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Industrial Holding Bulgaria Plc Interim Separate Financial StatementsFor the period ended 31 March 2013

INDUSTRIAL HOLDING BULGARIA PLC STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 31 MARCH 2013

In BGN thousand Note 31.03.2013

31.03.2012

Income from interest, dividends and investment transactions 5 4,924 4,579Other operating income 6 18,261 3

23,185 4,582

Payroll costs 7 (137) (129)Costs of hired services (218) (71)Other operating expenses 8 (72) (37)

Net operating income 22,758 4,345

Financial income 9 4 -Financial expenses 9 (454) (488)

Profit before taxation 22,308 3,857

Tax expenses 10 (1,830) (35)Profit for the period 20,478 3,822

Other comprehensive income for the period, net of taxes - -Total comprehensive income for the period, net of taxes 20,478 3,822

Basic earnings per shareBasic net earnings per share (in BGN) 17 (а) 0,30 0,0562

The Notes on pages 6 to 34 are an integral part of these financial statements.The financial statements were approved for publication by the Managing and Supervisory Boards on 29 April 2013.

Daneta ZhelevaChief Executive Officer

Ms. Toshka VassilevaPrepared by

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INDUSTRIAL HOLDING BULGARIA PLC STATEMENT OF FINANCIAL POSITION


In BGN thousand Note 31.03.2013 31.12.2012

AssetsNon-current assetsNon-current tangible and intangible assets 11 410 365Investments in subsidiaries 12 124,143 124,143Investments in associates 13 1,584 1,584Other investments 14 1,200 1,275Long-term loans of related parties 21 60,898 57,497Other receivables 14 105 -Total non-current assets 188,340 184,864

Current assetsMaterials 3 3Receivables from related parties 21 2,766 74Long-term loans of related parties 21 2,029 2,104Other receivables 15 179 242Cash and cash equivalent 16 104 2,054Total current assets 5,081 4,477Total assets 193,421 189,341

Equity and liabilitiesEquityShare Capital 17 67,978 67,978Premium reserves 17 30,604 30,604Reserves 17 7,398 7,398Retained earnings (net) 60,428 39,949Total equity 166,408 145,929

Non-current liabilitiesDebenture loan 18 - -Long-term payables 19 6 6Total non-current liabilities 6 6

Current liabilitiesDebenture loanTrade and other payables 18 22,374 21,946Payables to related parties 20 81 18,401Tax payables 21 2,722 2,120Total current liabilities 1,830 939Total liabilities 27,007 43,406Total equity and liabilities 27,013 43,412




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INDUSTRIAL HOLDING BULGARIA PLC CASH FLOW STATEMENT


In BGN thousand Note 31.03.2013 31.03.2012Operating cash flowReceivables from sale of shares and other tradereceivables 90 3Dividends received 1,318 986Loans repaid 666 8,249Interest received 51 190Payments related to acquisition of shares and stocks - (7,925)Loans granted (3,140) (909)Payments related to payroll (120) (125)Foreign exchange gain (loss) 1 -Profit taxes paid (938) (154)Cash flows related to unexercised rights of shareholders (net) (28) (57)Payments to suppliers, others (194) (148)Net operating cash flow (2,294) 110

Investment cash flowPurchase sale of non-current tangible assets (124) (98)Sale of non-current tangible assets - -Net investment cash flow (124) (98)

Financial cash flow

Payment for redemption of securities (105) -Received cash loans and accepted deposits 604 -Repaid cash loans, released deposits and interest paid (31) (1)Net financial cash flow 468 (1)

Increase/ (decrease) in cash and cash equivalents (1,950) 11Cash and cash equivalents at the beginning of the period 2,054 54Cash and cash equivalents on 31 December 16 104 65




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INDUSTRIAL HOLDING BULGARIA PLC EQUITY STATEMENTFOR THE PERIOD ENDED 31 MARCH 2013

In BGN thousandNote Share capital Premium

reservesReserves Retained

earningsTotal

Balance as of 1 January 2012 67,978 30,604 6,801 34,632 140,015

Comprehensive income for the periodProfit for the period - - - 3,822 3,822Other comprehensive income for the period - - - - -Total comprehensive income for the period - - - 3,822 3,822

Transactions with shareholders reported in the Statement of Equity Distribution of retained profit to reserve - - - - -Capital increase - - - - -Total transactions with shareholders - - - - -Balance as at 31 March 2012 17 67,978 30,604 6,801 38,454 143,837

Balance as at 1 January 2013 67,978 30,604 7,398 39,949 145,929

Total comprehensive income for the periodProfit for the period - - - 20,478 20,478Other comprehensive income for the period - - - 1 1Total comprehensive income for the period - - - 20,479 20,479

Transactions with shareholders reported in the Statement of EquityTransfer of retained profit to reserve - - - - -Issue of equity - - - - -Total transactions with shareholders - - - - -Balance as of 31 March 2013 17 67,978 30,604 7,398 60,428 166,408

The Notes on pages 6 to 34 are an integral part of these financial statements.The financial statements were approved for publication by Managing and Supervisory Boards on 29 April 2013.



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INDUSTRIAL HOLDING BULGARIA PLC NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 MARCH 2013

1. Corporate information

The financial statements for the year ending on 31 December 2012 were approved for publication by the Managing and Supervisory Boards on 29 April 2013.

Industrial Holding Bulgaria Plc (the Company or the Holding) is a joint-stock company registered in the Republic of Bulgaria – company file No 13081 of 1996 having its seat in Sofia and address of management at 42 Damyan Gruev Str., Sofia. Initially the Company was established as a privatization fund in compliance with the Law on Privatization Funds under the name of Privatization Fund Bulgaria AD.The General Meeting of Shareholders made a decision on rearrangement of the activities of Privatization Fund Bulgaria AD as a holding company and change of the name of the latter to Industrial Holding Bulgaria Plc at a session held on 27 February 1998. The capital of the Company amounts to BGN 67,978,543. The Company has a two-tier system of management including a Management Board and a Supervisory Board.

The scope of operations of the Company includes acquisition, management, assessment and sale of shares in Bulgarian and foreign companies, acquisition, assessment and sale of patents, cession of licenses for usage of patents of companies in which the Company holds interests, financing of companies in which the Company holds interests, as well as any other activity not prohibited by law.

The activity of the Company is bound by no term or other termination clause.

The Company is entered into the BULSTAT Unified Public Classifier of Economic Entities under Identification No BG 121631219 and is registered with the State Public Social Security Office. The Company is also registered in compliance with the Law on Value Added Tax. The shares of the Company are traded on the Bulgarian Stock Exchange AD, Sofia.

2.1 Basis of preparation

These Financial Statements have been prepared based on historical cost.

These financial statements are presented in BGN. The functional currency of the Company is the Bulgarian lev. The financial data are given in thousands of BGN, if not stated otherwise.

ComplianceThese Financial Statements have been prepared in compliance with the International Financial Reporting Standards (IFRS) adopted by the European Union (EU).

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2.1 Basis of preparation (continuation)

Compliance (continuation)This is a separate financial statement where investments in subsidiaries and associates are presented at acquisition cost.In accordance with IAS 27 Consolidated and Separate Financial Statements and the Accountancy Act, Industrial Holding Bulgaria AD prepares and presents consolidated financial statements. The consolidated financial statements for the period ended March 31st, 2013 will be presented by May 30th , 2013.These Interim Financial Statements should be read in relation to the annual financial statement of the Company as of 31 December 2012.

2.2 Summary of significant accounting policies

а) Foreign currency transactions

These financial statements are presented in BGN which is the functional currency of the Company.

Operations in foreign currencies are reported in the functional currency, at the exchange rate applicable on the day of the transaction. Monetary assets and liabilities denominated in foreign currencies are reported in the functional currency at the closing foreign exchange rate of the National Bulgarian Bank on the date of drafting of the statement of financial position. Foreign currency gain or loss are recognised in the profit or loss for the period

b) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless of when payment is received. Revenue is measured at fair value of the received or receivable on the basis of the agreed terms of payment, excluding discounts, rebates and other sales taxes or duty. The company analyses the sales agreements by specific criteria to determine whether it is acting as principal or agent. It has come to the conclusion that it acts as a principal in all agreements. Before revenue is recognised following specific recognition criteria must also be met:

Income from services

Revenues from provided services are recognized in proportion to the degree of completion of the transaction as of the reporting date. The state of completion is usually determined through an analysis of the work performed.

When the agreed services are provided in different reporting periods, the liabilities are referred at fair value to the services.

The stage of completion of the transaction is defined as a proportion of cost incurred for work performed to the estimated total cost. When the outcome of the transaction (contract) cannot be estimated in a reliably way, revenue is recognised insofar as the incurred expenses are refundable.

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2.2 Summary of significant accounting policies (continued)

b) Revenue recognition (continued)

Interest income

Interest income is reported under the effective interest rate method which represents the rate that discounts estimated future cash payments through the expected life of the financial instrument or for shorter period where appropriate, to the net carrying amount of the financial asset. Interest income is included in the financial statement of comprehensive income.

Dividend incomeDividend income is recognised on the date of establishment of the Company’s right to receive the payment.

в) Taxation

Current tax on income

Current tax assets and liabilities for the current and prior periods are recognised at the amount expected to be refunded from or paid to the taxation authorities. Current tax assets and liabilities are measured at the amount expected to be paid to (recovered from) taxation authorities, using the rates/laws that have been enacted or substantively enacted as the balance sheet date.

Current tax is recognised directly in equity statement (not in comprehensive income statement) when the tax is related to items that are directly recognised in equity. The management analyses various items in the tax form where tax legislation regulations are subject to interpretation and recognises provisions where appropriate.

Deffered tax

Deferred tax is calculated on the temporary differences between the amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax liabilities are not recognised for:

time differences from the initial recognition of tax liabilities for a transaction different than a business combination which does not affecting the profit and loss, neither for accounting, nor for taxation purposes; and

differences related to investments in subsidiaries, associates and jointly controlled companies, as long as it is probable that there will be no reversal in the foreseeable future.

A deferred tax asset is recognised for deductible temporary differences, tax credits and unused tax losses, and to the extent that it is probable that future taxable profits will be available against which they can be utilised:

except for time differences from the initial recognition of tax assets for a transaction different than a business combination which does not affecting the profit and loss, neither for accounting, nor for taxation purposes; and

for deductible temporary differences arising from investments in subsidiaries, associates, and joint ventures should be recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and that taxable profit will be available against which the temporary difference will be utilised.

The carrying amount of deferred tax assets should be reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilised. Unrecognised deferred tax assets are reviewed at each reporting date and are recognised to the extent that it is probable that taxable profit will be available to allow the benefi of that deferred tax asset to be utilised.

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b) Revenue recognition (continued)

Deffered tax (continued)Deferred tax assets and liabilities should be measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates/laws that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax related to items that are not included in the profit or loss are not recognised in profit and loss. Deferred tax is recognised either in other comprehensive income, or directly in equity depending on the type of transaction.

The company offsets deferred tax assets and liabilities only if has a legally enforceable right to offset current tax liabilities and assets, and the deferred tax liabilities and assets relate to income taxes levied by the same tax authority on the same taxable entity;

Value Added Tax (VAT)Revenues, expenses and assets are recognised net of the amount of value added tax (VAT), except:

where the amount of VAT incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case VAT is recognised as part of the cost of acquisition of an asset or as part of an item of expense if appropriate; and

for receivables and payables which are recognised inclusive of VAT.The net amount of VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the financial statement.

c) Retirement benefits

Pursuant to these provisions of the Bulgarian labour legislation upon termination of the labour contract of an employee who has obtained the right to a pension, the employer has to pay to this employee a remuneration amounting to two or six monthly gross salaries. If an employee has worked for the same employer for 10 or more years as at the date of retirement, the retirement benefit amounts to six gross monthly salaries. If an employee has worked for the same employer for less than 10 years, the retirement benefit amounts to two gross monthly salaries. The Management estimates the total amount of potential payables to all employees as of the report date based on an actuarial report using the projection credit unit method.

The Company recognizes all actuarial profit and loss arising from the defined income plan in the profit or loss.

The past service cost is recognised as an expense on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits are already vested immediately following the introduction of, or changes in the plan for retirement, the Company recognises the cost of past service cost immediately.Liability for employee benefits at retirement consists of the present value of the obligation to pay such income, less expenses unrecognized past service cost.

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d) Financial instruments – initial recognition and subsequent measurement Financial assets

Initial recognition

Financial assets within the scope of IAS 39 Financial Instruments: Recognition and Measurement are classified as financial assets at fair value through profit or loss, or loans and receivables or held to maturity investments or financial assets available for sale or as derivatives designated as hedging instruments in an effective hedge, as is appropriate. The Company determines the classification of its financial assets at initial recognition.

All financial assets are recognized initially at fair value plus, in the case of investments not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset.

Purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the marketplace (regular purchases) are recognized on the trade date (the transaction), ie on the date on which the Company has committed to purchase or sell the asset.

Subsequent measurement Subsequent measurement of financial assets depends on their classification as follows:

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition, loans and receivables are measured at amortized cost using the method of effective interest rate (ELP), less provision for impairment. Amortized cost is calculated taking into account any discounts or premium on acquisition and fees or costs that are an integral part of the ELP. Depreciation ELP is included in finance income in the statement of comprehensive income. Losses arising from impairment are recognized in other comprehensive income as expenses.

Investments in subsidiaries and associates

In the separate financial statements of the Company, investments in subsidiaries and associates are stated at cost less impairment losses (according to IAS 27, paragraph 37 (a)). Investments in subsidiaries and associated companies are derecognised and the net result (proceeds of disposal less the carrying amount of the investment) are recognized in profit or loss when the Company loses control or significant influence over the company in which it has invested. Additional information is provided in Note 12 and Note 13.

Derecognition Financial asset (or, where applicable, a part of a financial asset or a group of similar financial assets) is derecognised when:• the rights to receive cash flows from the asset have expired;• the rights to receive cash flows from the asset transferred or the Company has a duty to fully pay the cash flows without material delay to a third party through an agreement to transfer, in which (a) has transferred substantially all risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has not retained control.

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d) Financial instruments – initial recognition and subsequent measurement

Financial assets (continued)

Derecognition (continued)Where the Company has transferred its rights to receive cash flows from an asset or has intervened in the transfer agreement and neither transferred nor retained substantially all the risks and rewards of the asset, but has retained control over it, it continues to recognize the transferred financial asset to the extent of its continuing involvement in it. In this case, the Company recognizes the related obligation. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that may have to be reimbursed by the Company.

Impairment of financial assets

At each reporting date, the Company assesses whether there is objective evidence that a financial asset or group of financial assets may be impaired. Financial asset or group of financial assets is deemed to be impaired when there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (an "event of loss") and that the loss event has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably measured. Evidence of impairment may include indications that the debtors or groups of debtors experiencing serious financial difficulties or are in default or delinquency in the payment of interest or principal, or likely to declare insolvency / over-indebtedness or take financial reorganization and where observable data indicate measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that are related to defaults by borrowers.

Financial assets carried at amortised cost

For financial assets measured at amortized cost, the Company first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists individually assessed financial asset, whether it is significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets are assessed for impairment collective basis. Assets that are individually assessed for impairment and for which an impairment loss has been and continues to be recognized are not included in a collective assessment of impairment.If there is objective evidence that an impairment loss, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future expected losses on loans that have not yet been incurred). Present value of estimated future cash flows discounted at the original effective interest rate of financial assets. If a loan has a variable interest rate, the discount rate for evaluation of the impairment loss is the current effective interest rate.

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Financial assets (continued)

Impairment of financial assets (continued)

Financial assets carried at amortised cost (continued)

The carrying amount of the asset is reduced through use of an allowance account and the amount of the loss is recognised in profit or loss. Interest income continues to be accrued on the reduced carrying value using the interest rate used to discount the future cash flows for the assessment of impairment. Interest income is recorded as part of finance income in the statement of comprehensive income. Loans together with the associated provisions are written off when there is no realistic possibility that they be collected in the future and all securities are sold or transferred to the Company. If in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off be restored at a later stage, the recovery is recognised in profit or loss.

Investments in subsidiaries and associates

If there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair value because it cannot be reliably measured, the amount of the impairment loss is measured as the difference between the carrying amount of the financial asset and the amount, which is expected to be recovered from it, if it can be estimated reliably. Impairment losses are recognized in profit or loss.

Financial liabilities

Initial recognition and measurement

Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, or loans and borrowings, or as derivatives that are effective hedges, as is appropriate. The Company determines the classification of its financial liabilities at initial recognition.Financial liabilities are initially recognized at fair value plus, in the case of loans and borrowings, transaction costs that are directly attributable to the acquisition of the financial liability.The Company's financial liabilities include trade and other payables and debt securities issued.

Subsequent measurementSubsequent measurement of financial liabilities depends on their classification as follows:

Loans and borrowings

After initial recognition, loans and borrowings are measured at amortized cost using the method of ELP. Gains and losses on loans and borrowings are recognized in the income statement when the liability is derecognised as well as through the amortization process.

Amortised cost is calculated taking into account any discounts or premium on acquisition and fees or costs that are an integral part of the ELP. Depreciation ELP is included in finance costs in the statement of comprehensive income.

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Financial assets (continued)DerecognitionA financial liability is derecognised when it is extinguished, ie when the obligation specified in the contract is discharged or canceled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the profit or loss.

е) Offsetting of financial instrumentsFinancial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when there is a legally enforceable right to offset the recognized amounts and the Company intends to settle on a net basis, or to realize the asset simultaneously and settlement of liabilities.

f) Fair value of financial instrumentsAt each reporting date, the fair value of financial instruments traded in active markets is determined based on quoted market objectives or quotes from dealers ("buy" prices for long positions and prices "sell" for short positions) without deduction transaction costs.The fair value of financial instruments for which no active market is determined using valuation techniques. These techniques include using recent market transactions, reference to the current fair value of another instrument that is substantially the same, analysis of discounted cash flows and other valuation models.Analysis of fair values of financial instruments and further details of how they are evaluated is provided in Note 23.

g) Share capitalShare capital is represented at the nominal value of the issued and paid-up shares. Proceeds from shares issued over their nominal value are recorded as share premium. Costs directly attributable to the issue of ordinary shares are recognized as a deduction from equity, net of any tax effects.

h) Share buyback Own equity instruments which are re-acquired (treasury shares) are recognized at the fair value of the consideration transferred and deducted from equity. The Company does not recognise gain or loss on the purchase, sale, issue or cancellation of own equity instruments. Any difference between the face value and the fair value of the consideration transferred in the event of cancellation of treasury shares are recognised as a decrease / increase in share premium. For treasury shares with voting rights dividends are not distributed.

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2.2 Summary of significant accounting policies (continued)i) Convertible bonds

Convertible bonds are divided into passive component and equity component depending on the conditions of the contract.

Upon issuance of convertible bonds, the fair value of the liability component is determined using the market price for an equivalent non-convertible bond. This amount is classified as a financial liability measured at amortized cost (net of transaction costs), the conversion or redemption of the instrument.

Remainder of the proceeds is allocated to the conversion option that is recognized as an equity instrument. Conversion option recognised as equity is not remeasured subsequently.

Transaction costs are allocated to the liability and equity components of the convertible bonds in proportion to the proceeds on initial recognition of the instrument.

j) Plant and equipment

Plant and equipment are reported at acquisition cost, less accumulated depreciation and accumulated impairment losses, if any. The acquisition cost includes the cost of replacing parts of the plant and equipment and borrowing costs on long-term construction contracts, provided that they meet the criteria for recognition of an asset. When replacement of major components of plant and equipment at regular interval is needed, the Company recognises these components as individual assets with specific useful lives and, respectively, depreciation. Similarly, the expenditures for basic overview of the machine and / or equipment shall be included in the carrying amount of the asset as a replacement cost, provided they meet the criteria for recognition of an asset. All other repairs and maintenance are recognized in profit or loss in the period in which they are incurred.Depreciation is calculated on a straight-line basis over the useful life of the assets, which are defined as follows:

Motor vehicles /cars/ 5 yearsComputers and computer equipment 2 – 5 yearsFixtures and fittings and all others 6 - 10 years

Plant and equipment is derecognised upon disposal or when no future economic benefits from its use or disposal are expected. Gains or losses arising from derecognition of the asset (calculated as the difference between the net disposal proceeds, if any, and the carrying amount of the asset) is included in profit or loss when the asset is derecognised.At each financial year-end the residual values, useful lives and methods of depreciation are reviewed and, if expectations differ from previous estimates, the later change in future periods.

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k) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale to be capitalised as part of its cost. All other borrowing costs are expensed in the period in which they arise. Borrowing costs include interest and other costs that the Company incurs in obtaining borrowed funds.

l) Intangible assets

Intangible assets acquired separately are measured initially at acquisition cost. After initial recognition, intangible assets are carried at acquisition cost less accumulated depreciation and accumulated impairment losses.The useful lives of intangible assets are assessed to be finite as follows:Patents and trademarks 4 - 7 yearsSoftware 4 - 7 years

Intangible assets with finite lives are amortised over their useful lives and tested for impairment whenever there is an indication that their value is impaired. The amortization period and method of amortization of intangible assets with a finite useful life are reviewed at least at each financial year. Changes in the expected useful life or pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, and treated as changes in accounting estimates.

m) Impairment of non-financial assets

At each reporting date, the Company assesses whether there is any indication that an asset may be impaired. If any such indication exists, or when required annual impairment testing for an asset, the Company estimates the recoverable amount of that asset. Recoverable amount is the higher of fair value less costs to sell of an asset or cash-generating unit (CGU) and its value in use. Recoverable amount is determined for an individual asset, unless the use of that asset does not generate cash flows that are largely independent of the cash inflows from other assets or groups of assets. Where the carrying amount of an asset or CGU is higher than its recoverable amount, it is considered impaired and its carrying amount is reduced to its recoverable amount.In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate before tax that reflects current market assessments of the value of money and the risks specific to the asset. Fair value less costs to sell is determined on the basis of recent market transactions, if any. If such transactions cannot be identified, apply appropriate valuation model. These calculations are corroborated by valuation multiples or other available sources of information on the fair value of an asset or cash-generating unit.

Impairment calculations are based on detailed budgets and forecast calculations are made separately for each CGU to which the individual assets are distributed. These budgets and forecast calculations generally cover a period of five years. For longer periods calculated index for long-term growth and applies it after the fifth year of the future cash flows.

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m) Impairment of non-financial assets

Impairment losses are recognised as other expenses in the statement of comprehensive income, or as a separate item, if material.

At each reporting date, the Company assesses whether there is any indication that an impairment loss of an asset other than goodwill recognized in prior periods may no longer exist or may have decreased. If such indication exists, the Company estimates the recoverable amount of the asset or the cash-generating streams. An impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount of the asset since the last impairment loss. Recovery of an impairment loss is limited so that the carrying amount of the asset does not exceed its recoverable amount or nor does not exceed the carrying amount (net of depreciation) that would be determined if it was recognized impairment loss for asset in prior years. Recovery of an impairment loss is recognized in profit or loss, unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.

n) Cash and cash equivalents

Cash and cash equivalents in the statement of financial position include cash at bank, cash and short-term deposits with original maturities of three or fewer months.For the purposes of the cash flow statement, cash and cash equivalents include cash and cash equivalents as defined above.

o) Provisions

GeneralProvisions are recognised when the Company has a present obligation (legal or constructive) as a result of past events, it is likely to settle the obligation will be required outflow of resources embodying economic benefits when it can be reliably measured amount of the obligation. Where the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when it is virtually certain that these costs will be refunded. Cost of provision is presented in the statement of comprehensive income net of any reimbursement. Where the effect of the time value of money is material, provisions are discounted using a current discount rate before tax that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recogni sed as a finance cost.

p) Earning per share

Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to holders of ordinary shares by the weighted average number of shares outstanding for the period.

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5. Income from interest, dividends and investment transactions

In BGN thousand 31.03.2013 31.03.2012- -

Dividend income 4,009 3,506Interest income 915 1,073

4,924 4,579

The reported dividend income amounting to BGN 4,667 thousand comprises dividends distributed by Maritime Holding AD - BGN 486 thousand; by ZMM Bulgaria Holding AD - BGN 4,082 thousand, and by Odesos PBM AD - BGN 99 thousand.The reported dividend income amounting to BGN 4,009 (31.03.2012: BGN 3,505 thousand) comprises dividends distributed by Maritime Holding AD - BGN 598 thousand (31.03.2011: BGN 486 thousand); by ZMM Bulgaria Holding AD - BGN 3,411 thousand (31.03.2012: BGN 3,020 thousand).

Interest income relates to interest-bearing receivables from subsidiaries at the amount of BGN 900 thousand, deferred receivables from commercial contracts at the amount of BGN 14 thousand and current accounts amounting to BGN 1 thousand .

6. Other operating income

In BGN thousand 31.03.2013 31.03.2012

Income from sales of services 1 3Liabilities written-off 18,260 -

18,261 3

Obligations on rights sold to shareholders result from the increase of share capital in 2007. These shareholders have not exercised their rights to subscribe for shares in the capital increase and as a result, the unexercised rights were sold on the official auction of the Bulgarian Stock Exchange - Sofia, and Industrial Holding Bulgaria PLC receives the funds in January 2008 and began paying amounts to the holders of unexercised rights as of 4 February 2008. In February 2013 Industrial Holding Bulgaria AD stopped the payment for unexercised rights in relation with capital increase of the Company in 2007 because the limitation period of the obligation for payment expires on 04.02.2013 These liabilities are written off from profit in the current period.

7. Payroll costs

In BGN thousand 31.03.2013 31.03.2012

Salaries (125) (116)Social security costs and other social payments (13)

(137) (129)

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8. Other operating expenses

In BGN thousand 31.03.2013 31.03.2012

Depreciation and amortization (Note 11) (25) (15)Costs of materials (27) (5)Other operating expenses (20) (17)

(72) (37)

9. Financial income and expenses

In BGN thousand 31.03.2013 31.03.2012

Foreign exchange gains, net 4 -Financial income 4 -

In BGN thousand 31.03.2013 31.03.2012

Debenture loan interest expenses (428) (443)Interest expenses on deposits and loans from related parties (25) -Other expenses - ( 44)Financial expenses (1) (1)

(454) (488)

10. Income tax expense

Main components of income tax expense for the periods ended March 31, 2013 and 2012: In BGN thousand 31.03.2013 31.03.2012

Current tax expense (1,830) (35)Deferred tax relating to origination and reversal of temporary differences - -Income tax expense reported in the profit or loss (1,830) (35)

Current tax expense comprises income tax accrued at 10% (2012: 10%). In 2013 the applicable tax rate remain unchanged.

10. Income tax expense (continued)Reconciliation of income tax expense to accounting profit multiplied by the applicable tax rate for the period ended 31.03.2013 and 31.03.2012 is given below:

In BGN thousand 31.03.2013 31.03.2012

Profit before tax 22,308 3,857Income tax expense at tax rate of 10% for 2012 (2011: 10%) (2,230) (385)

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Income not taxable - dividends 400 350

Income tax expense at effective tax rate of 8,20% (2012: 9 %)(1,830) (35)

As at 31.03.2013 and 31.03.2012 the Company does not report deferred taxes. The company does not have unrelieved tax losses from previous years.

11. Non-current tangible and intangible assets

In BGN thousand Computers and

equipment

Transport vehicles

Fixturesand fittings and

other

Assets under construction

Total

Book valueBalance as at 1 January 2012 70 182 58 125 435Assets acquired 27 - 1 414 442Assets written-off - - - (242) (242)Transfer to intangible assets - - - (61) (61)Balance as at 31 December 2012 97 182 59 236 574

Balance as at 1 January 2013 97 182 59 236 574Assets acquired 1 - 12 - 13Assets written-offTransfer 16 - 220 (236)Balance as at 31 March 2013 114 182 291 587

Depreciation and impairment lossBalance as at 1 January 2012 62 98 55 - 215Depreciation costs 13 42 2 - 57Depreciation of assets written-off - - - - -Balance as at 31 December 2012 75 140 57 - 272

Balance as at 1 January 2013 75 140 57 - 272Depreciation costs 4 9 9 22Depreciation of assets written-offBalance as at 31 March 2013 79 149 66 294

Carrying amount

Balance as at 31 December 2012 22 42 2 236 302Balance as at 31 March 2013 35 33 225 - 293

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11. Non-current tangible and intangible assets (continued)

The Company has no limitations imposed in respect of the title of ownership of tangible non-current assets, and there are no assets pledged as collateral on liabilities or for other reasons.

Intangible AssetsAs the non-current intangible assets held by the Company represent an insignificant portion, no detailed note on their movement for the period has been prepared. The carrying amount of non-current intangible assets as at 31 March 2013 is BGN 117 thousand (31.12.2012: BGN 63 thousand). The increase is due to reported acquisition costs associated with improvements to new leased office in which the Company moved earlier in 2013. The depreciation charged for the period amounts to BGN 3 thousand.

12. Investments in subsidiaries

Investments held by the Company as of 31 March 2013 and 31 December 2012 are as follows:

31.03.2013 31.12.2012In BGN thousand Country Amount of

participation Percentage

ofparticipation

Amount of participation

Percentage of

participationZMM Bulgaria Holding AD Bulgaria 7,885 99.998 7,885 99.998Privat Engineering AD Bulgaria 56,992 99.790 56,992 99.790Dockyard Port Burgas AD Bulgaria 4,774 99.640 4,774 99.640Bulyard AD Bulgaria 11,682 61.500 11,682 61.500Maritime Holding AD Bulgaria 400 61.000 400 61.000International Industrial Holding Bulgaria AG Switzerland 130 100.000 130 100.000KLVK AD Bulgaria 39,980 64.47 39,980 64.47Hydropower Bulgaria AD-in liquidation Bulgaria - - - -Rekolta 2011 EAD Bulgaria 2,300 100.000 2,300 100.000

124,143 124,143

For the period 01.01 2013 - 31.03. 2013 there are no changes in the investment in subsidiaries and associates.

In 2012 the General Meeting of KLVK AD voted twice for the capital increase of the company – in March when the capital was increased by 2 515 873 ordinary registered voting shares with an issue price of BGN 3.15 each, and in May 2012 when the capital was increased by 4 900 000 new ordinary registered voting shares with an issue price of BGN 2,97 and a nominal value of BGN 1 each. IHB took part in the two capital increases: it subscribed for 100% of the shares in the first increase, and bought 86,56 % of the newly subscribed shares in the second increase. On 22 June 2012 the Registry Agency entered the capital increase of Privat Engineering AD from BGN 9 588 to BGN 10 788 through the issue of 1 200 000 new ordinary registered voting shares with a nominal value of BGN 1 each and an issue price of BGN 10. IHB took part in the capita increase and subscribed for 1 197 497 shares. The remaining shares were subscribed for by the shareholder Bulkari AD (indirect subsidiary of IHB). The Company holds 2 shares from the capital of Leyarmash AD, subsidiary of ZMM Bulgaria Holding.

Impairment test

As of 31.12.2012, the Company has made an analysis and has concluded that there are indications of impairment of investments in subsidiaries. As of 31.12.2012 the carrying value of these investments in Privat Engineering AD, KLVK AD and Bulyard amounts to BGN 56,992 thousand, BGN 39,980 thousand and BGN 11,682 thousand. As at 31.12. 2012 the Company has recognised an impairment loss on its investment in Bulyard at the amount of BGN 12,161 thousand.

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13. Investments in associates

31.03.2013 31.12.2012In BGN thousand Country Amount of

participation Percentage

ofparticipation

Amount of participation

Percentage of

participationDunav Tours AD Bulgaria - - 2,761 48.44Odesos PBM AD Bulgaria 1,584 30.00 1,584 30.00

1,584 4,345

In 2012 the share in the capital of Dunav Tours AD was sold.

14. Other long-term receivables

Other interest-bearing long-term receivables at the amount of BGN 1,200 are associated with the sale of IHB shares in the subsidiary Augusta Mebel AD. Receivables from the sale amounted to BGN 1,500 thousand (EUR 767 thousand) is deferred. With regard to the decision of the General Meeting of the Shareholders for share buyback, the Managing Board of Industrial Holding Bulgaria took the decision that for 2013 will be bought up to 3% of the registered capital of the Company, which at present is 67,978,543 shares, namely up to 2,039,356 shares.The chosen investment intermediary for the share buyback is Allianz Bank Bulgaria AD.

In January 2013 Industrial Holding Bulgaria PLC has bought back 99,308 shares at the average price of BGN 0.735 per share.In February 2013 Industrial Holding Bulgaria PLC has bought back 20,780 shares at the average price of BGN 0.741 per share. In March 2013 Industrial Holding Bulgaria PLC has bought back 22,000 shares at the average price of BGN 0.752 per share.The total number of own shares the Company possesses as at 31 March 2013 is 142,088 shares at the average price of BGN 0.738 per share.

15. Other receivables

In BGN thousand 31.03.2013 31.12.2012

Short-term receivables from sale of investment (Note 14) 154 155Guarantees provided - 73Prepaid services and advance payments 20 6Other receivables 5 8

179 242

16. Cash and cash equivalents

In BGN thousand 31.03.2013 31.12.2012

Cash in hand 9 10

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Cash at banks 95 2,044104 2,054

Cash in BGN is valued at its nominal value, and cash in foreign currency - at the closing exchange rate of BNB at the end of the reporting period. Foreign currency gains and loss are reported as current income and expenses respectively.

17. Share Capital

The share capital is reported at nominal value in accordance with the legal registrationof the Company. In BGN thousand 31.03.2013 2012

67,978,543 ordinary shares of BGN 1 nominal value each. 67,978 67,97867,978 67,978

The capital of the Company comprises 67,978,543 dematerialized registered voting shares of BGN 1 nominal value each. The share capital has been subscribed at its par value and is fully paid. There are no preference or bearer shares.Shareholders holding over 5% of the capital of IHB Plc as of 31 March 2013::

Shareholder Number of shares as at 31 March

2013

31.03. 2013

2012

Venside Enterprises AD 20,399,604 30.01% 30.01%DZH AD 9,537,921 14.03% 14.03%BULLS AD 4,646,278 6.83% 6.83%MUPF Allianz Bulgaria AD 3,977,174 5.85% 5.85%STOCK TOURS AD 3,540,523 5.21% 5.21%Other 25,877,043 38.07% 38.07%

67,978,543 100.00% 100.00%

Statutory and other reserves.Statutory reserves are formed by joint stock companies, such as Industrial Holding Bulgaria AD as profit distribution under Art. 246 of the Commercial Code. It is set aside until it reaches one-tenth or more of the capital. Sources to form statutory reserve are at least one-tenth of the net profits, share premium on shares and funds provided by the statutes or by resolution of the General Meeting of Shareholders. Statutory reserves can only be used to cover losses in the current and prior periods. As of March 31, 2013 statutory and additional eserves amounted to BGN 7,398 thousand (31.12. 2012: BGN 7,398 thousand).

17 (а). Basic earning per share

Basic earnings per share is calculated by dividing the financial result for the year by the weighted average number of ordinary shares outstanding for the year.The calculation of basic earnings per share as at 31 March 2013 is based on the net profit amounting to BGN 20,478 (31 March 2012: profit of BGN 3,822 thousand) and the weighted average number of ordinary shares available for the period ended 31 March 2013 of 67,978 thousand (31 March 2012: 67,978 thousand). Calculation is made as follows:

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In BGN thousand 31.03.2012 31.03.2011Net profit for the period 20,478 3,822Net profit attributable to holders of ordinary shares 20,478 3,822

In thousand 31.03.2013 31.03.2012Number of issued ordinary shares as of 1 January 67,978 67,978Number of ordinary shares at the end of the respective period 67,978 67,978Weighted average number of shares as at 31 March 67,978 67,978Basic earning per share (in BGN) 0.301 0.0562

18. Debenture loan

In BGN thousand 31.03.2013 2012Debenture loan 21,714 21,714Costs (123) (123)Interest charged 783 355

22,374 21,946including short-term - -including long-term 22,374 21,946

The Extraordinary General Meeting of Shareholders of Industrial Holding Bulgaria plc held on 17.12.2012 adopted the following decisions: 1. Decision to begin an initial public offering of up to 300 000 dematerialized, interest-bearing, convertible, freely transferable, unsecured bonds;2. Decision to amend the conditions of bond issue ISIN BG 2100018113;3. Decision for share buyback of IHB shares

On the grounds of Art.214, para 1 of the Commerce Code Antoaneta Mihailova Dimolarova, elected as a Representative of the bondholders on the First General Meeting of Bondholders held on 10.11.2011, convenes a General Meeting of the Bondholders of convertible bonds issue ISIN BG 2100018113, under the following Agenda and following adopted decisions:

1.Decision for the issuance under the conditions of an initial public offering of an issue of dematerialized, interest-bearing, convertible, freely-transferable and unsecured bonds with the following parameters and purpose:

Total nominal and issue value of the debenture loan: up to BGN 30,000,000 /thirty million/; Nominal value per bond: BGN 100 /one hundred/. Issue value per bond: BGN 100 /one hundred/. Number of bonds: Up to 300,00; Term (maturity of the debenture loan: 2 /two/ years (24months); Interest rate: 6.5% per year; Interest payment period: 6 months; Procedure for conversion of bonds into shares (conversion procedure): conversion - on the maturity date of

the bonds, each bond holder shall be entitled, under the terms of the debenture loan and prospectus for public offering of the issue of convertible bonds, instead of repayment of the bonds held, to exchange (convert) them for such a number of shares as would correspond to the conversion ratio valid at the time of the exchange.

Purpose of the debenture loan: the funds raised through the issue will be used to reimburse the debenture loan under a previous issue of convertible bonds - ISIN 2100018113, issued by Industrial Holding Bulgaria Plc, partial refinancing of Diamond Sky ship, expansion of Dockyard Burgas and other small projects of its subsidiaries

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2. Decision to amend the conditions of bond issue ISIN BG 2100018113, as follows:If the issue is successfully subscribed and paid for, the General Meeting of the shareholders adopts a decision to change the maturity of bond issue ISIN BG 2100018113 as follows: the payment of the principal of the debenture loan amounting to BGN 21,718,000 (twenty-one million seven hundred and eighteen thousand Bulgarian levs) will be paid within 10 days following the absorption of funds under the new bond issue together with the due interest until the payment of the principal.

Following the above stated, the Company represents the obligation under bond issue ISIN code BG 2100018113 as short-term liability as at 31.03.2013 and 31.12.2012.

The prospect for public offering for the new issue of convertible bonds is approved with a decision of FSC 138-Е/20.02.2013.

19. Retirement benefit payablesThe estimated retirement compensations in compliance with the provisions of the Labour Code and IAS 19 amounts to BGN 6 thousand as at 31.03.2013.

20. Trade and other payables

In BGN thousand 31.03.2013 31.12.2012

Payables on rights sold to shareholders 54 18,594Payables to suppliers 16 157Other payables 11 3

81 18,754

Payables on rights sold to shareholders as result of capital increase in 2007 were written off in February 2013 as Industrial Holding Bulgaria stopped the payment because the limitation period of the obligation for payment expired. These liabilities are written off from profit for the first quarter of 2013 (see Note 6)Payables on rights sold to shareholders as result of capital increase in 2011 and issuance of bond issue ISIN code BG 2100018113 which was successfully ended on 17.10.2011 amounts to BGN 54 thousand as at 31.03.2013. The payment still continues.

21. Related party disclosures

Shareholders

As at 31.03.2013 and 31.03.2012 the overall structure of the subscribed and paid up capital is presented in Note 17.As at 31.03.2013 the Company holds direct control (holds more than 50%) and indirect control to the following subsidiaries:

Percentage of ownershipCountry of registration 31.03.2013 2012

% %Industrial Holding Bulgaria AD Bulgaria Parent companyPrivat Engineering AD Bulgaria 100.00 100.00ZMM Bulgaria Holding AD Bulgaria 100.00 100.00ZMM Sliven AD Bulgaria 95.98 95.98ZMM Nova Zagora AD Bulgaria 93.57 93.57Leiarmach AD Bulgaria 100.00 100.00

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Mashstroy AD-in liquidation Bulgaria 80.81 80.81Elprom ZEM AD Bulgaria 80.78 80.78Dockyard Port Burgas AD Bulgaria 99.64 99.64KLVK AD Bulgaria 100.00 100.00International Industrial Holding Bulgaria AG Switzerland 100.00 100.00Maritime Holding AD Bulgaria 61.00 61.00Bulgarian Register of Shipping AD Bulgaria 61.00 61.00Bulgarian Lloyd AD Bulgaria 61.00 61.00Bulyard AD Bulgaria 61.50 61.50Bulyard Shipbuilding Industry AD Bulgaria 61.50 61.50Bulkari EAD Bulgaria 100.00 100.00IHB Shipping CO EAD Bulgaria 100.00 100.00Emona LTD Marshal Islands 100.00 100.00Karvuna LTD Marshal Islands 100.00 100.00Marciana LTD Marshal Islands 100.00 100.00Odria LTD Marshal Islands 100.00 100.00Tirista LTD Marshal Islands 100.00 100.00Rekolta 2011 ЕАD Bulgaria 100.00 100.00Serdika LTD Marshal Islands 100.00 100.00Bulport Logistics AD Bulgaria 51% -

Associates Odesos PBM is an associate of IHB. Additional information is presented in Note 13

21. Related party disclosures (continued)

The total amount of related party transactions and outstanding balances for the current and prior period are presented as follows:

21.1 Receivables from and payables to related parties

In BGN thousand 31.03.2013 2012

Long-term loans granted to related parties 60,898 57,497

Related party current receivables

In BGN thousand 31.03.2013 2012Receivables from loans granted, with accrued interest

-2,029 2,1042,029 2,104

Receivables from services provided75 74

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Dividends receivable 2,691 742,766 2,178

In the first quarter of 2013 cash loans were granted to Bulyard Shipbuilding Industry AD at the amount of BGN 2,546 thousand in relation with two contracts with repayment term by the end of 2015 and annual interest rate of 5%, respectively.

The cash loans granted to KLVK AD amounts to BGN 520 thousand with repayment term by 03.05.2015 and annual interest rate of 6%. At the same time the company repaid cash loan amounting to BGN 476 thousand and interest amounting to BGN 49 thousand.

During the period IHB granted loan to Emona Ltd at the amount of BGN 74 thousand (USD 50 thousand) with repayment term by 31.12.2013 and annual interest rate of 3%.

Related party payables


Accepted deposits (including due interest) 2,722 2,1202,722 2,120

As at 31.03.2013 IHB received deposit from Rekolta 2011 EAD amounting to BGN 260 thousand with repayment term by 29.03. 2014 with annual interest rate of 4%.

As at 31.03.2013 IHB received deposit from Maritime Holding AD amounting to BGN 350 thousand. The deposit is held for one year with annual interest rate of 5%.

21.2 Transaction with related parties

In BGN thousand 31.03.2013

Dividend income 4,009Interest income 900Interest expense 24Income from sale of services 1Loans granted 3,140 Loans repaid 666Accepted deposits 610

In BGN thousand 31.03.2012

Dividend income 3506Interest income 1,073 Interest expense 10Income from sale of services 3Loans granted 909 Loans repaid 8,249Contribution for capital increase 7,925

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22. Commitments and contingent liabilities

Legal claimsThere are no legal claims against the Company.

Guarantees Under a contract signed with a commercial bank for extension of a credit limit for issuance of bank guarantees, letters of credit and working capital funding for the Holding and/or companies from its Group amounting to a maximum of BGN 10,000 thousand as of 31.03.2013bank guarantees amounting to BGN 280 thousand were issued (31.03.2012: BGN 182), letters of credit were opened to Bulyard Shipbuilding Industry EAD and ZMM Bulgaria Holding for BGN 3,401 thousand (31.03.2012: BGN 6,315 thousand) and a revolving credit line was established for BGN 3,000 thousand (31.03.2012: BGN 3,000 thousand). The contract with the bank is secured with a second ranking special pledge on company Dockyard Port Burgas AD as a set of rights, obligations and factual relations, with registration of the main assets with the respective registries.

In February 2010 and in August 2011 Industrial Holding Bulgaria AD signed contracts with a commercial bank pursuant to which it became the guarantor for a signed credit contract for USD 20,000 thousand granted by the bank to subsidiary Privat Engineering AD with remaining balance of USD 14,334 thousand as of 31.03. 2013(31.03.2012: USD16,734 thousand).

IHB provided a guarantee in connection with optional participation of its subsidiary Rekolta 2011 EAD in investment plan in partnership with Alfa Finance Holding Diamond Solar Europe Limited (100% owned by Mitsubishi Corporation). The guarantee amounts to EUR 3,700 thousand and is secured. In April 2013 the loan was repaid to Rekolta AD and the guarantee provided by IHB was cancelled.

Other

The management does not consider that there are significant risks as a result of dynamic fiscal and regulatory environment in Bulgaria, which would require adjustments to the individual financial statements for the period ended 31.03. 2013

23. Financial instruments

Risk managementOverview

The Company is exposed to the following risks from the use of financial instruments: credit risk liquidity risk; market risk.

This Note gives information on the Company’s exposure to each of the aforementioned risks, the purposes of the Company, policies and processes related to risk assessment and management and management of the capital of the Company.

General risk management considerations

The Managing Board is responsible for identification and management of the risks to which the Company is exposed. The Company’s risk management policy is elaborated in such a way as to identify and analyse the risks facing the Company, to set limits for assuming risks and controls, to monitor the risks and the compliance with the set limits. This policy is subject to regular review to identify possible changes in the risk for the Company. The Company, through its training and management standards and procedures, aims to develop a constructive control environment where all employees understand their roles and duties.

The Audit Committee of the Company observes how the management ensures compliance with the risk management policies and reviews the adequacy within the risk management framework regarding the risks facing the Company.

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The Audit Committee of the Company uses the support of the Internal Audit Department. The Internal Audit Department handles both planned and surprise reviews of the risk management controls and procedures, the results of which are reported to the Audit Committee.

Credit risk

The credit risk, to which the Company is exposed, is the risk of possible loss in case a client or a party to financial instrument agreement fails to perform its contractual obligations. The credit risk is mainly related to receivables from clients and investments in securities.

Credit risk exposureThe carrying amount of financial assets represents the maximum exposure to credit risk. The maxim exposure as at the reporting date is as follows:


Cash and cash equivalents 104 2,044Other receivables 1,379 1,511Investment in subsidiaries 124,143 124,143Investment in associates 1,584 1,584Related party receivables 65,693 59,675

192,903 188,957

Credit risk

Other receivables

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Company’s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk, especially is case of deteriorating economic conditions.

Company’s related party receivables as at 31.03.2013 are in connection with investment programme for funding construction of ships. Each funding must be approved by the Managing Board.

The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets.

The maximum exposure to credit risk for trade and other receivables at the reporting date by geographic region was:

31.03.2013 2012

Trade and other receivables from third parties registered in Bulgaria 1,379 1,511

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Receivables from Group’s companies registered in Bulgaria 65,616 59,675

66,995 61,186

Impairment loss

Aging analysis of trade receivables as of the reporting date:

In BGN thousand 31 March 2013 31 December 2012Gross amount Impairment Gross amount Impairment

Neither past due nor impaired 65,797 - 69,596 -Up to 0 to 180 days past due 1,198 - 628 -180 to 360 days past due - - 29 -

66,995 - 61,186 -

23. Financial instruments (continued)Credit risk (продължение)

Investments

Investments are mainly in businesses and companies where the Holding has control interest and can determine the strategy for their development. Portfolio investments are mainly in liquid securities. Management does not expect any default on such investments.

GuaranteesThe policy of the Company envisages issuance of financial guarantees only to subsidiaries following preliminary approval by the Managing and Supervisory Boards.

Liquidity risk

Liquidity risk is the risk that the Company will have difficulties meeting its obligations associated with financial liabilities which are settled in cash or through another financial asset. The Company's approach to liquidity management is to ensure wherever possible that it will always have sufficient liquidity to meet its obligations both under normal and under stress conditions without incurring unacceptable losses or harming the reputation of the Company.

The Company elaborates financial planning to cover its expenses and current payables for a period of 30 days, including settlement of financial liabilities; this planning excludes the potential effect of extraordinary circumstances that may not be foreseen under usual conditions.Below are given the financial assets with agreed maturity, including expected interest payment excluding the effect of netting arrangements:

31 March 2013In BGN thousand Carrying

amountContractual cash flows

6 months or less

6-12 months

1-2 years

2-5 years

Over 5 years

Non-derivatives liabilitiesTrade and other payables 81 (81) (81) - - - -Debenture loan and interests 22,374 (22,623) (22,623) - - - -Deposit received 2,722 (2,844) - - (2,844) - -

25,177 (25,548) (22,704) - (2,844) - -

31


31 December 2012In BGN thousand Carrying

amountContractual cash flows

6 months or less

6-12 months

1-2 years

2-5 years

Over 5 years

Non-derivatives liabilitiesTrade and other payables 18,401 (18,401) (18,401) - - - -Debenture loan and interests 21,946 (22,583) (22,583) - - - -Deposit received 2,120 (2,217) - (2,217) - - -

42,467 (43,201) (40,984) (2,217) - - -

23. Financial instruments (continued)Liquidity risk (continued) As disclosed in Note 18, the Company has convertible debenture loan. The breach of covenant may require the Company to repay the loan earlier than indicated in the above table. Bonds are convertible and/or payable at maturity date. Except for these financial liabilities, it is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

Market risk

Market risk is the risk that changes in market prices, such as exchange rates, interest rates or prices of equity instruments will affect the income of the Company or the value of its investments. The purpose of market risk management is to control the exposure to market risk within acceptable limits through return rate optimization.

Currency riskThe Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currency of the Company - the BGN. The currencies in which these transactions primarily are denominated are in (EUR) and (USD). Effective 1999, the Bulgarian Lev (BGN) rate is fixed to the Euro (EUR). The applicable exchange rate is BGN 1.95583 / EUR 1.0.

Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Company, primarily BGN and Euro, but also USD. This provides an economic hedge without derivatives being entered into and therefore hedge accounting is not applied in these circumstances.

Exposure to currency riskExposure to currency risk based on notional amount is as follows:In BGN thousand BGN EUR USD BGN EUR USD

31 March 2013 31 December 2012Trade and other receivables 24 1,355 - 81 1,430 -Related party receivables 2,765 - - 74 - -Loan receivables from related parties 3,498 59,353 77 1,702 57,899 -Cash and cash equivalents 91 10 3 2,041 10 3Debenture loan (22,374) - - (21,946) - -Trade and other payables (2,803) - - (20,521) - -

(18,799) 60,720 80 (38,569) 59,339 3

Financial instruments denominated in EUR are not exposed to currency risk due to the fixed BGN/EUR exchange rate.

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Interest rate risk

IHB manages the interest rate risk by signing loan contracts with fixed interest rate. The interest rate profile of the Company’s interest-bearing financial instruments is given below:

In BGN thousand 31.03.2013 31.12.2012

Fixed rate instrumentsFinancial assets 62,865 60,439Financial liabilities (24,436) (23,696)

38,429 36,743

Variable rate instrumentsFinancial assets - -Financial liabilities - -

- -

Sensitivity analysis for fixed rate instrumentsThe Company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss and equity.

Capital management

The policy of the Managing Board is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Capital consists of share capital, reserves and retained earnings. The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position.

There were no changes in the Company’s approach to capital management during the year.

Fair values

Fair value is the amount at which a financial instrument could be exchanged or settled between knowledgeable, willing parties in an arm's length transaction between them, and which serves as the best indicator of its market price in an active market.

The Company determines the fair value of financial instruments based on available market information or failing that, through appropriate models. The fair value of financial instruments that are actively traded in organized financial markets is determined by reference to quoted prices "buy" at the end of the last business day of the reporting period. The fair value of financial instruments for which no active market is determined using valuation models. These models include using recent market transactions between knowledgeable, honest and willing parties using the current fair value of another instrument with similar characteristics, analysis of discounted cash flows or other valuation techniques.

The management of Industrial Holding Bulgaria AD believes that the fair values of financial instruments which include cash, loans and other receivables, bond loans and borrowings, trade and other payables do not differ from their carrying amount, especially if they are short-term or the applicable interest rates vary according to market conditions.

24. Events after the date of the report

On 18 April 2013 the third interest payment of the issue convertible bonds issued by Industrial Holding Bulgaria PLC, ISIN code: BG2100018113 and BSE code: 4IDD was be made.

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On 18.04.2013 Alfa Energy Ka returned the loan granted by Rekolta 2011 AD about joint investment plans due to the refusal of the Vintage 2011 AD to continue to its participation. The refusal is due to the legislative changes in 2012 in the field of renewable energy.

The Prospect for public offering was approved with a decision of FSC 138-Е/20.02.2013. The public offering of convertible bonds of Industrial Holding Bulgaria PLC closed successfully with the following results:

Closing date of the public offering – 17.04.2013. Total number issued rights – 67,978,543. Total number of convertible bonds offered for subscription - 300,000. Number of subscribed and paid convertible bonds – 299,998. Amount received from the subscribed and paid convertible bonds in the special account in Allianz Bank

Bulgaria AD – BGN 29,999,800.00; Expenses in relation with the public offering – commissions, remuneration and other expenses, including

the fees paid to the FSC – BGN 135,753.

The issuer and the investment intermediary for the offering did not meet any difficulties, there were no disputes and other of the kind during the trading of rights and subscription of shares.

On 24.02.2013 the Trade Register published announcement for opening of debenture loan and invitation to the First General Meeting of Bondholders for issue of convertible bonds ISIN code BG 2100006134 issued by Industrial Holding Bulgaria, decision of the Managing Board to summon the First General Meeting of Bondholders, and conditions for principal payment of debenture loan ISIN code BG 2100018113 in accordance with decisions of the General Meeting of Shareholders as of 17.12.2012 and General Meeting of Bondholders of issue of corporate convertible bonds ISIN code BG2100018113 as of 17.12.2012.

In compliance with decisions of the General Meeting of Shareholders as of 17.12.2012 and General Meeting of Bondholders issue of corporate convertible bonds ISIN code BG2100018113 as of 17.12.2012, payment of principal will be made on 26.04.2013 together with the accrued interest for the period between 19.04.2013 – 26.04.2013.

The right of interest and principal payment will be entitled to all bondholders registered with the Central Depository as of 19.04.2013 (Record Date). The interest rate is 8 % annually.

On the grounds of Art. 206, para 6 of the Commerce Act, the Managing Board of Industrial Holding Bulgaria summons the First General Meeting of Bondholders, possessing convertible bonds issue ISIN code BG 2100006134. The General Meeting shall be held on 17.05.2013 at 10.00 a.m. in the city of Sofia, 16-20 Alabin St., Bulgarian Industrial Chamber, in the meeting room on the first floor with the following agenda:1. Election of representative/s of the bondholders.Draft decision: The General Meeting of Bondholders took the following decision:1. The bondholders of Industrial Holding Bulgaria, possessing convertible bonds issue ISIN code BG 2100006134 shall have one representative;2. Elects Antoaneta Mihailova Dimolarova, attorney, Civil Identification Number 6601118259 as a representative of the bondholders of convertible bonds ISIN code BG 2100006134.3. Fixing the remuneration of the representative/s of the bondholdersDraft decision: The General Meeting of Bondholders took the following decision:Determines a monthly remuneration of BGN 250 /two hundred and fifty/ for the Bondholder’s Representative.3. Miscellanies. Other the events disclosed above, no important events occurred that warrants corrections or disclosure in the separate financial statement for the year ending 31 March, 2013.

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