Annual Consolidated Activity Report of Monbat Ad, Sofia for the Financial 2015

ANNUAL CONSOLIDATED ACTIVITY REPORT OF

MONBAT AD, SOFIA

FOR THE FINANCIAL 2015

FORWARD LOOKING STATEMENTS

The Annual consolidated Report may contain statements which reflect the current view of the members of the Board of Directors of the company in respect of achieving future financial results, execution of business strategy, plans and objectives of the management.

These forward-looking statements concern MONBAT AD and the companies included in its economic group as well as the sectors where the Companies operate in. Statements that include the words “expects”, “intends”, “plans”, “projects”, “accepts”, “will”, “aims”, “strives”, “can”, “could be”, “continues”, and other such statements with regard to the future presentation of the Company and the Companies included in the economic group constitute forward-looking statements for the purposes of the Bulgarian securities legislation and for other purposes.

In case that, forward-looking statements are presented the latter concern the future presentation and results of the Company and the companies in the economic group that involve risks and uncertainty. Therefore factors and events may arise that could cause the actual consolidated results of MONBAT AD to differ significantly from those given in the statements. These factors include but are not limited only to those described in the section entitled RISK FACTORS and should be considered in their interaction as well as in view of the whole financial and economic information presented in this document. The forward-looking statements are up- to-date only as at the date of the Annual Report. In compliance with the obligations under the Bulgarian legislation and the approved policy of MONBAT AD, the Board of Directors of the Company will continue announcing publicly, under the legally provided procedure, new forecasts as well as to update already presented forward-looking statement that need to be corrected.

Before taking an investment decision, potential investors should carefully consider the factors stated in the Annual Report, which may cause the actual results of MONBAT AD and the companies in its economic group to differ from the ones presented in this document.

PRESENTATION OF FINANCIAL, MARKET, ECONOMIC AND STATISTICAL INFORMATION

The financial information in the Annual consolidated Report has been prepared in compliance with the International Financial Reporting Standards (IFRS).

The market, economic and statistical information as well as information regarding the financial and economic situation in the Republic of Bulgaria and the Bulgarian securities market used in the Report has been taken from various sources, explicitly referred in the respective parts where such information is presented. Information presented in this document regarding a part of the systematic risks for MONBAT AD is extracted from publicly available information, including publications and information disclosed in compliance with the requirements of the applicable securities legislation and other regulations. The information presented in this Report regarding the economic sectors where MONBAT AD and the companies in the economic group operate is extracted from publicly available information, including publications and information disclosed in compliance with the requirements of the applicable securities legislation and other regulations. MONBAT AD does not guarantee the accuracy and exhaustiveness of this information and the presence of complete uniformity in the information from all these sources. With this regard, MONBAT AD takes responsibility only for the accurate reproduction of extracts from relevant sources of information.

The Board of Directors of MONBAT AD confirms that the information extracted from publications and other publicly available sources is reproduced correctly by the relevant sources and, to the best of its knowledge, no facts which could render the reproduced information inaccurate or misleading are missed. Nevertheless, The Board of Directors of MONBAT AD informs that it had relied on the accuracy of this information without conducting an independent review.

DEAR SHAREHOLDERS,

We, the members of the Board of Directors of MONBAT AD, led by the desire to manage the company in the interest of the shareholders and pursuant to the provisions of art. 33 of the Accountancy Act (as at 31.12.2015), article 100m, paragraph 7 of the LPOS and Annex № 10 to art. 32, paragraph 1, item 2 of Ordinance No. 2 of FCS prepared this Activity Report /the Report/. The consolidated Report presents comments and analysis of the financial statements and other essential information regarding the financial situation and the operational results of MONBAT AD and and the companies in the economic group . The consolidated Report reflects in a credible way the condition and the development prospects of MONBAT AD and the companies in the economic group. In 2015 occurred circumstances that the Company's management believes could be of relevance for investors in taking a decision to acquire, sell or continue holding publicly traded securities. The occurred circumstances have been disclosed within the tetms and in accordance with the procedure as provided by the LPOS to the investors, the regulated securities market and the Financial Supervision Commission. The same are also available on the company’s website www.monbat.com – “Investor Center” section, “News – Important Information”. As at 31.12.2015 MONBAT AD had generated consolidated net sales revenues in the amount of BGN 245 958 thousand which represents a increase by 7.68 % in comparison with the consolidated net sales revenues generated by 31.12.2014 in the amount of BGN 228 415 thousand. The consolidated net profit of MONBAT AD as at 31.12.2015 was in the amount of BGN 22 051 thousand and reported a decrease by 12.87 % compared to the consolidated net profit of the company for 2014 which was in the amount of BGN 25 309 thousand.

І. GENERAL INFORMATION ABOUT THE COMPANY

The company was incorporated in the Republic of Bulgaria in accordance with the Bulgarian legislation. The legal and organizational form of MONBAT AD is a joint stock public company. The company has its registered seat and business address at 4, Cherni vrah № 32A, 1407 Sofia.

Telephone: + 359 2 962 1150 Fax: + 359 2 962 1146 E-mail : [email protected] Website: www.monbat.com

As at the date of this Activity Report the share registered capital of the company is in the amount of BGN 39 000 000 divided in 39 000 000 dematerialized registered shares with a nominal value of BGN 1.00 each of them.

Changes in the capital of MONBAT AD since the establishment of the company to date are as follows:

On 16.02.1999 by a resolution of Montana District Court in the Commercial Register were filed the following changes under the batch of “AKUMIKAR” AD: the company’s capital was increased form 101 260 000 Bulgarian levs to 749 300 000 Bulgarian levs through issuance of new 64 804 registered voting shares with a nominal value of 10 000 Bulgarian levs each of them.

By a resolution № 4 оf 05.07.2000 of Sofia District Court the capital of MONBAT AD was denominated from 749 300 000 Bulgarian levs to BGN 749 300, divided into 74 930 registered voting shares with a nominal value of BGN 10 each of them.

By a resolution № 8 of 13.01.2003 of Sofia District Court the capital of MONBAT AD was increased from BGN 749 300 to BGN 800 000 through issuance of new 5 070 shares with a nominal value of BGN 10 each of them.

By a resolution № 10 of 29.12.2005 of Sofia District Court the capital of MONBAT AD was increased from BGN 800 000 to BGN 14 800 000 through issuance of 1 400 000 registered voting shares with a nominal value of BGN 10 each of them. By a resolution № 11 of 07.08.2006 of Sofia District Court was filed a change in the type of shares of MONBAT AD from materialized into dematerialized and the nominal value of BGN 10.00 per share was changed to a nominal value of BGN 1.00 per share.

By a resolution № 12 of 29.11.2006 of Sofia City Court was filed the company’s capital increase from BGN 14 800 000 to BGN 19 500 000 through issuance of new 4 700 000 dematerialized shares with a nominal value of BGN 1.00 each of them.

At the general assembly of the shareholders of MONBAT AD held on 16.05.2008 was approved a resolution a part of the company’s profit for the year 2007, together with the Reserve Fund, to be used for the increase of the Company’s capital and the rest of the profit for the year 2007 to be distributed to the shareholders as dividends. The capital increase of MONBAT AD under the procedure of Art.197, para. 1 and Art. 246, para. 4 of the Commercial Act from BGN 19 500 000 to BGN 39 000 000 was filed with the Commercial Register on 15.06.2008.

At its session as of 16.07.2008 the Financial Supervision Commission approved a resolution to file the subsequent issue of shares of MONBAT AD, issued as a result of the company’s capital increase from BGN 19 500 000 to BGN 39 000 000. The overall amount of the share registered capital of the company was admitted to trading on the Bulgarian Stock Exchange – Sofia AD.

In 2013, 2014 and 2015 were not made changes in the amount of the capital of MONBAT AD. As at 31.12.2015 there is one legal entity that exercises control over the public company MONBAT AD. This company is PRISTA OIL HOLDING EAD, Sofia. PRISTA OIL HOLDING EAD is related to another shareholder with considerable holdings, namely MONBAT TRADING OOD.

On the grounds of art. 145, para. 1, item 1 of LPOS PRISTA OIL HOLDING EAD notified Monbat AD on an executed by the company transfer transaction for 1 9500 000 voting shares or 5 % of the capital of Monbat AD with a settlement date of the transaction in the Central Depository 28.10.2015. As a result of the change PRISTA OIL HOLDING EAD holds directly 16 666 371 shares and the same number of votes at the General Assembly of the

Shareholders or 42,73 % of the capital of Monbat AD and through the related party Monbat Trading Ltd. holds 2 752 800 voting shares or 7,06 %. The total number of the shares and votes hold directly and through related parties on the part of PRISTA OIL HOLDING EAD is 19 419 171 shares or 49,79 %

As at 31.12.2015 the capital structure of MONBAT AD is the following: Тable № 1 Percentage of the Name of the shareholder Number of shares capital PRISTA OIL HOLDING EAD, Sofia 16 666 371 42.73 %

MONBAT TRADING Ltd., Sofia 2 752 800 7.06 %

PRISTA HOLDCO COOPERATIEF 10 053 758 25.78 % U.A.

Other physical persons and legal 9 527 071 24.43 % entities

AS AT 31.12.2015 THE STRUCTURE OF THE ECONOMIC GROUP OF MONBAT AD IS THE FOLLOWING:

On 25.06.2015 г. was held an ordinary session of the General Assembly of the Shareholders of MONBAT AD which approved a resolution for Petar Petrov to be released from his position as a member of the Board of Directors and Executive Director of Monbat AD and Eugen Georg Peterhans to be elected for new member of the Board of Directors and an Executive Director.

The filing of Eugen Georg Peterhans as new member of the Board of Directors and new Executive Director was made on 13.07.2015 under No 20150713144649 in the Commercial Register to the Registry Agency.

On 10.09.2015 the Board of directors of Monbat г. approved a resolution for Eugen Georg Peterhans to be released from his position as Executive Director of Monbat due to the health reasons and elected Atanas Stoilov Bobokov to be the Executive member of the Board of Directors of MONBAT AD. On 15.09.2015 г. Atanas Bobokov was filed as an Executive Director under No 20151001113426 in the Commercial Register to the Registry Agency. On 07.12.2015 was held an extraordinary session of the General Assembly of the Shareholders of MONBAT AD which approved a resolution for Eugen Georg Peterhans and Ivan Karageorgiev to be released from their position as members of the Board of Directors of Monbat AD and Peter Bozadzhiev and Yordan Karabinov to be elected for new members of the Board of Directors. The deletion of Eugen Georg Peterhans and Ivan Karageorgiev as members of the Board of Directors and the filing of Peter Bozadzhiev and Yordan Karabinov as new members of the Board of Directors was made on 15.12.2015 under No 20151215100641 in the Commercial Register to the Registry Agency.

As at 31.12.2015 the Board of Directors of Monbat AD is the following: Atanas Bobokov – Executive member of the Board of Directors Plamen Bobokov – Member of the Board of Directors Stoyan Stalev – Member of the Board of Directors Alexander Chaushev – Member of the Board of Directors Nikolay Trenchev – Member of the Board of Directors Kamen Zahariev – Member of the Board of Directors Florian Huth – Member of the Board of Directors Peter Bozadzhiev – Member of the Board of Directors Yordan Karabinov – Member of the Board of Directors

ІІ. OVERVIEW OF THE ACTIVITIES AND THE CONDITION OF THE COMPANY

1. Principal Activity

The principal activity of MONBAT AD is production of lead-acid starter and stationary accumulator batteries and their servicing. The products of the company can be divided in the following main groups: Starter Batteries

Comprehensive lineup of starter batteries, featuring the classic construction "Dynamic", "Maintenance Free", "Premium", "Heavy Duty" and "JIS" series and the AGM range under the label GEM. The batteries application cover the entire range of passenger and commercial vehicles, heavy trucks and agricultural machines, operating in normal and harsh environmental conditions.

Stationary Batteries Valve-regulated lead-acid (VRLA-AGM) batteries, constructed in accordance with the following standards and reference norms: IEC 60 896- 21/22, EN 60896-2, BS 6290-4, IEC 707 FVO, UL 94 VO, BS 6334 FVO, BDS 10457 / 88 and EUROBAT specification: Long life. Product range of 2-, 4-, 6- and 12-volt batteries with capacities from 50 to 600 Ah.

Semi-traction Batteries

An impressive combination of supperior cycling performance and superb starting power, makes these batteries a multipurpose energy source for applications like small traction, solar systems, cleaning machines, lifting devices, lighting, leisure time, etc.

Special Batteries

Batteries for military application, suitable for both Russian and NATO designed tanks and armoured vehicles - LAND POWER series, as well as for Russian helicopters and Airplanes - AIR POWER series.

Locomotives Batteries

Railroad source of starter power - batteries designed to facilitate diesel engines initial cranking and to provide the electronic and control circuits power supply in the electrolocomotives.

2. Major raw materials

The major raw materials essential to the Company’s activities are: lead with purity of 99.99% and 99.985%, lead alloys - antimony and calcium, polypropylene trade-mark 7523, polyethylene separator and sulfuric acid. The availability of these materials that MONBAT AD supports ensures the production process for a period of between 15 and 30 days. Prices of lead and lead alloys and polypropylene are variable and directly dependent on the exchange prices of lead on the London Metal Exchange and the stock exchange price of oil. During the last years the management of MONBAT AD has made considerable investment expenses to ensure resource availability of lead and propylene - own production, by means of building its own recycling facilities, namely: In 2010 opened the recycling facility in Idjia, Serbia with annual capacity 15 – 16 000 tones of lead and lead alloys.

At the end of 2011 opened the second foreign recycling facility in the economic group of MONBAT AD – Monbat Recycling SRL, Romania. An investment was made in the amount of EUR 13 mln. The annual capacity of the facility is 15 – 16 000 tones of lead and lead alloys. The share of own recycled lead, that MONBAT AD purchases mainly from its subsidiaries, used in the production process in 2013 represents 88 % and the share of the recycled polypropylene - own production - almost 100 %. The share of own recycled lead, that MONBAT AD buys mainly from its subsidiaries, used in the production in 2014 represented 88 % and the share of the recycled polypropylene - own production - nearly 100 %. The share of own recycled lead, that MONBAT AD buys mainly from its subsidiaries, used in the production in 2015 represented 96 % and the share of the recycled polypropylene - own production - nearly 100 %. By means of creating own recycling facilities, the management of the company strives to reduce the risk of change in the price of the major raw materials.

The movement of the lead price in 2015 is shown in the following diagram:

MOVEMENT OF THE LEAD PRICE FOR THE

PERIOD JANUARY - DECEMBER 2015

2200 2000 1800 1600 1400

May June July March April January August February October September NovemberDecember

USD/MT

*The average price of the lead for 2015 in USD/MT is 1794.95

The production is dependent on the price of electricity and natural gas, which are currently state-regulated. However, these prices do not significantly affect the cost price formation, as production of accumulator batteries is not energy consuming - up to 2 % of the cost price of the output is determined by electricity consumption and 0.9 % of the natural gas consumption.

MARKETS AND SALES

The companies in the economic group of MONBAT AD produce a wide range of products and have well grounded positions in the local markets, the markets of the Balkan region and expanded presence in the Western European markets, including Germany, France, Italy, Great Britain, Belgium, Switzerland, Norway, England, Sweden, Italy, Poland.

The consolidated net sales revenues generated in 2015 are in the amount of BGN 245 958 thousand which represents a increase by 7.68 % compared to 2014 when the generated consolidated net sales revenues were in the amount of BGN 228 415 thousand. Breakdown of the markets of MONBAT AD on a consolidated basisi for 2015 is shown in the table below.

Тable № 2 31.12.2015 31.12.2014 Country Export (EUR, mln) % Export (EUR, mln) % FRANCE 18.36 16.78 13.53 12.91 OTHER 13.91 12.71 15.85 15.16 SPAIN 11.11 10.15 7.59 7.24 GERMANY 9.47 8.66 7.89 7.53 GREECE 8.31 7.60 15.88 15.15 ROMANIA 7.09 6.48 6.06 5.78 NETHERLANS 5.56 5.08 6.16 5.88 ITALY 5.28 4.82 5.62 5.36 GREAT BRITAIN 4.98 4.55 3.63 3.46 SERBIA 4.54 4.15 4.01 3.82 BELGIUM 2.91 2.66 4.02 3.84 UKRAINE 2.48 2.27 0.4 0.33 SOUTH AFRICA 2.39 2.19 2.39 2.28 LEBANON 1.95 1.78 2.15 2.05 FINLAND 1.75 1.60 1.29 1.23 POLLAND 1.68 1.54 1.38 1.32 DENMARK 1.68 1.54 1.44 1.37 IRLAND 1.56 1.43 1.76 1.68 CZECH 1.49 1.36 1.63 1.55 PORTUGAL 1.46 1.34 0.6 0.61 GEORGIA 1.45 1.33 1.51 1.44 TOTAL 109,403 100 104.79 100

As at 31.12.2015 MONBAT AD has generated consolidated revenues from abroad totalling BGN 213 975 thousand which represents 87 % of the total net sales revenues. For the period 01.01.2015 – 31.12.2015 major market for the economic group of MONBAT AD was France with EUR 18.36 mln. sales revenues which represents 16.78 % of the total export of the company on a consolidated basis. The generated sales revenues on the domestic market on a consolidated basis during 2015 were in the amount of BGN 31 975 thousand and represent 13 % of the total sales, and the generated revenues from abroad including intra-community supplies were in the amount of BGN 213 975 thousand and represent 87 % of the net sales revenues of the company.

BREAKDOWN OF THE CONSOLIDATED NET SALES REVENUES ON THE DOMESTIC AND FOREIGN MARKETS AS AT 31.12.2015

ІІ. OPERATING RESULTS OF THE GROUP

As a result of the business activities carried out in 2015 the companies in the economic group of MONBAT AD report the following financial result on a consolidated basis:

As at 31.12.2015 MONBAT AD had generated consolidated net sales revenues in the amount of BGN 245 958 thousand which represents a increase by 7.68 % in comparison with the consolidated net sales revenues generated by 31.12.2014 in the amount of BGN 228 415 thousand. The generated consolidated profit before taxes in 2015 was in the amount of BGN 24 121 thousand which represents a decrease by 9,25 % compared to the consolidated profit before taxes registered for 2014 in the amount of BGN 26 580 thousands.

The consolidated net profit of MONBAT AD as at 31.12.2015 was in the amount of BGN 22 051 thousand and reported a decrease by 12.87 % compared to the consolidated net profit of the company for 2014 which was in the amount of BGN 25 309 thousand.

NET SALES REVENUES, EBITDA, NET PROFIT

122,416 125,756 140,000 116,786 Net sales revenues 120,000 EBITDA Net profit 100,000

80,000

60,000

40,000 20,593 21,717 19,175 12,981 12,940 11,274 20,000

0,000 2013 2014 2015

 Data presented in EUR mln.

Table № 3 (in thousand BGN)

SHAREHOLDERS' EQUITY, MINORITY HOLDINGS AND LIABILITIES 2013 2014 2015 а 1 % 2 % 3 А. SHAREHOLDERS' EQUITY I. Share capital 39000 0% 39000 0% 38989 II. Reserves 90802 3% 93535 -1% 92819 III. Retained earnings 1. Retained earnings from previous periods 6613 54% 10195 189% 29447 undistributed profit 6613 54% 10195 189% 29447 loss not covered 0 0% 0 0% 0 one-time effect from changes in accounting 0 0 0 policy 0% 0% 2. Current year profit 25389 0% 25309 -13% 22051 3. Current year lost 0 0% 0 0% 0 Total retained earnings 32002 11% 35504 45% 51498 TOTAL SHAREHOLDERS' EQUITY "А" (I+II+III): 161804 4% 168039 9% 183306

Table № 4 2013 2014 2015 Operational profit 31 186 28 463 25 157

The generated consolidated operating profit in 2015 is in the amount of BGN 25 157 thousand and reports a decrease by 11,61 % compared to the operating profit for 2014. The consolidated net sales revenues for 2015 increase by 7.68 % in comparison with 2014 and the expenditures increase by 10 %.

Operating revenues by category on a consolidated basis

Table № 5

(in thousand BGN) REVENUES 2013 2014 2015 1 % 2 % 3 А. Operating revenues I. Net revenues from the sale of: 1. Finished goods 231303 -6% 216808 5% 227571 2. Goods for sale 180 1445% 2781 229% 9158 3. Services 1482 -3% 1438 44% 2070 4. Other 6460 14% 7388 -3% 7159 I: Total net revenues from sale 239 425 -5% 228 415 8% 245 958 II. Revenues from financing for fixed assets 719 -13% 622 31% 815 incl. government grants II: Total 719 -13% 622 31% 815 III. Financial income 1. Interest revenue 605 124% 1353 -3% 1307 2. Divident income 0 0% 0 0% 0 3. Gains from operations with financial assets 0 0 and instruments 0% 0% 0 4. Gains from foreign exchange operations 4292 -64% 1531 64% 2512 5. Other financial income 195 0% 0 0% 0 III: Total financial income 5 092 -43% 2 884 32% 3 819 B. Total revenues before extraordinary activities (I+II+III) 245 236 -5% 231 921 8% 250 592

Operating expenditures by category on a consolidated basis

Table № 6 (in thousand BGN) ЕXPENSES 2013 2014 2015 а 1 % 2 % 3 Expenditures I. Operating expenses 1. Materials 153812 0% 153914 -3% 149163 2. External services 18717 -6% 17669 10% 19436 3. Depreciation 10570 6% 11193 3% 11532 4. Salaries 11760 14% 13383 14% 15216 5. Social secutiry 2688 -2% 2639 17% 3098 6. Net book value of assets sold (finished goods 3764 100% 7328 83% 13442 excluded) 7. Assets under construction and write off of assets 1383 100% (10799) -117% 1884 8. Other expenses 5545 -17% 4625 52% 7030 incl. impairment of assets 0 0% 0 0% 0 incl. provisions 0 0% 0 0% 0 Total: 208 239 -4% 199 952 10% 220 801 FINANCIAL INDICATORS 1. LIQUIDITY

Table № 7 As of 31.12.2013 As of 31.12.2014 As of 31.12.2015 Total liquidity ratio 1,81 2,50 1,94 As of 31.12.2013 As of 31.12.2014 As of 31.12.2015 Immediate ratio 0,11 0,37 0,20 As of 31.12.2013 As of 31.12.2014 As of 31.12.2015 Quick ratio 1,03 1,59 1,25 As of 31.12.2013 As of 31.12.2014 As of 31.12.2015 Absolute liquidity ratio 0,11 0,37 0,20

LIQUIDITY INDICATORS

3,00 2,50 2,50 1,81 2,00 1,94 1,59 1,50 1,03 1,25 1,00 0,11 0,37 0,50 0,11 0,37 0,20 0,00 0,20

As of 31.12.2013 As of 31.12.2014 As of 31.12.2015 Total liquidity ratio Quick ratio Immediate ratio Absolute liquidity ratio

The trend of the liquidity indicators over time provides the most valuable information. Liabilities to creditors of MONBAT AD are being paid off in cash rather than using inventories or equipment. I.e., these factors describe the company's ability to pay off its debts on time.

TOTAL LIQUIDITY RATIO

As at 31.12.2015 the value of the total liquidity ratio of 1.94 and registers a decreased compared to its rate of 2.50 for 2014. The registered decrease in the value of this ratio for 2015 compared to 2014 is due to the increase of the current assets by 6.10 % and increase of the current liabilities by 36.64 %.

IMMEDIATE LIQUIDITY RATIO

The value of the immediate liquidity ratio for 2015 is 0.20 and registers a decrease compared to its rate of 0.37 for 2014.

QUICK LIQUIDITY RATIO

The quick liquidity ratio of the Group of MONBAT AD for 2015 is 1.25 and registers a decreased compared to its rate for 2014 – 1,59. In 2015 compared to 2014 the current assets increased by 6.10 %, the current liabilities increased by 36.64 % and the group of inventories increased by 4.26 %.

ABSOLUTE LIQUIDITY RATIO

The absolute liquidity ratio is calculated as the ratio of cash and short term liabilities and indicates Company’s ability to meet its short term liabilities with its available cash. The absolute

liquidity ratio of the Group of MONBAT AD for 2015 registers a decrease to 0.20 comperated to 2014 when its rate is 0.37. For 2015 compared to 2014 the cash decreased by 25.80 %.

2. Capital resources LEVERAGE INDICATORS

2,00 1,86 1,78 1,91 1,80 1,60 1,40 1,20 1,00 0,80 0,54 0,35 0,56 0,60 0,36 0,52 0,40 0,35 0,20 0,00

As of 31.12.2013 As of 31.12.2014 As of 31.12.2015

Financial leverage indicator Debt/Assets Financial autonomy indicator

Table № 8 As of 31.12.2013 As of 31.12.2014 As of 31.12.2015 Financial leverage indicator 0,54 0,56 0,52 As of 31.12.2013 As of 31.12.2014 As of 31.12.2015 Debt/Assets 0,35 0,36 0,35 As of 31.12.2013 As of 31.12.2014 As of 31.12.2015 Financial autonomy indicator 1,86 1,78 1,91

The financial autonomy and financial leverage indicators report on the ratio between own funds and borrowed funds in the capital structure of the company. High rates of the financial autonomy inicator, respectively, low rates of the financial leverage indicator, provide guarantee both for investors /creditors/ and for the owners themselves, on the ability if the company to pay regularly its long-term liabilities. The effect of using borrowed funds (debt) by the company with a view to increase the final total net income from the funds involved in the activity (equity and borrowings) is called financial leverage. The benefit of using financial leverage appears when the company benefits from the investment of borrowed funds more than the expenses (interest) on their attraction. When a company achieves higher yields when using borrowed funds in its capital structure than the expenses on their attraction are, leverage is justified and should be considered in a positive way (with the reservation that the rate of leverage does not significantly negatively influence other financial indicators of the company)

FINANCIAL AUTONOMY RATIO

The financial autonomy ratio shows what percentage of the total liabilities represents the shareholders’ equity of the company. As at 31.12.2015 the value of the financial autonomy ratio is 1.91 in comparison with its rate of 1.78 for 2014. In 2015 compared to 2014 the shareholder’s equity increased by 9.09 % and the debt increased by 1.95 %.

FINANCIAL LEVERAGE RATIO

The indicators for the share of capital, obtained through loans show what part of the total capital represent the borrowings. The higher the share of long-term debt compared to shareholders’ equity is, the higher will be the likelihood of failure in the payment of fixed liabilities. As at 31.12.2015 the value of the financial leverage ratio is 0.52 and decreased compared to its rate of 0.56 for 2014 Table № 9 As of 31.12.2013 As of 31.12.2014 As of 31.12.2015 Financial leverage indicator 0.54 0.56 0.52

DEBT TO TOTAL ASSETS RATIO

The value of the ratio shows what part of the assets is being financed through debt.

Таблица № 10 As of 31.12.2013 As of 31.12.2014 As of 31.12.2015 Debt/Assets 0,35 0,36 0,35

The value of the Debt/Assets ratio in 2015 decreased to 0.35 compered to 2014 when its rate is 0.36. In 2015 compared to 2014 the debt of MONBAT AD on a consolidated basis increased by 1.95 % and the total assets increased by 6.14 %.

3. KEY INDICATORS

Summаrized information on the financial indicators of MONBAT AD on a consolidated basis for 2013, 2014 and 2015 is presented in the following table:

Table № 11

Indicators 2013 2014 2015 Net sales revenues 239425 228415 245958 EBITDA 42 475 40 278 37 504 EBIT 31 905 29 085 25 972 Net profit 25 389 25 309 22 051 Shareholders’ equity 161804 168039 183306 Long-term liabilities 15070 38676 20120 Short-term liabilities 71747 55665 76061 Long-term (non-current) assets 118001 120440 127885 Short-term (current) assets 129729 139279 147775 Working capital 57985 83614 71714 Cash 7673 20538 15232 Total debt 86817 94341 96181 Total assets 247730 259719 275660 Interest expenses 2701 2437 2077 Inventories 55607 50398 52547 Short-term receivables 66200 68175 79602 Operating expenditures 208 239 199 952 220 801 Materials 153812 153914 149163 Profitability of sales 10,60 11,08 8,965 ROA Return on assets 10,2487% 9,74% 8,00% ROE Return on equity 15,69% 15,06% 12,03%

RETURN ON EQUITY (ROE)

The Return on Equity indicator is calculated as the profit after taxation from the total income statement is related as a percentage of the Company's shareholders’ equity. This ratio measures the return to shareholders in terms of their absolute investments.

As of 31.12.2015 the value of the Return on Equity indicator of 12.03 % reports a decrease compared to its value of 15.06 % registered in 2014. The decarese in the value of this ratio is due to the decrease of the consolidated net profit of MONBAT AD by 12.87 % with a registered increase of the shareholder’s equity by 9.09 %.

RETURN ON ASSETS (ROA)

The Return on Assets indicator shows the effectiveness of using the total assets in the Group of MONBAT AD. The ratio net profit to total assets decreased its value in 2015 compared to 2014 from 9.74 % to 8,00 %. The decrease in the value of the Return on Assets indicator in 2015 compared to 2014 is due to the decrease of the company’s consolidated net profit by 12.87 % and the increase of the total assets by 6.14 %.

ІІІ. PRINCIPAL RISKS WHICH THE ISSUER FACES

Risks relevant to the Company and its operations can generally be divided into common (systematic) and specific (unsystematic) risks. Systematic risks are related to the macro environment where MONBAT AD operates, therefore they are not subject to control by the management team. Unsystematic risks are directly relevant to the operations of the Company and largely depend on the corporate Board. For their minimization it is relied on increasing the effectiveness of internal business planning and forecasting, which will provide opportunities to overcome the potential negative consequences of risk event occurring. The general risk management plan of the Company’s management is focused on the unpredictability of the financial markets and is aimed at minimizing the potential negative impact over the Company’s financial standing. Each of the risks associated with the state – political, economic, credit, inflation, monetary - has its own importance, but their aggregate consideration and interaction form an overall picture of the economic fundamentals, market conditions, competitive conditions in the country where the respective company operates. SYSTEMATIC RISKS OVERALL MACROECONOMIC RISK Pursuant to data of BNB („Economic Review” of BNB, 4th edition for 2015.), during the fourth quarter of 2015 the global economic indicator declined, giving a warning for an ongoing but slower improvement in global economic activity in comparison with the previous quarter. Divergences continued to be observed across geographic regions and based on the level of economic indicators a moderate increase in the Eurozone economic growth and weaker growth in the USA and the developing economies could be expected. Global inflation declined further due to the decrease in the price indices of both developed and developing economies, underpinned by the continuous fall in the international commodity prices and that of the crude oil in the utmost. The pace of growth of the world economy begins to slow down in 2015 mainly due to the developing economies lower growth. BNB expects that in 2016 and 2017 the growth in developing countries will increase, leading to acceleration of the global growth.The significant decrease in the international prices of basic raw materials, and the one of the crude oil in the utmost, in 2015 is due to maintaining a high level of production and stocks in the presence of weakening demand. According to BNB the downward trend in prices is expected to be discontinued at the earliest in the second half of 2016 under the influence of the growth recovery in developing countries. Increase in international prices of basic raw materials, according to BNB can be expected in 2017. The risks for a weaker global economic growth in the first half of 2016 are mainly related to the possibility of a more pronounced slowdown in some developing economies’ growth, as well as to the uncertainty over the effects stemming from the increase in the base interest rates in the USA. If the downward trend in the international prices of basic raw materials and crude oil continues, this would create risks of lower than currently expected global inflation. In the light of these risks the external environment will remain a source of uncertainty to the development of the Bulgarian economy in the first half of 2016. Pursuant to data of BNB the economic activity in Bulgaria in 2015 accelerated as the forecast foresees economic growth to slow down to 2.1 % in 2016, with lower government investment acting as a specific factor for this year. In 2017 BNB expects the real GDP growth to accelerate again to 2.8 % and estimates the risks for the economic activity growth as balanced.

Due to the open nature of the Bulgarian economy and the considerable import of basic raw materials and fuels, the dynamics of their prices on international markets has a significant impact on domestic prices. BNB expects that in 2016, with the stabilization of international commodity prices, deflationary trend in consumer prices in the country will be discontinued, and in 2017, in the pursuit of the assumption for an increase in international prices, inflation will slowly begin to increase. There are risks for inflation to be lower than projected, if international price dynamics is below the expectations. The Government forecasts regarding the impact of the negative trade balance is that the balance of the current account will decline to a deficit of 1 % of GDP in 2017. The direct foreign investments (DFI) are expected to stabilize at levels of around 3 % of GDP in the period 2015- 2017. With the gradual acceleration of economic activity in the period 2016-2017 the rate of employment growth is projected to reach 0.9 % in 2017, while the unemployment rate is expected to decrease to 9.4 %. With the employment increase in 2015 labor income will continue growing at a moderate pace. More significant acceleration in their dynamics is expected in the period 2016-2017, in terms of higher economic activity and growth in labor productivity in the country. The change in external assumptions for international commodity prices and exchange rate dynamics of the euro against the dollar will be reflected in a revision of expectations about the inflation in Bulgaria. The projected price increase in non-energy goods on the international markets and higher prices of imported durable goods (expressed in lev) would lead to an increase in the overall level of consumer prices at the end of 2015 of 0.8 %. The average annual inflation, however, is projected to remain negative due to declines in fuel prices at the end of the previous and the beginning of this year. The average annual change in the harmonized consumer prices index (HCPI) in 2015 is expected to be -0.6 %, and in the period 2016-2018 - inflation is expected to be positive 1.8 -2 %, assuming higher international oil prices during the following years and domestic demand recovery. According to forecasts of the Government, private sector crediting will grow at a relatively weak pace in the period 2016-2017. At the end of 2015 its growth on an annual basis will be 1.9 percent while by 2017 is will accelerate to 3.1 %. During the whole period will be observed a trend for a gradual increase in the contribution of loans to households, especially in consumer credits, which will follow the growing contribution of private consumption to the economic growth. (Source: Ministry of Finance) Pursuant to data of the National Statistical Institute (NSI) in the fourth quarter of 2015 the Gross Domestic Product (GDP) expanded with 3.1 % compared to the same quarter of the previous year and with 0.8 % compared to the third quarter of 2015 according to the seasonally adjusted data. According to the flash GDP estimates of NSI for the fourth quarter of 2015, the GDP at current prices amounted to BGN 23 977 million. GVA in the fourth quarter of 2015 amounted to 20 728 million BGN. In the structure of GDP by the expenditure approach the largest share has the final consumption (78.6%), which in nominal terms amounted to BGN 18 835 million. In the fourth quarter of 2015 gross capital formation is BGN 6 335 million and has a share of 26.4 % in GDP. The external balance (exports minus imports) has a negative sign.

Growth rate of GDP – total and by components

Source: NSI BULGARIAN TRADE WITH THIRD COUNTRIES IN 2015 (PRELIMINARY DATA)

Pursuant to data of the National Statistical Institute (NSI) in 2015 Bulgarian exports to third countries increased by 0.6 % compared to 2014 and amounted to BGN 16.4 Billion. Main trade partners of Bulgaria were Turkey, China, Serbia, Russian Federation, Former Yugoslav Republic of Macedonia, USA and Egypt, which accounted for 53.9 % of the exports to non-EU countries. In December 2015 Bulgarian exports to third countries increased by 3.2% compared to the corresponding month of the previous year and amounted to BGN 1.413 Billion.

Bulgarian imports from third countries in 2015 decreased by 5.9 % compared to 2014 and added up to BGN 18.4 Billion (at CIF prices). The largest amounts were reported for the goods imported from the Russian Federation, Turkey, China and Ukraine. In December 2015 Bulgarian imports from third countries decreased by 8.0 % compared to the corresponding month of the previous year and amounted to BGN 1.436 Billion.

BULGARIAN TRADE WITH THIRD COUNTRIES AND EU - TOTAL

Pursuant to data of the National Statistical Institute (NSI) in 2015 the value of all exported goods from Bulgaria amounted to BGN 45.5 Billion and compared to 2014 the exports

increased by 5.2 %. In December 2015 the total exports added up to BGN 3.574 Billion and increased by 4.4 % compared to the corresponding month of the previous year. The total value of all the goods imported in the country in 2015 amounted to BGN 51.7 Billion BGN (at CIF prices), or by 1.1 % more than 2014. In December 2015 the total imports decreased by 2.1 % compared to the same month of the previous year and added up to BGN 4.292 Billion.

The total foreign trade balance (exports FOB - import CIF) was negative in 2015 and amounted to BGN 6 175.3 Million which was BGN 1 688.6 Million less than the balance in 2014. At FOB/FOB prices (after elimination of transport and insurance costs on imports) in 2015 the total foreign trade balance was also negative and amounted to BGN 2 683.4 Million. In December 2015 the total foreign trade balance (exports FOB - import CIF) was negative and added up to BGN 718.5 Million. The trade balance at FOB/FOB prices was negative and amounted to BGN 458.5 Million.

INFLATION RISK

Inflation risk is the overall increase in prices, where money is devalued and there is likelihood for households and businesses to suffer a loss. Major factor that affected the annual inflation rate in 2015, according to BNB, is the deflationary impact of the external environment, reflecting the downward dynamics of international prices of commodities and basic materials. At the end of 2015 annual inflation was minus 0.9 % (with minus 0.2 % as of December, 2014). Prices of goods imported into Bulgaria continued the trend, established in the beginning of 2013, to decline on an annual basis and be a precondition for a decrease in the overall indices of domestic producer prices and end-user prices. The devaluation of the euro against the dollar by an average of 16.5 % in 2015 partially counteracted the downward trend in prices of imported goods. („Economic Review” of BNB, 4th edition for 2015.) Pursuant to data of the National Statistical Institute (NSI) the consumer price index for December, 2015 compared to November, 2015 is 100.0 %, i.e. monthly inflation is 0.0 %. Annual inflation for December, 2015 compared to December, 2014 is minus 0.4 %. The average annual inflation for the period January - December 2015 compared to January – December, 2014 is minus 0.1 %.

Source: NSI

Pursuant to data of the National Statistical Institute (NSI) the harmonized consumer price index for December, 2015 compared to November, 2015 is 100.4 %, i.e. monthly inflation is 0.4 %. Annual inflation for December, 2015 compared to December, 2014 is minus 0.9 %. The average annual inflation for the period January - December 2015 compared to January – December, 2014 is minus 1.1 %.

Inflation in 2015:

Table № 12 Month Consumer Price Index Harmonized Consumer (CPI) Price Index (HCPI) Compared to the From the Compared to the From the previous month beginning of the previous month beginning of the year year 1 January, 2015 -0.4 % -0.4 % -0.7 % -0.7 % 1 February, 2015 0.2 % -0.2 % 0.1 % -0.6 % 1 March, 2015 0.4 % 0.2 % 0.3 % -0.3 % 1 April, 2015 0.7 % 0.9 % 0.5 % 0.2 % 1 May, 2015 -0.2 % 0.7 % 0.0 % 0.2 % 1 June, 2015 -0.9 % -0.2 % -0.5 % -0.3 % 1 July, 2015 -0.2 % -0.3 % 0.2 % -0.2 % 1 August, 2015 0.0 % -0.3 % 0.1 % -0.1 % 1 September, 2015 -0.1 % -0.5 % -0.8 % -0.9 % 1 October, 2015 0.2 % -0.3 % -0.2 % -1.0 % 1 November, 2015 -0.1 % -0.4 % -0.3 % -1.3 % 1 December, 2015 0.0 % -0.4 % 0.4 % -0.9 %

The consumer price index (CPI) is the official measure of inflation in Bulgaria. It measures the total relative price change of goods and ٭ services used by households for private (non-production) consumption. The harmonized consumer price index (HCPI) is a comparable measure of inflation in the EU countries. It is one of the criteria for ٭٭ price stability and for Bulgaria's accession to the eurozone. HCPI and CPI measures the total relative change in the price level of goods and services.

The Bulgarian National Bank expects that during the first half of 2016 inflation will remain negative, but with the trend towards a gradual slowdown in the pace of decline that will be determined mainly by predicted slower decrease in prices of energy products and increase in some prices as a result of the rise in the vignette tax and excise duty on tobacco products since the beginning of 2016. The forecast is based on the assumption for a modest increase in international food prices in euros during the first half of 2016 compared to the end of 2015, while retaining the decrease on an annual basis. Prices set by administrative way are expected to contribute positively to the overall inflation, which will reflect the increase in the vignette tax and excise duty on tobacco products since the beginning of 2016. Base inflation will have lower positive contribution to the overall inflation in line with the predicted growth in consumer spending of households with continued improvement in the labor market and growth in employees’ compensations. There are risks for lower annual inflation rate than predicted, stemming mainly from the possibility of oil prices to continue declining at a faster pace than expected. Additional decline in the price of certain goods and services can be expected as a result of the decrease of the regulated price of natural gas during the first quarter of 2016 by the Energy and Water Regulatory Commission (EWRC). (ref. „BNB Forecast on the basic macroeconomic indicators for 2015-2017“).

INTEREST RATE RISK

The interest rate risk is related to possible, contingent adverse changes in the interest rates, set by the financial institutions in the Republic of Bulgaria. At its session in December 2015, the Governing Council of the European Central Bank (ECB) made an overall assessment of the strength and duration of the factors that currently delay the return of inflation to levels below, but close to, 2 % in the medium term. The analysis confirmed the need for further monetary stimulus in order to ensure the return of the inflation rate to these levels. For these reasons the Governing Council of the ECB has taken the following decisions to achieve its objective of price stability:  to reduce the interest rate on the deposit facility by 10 basis points to -0.30 % and the interest rate on the main refinancing operations and the interest rate on the marginal lending facility - to remain unchanged at the level of 0.05 % to 0.30 % ;  to extend the period of the Asset Purchase Program (APP), providing that monthly asset purchases for EUR 60 billion under the APP will be held by the end of March 2017, and if necessary - even longer, but in any cases until a durable correction in the trend of inflation, consistent with the objective, is found in place;  to be reinvested, as long as necessary, matured principal payments for securities purchased under the APP, which will contribute to more favorable liquidity conditions and more appropriate position of the monetary policy;  to include liquid debt instruments denominated in euro and issued by regional and local authorities in the Eurozone in the list of assets eligible for regular purchases by the national central banks;

 to continue conducting its main refinancing operations and the quarterly LTROs (long term refinancing operations) as fixed rate and full allotment auctions for as long as necessary, but at least until the end of the last period for maintenance of the 2017 reserves; The decisions were adopted with the objective for the inflation to return to the levels below, but close to 2 %, and thus to stabilize inflation expectations in the medium term. The new measures will ensure no restrictive financial conditions and will further strengthen the impact of the measures for significant facilitation taken from June 2014 onwards, which had a significant positive impact on the financing conditions, lending and the real economy.

2015 Base Interest Rates of the Bulgarian National Bank: Table № 13 Month Base Interest Rate

January, 2015 0.01 %

February, 2015 0.01 %

March, 2015 0.01 %

April, 2015 0.01 % May, 2015 0.01 % June, 2015 0.02 % July, 2015 0.02 % August, 2015 0.01 % September, 2015 0.01 % October, 2015 0.01 % November, 2015 0.01 % December, 2015 0.01 % *Source:BNB

In 2015 the interest rate policy of commercial banks and BNB paved the way for strong liquidity growth in the banking system, although it was closely related to the financial and economic consequences of the political processes in Greece. A series of restrictive measures were introduced by the Bulgarian National Bank to commercial banks in the country with Greek shareholdings during the period. Findings in relation to preservation of the capital buffers for credit institutions were within ranges except for one bank, which was not specified by the BNB. According to BNB in 2015 the volumes traded on the BGN monetary market decreased significantly compared to the previous year due to the increased liquidity in the banking system and the weak credit activity. The low activity on the interbank monetary market in combination with the interest rates conditions in the Eurozone are pointed out by BNB as main factors for the decrease in the interest rates in all maturities traded between banks during the year. During the last 12 months the interest rates on interbank deposits with 3, 6 and 12 months term in the country and in the Eurozone continued following a long-term downward trend. According to BNB the continuing growth of attracted funds from residents together with the interest rate conditions on the interbank monetary markets in the country and in the Eurozone have been the incentives for commercial banks to further lower the interest rates on deposits in 2015. As of November 2015, the weighted average interest rate on new fixed term deposits in total for the sectors “non-financial enterprises” and “households” amounted to 1.1 % (2.1 % as of December, 2014). The decreasing price of borrowed funds and the increase in liquidity in the banking system together with the increased competition between banks in the presence of still low demand for borrowings have been the main factors according to BNB determining the decrease in the interest rates on loans in 2015.

Interest rate risk could adversely affect the company in any eventual increase in the interest rates on loans, because the expenses for interests on the debt financing used by the company will increase, and this could have an adverse impact on its liquidity and financial results. POLITICAL RISK

Political risk is the likelihood of a governmental change or a sudden shift in its policy, occurrence of external or internal political disturbances and unfavorable changes in the European and/or national legislation, as a result of which the environment where local businesses operate to change adversely and investors - to suffer losses. Political risks for Bulgaria in the international aspect are associated with the commitments for implementation of significant structural reforms in the country in its capacity of a full-right EU member, enhancing social stability and reducing inefficient expenses. The Country Report Bulgaria of the European Commission, dated 26.02.2016 makes an in-depth review of all sectors and some of the main findings and forthcoming policy challenges for the country are indicated to be:  The performance of the financial sector as a whole has stabilised, but risks remain. It is found that the banking sector liquidity and profitability has improved, but it is also indicated that a more robust assessment of the resilience of the sector can only be made based on the results of the upcoming asset quality review and stress test, which are expected towards late summer. Vulnerabilities in the non-banking sector have been identified that have yet to be addressed.  Risks stemming from high corporate debt and barriers to deleveraging remain. The persistent negative inflation makes deleveraging more difficult and puts additional pressure on the profitability of non-financial corporations.  The external position of the country as a whole has improved further but risks remain.  Remaining weaknesses in the labour market continue to hinder growth and limit the adjustment capacity of the economy. It is noted that despite progress with reforms of active labour market policies, further improvement in matching people with vacancies is hindered by poor prioritisation, targeting and sustainability of measures in this area. The Country Report Bulgaria also found that “challenges persist regarding the business environment. An unstable legal framework and low trust in the judicial system hinder private investment. Furthermore, corruption remains an important concern in Bulgaria and the response of the national authorities continues to be hampered by weak and fragmented institutions. The slow implementation of reforms in the areas of public administration and e-government prevents significant improvements in the business environment. Furthermore, the outstanding weaknesses of the public procurement system limit the use of the European Structural and Investment Funds. Insufficient access to finance and lack of appropriate framework conditions for R&D investment hamper innovation and competitiveness. Delays with critical structural reforms in key sectors such as energy could further impede competitiveness.” Additional threat to the country represent the geopolitical risks including politics, diplomacy, international conflicts, crime and global governance. These risks are, in particular, terrorism, organized crime, illegal trade, corruption, regional military conflicts escalating conflicts over resources etc. In the report on global risks in 2015 were also added the following newly emerging risks: failure of national governments, inter-state conflicts with regional implications, large-scale terrorist attacks with political and / or religious purposes and weapons of mass destruction. Bulgaria together with the other countries – EU members from the region continue being seriously affected by the common European problem with the intensive refugee flow from the Middle East.

Political risk will continue growing if the government fails to take adequate measures for consistent implementation and completion of the structural reforms in all sectors and implement an integrated policy for financial, economic and social stabilization of the country. Other factors that also influence this risk are possible legislative changes and in particular those concerning the economic and investment climate in the country.

CURRENCY RISK Exposure to currency risk is the dependence on and the effects from changes in the currency exchange rates. Systematic currency risk is the likelihood of any possible change of the currency regime in the country (currency board) which would either lead to devaluation of the BGN or the appreciation of the BGN against foreign currencies. Currency risk will have impact over companies having market shares, payments to which are made in currencies different from the Bulgarian lev and the euro. In view of the fact that according to the current legislation in the country the Bulgarian lev is pegged to the euro at the rate of EUR 1 = BGN 1.95583 and the Bulgarian National Bank is obliged to maintain a level of Bulgarian lev in circulation equivalent to the foreign exchange reserves of the Bank, the risk of devaluation of the lev against the European currency is minimal and consists in a possible elimination of the currency board in Bulgaria ahead of term. At this stage it appears to be unlikely since the Currency Board is expected to be repealed upon adoption of the euro as an official legal tender in Bulgaria. Theoretically, currency risk could increase when Bulgaria joins the second phase of the European Exchange Rate Mechanism (ERM II). This is a regime under which the country must maintain the currency rate against the euro within a + / -15% from central parity. In practice, all countries which are currently in the mechanism (Denmark, Estonia, Cyprus, Lithuania, Latvia, Malta) have witnessed fluctuations that were significantly smaller than the allowed ± 15%. The fixed rate of the BGN to the EUR does not eliminate the risk for the Bulgarian currency of adverse movements in the euro exchange rate against other major currencies (U.S. dollar, British pound, Swiss franc) in the international financial markets, but at present the company does not consider that this risk would be significant in terms of its activity due to the fact that all purchases and sales of the company are being carried out in euro. The company might be affected by the currency risk, depending on the type of currency of its cash and the type of currency of the company’s contingent loans. The combination between the impact of the global recession and the intensive process of globalization changes the profile of the “users” of this type of risk.Insurance of any kind of financial and currency risks is a regular practice in the Western Europe countries, in order to limit the risk for the respective company to maintain or increase its growth, and to begin working with new or unknown partners, while at the same time expressing confidence in their ability to correctly pay by providing commercial credit.

UNSYSTEMATIC RISKS

RISK OF PRICE CHANGES IN THE BASIC PRIME AND RAW MATERIALS

The principal activity of MONBAT AD is production and trading with accumulator and lead-acid batteries – starter batteries, stationary batteries for telecom application, semi-traction batteries, specialized batteries – army power range and locomotive batteries. Major prime and raw materials for the company’s production process are lead and lead alloys, polypropylene, polyethylene separator and sulfuric acid. For the last three years, lead takes the following percentage of the cost structure per unit: 2013 – 74 %

2014 – 70 % 2015 - 70 %

The movement of the lead price in 2015 is shown in the following diagram:

MOVEMENT OF THE LEAD PRICE FOR THE

PERIOD JANUARY - DECEMBER 2015

2200 2000 1800 1600 1400

May June July March April January August February October September NovemberDecember

USD/MT

*The average price of the lead for 2015 in USD/MT is 1794.95

The risk of price change in the basic raw material – lead is being managed by means of construction of company’s own recycling facilities.

DEPENDENCE OF MONBAT AD ON DISTRIBUTORS, SUPPLIERS, CUSTOMERS There is no dependence of MONBAT AD on customers due to the fact that company’s sales are not being made directly with customers but through the mediation of an extensive distribution network in the country and abroad. Sales with deferred payment in the country and for export are insured in the Bulgarian Export Insurance Agency (BAEZ) by reason of which the risk of non-payment on the part of the customers is completely eliminated. MONBAT AD is an export-oriented company. The company exports in 2015 most of its products as the most important markets asFrance,Germany, Spain and Greece.

DEPENDENCE OF MONBAT AD ON KEY PERSONNEL The professional activities and efforts, qualifications, motivation and reputation of the members of the corporate boards and the senior officials of MONBAT AD and the companies within the economic group are essential for achieving the strategic and investment objectives of the Company. The leave or release of any member of corporate boards or key executive official would, in the short term, negatively affect the smooth conduct of the company’s business activities. Nevertheless, the established management system and consistently applied corporate policy for provision of incentives to motivate employees within the structure, guarantee to a great extent the long-term participation of the corporate boards’ members and key management personnel in the activities of the company.

RISK OF CHANGE IN THE DEMAND AND INTRODUCTION OF NEW TECHNOLOGIES This risk is related to demographic, economic and technological changes and determines the fact that the demand for company’s products might change over time also as a result of the introduction of new products. With the introduction of new technologies in the automotive industry (hybrid and electric cars), consistent with environmental protection and reduction of the separate carbon dioxide emissions to a minimum, the need for alternative energy sources such as new generation lead-acid batteries grows. At the same time, the need for multifunctional products - accumulator batteries - as a spare source for the photovoltaic power supply and lighting systems also grows. These new generation products could negatively affect the demand for an existing and approved product as a result of the fact that they are or at least they are perceived by consumers as more effective, more refined, combining new features, as well as due to the fact that they are more advertised. Monbat AD has not yet been exposed to such a risk, but in the future could be relatively exposed to such a risk since the principal products of the company are lead-acid batteries for various applications: starter batteries, stationary batteries for telecommunication application, semi- traction batteries, special batteries for military application and locomotive batteries. LIQUIDITY RISK Liquidity risk consists of the likelihood that MONBAT AD is unable to pay its current liabilities. The absolute liquidity ratio is calculated as the ratio of cash and short term liabilities and indicates company’s ability to meet its short term liabilities with its available cash.

ECOLOGICAL RISK The responsibility of MONBAT AD as the largest producer of accumulator batteries in Bulgaria and a dynamically developing public company finds expression also in the attitude towards environment. The management of MONBAT AD considers the activities directed towards pollution prevention or reduction aimed at achieving a maximum level of human health and environmental protection as a major priority and a crucial factor in the long-term and sustainable development. It is a company’s practice of long standing to provide clear and accurate environmental information on its products, services and activities to customers, suppliers and the general public. The management of MONBAT AD makes efforts to reduce the impact of the company on the environment through:  Effective use of electricity and heat power/thermal energy;  minimizing and recycling waste;  preventing pollution through reducing and minimizing detrimental emission in the air and water;  useing the best available techniques and best management practices when expanding the production;  internal monitoring in terms of air, water and soil pollution; Self-control system - the establishment and operation of an internal control system is designed to achieve continuous compliance with the environmental, health and safety regulations on the basis of the Integrated Management System. The self-control system evaluates the efficiency and effectiveness of the management system and the operations of MONBAT AD in general. Pursuant to the requirements of the Law on Health and Safe Labor Conditions and the respective subordinate legislation and the Disaster Protection Act, MONBAT AD has developed an emergency plan to carry out rescue and emergency recovery activities in case of disasters, emergencies and accidents which have occurred in the production process. The purpose of the

protection plan is to preventively ensure the necessary materials, equipment and resources for effective activities to prevent the consequences of disasters and accidents; preparation of the personnel on the site for action; way of announcing and preparing the personnel; managing the personnel’s activities; procedures for putting the plan into action and informing the competent authorities; ways, means and procedures for notifying, when possible, the endangered population near the site; the procedure for carrying out the relevant rescue and emergency recovery activities on the territory of the site; procedures for restoring the activities on the site; ensuring the necessary measures for recreation of the environment. The development strategy of MONBAT AD includes participation in long-term socially useful projects in the environment protection area. The Company has a system for separate waste collection and disposal by means of building a network of containers for collecting old accumulator batteries with the distributors of MONBAT AD. Old batteries are among the widespread harmful waste and the company significantly contributes to environmental protection by collecting, neutralizing and recycling such batteries. Lead and polypropylene derived form recycling are put again in the production of new accumulator batteries and thus waste has been efficiently utilized. The company has established the only individual system for collecting old batteries in Bulgaria and operates under its own Program for management of spent lead-acid accumulator batteries.

FORCE MAJEURE

A number of force majeure circumstances such as natural disasters, accidents or intentional acts, could cause substantial property damages that could lead to temporary suspension and even cessation of the activities of the company. MONBAT AD has a full property insurance of the production facilities and storages of materials and production but in case of a continuous violation of the sequence of production activities, that fact could hardly compensate the lost profits.

RISKS ASSOCIATED WITH THE STRUCTURE OF MONBAT AD

Risks associated with the choice of strategy by the management team of MONBAT AD

Future profits and value of MONBAT AD and the companies in its economic group largely depend on the strategy chosen both by the Issuer’s management team and the management teams of its subsidiaries. Choosing an inappropriate marketing strategy or non- fulfillment of the chosen one could lead to material losses and affect the value of the company on individual and consolidated basis. The management of MONBAT Plc strives to manage strategic risk by means of continuous monitoring over the implementation of the chosen strategy and the approved strategies of the subsidiaries with a view to undertaking adequate measures and when necessary - changes. Inappropriate or delayed changes in the company's strategy would have a significant adverse effect on its business, operating results and financial condition.

Movement in the value of the investments in subsidiaries

Since the parent company holds significant investments in subsidiaries in the country and abroad, changes in the value of these assets affect the value of the parent company as well as its balance sheet indicators and could affect the price of the securities of the parent company. None of the subsidiaries of MONBAT AD is a public company, and therefore none of the companies

has a market price fixed on the basis of the principle of active supply and demand on the stock exchange. The holdings of MONBAT AD in subsidiaries are subject to fair value assessment at end of the year and the effect of the assessment is reflected the reserves of the company. Non- public companies are tested for depreciation at the end of the year and the eventual depreciation may affect negatively the profit for the year when it was made.

Risk of sale or dissolution of the subsidiaries

The structure of the Issuer includes four major groups of companies setting up separate economic activities: o group of the producers of lead-acid batteries that includes MONBAT AD and Start AD; o group of the recycling companies that includes Monbat DOO, Serbia, Monbat Recycling EAD and Monbat Recycling, Romania; o group of the commercial companies active in optimizing the sales of lead-acid batteries that includes Monbat, Romania; U Monbat Serbia; o one separate company Octa Light Bulgaria AD, whose activity is related to production of LEDs for lighting fixtures. The structure allows selling or dissolution of each of the subsidiaries in case that there is a resolution of the shareholders or associates of the company, or when a respective decision has been adopted by the General Assembly of Shareholders to authorize the management body of MONBAT AD to execute such transactions. In this respect, occurrence of potential conflicts of interests and estimations among different shareholders or partners regarding the rationality of such decisions is possible.

RISKS ASSOCIATED WITH THE ACTIVITIES OF THE SUBSIDIARIES OF MONBAT AD

Due to the specific characteristics and scope of activity of the companies in the Group of MONBAT AD /except for Octa Light Bulgaria AD and the commercial companies MONBAT DOO, Romania and YU MONBAT, Serbia/ and in view of the fact that the activities of the companies in the Group are closely related to the activity of MONBAT AD, the above stated non-systematic risks for the activities of the Issuer are also relevant to the activities of the companies in the Group of MONBAT AD. Below are reviewed some more specific risks on an individual basis for companies in the group of MONBAT AD.

MONBAT RECYCLING EAD

 Dependence on customers

A considerable part of the revenues of Monbat Recycling EAD have been and will continue to be generated by one customer - MONBAT AD. There are no guarantees that this customer will bring the same amount or more revenues. The financial results of the company and its financial stability could be significantly influenced by the non-achievement of expected orders or by their delay or reduction. The relatedness between Monbat Recycling EAD and MONBAT AD limits potential negative effects of the strong dependence of the first company on the second one.

START AD, Sofia

 Risk of change in the demand and introduction of new technologies This risk is related to demographic, economic and technological changes and determines the fact that the demand for company’s products might change over time also as a result of the introduction of new products. With the introduction of new technologies in the automotive industry (hybrid and electric cars), consistent with environmental protection and reduction of the separate carbon dioxide emissions to a minimum, the need for alternative energy sources such as new generation lead-acid batteries grows. At the same time, the need for multifunctional products - accumulator batteries - as a spare source for the photovoltaic power supply and lighting systems also grows. These new generation products could negatively affect the demand for an existing and approved product as a result of the fact that they are or at least they are perceived by consumers as more effective, more refined, combining new features, as well as due to the fact that they are being more advertised. Start AD is relatively exposed to such a risk since the principal products of the company are lead-acid batteries for various applications: starter batteries and semi-traction batteries. If the company fails to oppose the pressure exerted by introduction of new generation of products and new competitors in the accumulator batteries market respectively, it is possible the demand for its products to decrease over time. However, a large-scale introduction of new technologies in the automotive industry - hybrid and electric cars is not expected in short term. In order to respond to these challenges the management of Start AD needs to extend the range of produced batteries.

 Dependence on distributors, suppliers, customers There is no dependence of Start AD on customers due to the fact that company’s sales are not being made directly with customers but through the mediation of an extensive distribution network in the country and abroad. Sales with deferred payment in the country and for export are insured in the Bulgarian Export Insurance Agency (BAEZ) by reason of which the risk of non-payment on the part of the customers is completely eliminated.

 Risk of price changes in the basic prime and raw materials The principal activity of Start AD is production, service and marketing of accumulator batteries; engineering and development-implementation activities; production and marketing of equipment for production of accumulator batteries; foreign and domestic trade and setting up commercial networks, specialized stores and representation offices. Basic prime and raw materials for the company’s production process are lead and lead alloys, polypropylene, polyethylene separator and sulfuric acid. During the last 2 years, the management of the parent Company made significant investment expenses to ensure resource availability, including for the subsidiary Company Start AD, of lead and propylene – own production by means of building Company’s own recycling facilities. By means of establishing its own recycling facilities, the issuer’s management isaimed at reducing the risk, including for the subsidiary company Start AD, of change in the basic prime and raw materials.

MONBAT RECYCLING, ROMANIA

 Risk of making investments in a foreign country

Since Monbat Recycling, Romania will operate in another foreign country it is possible, due to the tax and economic policy pursued by the Government of the Republic of Romania, the company to be exposed to a range of systemic risks. However, the Republic of Romania is a member of the European Union and to a great extent systematic risks in the tax and economic areas are minimized.

 Dependence on customers A considerable part of the revenues of Monbat Recycling, Romania is being generated by MONBAT AD. There are no guarantees that this customer will bring the same amount or more revenues. The financial results of the Company and its financial stability could be significantly influenced by the non-achievement of expected orders or by their delay or reduction. The relatedness between Monbat Recycling, Romania and MONBAT AD limits potential negative effects of the strong dependence of the first company on the second one.

MONBAT DOO, SERBIA

 Risk of making investments in a foreign country that is not a member of the European Union – the Republic of Serbia

Since Monbat Recycling, Romania will operate in another foreign country it is possible due to the tax and economic policy pursued by the Government of the Republic of Serbia, the company to be exposed to a range of systemic risks.

 Dependence on customers A considerable part of the revenues of Monbat DOO, Serbia (85%) is being generated by MONBAT AD. There are no guarantees that this customer will bring the same amount or more revenues. The financial results of the company and its financial stability could be significantly influenced by the non-achievement of expected orders or by their delay or reduction. The relatedness between Monbat Monbat DOO, Serbia and MONBAT AD limits potential negative effects of the strong dependence of the first company on the second one.

OCTA LIGHT BULGARIA AD

The main risks and uncertainties that the newly acquired company Octa Light Bulgaria AD is facing, are as follows:

 Technological risk

A technological risk is possible to occur in the process of production of LEDs. The management of the company strives to reduce the technological risk to the minimum by furnishing the new plant with machinery and equipment, developed and delivered by world famous manufacturers with proven qualities. The components and raw materials used in the production are being selected in accordance with the requirements of the technological equipment and pursued parameters of the final product - LED. Their origin is guaranteed and they have quality control. The technological process is automated, accompanied by an objective electronic quality control throughout the entire production process.

 Competitiveness and risk of presence of other market participants on the lighting fixtures’ market based on LEDs or the so called "LED" technology

Octa Light Bulgaria AD is a comparatively young company. Irrespective of that fact, the products introduced by the company have technical indicators that place the company among the top five global LEDs producers. In the company was built and equipped a laboratory which makes a complete electrical, light obtaining and spectral analysis of the lighting fixtures. The company has attracted leading experts in the "LED" technology field. During the last several

years the trend for production of lighting fixtures based on LEDs or the so called "LED" technology has been steadily growing. Given the existence of European and national regulatory requirements for imposing the use of lighting fixtures produced on the basis of the "LED" technology, the company’s management believes that the production of the company will be secured with availability of sufficiently good domestic and international markets.

MONBAT OOD, ROMANIA

 Risk of making investments in a foreign country

Since MONBAT OOD, ROMANIA operates in another foreign country it is possible, due to the tax and economic policy pursued by the Government of the Republic of Romania, the company to be exposed to a range of systemic risks. However, the Republic of Romania is a member of the European Union and to a great extent systematic risks in the tax and economic areas are minimized.

 Competitiveness and risk of presence of other market participants

MONBAT OOD, ROMANIA is a comparatively young company. Its activities are related to generating sales of accumulator batteries. The products sold by the company include a wide range of lead-acid batteries for various applications: starter batteries, stationary batteries with telecommunication application, special batteries for military application and locomotive batteries. Since the company is not a leading participant on the market in the Republic of Romania and is not in a position to dictate market sentiments, for this company there is a risk of high competition concentration as well as presence of other market participants that could take a part of its market share.

ІV. IMPORTANT EVENTS, OCCURRED AFTER THE DATE OF THE ANNUAL CONSOLIDATED FINANCIAL STATEMENTS

All important events, which have occurred after the date of the annual financial statements, were disclosed through the information disclosure system of MONBAT AD, namely - to the regulated securities market, the Financial Supervision Commission and the public. The information is also available on the website of the company www.monbat.com.

V. CURRENT TRENDS AND PROBABLE FUTURE DEVELOPMENT OF THE GROUP

2013 INVESTMENTS In 2013 the overall amount of the investments made by MONBAT AD amounts to EUR 3 200 000.

2014 INVESTMENTS In 2014 the overall amount of the investments made by MONBAT AD amounts to EUR 3 293 000.

2015 INVESTMENTS In 2015 Monbat AD has made investments totaling EUR 9 513 000 out of which directly bought assets in the amount of EUR 1 175 971.

VІ. RESEARCH AND DEVELOPMENT ACTIVITIES

In Start AD, Dobrich has been introduced a special technology to charge accumulator batteries. The new "block formation" technology for starter accumulator batteries allows in the battery box to be set the so-called green (unformed plates) and after an article is completed with a lid and shaped pole terminals to proceed with the formation of the plates. The equipment was designed, developed and put into operation by specialists of the company "INBATEC" - Germany and is the first its kind in Europe. The company’s own research and development laboratory is equipped with modern, specialized electronic devices:

o Spectrophotometer with inductively coupled plasma (ICP-OES) "VARIAN" for measuring the content of chemical elements in solutions. o Atomic absorption spectrophotometer "GBC" for measuring metals in water samples or samples dissolved in mineral acids. o Spectrophotometer "NOVA 400" Merk" for measuring concentration of elements in water and water samples. o Emission Spectrometer "Metalys" for measuring the concentration of elements in solid samples based on lead. o Conventional analytical chemical laboratory. o Stands for testing electrical characteristics (charge / discharge) Bitrode TPN6- 50/1500-12 and Bitrode TPN12-25/600-12. o Stand for simulation of a complete short circuit o Cameras for thermal impact on test specimens TBV 2000. o Equipment for mechanical impact on test specimens - shock and vibrostands.

Investments in research and development activities form a part of the overall investment expenses of the company for the respective periods. With this regard the same can not be separated.

VІІ. INFORMATION ON THE NUMBER AND THE NOMINAL VALUE OF THE SHARES OF THE ISSUER AND THE COMPANIES IN THE ECONOMIC GROUP

1. The number and the nominal value of the acquired and transferred through the year own stocks; the share of the capital which they represent, as well as the price at which the acquisition or transfer have been executed

As at 31.12.2015 the company does not holds own shares.

2. The number and the nominal value of the possessed own stocks and the share of the capital which they represent

As at 31.12.2015 the company does not holds own shares.

3. Number and nominal value of the shares hold in the capital of subsidiary companies included in the economic group of the issuer

Table № 14 Company’s Principal activity Capital share or name percentage of votes at the General Assembly as of 31.12.2015 MONBAT Recycling of accumulator batteries and lead scrap, lead alloys, 100 % of the capital PLC DOO, polyethylene and polypropylene materials, trading in Serbia accumulator batteries, batteries, lead, polyethylene and polypropylene scrap and materials on the territory of the Republic of Serbia as well as export and import from and to the Republic of Serbia of scrap, materials and finished goods. START AD, Production, service and marketing of accumulator batteries; 87,26 % of the voting Sofia engineering and development-implementation activities; shares production and marketing of equipment for production of accumulator batteries; foreign and domestic trade and setting up commercial networks, specialized stores and representation offices. SC MONBAT Recycling of accumulator batteries and lead scrap, lead alloys, 100 % of the capital RECYCLING polyethylene and polypropylene materials, trading in SRL – accumulator batteries, batteries, lead, polyethylene and Romania polypropylene scrap and materials on the territory of the Republic of Romania as well as export and import from and to the Republic of Romania of scrap, materials and finished goods. MONBAT Recycling of accumulator batteries and lead scrap, lead alloys, 100 % of the capital RECYCLING polyethylene and polypropylene materials, trading in EAD – accumulator batteries, batteries, lead, polyethylene and Bulgaria polypropylene scrap and materials on the territory of Bulgaria. OCTA Manufacturing of high power light emitting diodes – 51 % of the capital LIGHT manufacturing of single color (white), multicolor (blue, red, BULGARIA green), high power (from 0.5W to 5W), highly effective (above AD 100 lumen/Watt) user orientated (<80 lumen/Watt) series of light emitting diodes for general and specific purposes. Engineering in the field of lighting industry in the country and abroad, including marketing, feasibility studies, design. Design and manufacturing of specialized lighting fixtures and luminaries for general purpose for street, architectural, stage and accent lighting Design, manufacturing and installation of whole lighting systems, including implementation of energy-efficient lighting solutions, work with municipalities and private corporations. Complex engineering and exploitation of installations on ESCO agreements within the territory of Bulgaria and abroad (attractive nearby markets as Greece, Serbia, Rumania, future markets as Western Europe). Investment and development in the field of optoelectronics, studies and experimental activities for the implementation of new products and materials for the manufacturing of high power LEDs and their use for general lighting; development of new products and concepts for the introduction of high power light emitting diodes for mass usage. MONBAT Trade company with scope of activity: trading, service and 99 % of the capital

ROMANIA marketing of accumulator batteries, accumulator, lead, OOD polyethylene and polypropylene scrap.

VIII. FINANCIAL INSTRUMENTS USED BY THE GROUP

In 2015 the group has not used financial instruments for risk hedging.

IХ. ADDITIONAL INFORMATION UNDER SECTION VI A OF APPENDIX NO 10 OF ORDINANCE NO 2 OF FSC

1. Information given in value or quantitative terms about the main categories of commodities, products and/or provided services, with indication of their share in the revenues from sales of the issuer as a whole and the changes that occurred during the reporting fiscal year

SOLD CONTINGENT ACCUMULATOR BATTERIES FOR THE PERIOD 2012 - 2015 Table № 15 Year 2013 2014 2015 Number of accumulator batteries sold 2 257 935 2 282 652 2 565 681

2. Information about the revenues allocated by separate categories of activities, domestic and external markets as well as information about the sources for supply of materials required for the manufacture of commodities or the provision of services with indication of the degree of dependence in relation to any individual seller or buyer/user, where if the share of any of them exceeds 10 per cent of the expenses or revenues from sales, information shall be provided about every person separately about such person’s share in the sales or purchases and his relations with the issuer Information about the revenues allocated by major categories of activities: Table № 16 (in thousand BGN) REVENUES 2013 2014 2015 1 % 2 % 3 А. Operating revenues I. Net revenues from the sale of: 1. Finished goods 231303 -6% 216808 5% 227571 2. Goods for sale 180 1445% 2781 229% 9158 3. Services 1482 -3% 1438 44% 2070 4. Other 6460 14% 7388 -3% 7159 I: Total net revenues from sale 239 425 -5% 228 415 8% 245 958 II. Revenues from financing for fixed assets 719 -13% 622 31% 815 incl. government grants II: Total 719 -13% 622 31% 815 III. Financial income 1. Interest revenue 605 124% 1353 -3% 1307 2. Divident income 0 0% 0 0% 0 3. Gains from operations with financial assets 0 0 and instruments 0% 0% 0 4. Gains from foreign exchange operations 4292 -64% 1531 64% 2512 5. Other financial income 195 0% 0 0% 0 III: Total financial income 5 092 -43% 2 884 32% 3 819 B. Total revenues before extraordinary activities (I+II+III) 245 236 -5% 231 921 8% 250 592

 Information about the the revenues allocated by local and external markets.

3. Information about concluded big transactions and such of material importance for the activities of the companies in the economic group of the issuer

In 2015 the companies of the economic group of MONBAT AD has not concluded big transactions which are of material importance for their activities.

4. Information about the transactions concluded between the companies in the economic group of the issuer and related parties during the reporting period, proposals for conclusion of such transactions as well as transactions which are outside their usual activity or substantially deviate from the market conditions, to which the issuer or its subsidiary is a party, indicating the amount of the transactions, the nature of relatedness and any information necessary for an estimate of the influence over the issuer’s financial status and the financial status of the companies in the economic group

Table № 17 Related party Type of relation Transactions START AD, Sofia Subsidiary company of MONBAT Sale of materials and production AD as MONBAT AD holds 87.26 on the part of MONBAT AD % of the capital START AD, Sofia Subsidiary company of MONBAT Purchase of materials on the AD as MONBAT AD holds 87.26 part of MONBAT AD % of the capital MONBAT RECYCLING Subsidiary company of MONBAT Sale of materials and others on EAD BULGARIA AD as MONBAT AD holds 100 % the part of MONBAT AD of the capital MONBAT RECYCLING Subsidiary company of MONBAT Purchase of materials on the EAD BULGARIA AD as MONBAT AD holds 100 % part of MONBAT AD. of the capital MONBAT RECYCLING Subsidiary company of Monbat Purchase of materials on the ROMANIA Recycling EAD Bulgaria, as part of MONBAT AD. MONBAT AD holds 100 % of the capital PRISTA OIL HOLDING Major shareholder Granted funds EAD

No transactions with related parties have been concluded which are outside its usual activity or substantially deviate from the market conditions.

5. Information about events and indicators of unusual for the companies in the economic group of the issuer nature, having substantial influence over its operation and the realized by it revenues and expenses made; assessment of their influence over the results during the current year

During 2015 has not occurred an unpredictable and unforeseen circumstance of an extraordinary nature, which has had an impact on the company.

6. Information about off-balance kept transactions in 2015 – nature and business objective, indication of the financial impact of the transactions on the operation, if the risk and benefits of these transactions are substantial for the assessment of the issuer’s financial status and the financial status of the companies in the economic group

In 2015 were not concluded off-balance kept transactions.

7. Information about holdings of the issuer and the companies in the economic group, about its main investments in the country and abroad (in securities, financial instruments, intangible assets and real estate), as well asthe investments in equity securities outside its economic group and the sources/ways of financing

As of 31.12.2015 MONBAT AD has directl and indirect holdings in the following subsidiary companies within the economic group if the issuer:

Table № 18 Company’s Principal activity Capital share or name percentage of votes at the General Assembly as of 31.12.2015 MONBAT Recycling of accumulator batteries and lead scrap, lead alloys, 100 % of the capital PLC DOO, polyethylene and polypropylene materials, trading in Serbia accumulator batteries, batteries, lead, polyethylene and polypropylene scrap and materials on the territory of the Republic of Serbia as well as export and import from and to the Republic of Serbia of scrap, materials and finished goods. START AD, Production, service and marketing of accumulator batteries; 87,26 % of the voting Sofia engineering and development-implementation activities; shares production and marketing of equipment for production of accumulator batteries; foreign and domestic trade and setting up commercial networks, specialized stores and representation offices. SC MONBAT Recycling of accumulator batteries and lead scrap, lead alloys, 100 % of the capital RECYCLING polyethylene and polypropylene materials, trading in SRL – accumulator batteries, batteries, lead, polyethylene and Romania polypropylene scrap and materials on the territory of the Republic of Romania as well as export and import from and to the Republic of Romania of scrap, materials and finished goods.

MONBAT Recycling of accumulator batteries and lead scrap, lead alloys, 100 % of the capital RECYCLING polyethylene and polypropylene materials, trading in EAD – accumulator batteries, batteries, lead, polyethylene and Bulgaria polypropylene scrap and materials on the territory of Bulgaria. OCTA Manufacturing of high power light emitting diodes – 51 % of the capital LIGHT manufacturing of single color (white), multicolor (blue, red, BULGARIA green), high power (from 0.5W to 5W), highly effective (above AD 100 lumen/Watt) user orientated (<80 lumen/Watt) series of light emitting diodes for general and specific purposes. Engineering in the field of lighting industry in the country and abroad, including marketing, feasibility studies, design. Design and manufacturing of specialized lighting fixtures and luminaries for general purpose for street, architectural, stage and accent lighting Design, manufacturing and installation of whole lighting systems, including implementation of energy-efficient lighting solutions, work with municipalities and private corporations. Complex engineering and exploitation of installations on ESCO agreements within the territory of Bulgaria and abroad (attractive nearby markets as Greece, Serbia, Rumania, future markets as Western Europe). Investment and development in the field of optoelectronics, studies and experimental activities for the implementation of new products and materials for the manufacturing of high power LEDs and their use for general lighting; development of new products and concepts for the introduction of high power light emitting diodes for mass usage. MONBAT Trade company with scope of activity: trading, service and 99 % of the capital ROMANIA marketing of accumulator batteries, accumulator, lead, OOD polyethylene and polypropylene scrap.

8. Information about the concluded by the issuer, by its subsidiary or parent undertaking, in their capacity of borrowers, loan contracts with indication of the terms and conditions thereof, including the deadlines for repayment as well as information on the provided guarantees and assuming of liabilities

Long-term loans

Amount and maturity date of the loans of MONBAT AD as at 31.12.2015

Table № 19

Utilized Contract № and Type of Amount amount as of Bank date Maturity date credit Currency of credit 31.12.2015 г. Collateral Eurobank 100- Investment Bulgaria AD 532/16.05.2007 16.05.2017 loan EUR 6 100 000 1 080042 yes

Reiffeisen Bank 28.11.2013, Аnnex 15.12.2016/15.1 Investment EAD № 2/12.02.2014 1.2018 loan EUR 5 700 000 2 967 330 yes Reiffeisen Bank Revolving EAD 25.02.2014 15.02.2017 loan EUR 3 200 000 3 146 454 yes Eurobank 339/07.12.2014 01.09.2014 Credit line EUR 2 200 000 1 197 BGN yes

Bulgaria AD Unicredit Investment Bulbank 1099/14.06.2007 11.06.2017 loan EUR 6 228 000 0 yes Eurobank 100 -972/2010 01.09.2016 Overdraft EUR 1 000 000 0 yes Bulgaria AD Аnnex 29.07.2014 Hipo Noe 16.05.2014 г. 03.10.2016 Investment EUR 10 000 000 10 000 000 yes Gruppe Bank loan AG DSC Bank №1675/16.09.2015 10.09.2016 Overdraft EUR 2 500 000 400 000 yes

DSC Bank №1674/16.09.2015 10.09.2016 Overdraft EUR 2 000 000 0 yes Loan structure of Start AD as of 31.12.2015

Table № 20

Utilized Contract № and Type of Amount of amount as of Bank date Maturity date credit Currency credit 31.12.2015 г. Collateral 100- CIBANK AD 532/16.05.2007 20.07.2015 Overdraft EUR 3 000 000 2 912 057 yes

Loan structure of Monbat Recycling, Romania as at 31.12.2014

Table № 21

Utilized Contract № and Type of Amount of amount as of Bank date Maturity date credit Currency credit 31.12.2014 Collateral Credi Agricole Bank Romania Contract S.A. №019/21/2011 05.12.2015 г. Credit line EUR 3 500 000 3 500 000 yes

Loan structure of Monbat Recycling EAD Bulgaria as at 31.12.2015

Table № 22

Bank Contract № and Maturity date Type of Currency Amount of Utilized Collateral date credit credit amount as of 31.12.2014 Eurobank Bulgaria AD Factoring BGN 1 172 000 yes Reiffeisen Bank EAD 15.07.2015 30.09.2016 Credit line EUR 3 000 000 3 000 0000 yes

Loan structure of YU Monbat as at 31.12.2015

Table № 23

Bank Contract № and Maturity date Type of Currency Amount of Utilized Collateral date credit credit amount as of 31.12.2015 Societe Generale Bank 348/12- Serbia 717/07.08.2012 14.08.2015 Revolving EUR 1 000 000 0 yes

Loan structure of Octa Light Bulgaria as at 31.12.2015

Table № 24

Bank Contract № and Maturity date Type of Currency Amount of Utilized Collateral date credit credit amount as of 31.12.2015 DSK Bank № Revolving Bulgaria 1203/21.05.2013 21.05.2015 credit BGN 2 000 000 1 999 627 yes DSK Bank № Investment Bulgaria 1204/21.05.2013 21.11.2016 credit BGN 2 400 000 1 152 000 yes Investment Invest Bank № 1554/2015 26.09.2022 credit EUR 2 000 000 2 000 000 yes

9. Information about the concluded by the issuer, by its subsidiary or the parent undertaking, in their capacity of lenders, loan contracts, including the provision of guarantees of any type, including to related persons, with indication of the concrete conditions there under, including the deadlines for repayment and the purpose for which they have been granted

The main contracts for loans granted to related parties are presented as follows:

MONBAT RECYCLING EAD

 Contract, dated 05.11.2011 Firstly receivables of Monbat AD from Monbat Recycling EAD of the amount of BGN 12 734 had been increased with deals from transfers of receivables and other transaction with companies. Credit term: Till the fully acquittal of the debt Interest: 6 % annual interest rate Balance on the principle as of 31.12.2015 - BGN 10 435 thousand Redemption: Montly payment of principles at the amount of BGN 251 thousand till 14.03.2014 and from 01.04.2014 the amount of BGN 124 thousand including interests form of the debt of investment loans in Unicredit Bulbank N 1099/11.06.2007, the loan is refinanced from Raifaizenbank EAD and Eurobank EFG AD N 100-532/16.05.2007.

• Contract, dated 17.03.2014 for selling a receivable Monbat AD cedeed to Monbat Recycling EAD the receivable from Monbat Romania OOD for the amount of BGN 602 thousand . Balance on the receivable as of 31.12.2015 - BGN 602 thousand

• Contract, dated 21.10.2014 – loan The amount of the loan 3 960 000 EUR, 7 745 087 BGN. Maturity date10.05.2016 г. Interest 3 M EURIBOR + fixed mark-up Utilized amount as of 31.12.2015 at the amount of BGN 5 867 000 With an Annex from January 2015 the amount of the loan was changed to 3 000 000 EUR. With an Annex as of 06.01.2015 the interest rate on all granted loans was reduced to 4%. The other conditions were left unchanged.

OCTA LIGHT BULGARIA AD

 Contract, dated 29.02.2012 Utilized principle: BGN 4 660 thousand Credit term: 31.12.2013 Interest: 8 % annual interest rate Balance on the principle as of 31.12.2015 - BGN 4 660 thousand Collateral: Pledge on the machines and installations, secured with a Promissory Note Redemption: no redemption plan The loan of BGN 4 660 thousand was impaired during 2012 and 31.12.2014.  Contract, dated 2013 Utilized principle: BGN 3 510 thousand Credit term: 31.12.2013 Interest: 8 % annual interest rate Balance on the principle as of 31.12.2015 - BGN 1 380 thousand Collateral: Pledge on the machines and installations, secured with a Promissory Note Redemption: no redemption plan Part of the loans granted in 2013 and 2014 in the amount of BGN 2685 000 and the accrued interest in the amount of BGN 649 000 were devalued as of 31.12.2014.

 Contracts, dated 2014 Utilized principle: BGN 3 990 thousand Credit term: 31.12.2014 Interest: 8 % annual interest rate Balance on the principle as of 31.12.2015 - BGN 3 990 thousand Collateral: Pledge on the machines and installations, secured with a Promissory Note Redemption: no redemption plan With annex from 01.10.2014 the interest rate was changed to 5% and credit term to 31.12.2014. All the other conditions of the loan contracts are re-negotiated with the same conditions.

 Contracts, dated 2015 г.

Utilized principle: BGN 7 475 thousand Credit term: 31.12.2015 Interest: 5 % annual interest rate Balance on the principle as of 31.12.2015 - BGN 7 475 thousand Collateral: Pledge on the machines and installations, secured with a Promissory Note Redemption: no redemption plan Collaterals granted under the contracts were a pledge on the machines and equipment, secured by a promissory note. With annex as of 25.05.2015 the interest rate on all granted loans was reduced to 4% and the repayment term was set to be 31.12.2018. The other conditions were left unchanged.

PRISTA OIL HOLDING EAD

 Contract, dated 2013 Deposits granted to Prista Oil Holding EAD Utilized principle: BGN 17 594 thousand Credit term: 22.04.2015

Interest: 6 % annual interest rate Balance on the principle as of 31.12.2015 - BGN 11 328 thousand Redemption: no redemption plan

 Contract, dated 2014 Deposits granted to Prista Oil Holding EAD Utilized principle: BGN 2 900 thousand Credit term: 24.04.2015 Interest: 6 % annual interest rate Balance on the principle as of 31.12.2014 - BGN 2 900 thousand Redemption: no redemption plan With annex as of 01.06.2015 the interest rate on all granted loans was reduced to 4%. The other conditions were left unchanged.

START AD

 Contract, dated 16.12.2014 - loan Utilized principle: BGN 5 867 thousand Credit term: 06.02.2015 Interest: 4 % annual interest rate Balance on the principle as of 31.12.2015 - BGN 0 Redemption: no redemption plan

10. Information on the use of the funds from a new issue of securities of MONBAT AD and the companies in the economic group of the issuer carried out during the reported period

During the reported period the company has not issued a new issue of shares.

11. Analysis of the ratio between the achieved financial results reflected in the financial statement for the fiscal year and previously published forecasts for these results

The Company has not published a Forecast for 2015.

12. Analysis and assessment of the policy concerning the management of the financial resources with indication of the possibilities for servicing of the liabilities, eventual jeopardizes and measures which the issuer has undertaken or is to undertake with a view to their removal

The management of the financial resources is subject to the requirement to achieve maximum efficiency with the simultaneous observance of agreed payment terms both with suppliers and customers. This means predominant use of own resources which leads to lower financial costs. A result of such a policy of managing the financial resources is faster reduction of the period for collection of receivables compared to the period for payment of liabilities. This leads to an effective increase of the cash in the company and to the possibility for the investment costs to be financed without this being always at the expense of resources attracted by banks, which reduces the interest costs. On the other hand, this way a significant reserve of unused credits is preserved that can be used for both current and investment expenditures thus maintaining high liquidity of payments.

13. Assessment of the possibilities for realization of the investment intentions, indicating the amount of the available funds and stating the possible changes in the structure of the financing of this activity

In 2013 the total amount of the investments made in MONBAT AD is EUR 3 200 000.

In 2014 the total amount of the investments made in MONBAT AD is EUR 3 293 000. In 2015 the Company has not announced an Investment Program. In 2015 Monbat AD has made investments totaling EUR 9 513 000 out of which directly bought assets in the amount of EUR 1 175 971.

In 2016 the management of MONBAT AD plans the implementation of an investment program to ensure production of 2 600 000 accumulator batteries by means of improving the quality and reducing the production losses. The 2016 planned investments are in the amount of EUR 3 671 000 and will be implemented in the following directions:  Investments in a basic, assembly workshop /starter and stationary batteries/, block molding /starter and stationary batteries/, physics laboratory - EUR 3 615 000;  Ensuring the production capacity of the equipment - EUR 33 000;  Ensuring the quality of the production manufactured – EUR 23 000

14. Information about occurred during the reporting period changes in the base principles for management of the issuer and its economic group

There is no change occured in the base principles for management of the company and the companies included in the economic group of MONBAT AD.

15. Information about the main characteristics of the applied by the issuer in the course of preparation of the financial statements internal controls system and risk management system

The company has a functioning internal control and risk management system /ICRM system/ that guarantees the efficient functioning of reporting and information disclosure systems. The ICRM system was elaborated and functions also with a view to identify risks that pursue the activities of the company and support their efficient management. Senior management has the main responsibility and role in terms of developing the internal control and risk management system. It performs both managing and directing function and also ongoing monitoring. The ongoing monitoring of controls by senior management is to assess whether the ICRM system is still suitable for the company in a changed environment, whethet it acts as expected and whether it is periodically adjusted to changed conditions. Evaluation of selected areas, carried out in this context as a responsibility of the senior management complies with the priorities of the company. Evaluation is also proportionate to the characteristics of the company and the impact of the risks identified. The senior management reports to the audit committee on the basic characteristics of the ICRM system and also on key issues, including main incidents established and the respectively approved or applied corrective measures.

16. Information on the changes in the management and supervisory bodies of the company and the companies in the economic group during the reporting financial year

17. Information on the amount of the remunerations, rewards and/or the benefits of everyone of the members of the management and control bodies for the fiscal year under review, paid by the issuer and its subsidiaries, irrespective of whether they have been included in the issuer’s expenses or rise from profit distribution, including: a) received amounts and non-money remunerations; b) contingent or deferred remunerations, occurred during the year, even if the remuneration is due at a later time; c) amount owed by the issuer or its subsidiaries for payment of pensions, compensations at retiring on a pension or other similar compensations

In 2015 the members of the Board of Directors have received the following remuneration:

Table № 25 Full name Position Net/BGN Atanas Bobokov Chairperson and Executive member of the Board of Directors 418 004 since 01.10.2015 Plamen Bobokov Member of the Board of Directors 324 000 Alexandar Chaushev Member of the Board of Directors 24 000 Nikolay Trenchev Member of the Board of Directors 24 000 Kamen Zahariev Member of the Board of Directors 0 Florian Huth Member of the Board of Directors 0 Peter Bozadzhiev Member of the Board of Directors 1619 Yordan Karabinov Member of the Board of Directors 1619 Eugen Peterhans Member of the Board of Directors since 15.12.2015 г. 147 829 Ivan Karageorgiev Member of the Board of Directors since 15.12.2015 г. 22 380 Petar Petrov Member of the Board of Directors since 25.06.2015 г. 64 936 The General Assembly of Shareholders held on 25.06.2015 authorized the Board of Directors of the Company to set additional remuneration for 2014 to the members of the Board of Directors of MONBAT AD in the total amount of up to BGN 600 000. For 2015 Atanas Bobokov, as a member of the Board of Directors of Octa Light AD, received gross remuneration in the amount of BGN 12 150 , as a member of the Board of Directors of Mombat Recylicng EAD, receiving gross remuneration in the amount of BGN 413 328, as a member of the Board of Directors of Start AD, receiving gross remuneration in the amount of BGN 9 333, 36 18. Information about the owned by the members of the management and of the control bodies, procurators and the senior management shares of the issuer, including the shares held by anyone of them separately or as a percent from the shares of each class, as well as provided to them options on securities of the issuer by the latter – type and amount of the securities over which the options have been set up, price of exercising of the options, purchase price, if any, and term of the options As of 31.12.2015 the shares of the capital of MONBAT AD hold by members of the Board of Directors are as follows:  Atanas Stoilov Bobokov – Chairperson of the Board of Directors – 110 shares  Alexandar Chaushev – Member of the Board of Directors - 8 630 shares 19. Information about the known to the company agreements (including also after the fiscal year closing) as a result of which changes may occur at a future time in the owned percent of shares or bonds by current shareholders and bondholder The Management of Monbat AD does not have information about the known to the company agreements as a result of which changes may occur at a future time in the owned percent of shares by current shareholders. 20. Information about pending legal, administrative or arbitration proceedings relating to liabilities or receivables of the companies in the economic group of the issuer at the amount of at least 10 percent of its equity; if the total amountof the issuer’s liabilities or receivables under all initiated proceedings exceeds 10 per cent of its equity, information shall be submitted for each procedure separately There are no pending legal, administrative or arbitration proceedings relating to issuer’s liabilities or receivables at the amount of at least 10 percent of its equity. 21. Data about the investor relations director Daniela Ilcheva Peeva tel. +359 2 9882413 ; e-mail [email protected] 1407 Sofia, 32 A Cherni vrah blvd., fl. 4

Х. CHANGES IN THE PRICE OF THE COMPANY’S SHARES FOR 2015

200000 9 8 150000 7 6 5 100000 4 3 50000 2 1 0 0

Quantity Price

In the economic group of MONBAT AD there are no companies which are public within the meaning of the LPOS, due to which information on the market price oftheir shares or stakes, established on a regulated securities market, can not be presented.

ХІ. OTHER INFORMATION AT THE COMPANY’S DISCRETION

The Company estimates that there is no other information that has not been publicly disclosed by the company and that would be important for the shareholders and investors in taking a well-grounded investment decision.

Date: 28.04.2016 For MONBAT AD:

Atanas Bobokov– Executive Director

Annual Consolidated Activity Report Independent Auditor’s Report Consolidated Financial Statements

MONBAT AD

31 December 2015

Unofficial translation of the original in Bulgarian

Table of contents

Page

Annual consolidated activity report - Independent auditor’s report - Consolidated statement of financial position 1 Consolidated income statement 3 Consolidated statement of comprehensive income 4 Consolidated statement of changes in equity 5 Consolidated statement of cash flows 8 Notes to the consolidated financial statements 9

Monbat AD 1 Consolidated financial statements 31 December 2015 Consolidated statement of financial position as of 31 December

Assets Note 2015 2014 2013 BGN ‘000 BGN ‘000 BGN ‘000 Non-current assets restated restated Other intangible assets 7 905 1 606 1 054 Property, plant and equipment 8 126 517 118 371 116 484 Receivables from trade loans 13 455 455 455 Long-term financial assets 10 8 8 8 Non-current assets 127 885 120 440 118 001

Current assets Inventories 12 52 547 50 398 45 868 Receivables from trade loans 13 547 35 24 Trade receivables 14 40 523 39 889 39 316 Related party receivables 34 31 427 23 532 20 778 Tax receivables 15 6 325 3 702 4 958 Short-term financial assets 13 50 - - Other receivables 16 1 124 1 185 1 373 Cash and cash equivalents 17 15 232 20 538 7 673 Current assets 147 775 139 279 119 990

Total assets 275 660 259 719 237 991

Prepared by: Belnikolov and Partners OOD – Henry Executive Director: Atanas Bobokov Belnikolov Manager

Date of preparation: 27.04.2016

Audited according to the auditor’s report

______Desislava Dinkova Auditor Date:

The accompanying notes on pages from 9 to 68 form an integral part of the consolidated financial statements. This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 2 Consolidated financial statements 31 December 2015

Consolidated statement of financial position as of 31 December (continued)

Equity and liabilities Note 2015 2014 2013 BGN ‘000 BGN ‘000 BGN ‘000 Equity restated restated Share capital 18.1 38 989 39 000 39 000 Share premium 18.2 28 538 28 611 28 611 General reserves 18.3 64 993 64 786 51 949

Foreign currency translation reserve (712) 138 503 Retained earnings 51 498 35 504 32 002 Equity attributable to the owners of the parent: 183 306 168 039 152 065 Non-controlling interests (3 827) (2 661) (891)

Total equity 179 479 165 378 151 174

Liabilities Non-current liabilities Long-term borrowings 21.1 12 610 34 635 9 661 Finance lease liabilities 9.1 1 266 366 823 Long-term related party payables 34 7 7 7 Other liabilities - - 31 Long-term grants 21.2 4 999 2 386 2 848 Deferred tax liabilities, net 11 1 238 1 282 1 700

Non-current liabilities 20 120 38 676 15 070

Current liabilities Guarantee provisions 19 462 532 797 Pension and other employee obligations 20.2 1 286 1 093 1 086 Short-term borrowings 21.1 48 446 38 092 50 386 Finance lease liabilities 9.1 427 470 739 Trade payables 22 19 035 11 001 14 758 Short-term related party payables 34 305 15 129 Tax liabilities 23 2 141 1 658 2 030 Short-term grants 21.2 806 456 700 Other liabilities 24 3 153 2 348 1 122 Current liabilities 76 061 55 665 71 747 Total liabilities 96 181 94 341 86 817

Total equity and liabilities 275 660 259 719 237 991

Prepared by: Belnikolov and Partners OOD – Henry Executive Director: Atanas Bobokov Belnikolov Manager

Date of preparation: 27.04.2016 Audited according to the auditor’s report

______Desislava Dinkova Auditor Date:

The accompanying notes on pages from 9 to 68 form an integral part of the consolidated financial statements. This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 3 Consolidated financial statements 31 December 2015

Consolidated income statement for the year ended 31 December

Note 2015 2014 BGN ‘000 BGN ‘000 restated Sales revenue 25 244 653 228 371 Other revenue 25 815 622

Cost of materials 26 (149 163) (153 914) Hired services expenses 27 (19 436) (17 669) Employee benefits expense 20.1 (18 314) (16 022) Depreciation and amortization of non-financial assets 7,8 (11 532) (11 193)

Cost of goods sold and other current assets (12 140) (7 328) Changes in finished goods and work in progress (1 884) 10 799 Gain from sale of non-current assets 28 3 44 Other expenses 29 (7 030) (4 625) Operating profit 25 972 29 085

Finance costs 30 (3 047) (3 653) Finance income 30 1 307 1 353 Other financial items 31 (111) (205) Profit before tax 24 121 26 580 Tax expense 32 (3 236) (3 041) Profit for the year 20 885 23 539

Profit for the year, attributable to: Non-controlling interests (1 166) (1 770) Owners of the parent 22 051 25 309

Earnings per share BGN BGN

Basic and diluted earnings per share 33.1 0.57 0.65

Prepared by: Belnikolov and Partners OOD – Executive Director: Atanas Bobokov Henry Belnikolov Manager

Date of preparation: 27.04.2016

Audited according to the auditor’s report

______Desislava Dinkova Auditor Date:

The accompanying notes on pages from 9 to 68 form an integral part of the consolidated financial statements. This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 4 Consolidated financial statements 31 December 2015

Consolidated statement of comprehensive income for the year ended 31 December

2015 2014 BGN ‘000 BGN ‘000 restated Profit for the year 20 885 23 539

Other comprehensive income Currency translation differences from foreign operations (850) (365) Other comprehensive income for the year, net of tax 20 035 23 174 Total comprehensive income for the year 20 035 23 174 Total comprehensive income for the year attributable to: Non-controlling interests (1 166) (1 770) Owners of the parent 21 201 24 944 20 035 23 174

Prepared by: Belnikolov and Partners OOD – Henry Executive Director: Atanas Bobokov Belnikolov Manager

Date of preparation: 27.04.2016

Audited according to the auditor’s report

______Desislava Dinkova Auditor Date:

The accompanying notes on pages from 9 to 68 form an integral part of the consolidated financial statements. This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 5 Consolidated financial statements 31 December 2015

Consolidated statement of changes in equity for the year ended 31 December

All amounts are presented in BGN ‘000 Share Share General Foreign Retained Total equity Non-controlling Total capital premium reserves currency earnings attributable to owners interests equity translation of the parent reserve Balance at 1 January 2015 39 000 28 611 64 786 138 35 504 168 039 (2 661) 165 378 Redeemed own shares (11) (73) - - - (84) - (84) Dividends - - - - (5 850) (5 850) - (5 850) Transactions with owners (11) (73) - - (5 850) (5 934) - (5 934) Profit for the year - -- - 22 051 22 051 (1 166) 20 885 Other comprehensive income: ------Currency translation differences from foreign - - - (850) - (850) - (850) operations Total comprehensive income for the year - - - (850) 22 051 21 201 (1 166) 20 035 Transfer of retained earnings to reserves - - 207 - (207) - - - Balance at 31 December 2015 38 989 28 538 64 993 (712) 51 498 183 306 (3 827) 179 479 Prepared by: Executive Director: Atanas Bobokov

/ Belnikolov and Partners OOD – Henry Belnikolov Manager/

Date of preparation : 27.04.2016 Audited according to the auditor’s report

______Desislava Dinkova Auditor Date:

The accompanying notes on pages from 9 to 68 form an integral part of the consolidated financial statements. This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 6 Consolidated financial statements 31 December 2015

Consolidated statement of changes in equity for the year ended 31 December (continued)

All amounts are presented in BGN ‘000 Share Share General Foreign Retained Total equity Non-controlling Total capital premium reserves currency earnings attributable to interests equity translation owners of the reserve parent Balance at 1 January 2014 39 000 28 611 51 949 503 32 002 152 065 (891) 151 174 Dividends - - - - (8 970) (8 970) - (8 970) Transactions with owners - - - - (8 970) (8 970) - (8 970) Profit for the year -- - - 25 309 25 309 (1 770) 23 539 Other comprehensive income: ------Currency translation differences from foreign -- - (365) - (365) - (365) operations Total comprehensive income for the year -- - (365) 25 309 24 944 (1 770) 23 174 Transfer of retained earnings to reserves - - 12 837 - (12 837) - - Balance at 31 December 2014 39 000 28 611 64 786 138 35 504 168 039 (2 661) 165 378

Prepared by: Belnikolov and Partners OOD – Henry Executive Director: Atanas Bobokov Belnikolov Manager

Date of preparation: 27.04.2016

Audited according to the auditor’s report

______Desislava Dinkova Auditor Date:

The accompanying notes on pages from 9 to 68 form an integral part of the consolidated financial statements. This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 7 Consolidated financial statements 31 December 2015

Consolidated statement of changes in equity for the year ended 31 December (continued)

All amounts are presented in BGN ‘000 Share Share General Foreign Retained Total equity Non-controlling Total capital premium reserves currency earnings attributable to interests equity translation owners of the reserve parent Balance at 1 January 2013 36 377 14 631 50 523 (540) 15 794 116 785 (273) 116 512 Redeemed own shares 2 623 13 980 - - - 16 603 - 16 603 Dividends - -- - (7 755) (7 755) - (7 755) Transactions with owners 2 623 13 980 - - (7 755) 8 848 - 8 848 Profit for the year - - - - 25 389 25 389 (618) 24 771 Other comprehensive income: ------Currency translation differences from foreign - - - 1 043 - 1 043 - 1 043 operations Total comprehensive income for the year - - - 1 043 25 389 26 432 (618) 25 814 Transfer of retained earnings to reserves - - 1 426 - (1 426) - -- Balance at 31 December 2013 39 000 28 611 51 949 503 32 002 152 065 (891) 151 174

Prepared by: Belnikolov and Partners OOD – Henry Executive Director: Atanas Bobokov Belnikolov Manager

Date of preparation: 27.04.2016

Audited according to the auditor’s report

______Desislava Dinkova Auditor Date:

The accompanying notes on pages from 9 to 68 form an integral part of the consolidated financial statements. This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 8 Consolidated financial statements 31 December 2015 Consolidated statement of cash flows for the year ended 31 December

Prepared by: Belnikolov and Partners OOD – Henry Executive Director: Atanas Bobokov Belnikolov Manager Note 2015 2014 BGN ‘000 BGN ‘000 Operating activities Cash receipts from customers 237 310 225 465 Cash paid to suppliers (191 320) (189 575) Cash paid to employees and social security institutions (16 478) (14 349) Income tax for individuals paid (1 071) (1 111) Tax income/(expense) (1 161) 6 462 Other payments for operating activities (1 240) (1 944) Net cash flow from operating activities 26 040 24 948 Investing activities Purchase of property, plant and equipment (16 588) (12 487) Loans granted (3 168) (3 219) Loan repayments received 193 132 Grants received 3 680 - Other payment of investing activities (50) - Net cash flow used in investing activities (15 933) (15 574) Financing activities Received borrowings 10 632 51 825 Payments on borrowings (16 525) (39 553) Payments on finance leases (847) (664) Payments for redemption of shares (84) - Interest paid (1 818) (2 010) Dividends paid (5 588) (4 684) Other payments for financial activities (687) (1 040) Net cash flow from / (used in) financing activities (14 917) 3 874 Net change in cash and cash equivalents (4 810) 13 248 Cash and cash equivalents, beginning of year 17 20 538 7 673 Losses on foreign currency translation (496) (383) Cash and cash equivalents, year end 17 15 232 20 538

Date of preparation: 27.04.2016

Audited according to the auditor’s report

______Desislava Dinkova Auditor Date:

The accompanying notes on pages from 9 to 68 form an integral part of the consolidated financial statements. This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 9 Consolidated financial statements 31 December 2015 Notes of the consolidated financial statements

1. Scope of operations

The main activities of Monbat AD and its subsidiaries (“The Group”) include manufacturing, maintenance and realization of batteries; engineering and development activity; production and trade of equipment used in battery manufacturing; domestic and foreign trade and construction of commercial networks; specialized stores and representatives, recycling of lead and lead containing alloys.

The parent company Monbat AD (The Company) has the same principle activities. The Company is registered as a joint stock company under company file 4636/1999 of the Sofia City court. The parent company’s seat and management address is at 32 A ‘Cherni vrah’ buld., Sofia. The Company is registered at the Bulgarian stock exchange on 22.12.2006.

The principle place of the activity is town of Montana, 76 ‘Industrialna’ str. The Company’s shares are registered on the Bulgarian stock exchange. The Group is managed through single-tier management system consisting of Board of Directors.

The members of the Board of Directors are:

1. Atanas Stoilov Bobokov - chairman 2. Petar Nikolov Bozadjiev 3. Jordan Atanasov Karabinov 4. Plamen Stoilov Bobokov 5. Aleksandar Viktorov Chaushev 6. Nikolay Georgiev Trenchev 7. Stoyan Jivkov Stalev 8. Kamen Zahariev 9. Florian Huth

Executive director is Atanas Stoilov Bobokov

The ultimate owner of the group, is Prista Oil Group B.V., the Netherlands.

Information about the name, country of incorporation, percentage of share and voting power of the subsidiaries, included in the consolidation, is provided in note 5.

2. Basis for preparation of the consolidated financial statements The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and approved by the European Union (EU). The consolidated financial statements are presented in Bulgarian leva (BGN), which is also the functional currency of the parent company. All amounts are presented in thousands of Bulgarian leva (BGN‘000) (including the comparative information for 2014 and 2013) unless otherwise stated.

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 10 Consolidated financial statements 31 December 2015

The consolidated financial statements are prepared on a going concern basis. At the date of the preparation of these consolidated financial statements the management estimated the ability of the Group to continue its activity as a going concern, on the basis of information available for the foreseeable future. After the review of the Group, the Board of Directors believes that the Group has sufficient financial resources in order to continue its operations in the near future and to continue to apply the going concern basis upon the preparation of the consolidated financial statements.

Initial application of new amendments to the existing Standards and Interpretations effective for the current financial period

The following new amendments to the existing standards and new interpretation issued by the International Accounting Standards Board (IASB) and adopted by the EU are effective for the current financial period:

• Amendments to various standards “Improvements to IFRSs (cycle 2011-2013)” resulting from the annual improvement project of IFRS (IFRS 3, IFRS 13 and IAS 40) primarily with a view to removing inconsistencies and clarifying wording - adopted by the EU on December 18, 2014 (amendments are to be applied for annual periods beginning on or after January 1, 2015), • IFRIC 21 “Levies” adopted by the EU on June 13, 2014 (effective for annual periods beginning on or after June 17, 2014).

The adoption of these amendments to the existing standards and interpretation has not led to any material changes in the Company’s financial statements.

Amendments to the existing Standards issued by IASB and adopted by the EU but not yet effective

At the date of authorisation of these financial statements the following amendments to the existing standards issued by IASB and adopted by the EU were in issue but not yet effective:

• Amendments to various standards “Improvements to IFRSs (cycle 2010-2012)” resulting from the annual improvement project of IFRS (IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38) primarily with a view to removing inconsistencies and clarifying wording - adopted by the EU on December 17, 2014 (amendments are to be applied for annual periods beginning on or after February 1, 2015), • Amendments to IAS 16 “Property, Plant and Equipment” and IAS 41 “Agriculture” - Agriculture: Bearer Plants - adopted by the EU on November 23, 2015 (effective for annual periods beginning on or after January 1, 2016), • Amendments to IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible Assets” - Clarification of Acceptable Methods of Depreciation and Amortisation - adopted by the EU on December 2, 2015 (effective for annual periods beginning on or after January 1, 2016), • Amendments to IAS 19 “Employee Benefits” - Defined Benefit Plans: Employee Contributions - adopted by the EU on December 17, 2014 (effective for annual periods beginning on or after February 1, 2015),

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 11 Consolidated financial statements 31 December 2015

• Amendments to IFRS 11 “Joint Arrangements” – Accounting for Acquisitions of Interests in Joint Operations adopted by the EU on November 24, 2015 (effective for annual periods beginning on or after January 1, 2016). • Amendments to IAS 1 “Presentation of Financial Statements” - Disclosure Initiative – adopted by the EU on December 18, 2015 (effective for annual periods beginning on or after January 1, 2016), • Amendments to IAS 27 “Separate Financial Statements” - Equity Method in Separate Financial Statements - adopted by the EU on December 18, 2015 (effective for annual periods beginning on or after January 1, 2016), • Amendments to various standards “Improvements to IFRSs (cycle 2012-2014)” resulting from the annual improvement project of IFRS (IFRS 5, IFRS 7, IAS 19 and IAS 34) primarily with a view to removing inconsistencies and clarifying wording - adopted by the EU on December 15, 2015 (amendments are to be applied for annual periods beginning on or after January 1, 2016).

New Standards and amendments to the existing Standards issued by IASB but not yet adopted by the EU

At present, IFRS as adopted by the EU do not significantly differ from regulations adopted by the IASB except from the following new standards and amendments to the existing standards, which were not endorsed for use in EU as at the date of approval of these consolidated financial statements:

• IFRS 9 Financial Instruments (effective for annual periods beginning on or after January 1, 2018); • IFRS 14 “Regulatory Deferral Accounts” (effective for annual periods beginning on or after January 1, 2016) - the European Commission has decided not to launch the endorsement process of this interim standard and to wait for the final standard, • IFRS 15 “Revenue from Contracts with Customers” and further amendments (effective for annual periods beginning on or after January 1, 2018), • IFRS 16 “Leases” (effective for annual periods beginning on or after 1 January 2019), • Amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures” - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (effective for annual periods beginning on or after January 1, 2016), • Amendments to IFRS 10 “Consolidated Financial Statements”, IFRS 12 “Disclosure of Interests in Other Entities” and IAS 28 “Investments in Associates and Joint Ventures” - Investment Entities: Applying the Consolidation Exception (effective for annual periods beginning on or after January 1, 2016),

The Group anticipates that the adoption of these standards, amendments to the existing standards and interpretations will have no material impact on the financial statements of the Group in the period of initial application At the same time, hedge accounting regarding the portfolio of financial assets and liabilities, whose principles have not been adopted by the EU, is still unregulated. According to the Group’s estimates, application of hedge accounting for the portfolio of financial assets or liabilities pursuant to IAS 39: Financial Instruments: Recognition and

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 12 Consolidated financial statements 31 December 2015

Measurement, would not significantly impact the financial statements, if applied as at the balance sheet date.

3. Accounting policies 3.1. Overall considerations The significant accounting policies that have been used in the preparation of these consolidated financial statements are summarized below. The consolidated financial statements have been prepared using the measurement bases for each type of asset, liability, income and expense, according to IFRS. The measurement bases are described in details in the accounting policies to the consolidated financial statements. It should be noted that accounting estimates and assumptions are used for the preparation of the consolidated financial statements. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates and assumptions.

3.2. Presentation of consolidated financial statements The consolidated financial statements are presented in accordance with IAS 1 “Presentation of Financial Statements” (revised 2007). The Group has elected to present the consolidated statement of comprehensive income in two statements: a consolidated income statement and a consolidated statement of comprehensive income. Two comparative periods are presented for the consolidated statement of financial position

when the Group: (i) applies an accounting policy retrospectively, (ii) makes a retrospective restatement of items in its consolidated financial statements, or (iii) reclassifies items in the consolidated financial statements.

3.3. Basis of consolidation The Group financial statements consolidate those of the parent company and all of its subsidiary undertakings drawn up to 31 December 2015. Subsidiaries are all entities over which the Group has the power to control their financial and operating policies. The parent company obtains and exercises control through more than half of the voting rights. All subsidiaries have a reporting period as of 31 December. All intragroup transactions and balances between Group companies are eliminated on consolidation, including unrealized gains and losses on transactions between Group companies. Amounts reported in the financial statements of subsidiaries have been adjusted, where necessary, to ensure consistency with the accounting policies adopted by the Group. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognized as of the effective date of acquisition, or up to the effective date of disposal, as applicable. Non-controlling interest, represents a portion of equity ownership in the subsidiary's profit or loss and net assets not attributable to the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests.

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 13 Consolidated financial statements 31 December 2015

When the Group ceases to have control over a subsidiary, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognized in profit or loss. The fair value of any investment retained in the former subsidiary at the date of loss of control is considered fair value initial recognition of financial assets in accordance with IAS 39 “Financial Instruments: Recognition and Measurement” or, where appropriate, the cost for initial recognition, investments in associates or jointly controlled entity. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities (i.e. reclassified to profit or loss or transferred directly to retained earnings as specified by applicable IFRSs). The profit or loss on disposal is calculated as the difference between i) the aggregate amount of the fair value of the consideration received and the fair value of any retained interest and ii) the previous carrying amount of the assets including goodwill and liabilities of the subsidiary and any non-controlling interest.

3.4. Business combinations Business combinations are accounted for using the purchase method. For business combinations that have occurred since 1 January 2010, the requirements of IFRS 3(revised) have been applied. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the amount of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. The purchase method involves the recognition of the acquiree's identifiable assets and liabilities, including contingent liabilities, regardless of whether they were recorded in the financial statements of the acquiree prior to acquisition. On initial recognition, the assets and liabilities of the acquired subsidiary are included in the consolidated statement of financial position at their fair values, which are also used as the bases for subsequent measurement in accordance with the Group's accounting policies. On an acquisition-by-acquisition basis, the Group recognizes any non-controlling interest in the acquiree that is present ownership interests and entitles their holders to a proportionate share of the entity’s net assets in the event of liquidation either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another IFRS. Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of a) fair value of consideration transferred at the acquisition date, b) the recognized amount of any non-controlling interest in the acquiree and c) in business combination achieved in stages, the fair value of any existing equity interest in the acquiree, over the fair values at acquisition date of identifiable net assets. If the fair value of any identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognized in profit or loss immediately after the acquisitoin. When a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group obtains control) and the resulting gain or loss, if any, is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have been previously recognized in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if the interest were disposed of.

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 14 Consolidated financial statements 31 December 2015

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period which cannot exceed one year from the acquisition date or additional assets or liabilities are recognized to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date. Any contingent consideration to be transferred by the acquirer is measured at fair value at the acquisition date and included as part of the consideration transferred in a business combination. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, is recognized in accordance with IAS 39 “Financial Instruments: Recognition and Measurement” either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it is not remeasured until it is finally settled within equity. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are restated retrospectively, with corresponding adjustments against goodwill. Prior to 1 January 2010, business combinations were accounted under the previous version of IFRS 3.

3.5. Transactions with non-controlling interests Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are treated as transactions with equity owners of the Group. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the parent company.

3.6. Foreign currency transactions Foreign currency transactions are translated from local currency into the functional currency of the respective Group entity, using the exchange rates prevailing at the dates of the transactions (spot exchange rate as published by the Bulgarian National Bank). Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary items at year-end exchange rates are recognized in profit or loss. Non-monetary items measured at historical cost are translated using the exchange rates at the date of the transaction. Non-monetary items measured at fair value are translated using the exchange rates at the date when fair value was determined. Functional currency of all Group entities is EUR. The functional currency of the entities in the Group has remained unchanged during the reporting period. Presentation currency of the Group is BGN, which is pegged to EUR under the existing Currency Board in Bulgaria and the exchange rate has been fixed legislatively at BGN 1.95583 : EUR 1 on July 1, 1997. In the Group's consolidated financial statements, all assets, liabilities and transactions of Group entities have been converted from EUR functional currency to BGN presentation currency. Due to the fixed rate, no exchange differences have been recognized as a result of the conversion correspondingly.

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 15 Consolidated financial statements 31 December 2015

On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to statement of comprehensive income (foreign currency translation reserve). On disposal of a net investment in foreign operation the cumulative translation differences from local to functional currency recognized in foreign currency translation reserve, part of equity are reclassified to profit or loss and recognized as part of the gain or loss on disposal.

3.7. Segment reporting The management determines the operating segments on the basis of the geographical allocation of the Group’s activities. Each of these geographical segments is managed separately. The Group operates in one business segment- production and sale of batteries and raw materials for them. It also produces lead lighting. All transactions between the segments are made at prices corresponding to transactions between independent parties. For segment reporting under IRFS 8 “Operating Segments” the Group applies valuation policy corresponding to the valuation policy used in the consolidated financial statements. Information about the results of the separate segments that is regularly reviewed by the chief operating decision maker does not include isolated unrepeated events such as restructuring expenses, legal expenses and impairment due to an isolated non-recurring event. Finance income and costs are also not included in the results of operating segments which are regularly reviewed by the chief operating decision makers. There have been no changes from prior periods in the measurement methods used to determine reported segment profit or loss. No asymmetrical allocations have been applied between segments.

3.8. Revenue Revenue comprises revenue from the sale of products, goods, materials, rendering of services and other revenue. Revenue from major products, goods, materials and services are disclosed in note 25. Revenue is measured at fair value of the consideration received or receivable, excluding value added tax, trade discounts and volume rebates allowed by the Group. Revenue is recognized when the following conditions are met: • the amount of the revenue can be reliably measured; • it is probable that the economic benefits associated with the transaction will flow to the Group; • the costs incurred or to be incurred can be reliably measured; • when the criteria specific for each of the Group's separate activity has been met. These activity-specific recognition criteria are based on the goods or solutions provided to the customer and the contract terms in each case as described below.

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 16 Consolidated financial statements 31 December 2015

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 17 Consolidated financial statements 31 December 2015

3.8.1. Sale of products, goods, and materials Sale of products, goods, and materials include sale of batteries and equipment for batteries. Revenue is recognized when the Group has transferred to the buyer substantially all the risks and rewards of ownership of goods. It is considered that substantially all the risks and rewards are transferred to the buyer when the customer has accepted the goods without objection. 3.8.2. Rendering of services Services rendered by the Group comprise of transportation for delivery of products. Revenue is recognized when the services are provided in accordance with the degree of completion of the contract at the date of the financial statements.

3.8.3. Interest income Interest income is reported on an accrual basis using the effective interest method. Dividend income, is recognized at the time the right to receive payment is established. 3.9. Operating expenses Operating expenses are recognized in profit or loss upon utilization of the service or at the date of their origin. Expenditure for warranties is recognized and charged against the associated provision when the related revenue is recognized. 3.10. Interest expenses Interest expenses are reported on an accrual basis using the effective interest method. Borrowing costs primarily comprise interest on the Group's borrowings. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period in which the asset is expected to be completed and is prepared for its intended use or sale. Other borrowing costs are expensed in the period in which they are incurred and reported in 'Finance costs'. 3.11. Goodwill Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognized. See note 3.4 for information on how goodwill is initially determined. Goodwill is carried at cost less accumulated impairment losses. For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash- generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Refer to note 3.15 for a description of impairment testing procedures. On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. 3.12. Other intangible assets Other intangible assets include software licenses, trademarks and other intangible assets. They are accounted for using the cost model. The cost comprises its purchase price, including any import duties and non-refundable purchase taxes, and any directly attributable expenditure on preparing the asset for its intended use, whereby capitalized costs are amortized on a straight line basis over their estimated useful lives, as these assets are considered finite. If an intangible asset is acquired in a business combination, the cost of that intangible asset is based on its fair value at the date of acquisition.

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 18 Consolidated financial statements 31 December 2015

Subsequent measurement is carried at cost less accumulated depreciation and impairment losses. Allowance for impairment is recorded as an expense and are recognized in the consolidated statement of comprehensive income for the respective period. Subsequent expenditure related to other intangible assets after initial recognition are recognized in the consolidated income statement as incurred unless it is probable that this expenditure will enable the asset to generate future economic benefits in excess of its originally assessed standard of performance and this expenditure can be measured reliably and attributed to the asset. If these two conditions are met, the subsequent expenditure is added to the carrying amount of the intangible asset. Residual values and useful lives of the other intangible assets are defined by the Group at each reporting date Amortization is calculated using the straight-line method over the estimated useful life of individual assets as follows: • Software 2 years • Others 6.7 years Amortization expenses are included in the consolidated statement of comprehensive income under the line “Amortization of non-financial assets”. The gain or loss arising on the disposal of an intangible asset is determined as the difference between the proceeds and the carrying amount of the asset, and is included in the consolidated statement of comprehensive income under the line “Gain from sale of intangible assets”. The recognition threshold adopted by the Group for other intangible assets amounts to BGN

700. 3.13. Property, plant and equipment Items of property, plant and equipment are initially measured at cost, which comprises its purchase price and any directly attributable costs of bringing the asset to working condition for its intended use. Subsequent measurement of property, plant and equipment, except for assets under construction, is carried at cost, less accumulated depreciation and later losses. Subsequent expenditure relating to an item of property, plant and equipment is added to the carrying amount of the asset when it is probable that this expenditure will enable the asset to generate future economic benefits in excess of the its originally assessed standard of performance. All other subsequent expenditure is recognized as incurred. Residual value and useful life are estimated by management as of each reporting date. Property, plant and equipment acquired under finance lease agreement, are depreciated based on their expected useful life, determined by reference to comparable assets or based on the period of the lease contract, if shorter.

Depreciation is calculated using the straight-line method over the estimated useful life of

individual assets as follows: • Buildings 25 years • Machines 10 years • Vehicles 6.7 years • Fixtures 6.7 years • Computers 2 years

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 19 Consolidated financial statements 31 December 2015

• Others 6.7 years

Depreciation has been included in the consolidated income statement within 'Depreciation, amortization and impairment of non-financial assets'. Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognized in the consolidated income statement within 'Gain on sale of non-current assets'. The recognition threshold adopted by the Group for property, plant and equipment amounts to BGN 700. 3.14. Leases In accordance with IAS 17 “Leases” ownership of the asset is transferred to the lessee when the lessee bears substantially all the risk and rewards incidental to ownership of leased asset. Upon conclusion of a finance lease asset is recognized in the consolidated statement of financial position of the lessee at the lower of two values- fair value of the leased asset and the present value of minimum lease payments plus incidental payments, it any. The consolidated statement of financial position reflects the corresponding finance lease obligation, whether part of the lease payments are payable in advance upon signing the lease. Subsequently the lease payments are separated between finance expense and reduction of outstanding liability under a finance lease. Assets acquired under the terms of finance lease are depreciated or amortized in accordance with IAS 16 “Property, Plant and Equipment” or IAS 38 “Intangible Assets”. The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged to profit or loss over the period of the lease. All other leases are treated as operating leases. Payments on operating lease agreements are recognized as an expense on a straight-line basis over the lease term. Associated costs, such as maintenance and insurance, are recognized in profit or loss as incurred. 3.15. Impairment testing of goodwill, other intangible assets and property, plant and equipment For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors goodwill. Cash-generating units to which goodwill has been allocated are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount, which is the higher of fair value less costs to sell and value-in-use. To determine the value-in-use, management estimates expected future cash flows from each cash-generating unit and determines a suitable discount rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Group's latest approved budget, adjusted as necessary to exclude the effects

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 20 Consolidated financial statements 31 December 2015 of future reorganizations and asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect their respective risk profiles as assessed by management. Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that cash-generating unit. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognized may no longer exist or is decreased. An impairment charge recognized in prior reporting period is reversed if the cash-generating unit’s recoverable amount exceeds its carrying amount. 3.16. Financial instruments Financial assets and financial liabilities are recognized when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognized when it is extinguished, discharged, cancelled or expires. Financial assets and financial liabilities are measured initially at fair value plus transactions costs, except for financial assets and financial liabilities carried at fair value through profit or loss, which are measured initially at fair value. All financial assets are recognized on their transaction date. Financial assets and financial liabilities are subsequently measured as described below. 3.16.1. Financial assets For the purpose of subsequent measurement, financial assets other than those designated and effective as hedging instruments are classified into the following categories upon initial recognition: • Loans and receivables; • financial assets at fair value through profit or loss; • held-to-maturity investments; • available-for-sale financial assets. Financial assets are assigned to the different categories, depending on the purpose for which the investments were acquired. The category determines measurement method and whether any resulting income and expense is recognized in profit or loss or in other comprehensive income. All financial assets except for those at fair value through profit or loss are subject to review for impairment at least at each reporting date. Financial assets are impaired when there is any objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets, which are described below. All income and expenses relating to financial instruments that are recognized in profit or loss, no matter how they are valued, are presented in the consolidated income statement within 'Finance costs', 'Finance income' or 'Other financial items', except for impairment of trade receivables which is presented within 'Other expenses'. Loans and receivables Loans and receivables originated by the Group are non-derivative financial assets with fixed payments that are not quoted in an active market. After initial recognition these are measured at amortized cost using the effective interest method, less provision for impairment. The Group’s

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 21 Consolidated financial statements 31 December 2015 cash and cash equivalents, trade and most other receivables fall into this category of financial instruments. Discounting is omitted where the effect of discounting is immaterial. I

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 22 Consolidated financial statements 31 December 2015 ndividually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty will default. Receivables that are not considered to be individually impaired are reviewed for impairment in groups, which are determined by reference to the industry and region of a counterparty and other available feature of shared credit risk characteristics. The percentage of the write down is then based on recent historical counterparty default rates for each identified group. Impairment of trade receivables is reported in the consolidated income statement in “Other expenses”. Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets. The Group's available-for-sale financial assets include shares. Financial assets within this category are subsequently measured at fair value, unless there is no market value at active markets present and hence their fair value cannot be measured reliably. Those without quoted market prices are measured at amortized cost using the effective interest method or at cost in cases when they do not have fixed date of payment. Changes in fair value are recognized in other comprehensive income and reported within the available-for-sale reserve within the consolidated statement of changes in equity, net of income taxes, except for impairment losses and foreign exchange differences on monetary assets, which are recognized in profit or loss. When the available-for-sale financial asset is disposed of or is determined to be impaired, the cumulative gain or loss recognized in other comprehensive income is reclassified from the equity reserve to profit or loss and presented as a reclassification adjustment within other comprehensive income. Interest calculated using the effective interest method and dividends are recognized in profit or loss within 'finance income'. Reversals of impairment losses are recognized in other comprehensive income, except for financial assets that are debt securities which are recognized in profit or loss only if the reversal can be objectively related to an event occurring after the impairment loss was recognized. 3.16.2. Financial liabilities The Group's financial liabilities include bank loans, overdrafts, trade and other payables and finance lease liabilities. Financial liabilities are recognized when the Group becomes a party to the contractual agreements for payment of cash amounts or another financial asset to another company or contractual liability for exchange of financial instruments with another company under unfavourable terms. All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within 'Finance costs' or 'Finance income'. Financial liabilities are measured subsequently at amortized cost using the effective interest method, except for financial liabilities held for trading or designated at fair value through profit or loss, that are carried subsequently at fair value with gains or losses recognized in profit or loss. Bank loans are raised for support of long-term funding of the Group’s operations. They are recognized in the consolidated statement of financial position of the Group, net of any costs. Trade payables are recognized initially at their nominal value and subsequently measured at amortized cost less settlement payments. Dividends payable to shareholders are recognized when the dividends are approved at the general meeting of the shareholders.

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 23 Consolidated financial statements 31 December 2015

3.16.3. Derivative financial instruments The derivative financial instruments of the Company comprise of interest rate swap, which are recognized initially at fair value and reported subsequently at fair value in the statement of financial position. The changes in the fair value of derivatives are recognized in profit or loss for the period.

3.16.4. Sale and repurchase agreements Securities may be lent or sold subject to a commitment to repurchase them (a repo). Such securities are retained on the consolidated statement of financial position when substantially all the risks and rewards of ownership remain with the Group, and the counterparty liability is included separately on the consolidated statement of financial position when cash consideration is received. Similarly, where the Group borrows or purchases securities subject to a commitment to resell them (a reverse repo) but does not acquire the risks and rewards of ownership, the transactions are treated as collateralised loans when cash consideration is paid, and the securities are not included in the consolidated statement of financial position. The difference between sale and repurchase price is accrued over the life of the agreements using the effective interest method. Securities lent to counterparties are also retained in the consolidated financial statements. Securities borrowed are not recognised in the consolidated financial statements, unless these are sold to third parties, at which point the obligation to repurchase the securities is recorded as a trading liability at fair value and any subsequent gain or loss included in net operating result. 3.17. Inventory Inventories include raw materials, work in progress, and goods. Cost of inventories includes all expenses directly attributable to the purchase or manufacturing process, recycling and other direct expenses connected to their delivery as well as suitable portions of related production overheads, based on normal operating capacity. Financing costs are not included in the cost of the inventories. At the end of every accounting period, inventories are carried at the lower of cost and net realizable value. The amount of the impairment of inventory up to its net realizable value is recognized as an expense for the period of the impairment. Net realizable value is the estimated selling price of the inventories less any applicable selling expenses and cost of completion.. When inventory have already been impaired up to the net realizable value and when in a subsequent reporting period it is clear that the circumstances that have led to the impairment no longer exist, then the new net realizable value is adopted. The amount of the reversal may only be up to the carrying amount of the inventory before impairment The reversal of the write-down is accounted for as decrease in inventory expenses for the period in which the reversal takes place. The Group determines the cost of inventories by using the weighted average cost. When inventories are sold, the carrying amount of those inventories is expensed in the period in which the related revenue is recognized. 3.18. Income taxes Tax expense recognized in profit or loss comprises the sum of deferred tax and current tax not recognized in other comprehensive income or directly in equity.

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 24 Consolidated financial statements 31 December 2015

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 25 Consolidated financial statements 31 December 2015

Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the consolidated financial statements. Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill or on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realization, provided they are enacted or substantively enacted by the end of the reporting period.

Deferred tax liabilities are always provided for in full. Deferred tax assets are recognized to the extent that it is probable that they will be able to be utilized against future taxable income. For management's assessment of the probability of future taxable income to utilize against deferred tax assets, see note 3.24. Deferred tax assets and liabilities are offset only when the Group has a right and intention to set off current tax assets and liabilities from the same taxation authority. Changes in deferred tax assets or liabilities are recognized as a component of tax income or expense in profit or loss, except where they relate to items that are recognized in other comprehensive income (such as the revaluation of land) or directly in equity, in which case the related deferred tax is also recognized in other comprehensive income or equity, respectively. 3.19. Cash and cash equivalents Cash and cash equivalents comprise cash in hand, current bank accounts, deposits up to 3 months. 3.20. Equity, reserves, and dividend payments Share capital of the Group represents the nominal value of shares that have been issued. Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from paid share capital, net of any related income tax benefits. The revaluation reserve includes gains and losses from the revaluation of non-current assets. General reserves include legal reserves required by the Bulgarian legislation. In compliance with the Commercial Act, the Group sets aside 10% of its generated profit up until it reaches 10% of its share capital. Foreign currency translation reserve includes exchange rate differences from translation of foreign operations of the Group. Retained earnings include all current and prior period retained profits and uncovered losses from prior years.

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 26 Consolidated financial statements 31 December 2015

Dividend payables to shareholders are included in 'Related party payables' in the statement of financial position when the dividends have been approved at the general meeting of shareholders prior to the reporting date. All transactions with owners of the parent are recorded separately within equity.

3.21. Post-employment benefits and short-term employee benefits The Group reports short-term payables relating to unutilized paid leaves, which shall be compensated in case it is expected the leaves to occur within 12 months after the end of the accounting period during which the employees have performed the work related to those leaves. The short-term payables to personnel include wages, salaries and related social security payments. In accordance with Labor Code requirements, in case of retirement, after the employee has gained the legal right of pension due to years of services and age, the Group is obliged to pay him/her compensation at the amount of up to six gross wages. The Group has not reported a liability by law for the payment of retirement compensation (see also Note 20.2). In accordance with its defined benefit plans the Company owes pension remunerations to its employees. A defined contribution plan is a pension plan under which the Group pays fixed contributions into an independent entity. The Group has no legal or constructive obligations to pay further contributions after its payment of the fixed contribution. The Group contributes to several state plans and insurances for individual employees that are considered defined contribution plans. Contributions to the plans are recognized as an expense in the period that relevant employee services are received. Short-term employee benefits, including holiday entitlement, are current liabilities included in 'pension and other employee obligations', measured at the undiscounted amount that the Group expects to pay as a result of the unused entitlement.

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 27 Consolidated financial statements 31 December 2015

3.22. Provisions, contingent liabilities and contingent assets Provisions are recognized when present obligations as a result of a past event will probably lead to an outflow of economic resources from the Group and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events, for example, product warranties granted, legal disputes or onerous contracts. Restructuring provisions are recognized only if a detailed formal plan for the restructuring has been developed and implemented, or management has at least announced the plan's main features to those affected by it. Provisions are not recognized for future operating losses. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material. Any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is recognized as a separate asset. However, this asset may not exceed the amount of the related provision. All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognized. Contingent liabilities are subsequently measured at the higher amount of a comparable provision as described above and the amount initially recognized, less any amortization.

[ Possible inflows of economic benefits to the Group that do not yet meet the recognition criteria of an asset are considered contingent assets.

3.23. Financing

The government grants provided by the State, are initially recognised as deferred income (financing) when there is reasonable assurance that they will be received by the Company and that the latter has complied and complies with the associated thereto terms and requirements.

The government grant that compensates the Company for expenses incurred is recognised in current profit or loss on a systematic basis in the same period in which the expenses are recognised.

The government grant that compensates investment expenses incurred to acquire an asset is recognised in current profit or loss on a systematic basis over the useful life of the asset usually at the amount of the recognised depreciation charge.

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 28 Consolidated financial statements 31 December 2015

3.24. Significant management judgment in applying accounting policies The following are significant management judgments in applying the accounting policies of the Group that have the most significant effect on the consolidated financial statements. Critical estimation uncertainties are described in note 3.25.

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 29 Consolidated financial statements 31 December 2015

3.24.1. Leases In applying the classification of leases in IAS 17 “Leases”, management considers its leases of machines, equipment and vehicles facilities as finance lease arrangements. In some cases, the lease transaction is not always conclusive, and management uses judgment in determining whether the lease is a finance lease arrangement that transfers substantially all the risks and rewards incidental to ownership. 3.24.2. Deferred tax assets The assessment of the probability of future taxable income in which deferred tax assets can be utilized is based on the Group's latest approved budget forecast, which is adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. The tax rules in the numerous jurisdictions in which the Group operates are also carefully taken into consideration. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilized without a time limit, that deferred tax asset is usually recognized in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances.

3.25. Estimation uncertainty When preparing the consolidated financial statements management undertakes a number of judgments, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results may differ from the judgments, estimates and assumptions made by management, and will seldom equal the estimated results. Information about significant judgments, estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses are discussed below.

3.25.1. Impairment An impairment loss is recognized for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount, which is the higher of fair value less costs to sell and value-in-use. To determine the value-in-use, management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows (see note 3.15). In the process of measuring expected future cash flows management makes assumptions about future gross profits. These assumptions relate to future events and circumstances. The actual results may vary, and may cause significant adjustments to the Group's assets within the next financial year. In most cases, determining the applicable discount rate involves estimating the appropriate adjustment to market risk and the appropriate adjustment to asset-specific risk factors that are specific for the separate assets.

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 30 Consolidated financial statements 31 December 2015

3.25.2. Business combinations On initial recognition, the assets and liabilities of the acquired business are included in the consolidated statement of financial position at their fair values. In measuring fair value management uses estimates about future cash flows and discount rates, however, the actual results may vary. Any measurement changes upon initial recognition would affect the measurement of goodwill. 3.25.3. Useful life of depreciable assets Management reviews the useful lives of depreciable assets at each reporting date. At 31 December 2015 management assesses that the useful lives represent the expected utility of the assets to the Group. The carrying amounts are analyzed in notes 7 and 8. Actual results, however, may vary due to technical obsolescence, particularly relating to software and IT equipment. 3.25.4. Inventories Inventories are measured at the lower of cost and net realizable value. In estimating net realizable values, management takes into account the most reliable evidence available at the times the estimates are made. The Group's core business is subject to technology changes which may cause selling prices to change rapidly. Moreover, future realization of the carrying amounts of inventory assets BGN 52 547 thousand is affected by the changing prices of lead and lead components. 3.25.5. Fair value of financial instruments Management uses valuation techniques in measuring the fair value of financial instruments where active market quotes are not available. Details of the assumptions used are given in the notes regarding financial assets and liabilities. In applying the valuation techniques management makes maximum use of market inputs, and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.

3.25.6. Provisions Provisions for guarantees are recognized amounts that the Group expects to be utilized as expenses for warranty and replacement of faults in the streamline products for the next year. The amount recognized for warranties for which customers are covered for the cost of repairs is estimated based on management's past experience and the future expectations of defects. 3.25.7. Fair Value Measurement The Company applies IFRS 13 “Fair value measurements”. The standard establishes a single source of guidance for fair value measurements and disclosures without changing the requirements of other standards regarding which items should be measured or disclosed at fair value.

For financial reporting purposes IFRS 13 defines the fair values as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal market at the measurement date under current market condition. Fair value under IFRS 13 is an exit price regardless of whether the price is directly observable or estimated using another valuation technique. [[

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 31 Consolidated financial statements 31 December 2015

The scope of IFRS 13 is broad applying to both financial and non-financial instrument items for which other IFRSs require or permit fair value measurements and disclosures. The Standard requires no prospective application for previous periods.

Other than the additional disclosures, the application of IFRS 13 has not had any material impact on the amounts recognized in the financial statements.

Some of the accounting policies and disclosures of the Company require fair value measurement of financial and non-financial assets and liabilities.

When the fair value of an asset or liability is measured, the Company uses observable data, if possible. Fair value is categorized in different levels of fair value hierarchy based on imputs in the measurement technique, as follows: • Level 1 fair value measurements are those derived from quoted prices in active markets for identical assets or liabilities • Level 2 fair value measurements are those derived from inputs other than quoted market prices that are directly (such as prices) or indirectly (derived from prices) observable for the asset or liability, either directly or indirectly • Level 3 fair value measurements are those derived from valuations techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs)

If inputs used for fair value measurement of an asset or liability can be categorized in different from the fair value hierarchy levels, then the fair measurement is categorized as a whole in this fair value hierarchy level which input is significant for the whole measurement.

The Company recognizes transfers between the fair value hierarchy levels to the end of the reporting period in which the change occurred.

The fair value of financial and non-financial assets and liabilities does not differ significantly from their carrying amount.

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 32 Consolidated financial statements 31 December 2015

4. Correction of Prior Period Accounting Error

During 2015 following a revision of the costing model and the underlying assumptions with respect to valuation of the work in progress in Monbat AD (a subsidiary of the Group), the management of the Group discovered that:

1. Certain items which had the nature of finished products and raw materials were classified as work in progress. Certain items which had the nature of work-in progress were classified as finished products.

In these consolidated financial statements the correction of the misclassification is treated as a prior period accounting error under IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” and consequently the earliest comparative period presented is restated.

The effect for the year ended 2014 is: 1) a decrease in the reported numbers for work in progress in the amount of 1,820 BGN thousand, 2) a decrease in the reported numbers for finished products for 410 BGN thousand and 3) a corresponding increase in raw materials of 2,230 BGN thousand

The effect for the year ended 2013 is: 1) a decrease in the reported numbers for work in progress in the amount of 325 BGN thousand, 2) a decrease in the reported numbers for finished products for 1,439 BGN thousand and 3) a corresponding increase in raw materials of 1,764 BGN thousand.

2. There was an accounting error in aggregating the inventory stock count protocols for financial years ended 31.12.2014 and 31.12.2013 which led to increase in reported quantities for work in progress items.

3. The technological norms with respect to certain items that are part of the recipes used to value work in progress and the bill of materials used for the valuation of the later have not been accurate.

In these consolidated financial statements the corrections pertaining to items 2 and 3 listed are treated as a prior period accounting error under IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” and consequently the earliest comparative period presented is restated.

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 33 Consolidated financial statements 31 December 2015

EFFECT OF RESTATEMENT ON THE CONSOLDIATED STATEMENT OF FINANCIAL POSITON:

(all amounts in BGN thousands) As at 31 December Assets Note 2014 Effect of Error 2014 2013 Effect of Error 2013 Techn stockc Techn stockcou BGN ‘000 norms ount BGN ‘000 BGN ‘000 norms nt BGN ‘000 Original Restated Original Restated Non-current assets Intangible assets 7 1 606 - - 1 606 1 054 - - 1 054 Property, plant and - - 116 484 - - 116 484 equipment 8 118 371 118 371 Receivables from trade - - 455 - - 455 loans 13 455 455 Long-term financial assets 10 8 - - 8 8 - - 8 Non-current assets 120 440 - - 120 440 118 001 - - 118 001 Current assets Inventories 12 59 084 (8 117) (569) 50 398 55 607 (8 361) (1 378) 45 868 Short-term financial assets 13 35 - - 35 24 - - 24 Trade receivables 14 39 889 - - 39 889 39 316 - - 39 316 Related party receivables 34 23 532 - - 23 532 20 778 - - 20 778 Tax receivables 15 3 803 (24) (77) 3 702 4 958 - - 4 958 Other receivables 16 1 185 - - 1 185 1 373 - - 1 373 Cash and cash equivalents 17 20 538 - - 20 538 7 673 - - 7 673 Current assets 148 066 (8 141) (646) 139 279 129 729 (8 361) (1 378) 119 990

Total assets 268 506 (8 141) (646) 259 719 247 730 (8 361) (1 378) 237 991 (all amounts in BGN As at 31 December thousands) Equity and liabilities Note 2014 Effect of Error 2014 2013 Effect of Error 2013 Techn stockc BGN Techn stockcou BGN BGN ‘000 norms ount ‘000 BGN ‘000 norms nt ‘000 Original Restated Original Restatedl Equity Share capital 18.1 39 000 - - 39 000 39 000 - - 39 000 Share premium 18.2 28 611 - - 28 611 28 611 - - 28 611 General reserve 18.3 74 525 (8 361) (1 378) 64 786 61 688 (8 361) (1 378) 51 949 Foreign currency revaluation reserve 138 - - 138 503 - - 503 Retained earnings 34 556 220 728 53 504 32 002 - - 32 002 Equity attributable to the owners of the parent 176 830 (8 141) (650) 168 039 161 804 (8 361) (1 378) 152 065 Non-controlling interests (2 661) - - (2 661) (891) - - (891) Total equity 174 169 (8 141) (650) 165 378 160 913 (8 361) (1 378) 151 174 Liabilities Non-current liabilities Long-term borrowings 21.1 34 635 - - 34 635 9 661 - - 9 661 Finance lease liabilities 9.1 366 - - 366 823 - - 823

Long-term related party payables 34 7 7 7 7 Other liabilities 31 31 Long-term grants 21.2 2 386 - - 2 386 2 848 - - 2 848 Deferred tax liabilities, net 11 1 282 - - 1 282 1 700 - - 1 700 Non-current liabilities 38 676 - - 38 676 15 070 - - 15 070

Current liabilities Guarantee provisions 19 532 - - 532 797 - - 797 Pension and other employee obligations 20.2 1 093 - - 1 093 1 086 - - 1 086 Short-term borrowings 21.1 38 092 - - 38 092 50 386 - - 50 386 Finance lease liabilities 9.1 470 - - 470 739 - - 739 Trade payables 22 11 001 - - 11 001 14 758 - - 14 758 129 Short-term related party payables 34 15 - - 15 129 - - Tax liabilities 23 1 654 - 4 1 658 2 030 - - 2 030 Short-term grants 21.2 456 - - 456 700 - - 700 Other liabilities 24 2 348 - - 2 348 1 122 - - 1 122 Current liabilities 55 661 - 4 55 665 71 747 - - 71 747 Total liabilities 94 337 - 4 94 341 86 817 - - 86 817 Total equity and liabilities 268 506 (8 141) (646) 259 719 247 730 (8 361) (1 378) 237 991

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 34 Consolidated financial statements 31 December 2015

EFFECT OF RESTATEMENT ON THE CONDOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER:

Note 2014 Effect of Error 2014 BGN ‘000 Techn stockcount BGN ‘000 original norms Restated

Sales revenue 25 228 371 - - 228 371 Other revenue 25 622 - - 622

Cost of materials 26 (154 380) 466 - (153 914) Hired services expenses 27 (17 669) - - (17 669) Employee benefits expenses 20.1 (16 022) - - (16 022) Amortization of non-financial assets 7,8 (11 193) - - (11 193)

Changes in finished goods and work in progress 10 212 (222) 809 10 799 Cost of goods sold and other current assets (7 328) - - (7 328) Gain on sale of non-current assets 28 44 - - 44 Other expenses 29 (4 625) - - (4 625) Operating profit 28 032 244 809 29 085

Finance costs 28 (3 653) - - (3 653) Finance income 28 1 353 - - 1 353 Other financial items 29 (205) - - (205) Profit before tax 25 527 244 809 26 580 Tax expense 30 (2 936) (24) (81) (3 041) Profit for the year 22 591 220 728 23 539

Profit for the year, attributable to: Non-controlling interests (1 770) - - (1 770) Owners of the parent 24 361 220 728 25 309

BGN BGN

Earnings per share 31.1 0.62 0.01 0.02 0.65

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 35 Consolidated financial statements 31 December 2015

5. Basis of consolidation The subsidiaries included in the consolidation, as per carrying amount of the investment, are as follows:

Name of the Country of Main activities 2015 share 2012 share subsidiary incorporatio n BGN‘000 % BGN‘000 % Production of Start AD Bulgaria Batteries 4 483 87.26 4 483 87.26 Monbat DOO Serbia Serbia Lead recycling 25 643 100 25 643 100 Monbat Recycling Romania Lead recycling 29 745 100 29 745 100 Monbat Recycling EAD Bulgaria Lead recycling 35 182 100 35 182 100 YU Monbat Serbia Trade of Batteries Serbia 1 553 100 1 553 100 Octalight Production of Bulgaria AD Bulgaria powerful LED 1 173 51 1 173 51 Monbat OOD Romania Romania Trade of Batteries 196 100 196 100 97 975 - 97 975 -

6. Segment reporting

Management currently identifies the following Group's operating segments as geographical segments as further described in note 3.7: Segment reporting. These geographical segments are monitored by the management and strategic decisions are made on the basis of adjusted segment operating results.

Geographical information for the reporting periods can be analyzed as follows:

Bulgaria Serbia Romania Total 2015 2015 2015 2015 BGN‘000 BGN‘000 BGN‘000 BGN‘000 Revenue: - from external customers 237 830 3 008 4 630 245 468 - from other segments 245 176 13 007 65 033 323 216 Segment revenues 483 006 16 015 69 663 568 684

Bulgaria Serbia Romania Total 2014 2014 2014 2014 BGN‘000 BGN‘000 BGN‘000 BGN‘000 Revenue: - from external customers 223 095 3 735 2 163 228 993 - from other segments 192 900 14 226 66 933 274 059 Segment revenues 415 995 17 961 69 096 503 052

The totals presented for the Group's operating segments reconcile to the Group's key financial figures as presented in its consolidated financial statements as follows:

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 36 Consolidated financial statements 31 December 2015

2015 2014 BGN‘000 BGN‘000 Revenues Total segment revenues 568 684 503 052 Elimination intersegment revenues (323 216) (274 059) Group revenues 245 468 228 993

Profit Segment operating profit 26 408 29 709 Elimination from intersegment profits from related party transactions (436) (624) Group operating profit 25 972 29 085 Finance costs (3 047) (3 653) Finance income 1 307 1 353 Other financial items (111) (205) Group profit before tax 24 121 26 580

Bulgaria Serbia Romania Total 2015 2015 2015 2015 Assets BGN‘000 BGN‘000 BGN‘000 BGN‘000

Total segment assets 386 253 31 233 46 650 464 136 Consolidation (160 510) (10 917) (17 049) (188 476) Group assets 225 743 20 316 29 601 275 660

Bulgaria Serbia Romania Total 2015 2015 2015 2015 Liabilities BGN‘000 BGN‘000 BGN‘000 BGN‘000

Total segment liabilities 145 228 22 499 15 223 182 950 Consolidation (57 724) (22 060) (6 985) (86 769) Group liabilities 87 504 439 8 238 96 181

Bulgaria Serbia Romania Total 2014 2014 2014 2014 Assets BGN‘000 BGN‘000 BGN‘000 BGN‘000

Total segment assets 362 130 30 655 47 242 440 027 Consolidation (155 372) (11 527) (13 409) (180 308) Group assets 206 758 19 128 33 833 259 719

Bulgaria Serbia Romania Total 2014 2014 2014 2014 Liabilities BGN‘000 BGN‘000 BGN‘000 BGN‘000

Total segment liabilities 138 642 17 812 16 642 173 096 Consolidation (54 640) (16 372) (7 743) (78 755) Group liabilities 84 002 1 440 8 899 94 341 [

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 37 Consolidated financial statements 31 December 2015

In the periods under review, unallocated operating income and expense mainly consist of vehicle batteries and lead.

The Group’s revenue may be analyzed as follows for each major product and service category:

2015 2014 BGN ‘000 BGN ‘000

Revenue from sale of products 227 571 216 808 Revenue from sale of other materials 5 854 7 344 Revenue from rendering of services 2 070 1 438 Revenue from sales of goods 9 158 2 781 Other revenue 815 622 Group revenue 245 468 228 993

7. Other intangible assets

The Group's other intangible assets comprise acquired software licenses, trademarks and other intangible assets. The carrying amounts for the reporting periods under review can be analyzed as follows:

For the year ended Software Trade Other R&D Total 31 December 2015 marks expences BGN‘000 BGN‘000 BGN‘000 BGN‘000 лв. BGN‘000 Carrying amount Balance at 1 January 2015 403 1 224 1 299 701 3 627 Additions 73 42 14 - 129 Disposals - - (1 221) - (1 221) Balance at 31 December 2015 476 1 266 92 701 2 535 Amortization Balance at 1 January 2015 (388) (1 081) (515) (37) (2 021) Amortization (22) (45) (165) (36) (268) Disposals - - 659 - 659 Balance at 31 December 2015 (410) (1 126) (21) (73) (1 630) Carrying amount at 31 December 2015 66 140 71 628 905

For the year ended Software Trade Other R&D Total

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 38 Consolidated financial statements 31 December 2015

31 December 2014 marks expences BGN‘000 BGN‘000 BGN‘000 BGN‘000 лв. BGN‘000 Carrying amount Balance at 1 January 2014 389 1 184 1 203 - 2 776 Additions 14 40 96 701 851 Balance at 31 December 2014 403 1 224 1 299 701 3 627 Amortization Balance at 1 January 2014 (356) (1 036) (330) - (1 722) Amortization (32) (45) (185) (37) (299) Balance at 31 December 2014 (388) (1 081) (515) (37) (2 021) Carrying amount at 31 December 2014 15 143 784 664 1 606

No material contractual commitments were entered into during 2015 and 2014. All amortization and impairment charges are included within 'Depreciation, amortization and impairment of non-financial assets'. No other intangible assets have been pledged as security for liabilities.

On October 1, 2015 the Group acquired land and buildings used by Octa Light Bulgaria AD for production facility. All improvements on them until the present moment were transferred to their cost.

This document is a translation of the original Bulgarian text, in case of divergence the Bulgarian text shall prevail. Monbat AD 39 Consolidated financial statements 31 December 2015

8. Property, plant and equipment Group's property, plant and equipment comprise lands, buildings, machinery, equipment, vehicles, business inventory and cost of acquisition. The carrying amount can be analyzed as follows:

Lands Buildings Machinery Equipment Vehicles Business Assets Total inventory under construction BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 Gross carrying amount Balance at 1 January 2015 8 358 41 090 92 952 31 401 9 566 4 010 12 245 199 622 Additions - 1 586 2 516 467 681 280 15 217 20 747 Disposals (141) (1 090) (18) (104) (61) (18) (33) (1 465) Assets transfer 264 3 430 12 135 640 62 16 (16 547) - Balance at 31 December 2015 8 481 45 016 107 585 32 404 10 248 4 288 10 882 218 904 Depreciation Balance at 1 January 2015 - (8 760) (57 530) (6 163) (5 434) (3 364) - (81 251) Depreciation (1 589) (7 196) (1 377) (842) (260) - (11 264) Disposals - 90 2 9 216 - 128 Balance at 31 December 2015 - (10 259) (64 724) (7 531) (6 255) (3 618) - (92 387)

Carrying amount at 31 December 2015 8 481 34 757 42 861 24 873 3 993 670 10 882 126 517

Monbat AD 40 Consolidated financial statements 31 December 2015 Lands Buildings Machinery Equipment Vehicles Business Assets Total inventory under construction

BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 Gross carrying amount Balance at 1 January 2014 8 358 38 659 88 486 31 282 9 316 3 825 7 151 187 077 Additions - 505 1 792 80 486 183 10 436 13 482 Disposals - - - - (236) - (701) (937) Assets transfer - 1 926 2 674 39 - 2 (4 641) - Balance at 31 December 2014 8 358 41 090 92 954 31 401 9 566 4 010 12 245 199 622 Depreciation Balance at 1 January 2014 - (7 243) (50 645) (4 820) (4 787) (3 098) - (70 593) Disposals - - - - 236- - 236 Depreciation - (1 517) (6 885) (1 343) (883) (266) - (10 894) Balance at 31 December 2014 - (8 760) (57 530) (6 163) (5 434) (3 364) - (81 251)

Carrying amount at 31 December 2014 8 358 32 330 35 422 25 238 4 132 646 12 245 118 371

Monbat AD 41 Consolidated financial statements 31 December 2015

During the last months of 2015 the subsidiary Monbat DOO, Serbia, a lead recycling plant, became operational again after the cease of production activities since 2013. The carrying amount of the property, plant and equipment as of December 31, 2015 is BGN 13,242 thousand (2014: BGN 13,948 thousand). Due to the above impairment indicators, the Management of the Group has assessed the recoverable amount as of December 31, 2015 of the property, plant and equipment owned by Monbat DOO, Serbia based on value in use using the discounted cash- flow model.

The value in use calculations are based on the following key assumptions: 1. Approximately 12,000 tonnes of scrap batteries per year will be recycled in 2016 and for the foreseeable future. 2. The resulting by-products of the scrap battery recycling process are sold to Monbat Recycling Bulgaria. 3. The discount rate used is in the range of 8.9% to 9.8%. 4. The recoverable amount of the assets based on value in use amounted to BGN 21,766 thousand as of December 31, 2015

The management of the Group believes that based on the impairment testing results, there is no need for recognition of impairment for the year ended December 31, 2015.

As at 31.12.2015 the costs of acquisition of non-current assets are allocated as follows:

• Project BG 161 PО 003-1.1.07 (2014 - 5 059 th. BGN) • Production frame for lead plane and grille: 733 th. BGN(2014 г. : 745 th BGN) • New Hi-energy voltage cabel (2014 :BGN 345 thousand) • Assembly line for VRLA battery BGN 952 thousand (2014: BGN 847 thousand) • New LED license and models BGN 247 thousand (2014: BGN 279 thousand) • Project for reconstruction new pastir hall (2014:491th. BGN) • Production Hall 2 214 thousand BGN • Double wide Concast system negative grid making line 1 696 thousand BGN. • Mixer Ocsmaster 447 thousand BGN. • Other reconstructions BGN 4 593 thousand (2014 : BGN 4 479 thousand)

All depreciation charges are included within 'Depreciation and amortization of non-financial assets'.

In 2015 the Group has ordered equipment at the amount of 1 543 th. BGN and had paid in advance BGN 464 thousands. and production machine for plates with value of BGN 530 thousand, and made an advance payment in the amount of BGN 132 thousand.

In 2015 the Group has ordered equipment for the production of tin as the costs incurred as of the end of 2015 amount to BGN 1 639 thousand.

The carrying amount of Land Buildings Machinery Vehicles Total the Group’s property, plant and equipment pledged as security for its loans (see note 21), is presented as follows: BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000

Monbat AD 42 Consolidated financial statements 31 December 2015

Carrying amount at 31 December 2015 6 021 17 203 21 165 467 44 856 Carrying amount at 31 December 2014 6 021 17 920 23 517 549 48 007

9. Leases 9.1. Financial leases as lessee The Group acquired under finance lease agreements machinery and production facilities. The net carrying amount of the assets held under finance leases amounts to BGN 2 671 thousand (2014: BGN 1 929 thousand). The assets are included in group “Machinery and equipment” and “Vehicles” from “Property, plant and equipment” (see note 8).

Finance lease liabilities are secured by the related assets held under finance lease arrangements.

Future minimum finance lease payments at the end of each reporting period are as follows:

Minimum lease payments due Within 1 year 1 to 5 years After 5 Total years BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 31 December 2015 Lease payments 515 1 393 - 1 908 Discounting (88) (127) - (352) Net present values 427 1 266 - 1 693 31 December 2014 Lease payments 507 386 - 893 Discounting (37) (20) - (57) Net present values 470 366 - 836

The lease agreements include fixed lease payments and purchase option at the end of last year of the lease term. The agreements are non-cancellable but do not contain any further restrictions. No contingent rents were recognized as an expense and no sublease income is expected to be received as all assets are used exclusively by the Group.

The fair value of the liabilities on the finance lease is estimated at BGN 1 693 thousand (2014: BGN 836 thousand) which represents their current value and the interest rates on bank loans with collaterals and similar terms.

Monbat AD 43 Consolidated financial statements 31 December 2015

9.2. Operating leases as lessee

The Group's future minimum operating lease payments are as follows:

Minimum lease payments due Within 1 year 1 to 5 years Total BGN ‘000 BGN ‘000 BGN ‘000

31 December 2015 300 322 622 31 December 2014 300 322 622

Lease payments recognized as an expense during the period amount to BGN 300 thousand (2014: BGN 300 thousand). This amount consists of minimum lease payments. No sublease payments or contingent rent payments were made or received. No sublease income is expected as all assets held under operating lease agreements are used exclusively by the Group.

The Group's operating lease agreements do not contain any contingent rent clauses. None of the operating lease agreements contains renewal or purchase options or escalation clauses or any restrictions regarding dividends, further leasing or additional debt.

10. Long-term financial assets

The amounts, recognized in the consolidated financial statements, refer to the following categories of long-term financial assets.

2015 2014 BGN ‘000 BGN ‘000 Available-for-sale financial assets: Shares in Ekobat AD 8 8 8 8

The shares of Ekobat AD are not listed on the stock exchange and their fair value cannot be defined on quoted price basis.

For more information about credit risk, related to the long-term assets, on which the Group is exposed, see Note 38.2.

Monbat AD 44 Consolidated financial statements 31 December 2015

11. Deferred tax liabilities, net Deferred taxes arising from temporary differences can be summarized as follows:

Deferred tax liabilities (assets) 1 January 2015 Recognized in profit 31 December 2015 and loss BGN ‘000 BGN ‘000 BGN ‘000 Non-current assets Property, plant and equipment 2 796 (47) 2 749 Impairment of receivables (971) - (971) Obligations for employee’s (13) (4) (17) compensated leaves Provisions for guarantees for 10 7 17 claims Impairment of investment (350) - (350) Impairment of inventories (50) - (50) Other liabilities (140) - (140) 1 282 (44) 1 238 Recognized as: Deferred tax assets (1 524) (1 575) Deferred tax liabilities 2 806 2 813 Net deferred tax liabilities 1 282 1 238

Deferred tax liabilities (assets) 1 January 2014 Recognized in profit 31 December and loss 2014 BGN ‘000 BGN ‘000 BGN ‘000 Non-current assets Property, plant and equipment 2 759 37 2 796 Impairment of receivables (604) (367) (971) Obligations for employee’s (15) 2 (13) compensated leaves Provisions for guarantees for (17) 27 10 claims Impairment of investment (233) (117) (350) Impairment of inventories (50) - (50) Other liabilities (140) - (140) 1 700 (418) 1 282 Recognized as: Deferred tax assets (1 040) (1 524) Deferred tax liabilities 2 740 2 806 Net deferred tax liabilities 1 700 1 282

All deferred tax assets have been recognized in the consolidated statement of financial position.

Monbat AD 45 Consolidated financial statements 31 December 2015

12. Inventories Inventories, recognized in the consolidated statement of financial position can be analyzed as follows:

2015 2014 BGN ‘000 BGN ‘000

Work in progress 12 077 15 484 Materials 28 643 22 238 Production 11 163 10 630 Goods 138 1 097 Others 526 949 Inventories 52 547 50 398

Decrease in the expenses as a result of reversal of impairments, which have been recognized in previous periods, non occurred in 2015, 2014.

A special pledge has been created on raw materials and inventories – lead, lead compounds and accumulator batteries and similar, property of Monbat AD. The pledge is a collateral for obligations under overdraft agreement, used for working capital, and for the issuance of bank guarantees, with DSK Bank , and overdraft agreement from 07.12.2004 with Eurobank EFG Bulgaria AD and agreement 23.11.2010 with Eurobank EFG Bulgaria AD.

The carrying amount of inventories, pledged as a collateral is at the amount of BGN 12 242 thousand as at 31.12.2015. For more information, see note 21.

13. Receivables from trade loans Short term commercial loans granted are, as follows: 2015 2014 BGN ‘000 BGN ‘000 Battery Center Europa EOOD - 24 Mihail Jotov 10 10 Mihail Mihailov - 1 Monbat Mozambik 537 - Equity investment 50 - 597 35

• Contract from 22.12.2015 with Mihail Jotov Utilized principal: BGN 10 thousand. Contract duration: one year Balance of the principle as of 31.12.2015 - BGN 10 thousand Redemption: Single payment at the maturity date of the contract

• Contract from 01.08.2015 with Battery Center Europa Utilized principal: BGN 24 thousand. Contract duration: one year Redemption: Single payment at the maturity date of the contract Balance of the principle as of 31.12.2015 - BGN 0 thousand Reclassified as long-term

Monbat AD 46 Consolidated financial statements 31 December 2015

• Contract from 14.12.2015 with Monbat Mozambik Utilized principal: BGN 537 thousand. Contract duration: 30.12.2018 Balance of the principle as of 31.12.2015 - BGN 537 thousand Redemption: on 6 porsions.

Long-term commercial loans granted are, as follows: 2015 2014 BGN ‘000 BGN ‘000 “Lubriko” EOOD 455 455 455 455

• Contract from 28.12.2009 with Lubriko EOOD Utilized principal: BGN 1 500 thousand. Contract duration: one year Balance of principal as at 31.12.2015 BGN 455 thousand. Contract collaterals: none Redemption: Single payment at the maturity date of the contract

The financial assets are carried at cost, because they are not traded on an active public market. 14. Trade receivables 2015 2015 BGN ‘000 BGN ‘000

Trade receivables, gross 42 892 42 289 Impairment (2 369) (2 400) Trade receivables 40 523 39 889

All trade receivables are short term. The carrying amount of trade receivables is considered a reasonable approximation of fair value. All trade receivables of the Group have been reviewed for indications of impairment.

Certain trade receivables were found to be impaired and the corresponding impairment at the amount of BGN 576 thousand has been recognized within ‘Other expenses’ in the consolidated income statement. The impaired trade receivables are mostly due from trade customers experiencing financial difficulties. Part of the impaired receivables have been written-off.

The movement in impairments can be presented as follows:

2015 2014 BGN ‘000 BGN ‘000 Balance at 1 January (2 400) (1 824) Impairment loss - (576) Revenues from restatement impairment 31 - Balance at 31 December (2 369) (2 400)

An analysis of impaired overdue trade receivables is presented in note 38.2.

Monbat AD 47 Consolidated financial statements 31 December 2015

15. Tax Receivables 2015 2014 BGN ‘000 BGN ‘000 VAT recoverable 6 072 3 498 Customs collection 249 178 Corporate tax 4 26 6 325 3 702

Significant part of tax receivables are VAT recoverable for the period December 2015, recovered in 2016. 16. Other receivables 2015 2014 BGN ‘000 BGN ‘000 Advance payments on expenses 259 97 Advance payments on insurance 85 71 Trade borrowings’ interest receivables 1 644 Others 779 373 1 124 1 185

17. Cash and cash equivalents

Cash and cash equivalents include the following components: 2015 2014 BGN ‘000 BGN ‘000 Cash at bank and in hand: - BGN 2 897 5 389 - EUR 10 842 12 775 - USD 446 527 - RON and dinars 929 1 845 - GBP 118 2 Cash and cash equivalents 15 232 20 538

The Group no restricted cash at 31.12.2015 , and restricted cash at 31.12.2015 – BGN 5 867 th.

18. Equity 18.1. Share capital

The registered capital of the Group consists of 39 000 000 ordinary shares with a nominal value of BGN 1 per share. All shares are equally eligible to receive dividends and liquidation proceeds and represent one vote at the shareholders’ meeting of the Group. During 2015 the Group has redeemed 10 946 shares.

During 2014 the Group has sold 120 bought back own shares.

Monbat AD 48 Consolidated financial statements 31 December 2015

Unicredit Bank Austria AG has been engaged as a sub-custodian by Prista Holdco Cooperatief U.A. (being a shareholder in Prista Oil Group BV which is in turn the sole shareholder of Prista Oil Holding EAD and 90% owner of Monbat Trading OOD). As of 31.12.2015 and 31.12.2014 under the custodian agreement Unicredit Bank Austria AG holds 1 376 400 shares or 3.53% of the capital of the Company with beneficial owner Monbat Trading OOD, and 4 588 121 shares or 11.76% of the capital of the Company with beneficial owner Prista Oil Holding EAD. As at 31.12.2014 Prista Oil Holding EAD holds directly 18 616 371 shares and the same number of votes at the General Assembly of the Shareholders or 47.73% of the capital of Monbat AD and through the related party Monbat Trading Ltd. holds 2 752 800 voting shares or 7.06 % of the capital of the Company. The total number of the shares and votes hold directly and through related parties by Prista Oil Holding EAD is 21 369 171 shares or 54.79 %

On 28.10.2015 is executed transfer transaction for 1 9500 000 voting shares or 5 % of the capital of Monbat AD in the Central Depository. As at 31.12.2015 as a result of the change Prista Oil Holding EAD holds directly 16 666 371 shares and the same number of votes at the General Assembly of the Shareholders or 42,73 % of the capital of Monbat AD and through the related party Monbat Trading Ltd. holds 2 752 800 voting shares or 7,06 % of the capital of the Company. The total number of the shares and votes hold directly and through related parties on the part of Prista Oil Holding EAD is 19 419 171 shares or 49,79 % of the capital of Monbat AD.

Prista Holdco Cooperatief U.A., notified Monbat AD on an executed by the company acquisition transaction for 1 950 000 voting shares or 5 % of the capital of Monbat AD with a settlement date of the transaction in the Central Depository 28.10.2015. As a result of the change Prista Holdco Cooperatief U.A. holds directly 10 053 758 shares as at 31.12.2015 or 25,78 % of the capital of Monbat AD. Prista Holdco Cooperatief U.A.exercises the right to vote directly and not through related parties at the end of October.

A call option was granted by Prista Holdco Cooperatief U.A. to the Group with respect to the transferred shares on October 28, 2015. The call option lapses on 1st of June 2016 and is exercisable at any time prior to that date.

With additional agreement at the end of October 2015 Prista Holdco Cooperatief U.A. provided the voting rights to the General meeting of the shareholders of the Company to Prista Oil Holding EAD, related to the transferred on 28.10.2015 1 950 000 shares or 5% of the share capital of Monbat AD.

As a result as at 31.12.2015 and as at the date of these consolidated financial statements Prista Oil Holding EAD continues to exercise the voting rights over 54.79% from all shares of the Company or over 21 369 171 shares.

2015 2014 Number of Number of shares shares Number of shares issued and fully paid: - beginning of the year 39 000 000 38 999 880 Share redemption (10 946) - Sold redemption of shares - 120 Number of shares issued and fully paid 38 989 054 39 000 000 Total number of shares authorized as at 31 38 989 054 39 000 000

Monbat AD 49 Consolidated financial statements 31 December 2015

December

The list of the principal shareholders’ of the Company is as follows:

31 December 31 December 31 December 31 December 2015 2015 2014 2014

Number of Number of

shares % shares % Prista Oil Holding EAD 12 078 250 30.97 14 028 250 35.97 Prista Holdco Cooperatief U.A. 10 053 758 25.78 8 103 758 20.78 Unicredit Bank Austria AG 5 964 521 15.29 5 964 521 15.29 Monbat Trading OOD 1 376 400 3.53 1 376 400 3.53 Other individuals and entities 9 527 071 24.43 9 527 071 24.43

39 000 000 100 39 000 000 100 hares redeemed from other entities and individuals (10 946) (0.03) - -

38 989 054 99.97 39 000 000 100

18.2. Share premium

Share premium of the Company consists of proceeds, received in addition to nominal value of the shares issued in 2006. The proceeds are included in share premium, decreased with registration and other regulatory fees. The excess over the nominal value of BGN 1, for each redeemed share units and the fees for the investment mediator, increase the share premium value by BGN 28 611 thousand as of 31.12.2015 (31.12.2014 – BGN 28 611 thousand). In 2015 the Group has buyback of own shares 10 946. The exess over the nominal value of BGN 1 for each redeemed share units decreese the share premium.

18.3. General reserves

All amounts are in BGN‘000 Legal reserves Other reserves Total

Balance at 1 January 2015 3 900 48 049 51 949 Transfer of profit - 12 837 12 837 Balance at 31 December 2015 3 900 60 886 64 786 Transfer of profit - 207 207 Balance at 31 December 2015 3 900 3 900 49 144 61 093 5364 044 993

Legal reserves

Legal reserves represent 10% legal reserves set aside from current earnings as required by the Commercial law until it reaches 10% of the share capital.

Monbat AD 50 Consolidated financial statements 31 December 2015

Other reserves

Other reserves at 31.12.2015 amounted to BGN 61 093 thousand are formed by the retained earnings of the Group in 2006, 2008, 2009, 2010, 2012, 2013, 2014 and other changes.

Foreign currency translation reserve

The reserve from foreign currency translation includes currency translation differences, resulting from the Group’s foreign activities. In 2015 translation differences at the amount of BGN 712 thousand have been generated from the recalculation of non-monetary items, measured at fair value in foreign currency and recognized using the translation rate at the date of fair value estimation. 19. Provisions

Carrying amounts can be represented as follows: Guarantees provisions BGN ‘000 Carrying amount at 1 January 2015 532 Utilized/ (used) amounts (70) Carrying amount at 31 December 2015 462

2015 2014 BGN ‘000 BGN ‘000 Current Carrying amount 462 532 462 532

Provisions for guarantees are recognized amounts, which are expected by the Group to be made as expenses for warranty service and replacement of the main products through the next one year. Recognized provision is calculated on the best estimate basis, which the Group’s management can make based on previous experience and anticipated product sales.

20. Employee remuneration 20.1. Employee benefits expense Expenses recognized for employee benefits include: 2015 2014 BGN ‘000 BGN ‘000

Wages, salaries (15 216) (13 383) Social security contributions (3 098) (2 639) Employee benefits expense (18 314) (16 022)

Monbat AD 51 Consolidated financial statements 31 December 2015

20.2. Payables to employees The liabilities for pension, salaries and unused paid leave recognized in the consolidated statement of financial position consist of the following amounts

2015 2014 BGN ‘000 BGN ‘000

Wages, salaries obligations 498 357 Social security obligations 540 514 Compensated leaves obligations 248 222 Employee and Insurance institutions obligations 1 286 1 093

The current portion of these liabilities represents the Group's obligations to its current employees that are expected to be settled during 2016. Other short-term employee obligations arise mainly from accrued unused paid leaves at the end of the reporting period.

In accordance with the requirements of the Labor Code when terminating employment after the employee has become entitled to retirement pension, the Group is obliged to pay compensation amounting to six gross wages. The Group has not accrued legal obligation to pay benefits to employees upon retirement in accordance with the requirements of IAS 19 ‘Employee Benefits’, as based on previous experience such aren’t expected to occur.

21. Borrowings

Borrowings include the following financial liabilities:

Current Non-current 2015 2014 2015 2014 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Financial liabilities measured at amortized cost Other bank loans 48 446 38 092 12 610 34 635 Total carrying amounts 48 446 38 092 12 610 34 635

21.1. Borrowings at amortized cost

Details of the contracts for banking loans:

1. Eurobank Bulgaria AD Contract № 100-532 from 16.05.2007 Maturity date: 16.05.2017 Amount borrowed: EUR 6 100 000 Type of credit: Investment loan Interest: 3-month EURIBOR + fixed mark-up Collateral: Mortgage on real estate: Land in Regulation XXIII 27 250 sq. m. in Montana, including the buildings on it. Pledge on movable property owned by Monbat AD – Property, plant and equipment worth EUR 2 934 860, automobiles at the amount of EUR 131 484 and equipment acquired with the loan. Utilized amount as of 31.12.2015 at the amount of EUR 1 080 042 or BGN 2 112 379

Monbat AD 52 Consolidated financial statements 31 December 2015

2. Rajfaizenbank EAD Contract dated 28.11.2013, Annex 2/14.03.2014 Maturity date: 15.12.2016 (limit A),15.11.2018 (limit B) Amount borrowed: EUR 5 700 000 Type of credit: Investment loan Interest: 1-month EURIBOR + fixed mark-up Collateral: First rank collateral of assets including Engitec line, owned by Monbat Recysling and first rank conventional mortgage of own real estate, owned by Monbat Utilized amount as of 31.12.2015 at the amount of EUR 2 967 330 or BGN 5 803 593

3. Rajfaizenbank EAD Contract dated 25.02.2014, Maturity date: 15.02.2017 Amount borrowed: EUR 3 200 000 Type of credit: Revolving loan Interest: 1-month EURIBOR + fixed mark-up Collateral: Rank collateral of mortgage of own real estate, cadaster № 48489.5.279, cadaster № 48489.5.281, cadaster № 48489.5.396, together with bildings on it, on the teritory of Montana str. Indystrialna. Utilized amount as of 31.12.2015 at the amount of EUR 3 146 454 or BGN 6 153 929

4. Eurobank Bulgaria AD Contract № 339/07.12.2004 Maturity date: 01.09.2014 Amount borrowed: EUR 2 200 000 Type of credit: Credit line Interest: 3-month EURIBOR + fixed mark-up Collateral: Pledge, registered in the Special Pledge Registry Utilized amount as of 31.12.2015 at the amount of EUR 0 or BGN 0. There is annex from 29.07.2014 and the loan is transfered from EUR in BGN Maturity date: 01.09.2015 г. Amount borrowed: 9 129 401 BGN Type of credit: Credit line Interest: 3 M Sofibor + + fixed mark-up Collateral:: Pledge of assets and inventories owned by Monbat AD Utilized amount as of 31.12.2015 at the amount of BGN 1 197

5. Unicredit Bulbank AD Contract № 1099 from 14.06.2007 Maturity date: 11.06.2017 Amount borrowed: EUR 6 228 000 Type of credit: Investment loan Interest: 1-month EURIBOR + fixed mark-up Collateral: First rank conventional mortgage of own real estate, cadaster № 48489.5.279, 20 640 sq.m. First rank conventional mortgage of own real estate, cadaster № 48489.5.280, 24 800 sq.m. Second rank conventional mortgage of own real estate, cadaster № 48489.5.281, 7 940 sq.m. First rank asset collateral with market estimation value at the amount of EUR 2 102 200 First rank collateral of assets, acquired using funds from the loan at the amount of EUR 3 450 000.

Monbat AD 53 Consolidated financial statements 31 December 2015

First rank collateral of receivables of Monbat AD from Monbat DOO Serbia at the amount of EUR 3 673 000. Utilized amount as of 31.12.2015 at the amount of EUR 0 or BGN 0 The loan is refinanced from Rajfaizenbank EAD.

6. Eurobank Bulgaria AD Annex N 4 to Contract № 100-242/31.03.2006 Maturity date: 29.08.2015 Amount borrowed: EUR 1 000 000 Type of credit: working capital Interest: 3-month EURIBOR + mark-up Collateral: Property 1:1/2 ideal part of property with identification N 48489.282 from the cadaster map of thw town of Montana, approved by Order N RD-18-19-/05.04.2006 of the executive director of AC. Property 2:1/2 ideal part of property with identification N 48489.282 from the cadaster map of thw town of Montana, approved by Order N RD-18-19-/05.04.2006 of the executive director of AC. Special pledge: Pledge 1: machinery, equipment and vehicles located in the production building of Monbat AD in Montana, 72 Industrial Str. Pledge 2: Autoscales and porter’s office with build-up area of 102 sq.m. according to ownership document and inventory number 3000000003. Pledge 3: Unloading premise with build-up area of 1 980 sq.m. according to ownership document and inventory number 3000000004. Utilized amount as of 31.12.2015 at the amount of EUR 0 or BGN 0

There is annex from 29.07.2014 and the loan is transfered from EUR in BGN Maturity date: 01.09.2016 Amount borrowed: 1 955 830 BGN Type of credit: Credit line Interest: 3 M Sofibor + fixed mark-up Collateral: Special pledge on property and inventory ownership of Monbat AD. Utilized amount as of 31.12.2015 is BGN 594 thousand.

7. HYPO NOE Gruppe Bank AG Contract from 16.05.2014 Maturity date: 03.10.2016 Amount borrowed: EUR 10 000 000 Type of credit: Investment loan Interest: 3 M EURIBOR + fixed mark-up Collateral: Pledge agreement for all Monbat’s shares of Monbat Recycling EAD Utilized amount as of 31.12.2015 at the amount of EUR 10 000 000 or BGN 19 558 300

8. DSC Bank EAD Contract.№1675/16.09.2015 Maturity date: 10.09.2016 Amount borrowed: EUR 2 500 000 Type of credit: For working capital Interest: 3 M EURIBOR + fixed mark-up Collateral: Pledge agreement for materials Utilized amount as of 31.12.2015 at the amount of EUR 400 000 or BGN 782 332

Monbat AD 54 Consolidated financial statements 31 December 2015

9. DSC Bank EAD Contract.№1674/16.09.2015 Maturity date: 10.09.2016 Amount borrowed: BGN 2 000 000 Type of credit: For working capital Interest: 1 M EURIBOR + fixed mark-up Collateral: Pledge agreement for materials Utilized amount as of 31.12.2015 at the amount of BGN 0

10. Bank credit card accounts with credit limits BGN 100 000 and utilized amounts as of 31.12.2015 at the amount of BGN 2 000.

11. Cibank EAD Contract №1138/30.07.2013 Maturity date: 20.07.2016 Amount borrowed: EUR 3 000 000 Type of credit:: working capital Interest: 6-month EURIBOR + fixed mark-up Collateral: Land with ident. N72624.603.300, including the buildings on it. Land with ident. N72624.603.190, including the buildings on it. Land with ident. N72624.603.191, including the buildings on it. Land with ident. N72624.603.193., including the buildings on it. Land with ident. N72624.603.196, including the buildings on it. Non-current tangible assets at the amount of BGN 4 850 thousands. Balance as at 31.12.2015 at the amount of EUR 2 912 057 or BGN 5 695 489

12. Credi Agricole Bank Romania S.A. Contract N 019/21/2011 Maturity date: 05.12.2016 Amount borrowed: EUR 3 500 000 Type of credit: Credit line Interest rate and commission: 3 М EURIBOR + fixed mark-up Collaterals: Corporate guarantee on the name of Monbat AD, as well as reprocessing equipment for the recycling of wastage accumulator batteries – rotational furnace, boiler 5000. Balance as at 31.12.2015 at the amount of EUR 3 500 000 or BGN 6 845 405

13. Rajfaizenbank EAD Contract dated 15.07.2015 Maturity date: 30.09.2016 Amount borrowed: EUR 3 000 000 Type of credit: Credit line Interest rate and commission: 1 М EURIBOR + fixed mark-up Collaterals: First rank collateral on receivables from the bank Third rank special pledge on Engitech equipment First rank special pledge on inventory Balance as at 31.12.2015 at the amount of EUR 3 000 000 or BGN 5 867 490.

Monbat AD 55 Consolidated financial statements 31 December 2015

14. Societe Generale Bank Serbia Contract N 348/12-717/07.08.2012 Maturity date: 14.08.2015 Amount borrowed: 1 000 000 евро Type of credit : working capital Interest rate and commission: 3 М Sofibor + fixed mark-up Repayment schedule: Currently paid depending on the available cash and cash equivalents Collaterals: Building N 5, 7 promissory notes Balance as at 31.12.2015 at the amount of 0 EUR or BGN 0.

15. Eurobank EFG Bulgaria AD Factoring contract Collateral: Trade receivables Balance as at 31.12.2015: BGN 1 172 000

16.DSK Bank AD Contract N 1203/21.05.2013 Maturity date: 25.05.2016 Amount borrowed: BGN 2 000 000 Type of credit : working capital Interest rate and commission: 1 М Sofibor + fixed mark-up Repayment schedule: Currently paid depending on the available cash and cash equivalents Collaterals: Special pledge on tehnological equipment for producing of LED by Octa Light Bulgaria AD. Guarantee from Monbat Recycling EAD Balance as at 31.12.2015 at the amount of BGN 1 999 627

17. DSK Bank AD Contract N 1204/21.05.2013 Maturity date: 21.05.2015 Amount borrowed: BGN 2 400 000 Type of credit : Investment loan Interest rate and commission: 1 М Sofibor + fixed mark-up Repayment schedule: Currently paid depending on the available cash and cash equivalents Collaterals: Special pledge on tehnological equipment for producing of LED by Octa Light Bulgaria AD. Guarantee from Monbat Recycling EAD Balance as at 31.12.2015 BGN 1 152 000.

18. Investbank Contract N FC1554/2015 Maturity date: 26.09.2022 г. Amount borrowed: 2 000 000 EUR. Type of credit : Investment loan Interest rate and commission3 М EURIBOR + fixed mark-up Repayment schedule: On 79 monthly payments Collaterals: Second pledge on real estate situated in Godech with area of 19 200 sq.m.. Second rank collateral of machinery and equipment owned by IBT. First rank collateral of receivables and proceeds from accounts in Investbank. Balance as at 31.12.2015 EUR 2 000 000 or BGN 3 911 660

Monbat AD 56 Consolidated financial statements 31 December 2015

21.2. Grants

The short-term and long-term part of the financing as at 31.12.2015 and 31.12.2014 can be presented in the following way: 31.12.2015 31.12.2014 Non-current Non- Current Current current BGN ‘000 BGN ‘000 BGN BGN ‘000 ‘000 806 4 999 456 2 386 Carrying amount 806 4 999 456 2 386

In 2013 Monbat AD and Start AD won Projects under Procedure BG161PO003-1.1.04 "Support for The Commercialization of Innovative Products, Processes and Provision of Innovative Services," OP "Development of Competitive Bulgarian Economy" with total amount of BGN 7 092 500. The value of the grant under the procedure for both projects is BGN 3 542 940, granted in 2015. The project is for production of two types of batteries - AGM technology - stationary batteries (telecommunication) and automobile batteries with AGM technology. Under Operational Programme “Development of the competitiveness of the Bulgarian economy 2007–2015”, Monbat AD received in 2012 a grant in the sum of 4 227 thousands Bulgarian levs under the procedure “Technology upgrade in large enterprises”. The purpose of the grant is to invest in new equipment for production of grating and plates for dry-charged and lead-acid batteries.

22. Trade payables

Trade payables recognized in the consolidated statement of financial position include:

2015 2014 BGN ‘000 BGN ‘000 Payables to suppliers 19 035 11 001

The net book value of the trade payables is considered to be a reasonable approximate estimate of their fair value.

23. Tax liabilities

Tax liabilities include: 2015 2014 BGN ‘000 BGN ‘000 VAT 1 234 853 Corporate tax 561 525 Income tax for individuals 184 111 Expense tax - 79 Other taxes 162 90 2 141 1 658

Monbat AD 57 Consolidated financial statements 31 December 2015

24. Other liabilities

Other liabilities can be summarized as follows:

2015 2014 BGN ‘000 BGN ‘000 Product fee 885 632 Deductions from staff for other liabilities 12 12 Advances from clients 1 921 1 493 Dividends payable to individuals 48 40 Other liabilities – current 287 171 3 153 2 348

According to the Regulation on establishing the terms and conditions for payment of product fees for products whose use generates widespread waste, the Group charges product fee for batteries. The fee is not paid effectively to the Ministry of Environment and Water, as the Group has complied with the requirements of the waste management act and performs the activities required for the collection, transportation, temporary storage, pre-treatment, dismantling and disposal of the waste.

With Regulation № RD 335, dated 20.05.2015 of the Minister of Environment and Water, the accrued product fees for 2014 has been forfeited and the Group has reported revenue at the amount of BGN 633 thousand. The accrued product fees for 2015 are expected to be forfeited with a Regulation of the Minister of Environment and Water in 2016, because the Group keeps complying with the regulations per the Law of waste management. 25. Revenue from sales and other revenue The Group’s revenue can be analyzed as follows:

2015 2014 BGN ‘000 BGN ‘000 Sale of products 227 571 216 808 Rendering of services 2 070 1 438 Sale of goods 9 158 2 781 Financing income 815 622 Others, including written-off liabilities 5 854 7 344 245 468 228 993 26. Cost of materials Cost of materials includes: 2015 2014 BGN ‘000 BGN ‘000 Basic materials (131 975) (136 754) Fuels and lubricants (6 894) (8 848) Electricity (5 021) (3 557) Spare parts and accessories (2 137) (2 228) Packaging and other materials (1 132) (848) Other costs (2 004) (1 679) (149 163) (153 914)

Monbat AD 58 Consolidated financial statements 31 December 2015

27. Hired services expenses Hired services expenses include: 2015 2014 BGN ‘000 BGN ‘000

Distribution (11 021) (10 447) Insurance (901) (858) Rent (479) (536) Advertisement (394) (437) Fees on civic contracts (450) (424) Audit fees (62) (101) Other expenses (6 129) (4 866) (19 436) (17 669)

28. Gains from sale of non-current assets 2015 2014 BGN ‘000 BGN ‘000 Proceeds from sale of non-current assets 1 305 44 Carrying amount of non-current assets sold (1 302) - Gains from sale of non-current assets 3 44

29. Other expenses The Group’s other expenses include: 2015 2014 BGN ‘000 BGN ‘000 Donations (292) (218) Impairment of receivables (477) (576) Business trips (460) (590) Representation expenses (157) (106) Written-off inventory (1 138) (1 117) Impairment of inventory - (634) Written-off receivables (assets) (212) (17) Penalties ,interest, sanction (2 760) - Other (1 534) (1 367) (7 030) (4 625) 30. Finance income and finance cost

Finance cost for the presented reporting periods can be analyzed as follows:

2015 2015 BGN‘000 BGN‘000 Interest expenses (2 077) (2 437) Other financial expenses (970) (1 216) Finance costs (3 047) (3 653)

Finance income may be analyzed for the presented reporting

Monbat AD 59 Consolidated financial statements 31 December 2015

periods as follows: 2015 2014 BGN‘000 BGN‘000 Interest income on cash and cash equivalents 3 6 Interest income on financial assets carried at amortized cost 1 304 1 347 Total interest income on financial assets not at fair value through profit or loss 1 304 1 347 Finance income 1 307 1 353

31. Other financial items

Other financial items consist of the following: 2015 2014 BGN‘000 BGN‘000 Loss from exchange rate differences on loans and receivables (111) (205) Other financial items (111) (205)

32. Income tax expense The relationship between the expected tax expense based on the effective tax rate of 10 % (2014: 10 %) and the reported tax expense actually in profit or loss can be presented as follows:

2015 2014 BGN ‘000 BGN ‘000

Profit before tax 24 121 26 580 Tax rate 10% 10% Expected tax expense (2 412) (2 658) Expenses not deductible for tax purposes, not recognized deferred tax (824) (383) assets and effect of difference of the applicable tax rates Actual tax expense (3 236) (3 041) Tax expenses include Current tax expenses Deferred tax expense: (3 280) (3 459)

Origination and reversal of temporary differences 44 418 Income tax expense (3 236) (3 041) Effective tax rate 13.42 % 11.44 %

Note 11 provides information on the deferred tax assets and liabilities

Monbat AD 60 Consolidated financial statements 31 December 2015

33. Earnings per share and dividends

33.1. Earnings per share

Basic earnings per share have been calculated using the profit attributed to shareholders of the parent company as the numerator.

The weighted average number of outstanding shares used for basic earnings per share as well as profit attributable to shareholders is as follows:

2015 2014

Profit attributable to the shareholders (BGN) 22 051 000 25 309 000 Weighted average number of outstanding shares 38 997 000 39 000 000 Basic earnings per share (BGN per share) 0.57 0.65

33.2. Dividends

At a General meeting of the shareholders, which took place on 25 June 2015, a decision has been made to distribute dividends at the amount of BGN 5 850 000, which is part of the income for 2014. During 2015 the Company has paid dividends at the amount of BGN 5 587 540. At a General meeting of the shareholders, which took place on 30 June 2014, a decision has been made to distribute dividends at the amount of BGN 8 970 000, which is part of the income for 2013. During 2014 the Company has paid dividends at the amount of BGN 4 684 485 and dividends at the amount of 4 281 764 are off-set with payables under on granted loans – payables at the amount of BGN 3 331 667 and nterest of BGN 950 097 from Prista Oil Holding according to an agreement between Monbat and Prista Oil Holding EAD. At 01.09.2014 with a Decision of the Company and in accordance with an agreement between Monbat AD and Prista oil Holding EAD the dividends due have been attributed to Prista oil Holding EAD. Those dividends are at the amount of BGN 4 281 764 and were attributed with the use of receivables on granted loans – principal at the amount of BGN 3 331 667 and interest at the amount of BGN 950 097 from Prista oil Holding AD.

33.3. Related party transactions The Group's related parties include its shareholders, control, key management and other related parties, as described below.

Unless otherwise stated, none of the transactions incorporate special terms and conditions and no guarantees were given or received. Outstanding balances are usually settled by bank accounts.

Monbat AD 61 Consolidated financial statements 31 December 2015

The related parties are described below:

Related parties Country Type of relation "PRISTA OIL" Group B.V Netherlands Parent company Prista Holdco Cooperatief U.A. Netherlands Related party "MONBAT TRADING" OOD Bulgaria Related party " PRISTA OIL " EAD Bulgaria Parent company " PRISTA REAL ESTATES" Bulgaria Related party "PRISTA OIL TRADING" Bulgaria Related party “PRISTA OIL” Romania Related party “PRISTA OIL” Ukraine - Odessa Related party “PRISTA OIL” Ukraine - Kiyev Related party “PRISTA OIL” Hungary Related party “PRISTA OIL” Slovakia Related party “PRISTA OIL” Macedonia Related party “PRISTA OIL” Serbia Related party “PRISTA OIL” Related party Turkey Monbat Holdings BV Netherlands Related party Bobko OOD Bulgaria Plamen Bobokov Vinarska kyshta Ruse AD Bulgaria Plamen Bobokov Vuelta Evropa AD Bulgaria Plamen Bobokov Prista Port AD Bulgaria Plamen Bobokov Uglans OOD Bulgaria Plamen Bobokov Leventa OOD Bulgaria Plamen Bobokov PRR OOD Bulgaria Plamen Bobokov Foundation “Bratia Bobokovi” Bulgaria Atanas Bobokov Prista Oil Rally Team Bulgaria Atanas Bobokov FK Dunav – Ruse Bulgaria Atanas Bobokov MOL RUSE INVEST OOD Bulgaria Atanas Bobokov SD of PROEKT RUSE AD Bulgaria Atanas Bobokov Pomorie Vineyard AD Bulgaria Atanas Bobokov Agrohold AD Bulgaria Aleksandar Chaushev Ekspo Grup AD Bulgaria Aleksandar Chaushev Management and advertising of sports Bulgaria agency EAD Aleksandar Chaushev Sofservice OOD Bulgaria Aleksandar Chaushev Bulgarian chamber of commerce – Bulgaria Bulgarian businesses union Atanas Bobokov ТК VVV – Pro Tennis Bulgaria Plamen Bobokov Ziteks OD Bulgaria Atanas Bobokov Bulgarian chamber of commerce – Bulgaria Bulgarian businesses union Atanas Bobokov Belnikov, Petrov and Partners OOD Bulgaria Petar Petrov Ekobat AD Bulgaria “Start” AD Bulgarian Romanian Chamber of Bulgaria industrial commerce Plamen Bobokov PCHMV AD Bulgaria Plamen Bobokov IBT OOD Bulgaria Related party Star Oil Geneva Atanas Bobokov

Monbat AD 62 Consolidated financial statements 31 December 2015

Related parties Country Type of relation Member of the Board of Plamen Stoilov Bobokov Bulgaria Directors of Monbat AD Member of the Board of Aleksandar Viktorov Chaushev Bulgaria Directors of Monbat AD Member of the Board of Nikolay Georgiev Trenchev Bulgaria Directors of Monbat AD Member of the Board of Stoyan Stalev Bulgaria Directors of Monbat AD Member of the Board of Atanas Stoilov Bobokov Bulgaria Directors of Monbat AD Member of the Board of Jordan Atanasov Karabinev Bulgaria Directors of Monbat AD Member of the Board of Florian Huth Germany Directors of Monbat AD Member of the Board of Petar Nikolov Bozadjiev Bulgaria Directors of Monbat AD Member of the Board of Kamen Zahariev Bulgaria Directors of Monbat AD

33.4. Transactions with owners 2015 2014 BGN‘000 BGN‘000 Monbat Trading OOD - purchases of goods and services 1 007 538 - dividends paid 413 633 - sales of services 24 24

Prista oil EAD - purchase of goods 1 652 - - purchase of other 18 - - purchase of materials 14 7 - purchase of services 67 2 - purchase of non-current tangible assets 48 - - sales of goods 9 011 2 591 - sales of services 53 5 - sales of other 186 - - granted funds - 2 900 - accrued interest 904 1 212 - dividend receivable off-set - 4 282

Monbat AD 63 Consolidated financial statements 31 December 2015

33.5. Transactions with key management personnel

Key management personnel of the Group include members of the Management board and Supervisory board. Key management personnel remuneration includes the following expenses:

2015 2014 BGN‘000 BGN‘000 Short-term employee benefits: -Salaries 3 082 2 930 -Social security contributions 204 220 -Company cars 131 135 3 417 3 285

33.6. Transactions with other related parties 2015 2014 BGN‘000 BGN‘000 PCHMV AD - accrued interest 66 82 - purchases of non-current tangible assets (2) - - purchases of services (6) (2)

IBT OOD - purchases of non-current tangible assets (20) (9) - purchases of materials (10) (8) - sales of production 3 10 - sales of services 10 -

КОМ EOOD - purchases of non-current tangible assets (1 816) - - purchases of services (31) (22) - purchases of materials (105) (98)

Agencia Apeks OOD - sales of production 45 -

Atanas Bobokov - granted funds (235) (350)

Monbat AD 64 Consolidated financial statements 31 December 2015

34. Related party balances at year-end 2015 2015 BGN‘000 BGN‘000 Current receivables from: - Agencia Apeks OOD - trade receivables 74 - - Atanas Bobokov - granted funds 585 350 - Prista Oil EAD - granted funds 18 140 18 140 - Prista Oil EAD - trade receivables 6 668 2645 - Prista Oil EAD - interest 1 659 755 - PCHMV JSC - granted funds 1 360 1 360 - PCHMV JSC - interest 195 129 - IBT OOD – granted funds 123 93 - IBT OOD – trade receivables 46 - - IBT OOD – interest 14 - - КОМ EООD 8 4 - КОМ EООD – granted funds 2 100 44 - Octa Light EOOD– interest 8 7 - Octagon International - granted funds 427 - - Octagon International - interest 15 - - Georgy Trenshev- granted funds 5 5 31 427 23 532 Non-current payables to: - Ekobat AD – dividends 6 6 - Bat AD – dividends 1 1 7 7 Current payables to: - Prista Oil EAD - trade payables 24 4 - Monbat Trading OOD - dividends 184 - - Monbat Trading OOD - trade payables 9 - Octa Light EOOD - trade payables 1 - - IBT-trade payables 4 - - KOM EOOD - trade payables 83 7 - Prista Oil Romania - 2 - PCHMV JSC- trade payables - 2 305 15

The main contracts for loans granted to related parties are presented as follows:

PCHMV

• Contract from 2013 Utilized principle: BGN 1 640 thousand Credit term: 31.12.2014 Interest: 6 % annual interest rate Balance on the principle as of 31.12.2015 - BGN 1 360 thousand Redemption: no redemption plan With annex from 01.06.2015 the interest rate has been changed to 4% . All the other conditions of the loan contracts are re-negotiated with the same conditions.

Monbat AD 65 Consolidated financial statements 31 December 2015

Prista Oil Holding EAD

• Contract from 2013 Deposits granted to Prista Oil Holding EAD Deposits amount: BGN 17 594 thousand Credit term: 22.04.2015 Interest: 6 % annual interest rate Balance on the principle as of 31.12.2015 - BGN 11 328 thousand Redemption: no redemption plan

• Contract from 2014 Deposits granted to Prista Oil Holding EAD Deposits amount: BGN 2 900 thousand Credit term: 07.04.2016 Interest: 6 % annual interest rate Balance on the principle as of 31.12.2015 - BGN 2 900 thousand Redemption: no redemption plan With annex from 01.06.2015 the interest rate has been changed to 4%. All the other conditions of the loan contracts are re-negotiated with the same conditions.

35. Non-cash transactions During the presented reporting periods, the Group entered into the following non-cash investing and financing activities which are not reflected in the consolidated statement of cash flows:

• During 2014 with a General meeting of the shareholders the dividends due have been attributed to Prista oil Holding EAD. The dividends are at the amount of BGN 4 281 764 and were attributed with the use of receivables on granted loans – principal at the amount of BGN 3 331 667 and interest at the amount of BGN 950 097.

36. Contingent assets and contingent liabilities During the period there are no warranty or legal claims posed to the Group.

The contingent assets can be represented as follows:

2015 2014 BGN ‘000 BGN ‘000 Letters of credit 741 352 741 352

The contingent liabilities can be represented as follows:

2015 2014 BGN ‘000 BGN ‘000 Guarantee notes 644 1 324 644 1 324

Monbat AD 66 Consolidated financial statements 31 December 2015

37. Categories of financial assets and liabilities

The carrying amounts presented in the consolidated statement of financial position relate to the following categories of assets and liabilities:

Financial Assets Note 2015 2015 BGN‘000 BGN‘000 Non-current assets: Non-current financial assets 10 8 8 8 8 Loans and receivables: - current financial assets 13 547 35 - Trade and other receivables 14,16 41 647 41 074 - Receivables from related parties 34 31 427 23 532 Cash and cash equivalents 17 15 232 20 538 88 853 85 179

Financial liabilities Note 2015 2014 BGN‘000 BGN‘000 Financial liabilities measured at amortized cost Non-current liabilities: - Borrowings 21.1 12 610 34 635 - Financial lease 9.1 1 266 366 - Payables to related parties 34 7 7 13 883 35 008 Current liabilities: - Borrowings 21.1 48 446 38 092 - Financial lease 9.1 427 470 - Payables to related parties 34 305 15 - Trade and other payables 22,24 22 188 13 349 71 366 51 926

See note 3.16 about information related to the accounting policy for each category of financial instruments. Methods, which are used for assessment of fair value are presented in note 3.16. Description of the risk management objectives and policies of the Group, related to the financial

instruments, is presented in note 39.

Monbat AD 67 Consolidated financial statements 31 December 2015

38. Financial instrument risk Risk management objectives and policies The Group is exposed to various risks in relation to financial instruments. The Group's financial assets and liabilities by category are summarized in note 37. The main types of risks are market risk, credit risk and liquidity risk.

The Group's risk management is coordinated at its headquarters, in close co-operation with the managing board, and focuses on actively securing the Groups short to medium-term cash flows by minimizing the exposure to financial markets. Long-term financial investments are managed to generate lasting returns.

The Group does not actively engage in the trading of financial assets for speculative purposes nor does it write options.

The Group is exposed to market risk through its use of financial instruments and specifically to currency risk, interest rate risk and certain other price risks, which result from both its operating and investing activities.

38.1. Market risk analysis 38.1.1. Foreign currency risk Most of the Group’s transactions are carried out in Bulgarian Lev (BGN). Exposures to currency exchange rates arise from the Group's transactions, which are primarily denominated in US- Dollars and British Pounds.

To mitigate the Group's exposure to foreign currency risk, non-BGN cash flows are monitored. Generally, Group’s risk management procedures distinguish short-term foreign currency cash flows from longer-term cash flows. Where the amounts to be paid and received in a specific currency are expected to largely offset one another, no hedging activity is undertaken.

Financial assets and liabilities, denominated in foreign currency and recalculated in BGN at the end of the reporting period, are presented as follows:

Short-term exposure USD ‘000

31 December 2015 Financial assets 4 294 Financial liabilities (5 007) Total exposure (713)

31 December 2014 Financial assets 2 352 Financial liabilities (243) Total exposure 2 109

Monbat AD 68 Consolidated financial statements 31 December 2015

The following tables illustrate the sensitivity of post-tax financial result for the year and equity in regards to exchange rate differences between the Bulgarian Lev (BGN) and the following currencies:

• US Dollars (USD) +/- 10% (2014 +/- 10%) • Pound Sterling (GBP) +/- 10% (2014 +/- 10%)

All other parameters are taken to be constant.

These percentages have been determined based on the average market volatility in exchange rates in the previous 12 months. The sensitivity analysis is based on the Group's foreign currency financial instruments held at each reporting date.

Increase of the exchange Decrease of the rate exchange rate 31 December 2015 BGN/foreign currency BGN/foreign currency Net Equity Net Equity financial financial result result BGN‘000 BGN‘000 BGN‘000 BGN‘000 US Dollars (USD) (+/- 10%) (71) (71) 71 71

Increase of the exchange Decrease of the rate exchange rate 31 December 2014 BGN/foreign currency BGN/foreign currency Net Equity Net Equity financial financial result result BGN‘000 BGN‘000 BGN‘000 BGN‘000 US Dollars (USD) (+/- 10%) 211 211 (211) (211)

Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the Group's exposure to currency risk. 38.1.2. Interest rate risk The Group's policy is to minimize interest rate cash flow risk exposures on long-term financing. Longer-term borrowings are therefore usually at fixed rates. As at 31 December 2015, the Group is exposed to changes in market interest rates through bank borrowings at variable interest rates. All other financial assets and liabilities of the Group have fixed interest rates similar to the prior year.

Monbat AD 69 Consolidated financial statements 31 December 2015

If the interest rate would increase with 5 % (2014: 5%) then this would have had the following impact:

Effect on the financial result for the year ‘000

31 December 2015 (104) 31 December 2014 (122) If the interest rate would decrease with 5 % (2014: 5%) then this would have had the following impact:

Effect on the financial result for the year ‘000

31 December 2015 104 31 December 2014 122

38.2. Credit risk analysis Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The Group is exposed to this risk for various financial instruments, for example by granting loans and receivables to customers, placing deposits, etc. The Group's exposure to credit risk is limited to the carrying amount of financial assets recognized at the end of the reporting period, as summarized below:

Financial assets: Note 2015 2014 BGN‘000 BGN‘000 Non-current assets Long-term financial assets 10 8 8 8 8 Loans and receivables: - Short-term financial assets 13 547 35 - Trade and other receivables 14,16 41 647 41 074 - Receivables from related parties 34 31 427 23 532 Cash and cash equivalents 17 15 232 20 538 Carrying value 88 853 85 179

The Group continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporates this information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on customers and other counterparties are obtained and used. The Group's policy is to deal only with creditworthy counterparties. The Group's management considers that all the above financial assets that are not impaired or past due for each of the reporting dates under review are of good credit quality.

The Group has provided its financial assets as collateral for other transactions.

Monbat AD 70 Consolidated financial statements 31 December 2015

Some of the unimpaired trade receivables are past due as at the reporting date. Financial assets past due but not impaired can be shown as follows:

2015 2014 BGN‘000 BGN‘000

More than 6 months but not more than 1 year 694 243 More than 1 year but not more than 2 years - - More than 2 years - - Total 694 243

The Group is not exposed to any significant credit risk exposure to a single counterparty or any group of counterparties having similar characteristics. Trade receivables consist of a small number of customers in single industry and geographical area. Based on historical information about customer default rates management consider the credit quality of trade receivables that are not past due or impaired to be good. The credit risk for cash and cash equivalents, money market funds, non-secured debentures and derivate financial instruments is considered negligible, since the counterparties are reputable banks with high quality external credit ratings. Impairment loss has been recorded in relation to trade receivables. The carrying amounts disclosed above are the Group's maximum possible credit risk exposure in relation to these instruments.

38.3. Liquidity risk analysis Liquidity risk is the risk arising from the Group not being able to meet its obligations. The Group manages its liquidity needs by monitoring scheduled debt servicing payments for long- term financial liabilities as well as forecast cash inflows and outflows due in day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on the basis of a rolling 30-day projection. Long-term liquidity needs for a 180-day and a 360-day lookout period are identified monthly. Net cash requirements are compared to available borrowing facilities in order to determine headroom or any shortfalls. This analysis shows that available borrowing facilities are expected to be sufficient over the lookout period.

The Group maintains cash to meet its liquidity requirements for 30-day periods at a minimum. Funding for long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities. As at 31 December 2015, the Group's liabilities have contractual maturities (including interest payments where applicable) as summarized below:

31 December 2015 Current Non-current Within 12 months 1 to 5 years

BGN‘000 BGN‘000 Payables to banks 48 446 12 610 Financial lease obligations 427 1 266 Related parties payables 305 7 Trade and other payables 22 188 - Total 71 366 13 883

Monbat AD 71 Consolidated financial statements 31 December 2015

This compares to the maturity of the Group's liabilities in the previous reporting periods as follows:

31 December 2014 Current Non-current Within 12 months 1 to 5 years

BGN‘000 BGN‘000 Payables to banks 38 092 34 635 Financial lease obligations 470 366 Related parties payables 15 7 Trade and other payables 13 349 - Total 51 926 35 008

The above amounts reflect the contractual undiscounted cash flows, which may differ from the carrying values of the liabilities at the reporting date.

Financial assets used for managing liquidity risk The Group considers expected cash flows from financial assets in assessing and managing liquidity risk, in particular its cash resources and trade receivables. The Group's existing cash resources and trade receivables do not significantly exceed the current cash outflow requirements. Cash flows from trade and other receivables are all contractually due within six months. 39. Capital management policies and procedures The Group's capital management objectives are: • to ensure the Group's ability to continue as a going concern; and • to provide an adequate return to the shareholder by pricing products and services commensurately with the level of risk. The Group monitors capital on the basis of the correlation between adjusted share capital and net debt.

The Group determines the adjusted capital based on the carrying amount of equity and subordinated debt, presented in the statement of financial position.

Net debt comprises of total borrowings, loans, trade and other payables less the carrying amount of cash and cash equivalents. The amount of the correlation for the presented accounting periods is summarized as follows: 2015 2014 BGN‘000 BGN‘000

Equity 179 479 165 368 + Debt 64 002 73 563 - Cash and cash equivalents (15 232) (20 538) Net debt 48 770 53 025 Gearing ratio (net debt/total capital) 0.27 0.32

Monbat AD 72 Consolidated financial statements 31 December 2015

In 2015 there is no significant change in the ratio of net debt to total capital, compared to prior periods. The Group maintains a high ratio of capital to total funding.

40. Post-reporting date events No adjusting or significant non-adjusting events have occurred between the reporting date and the date of authorization.

41. Authorization of the consolidated financial statements

The consolidated financial statements for the year ended 31 December 2015 (including comparative information for 2014) were approved by the Management board on 27.04.2016.

BALANCE SHEET Company name: "MONBAT" AD UIC 111028849 Type of statement: consolidated Reporting period: 01.01.2015 -31.12.2015 ( thousand BGN)

Code Current Previous Code Current Previous period ASSETS LIABILITIES period period period

А. NON-CURRENT ASSETS А. SHAREHOLDERS' EQUITY I. Property, plant and equipment I. Share capital 1. Land 1-0011 8481 8358 Issued and outstanding shares 1-0411 38989 39000 2. Buildings 1-0012 34757 32330 Ordinary shares 1-0411-1

3. Machinery and equipment 1-0013 42861 35422 Preferred shares 1-0411-2

4. Facilities 1-0014 24873 25238 Treasury ordinary shares 1-0417 5. Vehicles 1-0015 3993 4132 Treasury preferred shares 1-0417-1

6. Office fittings 1-0017-1 670 646 Unpaid capital 1-0416 7. Assets under construction 1-0018 10882 12245 Total share capital 1-0410 38989 39000 8. Other 1-0017 II. Reserves Total property, plant and equipment 1-0010 126517 118371 1. Issue premiums 1-0421 28538 28611 II. Investment property 1-0041 2. Revaluation reserve 1-0422 III. Farm animals 1-0016 3. Reserves incl.: 1-0423 64281 64924 IV. Intangible assets general reserves 1-0424 64281 64924 1. Rights of ownership 1-0021 140 143 special reserves 1-0425 2. Software 1-0022 66 15 other reserves 1-0426 3. R&D expenses 1-0023 628 664 Total reserves 1-0420 92819 93535 4. Other intangible assets 1-0024 71 784 III. Retained earnings Total intangible assets 1-0020 905 1606 1. Retained earnings from previous periods 1-0451 29447 10195 undistributed profit 1-0452 29447 10195 V. Goodwill loss not covered 1-0453 1. Positive goodwill 1-0051 one-time effect from changes in accounting policy 1-0451-1

2. Negative goodwill 1-0052 2. Current year profit 1-0454 22051 25309 Total goodwill 1-0050 0 0 3. Current year loss 1-0455 VI. Financial assets Total retained earnings 1-0450 51498 35504 1. Share participations in: 1-0031 8 8 subsidiary companies 1-0032 joint ventures 1-0033 TOTAL SHAREHOLDERS' EQUITY 1-0400 183306 168039 associated companies 1-0034 other companies 1-0035 8 8 2. Long-term investment securities held to 1-0042 0 0 B. MINORITY SHAREHOLDINGS 1-0400-1 -3 827 -2 661 maturity treasury bonds 1-0042-1 bonds 1-0042-2 C. LONG-TERM LIABILITIES incl. municipality bonds 1-0042-3 I. Long-term debt other 1-0042-4 1. Due to related parties 1-0511 7 7 3. Other financial assets 1-0042-5 2.Due to financial institutions 1-0512 12610 34635 Total long-term financial assets 1-0040 8 8 3. Due under ZUNK 1-0512-1

VII. Long-term trade and other receivables from: 4. Trade loans 1-0514 1266 366

1. Related parties 1-0044 5. Bonds 1-0515 2. Trade loans 1-0045 455 455 6. Other long-term liabilities 1-0517 3. Financial lease receivables 1-0046-1 Total long-term debt 1-0510 13883 35008 4. Other long-term receivables 1-0046 Total long-term trade and other receivables 1-0040-1 455 455 II. Other long-term liabilities 1-0510-1

III. Deferred revenues 1-0520 VIII. Deferred expenses 1-0060 IV. Liabilities on deferred taxes 1-0516 1238 1282 IX. Assets on deferred tax payments 1-0060-1 V. Financing 1-0520-1 4999 2386

TOTAL NON-CURRENT ASSETS 1-0100 127885 120440 TOTAL LONG-TERM LIABILITIES 1-0500 20120 38676 B. CURRENT ASSETS I. Inventory D. SHORT-TERM LIABILITIES 1. Materials 1-0071 28643 22238 I. Trade and other payables 2. Finished goods 1-0072 11163 10630 1. Short-term borrowings 1-0612 48446 38092 3. Goods for resale 1-0073 138 1097 2. Short-term part of long-term loans 1-0510-2

4. Work in progress 1-0076 12077 15484 3. Short-term payables 1-0630 23194 14237 5. Farm animals 1-0074 related parties payables 1-0611 305 15 6. Other materials 1-0077 526 949 trade loans 1-0614 427 470 Total inventory 1-0070 52547 50398 trade accounts payables 1-0613 18443 10815 advance payments 1-0613-1 592 186

II. Receivables salaries payable 1-0615 698 538 1. Related parties receivables 1-0081 31427 23532 social security payable 1-0616 588 555 2. Trade accounts receivables 1-0082 34654 35203 tax payable 1-0617 2141 1658 3. Advance payments 1-0086-1 5869 4686 4. Other 1-0618 1232 855 4. Trade loans 1-0083 547 35 5. Provisions 1-0619 462 532 5. Court receivables 1-0084 Total trade and other payables 1-0610 73334 53716 6. Recoverable taxes 1-0085 6325 3702 7. Personnel receivables 1-0086-2 8. Other receivables 1-0086 780 1017 II. Other short-term liabilities 1-0610-1

Total receivables 1-0080 79602 68175 III. Deferred revenues 1-0700 1921 1493 IV. Financing 1-0700-1 806 456

III.Financial assets 1. Financial assets held for trading 1-0093 50 0 bonds 1-0093-1 TOTAL SHORT-TERM LIABILITIES 1-0750 76061 55665 derivatives 1-0093-2 other 1-0093-3 50 2. Financial assets declared for sale 1-0093-4 3. Other current financial assets 1-0095 Total current financial assets 1-0090 50 0

IV. Cash and cash equivalents 1. Cash 1-0151 258 406 2. Cash in banks 1-0153 14737 14129 3. Restricted cash 1-0155 237 6003 4. Cash equivalents 1-0157 Total cash and cash equivalents 1-0150 15232 20538 V. Deferred expenses 1-0160 344 168 TOTAL CURRENT ASSETS 1-0200 147775 139279 TOTAL ASSETS 1-0300 275660 259719 TOTAL LIABILITIES 1-0800 275660 259719 INCOME STATEMENT Company name: "MONBAT" AD UIC 111028849 Type of statement: consolidated Reporting period: 01.01.2015 -31.12.2015 (thousand BGN) Code Current Previous Code Current Previous period EXPENSES REVENUES period period period А. Expenditures А. Revenues I. Operating expenses I. Net revenues from the sale of: 1. Materials 2-1120 149163 153914 1. Finished goods 2-1551 227571 216808 2. External services 2-1130 19436 17669 2. Goods for sale 2-1552 9158 2781 3. Depreciation 2-1160 11532 11193 3. Services 2-1560 2070 1438 4. Salaries 2-1140 15216 13383 4. Other 2-1556 7159 7388 5. Social security 2-1150 3098 2639 Total net revenues from sale 2-1610 245958 228415 6. Net book value of assets sold (finished goods excluded) 2-1010 13442 7328 7. Assets under construction and write off of assets 2-1030 1884 -10799 II. Revenues from financing for fixed assets 2-1620 815 622 8. Other expenses 2-1170 7030 4625 incl. government grants 2-1621 incl. impairment of assets 2-1171 incl. provisions 2-1172 III. Financial income Total operating expenses: 2-1100 220 801 199 952 1. Interest revenue 2-1710 1307 1353 2. Divident income 2-1721 3. Gains from operations with financial assets II. Financial expenses and instruments 2-1730 1. Interest expenses 2-1210 2077 2437 4. Gains from foreign exchange operations 2-1740 2512 1531 2. Losses from operations with financial assets and instruments 2-1220 5. Other financial income 2-1745 3. Losses from foreign exchange operations 2-1230 2623 1736 Total financial income 2-1700 3819 2884 4. Other financial expenses 2-1240 970 1216 Total financial expenses: 2-1200 5 670 5 389

B. Total revenues before extraordinary B. Total operating expenses 2-1300 226 471 205 341 activities 2-1600 250592 231921

C. Profit/(loss) from operations 2-1310 24 121 26 580 C. Operating loss 2-1810 00 IV. Share in the loss of associated and joint III. Share in the profit of associated and joint companies 2-1250-1 companies 2-1810-1 IV. Extraordinary costs 2-1250 V. Extraordinary revenues 2-1750 D. Total expenses 2-1350 226 471 205 341 D. Total revenues 2-1800 250 592 231 921 E. Profit before tax 2-1400 24 121 26 580 E. Loss before taxes 2-1850 00 V. Tax expense 2-1450 3 236 3 041 1.Corporate profit tax 2-1451 3280 3459 2. Expenses/(gains) on deferred corporate taxes 2-1452 -44 -418 3. Other taxes 2-1453 F. Profit after taxes 2-0454 20 885 23 539 F. Loss after taxes 2-0455 00 incl. from minotiry shareholding 2-0454-1 incl. from minority shareholdings 2-0455-1 1166 1770

G. Net profit 2-0454-2 22 051 25 309 G. Net loss 00 2-0455-2 Total 2-1500 250 592 231 921 Total 2-1900 250 592 231 921 CASH FLOW STATEMENT - DIRECT METHOD

Company name: "MONBAT" AD UIC 111028849

Type of statement: consolidated Reporting period: 01.01.2015 -31.12.2015 (thousand BGN) Code Current period Previous period CASH FLOW А. Cash flow from operating activities 1. Cash receipts from customers 3-2201 237310 225465 2. Cash paid to suppliers 3-2201-1 -191320 -189575 3. Payments/income related to financial assets 3-2202

4. Cash paid to employees and social security 3-2203 -16478 -14349 5. Paid/refunded taxes except corporate tax/ 3-2206 603 8024 6. Corporate tax paid 3-2206-1 -2835 -2673 7. Interest received 3-2204 8. Interest and bank charges paid on short-term loans 3-2204-1 9. Foreign currency exchange gains/losses net 3-2205 -496 -383 10. Other proceeds/payments from operational activity 3-2208 -1240 -1944 Net cash flow from operational activities (A): 3-2200 25 544 24 565 B. Cash flow from investing activity 1. Purchase of fixed assets 3-2301 -18111 -12487 2. Sale of fixed assets 3-2301-1 1523 3. Loans granted 3-2302 -3168 -3219 4. Proceeds from loans 3-2302-1 54 132 5. Interest received on granted loans 3-2302-2 139 6. Purchase of investments 3-2302-3 7. Sale of investments 3-2302-4 8. Dividents received 3-2303 9. Foreign currency exchange gains/losses net 3-2305 10. Other proceeds/payments from investing activity 3-2306 3630 Net cash flow from investing activities (B): 3-2300 -15 933 -15 574 C. Cash flow from financing activities 1. Proceeds on securities issued 3-2401 2. Payments on securities buy-back 3-2401-1 -84 3. Proceeds on loans 3-2403 10632 51825 4. Payments of loans 3-2403-1 -16525 -39553 5. Payments on leasing contracts 3-2405 -847 -664 6. Paid interest, charges and commissions on investment loans 3-2404 -1818 -2010 7 . Dividents paid 3-2404-1 -5588 -4684 8. Other proceeds/payments on financing activities 3-2407 -687 -1040 Net cash flow from financing activities (C): 3-2400 -14 917 3 874

D. Net decrease/increase in cash and cash equivalents (A+B+C) : 3-2500 -5 306 12 865 E. Cash and cash equivalents as of the beginning of the period 3-2600 20 538 7 673 F. Cash and cash equivqlents as of the end of the period 3-2700 15 232 20 538 cash and bank deposits 3-2700-1 14995 14535 restricted cash 3-2700-2 237 6003 CHANGES IN SHAREHOLDERS' EQUITY STATEMENT Company name: "MONBAT" AD UIC 111028849 Type of statement: consolidated Reporting period: 01.01.2015 -31.12.2015 (thousand BGN)

Retained Reserves earnings Revaluati Reserve Total Share Issue Minority INDEXES Code on Reserves including: profit loss from shareholders capital premiums shareholdings reserve transfers ' equity general special other а 12 3 4 56789 1011 Code -b 1-0410 1-0410 1-0422 1-0424 1-0425 1-0426 1-0452 1-0453 4-0426-1 1-0400 1-0400-1 Balance-beginning of reporting period 4-01 39 000 28 611 0 64 924 0 35 504 0 168039 -2 661 Changes in initial balances due to: 4-15 000000000 0 0 Effect from changes in accounting policy 4-15-1 0 Fundamental mistakes 4-15-2 0 Corrected balance - beginning of reporting period 4-01-1 39 000 28 611 0 64 924 0 0 35 504 0 0 168039 -2 661 Net profit/loss 4-05 22051 0 22051 -1166 1. Distributed profit for: 4-06 0 0 0 207 0 0 -6 057 0 0 -5850 0 dividends 4-07 -5850 -5850 other 4-07-1 207 -207 0 2. Loss coverage 4-08 0 3. Revaluation of non-current tangible and intangible assets, incl.: 4-09 0 0 0 0 0 0 0 0 0 0 0 increase 4-10 0 decrease 4-11 0 4. Revaluation of financial assets and instruments, incl.: 4-12 0 0 0 0 0 0 0 0 0 0 0 increase 4-13 0 decrease 4-14 0 5. Deferred tax effect 4-16-1 0 6. Other changes 4-16 -11 -73 -84 Balance - end of reporting period 4-17 38 989 28 538 0 65 131 0 0 51 489 0 0 184156 -3 827 7. Changes from transfers of annual financial reports of companies 4-18 -365 -850 abroad 8. Changes from revaluation of financial reports in case of hyper inflation 4-19 0 Shareholders' equity - as of end of reporting period 4-20 38 989 28 538 0 65 131 0 0 51 489 0 -365 183306 -3 827

NON-CURRENT ASSETS STATEMENT Company name: "MONBAT" AD UIC 111028849 Type of statement: consolidated Reporting period: 01.01.2015 -31.12.2015

Reported value of non-current assets Revaluation Depreciation Revaluation Revaluated Balance value Revaluation depreciation as for the current INDEXES Code purchased written-off estimated written-off beginning end of (4+5-6) beginning of end of of end of period period during the during the increase decrease during during increase decrease of period period period period (11+12-13) (7-14) period period period period a b 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 I. Property, plant and equipment

1 Land 5-1001 8358 264 141 8481 8481 0 0 0 8481 2 Buildings 5-1002 41090 5016 1090 45016 45016 8760 1589 90 10259 10259 34757 3 Machinery and equipment 5-1003 92952 14651 18 107585 107585 57530 7196 2 64724 64724 42861 4 Facilities 5-1004 31401 1107 104 32404 32404 6163 1377 9 7531 7531 24873 5 Vehicles 5-1005 9566 743 61 10248 10248 5434 842 21 6255 6255 3993 5-1007-1 4010 296 18 4288 4288 3364 260 6 3618 3618 670 6 Office fittings 7 Assets under construction 5-1007-2 12245 15217 16580 10882 10882 0 0 0 10882 8 Other 5-1007 0 0 0 0 0 0 0 Total propety, plant and equipment 5-1015 199622 37294 18012 218904 00218904 81251 11264 128 92387 0092387 126517 II. Investment property 5-1037 00 000 III. Farm animals 5-1006 0 0 0 0 0 IV. Intangible assets 0 0 0 0 0 1 Rights of ownership 5-1017 1224 42 1266 1266 1081 45 1126 1126 140 2 Software 5-1018 403 73 476 476 388 22 410 410 66 3 R&D expenses 5-1019 701 701 701 37 36 73 73 628 4 Other intangible assets 5-1020 1299 14 1221 92 92 515 165 659 21 21 71 Total intangible assets 5-1030 3627 129 1221 2535 002535 2021 268 659 1630 001630 905 V. Financial assets (excl. of long-term receivables)

1 Share participations in: 5-1032 8 0 0 8 0 0 8 0 0 0 0 0 0 0 8 subsidiary companies 5-1033 0 0 0 0 0 joint ventures 5-1034 0 0 0 0 0 associated companies 5-1035 0 0 0 0 0 other companies 5-1036 8 8 8 0 0 8 2 Long-term investment securities held to maturity 5-1038 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 treasury bonds 5-1038-1 0 0 0 0 0

bonds incl. 5-1038-2 0 0 0 0 0

municipality bonds 5-1038-3 0 0 0 0 0

Other 5-1038-4 0 0 0 0 0

Other financial assets 5-1038-5 0 0 0 0 0 3 Total financial assets 5-1045 8 0 0 8 008 0000 00 08 VI. Goodwill 5-1050 00 000 Total ( I+ II+ III+ IV+V+VI) 5-1060 203257 37423 19233 221447 0 0 221447 83272 11532 787 94017 0 0 94017 127430

RECEIVABLES, PAYABLES AND PROVISIONS STATEMENT Company name: "MONBAT" AD UIC 111028849 Type of statement: consolidated Reporting period: 01.01.2015-31.12.2015 А. RECEIVABLES (thousand BGN) Receivables INDEXES Code Liquidity amount up to 1 year over 1 year а b I. Unpaid capital 6-2010 0 II. Long-term trade and other receivables 1. Related parties receivables, incl.: 6-2021 0 0 0 - advance payments 6-2022 0 - sale of assets and services 6-2241 0 - other 6-2023 0 2. Trade loans 6-2024 455 455 3. Other receivables, incl.: 6-2026 0 0 0 - financial lease 6-2027 0 - other 6-2029 0 Total long-term trade and other receivables 6-2020 455 0 455 III. Tax assets 0 Assets on deferred taxes 6-2030 0

IV. Short-term trade and other receivables 1. Related parties receivables, incl.: 6-2031 31427 31427 0 - advance payments 6-2032 22740 22740 0 - sales 6-2033 6787 6787 0 - other 6-2034 1900 1900 0 2. Trade accounts receivable 6-2035 34654 34654 0 3. Advance payments 6-2036 5869 5869 0 4. Trade loans 6-2037 547 547 0 5. Court receivables 6-2039 0 0 6. Adjudged receivables 6-2040 0 0 7. Taxes to be refunded, incl.: 6-2041 6325 6325 0 - corporate tax 6-2043 4 4 0 - VAT 6-2044 6072 6072 0 - refundable tax temporary differences 6-2045 0 0 - other taxes 6-2046 249 249 0 8. Other receivables, incl.: 6-2047 780 780 0 - personnel receivables 6-2048 0 0 - social security receivables 6-2049 0 0 - claims receivables 6-2050 0 0 - other 6-2051 780 780 0 Total short-term trade and other receivabls 6-2060 79602 79602 0 TOTAL RECEIVABLES (I+II+III+IV): 6-2070 80057 79602 455

B. PAYABLES Amount of INDEXES Code Aging Collateral value payables а b1 2 34 I. Long-term debt 1. Due to related parties, incl.: 6-2111 7 0 7 0 - loans 6-2112 0 - assets and services supplies 6-2113 0 - other 6-2244 7 7 2. Due to financial institutions, incl.: 6-2114 12610 0 12610 0 - banks, incl.: 6-2115 12610 12610 - overdue 6-2116 0 - financial institutions, incl.: 6-2114-1 0 - overdue 6-2114-2 0 3. ZUNK bonds 6-2123-1 0 4. Trade loans 6-2118 1266 1266 5. Bonds 6-2120 0 6. Other long-term debts, incl.: 6-2123 0 - financial lease 6-2124 0 Total long-term debt 6-2130 13883 0 13883 0 II. Tax liabilities Liabilities on deferred taxes 6-2122 1238 1238 III. Trade and other payables 1. Related parties payables, incl.: 6-2141 305 305 0 0 - assets and services supplied 6-2142 121 121 0 - dividends 6-2143 184 184 0 -other 6-2143-1 0 0 2. Short-term borrowings, incl.: 6-2144 48446 48446 0 0 - banks, incl.: 6-2145 48446 48446 0 - overdue 6-2146 0 - financial institutions, incl.: 6-2144-1 0 0 - overdue 6-2144-2 0 3. Short-term part of long-term loans 6-2161-1 0 0 0 0 - ZUNK 6-2161-2 0 0 - bonds 6-2161-3 0 0 - long-term loans 6-2161-4 0 0 - other 6-2161-5 0 0 4. Short-term payables 6-2148 22889 22889 0 0 Trade loans 6-2147 427 427 0 Trade accounts payable 6-2149 18443 18443 0 Advance payments 6-2150 592 592 0 Salaries payable 6-2151 698 698 0 Taxes payable, incl.: 6-2152 2141 2141 0 0 - corporate tax 6-2154 561 561 0 - VAT 6-2155 1234 1234 0 - other taxes 6-2156 346 346 0 Social security payable 6-2157 588 588 0 5. Other 6-2161 1232 1232 0 Total trade and other payables 6-2170 72872 72872 0 0 TOTAL PAYABLES 6-2180 87993 72872 15121 0

C. PROVISIONS (thousand BGN) In the beginning In the end of the INDEXES Code Increase Decrease of the year year

а b1 2 3 4 1. Provisions for legal payables 6-2210 0 2. Provisions for constructive payables 6-2220 0 3. Other provisions 6-2230 532 70 462 Total (1+2+3): 6-2240 532 0 70 462 Note: SECURITIES Company name: "MONBAT AD UIC 111028849 Type of statement: consolidated Reporting period: 01.01.2015 -31.12.2015 (thousand BGN ПОКАЗАТЕЛИ Type and number of securities Securities value revaluation (4+5- Code ordinary priviliged convertible reported value revaluation 6) а b123456 7 I. Non-current financial assets in securities 1. Shares 7-3031 0 2. Bond, incl.: 7-3035 0 municipality bonds 7-3035-1 0 3. Treasury bonds 7-3036 0 4. Other 7-3039 0 Total non-current financial assets in securities: 7-3040 000000 0 II. Current financial assets in securities 1. Shares 7-3001 0 2. Own shares repurchased 7-3005 0 0 3. Bonds 7-3006 0 4. Own bonds repurchased 7-3007 0 5. Treasury bonds 7-3008 0 6. Derivatives and other financial instruments 7-3010-1 0 7. Other 7-3010 0 Total current financial assets in securities: 7-3020 000000 0 N) STATEMENT investments in subsidiaries, joint ventures,

Company name: "MONBAT" AD UIC 111028849 Type of statement: consolidated Reporting period: 01.01.2015-31.12.2015 (thousand BGN) Investment in securities Investment % in other Investment in seucrities Company name Code Investment amount not traded on the Stock company equity traded on the Stock exchange exchange а b1 2 3 4 А. IN THE COUNTRY I. Investments in subsidiaries 1 2 3 4 5 6 7 0 8 0 9 0 10 0 11 0 12 0 13 0 14 0 15 0 Total 8-4001 000 II. Investments in joint ventures 1 0 2 0 3 0 4 0 5 0 6 0 7 0 8 0 9 0 10 0 11 0 12 0 13 0 14 0 15 0 Total 8-4006 000 III. Investments in associated companies 1 0 2 0 3 0 4 0 5 0 6 0 7 0 8 0 9 0 10 0 11 0 12 0 13 0 14 0 15 0 Total 84011 000 IV. Investments in other companies 1. EKOBAT Sofia AD 8 17 8 2 0 3 0 4 0 5 0 6 0 7 0 8 0 9 0 10 0 11 0 12 0 13 0 14 0 15 0 Total 8-4016 808 Total in the country (I+II+III+IV): 8-4025 808 Б. ABROAD I. Investments in subsidiaries 1 2 3 4 5 6 7 8 0 9 0 10 0 11 0 12 0 13 0 14 0 15 0 Total 8-4030 000 II. Investments in joint ventures 1 0 2 0 3 0 4 0 5 0 6 0 7 0 8 0 9 0 10 0 11 0 12 0 13 0 14 0 15 0 Total 8-4035 000 III. Investments in associated companies 1 0 2 0 3 0 4 0 5 0 6 0 7 0 8 0 9 0 10 0 11 0 12 0 13 0 14 0 15 0 Total 8-4040 000 IV. Investments in other companies 1 0 2 0 3 0 4 0 5 0 6 0 7 0 8 0 9 0 10 0 11 0 12 0 13 0 14 0 15 0 Total 8-4045 000 Total for abroad (I+II+III+IV): 8-4050 000