Interim Unconsolidated Financial Statements

INDUSTRIAL HOLDING BULGARIA AD

INTERIM UNCONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 31 MARCH 2009

INDUSTRIAL HOLDING BULGARIA PLC

INTERIM UNCONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 31 MARCH 2009

Income Statement

For the period ended 31 March 2009

Note / 2009 / 2008
In thousands of BGN / 31 March / 31 March
Income from interests, dividends and investment transactions / 6 / 1,345 / 5,222
Other operating income / 7 / 152 / 17
1,497 / 5,239
Payroll costs / 8 / (105) / (80)
Costs of hired services / (49) / (66)
Other operating expenses / 9 / (31) / (81)
Net operating income / 1,312 / 5,012
Financial income / 85 / -
Financial expenses / (428) / (71)
Net financial income/(expenses) / 10 / (343) / (71)
Tax income (expenses) / - / -
Profit prior to taxation / 969 / 4,941
Tax income (expenses) / 11 / (41) / -
Profit after taxation / 928 / 4,941
Basic earnings per share (in BGN) / 21 (a) / 0,021 / 0,113

This Income Statement shall be considered together with the Notes given on pages 6 to 29, which form integral part of these Financial Statements.

Chief Executive Officer:
Ms. Daneta Zheleva / Prepared by:
Ms. Toshka Vassileva

Balance Sheet

as of 31 March 2009

In thousands of BGN / Note / 2009 / 2008
31 March / 31 December
Non-current assets
Non-current tangible and intangible assets / 12 / 75 / 79
Investments in subsidiaries / 13 / 49,033 / 49,033
Investments in associates / 14 / 4,471 / 4,471
Long-term loans of related parties / 15 / 45,053 / 29,810
Total non-current assets / 98,632 / 83,393
Current assets
Trade and other receivables / 17 / 207 / 266
Receivables from related parties / 18 / 12,880 / 12,964
Cash and cash equivalents / 19 / 26,299 / 40,289
Materials / 3 / 3
Total current assets / 39,389 / 53,522
Total assets / 138,021 / 136,915
Equity
Share Capital / 20 / 43,756 / 43,756
Premium reserves / 24,503 / 24,503
Reserves / 6,297 / 6,297
Retained earnings (net) / 21,465 / 20,537
Total equity and reserves / 96,021 / 95,093
Long-term payables
Debenture loan / 21,650 / 21,650
Long-term payables / 3 / 3
Total non-current liabilities / 21 / 21,653 / 21,653
Current liabilities
Trade and other payables / 22 / 20,321 / 20,122
Tax payables / 26 / 47
Total current liabilities / 20,347 / 20,169
Total equity and liabilities / 138,021 / 136,915

This Balance Sheet shall be considered together with the Notes given on pages 6 to 29, which form an integral part of these Financial Statements.

Chief Executive Officer:
Ms. Daneta Zheleva / Prepared by:
Ms. Toshka Vassileva

Cash Flow Statement

For the period ended 31 March 2009

In thousands of BGN / Note / 31 March 2009 / 31 March 2008
Operating cash flow
Receivables from sale of shares and other trade receivables / 132 / 652
Dividends received / 1,086 / 763
Loans repaid / 691 / 382
Interests received / 138 / 290
Payments related to acquisition of shares and stocks / - / (275)
Loans granted / (15,594) / (24,186)
Payments related to payroll / (103) / (76)
Foreign exchange gain (loss) / 8 / (35)
Profit taxes paid / (83) / 44
Cash flows related to unexercised rights of shareholders (net) / (214) / 21,112
Other payments / (61) / (393)
Net operating cash flow / (14,000) / (1,722)
Investment cash flow
Purchase (sale) of non-current tangible assets / 11 / (5)
Net investment cash flow / 11 / (5)
Financial cash flow
Other financial payments / (1) / -
Net financial cash flow / (1) / 0
Increase/ (decrease) in cash and cash equivalents / (13,990) / (1,727)
Cash and cash equivalents at the beginning of the period / 40,289 / 42,146
Cash and cash equivalents as of 31 March / 19 / 26,299 / 40,419

This Cash Flow Statement shall be considered together with the Notes given on pages 6 to 29, which form an integral part of these Financial Statements.

Chief Executive Officer:
Ms. Daneta Zheleva / Prepared by:
Ms. Toshka Vassileva

Equity Statement

For the period ended 31 March 2009

This Equity Statement shall be considered together with the Notes given on pages 6 to 29, which form an integral part of these Financial Statements.

In thousands of BGN / Note / Share capital / Statutory reserves / Additional reserves / Retained earnings / Total
Balance as at 1 January 2008 / 43,756 / 1,740 / 26,424 / 14,782 / 86,702
Profit for the period / - / - / - / 4,941 / 3727
Balance as at 31 March 2008 / 21 / 43,756 / 1,740 / 26,424 / 14,782 / 86,702
Balance as at 1 January 2009 / 43,756 / 4,376 / 26,424 / 20,537 / 95,093
Profit for the period / - / - / - / 928 / 928
Balance as at 31 March 2009 / 43,756 / 4,376 / 26,424 / 21,465 / 96,021
Chief Executive Officer:
Ms. Daneta Zheleva / Prepared by:
Ms. Toshka Vassileva

Notes to the Financial Statements

1. Status and scope of operations

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 43,756,118.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 at Bulgarian Stock Exchange AD, Sofia.

2. Basis of preparation

(a) Statement of compliance

These Financial Statements have been prepared in compliance with the International Financial Reporting Standards (IFRS) prepared by the International Accounting Standards Board and adopted by the Commission of the European Union.

The financial statements of the Company’s subsidiaries were not consolidated as at 31 March 2009.As per the requirements of the national legislation a consolidated report as of 31 March of the present year has to be drafted and presented by 30 May 2009.

These Financial Statements should be read in relation to the annual financial statements of the Company as of 31.12 December 2008..

(b)Basis of measurement

These Financial Statements have been prepared based on historical cost with the exception of:

• Financial assets reported at fair value through profit and loss at fair value;
• Financial assets available for sale, which have been valued at their fair value

The methods used for fair value measurement are presented in detail in Note 4.

(c) Functional currency and reporting currency These Financial Statements are presented in BGN.The functional currency of the Company is the Bulgarian lev.The financial data in the Annual Financial Statements are given in thousands of BGN.

Notes to the Financial Statements

2. Basis of preparation, continued

(d) Used estimates and assumptions

The preparation of financial statements in compliance with IFRS requires that the Company’s Management makes decisions and estimates and assumptions affecting the accounting policies and the amounts of the reported assets, liabilities, income and expenses.The actual results may differ from such estimates made.

The estimates and the related assumptions are reviewed on a regular basis.The results of the accounting policies review are recognized over the period of review if the review concerns only this period, or over the period of review and future periods if the review concerns both the current and future periods.

The Management has made no significant estimates in the application of IFRS that might have material effect on the financial statements and estimates bearing material risk of significant adjustments over the next year.

(e) Going concern

The Financial Statements are prepared on the basis of the assumption that the Company is a going concern and will continue to operate in the foreseeable future.

During the last three months of 2008 the credit and financial crisis affecting the global markets escalated and developed into a practically full-blown market crisis. It affected all sectors and industries. The possibility for a material decrease of the economic growth and even recession for certain economic regions and countries is significant. This creates prerequisites for the Company to continue its business in a more difficult and hard to predict business environment. The Management estimates that the existing capital resources and funding sources will be adequate for the liquidity needs during the next year - 2009.

3. Significant accounting policies

The accounting policies described below have been consistently applied over all periods included in these Financial Statements.

(a) Consolidation basis

The Company prepares its consolidated financial statements by consolidation of all local and foreign subsidiaries.

Consolidation is made under the purchase method by consolidation of the assets, liabilities, equities and financial results of all subsidiaries of IHB Plc.

Significant investments in associates are consolidated under the equity method, which requires initial reporting of an investment at cost (acquisition costs) and subsequent readjustment based on the changes in the investor’s interest in the net assets of the company where it has invested.

(i) Subsidiaries

Subsidiaries are the enterprises controlled by the Company.Control exists when the Company has the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities.The financial statements of the subsidiaries are included in the consolidated financial statements from the date on which control commences to the date on which control is terminated.The accounting policies applied by the subsidiaries undergo changes, when necessary, in order to be harmonized with the policies applied by the Company.

Notes to the Financial Statements

3. Significant accounting policies, continued

(a) Consolidation basis, continued

The individual statements of the Company report investments in subsidiaries at cost less impairment loss.

The share of allocation of the net profit of the enterprises, where the Company has invested, i.e. the dividend following its distribution, is reported as current financial income.

(ii) Associates

Associates are enterprises where the Company has significant influence, but not control, over the financial and operating policies.Income in the form of dividends is recognized following measurement.

The individual statements of the Company report investments in associates at cost less impairment loss.

(b) Foreign currency transactions

Transactions in foreign currency are recalculated in the respective functional currency of the Company at the exchange rate of the Bulgarian National Bank (BNB) effective on the date of the transaction.On the balance sheet date monetary assets and liabilities denominated in foreign currencies are recalculated into the functional currency applying the closing foreign exchange rate of the Central Bank for that date.Foreign currency gain or loss represents the difference between the depreciated value of the functional currency at the beginning of the period adjusted by the interests based on the effective interest rate applied over the period and the depreciated value of the foreign currency recalculated as per the exchange rate at the end of the period.Non-monetary assets and liabilities denominated in foreign currency reported at fair value are recalculated in the functional currency applying the foreign exchange rate effective on the date of fair value determination.Foreign currency gain and loss arising as a result of recalculation is recognized as profit or loss, except for differences resulting from readjustment of equity instruments available for sale, financial liabilities defined as hedging for net investments in foreign operations or qualified as a hedge of monetary positions which are reported directly in the equity.

(c) Financial instruments

(i) Non-derivative financial instruments

Non-derivative financial instruments include investments in debt and equity securities, trade and other receivables, cash and cash equivalents, loans and trade and other payables.

Non-derivative instruments are initially recognized at fair value or at fair value plus all acquisition costs for instruments not reported at fair value in the profit or loss.Following initial recognition, financial instruments are valued as described hereinafter.

Non-derivative instruments are initially recognized at their fair value.Financial instruments are recognized when the Company becomes a party to the instrument contractual terms and conditions.Financial assets are no longer recognized when the rights agreed on the cash flows from the financial assets become invalid or the Company transfers the financial asset to third parties without retaining control or significant asset-related risks and benefits.The purchase and sale of financial assets in the ordinary course of operations are reported as of the transaction date, i.e. the date on which the Company has undertaken to purchase or sell the asset.Financial liabilities are no longer recognized when the liabilities of the Company as per the contract become invalid or exempted or cancelled.

Notes to the Financial Statements

3. Significant accounting policies, continued

(c) Financial instruments, continued

Cash and cash equivalents

Cash and cash equivalents include cash in hand and at bank, letters of credit and short-term bank deposits with original maturity of up to three months.For the purposes of the cash flow statement, bank overdrafts payable on demand and which form integral part of the cash flows managed by the Company are included in the cash and cash equivalents.

For the purposes of the Cash Flow Statement:

• Cash proceeds from customers and cash payments to suppliers are presented as gross, including VAT (20%).

• Cash flows related to acquisition and sale of equity shares and stocks in companies in which the Holding invests, as well as dividends received from them, are reported as proceeds from and payments for operating activities.

• Cash flows related to the granting of credit loans to subsidiaries, as per Article 280 of the Commerce Act and the proceeds upon their reimbursement are included as proceeds from and payments for operating activities.

• The underwriting of cash from the issue of equity securities or debenture securities, short-term or long-term loans from lenders external for the Company’s operations or non-banking institutions, including companies in the Group, and their repayment, as well as the payment of dividends, are reported as proceeds from and payments for financing activities.

Held-to-maturity Investments

Debt instruments, which the Company intends and is able to hold to maturity, are classified as debt held-to-maturity instruments.Held-to-maturity investments are reported at amortized cost based on the effective interest method less subsequent impairment.

Financial assets available for sale

The Company’s investments in equity and certain debt securities are classified as financial assets available for sale.Subsequent to their initial recognition they are valued at fair value and any revaluation gains or loss other than impairment loss and exchange rate gains and loss of monetary assets available for sale (see Note 3(b)) are reported in equity.Upon derecognition of investment in financial assets available for sale, the revaluations accumulated in equity are recognised as current profit and loss.

Financial assets measured at fair value through profit or loss

Financial assets are classified asfinancial assets measured at fair value through profit or loss if they are held for trading or if they have been designated as such upon their initial recognition.Financial instruments are classified as financial assets measured at fair value through profit or loss if the Group manages such investments and makes decisions on purchase and sale based on their fair value in compliance with the Company’s risk management policy and investment strategy.Upon their initial recognition the direct expenses associated with the acquisition are recognised in the income statement upon origination.Financial assets measured at fair value through gain and loss are valued at fair value and the resultant gain and loss is reported in the income statement.

Notes to the Financial Statements

3. Significant accounting policies, continued

(c) Financial instruments, continued

Other investments

Other non-derivative instruments are measured at amortized cost based on the effective interest method less impairment loss.

Trade and other receivables

Trade and other receivables are presented at amortised acquisition cost less any unrecoverable amounts.Such unrecoverable amounts are presented as impairment loss based on the estimated recoverable amounts of trade receivables.For sales realised under share sale agreements and stated terms of payments, the portion of the receivable which should be paid within one year as of balance sheet date as per the contractual terms is presented as short-term.Receivables under loans granted under Article 280, Paragraph 1 of the Law on Commerce are presented similarly...

Receivables under shares sale agreements and loans granted are split into short-term and long-term depending on the term of their collectibility.

Interest-bearing loans

Interest-bearing loans are recognised initially at cost less attributable transaction costs.Subsequent to initial recognition, interest-bearing loans are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the loans on an effective interest basis.

Trade and other payables

Short-term and long-term payables in Bulgarian leva are measured at amortised cost.Dividend payables and the current portion of long-term debt are stated in the balance sheet as short-term payables.

(ii) Share capital

Ordinary shares

Ordinary shares are classified as equity.The costs directly related to the issue of ordinary shares and share options are recognized as decrease in the equity, net of all tax effects.

(d)Non-current tangible assets

Property, plant and equipment (non-current tangible assets) are valued at acquisition cost less the accumulated depreciation and impairment loss.Newly acquired property, plant and equipment are reported at acquisition cost, which includes the purchase price and costs incurred to commission the asset.

When an item of property, plant and equipment comprises major components having different useful lives, they are accounted for as separate items of property, plant and equipment.

The Management of the Company has adopted a policy on assets capitalization in case their acquisition cost is equal to or exceeds the materiality threshold of BGN 700.

Notes to the Financial Statements