.

IAS 19 Employee Benefits – effective for annual periods beginning on or after 1 January 2019

Under the changes in IAS 19, in the event of an amendment, reduction or settlement of a defined benefit plan, it is now mandatory to recalculate current service costs and net interest for the remaining fiscal year using the actuarial assumptions used to revalue the net liability / net asset. In addition, amendments are included to clarify the effect of amending, reducing Addresses or settling a plan on asset ceiling requirements.

The adoption of the amendments did not have an impact on the financial position or performance of the Group. 93

Annual Improvements to IFRS Standards – 2015-2017 cycle - effective for annual periods beginning on or after 1 January 2019

The improvements include:

• IFRS 3 Business Combinations and IFRS 11 Joint Arrangements - The amendments to IFRS 3 clarify that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business. The amendments to IFRS 11 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business.

• IAS 12 Income Taxes: The improvements specify that all tax effects on dividends (distribution of profits) must be recognized in profit or loss, regardless of how the tax arose.

• IAS 23 Borrowing Costs: The amendments clarify that if any borrowing costs applicable to loans made specifically for the purpose of obtaining an asset that meets the requirements under IAS 23 remain unpaid after the related and mission Vision asset has been prepared for its intended use or sale, those borrowing costs are included in the calculation of the capitalization rate for the funds received for the acquisition of the asset.

The adoption of the above improvements did not have an impact on the financial position or performance of the Group.

Published standards that are not yet effective and have not been adopted earlier International

Amendments in the Conceptual Framework for Financial Reporting – effective for annual periods beginning on or after 1 Raiffeisen Bank January 2020

The new conceptual framework contains revised definitions of assets and liabilities, as well as new guidelines for measurement and derecognition, presentation and disclosure. The conceptual framework was not substantially revised as originally envisaged when the project was launched in 2004. Instead, CIAS focused on topics that were not yet covered or that appeared to be obvious shortcomings and had to be addressed. The revised conceptual framework is not subject to an approval process. in Bulgaria

Amendments in IFRS 3 Business Combinations (Definition of business) – effective for annual periods beginning on or after Raiffeisen Group 1 January 2020

The amendments are effective for annual periods beginning on or after 1 January 2020, allowing for earlier application. The amendments clarify the minimum business requirements and limit the definition of a business. The amendments also remove the assessment of whether market participants are able to change missing elements, provide guidance to assist companies in assessing whether the acquired process is significant and introduce an optional test for concentration of fair value. The application of the revised standard is not expected to affect the financial position or performance of the Group.

Amendments in IAS 1 Presentation of Financial Statements and IAS 8 Accounting Economic growth

Policies, Changes in Accounting Estimates and Errors – effective for annual periods beginning on or after 1 January 2020

The International Accounting Standards Board (IASB) has issued 'Definition of Material (Amendments to IAS 1 and IAS 8)' to clarify the definition of ‘material’ and to align the definition used in the Conceptual Framework and the standards themselves.

The application of the revised standard is not expected to affect the financial position or performance of the Group.

IFRS 17 Insurance Contracts – effective for annual periods beginning on or after 1 January 2023 reports Segment

IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of the standard. The objective of IFRS 17 is to ensure that an entity provides relevant information that faithfully represents those contracts. This information gives a basis for users of financial statements to assess the effect that insurance contracts have on the entity's financial position, financial performance and cash flows. IFRS 17 was issued in May 2017 and applies to annual reporting periods beginning on or after 1 January 2023. The application of the revised standard is not expected to affect the financial position or performance of the Group. The standard has not yet been incorporated into the European legislation by the EU. Independent Independent auditors` report auditors` Addresses Addresses 94

The reform of interest rate benchmarks for the purposes of financial instruments and its effect on financial reporting - IFRS 9, IAS 39 and IFRS 7 (Amendments)

The amendments are effective for annual periods beginning on or after 1 January 2020 and will be applied retrospectively. Early application is permitted. In September 2019, the International Accounting Standards Board (CIAS) published amendments to IFRS 9, IAS 39 and IFRS 7, thus concluding phase 1 of its work in response to the effects on financial reporting of the interbank interest rate reform. Phase 2 will focus on problems that may arise when interest rates are replaced Vision and mission by risk-free interest rates. The published amendments address problems that arise during the replacement of existing interest rates with alternative interest rates. The effects on specific cases of hedge accounting under IFRS 9 Financial instruments and IAS 39 Financial instruments: Recognition and measurement, where a forward-looking analysis is required, are addressed. The amendments provide for temporary reliefs applicable to hedging requirements, in cases where compliance with these requirements is directly affected by the benchmark reform. The amendments allow hedge accounting to continue in the period of uncertainty until the replacement of the existing reference interest rates with alternative risk-free interest rates. Amendments have also been made to IFRS 7 Financial instruments: Disclosures, requiring the submission of additional information on hedging uncertainty as a result of the reform. These amendments have not yet been adopted by the EU. The Group will analyze and evaluate the effects of the amendments on the financial position or the performance. Raiffeisen BankRaiffeisen International 3. Risk Management

Introduction and overview

The Group is exposed to the following risks as a result of the use of financial instruments:

A. Credit risk Raiffeisen GroupRaiffeisen in Bulgaria B. Liquidity risk

C. Market risk

D. Capital management

Risk management framework Economic growth

The Management Board is responsible for establishing and exercising ongoing oversight of the risk management framework.

Risk management is monitored by a Risk Governance Committee subordinated to the Supervisory Board. The Risk Committee is established in accordance with the requirements of art. 6 of the Bulgarian national bank’s Ordinance 7 on organization and risk management of banks. The functions of the Risk Committee to the Supervisory Board are to advise the Management and Supervisory Board on the Group's present and future risk appetite and strategy, as well as to assist them in monitoring the implementation of the strategy by the management.

Segment reports The Management Board has established Asset and Liability Committee (ALCO), Credit Committee, Problem Loans Committee, Operational Risk Management Committee and Risk Committee of the bank, responsible for the preparation of risk management policies in the various areas of activity. The members of the committees include representatives from the Management Board and other levels of management within the bank.

The main objectives of the risk management policies are to identify and analyze the various risks to which the Group is exposed, to set limits and to monitor compliance to the limits through ongoing monitoring of the exposures. Risk management policies and systems are reviewed regularly in order to reflect changes in the market conditions, as well as changes in the products and services offered. By implementing the established internal standards and training and management procedures,

auditors` report the Group strives to create the conditions for disciplined and constructive control where all employees consciously fulfill their

Independent roles and responsibilities.

By its very nature, the activity of the Group is related to the use of different types of financial instruments. The bank accepts deposits from customers with various agreed maturities on which it pays floating or fixed interest rates, seeking to invest the funds into high-quality assets. Addresses 95

A. Credit risk

The Group is constantly exposed to credit risk, mainly due to the probability that the loans and advances granted, as well as debt securities will not be repaid within the agreed terms or will not be repaid in full. The Group is also exposed to credit risk as a result of commitments under undrawn credit lines and issued guarantees. Credit risk is the main risk in the Group's operations, which is why the management of credit risk exposures is a priority for the Group's management. The Group has developed policies and procedures regarding the approval of credit applications and the management of credit exposures.

Credit risk concentrations (whether on or off-balance sheet) may arise from exposure to risk to a single debtor or to a group of debtors having similar characteristics such as those where changes in economic or other circumstances have a similar effect on meeting their contractual obligations.

The Group is also exposed to credit risk in result of its trading and investment activities, as well as in result of its activities as an investment intermediary for its customers or for third parties. The credit risk arising from trading and investment activities and mission Vision of the Group is managed through market risk management.

The risk that counterparts to financial instruments might default on their obligations is monitored on an ongoing basis by the Group. The instruments with a positive fair value that depends on market conditions are a priority when monitoring credit risk exposures related to the trading portfolio.

Credit risk management International Raiffeisen Bank Raiffeisen Bank The Supervisory Board of the bank has delegated the responsibility for the credit risk management to the Management Board. The Management Board determines the credit policy of the Group based on market conditions analysis, as well as on an assessment of the risks associated with the credit activity. The scope of the credit policy is to outline the directions in which

the credit portfolio of the Group should develop in the coming years. The approval and adoption of the credit policy by the bank's Supervisory Board confirms that the actions proposed by the Group in respect of target industries and products, as well as the consequent impact of these actions on the Group's loan portfolio, are in line with projections the Supervisory Board and with the main strategy of Raiffeisen Group.

The credit risk management is carried out by the structural units subordinated to the executive director in charge of Risk in Bulgaria

Management and Finance. The key tasks of these structural units are to: Raiffeisen Group

• Recommend and manage the limits for concentration of credit risk, with introduced limits for proactive restriction of concentrations at the level of a group of related parties GCC (Group of Connected Customers);

• Provide independent review of credit applications and credit risk assessment based on internal models for credit risk assessment;

• Perform proactive risk management, both on individual transaction level and on the level of the entire Credit portfolio; Economic growth • Ensure that the standards, policies and practices of Raiffeisen Group for risk management are adhered to by all business units involved in the lending process;

• Assist business units to create business-specific risk management practices that meet the standards introduced by the Raiffeisen Group and that are used to assess, measure, report, monitor, limit and analyze the credit risk related to corporate customers;

• Assist in the identification, classification and management of problem exposures, including exposures with forbearance; Segment reports Segment • Ensure correct reporting by business units of early warning signals and timely appropriate actions, such as customer rating reduction, a comprehensive review of high-risk exposures and the preparation of an action plan for potential problem exposures;

• Assist the business units in creating a credit policy, reviewing and proposing changes as needed, as well as monitoring and compliance with approved policy.

Limits monitoring and credit risk mitigation policies Independent auditors` report auditors`

The Group manages, sets limits and controls the credit risk concentration for all receivables that can be identified - in particular for individual counterparties and groups, as well as for individual industries and countries. Addresses Addresses 96

The Group structures the degree of credit risk assumed by setting limits both for an individual borrower or a group of borrowers and for geographical and industrial segments. Such risks are monitored on an ongoing basis and are subject to regular reviews.

Exposure to credit risk is managed with ongoing changes to credit limits based on regular analyzes of the ability of existing and potential borrowers to meet interest and principal payments. Vision and mission Credit risk assessment

The credit risk assessment for loans and receivables from customers and banks comprises four components:

(i) the probability of default under the loan agreement by the debtor;

(ii) current exposure to the debtor and estimates of exposure at default;

(iii) the expected rate of recovery of non - performing exposure (loss given default); Raiffeisen BankRaiffeisen

International (iv) a loss identification period that represents the time horizon of the probability of default.

These credit risk components, which reflect the expected losses, are in line with the regulatory requirements of the BNB and the European Capital Adequacy Directive and are embedded in the day-to-day operations of the Group.

However, as of 1 January 2018 the provisions of IFRS 9 are applied to determine the amount of expected credit losses in order to adjust the book value of loans and receivables.

Raiffeisen GroupRaiffeisen The Group assesses the probability of default of an individual exposure using internal rating models tailored to the

in Bulgaria various categories of exposures and counterparties. These models are developed on the basis of statistical analyzes and assessments and are compared to the available external information for the counterparty. The borrowers and their exposures are segmented into separate rating classes that reflect the limits of the probability of default for the class. This means that exposures can be shifted from one rating class to another, since the assessment for the probability of default is changing over time. The assessment methods are monitored on regular basis and are improved, if necessary. The Group regularly verifies

the reliability of the internal rating models for forecasting events of default. The Group uses ratings of recognized external rating agencies, when available, to compare the credit risk assessment performed using the internal rating models.

As of 1 November 2014, Raiffeisenbank Bulgaria has been formally authorized to use an internal rating-based approach Economic growth in the management and measurement of credit risk, as required by the most up-to-date bank regulations, namely Regulation 575/2013 of the European Parliament and the Council.

The default exposure reflects the expected amount of loan due in the event of default. For example, the default exposure on a loan is its outstanding principal and interest due at the time of default. For credit commitments, exposure to defaults is determined as the sum of the portion utilized and the probable future utilization at the time of the default.

Loss given default is defined as the amount of loss that the Group would incur in the event of a default on a receivable. The loss given default is directly related to the type of counterparty, the rank of the receivable, the availability of collateral or Segment reports other credit protection.

To assess the credit risk related to bonds and other securities, the Group uses both external ratings and internal rating models for those securities that have not been assigned a credit rating by recognized External credit rating agencies. The Group invests in securities of good credit quality that are a sufficiently secure source of liquidity, helping to meet mandatory the regulatory requirements and ratios.

Collateral auditors` report

Independent The Group uses a number of policies and practices to reduce credit risk. The most traditional way of credit protection is to accept collateral. The Group has adopted rules for the establishment of eligible classes of collateral or credit protection. The main types of collateral recognized by the Group are:

–– real estate mortgage;

–– cash deposits;

–– pledge on commercial assets, such as machinery and equipment, inventory and receivables; Addresses –– bank guarantees; 97

–– portfolio guarantees issued by first-class international or national institutions;

–– pledge of financial instruments such as debt or equity securities.

Long-term financing and loans to corporate clients are usually secured, while consumer loans to private individuals are unsecured. Also, in order to minimize the loss on loans, the Group may require additional collateral from the borrower upon the occurrence of an indication of the deterioration of the receivable.

Derivative instruments

The Group exercises strict control over compliance with the limits on the size and maturity of open positions in derivative instruments, considering the structure of transactions in terms of currency, term and face value. They can be divided into two categories, as follows: Vision and mission Vision • Settlement Limit: limits maximum outgoing payments within one day;

• FX limit for derivatives: limits the cost of replacing all derivatives in a non-regulated market if the counterparty becomes insolvent.

At all times, credit risk exposure is limited to the present fair value of the instruments that benefit the Group (i.e., financial instruments for which the fair value is positive), which for derivative instruments is only a small portion of the agreed nominal value commonly used to report the volume of the opened derivatives as of the reporting date. The credit risk exposure is International managed as part of total credit limits to customers, considering potential fluctuations in the market conditions. Collateral or Raiffeisen Bank other credit protection is not normally required for credit risk exposure on these financial instruments.

Settlement risk arises when, in transactions involving the delivery of foreign currency, debt or equity financial instruments, a counterclaim arises for the Group under these types of instruments. Day settlement limits for individual counterparties are set for risk management purposes to minimize the overall risk that arises in day-to-day trading.

Credit-related commitments in Bulgaria The purpose of these tools is to provide, at the request of the client, the availability of funds for a given commitment. Like Raiffeisen Group loans and other receivables, guarantees and letters of credit bear the same credit risk. Documentary Letters of Credit - which represent a commitment made by the Group in favor of the client, to settle its obligations to third parties up to a certain amount and under certain conditions - are usually collateralized by the subject matter of the delivery to which they relate and therefore the related credit risk is lower compared to the loan granted.

A commitment to provide a loan is the non-exercised right on the part of the client to utilize the agreed amount of a loan, guarantee or letter of credit. The credit risk associated with the Group's commitments to provide a loan is expressed in the potential loss that the Group would incur on the extent of the unutilized portion of the commitment. However, considering the standard level of the customers’ creditworthiness, the probable amount of loss is less than the sum of all unutilized commitments. The Group monitors the maturity of its credit commitments, since the long-term commitments carry a higher risk Economic growth than those with a shorter term. However, credit commitments that are unconditionally revocable on the part of the Group or are irrevocable on the basis of deterioration in the creditworthiness of the client, are not considered to be carriers of credit risk.

Policy on risk exposures assessment and allocation of provisions for expected credit losses under IFRS 9, effective from 1 January 2018

The Group estimates using a progressive methodology the expected credit losses related to assets from debt instruments reported at amortized cost and reported at fair value through other comprehensive income, as well as exposures arising reports Segment from credit transactions, lease receivables and financial guarantee contracts. The Group accrues provisions in such cases on each reporting date.

The application of IFRS 9 requires a higher degree of judgment or complexity based on many sources of uncertainty of the measurement, that have a significant risk of substantial adjustment in the next financial year. Quantitative information for each of these estimates and judgments is included in the relevant notes, together with information on the basis for calculating for each affected contracted item in the consolidated financial statements. Independent Independent auditors` report auditors` Measurement of expected credit losses

The measurement of the expected credit loss is a probability-weighted amount determined by calculating a number of possible outcomes, the value of the money over time and significant supporting information for past events at the reporting date, current conditions and projections of future economic conditions, and is provided without undue cost or effort. Addresses Addresses 98

The measurement of the expected credit loss on financial assets, measured at amortized cost and fair value through other comprehensive income, is an area that requires the use of sophisticated models and significant assumptions about the future economic conditions and the credit behavior. The application of the accounting requirements for measuring the expected credit losses requires significant judgments, namely:

• Defining criteria for significant credit risk growth;

Vision and mission • Selection of appropriate models and assumptions to measure the expected credit losses;

• Determining the number and relative weight of scenarios for the future related to each type of product / market and the associated credit losses;

• Establishment of groups of similar financial assets in order to measure the expected credit losses.

The credit risk of the Group arises from the risk of financial loss in the event that customers or market counterparties fail to meet their contractual obligations. Credit risk arises mainly from interbank, commercial and consumer loans and advances, and from credit commitments arising from credit activities, but may arise from credit facilities such as financial guarantees, letters of credit and acceptances. Raiffeisen BankRaiffeisen International The Group is also exposed to other credit risks arising from investments in debt securities and other exposures arising from its trading operations ("trade exposures"), including assets and derivatives in trading portfolio, as well as settlement balances with market counterparties and repurchase agreements.

The credit exposure assessment for risk management purposes is complex and requires the use of models as exposures vary depending on changes in market conditions, expected cash flows and time. The credit risk assessment of an asset portfolio requires additional calculations of the probability of default, related losses and counterparty default relationships. The group measures credit risk using probability of default (PD), exposure at default (EAD) and loss given default (LGD), under the Raiffeisen GroupRaiffeisen general approach set out in IFRS 9. in Bulgaria

The Group applies three-stage model for impairment based on changes in the credit quality of the initial occurrence. This model requires a financial instrument that is not credit impaired during the initial recognition, to be classified in stage 1 and its credit risk to be monitored continuously. If a significant increase in the credit risk is identified after the initial recognition, the financial instrument goes into stage 2 but is still not considered credit impaired. If the financial instrument is in default

(credit impaired), it should be moved to stage 3.

For the financial instruments in stage 1, the Group determines expected credit losses as a result of possible events of Economic growth default that could occur within the next 12 months of the life of the instrument. For the financial instruments in stage 2, the expected credit losses are determined over the remaining life of the instrument, irrespective of when the default occurred. For the financial instruments in stage 3, credit losses are determined and calculated for losses incurred on the asset for its entire remaining life. According to IFRS 9, when estimating the expected credit losses, it is necessary to consider forecast information. Purchased or initially generated financial assets with credit impairment (POCI) are those that are impaired at their initial origination. Their expected loss is always measured on a full-term basis (stage 3).

Significant increase in credit risk

Segment reports The Group considers that a financial instrument has suffered a significant increase in the credit risk when one or more of the following quantitative, qualitative or "backstop" criteria are met:

Quantification Criterion

The Group uses a quantitative criterion as the main indicator of the significant increase in credit risk in all material portfolios, as well as an additional criterion such as a past due period of 30 days or forbearance measures for specific exposures such as “backstop”. For quantification of the stages, Raiffeisenbank (Bulgaria) compares the PD curve for the entire life of the loan at the reporting date to the value of the same indicator at the date of initial recognition of the loan. Given the different nature auditors` report of credit products in Corporate Banking (Non-Retail) and Retail Banking (Retail) segments, the Group uses different methods Independent to calculate the potential significant increase in credit risk.

In order to compare the two PD curves in the Corporate Banking and Small and Medium-Sized Entities segment, their values are reduced to the probability of default on an annual basis. There is a significant increase in credit risk if the PD has increased by more than 250 per cent. For longer-term loans, the 250 per cent threshold is reduced to consider the effect of long-term maturity.

In the Retail Banking segment, the threshold for a significant Increase in credit risk for portfolios with developed models is Addresses calculated based on historical data. 99

The Group has decided to apply the above-mentioned thresholds over which the financial instrument is transferred to stage 2, based on the current market practices. There is an option for the implementation of other practices that would result in a lower or higher threshold for certain segments.

Qualitative Criterion

The Group uses a qualitative criterion as a secondary indicator for a significant increase in credit risk for all material portfolios. Re-classification in stage 2 takes place when the following criteria are met:

For sovereign, bank, corporate exposures and project finance, if the borrower meets one or more of the following criteria:

• Negative changes in external market indicators;

• Changes in the terms of the contract that lead to forbearance measures; and mission Vision

• Lack of rating as of the current period.

The calculation of the significant increase in credit risk includes forecast information and is performed on a quarterly basis at transaction level for all the Group's corporate portfolios.

For exposures in the Retail Banking segment, it is considered whether the borrower meets one or more of the following criteria: International

• Existence of forbearance measures which the creditor granted to the borrower due to economic or contractual Raiffeisen Bank reasons when he is experiencing economic difficulties, but which would otherwise not be permitted;

• Lack of rating as of the current period;

• Expert judgment on the potential deterioration in the creditworthiness of a group of clients due to indications of deterioration in the economic sector, region, employer and other force majeure circumstances.

The calculation of the significant increase in credit risk includes forecast information and is performed monthly at the level of a separate transaction for all retail portfolios held by the Group. in Bulgaria Raiffeisen Group Overdue days 30 days (backstop)

A backstop applies to the financial instrument that is considered to have a significant Increase in credit risk, if the borrower is in more than 30 days past due.

Exception for low credit risk

The Group uses the low credit risk exception for the purposes of determining the classification upon initial application of IFRS 9 for all debt securities that have a rating that is not lower than an investment grade, i.e. at least S&P BBB-, Moody's Baa3 or Economic growth Fitch BBB-, according to the Group policy. The Group did not use the exception for low credit risk in the initial classification of standardized loans (lending business).

Default definition and credit impairment of the assets

The group defines a financial instrument in the "default" category when it fully meets the definition of a credit impaired asset and meets one or more of the following criteria:

Quantification Criterion reports Segment

The borrower is in more than 90 days past due for a substantial portion of its contractual payments. There is no attempt to disprove the presumption that financial assets with more than 90 days past due should not be classified in stage 3.

Qualitative Criterion

The borrower meets the criteria of a high probability of not fully repaying his obligations, which indicates that the borrower Independent Independent is in significant financial difficulties. Indicators for low probability of repayment are: report auditors`

• The credit receivable is in the process of being sold with a material loss;

• The credit receivable is subject to restructuring (distressed restructuring);

• The borrower is insolvent; Addresses Addresses 100

• The borrower has committed credit fraud;

• The borrower has died;

• The execution of the contract is terminated early on the part of the Group, due to non-performance of contractual obligations on the part of the borrower.

Vision and mission The criteria above are applied to all financial instruments, which are held by the Group, and are in accordance with the definition of default used for the purposes of credit risk management. The definition of default is applied sequentially to model the probability of default (PD), exposure at default (EAD) and the loss given default (LGD) in the calculation of the expected loss of Raiffeisenbank (Bulgaria).

The group considers that an exposure / client is no longer in default (i.e. “recovered") when the latter does not meet any of the non-compliance criteria under Art. 178 of Regulation 575/2013 for a consecutive period of at least 3 months or longer, in case of restructured exposures in difficulty. In determining the rules for default/recovery, the Group follows the guidelines and the technical standards of the European Banking Authority (EBA/GL/2017/16 and EBA/RTS/2016/03).

Raiffeisen BankRaiffeisen Basic parameters, assumptions and calculation techniques International

The expected credit loss for the instrument is measured on a 12-month basis on a full-term basis depending on whether there has been a significant increase in the credit risk after the initial origination or whether an asset is considered as credit impaired. Economic forecast information is also included in the PD, EAD and LGD on a 12-month basis for the entire loan term. These assumptions vary by product type. Expected credit losses are the discounted result of the probability of default (PD), loss given default (LGD), the exposure at default (EAD) and the discount factor (D).

Probability of default Raiffeisen GroupRaiffeisen in Bulgaria Probability of default is the probability that a borrower will not meet its financial obligation over the next 12 months or during the remaining maturity of the liability. Generally, the probability of default over the entire term is calculated using the 12-month probability of default used for regulatory purposes, whereby the margins of conservatism were dropped, as point of reference. In addition, different statistical methods are used to determine how the default profile will develop from the time of the initial origination and for the entire duration of the loan or portfolio. The profile is based on historically monitored

data and parametric functions.

The Group uses different models for calculating the default profile of unpaid loan amounts and they can be grouped into the

Economic growth following categories:

• Sovereign, local and regional governments, insurance companies and collective investment enterprises - the default profile is generated using a migration matrix approach. Estimated information is included in probability of default using the single-factor model of Vasicek;

• Corporate clients, project financing and financial institutions - the default profile is generated using the parametric regression of survival. Estimated information is included in the probability of default using the single-factor model of Vasicek;

Segment reports • Mortgage loans and other retail loans - the default profile is generated using parametric regression of survival in competitive risk environments. Estimated information is included in the probability of default by using additional models.

In limited circumstances, where part of the initial information is not available, the grouping, averaging, and benchmarking of the input data is used for the calculation.

Loss given default (LGD) auditors` report

Independent "Loss given default" or "LGD" means the ratio of the loss on an exposure due to the default of a counterparty to the amount of the exposure at the time of default. LGD varies according to the type of counterparty and product. LGD is expressed as percentage loss per unit of exposure at the time of default. Loss given default is calculated on a 12-month basis or based on the entire loan term. Loss given default on a 12-month basis is the expected loss rate, if the exposure default occurs in the next 12 months and the loss given default on a full-term of the loan is the percentage of expected loss, if the default occurs during the remaining expected period of the loan. Addresses 101

Various models are used to determine the loss given default on loans and they can be grouped into the following categories:

• Loss given default at Sovereign model is estimated using market information;

• Corporate clients, project financing, financial institutions, local and regional governments, insurance companies - loss given default is generated by discounting the expected cash flows identified in the problem loan management process. Estimated macroeconomic information is included in the loss given default using the Vasicek model;

• Mortgage and other retail loans - loss given default is generated on the basis of the default loss models developed in accordance with Regulation 575/2013 by eliminating indirect costs and conservatism margins. Estimated information is included in the loss given default, using various additional models;

• For a small portion of the portfolio where a standardized approach is used for regulatory purposes under Regulation 575/2013, parameters and models defined at Group level are used to determine its risk value. Vision and mission Vision Exposures at default

The exposures at default are based on the amounts due to the Group at the time of default over the next 12 months or over the remaining life of the loan. The 12-month exposures at default and those based on the entire period of the loan are determined on the basis of the expected payment profile, which varies according to the type of product. For amortization products and loans with a single repayment of the principal at maturity, this is based on the contractual payments due by the borrower for a period of 12 months or for the entire period. The assumptions for early repayment / refinancing are also considered in the calculations. International Raiffeisen Bank Raiffeisen Bank

For revolving products, the exposure at default is projected by taking the current balance and adding the expected utilization of the limits remaining at the time of default after applying a credit conversion factor. The credit conversion factor is applied

after subtracting the prudential regulatory margins. For a small part of the portfolio where a standardized approach is used for regulatory purposes under Regulation 575/2013, parameters and models defined at Group level are used to determine its risk value.

Discount factor in Bulgaria

The original effective interest rate or estimate is used for determining the discount factor, except in the case of leases or Raiffeisen Group acquired or initially incurred credit impairment exposures using the effective interest rate adjusted for the credit risk calculated on initial recognition.

Calculations

The expected credit loss is the result of PD, LGD, EAD and the probability of non-default before the time period considered. The latter is expressed by a survival function. Thus, future estimates of expected credit losses that are then discounted to the present value at the reporting date are calculated effectively and are summed up. Economic growth The calculated values of the estimated credit losses are subject to subsequent weighing through three projections scenarios: baseline (50 per cent), optimistic (25 per cent), pessimistic (25 per cent).

Different models for calculating the provisions for stage 3 exposures are used, and can be grouped into the following categories:

• Sovereign, corporate clients, project financing, financial institutions, local and regional governments, insurance companies and collective investment undertakings - stage 3 provisions are calculated by problem loan managers based on expected cash flows discounted at effective interest rates; Segment reports Segment

• Mortgage loans and other retail loans in the Retail Banking segment – the Phase 3 provisions are obtained by calculating the statistically derived best estimate of the expected loss. The indirect costs are not involved in determining the LGD parameter.

Standard features of the credit risk

The Group is using a collective approach in determining the provisions for expected credit losses, except for part of the Independent Independent stage 3 exposures in corporate business, where the bulk is calculated on an individual basis. In determining the provision report auditors` for the estimated credit losses, calculated on a collective basis, the Group carries out the grouping of exposures on the basis of common credit risk characteristics, so that they are similar in each group. The characteristics of retail exposures are grouped at country level, classification on a counterparty level (Private Individuals and Microenterprises), product (e.g., mortgage, consumer loans, overdrafts, credit cards), rating level and LTV (loan-to-value) groups. For each combination of the above criteria, a separate model has been developed. The characteristics of exposures to corporate business are grouped at country and product level. Addresses Addresses 102

Forecast information

Determining the moment of significant credit risk growth and the amount of expected credit losses require the inclusion of forecast information. The Group made a historical analysis and identified the main economic variables that affect the credit risk and the expected credit losses for each portfolio.

Vision and mission These economic variables and their respective impacts on probability of default, loss given default and exposures at default vary according to the macroeconomic model for the PD / LGD / product. Expert assessment is also used in this process. Estimates of defined economic variables ("underlying economic scenario") are provided by Raiffeisen Research on a quarterly basis and provide specific expectations for economic growth over the next three years. After the third year, in order to predict economic variables, the average reversed approach was used for longer-life instruments, meaning that the economic variables tended to either a long-term average, or a long-term average growth rate to maturity. The impact of these economic variables on probability of default, loss given default and default exposures is determined by statistical regression based on historical data.

In addition to the baseline economic scenario, Raiffeisen Research provides the best- and worst-case scenario, along with the corresponding weights, to ensure that nonlinearities are detected. The group assumes that three or less scenarios

Raiffeisen BankRaiffeisen adequately detect non-linearity. Weights of scenarios are determined by a combination of statistical analysis and expert International credit assessment, considering the range of possible outcomes where each selected scenario is a representative. Probability weighted expected credit losses are determined by performing each scenario using the appropriate credit loss model and multiplied by the respective weight.

As with all economic forecasts, estimates and probabilities of occurrence are subject to a high degree of uncertainty, and therefore the actual values may be significantly different from those predicted. The Group believes that these estimates represent the best estimate of possible outcomes and cover all potential nonlinearities and asymmetries in the various portfolios of the Group. Raiffeisen GroupRaiffeisen

in Bulgaria The most significant assumptions used to estimate the expected credit loss at the end of each quarter are shown in the table below:

Bulgaria Scenario 2019 2020 2021

Real GDP

Optimistic 3.83% 3.61% 4.24% Baseline 3.39% 2.28% 1.20% Economic growth Pessimistic 2.95% 0.68% 0.72% Unemployment

Optimistic 3.87% 2.75% 2.70% Baseline 4.35% 4.79% 5.70% Pessimistic 5.81% 9.20% 10.44% Consumer Price Index Segment reports Optimistic 4.66% 5.95% 6.76% Baseline 3.62% 2.84% 2.72% Pessimistic 3.47% 1.95% 1.96%

The weights applied to each scenario are as follows: 25 per cent for the optimistic scenario, 50 per cent for the baseline, and 25 per cent for the pessimistic scenario.

auditors` report Sensitivity analysis of portfolio in stages 1 and 2 Independent Assumptions significantly affecting the sensitivity of expected credit losses are as follows:

• Gross domestic product (for all portfolios);

• Unemployment rate (for all portfolios);

• Long-term rate of government bonds (especially for portfolios in the Corporate Banking segment). Addresses 103

The table below provides a comparison between the reported total amount of provisions for expected credit losses at the following weights - 25 per cent for optimistic, 50 per cent for baseline and 25 per cent for pessimistic scenario for Non-Retail portfolio (corporate loans, securities, receivables from financial institutions, classified at amortized cost, as well as securities classified in other comprehensive income) and portfolios in the Retail Banking segment in Phases 1 and 2, relative to 100 per cent weight of each scenario:

Expected credit losses in million BGN Reported Pessimistic Baseline Optimistic Non-Retail portfolio stage 1 and 2 8.07 13.56 7.02 4.68 Retail portfolio stage 1 and 2 42.34 44.43 43.15 41.76

The optimistic and pessimistic scenarios do not reflect the extreme cases but only the average scenarios that are distributed in these cases. Vision and mission Vision Partial write-off

Loans and securities are subject to write-off (in whole or in part) when there is no reasonable expectation of repayment of credit obligations. The Group applies the rule when there is objective evidence that the borrower can no longer report revenue from its operating activities and the value of the collateral on the loan cannot generate cash flows that are sufficient pay off the amount subject to write-off. For corporate exposures in the case of a non-operating undertaking, loans are written off to the value of the collateral, if the company no longer generates income from its operating activities. For retail exposures,

qualitative criteria are considered, and in cases where there is no payment for one year, the credit is written off. If the Retail International exposure is collateralized and the expected repayment installments of the collateral are not sufficient to cover the entire debt Raiffeisen Bank and there is no reasonable expectation of repayment from other sources for the residual debt after the collateral, partial write- off can be made. For retail exposures, qualitative criteria are considered, and in cases where there is no payment for one year, the credit is written off. If the retail exposure is collateralized and the expected repayment installments of the collateral enforcement are not sufficient to cover the entire debt and there is no reasonable expectation of repayment from other sources for the residual debt after the collateral enforcement, partial write-off can be made. The amount of the partial write-off is equal to the difference between the residual exposure and the estimate of the potential repayment from the collateral enforcement.

Written-off loans can be subject to collection (enforcement activity). in Bulgaria Raiffeisen Group The contractual obligations, which are written off during the reporting period and are still subject to collection, amount to BGN 18,789 thousand (2018: BGN 35,286 thousand).

Credit risk categories

The credit risk categories as of 31.12.2019 are determined against the rating and the corresponding limits of the estimated probability of default as follows:

Risk categories Lower limit of Upper limit of Economic growth probability of default probability of default Excellent debt service potential >0.0000% ≤0.0300% Very good debt service potential >0.0300% ≤0.1878% Good debt service potential >0.1878% ≤1.1735% Acceptable debt service potential >1.1735% ≤7.3344% Poor debt service potential / under normal >7.3344% <100%

Default 100% n.a. reports Segment Independent Independent auditors` report auditors` Addresses Addresses 104

The tables below present the gross value and a provision for credit losses of financial instruments as of 31 December 2019, divided in phases and credit quality.

Gross value of financial instruments as at 31 December 2019

Loans and advances to customers Vision and mission Credit quality Stage 1 Stage 2 Stage 3 Mandatorily Total fair value hrough profit/loss

Excellent 2,876 - – – 2,876 Very good 771,460 16,416 – – 787,876 Good 2,673,634 129,319 – – 2,802,953

Raiffeisen BankRaiffeisen Acceptable 1,663,763 129,060 – 23,334 1,816,157 International Poor 112,450 197,054 – – 309,504 Default – – 144,357 2,934 147,291 Without measurement 158,152 23,940 0 – 182,092 Of which with forbearance measures 1 40,920 46,656 26,268 113,845 5,382,335 495,789 144,357 26,268 6,048,749 Raiffeisen GroupRaiffeisen in Bulgaria Loans and advances to banks

Credit quality Stage 1 Stage 2 Stage 3 Total Excellent 19 19

Very good 342,323 – – 342,323 342,342 – – 342,342 Economic growth

Debt securities at amortized cost

Credit quality Stage 1 Stage 2 Stage 3 Total

Excellent 12,090 – – 12,090 Very good 605,464 – – 605,464 – – 9,169

Segment reports Good 9,169 626,723 – – 626,723

Debt securities at fair value through other comprehensive income

Credit quality Stage 1 Stage 2 Stage 3 Total

Excellent 129,507 – – 129,507 auditors` report Very good 383,072 – – 383,072 Independent 512,579 – – 512,579 Addresses 105

Commitments on issued guarantees and letters of credit

Credit quality Stage 1 Stage 2 Stage 3 Total

Excellent 478 – – 478 Very good 70,594 3,086 – 73,680 Good 179,029 9,590 – 188,619 Acceptable 109,836 6,645 – 116,480 Poor 637 1,810 – 2,447 Default – – 4,197 4,197 Without measurement 8,561 170 – 8,731 Vision and mission Vision 369,135 21,301 4,197 394,633

Undrawn credit lines

Credit quality Stage 1 Stage 2 Stage 3 Total

Excellent 39,223 650 – 39,873 International Raiffeisen Bank Raiffeisen Bank Very good 293,654 11,659 – 305,313 Good 947,919 49,293 – 997,212

Acceptable 422,689 23,409 – 446,098 Poor 3,625 10,791 – 14,416 Default – – 4,101 4,101 Without measurement 41,968 4,045 – 46,013 Of which with forbearance in Bulgaria measures – 79 2,439 2,518 Raiffeisen Group

1,749,078 99,847 4,101 1,853,026

Provisions for credit losses as at December 31, 2019

Loans and advances to customers

Credit quality Stage 1 Stage 2 Stage 3 Mandatory Total Economic growth fair value hrough profit or loss

Excellent – – – – – Very good 162 146 – – 308 Good 3,527 1,222 – – 4,749 Acceptable 7,598 3,510 – – 11,108 Segment reports Segment Poor 3,810 25,789 – – 29,599 Default – – 98,779 – 98,779 Without measurement 5,183 1,488 – – 6,671 Of which with forbearance measures – 3,122 31,312 – 34,434

20,280 32,155 98,779 – 151,214 Independent Independent auditors` report auditors` Addresses Addresses 106

Loans and advances to banks

Credit quality Stage 1 Stage 2 Stage 3 Total

Very good 6 – – 6

6 – – 6 Vision and mission

Debt securities at amortized cost

Credit quality Stage 1 Stage 2 Stage 3 Total

Excellent – – – – Very good 72 – – 72 Good 6 – – 6

Raiffeisen BankRaiffeisen 78 – – 78 International

Debt securities at fair value through other comprehensive income

Credit quality Stage 1 Stage 2 Stage 3 Total

Excellent 3 – – 3

Raiffeisen GroupRaiffeisen Very good 24 – – 24 in Bulgaria 27 – – 27

Commitments on issued guarantees and letters of credit

Credit quality Stage 1 Stage 2 Stage 3 Total

Very good 1 1 – 2

Economic growth Good 16 9 – 25 Acceptable 20 2 – 22 Poor 1 67 – 68 Default – – 3,883 3,883 Without measurement 106 36 – 142

144 115 3,883 4,142 Segment reports Undrawn credit lines

Credit quality Stage 1 Stage 2 Stage 3 Total

Excellent – – – – Very good 16 5 – 21 Good 599 199 – 798

auditors` report Acceptable 771 249 – 1,020 Independent Poor 55 405 – 460 Default – – 3,632 3,632 Without measurement 426 140 – 566 Of which with forbearance measures – – 2,243 2,243

1,867 998 3,632 6,497 Addresses

For comparison, the tables below present the gross value and the provision for credit losses of financial instruments as of 31 December 2018, broken down by stages and credit quality. 107

Gross value of financial instruments as at 31 December 2018

Loans and advances to customers

Credit quality Stage 1 Stage 2 Stage 3 Mandatorily Total fair value hrough profit/loss Excellent 1,536 – – – 1,536 Very good 600,215 8,820 – – 609,035 Good 2,620,897 135,042 – – 2,755,939

Acceptable 1,244,054 122,683 – 23,987 1,390,724 and mission Vision Poor 54,704 135,394 – – 190,098 Default 0 0 134,745 4,396 139,141 Without measurement 127,623 16,034 – – 143,657 Of which with forbearance measures 383 37,433 67,548 25,427 130,791

4,649,029 417,974 134,745 28,383 5,230,130 International Raiffeisen Bank Raiffeisen Bank

Loans and advances to banks

Credit quality Stage 1 Stage 2 Stage 3 Total Very good 221,711 – – 221,711 221,711 – – 221,711 in Bulgaria

Debt securities at amortized cost Raiffeisen Group

Credit quality Stage 1 Stage 2 Stage 3 Total

Excellent 40,892 – – 40,892 Very good 458,155 – – 458,155 Good 13,737 – – 13,737 512,784 – – 512,784 Economic growth

Debt securities at fair value through other comprehensive income

Credit quality Stage 1 Stage 2 Stage 3 Total

Excellent 128,038 36,409 – 164,447

Very good 377,101 12,376 – 389,477

505,139 48,785 – 553,924 reports Segment Independent Independent auditors` report auditors` Addresses Addresses 108

Commitments on issued guarantees and letters of credit

Credit quality Stage 1 Stage 2 Stage 3 Total

Very good 52,827 6,249 – 59,076 Good 145,726 8,890 – 154,616 Vision and mission Acceptable 75,367 9,983 – 85,350 Poor 889 2,510 – 3,399 Default – – 4,673 4,673 Without measurement 7,119 964 – 8,083

281,928 28,596 4,673 315,197

Undrawn credit lines Raiffeisen BankRaiffeisen International Credit quality Stage 1 Stage 2 Stage 3 Total

Excellent 29,960 – – 29,960 Very good 228,561 5,871 – 234,43 Good 988,814 65,610 – 1,054,424 Acceptable 273,862 9,135 – 282,997 Poor 3,056 10,149 – 13,205 Raiffeisen GroupRaiffeisen Default – 1 4,676 4,677 in Bulgaria Without measurement 38,951 3,591 – 42,542 Of which with forbearance measures – 10 755 765

1,563,204 94,357 4,676 1,662,237

Provisions for credit losses as at 31 December 2018 Economic growth Loans and advances to customers

Credit quality Stage 1 Stage 2 Stage 3 Total

Excellent – – – – Very good 424 144 – 568 Good 4,118 3,656 – 7,774

Segment reports Acceptable 4,353 4,392 – 8,745 Poor 1,715 21,908 – 23,623 Default – – 109,962 109,962 Without measurement 3,196 1,596 – 4,792 Of which with forbearance measures 11 3,636 58,500 62,147

13,806 31,696 109,962 155,464 auditors` report Independent Debt securities at amortized cost

Credit quality Stage 1 Stage 2 Stage 3 Total

Excellent – – – – Very good 44 – – 44 Good 8 – – 8 Addresses 52 – – 52 109

Debt securities at fair value through other comprehensive income

Credit quality Stage 1 Stage 2 Stage 3 Total

Excellent 3 13 – 16

Very good 32 16 – 48 35 29 – 64

Commitments on issued guarantees and letters of credit

Credit quality Stage 1 Stage 2 Stage 3 Total Vision and mission Vision Very good 2 1 – 3 Good 14 1 – 15 Acceptable 21 8 – 29 Poor – 214 – 214 Default – – 2,973 2,973 Without measurement 87 24 – 111 International Raiffeisen Bank Raiffeisen Bank 124 248 2,973 3,345

Undrawn credit lines

Credit quality Stage 1 Stage 2 Stage 3 Total

Excellent 2 – – 2

Very good 66 27 – 93 in Bulgaria Raiffeisen Group Good 751 3,144 – 3,895 Acceptable 469 77 – 546 Poor 37 550 – 587 Default – 1 3,353 3,354 Without measurement 476 242 – 718 Of which with forbearance measures 1 – 335 336 Economic growth 1,801 4,041 3,353 9,195

Forborne exposures

Forborne exposures are regulated under the "Technical Standards for Reporting on Forborne exposures and Non-performing Exposures - Article 99 (4) of EU Regulation No 575/2013".

Forborne exposure is an exposure for which discounts have been made by modifying the credit parameters and / or

refinancing to a client who is in financial difficulty or would be in difficulty if discounts are not applied. reports Segment

Loan-to-Value

Upon initial recognition of loans and advances, the fair value of collateral is based on valuation techniques commonly used for the corresponding assets. In subsequent periods, the fair value is updated by reference to market price or indexes of similar assets where the update frequency depends on the asset type and the market conditions.

The table below shows credit exposures from mortgage loans and advances to retail customers by ranges of loan-to-value Independent (LTV) ratio. LTV is calculated as the ratio of the gross value of the loan to the value of the collateral. Gross value does not report auditors` include accrued impairment. The valuation of the collateral does not include future costs for the acquisition and realization of the collateral. The value of mortgage collateral is based on the value of collateral at the time of the loan origination, updated on the basis of changes in house price indices. Addresses Addresses 110

The table below presents the loan-to-value ratio for housing loans only and mortgage-backed consumer loans:

in BGN Thousand 2019 2018

Loan to value (LTV) ratio:

Less than 50% 22,095 67,981 Vision and mission 51% to 70% 442,932 403,826 71% to 90% 669,366 454,873 91% to 100% 13,739 15,086 More than 100% 17,846 13,808 Total 1,165,978 955,574

The table below ranks the exposure of finance lease granted on real estate according to the Loan-to-value (LTV) ratio. LTV is calculated as the ratio of the gross value of the finance lease to the market value of the collateral. Gross value does not

Raiffeisen BankRaiffeisen include the impairment of exposures. The valuation of the collateral does not include future acquisition and realization costs. International As of 31 December 2019, the net investment in property is BGN 27,896 thousand and the weighted value of collateral under these leases is BGN 25,263 thousand. The Group recognizes impairment of BGN 238 thousand.

As of 31 December 2018, the net investment in property is BGN 30,947 thousand and the weighted value of collateral under these leases is BGN 26,383 thousand. The Group recognizes impairment of BGN 460 thousand.

in BGN Thousand 2019 2018

Raiffeisen GroupRaiffeisen Loan to value (LTV) ratio: in Bulgaria Less than 50% – – 51% to 70% 1,479 1,842 71% to 90% 4,308 5,117

91% to 100% 16,750 17,855 More than 100% 5,597 6,593 Total 28,134 31,407 Economic growth

The following table shows the loan-to-value ratio for the entire Credit portfolio of the Group.

in BGN Thousand 2019 2018

Loan to value (LTV) ratio:

Less than 50% 2,556,468 2,195,622 51% to 70% 1,141,126 1,089,105 Segment reports 71% to 90% 1,153,460 860,386 91% to 100% 200,465 162,119 More than 100% 997,230 922,899 Total 6,048,749 5,230,131 auditors` report Independent Addresses 111

Credit risk concentration by industry for loans and advances to customers

The table below shows the breakdown by industry of gross balance-sheet credit exposures reported at amortized cost (excluding banks and debt securities) and fair value.

in BGN Thousand 2019 % 2018 % Industry 1,269,125 24% 1,147,811 24% Construction and real estate 365,579 7% 325,710 5% Transport 229,032 4% 193,428 4% Trade 1,120,688 21% 1,023,757 20% Others 426,537 8% 357,179 7% Vision and mission Vision Private individuals 2,637,788 50% 2,182,246 40% Including mortgage loans 1,165,978 22% 955,574 18% Total loans 6,048,749 5,230,131 Including loans mandatorily at fair value/ through profit or loss: Construction and real estate 26,268 28,383 International Raiffeisen Bank Raiffeisen Bank Credit concentration by clients

As of 31 December 2019, the total book value of the ten largest credit exposures to customers amounted to BGN 479,000 thousand, respectively BGN 580,144 thousand as of 31 December 2018.

Exposures to banks

The bank places free liquidity on the money market and as short-term credit facilities only to banks with a very good credit in Bulgaria rating. In general, the free funds are placed with the parent bank or with other banks within the Raiffeisen Group. Raiffeisen Group

The bank has established correspondent relationships with credit institutions around the world and maintains accounts in various currencies with first-class international banks.

Risk of residual value of the leased assets

Due to its leasing business, the Group is exposed to risk of the residual value of the leased assets. In the case of non-payment and seizure of assets under finance leases or expiry of an operating lease term, the residual values of the assets may not be covered by direct sale or re-leasing. Economic growth

The Group manages the risk of residual value deficiency by requiring down payments from customers under finance leases, which are determined depending on the type of assets and whether it is new or second hand. For assets leased to an operating lease, the Group analyzes the expected residual value to determine the lease payments and the duration of the contract. Segment reports Segment Independent Independent auditors` report auditors` Addresses Addresses 112

The table below shows an analysis of the concentration of financial lease receivables by type of asset:

31 December 2019 Net investment in BGN Thousand in finance leases % Type of asset

Vision and mission Passenger cars and commercial vehicles 191,180 41% Real estate 86,007 19% Heavy trucks 87,140 19% Agricultural machinery 51,486 11% Machinery, plant and equipment 28,134 6% Construction machines 11,597 2% Others 8,362 2%

Raiffeisen BankRaiffeisen Gross value 463,906 100% International Provisions for impairment (6,739)

Net value 457,167

31 December 2018 Net investment in BGN Thousand in finance leases % Type of asset Raiffeisen GroupRaiffeisen in Bulgaria Passenger cars and commercial vehicles 161,054 43% Real estate 74,093 20% Heavy trucks 46,592 12% Agricultural machinery 45,471 12%

Machinery, plant and equipment 31,408 8% Construction machines 10,285 3%

Economic growth Others 8,030 2%

Gross value 376,933 100%

Provisions for impairment (4,794)

Net value 372,139

Credit risk from debt and equity instruments exposures Segment reports The tables below show the quality of debt and equity instruments classified in portfolios according to their characteristics and the management business model of the bank, by the maximum credit exposure based on credit ratings issued by rating agencies where those ratings are applicable.

in BGN Thousand 2019 2018 Debt instruments held for trading

Bulgarian government securities auditors` report

Independent BBB-/Baa3 33,430 39,840 Foreign government securities AA+/Aa1 17,387 3,400 AA/Aa2 4,079 1,917

Total debt instruments held for trading 54,896 45,157 Addresses 113

in BGN Thousand 2019 2018 Securities portfolio reported at fair value through other comprehensive income/Business model „Held to collect the contractual cash flows and sale“

Bulgarian government securities BBB-/Baa2 263,884 – BBB-/Baa3 – 231,005 Foreign government securities AA+/Aa1 99,240 107,884

Foreign corporate bonds and mission Vision Aa/A2 28,875 – A+/A1 – 126,457 A/Aa2 28,279 12,376 A-/Aa3 92,302 76,201

Total 512,580 553,923 International Raiffeisen Bank Raiffeisen Bank in BGN Thousand 2019 2018 Securities portfolio reported at amortized cost/ Business model „Held to collect the contractual cash flows“

Bulgarian government securities BBB-/Baa2 474,324 -

BBB-/Baa3 – 394,554 in Bulgaria

Bulgarian corporate bonds Raiffeisen Group BB/Ba2 59,724 59,727 Bulgarian municipal bonds BB+/Ba1 9,169 13,737 Foreign government securities AA+/Aa1 12,090 40,892 A/Aa2 7,829 - Economic growth Foreign Bonds (Financial Institutions) AA+/Aa1 – 3,870 AAÀ/Aa1 3,878 – AA-/Aa3 59,709 –

Total 626,723 512,780

in BGN Thousand 2019 2018 reports Segment Equity securities portfolio reported at fair value through other comprehensive income/Business model equity instruments held as a strategic investment

Bulgarian government securities Unrated 2,837 2,848

Foreign corporate shares Independent auditors` report auditors` ÀÀ-/Àà3 7,044 4,942

Total 9,881 7,790 Addresses Addresses 114

B. Liquidity risk

Liquidity risk can be defined as the potential inability of the Group to finance the increase of its assets or to meet its liabilities when they fall due without incurring unacceptable losses.

For the purpose of its effective management, the Group distinguishes two dimensions of the liquidity risk - short-term liquidity

Vision and mission risk and funding liquidity risk.

Organizational structure for liquidity risk management

Under the Group-level liquidity risk management framework, the Assets and liabilities committee (ALCO) monitors the liquidity position of the Group against the risk limits set and approves the financing plans (annual plan to provide the necessary resources as well strategy for the next three years). In addition, the Committee seeks to ensure compliance with both the standards and policies on liquidity risk, and the legal and regulatory requirements in this field.

Liquidity management process and strategy Raiffeisen BankRaiffeisen International The liquidity position of the Group is monitored on a daily basis and the current status is reported regularly to the Assets and liabilities committee.

The liquidity management strategy of the Group is subject to the aim of timely provision of liquidity resources in the optimal volume, quality and structure to meet the liabilities when due, both in normal and extraordinary circumstances, while avoiding unacceptable losses and jeopardizing the reputation of the Group.

The Group does not maintain liquid assets to the extent necessary to meet all possible outflows, since the historical experience

Raiffeisen GroupRaiffeisen shows that there is a minimum level of renewal of maturing deposits that can be predicted with sufficient accuracy. in Bulgaria For this purpose, incoming and outgoing cash flows are analyzed for both the "going concern" scenario and the stress scenario, considering not only contractual relationships but also behavioral factors. Liquidity imbalances are tracked at time intervals also on a currency composition level.

In case of unacceptable liquidity imbalances, escalation procedures are triggered, and actions are taken depending on the gap significance and the time bucket.

Economic growth The key elements of the Group's liquidity strategy are as follows:

–– Maintaining a diversified funding base with an adequate proportion of customer deposits (both retail and corporate) and wholesale funding;

–– Maintaining a portfolio of liquid assets with appropriate currency and maturity structure;

–– Applying an adequate system of tools for measuring and monitoring the liquidity situation depending on the imposed internal restrictions and regulatory requirements; monitoring of liquidity ratios, maturity mismatches, behavioral characteristics of the Group’s financial assets and liabilities; Segment reports –– Dynamic process for conducting stress tests of the liquidity position, introduced at a group level. Stress tests are subject to continuous improvements in line with the regulatory requirements of both local regulators and the EU ones. They are complemented by a system of early warning indicators that are designed to timely identify the liquidity needs and an action plan to be activated in crisis situations;

–– Adequate reporting framework allowing a continuous process of control over the liquidity profile of the Group as well as the application of relevant remedial measures, if necessary;

–– Avoidance of concentrations to a group of related parties and the treatment of these funds as a potential auditors` report

Independent immediate cash outflow.

Liquidity stress tests

The group conducts stress tests to measure the ability to overcome crisis situations in three types of scenario: Market, Reputation, and Combined Crisis. The results are reviewed and analyzed on a daily basis and reported to the management of the Group to take preventive actions, if necessary.

Addresses The preparation of the stress tests and the subsequent analysis of the results includes the observance of a system of limits imposed on the liquidity position. They predict a survival period of at least one month, which is a requirement for positive discrepancies in the first 30 days. The limits are observed both at the total level and at the level of a significant currency 115

(BGN, EUR, USD and combined BGN / EUR). The results of the stress test in USD must be positive; the result in BGN may be negative, down to - EUR 300 million, but only under the condition that the combined BGN / EUR result is positive. Following a recommendation of the European Central Bank to RBI Vienna, the 30-day limit is extended to a 90-day horizon at the level of all currencies. The latter will also trigger measures that complement the liquidity buffer. Some of these are described in the Recovery Plan of the Group.

Liquidity buffer

The Group maintains a liquidity buffer in the form of cash and other liquid assets designed to provide a maximum survival period. This is the reason why the Group strives to continuously optimize the ratio of the total amount of high-quality liquid assets to the total amount of the liabilities.

The liquid assets of the Group include cash and cash balances with the Central Bank, current account funds in other banks

and interbank deposits up to 7 days, tradable debt securities issued by central governments or central banks, treasury bills and mission Vision and government bonds of the Republic Bulgaria, tradable debt securities issued by first-class credit rating institutions, tradable debt securities issued by international development banks and international organizations. Liquid assets do not include assets provided as collateral. Pledged securities at the end of 2019 are at a total amount of BGN 109 million. The amount of those pledged as at 31 December 2018 is BGN 124 million.

Monitoring and control of liquidity risk is performed by compiling a forecast of incoming and outgoing cash flows for the next day, week, month, since these are the key periods for liquidity risk management. These estimates are based on an analysis of the agreed maturity of the financial liabilities and the expected maturity of the financial assets. International Raiffeisen Bank Raiffeisen Bank Unsecured mid-term assets, the extent and type of undrawn credit commitments, the use of overdraft lines and the impact of off-balance sheet commitments such as guarantees, and letters of credit are also monitored and analyzed.

Pledged assets

The amount of the blocked securities is monitored on a daily basis, changes are made - when necessary (may be daily). The amount of the blocked securities is excluded from the value of the liquidity buffer for the purposes of the liquidity model and

the calculation of the stress test result, as well as the amount of the available highly liquid securities for the purposes of the in Bulgaria

liquidity coverage ratio. Raiffeisen Group

The securities blocking process is an integral part of the overall liquidity risk management framework in the Group. In this sense, the currency structure of the blocked securities always considers the current and expected results of the Stress test for each significant currency.

The general principles, responsibilities and responsibilities to be respected in the risk management associated with the pledge on assets are described in internal regulatory documents. Pledge on assets is made in the following cases:

• Provision of financing schemes with International Financial Institutions and banks outside the RBI Group; Economic growth • Provision of borrowed funds - includes the provision of the borrowed funds by the Group and the provision of external lines by the Group through local government securities and Eurobonds / Global government securities;

• Secured funding transactions – repo transactions, securities lending and leasing transactions, transactions related to securities repurchase agreements;

• Agreements for providing collateral for derivative transactions (Margin account);

• Securitization of customer loans portfolios. Segment reports Segment

in BGN Thousand Individual basis Book value Guaranteed liabilities of pledged assets

Loans on demand 10,744 Participation in guarantee mechanism Guarantee on attracted budgetary funds (BGN 40 mln) Independent auditors` report auditors` Debt securities 108,974 and funding received from supra nationals (BGN 68 mln) Other assets 11,421 Margin account for derivative deals 131,139 Addresses Addresses 116

In addition, and in order to prevent inconsistencies, the Group has developed a special instruction detailing the roles and responsibilities of the employees involved in meeting the requirements of the Bulgarian National Bank and the Ministry of Finance applicable to credit institutions, in accordance with the Law on the State budget, regarding the servicing of budget funds, as well as the requirements of the International Financial Institutions, according to signed funding contracts (these are the two main sources of pledges for the Group).

Sources of cash flows Vision and mission

"Treasury" (Asset Management and liabilities) Department regularly reviews sources of liquidity in order to maintain wide diversification by currency, geographical origin, counterparty, product type and term.

Diversification of wholesale funding is regulated by a special concept at a Group level - " Funding risk arising from concentration". The latter impacts on the results of the liquid stress test and de-stimulates significant funding from a group of related parties.

Early warning system Raiffeisen BankRaiffeisen

International The Group periodically reviews and monitors certain liquidity ratios deemed to be representative of early recognition of possible liquidity problems. The ratios tracked cover the following areas - quality of receivables, liabilities dependability, liquid assets tradability, market environment and other qualitative and quantitative ratios.

Cash flows from non-derivative liabilities

The following tables show the cash flows payable by the Financial liabilities Group, allocated according to the remaining contractual term at the date of preparation of the statement of financial position. The values in the table are the contracted undiscounted cash flows, including interest due according to the interest payment date. The Group manages inherent liquidity Raiffeisen GroupRaiffeisen risk on the basis of expected undiscounted incoming cash inflows. in Bulgaria

Cash flows from derivative liabilities

Derivative financial instruments in the portfolio of the Group will be settled on a gross basis and include:

–– FX derivative financial instruments - FX forwards and FX swaps;

–– Interest rate derivative financial instruments - interest rate swaps in one currency and interest rate swaps in cross- Economic growth currencies. Segment reports auditors` report Independent Addresses 117

The tables below illustrate the residual maturity of the agreed maturities of the financial liabilities used by the bank. Provisions for liabilities do not have a specific agreed term and are distributed according to their nature.

As at 31 December 2019 up to 1 1 to 3 3 months 1 to 5 over Total Book in BGN Thousand month months to 1 year years 5 years incoming/ value outgoing

Non-derivative liabilities Financial liabilities at amortized cost (5,468,921) (1,213,326) (743,894) (448,649) (183,933) (8,058,723) 8,007,568 - Deposits from banks (70,502) – – – – (70,502) 70,502 - Deposits from customers (5,365,776) (1,189,196) (648,757) (37,740) – (7,241,469) 7,240,879

- Borrowings from banks (5) (20,502) (51,922) (159,073) (212) (231,714) 230,756 and mission Vision - Subordinated liabilities (986) (1,825) (8,254) (222,971) (178,519) (412,555) 365,218 - Other financial liabilities (30,766) (40) (27,033) (1,763) – (59,602) 59,602 - Leasing liabilities (887) (1,763) (7,928) (27,101) (5,203) (42,882) 40,612 Other liabilities (3,866) (1,889) (4,945) (1,799) – (12,499) 12,498 Provisions for liabilities – – (5,041) (27,776) (1,746) (34,563) 34,563 International

Total undrawn credit lines (1,853,026) – – – (1,853,026) – Raiffeisen Bank Total non-derivative liabilities (5,472,787) (3,068,241) (753,880) (478,224) (185,679) (9,958,811) 8,054,629

Derivative liabilities - FX instruments 5,548 - Outflow (400,429) (123,694) (242,759) – – (766,882) - Inflow 400,618 123,787 242,932 – – 767,337 in Bulgaria - Interest rate instruments 3,815 Raiffeisen Group - Outflow (70) (139) (3,070) (13,323) (4,740) (21,342) - Inflow 46 92 2,186 9,478 3,345 15,147 Total derivative liabilities 165 46 (711) (3,845) (1,395) (5,740) 9,364 Economic growth Segment reports Segment Independent Independent auditors` report auditors` Addresses Addresses 118

As at 31 December 2018 up to 1 1 to 3 3 months 1 to 5 over Total Book in BGN Thousand month months to 1 year years 5 years incoming/ value outgoing Non-derivative liabilities Financial liabilities at

Vision and mission amortized cost (237,230) (5,437,852) (750,525) (346,844) (295,054) (7,067,505) 7,006,959 - Deposits from banks (36,376) (40,241) (19,578) – – (96,195) 96,140 - Deposits from customers (173,717) (5,362,808) (638,463) (29,058) – (6,204,046) 6,203,581 - Borrowings from banks (1,696) (31,905) (60,888) (196,757) (289) (291,536) 289,467 - Subordinated liabilities – (2,866) (8,506) (117,104) (294,765) (423,241) 365,284 - Other financial liabilities (25,440) (32) (23,090) (3,925) – (52,487) 52,487 Other liabilities (2,665) (2,031) (3,196) (1,060) – (8,954) 8,954 Provisions for liabilities – – (5,070) (26,775) (1,837) (33,682) 33,682 Raiffeisen BankRaiffeisen

International Total undrawn credit lines – (1,655,083) – – – (1,655,083) Total non-derivative liabilities (239,895) (7,094,966) (758,791) (374,679) (296,891) (8,765,224) 7,049,593 Derivative liabilities

- FX instruments 10,528 - Outflow (38,375) (53,373) (157,755) – – (249,503) - Inflow 37,220 50,862 148,108 – – 236,190 Raiffeisen GroupRaiffeisen

in Bulgaria - Interest rate instruments 1,398 - Outflow (77) (8) (2,357) (10,305) (4,734) (17,481) - Inflow 55 6 1,783 7,785 3,550 13,179 Total derivative liabilities (1,177) (2,513) (10,221) (2,520) (1,184) (17,615) 11,926

Economic growth Segment reports auditors` report Independent Addresses 119

The following table illustrates the book values of assets and liabilities, broken down by expected realization up to and over 12 months.

in BGN Thousand 2019

up to 12 over 12 months months Assets

Cash and balances with the Central bank 1,217,910 – Other demand deposits 126,200 – Financial assets held for trading 25,046 36,601

Financial assets mandatorily at fair value and mission Vision through profit or loss – 26,268 Loans to customers – 26,268 Financial assets at fair value through other comprehensive income 103,009 419,452 Debt securities 103,009 409,571 Equity securities – 9,881 International Raiffeisen Bank Raiffeisen Bank Financial assets at amortized cost 2,390,330 4,480,334 Loans and advances to banks 342,342 – Loans and advances to customers 1,937,295 3,933,966

Debt securities 80,277 546,368 Other receivables 30,416 – Other assets 10,244 12,780

Property, plant and equipment – 82,785 in Bulgaria Raiffeisen Group Intangible assets – 45,038 Deferred tax assets – 143

Total assets 3,872,739 5,103,401

Liabilities Financial liabilities held for trading 5,550 3,814 Financial liabilities at amortized cost 7,414,651 592,917

Deposits from banks 70,502 – Economic growth Deposits from customers 7,203,729 37,150 Borrowings from banks 72,095 158,661 Subordinated liabilities – 365,218 Other financial liabilities 57,838 1,764 Lease liabilities 10,488 30,124 Current tax liabilities 1,197 0 Segment reports Segment Other liabilities 10,700 1,799 Provisions for liabilities 5,041 29,522 Deferred tax liabilities – 16 Total liabilities 7,437,139 628,068 Independent Independent auditors` report auditors` Addresses Addresses 120

in BGN Thousand 2018

up to 12 over 12 months months Assets

Vision and mission Cash and balances with the Central bank 1,288,461 – Other demand deposits 122,187 – Financial assets held for trading 18,290 41,132 Financial assets mandatorily at fair value through profit or loss – 28,383 Loans to customers – 28,383 Financial assets at fair value through other comprehensive income 157,932 403,782

Raiffeisen BankRaiffeisen Debt securities 157,932 395,992 International Equity securities 0 7,790 Financial assets at amortized cost 2,148,060 3,665,580 Loans and advances to banks 221,752 – Loans and advances to customers 1,795,239 3,251,043 Debt securities 98,190 414,538 Other receivables 32,879 – Raiffeisen GroupRaiffeisen – in Bulgaria Assets held for sale 1,900 Other assets 12,563 8,990 Property, plant and equipment – 40,512 Intangible assets – 36,456

Total assets 3,749,393 4,224,835 Liabilities

Economic growth Financial liabilities held for trading 10,529 1,397 Financial liabilities at amortized cost 6,420,266 586,693 Deposits from banks 96,140 – Deposits from customers 6,184,614 18,968 Borrowings from banks 90,951 198,516 Subordinated liabilities – 365,284 Other financial liabilities 48,562 3,925 Segment reports Current tax liabilities 234 – Other liabilities 7,892 1,060 Provisions for liabilities 5,070 28,612 Deferred tax liabilities – 75

Total liabilities 6,443,991 617,837 auditors` report Independent Addresses 121

The table below shows an analysis of the financial assets forming the liquidity reserve available to the bank. Amounts form the composition of the liquidity buffer within the meaning of Title II, Chapter 1, Art. 6 of Commission Delegated Regulation (EU) 2015/61 of 10.10.2014. The liquid assets are measured in accordance with the requirements of Art. 418, para. 1 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26.06.2013.

in BGN Thousand 2019 2018

Liquid assets Coins and banknotes 223,271 227,079 Reserves at the Central Bank 1,005,376 1,067,996 Assets in central government 752,386 655,168 Total liquid assets 1,981,033 1,950,243 Vision and mission Vision

C. Market risk

In general, market risk is the risk of loss due to sudden changes in market factors (interest rates, exchange rates, prices, etc.) that adversely affect the value of an asset or a portfolio. All instruments measured at market price are subject to market risk, namely the risk that future changes in market conditions will lead to a decrease in the value of the financial instrument or asset in the portfolio of the Group. Market risk arises for open positions in interest rate, FX and equity instruments. International

These instruments are exposed to general and specific market risk, and in addition they are all affected by unexpected or Raiffeisen Bank unfavorable movements and changes in the degree of volatility of market factors (interest rates, credit spreads, exchange rates, etc.) as well as changes in indexes and prices of equity instruments. The Group monitors market risks for both its Trading and the banking Portfolio.

All instruments that are measured at market prices are reported in the statement of financial position of the Group at fair value based on quoted market prices and the effect of changes in market conditions is recognized in profit or loss. Depending on the classification and reporting method, the market risk may affect the net trading result, interest income or directly on the capital of the Group. in Bulgaria

The Group manages its trading portfolios in accordance with the amendments in market conditions. The market risk is also Raiffeisen Group managed through limits set by the management for the relevant instruments.

Market risk management

Exposure of the Group to Market Risk is managed in accordance with the limits set by the management for the purchase and sale of financial instruments.

The overall responsibility for market risk is borne by ALCO. The departments responsible for Market Risk Management in the Group and at a Group level, develop detailed risk management policies (subject to review and approval by ALCO and the Economic growth Market Risk Committee on a group level) and for their day-to-day compliance. Segment reports Segment Independent Independent auditors` report auditors` Addresses Addresses 122

The table below shows the assets and liabilities exposed to market risk distributed in a trading and bank portfolio as at 31 December 2019 by type of instrument.

As at 31 December 2019 in BGN Thousand Book value Trading portfolio Bank portfolio

Vision and mission Assets exposed to market risk Cash and balances with the Central bank 1,217,910 – 1,217,910 Other demand deposits 126,200 – 126,200 Debt instruments 1,194,121 54,896 1,139,225 Equity instruments 9,881 – 9,881 Derivative financial instruments 6,751 6,751 – Loans and advances to banks 342,342 – 342,342

Raiffeisen BankRaiffeisen Loans and advances to customers 5,897,529 – 5,897,529 International Other receivables 30,416 – 30,416 Liabilities exposed to market risk Derivative financial instruments 9,364 9,364 – Deposits from banks 70,502 – 70,502 Deposits from customers 7,240,879 – 7,240,879 Borrowings from banks 230,756 – 230,756 Raiffeisen GroupRaiffeisen – in Bulgaria Subordinated liabilities 365,218 365,218 Other financial liabilities 59,602 – 59,602 Lease liabilities 40,612 – 40,612

The table below shows the assets and liabilities exposed to market risk distributed in a trading and bank portfolio as at 31

December 2018 by type of instrument:

Economic growth As at 31 December 2018 in BGN Thousand Book value Trading portfolio Bank portfolio

Assets exposed to market risk

Cash and balances with the Central bank 1,288,461 – 1,288,461 Other demand deposits 122,187 – 122,187 Debt instruments 1,111,809 45,157 1,066,651 Equity instruments 7,790 – 7,790 Segment reports Derivative financial instruments 14,264 14,264 – Loans and advances to banks 221,752 – 221,752 Loans and advances to customers 5,074,665 – 5,074,665 Other receivables 32,879 – 32,879 Liabilities exposed to market risk

Derivative financial instruments 11,926 11,926 – auditors` report

Independent Deposits from banks 96,140 – 96,140 Deposits from customers 6,203,581 – 6,203,581 Borrowings from banks 289,467 – 289,467 Subordinated liabilities 365,284 – 365,284 Other financial liabilities 52,487 – 52,487 Addresses 123

Techniques for market risk assessment

Market risk is the risk of a loss or a negative effect on the Group's income or the value of financial instruments it owns as a result of unfavorable or unexpected changes in market factors: interest rates, securities prices, exchange rates and credit spreads (not related to changes in the debtor / issuer's financial condition).

The objective of market risk management is that the respective exposures of the Group are managed and controlled within acceptable parameters and in line with the risk appetite and the overall strategy of the Group.

Value at risk (VaR)

The Group applies value at risk (VaR) models to measure market risk for the Trading and Banking Portfolio, in order to assess the potential loss through an appropriate analytical method supported by empirical circumstances and a documented analysis. This method is applied sequentially and with a higher degree of conservatism when the available data is limited. and mission Vision

The Group uses the Value at Risk (VaR) limits for the entire market risk as well as divided by individual factors, namely: exchange (FX), interest rate (IR), a base (Bs) and spread risk (SP). The overall value-at-risk (VaR) structure of the limits is subject to review and approval by the ALCO. Value at Risk (VaR) limits are designed for both the trading and banking portfolio, but also on the overall portfolio level for the Group.

Value at Risk is an estimate based on statistical methods of measuring the potential loss that the Group would incur in adverse market conditions. This value represents the maximum loss, but only to a certain degree of confidence (99 per cent). This International Raiffeisen Bank Raiffeisen Bank means that there is still a statistical probability (1 per cent) that the realized loss could exceed the expected amount. The Value-at-Risk Model assumes a certain retention period until closing the risk positions (1 day).

It is also assuming that the changes in the market conditions during the retention period will follow to some extent the changes that have been registered in past periods.

Since the beginning of 2010, the Group has used a hybrid approach to the VaR calculation. The model is based on a historical simulation, which is combined with the parametric model for calculating VaR considering events resulting from extreme levels of risk factors. Volatility in the market factors is weighted according to the reporting period (the volatility for in Bulgaria

the last 20 working days is weighted by 80 per cent for the VaR calculation, while the last two years' volatility gets 20 per Raiffeisen Group cent of the weight in the model), giving significant importance to the current market conditions.

The actual results of the applied model are analyzed in order to determine the validity of the assumptions and factors used in the calculations.

Applying this approach could not prevent losses beyond the set limits, but the use of the VaR hybrid approach to a certain extent takes into account extreme movements in market factors and conditions above expectations.

The quality and validity of models for calculating the value at risk are tested on ongoing basis by projecting the results on Economic growth the trading portfolio of the Group. In case the tests show extraordinary profits/losses, a detailed analysis is performed, and the results are reported to the Assets and Liabilities Committee. Segment reports Segment Independent Independent auditors` report auditors` Addresses Addresses 124

Value at risk (VaR)

in BGN Thousand (1d, 99 %) As at 31 December 2019 As at 31 December 2018 Value at risk in the trading portfolio

Diversified 117 56 Vision and mission including interest rate risk 94 50 including spread risk 49 24 including FX risk 65 19

Value at risk in the bank portfolio Diversified 2,057 1,339 including interest rate risk 1,741 773 including spread risk 1,205 1,070 Raiffeisen BankRaiffeisen

International Total value at risk Diversified 2,098 1,370 including interest rate risk 1,684 761 including spread risk 1,240 1,086 including FX risk 65 19

Dynamics of development of VaR value by risk category in 2019 Raiffeisen GroupRaiffeisen in Bulgaria

in BGN Thousand (1d, 99 %) Average Maximum Minimum value value value Value at risk in the trading portfolio

Diversified 119 279 35 including interest rate risk 102 272 32

Economic growth including spread risk 27 76 12 including FX risk 46 102 12

Value at risk in the bank portfolio Diversified 1,664 2,666 875 including interest rate risk 1,214 2,208 491 including spread risk 1,111 1,484 820

Segment reports Total value at risk Diversified 1,670 2,748 909 including interest rate risk 1,220 2,302 482 including spread risk 1,120 1,546 816 including FX risk 46 102 12

Recognizing the limitations of the value at risk (VaR) methodology, the Group complements its risk assessment and limiting toolkit by using position and sensitivity limits.

auditors` report In addition, the Group uses a wide range of stress tests to model the financial impact of the variety of market scenarios Independent on its Trading and Banking Portfolio. The baseline data from the respective simulations and their impact at Group level are reported regularly to ALCO.

Stress tests

By using stress tests, the Group assesses the potential loss that it would incur in extraordinary circumstances. Stress tests include:

Addresses • stress testing of risk factors, with potentially the most extreme adverse developments for the Group for each risk category; 125

• stress testing in emerging markets, where the subject of testing are the portfolios acquired in these markets;

• special stress tests that cover stress testing of specific items or regions.

The results of the stress tests are presented to ALCO and are being monitored on ongoing basis by the management of the Group. All stress tests are modeled according to the activity of the Group and are usually in the form of a scenario analysis.

Interest rate risk

Interest rate risk refers to the possible adverse effect of changes in market interest rates on profit in the portion of net interest income that forms a major portion of the financial result of the Group.

Compared to other types of risks, the interest rate risk can be minimized through the interrelated management of the assets and liabilities. and mission Vision

The policy of the Group is to minimize interest rate risk by lending floating interest rate loans against floating interest rate funding. This risk is also managed by the Group, both with a balanced use of different sources of financial resources (borrowings from other Bulgarian banks, foreign correspondent credit lines, borrowed deposits, etc.), as well as with a targeted credit policy providing a growing return.

In the current low and negative interest market environment, the Group continues its policy and strive to optimize and minimize

its interest rate risk, including the provision of strategies limiting the granting of loans with fixed interest rates in the medium International term, due to expectations for rising interest rates. Raiffeisen Bank

It is essential for management to manage the sensitivity of the interest rates on assets and liabilities. Due to the nature of the banking activity, it is not possible to absolutely cover the differences in the maturities or periods of change of the agreed interest rates on the financial assets and liabilities.

The interest rate exposures of the Group are managed using interest rate sensitivity reports on assets and liabilities. The bulk of interest-bearing assets and liabilities of the Group are structured to cover short-term assets with short-term liabilities or

long-term assets with liabilities with the option of interest rate changes within one year or long-term assets with corresponding in Bulgaria

liabilities as interest rates are changed at the same time. Raiffeisen Group

For a significant part of the interest-earning assets and liabilities there is an option to change interest rates with a relatively short notice period, as a result of which the differences in the interest structure of the assets and the liabilities are considered insignificant.

The table below shows the periods of change in the agreed interest rates of financial assets and liabilities in the bank portfolio as at 31 December 2019 by type of instrument.

in BGN Thousand Up to 3 months 3 months 1 to Over Total Economic growth As at 31 December 2019 to 1 year 5 years 5 years Assets

Other demand deposits 126,200 – – – 126,200 Loans and advances to banks 342,342 – – – 342,342 Loans and advances to customers 4,610,572 707,200 344,423 235,334 5,897,529 Debt securities 144,619 58,239 768,895 222,368 1,194,121

Total assets 5,223,732 765,439 1,113,318 457,702 7,560,191 reports Segment Liabilities

Deposits from banks 70,502 – – – 70,502 Deposits from customers 6,550,477 651,514 38,888 – 7,240,879 Borrowings from banks 152,157 6,519 69,279 2,801 230,756 Subordinated liabilities 365,218 – – – 365,218 Independent Independent

Total liabilities 7,138,354 658,033 108,167 2,801 7,907,355 report auditors` Net position (1,914,622) 107,406 1,005,151 454,901 (347,164) Addresses Addresses 126

The table below shows the periods of change in the agreed interest rates of financial assets and liabilities in the bank portfolio as at 31 December 2018 by type of instrument:

in BGN Thousand Up to 3 months 3 months 1 to Over Total As at 31 December 2018 to 1 year 5 years 5 years Assets Vision and mission Other demand deposits 122,187 – – – 122,187 Loans and advances to banks 198,289 23,463 – – 221,752 Loans and advances to customers 3,474,911 1,001,503 485,946 112,305 5,074,665 Debt securities 178,013 98,159 594,922 240,715 1,111,809 Total assets 3,973,400 1,123,125 1,080,868 353,020 6,530,413 Liabilities

Deposits from banks 76,589 19,551 – – 96,140 Raiffeisen BankRaiffeisen

International Deposits from customers 5,498,998 668,586 29,265 6,732 6,203,581 Borrowings from banks 274,353 8,382 – 6,732 289,467 Subordinated liabilities 365,284 – – – 365,284 Total liabilities 6,215,224 696,519 29,265 13,464 6,954,472 Net position (2,241,824) 426,606 1,051,603 339,556 (424,059)

Interest rate risk management is complemented by an analysis of the sensitivity of net interest income and revaluation of Raiffeisen GroupRaiffeisen securities to various standard and non-standard interest scenarios. The table below shows an analysis involving simulations in Bulgaria with a simultaneous increase or decrease by 200 basis points of all yield curves. Following the implementation of software specifically developed for the purpose of such simulations, the group accepts the above amendment as the main type of simulation.

Sensitivity of the expected net interest income (Bank portfolio)

200 b.p. (200 b.p.) As at 31 December 2019 simultaneous simultaneous Economic growth in BGN Thousand increase decrease Simulated change in net interest income 61,280 (26,508) Simulated change in the revaluation of securities (16,794) 19,909 Total simulated change 44,486 (6,599)

200 b.p. (200 b.p.) As at 31 December 2018 simultaneous simultaneous Segment reports in BGN Thousand increase decrease Simulated change in net interest income 52,276 (32,782) Simulated change in the revaluation of securities (18,397) 28,524 Total simulated change 33,879 (4,258)

The values presented reflect the change in net interest income and the revaluation of securities for the relevant stress scenario against a baseline scenario (without change in interest rates) for a future period of one calendar year. auditors` report

Independent Warning/Activating limits:

Threshold limits have been introduced in order to support the operational risk-based limit tracking process. Reaching this threshold (typically 70 per cent) triggers certain strategy to address the situation, where exceeded does not lead directly to a restriction of business, but rather the process for risk insurance and reporting to the management of the Group about the situation and review of possible solutions to prevent or mitigate the negative effect and reaching the stop loss limit. This type of limits are of extreme importance in the operational management of the limits in the Group and serve as a warning signal for the level of risk reached in a business segment or operations, and when they are reached a more intense tracking and

Addresses more stringent monitoring of the respective exposures takes place. Typical of these limits is that they are not considered as separate or individual limits but rather contribute to more flexible operational management of the established limits. 127

Stop/loss limits

Risk (including interest rate risk) can be effectively limited through the so-called Stop Loss Limits which results in a decrease in exposure if the loss from the portfolio exceeds a predetermined amount/limit. Defining the Stop/Loss Limit and triggering the Stop/Loss process limits the loss to the predetermined Stop/Loss level (where, of course, transaction costs in closing position should be added to the amount). Stop/Loss limits are most commonly used for transactions in the trading portfolio of the Group but may also be used in the bank portfolio, if there is a relatively liquid market for this type of assets or there are instruments for hedging them.

Potential loss cannot be fully realized as it is limited by limiting loss limits (i.e. Stop/Loss Limits).

A High Watermark S/L Limit with immediate effect is introduced to capture the negative effect of revaluation and trading at a certain amount of the highest trading result in the year for the trading portfolio. Vision and mission Vision FX risk

The Group is exposed to FX risk through its foreign currency operations. The group operates in the major world currencies: US dollars, Euros, British pounds, Swiss francs and others. The euro and the Bulgarian lev are pegged, respectively each FX risk assumed by the Group follows predominantly from changes in the exchange rate euro / dollar or other currency pairs. The Group considers that it is not exposed to significant FX risk as at any time the ratio between the amount and the maturity of the dollar assets and liabilities within the established limits is monitored and maintained according to the investment guidelines. International Raiffeisen Bank Raiffeisen Bank Profits and losses arising from transactions in foreign currency are recognized in the profit and loss account. Foreign currency exposures are those assets and liabilities of the Group that are not denominated in BGN.

Foreign Currency Structure as at 31 December 2019

Bulgarian Euro Other Total in BGN Thousand Levs currencies

Financial assets in Bulgaria Raiffeisen Group Cash and balances with the Central bank 1,080,276 126,927 10,707 1,217,910 Other demand deposits 10,759 32,278 83,164 126,200 Financial assets held for trading 7,482 34,126 20,039 61,647 Financial assets mandatorily reported at fair value through profit or loss 0 26,268 0 26,268 Financial assets at fair value through other comprehensive income 50,217 387,616 84,628 522,461

Debt instruments 47,380 387,616 77,583 512,579 Economic growth Equity instruments 2,837 – 7,044 9,881 Financial assets at amortized cost 3,981,970 2,601,518 287,176 6,870,664 Loans and advances to banks 824 87,975 253,543 342,342 Loans and advances to customers 3,746,725 2,090,903 33,633 5,871,261 Debt instruments 206,665 419,980 – 626,645 Other receivables 27,756 2,660 – 30,416 Segment reports Segment Other assets 9,703 13,044 276 23,023

Total financial assets 5,140,407 3,221,778 485,989 8,848,174 Independent Independent auditors` report auditors` Addresses Addresses 128

Bulgarian Euro Other Total in BGN Thousand Levs currencies

Financial liabilities

Financial liabilities held for trading 1,233 5,664 2,467 9,364

Vision and mission Financial liabilities at amortized cost 4,592,236 2,899,971 515,361 8,007,568 Deposits from banks 70,470 30 1 70,501 Deposits from customers 4,464,812 2,264,168 511,899 7,240,879 Borrowings from banks 0 230,756 – 230,756 Subordinated liabilities 0 365,218 – 365,218 Other financial liabilities 28,256 27,884 3,462 59,602 Lease liabilities 28,698 11,914 – 40,612 Other liabilities 8,988 3,308 202 12,498 Raiffeisen BankRaiffeisen International Total financial liabilities 4,602,456 2,908,943 518,032 8,029,431

Net FX position 537,951 312,836 (32,043) 818,744

Foreign Currency Structure as at 31 December 2018

Bulgarian Euro Other Total in BGN Thousand Levs currencies Raiffeisen GroupRaiffeisen in Bulgaria Financial assets Cash and balances with the Central bank 1,121,217 155,256 11,987 1,288,461 Other demand deposits 6,639 46,559 68,988 122,187 Financial assets held for trading 10,605 31,620 17,197 59,422

Financial assets mandatorily reported at fair value through profit or loss – 28,383 – 28,383

Economic growth Financial assets at fair value through other comprehensive income 45,447 442,170 74,098 561,714 Debt instruments 42,598 442,170 69,156 553,924 Equity instruments 2,849 – 4,942 7,790 Financial assets at amortized cost 3,414,073 2,232,824 166,743 5,813,641 Loans and advances to banks 40 97,742 123,970 221,752 Loans and advances to customers 3,151,952 1,851,568 42,761 5,046,282

Segment reports Debt instruments 230,634 282,094 – 512,727 Other receivables 31,447 1,420 12 32,879 Other assets 21,551 – – 21,551

Total financial assets 4,619,532 2,936,812 339,013 7,895,358

Financial liabilities

Financial liabilities held for trading – 1,467 10,459 11,926

auditors` report Financial liabilities at amortized cost 3,804,310 2,718,871 483,777 7,006,958 Independent Deposits from banks 45,693 19,570 30,876 96,140 Deposits from customers 3,732,531 2,026,349 444,701 6,203,581 Borrowings from banks – 289,467 – 289,467 Subordinated liabilities – 365,284 – 365,284 Other financial liabilities 26,086 18,201 8,200 52,487 Other liabilities 5,811 2,887 254 8,952 Addresses Total financial liabilities 3,810,121 2,723,225 494,490 7,027,836

Net FX position 809,411 213,587 (155,477) 867,522 129

D. Capital management

The elements of the capital base are not limited to the capital represented in the respective section of the statement of financial position of the Group, and its management is directed to:

–– Compliance with the requirements of the local bank regulator for capital adequacy;

–– Ensuring the ability of the Group to continue as a going concern to provide returns to shareholders;

–– maintaining a stable capital base in support of the activities of the Group.

The Bulgarian National Bank is the competent authority in the Republic of Bulgaria for the supervision of banks under Regulation (EU) No 575/2013 of the European Parliament and of the Council on prudential requirements for credit institutions

and investment intermediaries (Basel III), in force since 01 January 2014. and mission Vision

In connection with the introduction of capital buffers under the Directive 2013/36/EC (CRD IV), at its meeting, the Governing Council of the BNB adopted a decision on the maintenance of a capital buffer of all banks, as well as a requirement to determine a capital buffer for systemic risk of the risk-weighted exposures in the country, formed by the banks, stemming from Ordinance No. 8 of 24 April 2014 of the BNB on capital buffers of banks. According to Ordinance 8 of 1 January 2016, the Bulgarian National Bank assesses and determines, on a quarterly basis, the level of the counter-cyclical buffer for the banks in the country. International Capital conservation buffer Raiffeisen Bank

• Aim of the buffer – the establishment of a capital conservation buffer is aimed at avoiding future situations where, in the event of difficulties for banks, state aids are used, i.e. taxpayers’ money. This buffer shall provide additional funds in case of recovery and resolution of credit institutions in crisis conditions;

• Level of the buffer – the banks shall maintain a capital conservation buffer from their common equity Tier I capital (Common Equity Tier 1 - CET 1) at the amount of 2.5 per cent of their total risk exposure;

• Entry into force – the capital conservation buffer takes effect from the entry into force of Ordinance No 8 of 24 in Bulgaria

April 2014 of the BNB on the capital buffers of banks. Raiffeisen Group

Systemic risk capital buffer

• Aim of the buffer – preservation of the year to date accumulated capital reserves in the Bulgarian banking system, as well as to prevent and mitigate the effect of long-term non-cyclical systemic or macro prudential risks, which could cause disruption in the financial system;

• Level of the buffer – the buffer is at the amount of 3 per cent of risk weighted exposures in the Republic of Bulgaria and, at the discretion of the BNB, also applies to exposures in third countries; Economic growth

• Entry into force - the Systemic Risk Buffer is effective from 31 December 2014 and applies to all banks in the country.

Countercyclical capital buffer

• Aim of the buffer – the countercyclical capital buffer is a macro prudential instrument provided for in BNB Ordinance No. 8 on the capital buffers of banks, in accordance with the requirements of Directive 2013/36/ EU. The main purpose of the buffer is to safeguard the banking system against potential losses, stemming from build-up of cyclical systemic risk during periods of excessive credit growth. reports Segment

• Level of the buffer – as of 31.12.2019, the countercyclical capital buffer is 0,5 per cent of the total risk exposure, and the BNB uses the methodology of the Basel Committee on Banking Supervision, which is also contained in parts I and II of the Annex to the ESRB Recommendation of 18 June 2014 on Guidelines for Determining Levels of Countercyclical Buffer (ESRB/2014/1).

• Entry into force – the countercyclical capital buffer enters into force on 1 January 2016 and its level is determined

by the BNB on a quarterly basis. Independent auditors` report auditors` Pursuant to Art. 9, para. 1 and in accordance with the criteria under Art. 9, para. 7 of Ordinance No 8 of the BNB on capital buffers of banks and the pan-European methodology set out in the Guidelines of the European Banking Authority, on 10 November 2016, the Governing Council (GC) in the BNB identified as other systemically significant institutions (OSSI) ten banks, including Raiffeisenbank (Bulgaria) EAD. The Group's buffer level as defined by the BNB Governing Council is as follows: Addresses Addresses 130

• 2017 – 0

• 2018 – 0.25 per cent

• 2019 – 0.50 per cent

• 2020 – 0.75 per centt Vision and mission Basel III introduces the requirement of total capital ratio, core equity tier I capital ratio and tier I capital ratio, as well as the capital requirements for credit, market and operational risks. It defines the minimum required amount, the elements and the structure of own funds of credit institutions and the minimum capital requirements for the risks they undertake.

The capital ratios as percentage of the total risk exposures of credit institutions are defined as follows:

• Core equity tier I ratio – 4.5 per cent

• Tier I ratio – 6 per cent Raiffeisen BankRaiffeisen

International • Total capital ratio – 8 per cent.

The capital adequacy and the adherence to the regulatory capital requirements are monitored by the bank’s management.

The Group’s regulatory capital consists of:

–– Core tier I capital – ordinary share capital and retained earnings (incl. statutory reserve fund);

–– Tier II capital – qualified subordinated debt. Raiffeisen GroupRaiffeisen in Bulgaria Regulatory capital is reduced by the following elements:

–– accumulated other comprehensive income;

–– intangible assets;

–– Insufficient adjustments of credit risk against expected losses in the IRB Approach.

Economic growth The capital base of the Group includes the following:

in BGN Thousand Core tier I capital, including 2019 2018

- Paid in capital instruments 603,448 603,448 - Retained earnings from previous years 74,686 75,146 - Interim profit as at 30.09. 37,683 -

Segment reports - Other reserves 86,443 86,443 - Accumulated other comprehensive income 10,740 5,521 - Total deductions from Core tier I capital (44,512) (36,480) Tier II capital, including - Subordinated debt eligible for Tier II capital 329,218 360,611 - Total adjustments to Tier II capital 9,006 19,184

auditors` report EQUITY 1,106,712 1,113,873 Independent

In compliance with Basel III requirements the Group is calculating its total risk exposure as the sum of:

–– the risk-weighted exposure amounts for credit risk, counterparty credit risk and dilution risk for its total exposure excluding the risk weighted exposures from its trading portfolios;

–– the amount of the capital requirement for position, foreign exchange and commodities risk, multiplied by 12.5;

Addresses –– the amount of the capital requirement for operational risk, multiplied by 12.5; 131

–– the amount of the capital requirement in respect of the risk associated with credit valuation adjustment for OTC derivative instruments other than credit derivatives recognized for reduction of the risk-weighted exposure amounts for credit risk, multiplied by 12.5.

As of 1 November 2014, Raiffeisenbank Bulgaria has been officially approved to use an IRB Approach in credit risk management and measurement, according to the most up-to-date banking regulations, namely Regulation 575/2013 of the European Parliament and of the Council. Exposures under the IRB Approach as of 31.12.2018 represent 81.4 per cent of the bank's total portfolio on an individual basis prior to conversion. Exposures for which the bank applies a standardized approach (18.6 per cent of the total portfolio) for determining risk-weighted assets for credit risk are to a limited number of counterparties for which it is excessively burdensome to introduce a rating system, exposures to non-core business units or exposures, which are insignificant in size or perceived risk profile.

The Group applies the Standardized Approach to calculate the capital requirements for operational risk. Vision and mission Vision During the financial year, the Group complied with all regulatory capital and capital buffers requirements and maintained its capital ratios above the required regulatory minimum.

The table below illustrates the bank’s total risk exposures and capital ratios as at 31 December 2019 and as at 31 December 2018. (In BGN Thousand).

in BGN Thousand 2019 2018 International

TOTAL RISK EXPOSURE AMOUNT 5,188,088 4,175,372 Raiffeisen Bank

RISK WEIGHTED EXPOSURE AMOUNTS FOR CREDIT, COUNTERPARTY CREDIT AND DILUTION RISKS AND FREE DELIVERIES 4,634,174 3,631,659

Standardized Approach 544,903 434,388

Exposure classes in the standardized approach excluding securitization positions 544,903 434,388 Central government 53 - in Bulgaria

Regional governments or local authorities 10,153 12,557 Raiffeisen Group Public sector entities 164 Institutions Corporates 309,684 239,811 Retail 93,679 78,917 Secured by mortgages on immovable property 12,157 9,741 Exposures in default 5,395 4,673 Other items 113,618 88,233 Economic growth Internal ratings-based approach (IRB) 4,089,271 3,197,271 Internal ratings-based approaches, when own default loss estimates and conversion factors are not used 2,517,744 2,053,339 Central government and central banks 44,698 28,065 Institutions 156,902 130,560 Corporates - SME 822,152 807,311 Corporates - Specialized Lending 193,342 76,354 reports Segment Corporates - Other 1,300,650 1,011,049 Internal rating-based approaches when own estimates of Loss given default and/or Conversion Factors are used 1,561,576 1,136,453 Retail - Secured by real estate SME 306,909 222,609 Retail - Secured by real estate non-SME 470,955 316,425

Retail - Qualifying revolving 39,157 29,776 Independent auditors` report auditors` Retail - Other SME 106,521 70,582 Retail - Other non-SME 638,034 497,061 Equity instruments under the IRB Approach 9,951 7,479 TOTAL RISK EXPOSURE AMOUNT FOR POSITION, FOREIGN EXCHANGE AND COMMODITIES RISKS 28,413 31,875 Addresses Addresses 132

in BGN Thousand 2019 2018 Risk exposure amount for position, foreign exchange and commodities risks under standardized approaches 28,413 31,875 Traded debt instruments 28,413 31,875 TOTAL RISK EXPOSURE AMOUNT FOR OPERATIONAL RISK 525,063 511,213 Vision and mission Standardized / Alternative standardized approach to operational risk 525,063 511,213 TOTAL RISK EXPOSURE AMOUNT FOR CREDIT VALUATION ADJUSTMENT 438 625 Standardized approach 438 625 CET1 Capital ratio 14,81% 17.58% Surplus (+)/Deficit (-) of CET1 capital 535,024 546,186 T1 Capital ratio 14,81% 17.58%

Raiffeisen BankRaiffeisen Surplus (+)/Deficit (-) of T1 Capital 457,203 483,556 International Total capital ratio 21,33% 26.68% Surplus (+)/Deficit (-) in total capital 691,665 779,843

4. Use of Estimates

Raiffeisen GroupRaiffeisen The preparation of the financial statements requires the management to make judgments, estimates and assumptions that in Bulgaria affect the application of the accounting policies and the reported value of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected.

Impairment of financial assets Economic growth The Group makes estimates, on the basis of progressive methodology, with regard to the expected credit losses associated with the assets of debt instruments, measured at amortized cost and reported at fair value through other comprehensive income, as well as exposures arising from credit transactions, leasing receivables and financial guarantee contracts. The Group charges provisions in such cases at each reporting date.

Determination of credit losses involves a higher degree of judgment or complexity as well as many sources of uncertainty of the valuation that have a significant risk of substantial adjustment in the next financial year. Quantitative information for each of these estimates and judgments is included in the relevant notes, together with information on the basis for calculating each item of interest in the consolidated financial statements. Segment reports Measurement of expected credit losses

The measurement of the expected credit loss is an unbiased, probability-weighted amount determined by calculating a number of possible outcomes, the value of the money over time and significant supporting information for past events at the reporting date, current conditions and projections of future economic conditions, and is provided without undue cost or effort.

Independent economic conditions and the credit behavior. The application of the accounting requirements for measuring the expected credit losses requires significant judgments, namely:

• Defining criteria for significant credit risk growth;

• Selection of appropriate models and assumptions to measure the expected credit losses;

• Determining the number and relative weight of scenarios for the future for each type of product / market and the associated credit losses; Addresses

• Creating groups of similar financial assets in order to measure the expected credit losses. 133

Determination of fair values

Valuation of financial instruments

Fair value is defined as the price that would be received upon sale of an asset or would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Group discloses information on the fair value of those financial assets and liabilities for which market information is available and the fair value of which significantly differs from the reported book value.

If there is no active market for a certain financial instrument, then the Group determines fair values by using valuation techniques. The valuation techniques consider recent direct deals between knowledgeable, willing market participants (if such exist), information about current fair values of similar financial instruments, analysis of discounted cash flows, as well as models with option prices. The selected valuation technique uses the maximum market data, relies as little as possible on Group-specific estimates, includes all the factors that market participants would take into account when setting the price, and mission Vision and is consistent with the accepted financial methodologies used for pricing financial instruments. The data on valuation techniques reasonably represent market expectations and measures for the risk and return factors inherent to the financial instrument. The Group verifies the valuation techniques and tests their validity by using prices from observable current market transactions with the same financial instrument or based on other observable market data.

The best indicator of the fair value of a financial instrument upon initial recognition is the transaction price, i.e. the fair value of the consideration given or received, unless the fair value of that instrument is seen when compared to other explicit current

market transactions with the same instrument or based on valuation techniques where variables include only observable International market data. When the transaction price is the best indicator of fair value upon initial recognition, the financial instrument Raiffeisen Bank is initially measured at the transaction price and any difference between that price and the value originally derived from the measurement model is subsequently recognized in profit or loss, depending on the individual facts and circumstances of the transaction, but not later than the moment when the assessment is fully supported by explicit market data or the transaction is completed.

Assets and long positions are measured at a bid price and liabilities and short positions at an ask price. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group and the counterparty where appropriate. Fair value estimates obtained from models are adjusted for any other factors, such as liquidity risk or in Bulgaria model uncertainties to the extent that the Group believes that a third-party market participant would take them into account Raiffeisen Group in pricing a transaction.

The Group measures fair values of the financial instruments using the following hierarchy of methods that reflects the significance of the inputs used to determine fair value:

• Level 1: Quoted (unquoted) prices on active markets of identical financial instruments are used;

• Level 2: valuation techniques are applied, the input data at level 2 is input data for an asset or liability, other than the quoted prices included in level 1, which are, directly or indirectly, available for monitoring. This

category includes instruments measured by using: quoted prices of similar assets or liabilities in active markets; Economic growth quoted prices of identical or similar assets or liabilities on markets that are not considered active; other valuation techniques where all significant inputs are directly or indirectly available for observation using market data;

• Level 3: Level 3 inputs are unobservable inputs for an asset or liability. This category includes all instruments where the valuation technique does not include observable inputs and the unobservable inputs have a significant effect on the valuation of the instrument. This category includes instruments that are assessed on the basis of quoted prices of similar instruments, where significant unobservable adjustments or assumptions are required to reflect differences between instruments.

The Group uses recognized models to measure the fair value of instruments such as options, interest rate and FX swaps. For reports Segment these financial instruments, market conditions allow the use of valuation models.

in BGN Thousand 2019 Migration from Level 1 to Level 2

Debt instruments held for trading

Bulgarian government securities 3,638 Independent Held to collect cash flows and sell report auditors` Bulgarian government securities 48,947 Foreign government securities 12,913 Held to collect cash flows 62,108 Total 127,606 Addresses Addresses 134

in BGN Thousand 2019 Migration from Level 1 and Level 2 to Level 3

Held to collect cash flows and sell Foreign bonds (financial institutions) 28,280

Vision and mission Held to collect cash flows Bulgarian municipal bonds 9,169 Total 37,449

To the extent that the level of fair value should reflect available market data, trends and factors, the Group uses a dynamic valuation approach based on empirical data from proven market sources. The main factors for this migration are both the introduction of a new model for valuation of debt instruments by the Group and changes in the market environment (reduced primary supply of Bulgarian government securities, number and volume of transactions made on the secondary market, number of active quotations). Raiffeisen BankRaiffeisen International The securities reclassified due to the new valuation model to level 3 have a total value of BGN 37,449 thousand.

Securities valuation models provide for the consideration of market factors and their positive or negative change is dynamically reflected in the fair value level of the respective securities.

For more complex financial instruments, the Group uses models based on best practices and methods in cooperation with internationally recognized data providers, and for debt securities a two-step approach is used, based on a combined sequence of use of market information - Direct Observations and Observed Comparable. The determined price is a combination of

Raiffeisen GroupRaiffeisen modern quantitative approaches and methodologies. Some of the estimates determined may not be observable in the current

in Bulgaria market conditions and are based on market prices or percentages or are estimated on the basis of assumptions. When a transaction is entered into, the financial instrument is initially recognized at cost, which is the best indicator of fair value, although it may differ from the value determined by the application of valuation models. This initial difference resulting from the application of valuation models is recognized in profit or loss depending on the circumstances and conditions of the respective transaction, but not later than when observable data on the financial markets are available.

The fair values obtained through evaluation models are adjusted to reflect a number of factors and circumstances that are relevant to the transaction and which cannot always be accounted for in the valuation model. These adjustments account for credit risk, dealer margins, liquidity risk, etc. The management believes that these adjustments are necessary and relevant Economic growth for the appropriate presentation of fair values in the statement of financial position of the Group, so as to bring it as close as possible to a market price which would be determined on a market basis in a transaction between unrelated parties.

The determination of the fair values is controlled by the Risk Controlling Division as a unit, independent of the others in the Group, who are directly involved in the commercial and investment activity. The specific control functions include confirmation of applied market prices, revision of valuation models, review and confirmation of new valuation models.

The following tables analyze the financial instruments reported at fair value according to the levels under which they fall:

Segment reports As at 31 December 2019 in BGN Thousand Level 1 Level 2 Level 3 Total

Assets

Financial assets held for trading 51,258 10,389 – 61,647 Financial assets mandatorily at fair value through profit or loss – – 26,268 26,268 Financial assets at fair value through auditors` report other comprehensive income 429,581 51,860 31,020 512,461 Independent Liabilities Derivative financial instruments – 9,364 – 9,364 Addresses 135

As at 31 December 2018 in BGN Thousand Level 1 Level 2 Level 3 Total

Assets

Financial assets held for trading 45,157 14,265 – 59,422 Financial assets mandatorily at fair value through profit or loss – – 28,383 28,383 Financial assets at fair value through other comprehensive income 554,032 4,941 2,741 561,714 Liabilities

Derivative financial instruments – 11,926 – 11,926 Vision and mission Vision The derivative financial instruments are classified under level 2, because they are OTC and their fair value is calculated using observable inputs for similar financial instruments traded on active markets.

The following tables analyze the fair according to the levels under which they fall values of financial instruments that are not reported at fair value, under the levels where they fall:

As at 31 December 2019 Level 1 Level 2 Level 3 Total Book

in BGN Thousand fair value International value Raiffeisen Bank Assets Cash and balances with the Central bank 1,217,910 – – 1,217,910 1,217,910 Other demand deposits 126,200 – – 126,200 126,200 Financial assets at amortized cost 600,370 32,216 6,583,062 7,215,648 6,870,664 Loans and advances to banks – – 341,860 341,860 342,342 in Bulgaria

Loans and advances to customers – – 6,201,342 6,201,342 5,871,261 Raiffeisen Group Debt securities 600,370 32,216 9,444 642,030 626,645 Other receivables – – 30,416 30,416 30,416 Liabilities

Financial liabilities at amortized cost – – 8,019,244 8,019,244 8,007,568 Deposits from banks – – 70,501 70,501 70,502 Deposits from customers – – 7,240,686 7,240,686 7,240,879 Economic growth Borrowings from banks – – 233,214 233,214 230,756 Subordinated liabilities – – 374,629 374,629 365,218 Other financial liabilities – – 59,602 59,602 59,602 Lease liabilities – – 40,612 40,612 40,612 Segment reports Segment Independent Independent auditors` report auditors` Addresses Addresses 136

As at 31 December 2018 Level 1 Level 2 Level 3 Total Book in BGN Thousand fair value value Assets Cash and balances with the Central bank 1,288,461 – – 1,288,461 1,288,461 Vision and mission Other demand deposits – – 122,187 122,187 122,187 Financial assets at amortized cost 507,166 13,737 5,427,887 5,948,790 5,842,024 Loans and advances to banks – – 221,752 221,752 221,752 Loans and advances to customers – – 5,173,256 5,173,256 5,074,665 Debt securities 507,166 13,737 – 520,903 512,728 Other receivables – – 32,879 32,879 32,879

Liabilities Raiffeisen BankRaiffeisen

International Financial liabilities at amortized cost – – 6,801,686 6,801,686 7,006,959 Deposits from banks – – 96,151 96,151 96,140 Deposits from customers – – 5,999,972 5,999,972 6,203,581 Borrowings from banks – – 290,619 290,619 289,467 Subordinated liabilities – – 362,457 362,457 365,284 Other financial liabilities – – 52,487 52,487 52,487 Raiffeisen GroupRaiffeisen The fair value of the receivables from banks is determined by the nature of the receivable. In the case of a short-term liquidity in Bulgaria resource placed on the money market, the fair value is assumed to be their book value. There is no active market for these instruments and no observable inputs to determine their fair value.

Loans and advances to customers are classified within level 3 as for them there are no observable inputs. The valuation model for determining the fair value of loans and advances to customers that are not in default, is based on the discounted

contracted cash flows, considering the effective interest rate. The discount rate for loans to the retail banking segment is based on the current profitability of newly-generated portfolios in the last quarter. It is believed that new deals best reflect current market conditions. Economic growth

The discount rate for corporate segment loans is based on a risk-free investment, adjusted for the current credit spread for the respective industry and the rating of the customer, as well as the liquidity premium for the duration of the loan, which is based on the CDS of Bulgaria.

For non-performing exposures in the retail banking segment, the fair value is assumed to be their book value.

The fair value of non-performing exposures in the corporate segment is calculated by discounting the expected cash flows.

Segment reports The discount factor is a risk-adjusted return adjusted with a 5 per cent spread when the expected cash flows are based on collateral and a 10 per cent spread when the flows are expected to be repaid by the debtor's current business.

For other short-term financial assets, it is assumed that their fair value corresponds to their book value.

For liabilities reported at amortized cost, observable inputs are also not available as there is no active market for such instruments. Their fair value is determined by applying valuation techniques based on discounted contractual cash flows. The discount factor for the liabilities is the return on the risk-free investment, increased by the liquidity premium for the relevant maturity. The liquidity premium is based on the CDS of Bulgaria for the respective maturity. auditors` report Independent Addresses 137

5. Classification of Financial Assets and Liabilities

The following tables illustrate the categories of financial assets and liabilities recognized in the statement of financial position of the Group.

As at 31 December 2019 Held for Mandatorily Fair value Amortized Total according to the trading at fair value through other cost book IFRS 9 categories through comprehensive value In BGN Thousand profit or loss income

Assets

Cash and balances

with the Central bank – – – 1,217,910 1,217,910 and mission Vision Other demand deposits – – – 126,200 126,200 Debt instruments held for trading 54,896 – – – 54,896 Derivative instruments 6,751 – – – 6,751 Loans and advances to banks – – – 342,342 342,342 Loans and advances to customers – 26,268 – 5,871,261 5,897,529

Debt instruments – – 512,579 626,637 1,139,216 International Raiffeisen Bank Raiffeisen Bank Equity instruments – – 9,882 – 9,882 Other receivables – – – 30,416 30,416

Total financial assets 61,647 26,268 522,461 8,214,766 8,825,142

Liabilities

Derivative financial instruments 9,364 – – – 9,364

Deposits from banks – – – 70,502 70,502 in Bulgaria

Deposits from customers – – – 7,240,879 7,240,879 Raiffeisen Group Borrowings from banks – – – 230,756 230,756 Subordinated liabilities – – – 365,218 365,218 Other financial liabilities – – – 59,602 59,602 Lease liabilities – – – 40,612 40,612 Total financial liabilities 9,364 – – 8,007,568 8,016,933 Economic growth Segment reports Segment Independent Independent auditors` report auditors` Addresses Addresses 138

As at 31 December 2018 Held for Mandatorily Fair value Amortized Total according to the trading at fair value through other cost book IFRS 9 categories through comprehensive value In BGN Thousand profit or loss income

Assets

Vision and mission Cash and balances with the Central bank – – – 1,288,461 1,288,461 Other demand deposits – – – 122,187 122,187 Debt instruments held for trading 45,158 – – – 45,158 Derivative instruments 14,264 – – – 14,264 Loans and advances to banks – – – 221,752 221,752 Loans and advances to customers 28,383 5,046,282 5,074,665 Debt instruments – – 553,924 512,728 1,066,652 Raiffeisen BankRaiffeisen

International Equity instruments – – 7,790 – 7,790 Other receivables – – 32,879 32,879

Total financial assets 59,422 28,383 561,714 7,224,289 7,873,808

Liabilities Derivative financial instruments 11,926 – – – 11,926 Deposits from banks – – – 96,140 96,140

Raiffeisen GroupRaiffeisen Deposits from customers – – – 6,203,581 6,203,581 in Bulgaria Borrowings from banks – – – 289,467 289,467 Subordinated liabilities – – – 365,284 365,284 Other financial liabilities – – – 52,487 52,487

Total financial liabilities 11,926 – – 7,006,959 7,018,885 Economic growth 6. Segment Analysis

The Group operates in the following main segments:

–– Private individuals – private banking services, private individuals current accounts, savings, deposits, credit and debit cards, consumer loans and mortgages;

–– Large corporate clients – current accounts, time deposits, overdrafts and credit lines, real estate financing, foreign

Segment reports exchange and derivative products;

–– SME - current accounts, term deposits, overdrafts and credit lines, loans for small and medium-sized businesses, foreign exchange and derivative products;

–– Non-Client business - financial transactions that the Group enters in its own name and on its own expense and risk, in order to manage market risk exposures such as FX trading, securities and derivatives trading, money market trading, liquidity management and financing, strategic investments, interest rate risk management;

–– Segment “Other” includes cash, capital and reserves, other assets and other liabilities and related results in profit auditors` report or loss by segments that cannot be allocated to other segments. Independent Addresses 139

Segment results are based on internal transfer pricing.

Private Làrge SME Non-Client Other Total As at 31 December 2019 individuals corporate business clients and in BGN Thousand budget enterprises Operating income 150,674 83,365 98,343 8,258 4,488 345,128 including net interest income 103,488 58,259 58,311 1,030 1,667 222,755 including net income from fees and commissions 40,343 18,046 34,233 1,102 (163) 93,561 Total net assets 2,273,156 2,127,487 1,285,322 2,875,779 414,396 8,976,140 Total liabilities 4,110,280 1,755,129 1,374,340 506,586 318,871 8,065,206 Vision and mission Vision Impairment costs 6,177 (246) (10,095) 123 – (4,041) Administrative and other operating expenses (95,354) (38,294) (53,556) (3,274) (11,864) (202,342) Profit / (loss) before tax 61,498 44,824 34,692 5,107 (7,376) 138,745

Private Làrge SME Non-Client Other Total individuals corporate business As at 31 December 2018 International clients and Raiffeisen Bank in BGN Thousand budget enterprises Operating income 138,743 80,501 96,587 2,021 2,586 320,439

including net interest income 97,499 53,945 58,760 (6,095) (387) 203,722 including net income from fees and commissions 34,511 19,685 29,739 (84) (297) 83,554 Total net assets 1,725,386 2,243,042 1,105,949 2,531,511 368,874 7,974,762 in Bulgaria

Total liabilities 3,517,175 1,566,462 1,119,944 382,795 475,454 7,061,830 Raiffeisen Group Impairment costs (8,823) 7,009 2,082 (117) – 151 Administrative and other operating expenses (85,445) (35,615) (50,881) (3,184) (3,962) (179,087) Profit / (loss) before tax 44,475 51,895 47,789 (1,280) (1,376) 141,503

7. Net Interest Income Economic growth

in BGN Thousand 2019 2018 Interest income

Loans and advances to banks 6,731 3,853 Loans and advances to customers 222,662 207,620 Debt securities 8,263 7,294

Negative interest on financial liabilities 1,347 1,247 reports Segment

Total interest income 239,003 220,014

Interest expense Deposits from banks (256) (333) Deposits from customers (2,139) (1,605) Borrowings from banks (1,104) (1,857) Independent Independent

Subordinated liabilities (11,281) (11,350) report auditors` Lease liabilities (946) – Negative interest on financial assets (523) (1,148)

Total interest expense (16,248) (16,293)

Net interest income 222,755 203,721 Addresses Addresses 140

Interest income on impaired loans is recognized only on the net book value of the exposure after deducting the impairment.

The interest income on impaired assets for 2019 amount to BGN 8,750 thousand and in 2018 to BGN 10,808 thousand.

Vision and mission 8. Net Income from Fees and Commissions

in BGN Thousand 2019 2018

Fee and commission income Payment transactions 29,406 26,692 Card transactions 45,813 39,568 Cash transactions 8,985 8,335 Opening and maintenance of accounts 18,597 16,406 Raiffeisen BankRaiffeisen International Other fees on loans 7,795 5,995 Documentary operations 3,863 3,337 Securities transactions 1,244 1,062 Revenues from asset management 1,469 1,485 Insurance agency 8,091 2,530 Others 2,820 2,591 Raiffeisen GroupRaiffeisen Total fee and commission income 128,083 108,001 in Bulgaria Fee and commission expense

Payment transactions (3,768) (2,719) Card operations (local and foreign card operators) (25,354) (18,832)

Credit lines and guarantees (3,061) (1,864) Securities transactions (196) (161)

Economic growth Others (2,143) (871)

Total fee and commission expense (34,522) (24,447)

Net income from fees and commissions 93,561 83,554

9. Net Trading Result Segment reports

in BGN Thousand 2019 2018 Debt instruments 1,501 482 FX trading and revaluation 21,175 19,349 FX derivative instruments (570) 841 Interest rate derivative instruments (1,073) 577 auditors` report Net trading profit 21,033 21,249 Independent

The net result of trading in debt instruments includes a realized and unrealized dealer margin from the change in market prices of government securities and corporate bonds.

The net result of Foreign exchange includes the net result of the foreign currency purchase and sale, and the result from the revaluation in BGN for assets and liabilities denominated in foreign currency.

Addresses Foreign exchange derivative instruments include FX forwards and cross-currency swaps. Interest rate derivative instruments are mainly interest rate swaps. 141

10. Profit/Loss from Financial Assets Reported Mandatorily at Fair Value Through Profit or Loss

With the introduction of IFRS 9, the bank classifies certain assets as reported mandatorily at fair value through profit or loss. The amount of BGN 65 thousand represents a decrease in their fair value in 2019, compared to an increase of BGN 838 thousand in 2018.

11. Net Profit from Investments Vision and mission Vision in BGN Thousand 2019 2018 Net result from a change in the book value – 366 Net profit from investments – 366

12. Administrative Expenses International Raiffeisen Bank Raiffeisen Bank

in BGN Thousand 2019 2018

Personnel expenses (87,882) (78,365) Expenses for materials and outsourcing (59,587) (64,722) Depreciation and amortization (27,526) (15,169) Annual contribution to the Bulgarian Resolution Fund (10,424) (7,719) in Bulgaria

Annual contribution in Bulgarian Deposit Insurance Fund (9,911) (9,652) Raiffeisen Group Total administrative expenses (195,330) (175,627)

For 2019, the depreciation and amortization include BGN 10,646 thousand depreciation of the right to use leased assets, as a result of the application of IFRS 16. In 2018, the reported costs for renting assets under operating leases amount to 12,270 and are included in Expenses for materials and outsourcing.

The personnel expenses include the expenses for social and health insurance contributions in the amount of BGN 12,732 thousand (2018: BGN 11,790 thousand). Economic growth

In 2019, expenses for independent financial audit were reported in the amount of BGN 258 thousand (2018: BGN 259 thousand), BGN 28 thousand (2018: BGN 34 thousand) other expenses not related to the independent financial audit, as well as services for audit and review of historical financial information, requested by the auditors of the Parent Company in the amount of BGN 42 thousand. (2018: BGN 83 thousand).

Expenses for independent financial audit are all accruals in 2019 related to the mandatory financial audit of individual and consolidated statements.

Expenses not related to the independent financial audit represent the amounts accrued for the report on the reliability of reports Segment internal controls under Ordinance 14 of the BNB, as well as a review of the interim individual financial statements of the bank as of 30 September 2019.

Services for audit and review of historical financial information requested by the auditors of the Parent Company represent the costs charged for the services on the group package. Independent Independent auditors` report auditors` Addresses Addresses 142

13. Other Operating Expenses

in BGN Thousand 2019 2018 mpairment of assets acquired from collateral (660) (899)

Vision and mission Others (6,352) (2,636) Total (7,012) (3,535)

Other operating expenses include both provisions for lawsuits and amounts paid/provisioned as a result from unlawful conduct of third parties.

14. Net Result from Impairment of Financial Assets Raiffeisen BankRaiffeisen International Loans and advances to customers

Change in expected credit losses

in BGN Thousand Stage 1 Stage 2 Stage 3 Total Expected credit losses as at 01 January 2019 13,841 31,660 109,965 155,466

Raiffeisen GroupRaiffeisen New assets produced or purchased 8,634 2,021 120 10,775 in Bulgaria Assets repaid (3,880) (5,678) (15,431) (24,989) Assets transferred to Stage 1 53,262 (42,860) (10,402) – Assets transferred to Stage 2 (7,598) 25,735 (18,137) – Assets transferred to Stage 3 (385) (17,153) 17,538 –

Changes in expected credit losses due to a change in the credit risk (43,589) 38,431 33,878 28,720

Economic growth Expected credit losses on written off assets – – (18,789) (18,789) Other changes – – 38 38 Expected credit losses as at 31 December 2019 20,285 32,156 98,780 151,221

Changes in the gross amounts of the financial assets reported at amortized cost between the different stages

Loans to customers Stage 1 Stage 2 Stage 3

Segment reports 5,382,301 495,715 144,464 Transferred from Stage 1 133,864 21,702 Transferred from Stage 2 98,120 30,537 Transferred from Stage 3 8,958 16,338 auditors` report Independent Addresses 143

Commitments under issued guarantees and letters of credit, and undrawn credit lines

in BGN Thousand Stage 1 Stage 2 Stage 3 Total Expected credit losses as at 01 January 2019 1,983 4,243 6,327 12,553 New assets produced or purchased 2,417 424 88 2,930 Assets repaid (885) (1,286) (1,454) (3,625) Assets transferred to Stage 1 5,726 (3,745) (1,981) – Assets transferred to Stage 2 (180) 841 (661) – Assets transferred to Stage 3 (6) (123) 129 –

Changes in expected credit losses and mission Vision due to a change in the credit risk (7,038) 759 5,066 (1,213) Other changes – – 1 1 Expected credit losses as at 31 December 2019 2,017 1,113 7,515 10,645

Changes in the gross amounts of the commitments on issued guarantees and letters of credit,

and undrawn credit between the different stages International Raiffeisen Bank Raiffeisen Bank Off-balance sheet commitments Stage 1 Stage 2 Stage 3 2,120,084 121,107 8,298

Transferred from Stage 1 13,771 383 Transferred from Stage 2 35,641 287 Transferred from Stage 3 1,432 297 in Bulgaria

Debt instruments at fair value through other comprehensive income Raiffeisen Group

Changes in expected credit losses

in BGN Thousand Stage 1 Stage 2 Stage 3 Total Expected credit losses as at 01 January 2019 34 30 – 64 New assets produced or purchased 3 – – 3 Assets repaid (11) (11) Economic growth Assets transferred to Stage 1 30 (30) – – Assets transferred to Stage 2 – – – – Assets transferred to Stage 3 – – – – Changes in expected credit losses due to a change in the credit risk (30) – – (30) Expected credit losses as at 31 December 2019 26 – – 26 Segment reports Segment

Changes in the gross amounts between the different stages

in BGN Thousand Stage 1 Stage 2 Stage 3 Total Book value as at 01 January 2019 505,139 48,785 – 553,924 New assets produced or purchased 113,940 – – 113,940 Assets repaid (157,380) – – (157,380) Independent Independent

Assets transferred to Stage 1 48,785 (48,785) – – report auditors` Assets transferred to Stage 2 – – – – Assets transferred to Stage 3 – – – – Other changes 2,095 – – 2,095 Book value as at 31 December 2019 512,579 – – 512,579 Addresses Addresses 144

Debt instruments at amortized cost

Changes in expected credit losses

in BGN Thousand Stage 1 Stage 2 Stage 3 Total Expected credit losses Vision and mission as at 01 January 2019 53 – – 53 New assets produced or purchased 10 – – 10 Assets repaid – – – – Assets transferred to Stage 1 – – – – Assets transferred to Stage 2 – – – – Assets transferred to Stage 3 – – – – Changes in expected credit losses due to a change in the credit risk 15 – – 15 Raiffeisen BankRaiffeisen

International Expected credit losses as at 31 December 2019 78 – – 78

Changes in the gross amounts between the different stages

in BGN Thousand Stage 1 Stage 2 Stage 3 Total Book value as at 01 January 2019 512,781 – – 512,781 New assets produced or purchased 202,763 – – 202,763 Raiffeisen GroupRaiffeisen in Bulgaria Assets repaid (100,564) – – (100,564) Assets transferred to Stage 1 – – – – Assets transferred to Stage 2 – – – – Assets transferred to Stage 3 – – – –

Other changes 11,743 – – 11,743 Book value as at 31 December 2019 626,723 – – 626,723 Economic growth Reconciliation of net income from impairment

Financial Financial Undrawn Total assets at assets at credit lines and in BGN Thousand amortized fair value commitments cost through other under issued comprehensive guarantees income and letters

Segment reports of credit

Net impairment (expense) / income (14,530) 38 1,909 (12,583) Income from written-off impaired financial assets 8,541 – – 8,541 Net profit/(loss) (5,989) 38 1,909 (4,042) auditors` report Independent Addresses 145

Disclosure as at 31 December 2018 in accordance with IFRS 9

Loans and advances to customers

Change in expected credit losses

in BGN Thousand Stage 1 Stage 2 Stage 3 Total Expected credit losses as at 01 January 2018 9,917 22,579 146,448 178,944 New assets created or purchased 6,294 3,918 274 10,486 Assets repaid (2,925) (5,135) (11,073) (19,133) Assets transferred to Stage 1 34,462 (33,623) (725) 114 Vision and mission Vision Assets transferred to Stage 2 (5,727) 14,306 (8,522) 57 Assets transferred to Stage 3 (106) (9,088) 9,162 (32) Changes in expected credit losses due to a change in credit risk (28,074) 38,703 9,929 20,558 Expected credit losses on written off assets – – (35,528) (35,528) Expected credit losses

as at 31 December 2018 13,841 31,660 109,965 155,466 International Raiffeisen Bank Raiffeisen Bank

Changes in the gross amounts of financial assets reported at amortized cost between the different stages

Loans to customers Stage 1 Stage 2 Stage 3 4,649,028 417,974 134,745 Transferred from Stage 1 134,798 13,292

Transferred from Stage 2 47,931 5,518 in Bulgaria

Transferred from Stage 3 11,013 4,738 Raiffeisen Group

Commitments on issued guarantees and letters of credit, and undrawn credit lines

in BGN Thousand Stage 1 Stage 2 Stage 3 Total Expected credit losses as at 1 January 2018 1,686 2,492 6,042 10,220 New assets produced or purchased 1,508 2,442 95 4,045 Assets repaid (918) (3,288) (1,456) (5,662) Economic growth Assets transferred to Stage 1 7,214 (7,046) (168) – Assets transferred to Stage 2 (445) 535 (90) – Assets transferred to Stage 3 (1) (51) 52 – Changes in expected credit losses due to a change in credit risk (7,060) 9,158 1,851 3,949 Expected credit losses

as at 31 December 2018 1,984 4,242 6,326 12,552 reports Segment

Changes in gross amounts of commitments under issued guarantees and letters of credit and undrown credit lines between the different stages

Off-balance sheet commitments Stage 1 Stage 2 Stage 3 1,866,999 122,240 9,349

Transferred from Stage 1 31,780 1,680 Independent auditors` report auditors` Transferred from Stage 2 12,101 166 Transferred from Stage 3 33 12 Addresses Addresses 146

Debt instruments at fair value through other comprehensive income

Changes in expected credit losses

in BGN Thousand Stage 1 Stage 2 Stage 3 Total Expected credit losses Vision and mission as at 01 January 2018 17 – – 17 New assets produced or purchased 27 – – 27 Assets repaid (5) – – (5) Assets transferred to Stage 1 – – – – Assets transferred to Stage 2 (17) 17 – – Assets transferred to Stage 3 – – – – Changes in expected credit losses due to a change in credit risk 12 13 – 25 Raiffeisen BankRaiffeisen

International Expected credit losses as of 31 December 2018 34 30 – 64

Changes in gross amounts between the different stages

in BGN Thousand Stage 1 Stage 2 Stage 3 Total Book value as at 01 January 2018 530,420 – – 530,420 New assets produced or purchased 307,310 – – 307,310 Raiffeisen GroupRaiffeisen

in Bulgaria Assets repaid (276,278) – – (276,278) Assets transferred to Stage 1 – – – – Assets transferred to Stage 2 (48,785) 48,785 – – Assets transferred to Stage 3 – – –

Other changes (7,528) – – (7,528) Book value as at 31 December 2018 505,139 48,785 – 553,924 Economic growth Debt instruments at amortized cost

Changes in expected credit losses

in BGN Thousand Stage 1 Stage 2 Stage 3 Total Expected credit losses as at 01 January 2018 23 – – 23 New assets created or purchased 34 – – 34 Segment reports Assets repaid (3) – – (3) Assets transferred to Stage 1 – – – – Assets transferred to Stage 2 – – – – Assets transferred to Stage 3 – – – – Changes in expected credit losses due to a change in credit risk (1) – – (1) Expected credit losses auditors` report

Independent as at 31 December 2018 53 – – 53 Addresses 147

Changes in the gross amounts between the different stages

in BGN Thousand Stage 1 Stage 2 Stage 3 Total Book value as of 01 January 2018 430,043 – – 430,043 New assets produced or purchased 242,475 – – 242,475 Assets repaid (170,717) – – (170,717) Assets transferred to Stage 1 – – – – Assets transferred to Stage 2 – – – – Assets transferred to Stage 3 – – – – Other changes 10,980 – – 10,980 Book value as of 31 December 2018 512,781 – – 512,781 and mission Vision

Reconciliation of net impairment income

Financial Financial Undrawn Total assets at assets at credit lines and in BGN Thousand amortized fair value commitments

cost through other under issued International comprehensive guarantees Raiffeisen Bank income and letters of credit

Net (impairment) loss (8,223) (47) (2,331) (10,601) Income from written-off impaired financial assets 10,827 – – 10,827 Net profit/(loss) 2,604 (47) (2,331) 226 in Bulgaria Raiffeisen Group 15. Taxes

In BGN Thousand 2019 2018 Tax (expense) for the period (14,082) (14,015) Saving/(Expense) for deferred taxes as a result of temporary differences 92 (122) Economic growth Total tax (expense)/income (13,990) (14,137)

The income tax expense for the period represents the amount of the corporate tax due under the national tax legislation. The expense, respectively the income from deferred taxes is a result of a change in the value of deferred tax assets and liabilities.

The relationship between accrued taxes and accounting profit is as follows:

in BGN Thousand 2019 2018 Segment reports Segment Accounting profit 138,744 141,076 Tax according to the current tax rate (10% for 2019, 10% for 2018) (13,874) (14,107) Tax effect on permanent differences (116) (30) Total tax (expense)/income (13,990) (14,137) Effective tax rate 10.08% 10.02% Independent Independent auditors` report auditors` in BGN Thousand 2019 2018 Other comprehensive income, subject to tax 5,618 (295) Tax according to the current tax rate (10% for 2019, 10% for 2018) (562) 30 Tax effects in other comprehensive income (562) 30 Addresses Addresses 148

Deferred income tax balances relate to the following items in the statement of financial position as at 31 December 2019 and 2018 and are presented separately for the bank and its subsidiaries due to inadmissibility the deferred tax assets to be netted with deferred tax liabilities within the Group:

The bank

Vision and mission Assets Liabilities Net (Assets)/Liabilities

in BGN Thousand 2019 2018 2019 2018 2019 2018 Fixed assets – – 2,153 2,071 2,153 2,071 Unused leave of personnel (482) (465) – – (482) (465) Provisions for employee remuneration (1,218) (1,070) – – (1,218) (1,070) Other provisions (588) (449) – – (588) (449) Investments – – 162 162 162 162

Raiffeisen BankRaiffeisen Impairment of assets acquired International from collateral (117) (114) – – (117) (114) Impairment of investments in subsidiaries – (60) – – – (60) Net tax (assets)/liabilities (2,405) (2,158) 2,315 2,233 (90) 75

Subsidiaries

Raiffeisen GroupRaiffeisen The subsidiaries report deferred tax assets in the amount of BGN 53 thousand related to provisions for unused leave and in Bulgaria other income of the staff, as well as deferred tax liabilities under other provisions. The deferred tax assets reported in the balance sheet of the Group are a net effect of deferred tax liabilities on fixed assets and deferred tax assets on provisions of Raiffeisen Leasing Bulgaria EOOD in the amount of BGN 16 thousand. As of 31 December 2018, the deferred tax assets of subsidiaries amount to BGN 110 thousand.

Deferred taxes are calculated for all temporary differences at a tax rate of 10 per cent.

The changes in temporary differences during the year are recognized in profit or loss as follows: Economic growth Change during the year net for all companies in the Group

Tax (assets)/liabilities 2019 Changes 2018 In the profit or loss in BGN Thousand Fixed assets, net 2,220 117 2,103 Unused leave of personnel (536) (20) (516) Segment reports Provisions for employee remuneration (1,218) (148) (1,070) Other provisions (638) (136) (502) Investments 162 (0) 162 Impairment of assets acquired from collateral (117) (0) (117) Impairment of investments – 60 (60) Tax loss – 35 (35) auditors` report (127) (92) (35) Independent Addresses 149

16. Other Comprehensive Income

in BGN Thousand 2019 2018 Items that will not be subsequently reclassified to profit or loss, incl.: 2,199 309 Revaluations of liabilities under defined benefit plan 163 309 Revaluations of equity instruments at fair value through OCI 2,036 – Components that will subsequently be reclassified to profit or loss, incl.: 3,582 (295) Changes in the fair value of debt instruments at fair value through OCI 3,582 (295) Tax effect in other comprehensive income (562) 30 Vision and mission Vision Other comprehensive income 5,224 49

17. Cash and Balances with Central Banks

in BGN Thousand 2019 2018 International Raiffeisen Bank Raiffeisen Bank Cash on hand 173,883 164,576 ATM cash 49,395 62,506

Cash balances with the Central Bank 994,632 1,061,379 Total 1,217,910 1,288,461

The cash balances with the Central Bank include the settlement account for direct participation in the money market, in the securities market and for participation in the BGN payments system, as well as the accounts for the mandatory minimum in Bulgaria reserves. 50 per cent of the cash balances are accepted as reserve assets, including the cash in ATMs, the settlement account, Raiffeisen Group as well as other special accounts in BGN and EUR with the BNB.

18. Other Demand Deposits

Other demand deposits as at 31 December 2019, in the amount of BGN 126,200 thousand (2018: BGN 122,187 thousand) represent nostro accounts with banks, as well as overnight deposits on the money market and existing cash in BNB account for participation in the guarantee mechanism. Economic growth

19. Financial Assets Held for Trading

in BGN Thousand 2019 2018 Bulgarian government securities 33,430 39,840

Bulgarian corporate bonds 21,466 5,318 reports Segment Foreign government securities 6,751 14,264 Total 61,647 59,422 Independent Independent auditors` report auditors` Addresses Addresses 150

20. Derivative Financial Instruments

The Group uses the following derivative financial instruments for both hedging and trading operations:

• FX forwards represent commitments for purchase and sale of currency, including spot transactions with future delivery date. Vision and mission • FX and interest rate swaps represent commitments to exchange one cash flow for another.

Swap transactions result in the exchange of currencies or interest rates (such as a fixed rate against a floating interest rate) or a combination - cross-currency interest rate swaps. Usually, these transactions do not involve the exchange of nominal values. Swaps inherent credit risk represents the potential cost of replacing the contract if the contractor fails to perform its obligations. The risk is monitored on an ongoing basis, considering the fair value, the nominal value of the contract, as well as the liquidity of the market.

In order to control the credit risk of derivative instruments, the Group assesses its counterparties using the techniques and methods applied to the lending activity. Raiffeisen BankRaiffeisen International All derivative financial instruments held by the Group are presented in the table below.

in BGN Thousand Nominal value Fair value

Assets Liabilities

As at 31 December 2019

Raiffeisen GroupRaiffeisen FX forwards 758,024 5,506 5,540 in Bulgaria FX swaps 9,139 20 8 Interest rate swaps 160,769 1,225 3,816 927,932 6,751 9,364

As at 31 December 2018

FX forwards 460,309 10,684 10,505

Economic growth FX swaps 164,265 3,191 23 Interest rate swaps 108,478 389 1,398 733,378 14,264 11,926

21. Financial Assets Mandatorily at Fair Value Through

Segment reports Profit or Loss

in BGN Thousand 2019 2018 Loans and advances to customers 26,268 28,383 Large Corporate Clients 26,268 28,383 Total 26,268 28,383 auditors` report

Independent Loans to customers classified according to IFRS 9 in the category "Financial assets reported mandatorily at fair value through profit or loss" represent loans where the contractual cash flows are not only payments of principal and interest on the outstanding principal. Addresses 151

22. Financial Assets at Fair Value Through Other Comprehensive Income

in BGN Thousand 2019 2018 Bulgarian government securities 263,884 231,005 Foreign government securities 99,240 107,885 Foreign corporate bonds 149,456 215,034 Foreign corporate shares 7,044 4,942

Bulgarian corporate shares 2,837 2,848 and mission Vision Total 522,461 561,714

23. Financial Assets at Amortized Cost

А. Loans and advances to banks International Raiffeisen Bank Raiffeisen Bank

in BGN Thousand 2019 2018

Money market deposits Foreign banks 342,342 221,752 342,342 221,752 in Bulgaria

B. Debt securities Raiffeisen Group

in BGN Thousand 2019 2018 Bulgarian government securities 474,325 394,555 Bulgarian corporate bonds 59,724 59,727 Bulgarian municipal bonds 9,169 13,737 Foreign government securities 19,919 40,892 Foreign bonds (financial institutions) 63,586 3,870 Economic growth Gross value of debt securities 626,723 512,780 Minus: Provisions for impairment (78) (53) Net value 626,645 512,728 Segment reports Segment Independent Independent auditors` report auditors` Addresses Addresses 152

C. Loans and advances to customers

in BGN Thousand 2019 2018

Private individuals - Overdrafts 2,802 3,261 Vision and mission - Credit cards 57,827 52,166 - Consumer loans 1,054,296 893,445 - Mortgage loans 1,168,152 955,574 - Finance lease 60,088 45,443

2,343,165 1,949,889

Corporate clients - Large Corporate Clients 2,347,454 2,136,024 Raiffeisen BankRaiffeisen International including Finance lease 288,677 233,696 - SME 1,331,861 1,144,217 including Finance lease 115,141 97,796 3,679,315 3,280,241 Gross value of loans 6,022,480 5,230,131 Minus: Provisions for impairment (151,219) (155,465) Raiffeisen GroupRaiffeisen

in Bulgaria Net value 5,871,261 5,074,665

D. Net investment in finance lease

The net investment in finance lease represents the gross investment in finance lease less the unrealized finance income and less accumulated impairment.

Economic growth in BGN Thousand 2019 2018 With maturity up to 1 year 148,814 126,360 With maturity from 1 to 5 years 322,693 255,777 With maturity over 5 years 20,672 22,071 Gross investment in the finance lease 492,179 404,209 Unrealized finance income (28,273) (27,241) Minimum lease payments 463,906 376,968 Segment reports Impairment (6,739) (4,794) Net investment in finance lease 457,167 372,174

E. Other receivables

As at 31 December 2019, other receivables include balances on the settlement of card transactions in the amount of BGN 20,212 thousand (2018: BGN 19,427 thousand). auditors` report Independent Addresses 153

24. Property, Plant and Equipment

In BGN Thousand Total Buildings Computers Inventory Vehicles Recon- Assets Right structions under con- of use structions

Cost

31 December 2018 131,235 6,495 42,015 43,610 6,102 29,606 3,406 – Effect from application of IFRS 16 48,589 – – – – – – 48,589 1 January 2019 179,824 6,495 42,015 43,610 6,102 29,606 3,406 48,589 Vision and mission Vision Acquired 17,246 – 2,730 6,421 1,692 2,533 1,394 2,476 Disposed (11,276) – (1,189) (7,989) (1,254) (902) – (19) Transferred to fixed assets (3,403) – – – – – (3,403) – 31 December 2019 182,314 6,495 43,557 42,042 6,539 31,237 1,396 51,046

Accumulated depreciation International

1 January 2019 90,722 2,925 32,210 29,824 1,817 23,947 – 0 Raiffeisen Bank Expense for 2019 19,617 243 3,394 3,195 1,072 1,491 – 10,222 Depreciation of disposed (10,810) – (1,189) (7,891) (829) (902) – (1) 31 December 2019 99,529 3,168 34,414 25,128 2,061 24,537 0 10.221

Book value 31 December 2019 82,785 3,327 9,143 16,914 4,478 6,701 1,396 40,826 in Bulgaria

Cost Raiffeisen Group

1 January 2018 136,104 6,495 40,994 49,161 4,646 30,842 3,965 – Acquired 12,979 – 4,002 4,190 2,192 1,778 817 – Disposed (16,472) – (2,981) (9,741) (736) (3,014) – – Transferred to fixed assets (1,376) – – – – – (1,376) – 31 December 2018 131,235 6,495 42,015 43,610 6,102 29,606 3,406 –

Accumulated depreciation Economic growth 1 January 2018 98,739 2,682 32,044 36,884 1,463 25,666 – – Expense for 2018 8,151 243 3,146 2,588 879 1,295 – – Depreciation of disposed (16,167) – (2,981) (9,648) (525) (3,014) – – 31 December 2018 90,723 2,925 32,210 29,824 1,817 23,947 – – Book value

31 December 2018 40,512 3,570 9,806 13,786 4,285 5,659 3,406 – reports Segment Book value 1 January 2018 37,365 3,813 8,951 12,277 3,182 5,177 3,965 – Independent Independent auditors` report auditors` Addresses Addresses 154

25. Intangible Assets

Total Software Licences Assets In BGN Thousand under construction Vision and mission Cost

1 January 2019 101,426 88,987 364 12,075 Acquired 28,534 23,086 – 5,448 Disposed (473) (118) (355) - Transferred to fixed assets (12,053) – – (12,053) 31 December 2019 117,434 111,955 9 5,470 Accumulated depreciation Raiffeisen BankRaiffeisen

International 1 January 2019 64,960 64,605 355 – Expense for 2019 7,909 7,907 2 – Amortization of disposed (473) (118) (355) – 31 December 2019 72,396 72,394 2 – Book value 45,038 39,562 7 5,470 31 Decembe26r 2019

Raiffeisen GroupRaiffeisen Cost in Bulgaria 1 January 2018 89,255 81,554 367 7,334 Acquired 17,218 7,702 – 9,516 Disposed (272) (269) (3) – Transferred to fixed assets (4,775) – – (4,775)

31 December 2018 101,426 88,987 364 12,075 Accumulated amortization Economic growth 1 January 2018 58,064 57,708 355 58,064 Expense for 2018 7,020 7,017 3 – Amortization of disposed (123) (120) (3) – 31 December 2018 64,961 64,605 355 – Book value 31 December 2018 36,465 24,382 9 12,075

Segment reports Book value 1 January 2018 31,192 23,847 12 7,334

26. Other Assets

in BGN Thousand 2019 2018 auditors` report

Independent Deferred expenses 3,936 3,564 Assets acquired from collateral 1,178 1,307 Other 17,910 16,680 Total 23,024 21,551

The item “Other” includes blocked cash in the amount of BGN 11,402 thousand (2018: BGN 5,887 thousand) provided in the form of a margin for concluding derivative transactions. Addresses 155

The table below presents the movement in the assets acquired from collateral / seized leasing assets.

in BGN Thousand 2019 2018 Balance 1 January 1,307 1,252 Acquired 2,192 1,547 Sold (1,989) (593) Impaired (332) (899) Balance 31 December 1,178 1,307

28. Financial Liabilities at Amortized Cost and mission Vision

А. Deposits from banks

in BGN Thousand 2019 2018 Loro accounts International Raiffeisen Bank Raiffeisen Bank Local banks 2,838 2,871 Foreign banks 55,464 37,370

Total 58,302 40,241

in BGN Thousand 2019 2018 Money market deposits in Bulgaria

Local banks – 50,398 Raiffeisen Group Foreign banks 12,200 5,500 Total 12,200 55,898 Total deposits from banks 70,502 96,139

B. Deposits from customers Economic growth in BGN Thousand 2019 2018 Large corporate customers and budget entities - Current accounts 1,625,854 1,408,514 - Term deposits 133,699 157,949 1,759,553 1,566,463 SME Segment reports Segment - Current accounts 1,305,467 1,052,139 - Term deposits 67,560 67,805 1,373,027 1,119,944 Private individuals

- Current accounts 2,537,114 2,093,126

- Term deposits and savings products 1,571,185 1,424,048 Independent auditors` report auditors` 4,108,299 3,517,174

Total 7,240,879 6,203,581 Addresses Addresses 156

C. Borrowings from banks

Borrowings from banks include long-term loans from international financial institutions for financing small and medium-sized enterprises in the fields of environmental protection, energy, services, industry and tourism, as well as municipalities and private individuals.

Vision and mission The bank also uses syndicated and other loans from foreign credit institutions to finance its lending business.

in BGN Thousand 2019 2018 Credit lines from international financial institutions 216,950 242,195 Loans from foreign banks – 24,261 Loans from local banks 13,806 23,010 Total 230,756 289,467 Raiffeisen BankRaiffeisen

International D. Subordinated liabilities

31 December 2019, the subordinated liabilities consist of:

• Debt-capital hybrid instrument with principal in the amount of BGN 177,981 thousand (book value BGN 178,343 thousand), issued by the bank in 2001. The repayment of the debt-equity hybrid instrument is not time-bound. The management believes that the use of this tool will be for a period of more than 5 years.

• Subordinated term debt with principal in the amount of BGN 185,022 thousand. (book value BGN 186,875 Raiffeisen GroupRaiffeisen thousand), issued by the bank in 2013 and 2014 for a period of 10 years. in Bulgaria

The bank has received permission from the Bulgarian National Bank to include these subordinated liabilities in its additional capital reserves and to increase its equity for capital adequacy purposes.

The bank regularly services the contractual payments under the subordinated liabilities.

E. Other liabilities Economic growth in BGN Thousand 2019 2018 Transfers in process 15,567 18,078 Liabilities under factoring transactions 22,783 23,375 Other financial liabilities 21,252 11,034 Total 59,602 52,487

Segment reports Transfers in process represent ordered customer payments, the value date of which will occur after 31 December 2019.

F. Lease liabilities

From 01 January 2019, the bank applies the new IFRS 16 for accounting for leases. Financial liabilities at amortized cost include lease liabilities in the amount of BGN 40,612 thousand. auditors` report

Independent 28. Other Liabilities

As at 31 December 2019, the item "Other payables" include deferred income, VAT accrued for payment, as well as income tax and social security contributions accrued for payment and related to the staff remuneration paid at the year-end. Addresses 157

29. Provisions for Liabilities

in BGN Thousand 2019 2018 Provisions for employees’ remuneration 10,634 9,163 Provisions for unused paid leave 5,100 4,853 Provisions for defined income of staff 1,839 1,837 Provisions for impairment losses on commitments under issued guarantees and letters of credit, and undrawn credit lines 10,645 12,552 Other provisions 6,345 5,276

Total 34,563 33,682 and mission Vision

The Group allocates provisions for unused leave, that represent the undiscounted short-term liabilities to staff for the days worked during the year.

Provisions are also allocated for other short-term liabilities to the staff, such as amounts accrued but not paid to the employees, related to the results achieved by them, according to the assessment of the Management for the implementation of the planned tasks and objectives for the year. International Raiffeisen Bank Raiffeisen Bank Liabilities for defined benefit plans upon retirement

The accrued provision for retirement benefits as at 31 December 2019 amounts to BGN 1,839 thousand. The approximate amount of the liabilities is based on an actuarial report, using the following parameters and assumptions:

• Discount rate: 0,6 per cen;

• Date of retirement: according to the provisions for length of service and age. in Bulgaria

Changes in the present value of the liabilities under the defined benefit plans Raiffeisen Group

in BGN Thousand 2019 2018 Present value of the liabilities as of 1 January 1,838 2,000 Amounts paid (105) (168) Cost of current services 249 282 Interest expense 20 31 Economic growth Actuarial (profit) / loss for the period (163) (307) Present value of the liabilities as at 31 December 1,839 1,838

Current service cost is recognized in profit or loss in personnel expenses. The actuarial (gain)/loss for the period is recognized in other comprehensive income. Segment reports Segment Independent Independent auditors` report auditors` Addresses Addresses 158

30. Changes in the Liabilities Arising from Financing Activities

The following table summarizes the changes in the liabilities arising from financial activities, including both cash flow changes and non-cash changes, containing a reconciliation between opening and closing balances in the statement of financial Vision and mission position of the liabilities arising from financial activities for the year ended 31 December 2019 and 31 December 2018.

1 January Cash Cash Effective Other Interest 31 December 2019 inflows outflows interest rate non cash paid 2019 in BGN Thousand metod changes accruals Non-current interest-bearing 289,467 51,467 (113,284) 145 3,137 (176) 230,756 loans and borrowed funds

Raiffeisen BankRaiffeisen Dividends paid – – (131,549) – 131,549 – – International Total liabilities from financial 289,467 51,467 (244,833) 145 134,686 (176) 230,756 activity

1 January Cash Cash Effective Other Interest 31 December 2018 inflows outflows interest rate non cash paid 2018 in BGN Thousand method changes accruals Raiffeisen GroupRaiffeisen

in Bulgaria Non-current interest-bearing 339,786 78,233 (128,601) 361 – (312) 289,467 loans and borrowed funds Dividends paid – – (134,465) – 134,465 – –

Total liabilities from financial 339,786 – (263,066) 361 134,465 (312) 339,786 activity Economic growth

31. Equity

Share capital

As at 31 December 2019, the registered and paid-in share capital of the bank is formed by 603,447,952 shares with a

Segment reports nominal value of BGN 1 each.

"Statutory Reserve" Fund

The "Statutory Reserve" Fund includes reserves designated to meet the requirements of the local legislation. According to the Commercial Law, the bank sets aside one tenth of its profits after taxes and before the payment of dividends to the "Statutory Reserve" Fund, until the amounts set aside reach 10 per cent of its equity.

auditors` report Retained earnings Independent This item accounts for all other general reserves after the "Statutory Reserve" Fund is set aside, which, after deducting actuarial gains / losses, can be used for dividends payout and to cover future losses.

Revaluation reserve

The revaluation reserve represents the accumulated net changes in the fair value of the available-for-sale financial assets until

Addresses the financial asset is sold or written off. 159

32. Contingent Liabilities and Commitments

The Group issues financial guarantees and letters of credit to guarantee the obligations of its clients to third parties (credit commitments). They represent financial instruments, engaging the bank and are characterized as a credit substitute.

The nominal value of contingent liabilities and commitments is presented in the table below. The amounts of guarantees and letters of credit presented represent the maximum loss that the Group would recognize in the statement of financial position in the event that a customer fails to meet its contractual obligations.

in BGN Thousand 2019 2018 Guarantees and letters of credit issued 394,633 315,438

including to banks 12,179 6,926 and mission Vision Undrawn credit lines 1,853,026 1,683,149 including to banks 92,385 87,319 Total 2,247,659 1,998,587

The Group allocates provisions for impairment due to credit risk on its commitments for which there is an irrevocable commitment. The provisions for impairment of loan commitments represent an estimate of the potential loss that the Group International would realize in the event that the loan commitment is utilized by the customer, taking into account the probability that this Raiffeisen Bank will happen. For this purpose, the Group converts the net contingent exposure after deducting the liquid collateral to the balance sheet.

For those converted to balance sheet equivalents, the same calculation processes apply to contingent exposures as for the balance sheet exposures. in Bulgaria

33. Cash and Cash Equivalents Raiffeisen Group

For the purposes of the statement of cash flows, cash and cash equivalents represent the following balances with an original maturity of up to 3 months:

in BGN Thousand 2019 2018 Cash 223,278 227,042 Current accounts with other banks 84,116 83,915

Cash balances with the Central Bank 994,632 1,061,379 Economic growth Receivables from other banks with original maturity of up to 3 months 137,292 214,759 Total 1,439,318 1,587,094

34. Group Members

Subsidiaries reports Segment

Subsidiaries are these entities, which are controlled by the bank. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The revenues and expenses of the subsidiary are included in the consolidated financial statements as of the date of acquisition to the date on which the bank loses control over the subsidiary.

The intragroup balances, transactions, income and expenses arising from transactions between the companies within the Independent Group are completely eliminated in the preparation of the consolidated financial statements. Gains and losses arising from report auditors` intragroup transactions that are recognized in assets, such as loans and receivables, are eliminated in full. Addresses Addresses 160

The subsidiaries controlled by the bank as at 31 December 2019 are as follows:

Raiffeisen Leasing Bulgaria EOOD – 100 per cent participating interest

Raiffeisen Leasing Bulgaria OOD was founded in 2004, with Raiffeisenbank (Bulgaria) EAD (24.5 per cent) and Raiffeisen Leasing International GmbH (75.5 per cent) as partners. In 2016, the bank acquired full ownership of Raiffeisen Leasing

Vision and mission OOD by buying all shares of Raiffeisen Leasing International GmbH. After the share purchase, the legal status of the company changed to Raiffeisen Leasing Bulgaria EOOD.

In August 2019, the bank increased the capital of Raiffeisen Leasing Bulgaria EOOD with a non-monetary contribution in the amount of BGN 793 thousand, representing the value of the bank's participation in the subsidiary Raiffeisen Insurance Broker EOOD. The assessment of the participation was made by an expert, according to the requirements of art. 72 of the Commercial Law.

The company’s registered capital amounts to BGN 35,200 thousand. As of 31 December 2019, the total assets of Raiffeisen Leasing Bulgaria EOOD reached BGN 495 million (2018: BGN 399 million). Raiffeisen BankRaiffeisen

International Raiffeisen Service EOOD – 100 per cent participating interest

Raiffeisen Service EOOD is registered in the Commercial Register with a capital of BGN 4,220 thousand. The scope of activity of the company includes property management, financial and accounting consultancy, legal consultancy, accounting services, evaluation of movable and immovable property, financial assets and companies, electronic data processing and information analysis, information services, rental of safes, leasing. As at 31 December 2019, the net assets of the company amount to BGN 4,741 thousand. (2018: BGN 5,320 thousand).

Raiffeisen Asset Management (Bulgaria) EAD – 100 per cent participating interest Raiffeisen GroupRaiffeisen in Bulgaria Raiffeisen Asset Management (Bulgaria) EAD was licensed in 2005 by the Financial Supervision Commission to conduct activities under Article 202, paragraph 1, items 1, 2 and 3 of the Public Offering of Securities Act (POSA), namely management of the activities of collective investment schemes (CIS) and of closed-end investment companies, as well as activities under Article 202, paragraph 2 of POSА - management of individual portfolios at own discretion, without special client orders and providing investment advice on securities. As of 31 December 2019, the assets under management in the six

funds reached BGN 215,9 mln., i.e. a market share of 12.7 per cent. The registered capital of the company amounts to BGN 250 thousand and its net assets as of 31 December 2019 amount to BGN 1,427 thousand (2018: BGN 1,523 thousand).

Economic growth Raiffeisen Insurance Broker EOOD – 100 per cent participating interest

Raiffeisen Insurance Broker EOOD was established in 2006 with 100 per cent ownership of Raiffeisenbank (Bulgaria) EAD. The company was entered in the register of the insurance brokers on 30 March 2006 with decision №250-ZB of the Financial Supervision Commission.

The business of the company is related to the intermediation in concluding insurance contracts between the clients of the Broker and the insurance companies.

Segment reports In August 2019, the bank transferred its participation in the company to its subsidiary Raiffeisen Leasing Bulgaria EOOD.

As at 31 December 2019, the registered capital of the company amounts to BGN 5 thousand and its net assets are BGN 2,837 thousand (2018: BGN 5,533 thousand).

Disclosure under art. 70, para. 6 of the Law on Credit institutions auditors` report Independent Addresses 161

The data provided is as at 31 December 2019 and does not include consolidation eliminations:

Name Activity Seat Turnover Number Profit Tax Return State description amount * of before charged on subsidiaries Bulgaria: employees tax assets received

Finance lease, lending with funds not raised through Raiffeisen Leasing public fundraising Sofia 11,122 103 3,853 (351) 1% – (Bulgaria) EOOD or other repayable funds, all additional leasing services permitted by the LCI Vision and mission Vision Conducting activities under Article 202, paragraph 1, items Raiffeisen Asset 1, 2 and 3 of the Sofia 1,479 12 280 (28) 12% – management EAD Public Offering of Securities Act (POSA), as well as

activities under International

Article 202, Raiffeisen Bank paragraph 2 of POSÀ

Insurance intermediation between Intermediation in Raiffeisen concluding Sofia 3,720 17 3,033 (303) 93% – Insurance insurance contracts Broker EOOD between the clients of the Broker and in Bulgaria

the insurance Raiffeisen Group companies property management, financial and accounting consultancy, legal property management, financial and accounting consultancy, legal consultancy,

Raiffeisen Economic growth accounting services, Service EOOD Sofia 695 2 300 (61) 5% – evaluation of movable and immovable property, financial assets and companies, electronic data processing and information analysis, information services, rental of safes,

leasing reports Segment Independent Independent auditors` report auditors` Addresses Addresses 162

The consolidation methods applied are as follows:

Participation Participation Consolidation Consolidation as of as of method method 31 December 31 December 2019 2018 2019 2018

Vision and mission Raiffeisen Service EAD 100% 100% Full Full consolidation consolidation Raiffeisen Asset Management (Bulgaria) EAD 100% 100% Full Full consolidation consolidation Raiffeisen Insurance broker EOOD 100% 100% Full Full consolidation consolidation Raiffeisen Leasing Bulgaria OOD 100% 100% Full Full consolidation consolidation Raiffeisen BankRaiffeisen International 35. Related Parties

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions or if the related party entity and another entity are subject to common control with the bank.

In the ordinary course of business, the bank enters into various relationships with related parties, such as granting loans, accepting deposits or other transactions. Transactions with related parties are subject to agreed terms. Raiffeisen GroupRaiffeisen in Bulgaria Parent company and company exercising ultimate control

The direct owner of the bank's capital is Raiffeisen SEE Region Holding GmbH, which is 100% owned by Raiffeisen Bank International AG, Austria - the parent company. Therefore, the Group considers that, in accordance with the requirements of IAS 24, for the purposes of disclosure of transactions with related parties, the following persons are related:

–– Shareholders and parties related to the shareholders; Economic growth –– Key management personnel and parties related to the key management personnel.

Shareholders of the bank and parties related to the shareholders

Related party Type of transaction Transaction value Balance in BGN Thousand for the period at 31 December 2019 2018 2019 2018

Segment reports Parent company Loans and advances of banks 41,082 64,405 Parent company Positive fair value of derivative financial instruments 4,414 6,533 Parent company Fixed assets 2,929 3,816 Parent company Other assets 11,448 5,898 Parent company Deposits from banks 12,552 2,830 Parent company Negative fair value of

auditors` report derivative financial instruments 4,962 8,879 Independent Parent company Subordinated liabilities 365,218 365,284 Parent company Other liabilities 133 89 Parent company Interest income 1,941 1,350 Parent company Interest expense (14,125) (12,808) Parent company Fee and commission income 99 96 Parent company Fee and commission expense (42) (177) Addresses Parent company Profit or loss on financial assets and liabilities held for trading (3,417) (2,666) 163

Related party Type of transaction Transaction value Balance in BGN Thousand for the period at 31 December 2019 2018 2019 2018 Parent company Administrative expenses (10,854) (9,483) Parent company Off-balance sheet commitments and undrawn credit lines 2,630 1,582 Entities related to the parent company Loans and advances to banks 326,800 98,033 Entities related to the parent company Investment securities 32,156 126,457 Entities related to the parent company Loans and advances to customers 19,478 18,458 Entities related to the parent company Fixed assets 9,338 940 Vision and mission Vision Entities related to the parent company Deposits from banks 3,898 32 Entities related to the parent company Deposits from customers 572 1,520 Entities related to the parent company Other financial liabilities 9,040 Entities related to the parent company Other liabilities 202 Entities related to the parent company Interest income 2,724 2,008 Entities related to the parent company Interest expense (225) International Entities related to the parent company Fee and commission income 18 22 Raiffeisen Bank Entities related to the parent company Fee and commission expense (4,395) (3,709) Entities related to the parent company Administrative expenses (4,730) (4,605)

Entities related to the parent company Off-balance sheet commitments and undrawn credit lines 1,059 367

Key management personnel and parties related to the key management in Bulgaria

personnel Raiffeisen Group

The key management personnel includes members of the supervisory and management boards and other management personnel who have the authority and responsibility to plan, manage and control the activities of the Group, directly or indirectly, including each director (executive or otherwise) of the Group. Persons related to the key management personnel are the members of their families and companies or activities controlled by the key management personnel and members of their families. During the financial year there were 5 members of the Supervisory Board of the Group and 5 members of the Management Board. As of the reporting date, apart from the members of the Supervisory and Management Boards, the Group does not consider other persons as key management personnel.

The table below shows the remuneration of the key management personnel: Economic growth

Remuneration of the key management personnel in BGN Thousand 2019 2018 Short-term employee remunerations 3,530 3,187 Total 3,530 3,187 Segment reports Segment The related party transactions are as follows:

Banking services

The Group provides current account services to related parties and accepts funds on term deposits, on which it pays interest, as well as it grants loans for which it receives interest accordingly. The Group also collects fees and commissions for services provided to related parties. Independent Independent Other transactions report auditors`

Other related party transactions include rent received from and paid to related parties for the use of real estate, as well as costs of other services provided. Addresses Addresses 164

Transactions with key management personnel

Type of transaction Value of the transactions Book value in BGN Thousand for the year ended as of 31 December 2019 2018 2019 2018 Vision and mission Current accounts and deposits – – 2,379 1,692 Fee and commission income 3 3 – – Remuneration 3,530 3,187 – – Loans and credit commitments – – 16 8

36. Events After the Reporting Date Raiffeisen BankRaiffeisen International The coronavirus (COVID-19) pandemic was confirmed by the World Health Organization in early 2020 and spread from China around the world, causing disruptions to normal business activities. On 8 March 2020, the first positive cases of COVID-19 were announced in Bulgaria. On 13 March 2020, the National Assembly of the Republic of Bulgaria declared a state of emergency in the country due to the coronavirus and intensified anti-epidemic measures and restrictions were introduced.

Raiffeisen GroupRaiffeisen economic entities. For the purposes of the individual financial statements for 2019, the management estimates the pandemic

in Bulgaria as a non-adjusting event occurring after the balance sheet date.

In accordance with the measures taken by the government of the country and the guidelines of the Governing Council of the Bulgarian National Bank, the management of the bank has initiated and already implemented a number of actions to limit the potential future negative consequences and effects:

• A committee has been formed in Raiffeisenbank to monitor the situation and to coordinate the actions related to the threat;

Economic growth • The situation on a global and national level is monitored on a daily basis, as well as the risks associated with our employees;

• A constant contact is maintained with the other members of the Raiffeisen International Group in order to coordinate actions and to exchange experience;

• Regular communications are sent to the bank's employees regarding the situation and the measures taken;

• The continuity of critical processes in the bank has been ensured according to the pandemic response plan

Segment reports (maintained by the bank);

• At Group level, an analysis was initiated to evaluate the impact of the spread of the Corona Virus on our clients and the ability to service their exposures;

• An analysis has been made at an industry level and measures have been taken to lower the ratings of customers in the most affected industries;

• The effects on the plans and budget indicators of the bank are evaluated, both for the income and the expense part (provisions, revaluations, etc.); auditors` report Independent • The bank is participating in the decreed moratorium on loan payments. The delayed payments shall not be decreased or canceled but shall be reflected as changes in the customer’s repayment schedule. Debtors are entitled to apply for one of the 3 mechanisms until 3 June 2020. Addresses 165

As of the date these Consolidated financial statements are issued, there is still uncertainty on the future development of the pandemic, its duration and impact on the country’s economy in 2020. Notwithstanding the measures introduced by the Bulgarian Government to support households and businesses, the Group expects increase in impairment losses resulting from increased credit risk of some customers. The Group has classified the different industries that it is exposed to and performs regular reviews of the different industry classes depending on the perspectives for development. Currently there are no significant delays and increase in credit risk by debtors and industries.

The constantly changing environment requires constant necessity to update the economic scenarios in 2020 based on the updated economic forecasts. The Group has prepared stress scenarios reflecting possible developments of the pandemic. All scenarios show no deterioration in regulatory requirements on the Group’s capital and liquidity position.

Except the above mentioned, there are no other significant events that could affect the Consolidated financial statements. Vision and mission Vision International Raiffeisen Bank Raiffeisen Bank

in Bulgaria Raiffeisen Group Economic growth Segment reports Segment Independent Independent auditors` report auditors` Addresses Addresses 166 Vision and mission Raiffeisen BankRaiffeisen International Raiffeisen GroupRaiffeisen in Bulgaria

Economic growth Adresses Segment reports auditors` report Independent Addresses 167 Vision and mission Vision International Raiffeisen Bank Raiffeisen Bank

in Bulgaria Raiffeisen Group

Addresses 168 Economic growth Segment reports Segment Independent Independent auditors` report auditors` Addresses Addresses 168

Addresses and Contacts Branch Network in Vision and mission Bulgaria

Head Office Sofia 8 Sofia 18 1407 Sofia 1715 Sofia 1517 Sofia 55, N.Vaptsarov Blvd. Business Park Sofia, bl. 11A Botevgradsko Shose Blvd., bl. 4, entr. G-E Business Centre EXPO 2000 Tel.: (+359 2) 9 705 712 Tel.: (+359 2) 8 190 3 61/362 Fax: (+359 2) 9 742 019 Fax: (+359 2) 9 454 422 Raiffeisen BankRaiffeisen Tel.: (+359 2) 91 985 101 International Fax: (+359 2) 9 434 528 Sofia 9 Sofia 19 Raiffeisenbank (Bulgaria) EAD 1330 Sofia 1000 Sofia Krasna Polyana Compl. 93A, Vasil Levski Blvd. Raiffeisenbank (Bulgaria) EAD N. Mushanov Blvd., bl. 31 Tel.: (+359 2) 9 396 011/12 Offices in Sofia: Tel.: (+359 2) 8 126 053 Fax: (+359 2) 9 802 377 Fax: (+359 2) 9 201 134 Sofia Main Branch Sofia 20 1504 Sofia Sofia 10 1612 Sofia 18-20, Gogol Str. 1220 Sofia 7, Tsar Boris III Blvd., entr. A-B Raiffeisen GroupRaiffeisen Tel.: (+359 2) 91 985 702/ 121 Nadezhda Compl. Tel.: (+359 2) 8 051 612/613 in Bulgaria Fax: (+359 2) 91 985 139 Lomsko Shose Blvd., bl. 171 Fax: (+359 2) 9 523 878 Tel.: (+359 2) 8 134 013 Sofia 2 Sofia 22 Fax: (+359 2) 9 361 193 1000 Sofia 1750 Sofia 135, G.S. Rakovski Str. Sofia 11 Mladost 1 Compl., Saharov Market

Tel.: (+359 2) 8 155 712 1463 Sofia Tel.: (+359 2) 9 764 911/912 Fax: (+359 2) 9 803 042 3, Hristo Stambolski Str. Fax. (+359 2) 9 745 030 Tel.: (+359 2) 9 178 113/114 Sofia 3 Sofia 23 Fax: (+359 2) 9 549 386 Economic growth 1750 Sofia 1712 Sofia Mladost 1 Compl, bl.30, entr. V Sofia 12 Mladost 3 Compl., bl. 304 Tel.:(+359 2) 9 760 960/967/968 1202 Sofia Tel.: (+359 2) 8 175 011/12 Fax: (+359 2) 9 753 158 65, Maria Luiza Blvd. Fax: (+359 2) 9 744 479 Tel.: (+359 2) 9 264 043 Sofia 4 Sofia 24 Fax: (+359 2) 9 800 781 1303 Sofia 1504 Sofia 132, Todor Alexandrov Blvd. Sofia 14 10, Yanko Sakazov Blvd. Tel: (+359 2) 9 159 921/922 1111 Sofia Tel.: (+359 2) 8 192 711/712/713 Fax: (+359 2) 9 811 921 43, Shipchenski Prohod Blvd. Fax: (+359 2) 9 434 074 Segment reports Tel.: (+359 2) 8 171 863/864 Sofia 5 Sofia 26 Fax: (+359 2) 9 712 008 1606 Sofia 1612 Sofia 5, Gen. Totleben Blvd. Sofia 15 124A, Tsar Boris III Blvd. Tel: (+359 2) 9 157 913/14/15 1407 Sofia Tel.: (+359 2) 8 081 752 Fax: (+359 2) 9 532 880 55, N. Vaptsarov Blvd. Fax: (+359 2) 9 559 632 Business Centre EXPO 2000 Sofia 6 Sofia 29 Tel.: (+359 2) 8 190 061/062 1421 Sofia 1574 Sofia Fax: (+359 2) 8 682 080 49, Bulgaria Blvd. 3, Temenuga Str. auditors` report Business Center Vitosha Sofia 16 Tel.: (+359 2) 8 924 013 Independent Tel.: (+359 2) 8 181 914/915 1303 Sofia Fax: (+359 2) 8 701 086 Fax: (+359 2) 9 589 961 79, Hristo Botev Blvd. Sofia 30 Tel.: (+359 2) 8 138 061/062 Sofia 7 1000 Sofia Fax: (+359 2) 9 311 038 1324 Sofia 111, G.S. Rakovski Blvd. Lyulin 6 Compl. Sofia 17 Tel.: (+359 2) 9 234 411/412 29, Dzhavaharlal Neru Blvd. 1700 Sofia Fax: (+359 2) 9 802 372 Tel.: (+359 2) 9 216 913/914 9, Acd. Boris Stefanov Str. Sofia 31 Fax: (+359 2) 9 252 371 Tel.: (+359 2) 8 190 432 Addresses 1421 Sofia Fax: (+359 2) 9 625 042 32A, Cherni Vrah Blvd. Tel.: (+359 2) 8 065 822 Fax: (+359 2) 9 631 328 169

Sofia 32 Sofia 47 Raiffeisenbank (Bulgaria)EAD 1336 Sofia, 1324 Sofia Lyulin 3 Compl. 15, Tsaritsa Yoanna Blvd. Offices in Bulgaria Tsaritsa Yoana Blvd., bl.387 Mega mall Tel.: (+359 2) 8 144 312 Tel.: (+359 2) 9 231 852 Aytos Fax: (+359 2) 8 263 534 Fax: (+359 2) 9 310 804 8500 Aytos 17, Tsar Osvoboditel Str. Sofia 33 Sofia 48 Tel.: (+359 558) 29 120 1000 Sofia 1407 Sofia Fax: (+359 558) 23 530 5, Sveta Nedelya Square 51B, Cherni Vrah Blvd. Tel.: (+359 2) 9 156 212 Tel.: (+359 2) 8 054 915 Asenovgrad Fax: (+359 2) 9 883 521 4230 Asenovgrad Sofia 50 Izlozhenie Str. Sofia 34 1528 Sofia Tel.: (+359 331) 60 060/062 1040 Sofia 7 Iskarsko shosse Blvd. Fax: (+359 331) 64 902 and mission Vision 126, Vasil Levski Blvd. Commercial center Evropa Tel.: (+359 2) 8 062 712 Tel.: (+359 2) 9 040 882 Blagoevgrad Fax: (+359 2) 9 433 474 1619 Sofia 2700 Blagoevgrad 47, Todor Aleksandrov Str. Sofia 35 Sofia Cantek Tel.: (+359 73) 829 161 1680 Sofia 81, Nikola Petkov Blvd. Fax: (+359 73) 831 582 76, Gotse Delchev Blvd. Tel.: (+359 2) 8 081 911/912 Tel.: (+359 2) 8 157 552 Fax: (+359 2) 9 571 204 Blagoevgrad 2 2700 Blagoevgrad

Fax: (+359 2) 8 586 589 International

Sofia 51 Raiffeisen Bank 3, Arseniy Kostentsev Str. Sofia 36 1000 Sofia Tel.: (+359 73) 882 091 1618 Sofia 81 Aleksandar Stamboliyski Blvd. Fax: (+359 73) 882 092 13, Al. Pushkin Str. Tel.: (+359 2) 9 040 041/ 042

Tel.: (+359 2) 8 082 742 Botevgrad Sofia 52 Fax: (+359 2) 9 554 476 2140 Botevgrad 1618 Sofia 2, Akad. Stoyan Romanski Str. Sofia 37 18 Todor Kableshkov Blvd. Tel.: (+359 723) 68 711 1113 Sofia Tel.: (+358 2) 9 077 381 Fax: (+359 723) 66 322 12, Tsarigradsko Shose Blvd. Sofia 53 in Bulgaria Tel.: (+359 2) 8 074 311 Burgas 1 1510 Sofia Raiffeisen Group Fax: (+359 2) 8 705 584 8000 Burgas 51, Makgahan Str.. 1, Adam Mitskevich Str. Sofia 38 Tel.: (+359 2) 9 040 092 Tel.: (+359 56) 897 845 1584 Sofia Sofia 54 Fax: (+359 56) 820 046 Druzhba 2 Compl., 1632 Sofia 120, Tsvetan Lazarov Blvd. Burgas 2 Ovcha kupel Compl. Tel.: (+359 2) 8 079 512 8000 Burgas 63 Montevideo Blvd. Fax: (+359 2) 9 790 627 115, Aleksandrovska Str. Tel.: (+359 2) 81 90 051/052 Tel.: (+359 56) 875 922 Sofia 42 Fax: (+359 56) 830 173

1113 Sofia Economic growth 18А, F. J. Curie Str. Burgas 3 Tel.: (+359 2) 8 077 972 8000 Burgas Fax: (+359 2) 9 711 308 Bratya Miladinovi Compl., bl.117 Tel.: (+359 56) 859 487 Sofia 43 Fax: (+359 56) 831 825 1142 Sofia 41А, Graf Ignatiev Str. Burgas 4 Tel.: (+359 2) 810 22 12 8000 Burgas 5, Ferdinandova Str. Sofia 44

Tel.: (+359 56) 851 422 reports Segment 1606 Sofia Fax: (+359 56) 842 640 8, Praga Blvd. Tel.: (+359 2) 8 953 912 Burgas 5 Fax: (+359 2) 9 523 441 8000 Burgas Meden Rudnik Compl., bl.187 Sofia 45 Tel.: (+359 56) 857 911 1606 Sofia Fax: (+359 56) 850 096 53, Hristo Botev Blvd. Tel.: (+359 2) 8 951 712 Burgas 6 Independent Independent

Fax: (+359 2) 9 549 481 8000 Burgas report auditors` Slaveykov Compl., bl. 126 Sofia 46 Tel.: (+359 56) 895 811 1404 Sofia Fax: (+359 56) 586 057 2, Deyan Belishki Str. Tel.: (+359 2) 8 085 912 Fax: (+359 2) 9 583 068 Addresses Addresses 170

Byala Haskovo 3 Panagyurishte 7100 Byala 6300 Haskovo 4500 Panaguyrishte 1, Ekzarh Yosif Parvi Square 146, Bulgaria Blvd. 3, G.Benkovski Str. Tel.: (+359 817) 713 12/13 Tel.: (+359 38) 650 312 Tel.: (+359 357) 88 00 Fax: (+359 817) 720 56 Fax: (+359 38) 661 114 Fax: (+359 357) 60 37 Dimitrovgrad Isperih Pazardzhik 1

Vision and mission 6400 Dimitrovgrad 7400 Isperih 4400 Pazardzhik 9, Dimitar Blagoev Str. 6, Stefan Karadzha Str. 7, Tsar Shishman Str. Tel.: (+359 391) 65 113 Tel.: (+359 8431) 46 75 Tel.: (+359 34) 403 023/024 Fax: (+359 391) 67 684 Fax: (+359 8431) 28 22 Fax: (+359 34) 403 020 Dobrich Kazanlak Pazardzhik 2 9300 Dobrich 6100 Kazanlak 4400 Pazardzhik 25, 25-ti Septemvri Str. 2, Knyaz Mirski Str. 13, Han Krum Str. Tel.: (+359 58) 653 002/003 Tel.: (+359 431) 68 912 Tel.: (+359 34) 406 712 Fax: (+359 58) 601 783 Fax: (+359 431) 70 066 Fax: (+359 34) 431 019 Dobrich 2 Kardzhali Pernik Raiffeisen BankRaiffeisen

International 9300 Dobrich 6600 Kardzhali 2300 Pernik 20, Otets Paisiy Str. 23B, Ekzarh Yosif Str. 15, Krakra Str. Tel.: (+359 58) 655 032 Tel.: (+359 361) 60 653 Tel.: (+359 76) 688 111 Fax: (+359 58) 622 034 Fax: (+359 361) 61 366 Fax: (+359 76) 609 062 Dulovo Karlovo Peshtera 7650 Dulovo 4300 Karlovo 4550 Peshtera 11, Vasil Levski Str. 1, Evstati Geshev Str. 19, Doyranska Epopeya Str. Tel.: (+359 855) 21 112 Tel.: (+359 335) 90 433 Tel.: (+359 350) 63 71 Fax: (+359 855) 22 799 Fax: (+359 335) 92 295 Fax: (+359 350) 41 51 Raiffeisen GroupRaiffeisen in Bulgaria Dupnitsa Karnobat Petrich 2600 Dupnitsa 8400 Karnobat 2850 Petrich 2, Solun Str. 1, Karnobatska Komuna Str. 51/53, Rokfeler Str. Tel.: (+359 701) 59 813 Tel.: (+359 550) 28 843 Tel.: (+359 745) 69 611 Fax: (+359 701) 51 113 Fax: (+359 550) 22 908 Fax: (+359 745) 61 461

Elin Pelin Kostinbrod Pirdop 2100 Elin Pelin 2230 Kostinbrod 2070 Pirdop Vitosha Blvd., bl.4, entr.B 11, Ohrid Str. 59, Tsar Osvoboditel Blvd. Economic growth Tel.: (+359 725) 68 012 Tel.: (+359 721) 68 861/862 Tel.: (+359 728) 68 061 Fax: (+359 725) 66 966 Fax: (+359 721) 60 440 Fax: (+359 7181) 86 63 Gabrovo Kyustendil Pleven 1 5300 Gabrovo 2500 Kyustendil 5800 Pleven 30, Skobelevska Str. Demokratsiya Square 1, Vardar Str. Tel.: (+359 66) 810 062 Tel.: (+359 78) 556 312 Tel.: (+359 64) 894 423 Fax: (+359 66) 801 345 Fax: (+359 78) 554 152 Fax: (+359 64) 804 394 Gorna Oryahovitsa Lovech Pleven 2

Segment reports 5100 Gorna Oryahovitsa 5500 Lovech 5800 Pleven 1, Mano Todorov Str. 3, Bulgaria Blvd. 2, Tsar Boris III Str. Tel.: (+359 618) 61 712 Tel.: (+359 68) 689 019 Tel.: (+359 64) 890 512 Fax: (+359 618) 64 491 Fax: (+359 68) 689 020 Fax: (+359 64) 803 470 Gotse Delchev Montana Pleven 3 2900 Gotse Delchev 3400 Montana 5800 Pleven 1, Byalo More Str. 4, Zheravitsa Sq. 74, Hristo Botev Blvd. Tel.: (+359 751) 61 322 Tel.: (+359 96) 391 939 Tel.: (+359 64) 891 062 Fax: (+359 751) 60 024 Fax: (+359 96) 303 036 Fax: (+359 64) 800 363 auditors` report

Independent Harmanli Nesebar Plovdiv 1 6450 Harmanli 8230 Nesebar 4000 Plovdiv 1, Bulgaria Blvd. 3, Priboyna Str. 20, Vasil Aprilov Str. Tel./Fax: (+359 373) 34 91 Tel.: (+359 554) 46 660 Tel.: (+359 32) 261 912 Fax: (+359 554) 43 516 Fax: (+359 32) 629 966 Haskovo 1 6300 Haskovo Nova Zagora Plovdiv 2 7, Sqare Svoboda 8900 Nova Zagora 4000 Plovdiv Tel.: (+359 38) 604 722/ 711 49, Vasil Levski Str. 125, Shesti Septemvri Blvd. Addresses Fax: (+359 38) 604 721 Tel.: (+359 457) 61 112 Tel.: (+359 32) 648 841 Fax: (+359 457) 62 870 Fax: (+359 32) 649 531 171

Plovdiv 3 Samokov Svilengrad 4000 Plovdiv 2000 Samokov 6500 Svilengrad 1, Maria Luiza Blvd. 33, Makedonia Blvd 73, Bulgaria Blvd. Tel.: (+359 32) 646 562 Tel.: (+359 722) 68 011 Tel.: (+359 379) 706 52/53 Fax: (+359 32) 662 900 Fax: (+359 722) 60 186 Fax: (+359 379) 71 552 Plovdiv 4 Sandanski Svishtov 4000 Plovdiv 2800 Sandanski 5250 Svishtov 106, Bulgaria Blvd. 1, Hristo Smirnenski Str. 100, Tsar Osvoboditel Str. Tel.: (+359 32) 907 912/913 Tel.: (+359 746) 34 631 Tel.: (+359 631) 61 311 Fax: (+359 32) 940 076 Fax: (+359 746) 32 703 Fax: (+359 631) 60 385 Plovdiv 5 Sevlievo Targovishte 4000 Plovdiv 5400 Sevlievo 7700 Targovishte 5, Avksentiy Veleshki Str. 1, Svoboda Square 2, Preslav Str. Vision and mission Vision Tel.: (+359 32) 601 287/270 Tel.: (+359 675) 31 213 Tel: (+359 601) 69 553 Fax: (+359 32) 629 911 Fax: (+359 675) 33 091 Fax: (+359 601) 69 303 Plovdiv 7 Shumen Troyan 4023 Plovdiv 9700 Shumen 5600 Troyan Saedinenie Blvd., 97, Tsar Osvoboditel Str. 1, Rakovski Square Arimag Shopping Center Tel: (+359 54) 850 953 Tel.: (+359 670) 66 612/613 Tel.: (+359 32) 271 412 Fax: (+359 54) 830 757 Fax: (+359 670) 60 977

Fax: (+359 32) 682 053 International

Silistra Varna 1 Raiffeisen Bank Plovdiv 9 7500 Silistra 9000 Varna 4004 Plovdiv 20, Tsar Shishman Str. 32, Tsar Simeon Parvi Str. 63, Makedonia Blvd., Tel.: (+359 86) 818 213 Tel.: (+359 52) 688 023

Tel.: (+359 32) 202 254 Fax: (+359 86) 822 877 Fax: (+359 52) 633 007 Pomorie Sliven 1 Varna 3 8200 Pomorie 8800 Sliven 9000 Varna 40, Prof. Stoyanov Str. 11, Tsar Simeon Str. 80-82, Osmi Primorski Polk Blvd. Tel.: (+359 596) 28 912 Tel.: (+359 44) 610 431/33 Tel.: (+359 52) 685 713 in Bulgaria Fax: (+359 596) 28 096 Fax: (+359 44) 662 123 Fax: (+359 52) 603 744 Raiffeisen Group Radnevo Sliven 2 Varna 4 6260 Radnevo 8800 Sliven 9000 Varna 6, Georgi Dimitrov Str. 4, Dimitar Dobrovich Str. 91, Slivnitsa Blvd. Tel.: (+359 417) 81 122 Tel.: (+359 44) 610 412 Tel.: (+359 52) 952 711/712 Fax: (+359 417) 82 456 Fax: (+359 44) 630 555 Fax: (+359 52) 654 627 Razgrad Smolyan Varna 5 7200 Razgrad 4700 Smolian 9000 Varna 2, Stefan Karadzha Str. 73, Bulgaria Blvd. 68, Vladislav Varnenchik Blvd.

Tel.: (+359 84) 611 463 Tel.: (+359 301) 62 095 Tel.: (+359 52) 662 412 Economic growth Fax: (+359 84) 660 289 Fax: (+359 301) 92 096 Fax: (+359 52) 695 454 Razlog Stara Zagora 1 Varna 7 2760 Razlog 6000 Stara Zagora 9000 Varna 1, Stefan Stambolov Str. 79, Knyaz Boris Str. 3-5, Vladislav Varnenchik Blvd. Tel.: (+359 747) 89 011 Tel.: (+359 42) 617 512 Tel.: (+359 52) 679 942 Fax: (+359 747) 80 647 Fax: (+359 42) 604 498 Fax: (+359 52) 623 447 Ruse 1 Stara Zagora 2 Varna Piccadilly 7000 Ruse 6000 Stara Zagora 9000 Varna 22, Slavyanska Str. 67, Tsar Simeon Veliki Str. 482, Primorski Park II Blvd. reports Segment Tel.: (+359 82) 817 963 Tel.: (+359 42) 602 043 Saltanat Area Fax: (+359 82) 821 597 Fax: (+359 42) 601 924 Tel.: (+359 52) 385 312 Fax: (+359 52) 308 033 Ruse 2 Stara Zagora 3 7000 Ruse 6000 Stara Zagora Varna Mall 54, Lipnik Blvd. 2, Mitropolit Metodi Kusev Blvd. 9000 Varna Tel.: (+359 82) 814 352/354 Tel.: (+359 42) 693 512 186, Vladislav Varnenchik Blvd. Fax: (+359 82) 841 682 Fax: (+359 42) 230 045 Tel.: (+359 52) 575 832 Independent Independent

Fax: (+359 52) 731 069 report auditors` Ruse 3 Sunny Beach 7000 Ruse 8240 Sunny Beach Veliko Tarnovo 1 4, Borisova Str. Hotel Diamond 5000 Veliko Tarnovo Tel.: (+359 82) 880 411/412 Tel: (+359 554) 24 565 23, Vasil Levski Blvd. Fax: (+359 82) 820 177 Fax: (+359 554) 23 621 Tel.: (+359 62) 616 411 Fax: (+359 62) 601 204 Addresses Addresses 172

Veliko Tarnovo 2 Others: 5000 Veliko Tarnovo 37, B Nikola Gabrovski Str. Raiffeisen Leasing Bulgaria Tel.: (+359 62) 610 512 1407 Sofia Fax: (+359 62) 671 114 Lozenets 32 A, Cherni vrah Blvd., 6th floor Velingrad Tel.: (+359 2) 491 91 91

Vision and mission 4600 Velingrad Fax: (+359 2) 974 20 57 Аl. Stambolyiski Str., bl.1 Tel.: (+359 359) 56 921 Raiffeisen Asset Management Fax: (+359 359) 51 026 1407 Sofia 55, N. Vaptsarov Blvd. Vidin Business Centre EXPO 2000 3700 Vidin Tel.: (+359 2) 919 85 452 1, Tsar Ivan Asen II Str. Fax: (+359 2) 943 33 65 Tel.: (+359 94) 609 112 Fax: (+359 94) 607 143 Raiffeisen Direct – Call Centre 1407 Sofia Vratsa 55, N. Vaptsarov Blvd. Raiffeisen BankRaiffeisen

International 3000 Vratsa Business Centre EXPO 2000, Building D Hristo Botev Square Tel.: 0 700 10 000 Tel.: (+359 92) 668 833 Fax: (+359 2) 862 38 81 Fax: (+359 92) 666 698 Raiffeisen Insurance Broker Yambol 1407 Sofia 8600 Yambol 55, N. Vaptsarov Blvd. 20, Zhorzh Papazov Str. Business Centre EXPO 2000 Tel.: (+359 46) 683 462/464 Tel.: (+359 2) 817 42 60, 817 43 39 Fax: (+359 46) 664 175

Raiffeisen GroupRaiffeisen Fax: (+359 2) 973 30 94 in Bulgaria

Economic growth Segment reports auditors` report Independent Addresses 173

Contacts of Selected Members of Raiffeisen Bank International AG

Raiffeisen Bank International AG Croatia Slovakia Raiffeisenbank Austria d.d. Tatra banka, a.s. Austria Magazinska cesta 69 Hodzovo námestie 3 Raiffeisen Bank International AG 10000 Zagreb 81106 Bratislava 1 Austria Phone: +385-1-45 664 66 Phone: +421-2-59 19-1000 Am Stadtpark 9 Fax: +385-1-48 116 24 SWIFT/BIC: TATRSKBX and mission Vision 1030 Vienna SWIFT/BIC: RZBHHR2X www.tatrabanka.sk Phone: +43-1-71 707-0 www.rba.hr Ukraine Fax: +43-1-71 707-1715 Czech Republic Raiffeisen Bank Aval JSC www.rbinternational.com Raiffeisenbank a.s. Vul Leskova 9 [email protected] Hvezdova 1716/2b 01011 Kiev [email protected] 14078 Prague 4 Phone: +38-044-49 088 88 Phone: + 420-412 446 400 Fax: +38-044-295-32 31 International

CEE banking network Fax: +420-234-402-111 SWIFT/BIC: AVALUAUK Raiffeisen Bank Albania SWIFT/BIC: RZBCCZPP www.aval.ua www.rb.cz Raiffeisen Bank Sh.A. “European Trade Center” Hungary Leasing companies

Bulevardi “Bajram Curri” Raiffeisen Bank Zrt. Austria Tirana Akadémia utca 6 Raiffeisen-Leasing G.m.b.H. Phone: +355-4-23 8 100 1054 Budapest Mooslackengasse 12 Fax: +355-4-22 755 99 Phone: +36-1-48 444-00 1190 Vienna SWIFT/BIC: SGSBALTX Fax: +36-1-48 444-44

Phone: +43-1-71 601-0 in Bulgaria www.raiffeisen.al SWIFT/BIC: UBRTHUHB Fax: +43-1-71 601 8029 Raiffeisen Group www.raiffeisen-leasing.at Belarus www.raiffeisen.hu Priorbank JSC Kosovo Albania V. Khoruzhey str. 31-A Raiffeisen Bank Kosovo J.S.C. Raiffeisen Leasing Sh.a. 220002 Minsk Robert Doll St. 99 “European Trade Center” Phone: +375-17-28 9-9090 10000 Pristina Bulevardi “Bajram Curri” Fax: +375-17-28 9-9191 Tel: +383-38-222 222 Tirana SWIFT/BIC: PJCBBY2X SWIFT/BIC: RBKOXKPR Phone: +355-4-22 749 20 www.priorbank.by www.raiffeisen-kosovo.com Fax: +355-4-22 325 24 www.raiffeisen-leasing.al

Bosnia and Herzegovina Romania Economic growth Belarus Raiffeisen Bank d.d. Raiffeisen Bank S.A. “Raiffeisen-Leasing” JLLC Bosna i Hercegovina Calea Floreasca 246C V. Khoruzhey 31-A Zmaja od Bosne bb 014476 Bucharest 220002 Minsk 71000 Sarajevo Phone: +40-21-30 610 00 Phone: +375-17-28 9-9394 Phone: +387-33-287 100 Fax: +40-21-23 007 00 Fax: +375-17-28 9-9974 Fax: +387-33-21 385 1 SWIFT/BIC: RZBRROBU www.rl.by SWIFT/BIC: RZBABA2S www.raiffeisen.ro www.raiffeisenbank.ba Bosnia and Herzegovina Russia Raiffeisen Leasing d.o.o. Sarajevo

Bulgaria reports Segment AO Raiffeisenbank Zmaja od Bosne bb. Raiffeisenbank (Bulgaria) EAD St. Troitskaya 17/1 71000 Sarajevo Nikola I. Vaptzarov Blvd. 129090 Moscow Phone: +387-33-254 340 Business Center EXPO 200 PHAZE III, Phone: +7-495-72 1-9900 Fax: +387-33-212 273 1407 Sofia Fax: +7-495-72 1-9901 www.rlbh.ba Phone: +359-2-91 985 101 SWIFT/BIC: RZBMRUMM Fax: +359-2-94 345 28 www.raiffeisen.ru Bulgaria SWIFT/BIC: RZBBBGSF Raiffeisen Leasing Bulgaria OOD www.rbb.bg Serbia 32A Cherni Vrah Blvd. Fl.6 Raiffeisen banka a.d. Independent 1407 Sofia report auditors` Djordja Stanojevica 16 Phone: +359-2-49 191 91 11070 Novi Beograd Fax: +359-2-97 420 57 Phone: +381-11-32 021 00 www.rlbg.bg Fax: +381-11-22 070 80 SWIFT/BIC: RZBSRSBG www.raiffeisenbank.rs Addresses Addresses 174

Croatia Slovenia Branches and representative Raiffeisen Leasing d.o.o. Raiffeisen Leasing d.o.o. offices – Asia Radnicka cesta 43 Letališka cesta 29a 10000 Zagreb SI-1000 Ljubljana China Phone: +385-1-65 9-5000 Phone: +386-1-241-6250 RBI Beijing Branch Fax: +385-1-65 9-5050 Fax: +386-1-241-6268 Beijing International Club Suite 200 www.rl-hr.hr www.rl-sl.si 2nd floor Vision and mission Jianguomenwai Dajie 21 Czech Republic Ukraine 100020 Beijing Raiffeisen-Leasing s.r.o. LLC Raiffeisen Leasing Aval Phone: +86-10-65 32-3388 Hvìzdova 1716/2b Stepan Bandera av. 9 Fax: +86-10-65 32-5926 14078 Prague 4 Build. 6 Office 6-201 Phone: +420-2-215 116 11 04073 Kiev RBI Representative Office Zhuhai Fax: +420-2-215 116 66 Phone: +380-44-590 24 90 Room 2404, Yue Cai Building www.rl.cz Fax: +380-44-200 04 08 No. 188, Jingshan Road, Jida, www.rla.com.ua Zhuhai, Guangdong Province Hungary 519015, P.R. China Raiffeisen Corporate Lizing Zrt. Phone: +86-756-32 3-3500 é Branches and representative Raiffeisen BankRaiffeisen Akad mia utca 6 Fax: +86-756-32 3-3321 International Phone: +36-1-477 8709 offices – Europe India Fax: +36-1-477 8702 France RBI Representative Office Mumbai www.raiffeisenlizing.hu RBI Representative Office Paris 501, Kamla Hub, Gulmohar Road, Juhu 9-11 Avenue Franklin D. Roosevelt Kosovo Mumbai – 400049 75008 Paris Raiffeisen Leasing Kosovo LLC Phone: +91-22-26 230 657 Phone: +33-1-45 612 700 Rr. UCK p.n. 222 Fax: +91-22-26 244 529 10000 Pristina Fax: +33-1-45 611 606 Korea Phone: +38-1-222-222-340 Germany

Raiffeisen GroupRaiffeisen RBI Representative Office Korea www.raiffeisenleasing-kosovo.com RBI Frankfurt Branch in Bulgaria #1809 Le Meilleur Jongno Town Wiesenhuttenplatz 26 Moldova 24 Jongno 1ga 60 329 Frankfurt I.C.S. Raiffeisen Leasing S.R.L. Seoul 110-888 Phone: +49-69-29 921 924 Alexandru cel Bun 51 Phone: +82-2-72 5-7951 Fax: +49-69-29 921 9-22 2012 Chisinau Fax: +82-2-72 5-7988 Phone: +373-22-27 931 3 Poland Singapore Fax: +373-22-22 838 1 RBI Poland Branch RBI Singapore Branch www.raiffeisen-leasing.md Ul. Grzybowska 78 50 Raffles Place Romania 00-844 Warsaw Economic growth #31-03 Singapore Land Tower Phone: +48-22-578 56 00 Raiffeisen Leasing IFN S.A. Singapore 048623 Fax: +48-22-578 56 01 Calea Floreasca 246 D Phone: +65-63 05-6000 SWIFT/BIC: RCBWPLPW 014476 Bucharest Fax: +65-63 05-6001 Phone: +40-21-36 532 96 www.raiffeisen.pl Vietnam Fax: +40-37-28 799 88 Sweden RBI Representative Office www.raiffeisen-leasing.ro RBI Representative Office Ho-Chi-Minh-City Nordic Countries Russia 35 Nguyen Hue Str., Drottninggatan 89, Plan 14/14th Floor OOO Raiffeisen-Leasing Harbour View Tower 11360 Stockholm Segment reports Smolenskaya-Sennaya 28 Room 601A, 6th Floor, Dist 1 Phone: +46-8-440 5086 119121 Moscow Ho-Chi-Minh-City Phone: +7-495-72 1-9980 UK Phone: +84-8-38 214 718, Fax: +7-495-72 1-9901 RBI London Branch +84-8-38 214 719 www.raiffeisen-leasing.ru Tower 42, Leaf C, 9th Floor Fax: +84-8-38 215 256 Serbia 25 Old Broad Street Raiffeisen Leasing d.o.o. London EC2N 1HQ Djordja Stanojevica 16 Phone: +44-20-79 33-8000 11070 Novi Beograd Fax: +44-20-79 33-8099

auditors` report Phone: +381-11-220 7400 Independent Fax: +381-11-228 9007 www.raiffeisen-leasing.rs Slovakia Tatra-Leasing s.r.o. Èernyševského 50 85101 Bratislava Phone: +421-2-59 19-3168 Fax: +421-2-59 19-3048 Addresses www.tatraleasing.sk 175 Vision and mission Vision International Raiffeisen Bank Raiffeisen Bank

in Bulgaria Raiffeisen Group Economic growth Segment reports Segment Independent Independent auditors` report auditors` Addresses Addresses Raiffeisen X BANK Bulgaria