Annual Report (ESEF) • Apr 25, 2024
Preview not available for this file type.
Download Source File8945006HQ7VN30FUR5312021-01-012021-12-318945006HQ7VN30FUR5312023-12-31iso4217:BGN8945006HQ7VN30FUR5312022-12-318945006HQ7VN30FUR5312023-01-012023-12-318945006HQ7VN30FUR5312022-01-012022-12-31iso4217:BGNxbrli:shares8945006HQ7VN30FUR5312021-12-318945006HQ7VN30FUR5312021-12-31ifrs-full:IssuedCapitalMember8945006HQ7VN30FUR5312021-12-31ifrs-full:SharePremiumMember8945006HQ7VN30FUR5312021-12-31staraplaninahold:RevaluationReservesMember8945006HQ7VN30FUR5312021-12-31ifrs-full:OtherReservesMember8945006HQ7VN30FUR5312021-12-31ifrs-full:RetainedEarningsMember8945006HQ7VN30FUR5312021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember8945006HQ7VN30FUR5312021-12-31ifrs-full:NoncontrollingInterestsMember8945006HQ7VN30FUR5312022-01-012022-12-31ifrs-full:IssuedCapitalMember8945006HQ7VN30FUR5312022-01-012022-12-31ifrs-full:SharePremiumMember8945006HQ7VN30FUR5312022-01-012022-12-31staraplaninahold:RevaluationReservesMember8945006HQ7VN30FUR5312022-01-012022-12-31ifrs-full:OtherReservesMember8945006HQ7VN30FUR5312022-01-012022-12-31ifrs-full:RetainedEarningsMember8945006HQ7VN30FUR5312022-01-012022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember8945006HQ7VN30FUR5312022-01-012022-12-31ifrs-full:NoncontrollingInterestsMember8945006HQ7VN30FUR5312022-12-31ifrs-full:IssuedCapitalMember8945006HQ7VN30FUR5312022-12-31ifrs-full:SharePremiumMember8945006HQ7VN30FUR5312022-12-31staraplaninahold:RevaluationReservesMember8945006HQ7VN30FUR5312022-12-31ifrs-full:OtherReservesMember8945006HQ7VN30FUR5312022-12-31ifrs-full:RetainedEarningsMember8945006HQ7VN30FUR5312022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember8945006HQ7VN30FUR5312022-12-31ifrs-full:NoncontrollingInterestsMember8945006HQ7VN30FUR5312023-01-012023-12-31ifrs-full:IssuedCapitalMember8945006HQ7VN30FUR5312023-01-012023-12-31ifrs-full:SharePremiumMember8945006HQ7VN30FUR5312023-01-012023-12-31staraplaninahold:RevaluationReservesMember8945006HQ7VN30FUR5312023-01-012023-12-31ifrs-full:OtherReservesMember8945006HQ7VN30FUR5312023-01-012023-12-31ifrs-full:RetainedEarningsMember8945006HQ7VN30FUR5312023-01-012023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember8945006HQ7VN30FUR5312023-01-012023-12-31ifrs-full:NoncontrollingInterestsMember8945006HQ7VN30FUR5312023-12-31ifrs-full:IssuedCapitalMember8945006HQ7VN30FUR5312023-12-31ifrs-full:SharePremiumMember8945006HQ7VN30FUR5312023-12-31staraplaninahold:RevaluationReservesMember8945006HQ7VN30FUR5312023-12-31ifrs-full:OtherReservesMember8945006HQ7VN30FUR5312023-12-31ifrs-full:RetainedEarningsMember8945006HQ7VN30FUR5312023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember8945006HQ7VN30FUR5312023-12-31ifrs-full:NoncontrollingInterestsMember BGN’000s ASSETS Note 31.12.2023 31.12.2022 Property, plant and equipment 1 104 964 92 712 Intangible assets 2 2 503 1 165 Positive goodwill 16 489 - Investments in other companies 3 41 403 36 979 Other financial assets 4 1 218 1 218 Trade and other receivables 5 13 541 11 644 Deferred tax assets 255 125 Total Non-current assets 180 373 143 843 Materials 6 57 898 64 390 Trade and other receivables 7 54 191 50 206 Financial assets - - Cash and cash equivalents 8 35 940 44 909 Prepaid expenses 503 358 Total current assets 148 532 159 863 TOTAL ASSETS 328 905 303 706 Share capital 9 20 725 20 725 Reserves 9 48 918 45 838 Retained earnings/loss 9 66 634 61 113 Total equity 136 277 127 676 Non-controlling interest 130 997 116 101 Trade and other payables 10 12 745 4 109 Deferred tax liabilities 10 2 397 1 859 Deferred revenues 10 50 50 State financing 10 992 1 084 Total non-current liabilities 16 184 7 102 Trade and other payables 11 44 761 51 907 Deferred revenues 11 37 20 State financing 11 649 900 Total current liabilities 45 447 52 827 Total liabilities 61 631 59 929 TOTAL EQUITY AND LIABILITIES 328 905 303 706 Date: 18.04.2024 Prepared by: Kremena Dulgerova Katya Zlatareva Registered Auditor, Diploma No 0610 STARA PLANINA HOLD PLC Non-current assets For the period ended 31 December 2023 Current assets EQUITY LIABILITIES Current Non-current CONSOLIDATED STATEMENT OF FINANCIAL POSITION Manager: Vasil Velev Kremena Gantcheva Dulgerova Digitally signed by Kremena Gantcheva Dulgerova Date: 2024.04.25 14:59:40 +03'00' Digitally signed by Vasil Georgiev Velev Date: 2024.04.25 15:05:07 +03'00' KATYA RAYKOVA ZLATAREVA Digitally signed by KATYA RAYKOVA ZLATAREVA Date: 2024.04.26 06:38:30 +03'00' BGN’000s Note 31.12.2023 31.12.2022 Net sales revenues 12 378 966 375 256 State finansing revenues 910 8 504 Cost of materials (181 510) (203 511) Cost of hired services (28 555) (28 357) Depreciation (16 965) (15 969) Salaries (78 419) (71 062) Social securities (15 800) (14 106) Changes in finished goods and work in progress (4 756) 6 939 Cost of disposals (3 185) (3 900) Other expenses (3 767) (3 027) Operational profit 46 919 50 767 Financial income 13 1 155 1 404 Financial expenses 14 (1 131) (787) Profit before tax 46 943 51 384 Tax expenses, net 6 478 5 771 Net profit for the period 40 465 45 613 Profit attributable to: Non-controlling interest 26 552 28 075 Equity holders of the parent company 13 913 17 538 Other comprehensive income Investments in equity instruments, reported at FVOCI, net 4 578 2 687 Other comprehensive income-revaluation of a defined benefit obligation (12) 6 Other comprehensive income, net of taxes 4 566 2 693 Total comprehensive income 45 031 48 306 Total comprehensive income attributable to: Non-controlling interest 28 212 28 881 Equity holders of the parent company 16 819 19 425 Earnings per share 0,67 0,85 Date: 18.04.2024 Prepared by: Kremena Dulgerova Katya Zlatareva For the period ended 31 December 2023 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME STARA PLANINA HOLD PLC Registered Auditor, Diploma No 0610 Manager: Vasil Velev Kremena Gantcheva Dulgerova Digitally signed by Kremena Gantcheva Dulgerova Date: 2024.04.25 15:00:10 +03'00' Digitally signed by Vasil Georgiev Velev Date: 2024.04.25 15:05:32 +03'00' KATYA RAYKOVA ZLATAREVA Digitally signed by KATYA RAYKOVA ZLATAREVA Date: 2024.04.26 06:39:33 +03'00' BGN’000s CASH FLOWS FROM OPERATING ACTIVITIES 31.12.2023 31.12.2022 Cash receipts from customers 407 425 401 751 Cash paid to suppliers (249 896) (282 074) Cash paid to employees and social security institutions (92 088) (83 636) Taxes paid/received (595) 5 602 Interest, fees and commissions paid/received (153) (20) Other payments/proceeds for operating activities (7 214) (750) Net cash flow from operating activities 57 479 40 873 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of non-current assets (30 032) (23 822) Proceeds from sales of non-current assets 22 126 Payments for loans granted (922) - Proceeds from loans granted and lease contracts 358 140 Interests from loans received 270 125 Revenues from sale of investments 560 - Dividends received from investment 38 31 Other payments/proceeds for investing activities (15 498) 327 Net cash flow from investing activities (45 204) (23 073) CASH FLOWS FROM FINANCIAL ACTIVITIES Proceeds from loans received 12 959 11 847 Payments for loans received (15 610) (11 338) Payments under to lease contracts (116) (124) Interest, fees and commissions paid (177) (110) Dividends paid (18 300) (15 625) Other payments/proceeds for financial activity - (52) Net cash flow from financial activities (21 244) (15 402) Net increase/decrease in cash and cash equivalents (8 969) 2 398 Cash and cash equivalents at a beginning of the period 44 909 42 511 Cash and cash equivalents at the end of the period 35 940 44 909 Date: 18.04.2024 Prepared by: Manager: Kremena Dulgerova Vasil Velev Katya Zlatareva Registered Auditor, Diploma No 0610 CONSOLIDATED CASH FLOW STATEMENT STARA PLANINA HOLD PLC For the period ended 31 December 2023 Kremena Gantcheva Dulgerova Digitally signed by Kremena Gantcheva Dulgerova Date: 2024.04.25 15:00:32 +03'00' Digitally signed by Vasil Georgiev Velev Date: 2024.04.25 15:05:51 +03'00' KATYA RAYKOVA ZLATAREVA Digitally signed by KATYA RAYKOVA ZLATAREVA Date: 2024.04.26 06:40:09 +03'00' BGN’000s Share Capital Premium reserve Revaluation reserve Other reserves Retained earnings Total Non- controlling interest Balance 01 January 2022 20 725 1 178 24 899 18038 50 725 115 565 99 422 Net result for the period - - - - 17 538 17 538 28 075 Profit sharing for dividents - - - - (6 181) (6 181) (11 870) Other profit sharing - - - 53 (1 009) (956) (218) Revaluation of financial assets - - 1 708 - - 1 708 802 Other changes in equity - - (4) (34) 40 2 (110) Balance 31 December 2022 20 725 1 178 26 603 18 057 61 113 127 676 116 101 Balance 01 January 2023 20 725 1 178 26 603 18 057 61 113 127 676 116 101 Net result for the period - - - - 13 913 13 913 26 552 Profit sharing for dividents - - - - (6 545) (6 545) (13 519) Other profit sharing - - - - (1 125) (1 125) (268) Revaluation of financial assets - - 2 281 - - 2 281 1 662 Other changes in equity - - (4) 803 (722) 77 469 Balance 31 December 2023 20 725 1 178 28 880 18 860 66 634 136 277 130 997 Date: 18.04.2024 Prepared by: Kremena Dulgerova Vasil Velev Registered Auditor, Diploma No 0610 Manager: CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the period ended 31 December 2023 STARA PLANINA HOLD PLC Katya Zlatareva Kremena Gantcheva Dulgerova Digitally signed by Kremena Gantcheva Dulgerova Date: 2024.04.25 15:01:01 +03'00' Digitally signed by Vasil Georgiev Velev Date: 2024.04.25 15:06:13 +03'00' KATYA RAYKOVA ZLATAREVA Digitally signed by KATYA RAYKOVA ZLATAREVA Date: 2024.04.26 06:40:49 +03'00' To the Annual Consolidated Financial Statements as of 31.12.2023 Name of Reporting Entity STARA PLANINA HOLD Plc Country of Registration Republic of Bulgaria Legal Form Public company Domicile and Address of Registerred Office 20, Fr. J. Curie Str., 9 floor, 1113 Sofia Place of Business Republic of Bulgaria Nature of Operations Holding Company Change in name none Parent Entity none Ultimate Parent Entity none GENERAL INFORMATION STARA PLANINA HOLD Plc was incorporated in Bulgaria on 27.09.1996 for an unlimited period of time. The Holding is a successor of Central Privatization Fund AD. On 19.12.1997 Central Privatization Fund AD was renamed to Central Fund Hold Plc, and since 30.04.1999 the company has been operating under its current name. Stara Planina Hold Plc is registered in the Registry Agency under UICode 121227995. The company is not registered under the VAT Act. Stara Planina Hold Plc is a public company within the meaning of Art. 110 of the Public Offering of Securities Act. The registered seat and business address are in the city of Sofia, Izgrev district, 20 Frederic Joliot-Curie, 9th floor; telephone/fax: 02/9634159; 9630577; 9633754; e-mail [email protected], website www.sphold.com. The scope of business activity of the holding is: acquisition, management, evaluation and sale of shareholdings in Bulgarian and foreign companies; acquisition, management and sale of bonds, evaluation and sale of patents, transfer of licenses for use of patents, belonging to companies where the holding company has STARA PLANINA HOLD PLC – www.sphold.com 2. participations; financing companies where the holding company has participations; other commercial operations, except those prohibited by law. The registered capital of Stara Planina Hold Plc is BGN 21 000 000 (twenty-one million) leva divided into 21 000 000 (twenty-one million) non-preferred registered voting shares with a nominal value of BGN 1.00 each. The management body of the company is the Board of Directors with the following members: Evgeniy Vasilev Uzunov – Chairman of the Board of Directors and representative of the company; Vasil Georgiev Velev – executive member of the Board of Directors and representative of the company; Finance Invest OOD, having its registered seat and business address in the town of Plovdiv, 14, Maria Luiza Blvd., UIC 115016144, represented for the purpose of performing its obligations as a member of the Board of Directors by the legal representative Spas Borisov Videv; Stefan Atanasov Nikolov – member of the Board of Directors. Shareholders holding more than 5 % of the voting rights as of 31.12.2023: Potbul Invest Foundation - 4655400 shares, representing 22.17 % of the capital; Garant-5 Ltd - 2595972 shares, representing 12.36 % of the capital; ZUPF Allianz Bulgaria AD - 1285293 shares, representing 6.12 % of the capital. In the consolidated financial statements, the assets, liabilities, income, expenses and cash flows of the parent company Stara Planina Hold Plc and its subsidiaries are presented as such of one business unit. As "Non-controlling interest" in the consolidated financial statement for the financial year 2023 is presented the equity capital of the subsidiaries which is not attributable, either directly or indirectly, to the parent company. The non-controlling interest in the consolidated financial statements for the financial year 2023 is estimated based on the proportional share in the recognized values of the distinguishable net assets of the subsidiaries. Majority share of the voting rights Control is presumed to exist when a majority of the voting rights are held unless other factors indicate that a majority share of the voting rights does not create control. Ownership of a majority of the voting rights generally results in control when: Significant activities are performed by the voice of the holder of the majority share; or The holder of a majority share of the voting rights can appoint the majority of the members of the governing body that directs the activity. Less majority share of the voting rights Control could also exist where one party does not have a majority share of the voting rights, but: Pursuant to a contractual agreement with the majority shareholder and other parties, to provide to perform the significant activities. Rights arising from other contractual agreements. Other decision-making rights along with voting rights may give the party the right to direct the relevant activities. Scope of the investor's voting rights. Although an investor may not hold a majority share of the voting rights, the rights held may be so significant as to give that investor the power to have the practical ability to unilaterally direct the significant activities - the presence of de facto control. An investor may hold potential voting rights that are material. Potential voting rights are rights to receive voting rights in the investee such as convertible instruments and options. To be material, potential voting rights must be exercisable when decisions are to be made about the direction of material activities. When evaluating the actual control, Stara Planina Hold Plc takes into account the size of the investor's shareholding relative to the size and dispersion of the other investors along with the other considerations listed above. Information about the Group: STARA PLANINA HOLD PLC – www.sphold.com 3. As of 31.12.2023, Stara Planina Hold Plc - Group consists of: Stara Planina Hold Plc - parent company Hydraulic Elements and Systems Plc - subsidiary company Elhim-Iskra Plc - subsidiary company Fazan JSC - subsidiary company SPH Invest JSC - subsidiary company M+S Hydraulic Plc - associated company Bulgarian Rose Plc - associated company Boryana JSC - an associated company LIST of subsidiaries included in the consolidated financial statements Enterprise Location Share capital and voting rights Hydraulic elements and systems Plc Yambol 64.53% Elhim-Iskra Plc Pazardzhik 51.40% Fazan Plc Ruse 92.65% SPH Invest Jsc Sofia 99.39% LIST of associates included in the consolidated financial statements Enterprise Location Share capital and voting rights M+C Hydraulic Plc Kazanluk 30.61% Bulgarian Rose Plc Karlovo 49.99% Boryana Jsc Cherven Briag 50.00% Ustrem Jsc Svishtov 45.00% On 18.07.2023 Stara Planina Hold Plc sold its shareholding, representing 45.00 % of the capital of Ustrem Jsc., UIC: 206417771, Svishtov at the price of BGN 560 000. Buyer of the shares is the company "Raykov" Ltd. UIC: 104697074. The investment in Ustrem Jsc was made by Stara Planina Hold Plc in 2017, with the shareholding in the amount of 45.00 % of the company's capital worth BGN 319 077. Ustrem JSC participates in the consolidation until the date of sale. Statement of Compliance Stara Planina Hold Plc presents its consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) and preserves their use as an applicable basis for the preparation of the consolidated financial statements for the current period. The company complies with the principles and provisions of the Accounting Act. The management is responsible for the compilation and fair presentation of the information in these consolidated financial statements. As of the date of preparation of these consolidated financial statements, the management has made an assessment of the Group's ability to continue its activity as a going concern based on the available information for the foreseeable future. After the review of the Group's activities, the Board of Directors expects that the Group has sufficient financial resources to continue its operational activities in the near future and continues to apply the going concern principle in the preparation of the consolidated financial statements. The consolidated financial statements have been adopted by the Board of Directors on 25.04.2024. New and amended International Financial Reporting Standards The group has taken into account the amendments to IAS/IFRS, effective from 01.01.2023 that companies must reflect in their 2023 financial statements, including: • Changes to 3 standards: – IAS 1 Presentation of financial statements – IAS 8 Accounting policy, changes in the accounting estimates and errors; – IAS 12 Income Taxes. • New standard - IFRS 17 Insurance contracts, replacing IFRS 4 Insurance contracts. All of them are accepted for use in the EU. Functional currency and presentation currency These financial statements are presented in Bulgarian levs which is the functional currency of the Group. All data for 2023 and 2022 are presented in thousands of BGN unless otherwise stated at the respective place. The income per share is calculated and disclosed in BGN. Upon initial recognition, a foreign currency transaction is recorded in the functional currency and the exchange rate at the time of the transaction or operation published by the BNB is applied to the foreign currency amount. Cash, receivables and payables, such as monetary reporting items denominated in foreign currency, are valued in Bulgarian levs using the final exchange rate of the BNB. In preparing these financial statements, the management has made valuations, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. The actual result may differ from these estimates. Estimates and key assumptions are currently under review. The Company presents comparative information in these financial statements for the previous year, as the articles on the Statement of Financial Position and the Statement of Changes in Equity, as well as the notes thereto, include comparative data as of the beginning of the earliest comparative period. ACCOUNTING POLICY General provisions The significant accounting policies applied in the preparation of these consolidated financial statements are presented below. The consolidated financial statements have been prepared in compliance with the principles for evaluating all assets, liabilities, income and expenses. Accounting estimates and assumptions were used in the preparation of the consolidated financial statements. Although they are based on information provided to the management as of the date of preparation of the consolidated financial statements, actual results may differ from the estimates and assumptions made. The Group presents the consolidated statement of profit or loss and other comprehensive income in a single statement. The consolidated statement of financial position presents two comparative periods when the Group applies an accounting policy retrospectively, retrospectively recalculates items in the consolidated financial statements or reclassifies items in the consolidated financial statements and this has a material effect on the information in the consolidated statement of financial position at the beginning of the previous period. The Group has agreed to present two comparative periods in all cases in order to ensure consistency of presentation for each year. The significant accounting policies presented below have been applied consistently in all periods presented. Basis for consolidation In the financial statement of the Group are consolidated the financial statements of the parent company Stara Planina Hold Plc and its subsidiaries Hydraulic elements and systems Plc; Elhim Iskra Plc; Fazan Jsc and SPH Invest Jsc, as well as its associated enterprises where control is identified: M+S Hydraulic Plc, Bulgarian Rose Plc, Boryana Jsc, as well as Ustrem Jsc, until the date of its sale. Consolidated enterprises are all enterprises that are under the control of the parent company. Control exists when the parent company is exposed to, or has rights to the variable returns from its interest in the investee and has the ability to influence those returns through its power over the entity. The consolidated companies have an accounting period ending on December 31. All intra-group transactions and balances are eliminated, including unrealized gains and losses on transactions between companies within the Group. When unrealized losses on intra-group sales of assets are eliminated, the relevant assets are tested for impairment from the Group’s perspective. The amounts presented in the financial statements of the consolidated entities have been adjusted where necessary to ensure compliance with the accounting policy applied by the Group. Gains or losses and other comprehensive income from investments of a consolidated entity that are acquired or disposed of during the year are recognized from the date of acquisition or until the date of sale, respectively. When the Group loses control of a consolidated entity, any investment retained in the former consolidated entity is recognized at fair value at the date of loss of control, with the change in book value reflected in the profit or loss. The fair value of any investment held in the former consolidated entity at the date of loss of control is considered fair value on initial recognition of a financial asset in accordance with IFRS 9: Financial Instruments, or where appropriate, cost on initial recognition of an investment in an associated or jointly controlled entity. In addition, any amounts recognized in other comprehensive income in respect of that consolidated entity are accounted for on the same basis as would be required when the Group directly disposed of the relevant assets or liabilities (e.g. reclassified to profit or loss or transferred directly in the retained earnings according to the requirements of the relevant IFRS). The gain or loss from the write-off of an investment in a subsidiary is the difference between: - The sum of the fair value of the consideration received and the fair value of any retained investment in the former consolidated entity and - The book values of the assets (including goodwill) and liabilities of the consolidated entity and any non- controlling interest. Financial instruments Identification and evaluation of investments in subsidiaries Subsidiary enterprises are all enterprises under the control of Stara Planina Hold Plc. The control over the subsidiaries is conditioned by the fact that the company is exposed to and has rights to the variable returns from its participation in the subsidiaries and is able to have impact on those returns through its powers in the enterprises where investments were made. When recognizing investments in subsidiary enterprises, all facts and circumstances are examined and assessed in order to determine the existence of the conditions for control, including: - authority (powers) over the enterprises where the investment was made; - exposure or rights to returns; and – the possibility of Stara Planina Hold Plc to use the power over the enterprise it has invested in to influence the amount of return. Facts and circumstances such as: - the purpose and objective of the enterprise where investments were made; - what are the significant (relevant) activities; - how decisions are made about these activities; - whether the rights of Stara Planina Hold Plc give it a current opportunity to lead the significant activities; - whether Stara Planina Hold Plc is represented or has the right to influence the returns from its participation in the enterprise; and - whether Stara Planina Hold Plc has the ability to use its authority over the investee to influence the amount of return, are continuously monitored and if there are any changes in facts or circumstances, control is reassessed. As of the date of the financial statements, there have been no changes in facts or circumstances that require a reassessment of the control over the subsidiaries. Stara Planina Hold Plc has power over its subsidiaries due to the existing rights that give the current opportunity to direct the significant activities that have an essential impact on the returns of these enterprises. Stara Planina Hold Plc can control the activities that generate income. In the company's separate financial statements, investments in subsidiaries are reported at acquisition cost. The Company recognizes dividends from a subsidiary in the profit or loss in its separate financial statements when its right to receive the dividend is established. Identification and evaluation of investments in associates The enterprises over which the Company exercises significant influence are associated. Significant influence is the right to participate in decision-making related to the financial and operational policy of the enterprise where Stara Planina Hold Plc has invested but is not control or joint control over this policy. When assessing the significant influence, Stara Planina Hold Plc evaluates all facts and circumstances, including the term of exercise of potential voting rights and all other contractual commitments. Factors that are indicators of significant influence were taken into account during the evaluation: - representation in the board of directors or another equivalent governing body; - participation in policy-related decision-making processes, including decisions on dividends and other distributions; - significant transactions between the parties; - mutual exchange of management personnel; - provision of essential technical information. Investments in associates are accounted for at acquisition cost. The Company recognizes dividends from an associate in the profit or loss in its separate financial statements when its right to receive the dividend is established. Associates are those entities over which the company is able to exercise significant influence but which are neither subsidiaries nor jointly controlled entities. Investments in associates are accounted for using the cost price method. The Company recognizes dividend payments from associates in its profit or loss in the separate financial statements when the right to receive the dividend is established. Classification and valuation of investments in equity instruments (minority interests) The Group complies with the requirements of IFRS 9 Financial Instruments; IFRS 7 Financial instruments: disclosure when reporting investments in equity instruments (minority interests). The Group classifies these investments as accounted for at fair value through other comprehensive income (FVOCI). When classifying in the category under the fair value through other comprehensive income the Group took into account the conditions: - the financial assets are held within the framework of a business model, the purpose of which is achieved both by reducing contractual cash flows and by selling financial assets; - the contractual terms of the financial asset give rise to cash flows. Changes in the fair value of investments are reported through other comprehensive income (as a reserve from subsequent valuation of financial instruments). Income from dividends is recognized in the profit or loss for the period, only when: - the right of Stara Planina Hold Plc to receive payment for dividends is established; - it is probable that the economic benefits related to the dividends will be received by the companies in the Group and - the amount of the dividends can be reliably estimated. Granted loans The Group recognizes a financial asset – a loan receivable when it becomes a party to the contractual terms of the instrument. Initially, the financial asset is valued at the relevant transaction price - transaction value. Loan income is accrued in the period when it arises. Trade and other receivables Trade and other receivables are initially recognized when they arise and are reported at the relevant transaction price – their nominal value, reduced by the amount of impairment for uncollectible amounts. Cash Cash includes cash on current accounts, bank deposits and cash on hand. They are reported at their nominal value. For the purposes of preparing the cash flows statements, cash receipts from customers and cash payments to suppliers are presented gross, including VAT (20%). The Group believes that there is no need for depreciation of available cash because it is held in a financial institution and has a low credit risk. Impairment of financial assets The Group has adopted the approach to recognize financial assets impairment losses when an impairment event has occurred. The Group recognizes an impairment loss for its financial assets, according to fair value through other comprehensive income, contract receivables and credit commitments, and the expected credit loss model is used for the recognition. This is the part of lifetime expected credit losses that represent expected credit losses that result from default events on financial instruments that are possible within 12 months of the reporting date. The Group's management has made significant judgments and estimates, developing models covering historical information as well as forward-looking information in order to reliably estimate expected credit losses. The Group recognizes an adjustment for impairment losses: - for financial instruments, in respect of which there is no significant increase in the credit risk after the date of initial recognition, the recognized adjustment for losses must represent the expected credit losses for 12 months; - for financial instruments in respect of which there is a significant increase in the credit risk after the date of initial recognition, an adjustment for expected credit losses is recognized for the entire term. The Group's management makes valuations at each reporting date whether the credit risk of the financial instrument has increased significantly since the initial recognition. The valuation uses the change in default risk over the expected term of the financial instrument instead of the change in the amount of expected credit losses. For the purposes of the valuation, the default risk for the financial instrument at the reporting date is compared to the default risk for the financial instrument as it was at the initial recognition and takes into account reasonable and hopeful information that is available without undue cost and efforts and is indicative of the significant increase in the credit risk since the initial recognition. Indicators that are relevant to the credit risk valuation include: - change in internal interest rates or other valuations for instruments after the date of the initial recognition of the instrument; - change in other conditions for the instrument, such as conditions or clauses, collateral, etc.; - change in market interest rates and spreads for similar instruments; - internal and external credit quality assessments; - change in the operations of the borrower, including financial results and deviation from expectations and forecasts; - changes in economic conditions, including regulatory changes that affect the borrower; - default on other instruments by the same borrower, etc. At the end of the reporting period, the company's management has valuated the expected credit losses and has assessed that the credit risk has not increased significantly since the initial recognition as a result of which valuation no impairment has been recorded. Derivative financial instruments The company has not used derivative financial instruments for hedging against currency, interest rate and cash flow risks. Tangible fixed assets The company has adopted a threshold of significance in the amount of BGN 700 under which tangible assets, regardless if fixed or not, are accounted for as current expenditures upon acquisition. Tangible fixed assets are initially recognized at acquisition price, which includes the purchase price (including duties and non-recoverable taxes) and all direct costs. Direct costs are those necessary to turn the asset into working condition in accordance with its intended use. Following the initial recognition, each individual tangible fixed asset is accounted for at acquisition price less accrued depreciation and accumulated impairment loss. Subsequent costs related to a separate tangible fixed asset are used to adjust the book value of the asset when it is probable for the economic benefits of the company to exceed the initially measured standard efficiency of the existing asset. All of the other subsequent expenses are recognized as such during the period when they have incurred. Tangible fixed assets are written off upon their sale or when no economic benefits are expected from their use or upon release of the asset. When a tangible fixed asset is transformed into a commodity, no profit or loss is reported. The acquisition price of the commodity shall be the book value of the tangible fixed asset which is written off. When a tangible fixed asset is acquired as a result of a complete or partial exchange for another dissimilar in nature asset or other assets, the acquisition price will be defined under the fair value of the asset received which is equivalent to the fair value of the given asset, adjusted with all transferred cash. The difference between the acquisition price of the asset received and the book value of the exchanged asset, along with all transferred cash shall be reported as profit or loss. Amortized cost of tangible fixed assets is equal to their book value. Tangible fixed assets are amortized on a straight-line basis according to their expected useful life (service life). Service life is defined according to the period during which it is assumed that the depreciable assets will be used by the company taking into account their probable physical wear and obsolescence. The terms are defined as follows: Buildings – 25 years Plant and equipment – 3.33 years Motor vehicles – 4 years Computers – 2 years Other fixed assets – 6.66 years Impairment of assets Depreciable assets are regularly tested for impairment when events or changes in circumstances indicate that the book value of the asset may not be recoverable. The depreciation loss from an asset is recognized immediately as a current operating expense. In case that after a depreciation of an asset its recoverable value exceeds the book value, a depreciation loss recovery shall be reported as a current operating income up to the amount of the previous depreciation which has been reported as a current operating expense. Assets for which impairment loss has been recognized are subsequently tested for a possible recovery of the impairment at each date of preparation of the financial statements. Intangible fixed assets The Group recognizes identifiable non-monetary assets without physical substance as intangible assets when they meet the definition of an intangible asset and the recognition criteria set out under IAS 38. Intangible fixed assets are initially recognized at acquisition price, which includes the purchase price (including duties and non- recoverable taxes) and all direct costs. Direct costs are those necessary to turn the asset into working condition in accordance with its intended use. Direct costs are the costs necessary to render the asset operational as per its intended use. Intangible assets subject to amortization are amortized on a straight-line basis during their expected useful life. Inventory Inventories are initially measured at their delivery cost which is the sum of all purchase and processing costs, as well as other expenditures incurred in relation to the delivery to their current location and condition. The valuation method of inventories when they are written off is "weighted average price". Inventories are valued at the lower of the delivery cost and net realizable value and the difference shall be accounted for as other current operating expenses. At the end of the reporting period, the net realizable value of inventories will be assessed. The net realizable value is the estimated selling price within the course of normal business operations less the approximately measured sales costs. Retirement benefits and other liabilities The employer provides compulsory insurance of the employed personnel for retirement, healthcare and unemployment. Social security and retirement plans offered by the company in its capacity of an employer are based on the Bulgarian legislation and constitute predetermined fixed instalments. Short term employee benefits (due within 12 months following the end of the period when earned) are recognized as expenses in the income statement during the period wherein the work has been performed and as a current liability (less all amounts paid out and any due deductions) in an undiscounted amount. As of the date of the annual financial statements the company makes an estimate of the expected costs for the leave subject to compensation to be accumulated which is expected to be paid as a result of the unused right to accumulated leave. The assessment includes the costs for remunerations and the amounts for the compulsory social insurance, due by the employer, in an undiscounted amount. Provisions Provisions are recognized when the company has a current legal or constructive obligation resulting from a past event the repayment of which will require expenditure of economically-beneficial resources and it is possible to make a reliable estimate of the amount for repayment of the obligation. When a discount is used, the reported amount of the provision will be increased in each period in order to reflect the expired time. Such an increase will be recognized as a financial expenditure. A contingent liability is disclosed in the statement unless the probable need for cash outflows, including economic benefits to repay the obligation, is deferred. Temporary tax differences Temporary tax differences are accrued using the balance sheet method for all temporary differences between the tax base of the assets and the liabilities and their book value, measured for accounting purposes. When calculating temporary tax differences, the applicable tax rates for the periods of reverse occurrence are used. When calculating temporary tax differences, tax rates are used which refer to the periods of reverse occurrence of the temporary tax differences. The main temporary differences result from impairment of receivables, revaluations under fair value and accrued provision expenses. Recoverable temporary tax differences arising from the transfer of unused tax losses from previous periods are recognized only when it is probable that future taxable profits will be available against which the losses can be utilized. Recognizing income and expenses Accounting policy applicable to revenue is based on IFRS 15 Revenue from Contracts with Customers. The usual revenue of the Group is from the sale of its own production. The revenue in the Group is recognized when the control over the goods and/or services subject to the contract with the customer are transferred to the customer. The control is transferred to the customer upon satisfaction of the performance obligations under the contract by transferring the promised goods and/or providing the promised services. Evaluation of a contract with a customer is present only when, upon its entry into force, it: 1. Нas a commercial nature and motive; 2. The parties have approved it (orally, in writing or on the basis of "established and generally accepted business practice") and have committed to fulfill it; 3. The rights of each party are respected; 4. Payment terms can be identified; 5. There is a probability that the remuneration to which the group is entitled when fulfilling its performance obligations will be received. When evaluating collectability, all relevant facts and circumstances in relation to the transaction are taken into account, incl. past experience, usual business practices, published policies and representations made by the group, guarantees and opportunities for remedies. A contract for which any of the above criteria has not yet been met is subject to a new assessment each reporting period. The remuneration received under such a contract is recognized as a liability (contract liability) in the statement of financial position, while: 1. All five criteria for recognition of a contract with a customer are met; 2. The Group has fulfilled its performance obligations and has received all or substantially all of the remuneration (which is non-refundable); and/or 3. When the contract is terminated and the remuneration received is non-refundable. When initially evaluating its contracts with customers, the group makes an analysis and a judgment whether two or more contracts should be considered in their combination and accounted for as one, and resp. whether the promised goods and/or services in each separate and/or combined contract should be accounted for as one and/or more performance obligations. Any promise to transfer goods and/or services that are distinguishable (by themselves and in the context of the contract) is counted as a single performance obligation. The Group recognizes revenue for each separate performance obligation at the level of a separate contract with a customer by analyzing the type, duration and terms of each specific contract. Revenue is measured based on the transaction price set up for each contract. The transaction price is the remuneration amount to which the Group expects to be entitled, excluding amounts collected on behalf of third parties. When defining the transaction price, the Group takes into account the terms of the contract and its usual commercial practices. The revenues generated in the Group are mainly from the sale of own production. Revenues from sales of goods and services have an insignificant share. In its arrangements with customers, the Group acts as a principal because it usually controls the output and/or goods and/or services before transferring them to the customer. Upon a sale, the control over the production/goods is transferred to the customer at a precise point in time which is usually when the goods are handed over to the customer/carrier at an agreed location, and the customer can dispose of the sold produce/goods by managing the use and receiving essentially all remaining benefits. Control over services is transferred in the period of time when they are provided. Sales revenue is recognized over time by measuring the degree of fulfillment of the Group's obligations (stage of completion). The transaction price usually includes a fixed selling price according to the price list, with reduced trade discounts. Variable consideration is included in the transaction price only to the extent that it is highly probable that no material adjustment will occur in the amount of cumulative revenue recognized. The companies in the Group currently report the costs for the activities by economic elements and then refer them by functional purpose in order to form the amount of costs by directions and activities. Recognition of expenses for the current period is carried out upon accrual of their corresponding revenues. Expenses are reported on an accrual basis. They are evaluated according to the fair value paid or payable. General and administrative expenses This expense category includes all expenses of a general and administrative nature. Financial income and expenses Financial income includes income from interest on invested funds (incl. investments available for sale), dividend income, profit from sale of financial assets available for sale, changes in the fair value of financial assets reported at fair value in the profit or loss, profit from operations in foreign currency recognized as profits and losses. Interest income is recognized at the time of its accrual using the effective interest method. Dividend income is recognized on the date when the Company's right to receive the payment is established. Costs for the activity also include financial costs that are related to the usual activity. The accrual principle applies to financial costs as it applies to all other components of the income statement. They also include all impairments of financial assets. Financial expenses include interest expenses on loans, losses from foreign currency operations, changes in the fair value of financial assets reported at fair value in the profit or loss, impairment of financial assets that are recognized in the profit or loss. All interest expense on borrowings is recognized in the profit or loss using the effective interest method. Profits or losses for the period All income and expense items recognized for the period are included in the profit or loss unless an IFRS standard or interpretation requires otherwise. Profit or loss is the total amount of revenue minus expenses, excluding the components of other comprehensive income. Related parties For the purpose of preparing these financial statements, members of the Board of Directors have presented in the annual report the legal entities related to them and controlled by them. Related parties to the company are the subsidiaries and associates. Changes in the related parties to Stara Planina Hold Plc are being followed for the entire reporting period and for the previous reporting period, as far as this information concerns reporting of transactions and events in the financial statements. The Board of Directors of Stara Planina Hold Plc has adopted procedures to avoid and disclose conflicts of interest. They impose obligations for the members to avoid and not to admit actual or potential conflicts of interest and, if necessary, to immediately disclose conflicts of interest and provide shareholders with access to information on transactions between them and the company or any related party. During the reporting period members of the Board of directors and parties related to them have not entered into agreements with the company under terms beyond the regular business operations or deviating significantly from the market conditions. There are no transactions beyond the regular business operations of the issuer or deviating significantly from the market conditions. Transactions between Stara Planina Hold Plc and related parties during the reporting period include mostly the loans provided to subsidiaries and associates. Loan agreement dated 25.04.2019 granting Fazan Jsc the amount of BGN 407 000 with maturity until 25.12.2025 at 2.5 % annual interest rate. Loan agreement dated 09.01.2022 granting Fazan Jsc the amount of BGN 550 000 with maturity until 08.01.2026 at 2.5 % annual interest rate. Loan agreement dated 01.07.2022 with Boryana Jsc, – associated company, including loand under the following conditions: 1. Loan in the amount of BGN 470 thousand with maturity until 16.09.2027 at 2.5% annual interest, unpaid principal as of 31.12.2023 in the amount of BGN 430 thousand. 2. Loan to finance the purchase of machines in the amount of BGN 483 thousand with a maturity until of 01.03.2027 at 2.5 % annual interest, unpaid principal as of 31.12.2023 in the amount of BGN 112 thousand. Loan agreement dated 15.11.2022 with Elhim-Iskra Plc - in the amount of BGN 1 200 000 for a period until 30.11.2027 at an annual interest rate 2.5%, unpaid principal as of 31.12.2023 in the amount of BGN 1 150 thousand. Loan agreement dated 12.07.2023 with HES Plc - in the amount of BGN 4 000 000 for a period until 30.06.2024 at an annual interest rate 3.5%. Loan agreement dated 01.11.2023 with SPH Invest Jsc - in the amount of up to BGN 1 000 000 (one million) for a period until 01.11.2025 at an annual interest rate 3.5%, unpaid principal as of 31.12.2023 in the amount of BGN 700 thousand. Events after the balance sheet date Events, both favorable or unfavorable, that occur between the end of the reporting period and the date that the financial statements are approved for issuance, may be: (a) adjusting events – events that provide further evidence on conditions that existed on the date of the annual financial statements, and (b) non-adjusting events – events that are indicative of conditions after the date of the annual financial statements. The Group adjusts recognized amounts or recognizes amounts which have not been recognized, in case of reported adjusting events. The Group does not adjust recognized amounts or does not recognize amounts which have not been recognized in case of reported non-adjusting events. They are only disclosed in the Notes to the annual financial statements. Financial risk management The Management monitors the overall risk and finds ways to neutralize potential negative effects on the company’s financial indicators. Market risk includes three types of risk: Currency risk - the risk that the value of a financial instrument will vary due to changes in exchange rates. Interest rate risk - the risk that the value of a financial instrument will vary due to changes in market interest rates. Price risk - this is the risk that the value of a financial instrument will vary as a result of changes in market prices. The main sales in the Group are realized in the European Union and from exports to third countries. Payments are in euros and US dollars. The management monitors exchange rate movements and takes measures to avoid the negative consequences as a result of their variance. The interest-bearing financial instruments of Stara Planina Hold Plc are mainly the loans granted. The majority of them have a fixed interest rate from 2.5% to 3.5% annual interest. Investments in subsidiaries and associates are accounted for and presented under the acquisition price method. The risk of changes in the market price of equity instruments arises from equity stocks classified as reported under fair value in other comprehensive income (FVOCI) held for long-term investments. Credit risk - Stara Planina Hold Plc has granted loans to companies in its portfolio which have a longstanding and unblemished credit reputation which minimizes the credit risk. Due to the nature of the financial instruments used by Stara Planina Hold Plc, the liquidity risk and the interest rate risk of the cash flow are also minimized. All risk factors for the operations of the company are described in detail in the Activity Report. Approximate accounting estimates, fundamental errors and amendments to the accounting policy The accounting policy has been developed in accordance with the hierarchy of IAS 8 Accounting Policy, Changes in Accounting Estimates and Errors. Accounting estimates are the monetary amounts in the financial statements, the estimation of which has an element of uncertainty. The Group prepares accounting estimates when the accounting policy requires the items in the financial statements to be valued in a way that includes uncertainty in the valuation, i.e. be valued at monetary amounts that cannot be directly observed but must instead be estimated. The Group prepares accounting estimates to achieve the objective stated in the accounting policy. Preparing accounting estimates involves the use of judgments or assumptions based on the most current, reliable information available. Accounting estimates have been applied to assess: - the fair value of financial assets and; - the costs of depreciation of an asset of property, machinery and equipment. Preparation of an accounting estimate includes the selection and simultaneous use of: - valuation methods; - input data for evaluation. Valuation methods include: - estimation methods (used to estimate the loss allowance for expected credit losses under IFRS 9 Financial Instruments. Estimates are subject to revision in case of changes in the circumstances they are based on or resulting from further experience or subsequent developments. The effects of changes in the accounting estimates are taken into account when defining the profit or loss, as follows: a) For the period of the change - if the change affects only that period; b) For the period of the change and future periods - if the change affects these periods as well. The effect of the changes in the accounting estimate is included in the same entry of the comprehensive income statement as previously used for the estimated value. The error related to prior periods is reported during the current period by increasing or decreasing the retained profit balance from previous years. The comparative information from the previous reporting period is recalculated. When the decrease in retained earnings is greater than the balance of retained earnings before the decrease, the difference is reported as an uncovered loss from previous years. Changes in the accounting policy are to be made only when required by law, accounting standards, or if the change will lead to a more adequate representation of the events or transactions reported in the financial statements. Changes in the accounting policy are to be applied retrospectively. Any adjustment due to the change is recorded as an adjustment to the balance of the retained earnings from previous years. The comparative information is recalculated. The difference resulting from the recalculation of tax expenses in the income statement for the previous period are reported as an adjustment to the retained earnings (uncovered loss). The change in the accounting policy is applied retroactively when the adjustment to the balance of retained earnings from previous years cannot be reliably determined. A change in the accounting policy occurs when a new or amended accounting standard is adopted, and is accounted for in accordance with the requirements specified in the new or amended accounting standard, if any. When the respective accounting standard does not stipulate specific requirements for reporting changes in the accounting policy, they are to be reported in accordance with IAS 8. During the reporting period, the accounting policy has not been changed. No errors were identified, both for the current and for previous reporting periods, which required the reflection of corrections. NOTES UNDER THE STATEMENT OF FINANCIAL STANDING (In all applications amounts are shown in thousands BGN unless otherwise stated) Note 1 Property, plant and equipment Property, plant and equipment Land Buildings and construction s Machinery and equipment Facilitie s Vehicles Office fittings Expenses for acquisition and liquidation of assets in a business way Others Total Book value as of 31.01.2023 8107 56850 208424 14852 4719 3429 6397 1286 304064 Received during the period 235 11049 15166 1318 199 348 17948 58 46321 Out of use 20 289 1351 58 73 25 17383 5 19204 Depreciation accrued in the beginning of the period 28509 167957 7464 3589 2941 864 211324 Depreciation accrued during the period 2074 13240 554 311 165 144 16488 Depreciation written off during the period 16 1399 76 73 25 6 1595 Balance as of 31.12.2023 8322 37043 42441 8170 1018 671 6962 337 104964 Note 2 Intangible assets Intangible assets Rights of ownership Software R&D products Others Total Book value as of 31.01.2023 1281 4695 1240 2000 9216 Received during the period 17 321 13 351 Out of use 695 416 76 1187 Depreciation accrued in the beginning of the period 1161 4425 538 463 6587 Depreciation accrued during the period 23 324 31 99 477 Depreciation written off during the period 695 416 76 1187 Balance as of 31.12.2023 114 267 671 1451 2503 Note 3 Investments in Other Companies Company name and registered seat of the companies where the investments were made Fair value Percentage of the capital of the other company Investment in securities admitted to trading on a stock exchange Investment in securities not admitted to trading on a stock exchange International Asst Bank JSC, Sofia 21467 12,97 21467 ZAD Asset Insurance JSC, Sofia 9388 40,00 9388 Hydraulic elements and systems Plc, Yambol 8964 8,28 8964 Elhim - Iskra Plc, Pazardzhik 190 0,80 190 Leasing Company JSC, Sofia 900 5,00 900 SPH Trans Ltd., Sofia 39 95 39 Medical Center “Center for Prevention of the health” Ltd, Sofia 2 25,00 2 Progres JSC, Stara Zagora 335 4,00 335 Dionisii Jsc, Nikopol 99 68,99 99 VR Bank Dreieich-Offenbach AG 19 19 TOTAL 41403 9154 32249 Investments in equity instruments (minority shares), pursuant to IFRS 9 are classified as reported at fair value through the statement of other comprehensive income (FVOCI). Market valuation of the shares is prepared at the end of the year. Note 4 Other financial assets 31.12.2023 31.12.2022 Additional cash contribution in accordance with art. 246, para 2, item 4 of Commercial Act 1218 1218 In 2016 an additional monetary contribution was made by Stara Planina Hold Plc in accordance with art. 246, para 2, item 4 of Commercial Act in the amount of BGN 609 thousand in the Reserve fund of Asset Insurance AD - a minority interest company in the portfolio of Stara Planina Hold Plc portfolio. In 2016 an additional monetary contribution was made by HES Plc in accordance with art. 246, para 2, item 4 of Commercial Act in the amount of BGN 609 thousand in the Reserve fund of Asset Insurance AD - a minority interest company in the portfolio of Stara Planina Hold Plc portfolio. Note 5 Long-term trade and other receivables 31.12.2023 31.12.2022 Trade loans 9250 9400 Others 4291 2244 Total 13541 11644 Note 6 Inventory 31.12.2022 31.12.2021 Materials 38605 26996 Finished goods 9064 6490 Goods for resale 2481 1483 Work in progress 14240 11521 Others 2 Total 64390 46492 Note 7 Current trade and other receivables 31.12.2023 31.12.2022 Trade accounts receivables 49271 44516 Advance payments 1769 2452 Trade loans 1000 Court receivables 11 1 Recoverable taxes 1640 2686 Others 500 551 Total 54191 50206 Note 8 Cash and cash equivalents 31.12.2023 31.12.2022 Cash 132 76 Cash in banks 33895 43080 Restricted cash 1913 1748 Cash equivalents 5 Total 35940 44909 Note 9 Share capital and Reserves 31.12.2023 31.12.2022 Share capital 21000 21000 Treasury shares -275 -275 Premium reserves when issuing securities 1178 1178 Reserve from subsequent valuations of assets and liabilities 28880 26603 General reserves 13279 13394 Special reserves Other reserves 5581 4663 Undistributed profit 53149 44003 Loss not covered -428 -428 Current year profit (loss) 13913 17538 Total 136277 127676 Note 10 Long-term trade and other liabilities 31.12.2023 31.12.2022 Due to related parties 437 347 Due to banks under loans received 871 944 Lease obligations 63 107 Due to staff upon leave 2987 2523 Liabilities on deferred taxes 2397 1859 State financing 992 1084 Provisions 70 150 Others 8367 88 Total 16184 7102 Note 11 Current trade and other liabilities 31.12.2023 31.12.2022 Due for dividends 7092 7324 Due to banks under loans received 3603 768 Trade loans 252 245 Trade accounts payables 17901 26572 Advance payments 2132 2495 Salaries payable 9224 9158 Social security payable 1993 2006 Tax liabilities 1466 1555 Others 1025 1715 Provisions 73 69 Deferred revenues 37 20 State financing 649 900 Total 45447 52827 Off-balance sheet liabilities An agreement for undertaking a subordinated contingent liability has been concluded between Stara Planina Hold Plc and ZAD Asset Insurance AD. Pursuant to this agreement, Stara Planina Hold Plc shall provide ZAD Asset Insurance AD, upon request and upon occurrence of an activating event, the amount of up to BGN 294 thousand. An agreement for undertaking a subordinated contingent liability has been concluded between HES Plc and ZAD Asset Insurance AD. Pursuant to this agreement, HES Plc shall provide ZAD Asset Insurance AD, upon request and upon occurrence of an activating event the amount of up to BGN 294 thousand. NOTES UNDER THE COMPREHENSIVE INCOME STATEMENT (In all applications amounts are shown in thousands BGN unless otherwise stated) Note 12 Net sales revenues 31.12.2023 31.12.2022 Finished goods 351004 357694 Goods for sale 17888 5173 Services 2882 3830 Others 7192 8559 Total 378966 375256 Note 13 Other financial income 31.12.2023 31.12.2022 Interest revenue 241 227 Dividend income 539 501 Gains from operations with financial assets and instruments 241 Gains from foreign exchange operations 134 676 Other financial income Total 1155 1404 Note 14 Other financial expenses 31.12.2023 31.12.2022 Interest expenses 458 202 Losses from foreign exchange operations 319 389 Other financial expenses 354 196 Total 1131 787 Chief Accountant: Kremena Dulgerova Executive Director: Vasil Velev Kremena Gantcheva Dulgerova Digitally signed by Kremena Gantcheva Dulgerova Date: 2024.04.25 15:01:54 +03'00' Digitally signed by Vasil Georgiev Velev Date: 2024.04.25 15:07:06 +03'00' CONTENTS Introduction ........................................................................................................................................................ 2 I. Activity overview ............................................................................................................................................. 2 1. Indicators characterizing the main operational results ............................................................................... 2 2. Investment portfolio .................................................................................................................................... 3 3. Operational results ..................................................................................................................................... 3 4. Major indicators for financial and accounting analysis on a consolidated basis ........................................ 5 5. Risk factors for the activities of the Group of Stara Planina Hold Plc ........................................................ 6 II. Consolidated Non-financial Declaration ...................................................................................................... 13 III. Information Disclosure on the Key Performance Indicators (KPIs) under Art. 8 of the Taxonomy Regulation as of 31 December 2023 on a Consolidated Basis ....................................................................... 28 IV. Important developments occurred since the beginning of the year ........................................................... 37 V. Expected development of the group ........................................................................................................... 37 VI. Research and Development Activity .......................................................................................................... 39 VII. Company shares ....................................................................................................................................... 40 1. Own shares. Buy-back ............................................................................................................................. 40 2. Changes in the share price of the companies ......................................................................................... 41 3. Dividend policy ......................................................................................................................................... 43 VІIІ. Financial instruments used by the enterprise .......................................................................................... 44 1. Accounting policy ..................................................................................................................................... 44 2. Financial instruments ............................................................................................................................... 44 3. Liquidity .................................................................................................................................................... 45 4. Exposure of the enterprise to price, credit, liquidity and cash flow risk ................................................... 45 ІX. Corporate Governance Declaration ........................................................................................................... 45 1. National Corporate Governance Code..................................................................................................... 45 2. Implementation of the National Corporate Governance Code ................................................................. 46 5. Information Art. 10 of Directive 2004/25/EC ............................................................................................ 51 6. Diversity policy ......................................................................................................................................... 52 7. Information on the Board of Directors ...................................................................................................... 52 Х. Additional information on Appendix 2 of Ordinance No 2 of the FSC ......................................................... 53 Media............................................................................................................................................................ 56 This document contains information regarding the published estimates feasibility, future period forecasts, as well as data, which constitutes proprietary information pursuant to Art. 7 Regulation (EU) No 596/2017 on market abuse. This information could have significant impact on the price of shares issued by the company. 2. Introduction The annual consolidated report on the activities of Stara Planina Hold Plc provides comments and analysis of the financial statements and other material information on the financial standing and operational results of the company, included in the consolidation as a whole. The report contains an objective overview presenting faithfully and honestly the development and results of the activities of the companies in the group of Stara Planina Group Hold Plc, together with a description of the main risks they face. The Report includes the information required under Art. 45 of the Accountancy Act, Art. 100n, para. 5 of the Public Offering of Securities Act (POSA), as well as Art. 11 of Ordinance № 2 of the Financial Supervision Commission. STARA PLANINA HOLD PLC is a public company within the meaning of art. 110 of the Public Offering of Securities Act. The company is successor of Central Privatization Fund AD incorporated on 27 September 1996. The holding is a parent company within the meaning of §1, item 18 of the Additional Provisions of the Accountancy Act and holds shareholdings in the capital of industrial enterprises in various fields of production. The company actively participates in the development of the Bulgarian industry by achieving European and world level of quality and profitability. I. Activity overview 1. Indicators characterizing the main operational results Indicator (BGN’000s) Y2021 Y2022 Y2023 Income from main business activity 278 366 375 256 378 966 Net profit from business activity 13 054 17 538 13 913 Amount of assets 268 645 303 706 328 905 Shareholders' Equity 115 565 127 676 136 277 Structure of the investment portfolio The economic group of Stara Planina Hold Plc consists of the parent company and its subsidiaries and associates. The investment portfolio of the holding is distributed mainly in the following industries: 62.8 15.4 6.6 15.2 Machine Building Electrical Engineering Light Industry Financial 3. 2. Investment portfolio The participation of Stara Planina Hold Plc in subsidiaries and associates is reported in accordance with the provisions and requirements of IFRS 10: Consolidated financial statements and IAS 28: Investments in Associates. The Company recognizes dividends from a subsidiary or associate company in the profit or loss account in its separate financial statements when its right to receive the dividend is established. Subsidiaries are all enterprises under the control of the company. The control over the subsidiaries of the company is expressed in its ability to manage and define the financial and operational policy of the subsidiaries so as to derive benefits as a result of their operations. In the separate financial statements of the company, investments in subsidiaries are accounted for at their cost value. Associates are those enterprises over which the company is able to exercise significant influence but are neither subsidiaries, nor jointly controlled entities. Investments in associates are accounted for at their cost value. Major investments in the portfolio of Stara Planina Hold Plc as of 31.12.2023: Investments in subsidiaries Hydraulic Elements and Systems Plc 64.53 % Elhim Iskra Plc 51.40 % Fazan Jsc 92.65 % SPH Invest Jsc 99.39 % Investments in associates M+C Hydraulic Plc 30.61 % Bulgarian Rose Plc 49.99 % Boryana Jsc 50.00 % Investments in other companies Asset Insurance Jsc 20.00 % Leasing Company Jsc 5.00 % The subsidiary of Stara Planina Hold Plc SPH Invest Jsc holds 8.28 % of the capital of Hydraulic Elements and Systems Plc and 0.8 % of the capital of Elhim-Iskra Plc. Taking into account the influence of the holding on the decision-making process with regard to the associates and the need to provide more comprehensive and correct information to the shareholders, investors and all interested parties, as of 01.01.2011 Stara Planina Hold Plc applies an accounting policy aimed at further facilitating investors in making a well-grounded investment decision. 3. Operational results As a holding company, Stara Planina Hold Plc does not perform independent commercial operations and has only financial income. The consolidated activity results are formed mainly from the results of the entities within the group which participate in the consolidated statements. The structure of income within the last three years is summarized in the table below: INCOME (BGN’000s) Y2021 Y2022 Y2023 Sales of finished goods 266 064 357 694 351 004 Sales of trading goods and services 5 154 9 003 20 770 Other incomes 7 148 8 559 7 192 Grants 4 633 8 504 910 Financial income 1 541 1 404 1 155 Total Income 284 540 385 164 381 031 4. The consolidated sales of the companies in the group as of 31.12.2022 reached BGN 378.97 million thus reporting a 1 % increase compared to the sales in 2022 and an increase by 36.14 % compared to the reported sales in 2021. Annual sales of all companies in the group of Stara Planina Hold group (million BGN) * forecast Based on the results achieved in the first months of 2024 and the updated forecast for the first half of the year, given the escalating geopolitical military conflicts, the new political instability in the country as well as taking into account the continued negative development of the European and world economy, including the seriously lowered expectations of the German government for growth in 2024 by only 0.2% of the economy of Germany, we confirm our forecast expectations that consolidated sales in the first quarter of 2024 will reach BGN 77.4 million but we are adjusting downward our forecast for the next quarters. With the results for the first quarter, we would report a decrease by about 28 % compared to the record high levels of sales achieved in the same period of 2023 and a decrease by about 11 % compared to the first quarter of 2022. At this stage, we expect with the consolidated revenues for the first half of 2024 to report a decrease by about 30 % compared to the same period of 2023 and presume that the group's consolidated sales revenue for 2024 will be worth around BGN 258.4 million. The net consolidated profit as of 31.12.2023 amounts to BGN 13 913 thousand and reports a decrease by 20.67 % compared to 2022 and an increase by 6.58 % compared to 2021. Consolidated Net Profit (BGN’000s) 218.1 242.7 224.4 200.0 278.4 375.3 379.0 258.4 2017 2018 2019 2020 2021 2022 2023 2024 7861 7556 6747 8096 13054 17538 13913 2017 2018 2019 2020 2021 2022 2023 5. The 2023 consolidated EBITDA amounts to BGN 64.4 million and reports a 4.87 % decrease compared to 2022 and an increase by 32.51 % compared to 2021. Consolidated EBITDA (million BGN) EBITDA is very important benchmark for any business group. The graph provides data on the consolidated EBITDA of the Group of Stara Planina Hold Plc for the last 7 years. 4. Major indicators for financial and accounting analysis on a consolidated basis Profitability Indicator 31.12.2021 31.12.2022 31.12.2023 K1 0.113 0.137 0.102 K2 0.049 0.058 0.042 К1 Profitability of Shareholders’ equity ratio = Net profit / Shareholders’ equity К2 Asset capitalization ratio = Net profit / Total assets Profitability (yield) is the ability of the company to provide economic profit to its owners through the skillful management of the assets, the shareholders’ equity and the borrowed capital and the other liabilities. It is the most important indicator for the efficiency of the activity carried out by us. The return on equity ratio is calculated by expressing net profit as a percentage of equity. This ratio measures the absolute return to shareholders in terms of their absolute investment. In 2023, compared to 2022, the return on equity ratio reports a decrease due to the decrease in the net consolidated profit by 20.67 % compared to the reported increase in the value of equity on a consolidated basis by 6.74 %. The return on assets ratio shows the efficiency of using the total assets and in 2023 also reported a decrease compared to the previous year due to the decrease in the net consolidated financial result by 20.67 % compared to the increase in the amount of consolidated assets by 8.30 %. Efficiency Indicator 31.12.2021 31.12.2022 31.12.2023 K3 1.131 1.154 1.141 K4 0.884 0.867 0.877 К3 Expenses efficiency ratio = Total income / Total expenses К4 Income efficiency ratio = Total expenses / Total income The analysis of the efficiency of the consolidated revenues and expenses for 2023 shows that BGN 1.141 revenues were received per BGN 1.00 of the expenses. Revenues fully cover the expenses on a consolidated basis which is a pre-condition for a positive cash flow from operational activity, meeting 35.3 37.1 34.1 38.1 48.6 67.7 64.4 2017 2018 2019 2020 2021 2022 2023 6. the undertaken dividend commitments as well as for partial financing of the companies in the portfolio of the Holding. Liquidity Indicator 31.12.2021 31.12.2022 31.12.2023 K5 2.900 3.026 3. 268 K6 0.908 0.850 0.791 К5 Total liquidity ratio = Current assets / Current liabilities К6 Absolute liquidity ratio = Cash / Current liabilities It is assumed that the optimal values of the total liquidity indicator are above 1-1.5. In 2023, the value of this indicator on a consolidated basis reports an increase compared to the previous year which is due to a decrease in the value of consolidated current assets by 7.09 % compared to a decrease in the value of current liabilities by 13.97 %. The absolute liquidity ratio expresses the ability of the Group to meet its short-term obligations with its available cash. In 2023, the value of this ratio on a consolidated basis reports a slight decrease compared to the previous year which is due to a decrease in the short-term liabilities by 13.97 % compared to the cash decrease by 19.97 %. In 2023 again the Group of Stara Planina Hold Plc has been covering its current liabilities on time with the available current assets. The liquid structure of current assets and liabilities allows part of the funds to be directed to long-term financing of the companies under control. Financial Autonomy Indicators 31.12.2021 31.12.2022 31.12.2023 K7 2.154 2.130 2.211 K8 0.464 0.469 0.452 К7 Financial Autonomy ratio = Shareholders’ equity / Borrowed capital К8 Debt ratio = Borrowed capital / Shareholders’ equity Through the financial autonomy indicator and debt ratio, the proportion between shareholders’ equity and borrowed funds in the capital structure of the group is taken into account. The high level of the financial autonomy ratio, respectively the low level of the debt ratio is a guarantee, both for the investors /creditors/ and for the owners themselves, regarding the ability of the companies in the group to regularly pay their long-term obligations. 5. Risk factors for the activities of the Group of Stara Planina Hold Plc A significant effect on the financial standing of Stara Planina Hold Plc has the direct dependence on the financial condition of the subsidiaries and associates as far as their operations are primarily export- oriented - mainly to the countries of the European Union. Major risks and uncertainties for Stara Planina Hold Plc are related to the possibility for the actual income from a given investment not to correspond to the expected one which is conditioned by the successful activities of the companies in the Group. In this sense, the main risks for Stara Planina Hold Plc and the companies in the Group for 2023 are: Overall macroeconomic risk: Macroeconomic conditions and trends for the development of the market and the macro environment where the companies operate represent a systematic risk that cannot be managed and controlled by the corporate board of the holding and those of the companies in the Group but has a significant impact on the activities and results of the enterprises. Macroeconomic indicators such as inflation, uncertainty about the price and security of energy supply, weak demand, geopolitical tensions and economic challenges driven by high interest rates continue to have a significant impact on business processes and prospects for economic development in global aspect. 7. According to data from the December, 2023 Economic Bulletin of the ECB, the economy of the euro area contracted in the second half of 2023 under the adverse impact of tight financing conditions, weakened confidence and loss of competitiveness. The current expectations of the ECB’s experts are that its recovery will be slightly slower than predicted in the September 2023 forecasts. Short-term indicators point to weak economic activity in the fourth quarter of 2023 as well. However, growth is expected to strengthen from the beginning of 2024 onward with real disposable income rising, supported by falling inflation, solid wage growth and sustained employment, and with export growth picking up to catch up with stronger foreign demand. Overall, average annual real GDP growth is expected to slow from 3.4% in 2022 to 0.6% in 2023, then pick up to 0.8 % in 2024 and stabilize at 1.5% in 2025 and 2026. Compared to the September 2023 forecast, the GDP growth outlook has been revised slightly downwards for 2023-2024 based on the latest published data and weak business survey results but has not been revised for 2025. Business investments are expected to grow weakly in 2024 due to the tight financing conditions, lagging behind rising demand. A recovery is expected in 2025-2026, reflecting weakening of the negative impact of financing conditions and the support under the New Generation EU (NGEU) program. Global trade growth is expected to regain momentum and increase broadly in line with the economic activity. ECB’s experts forecast world trade to grow by 3.0 % in 2024 and 2025 and by 3.2 % in 2026. External demand for the euro area is forecast to grow by 2.6 % in 2024, 2.9 % in 2025 and 3.1% in 2026 which is also at lower level than the September forecasts. In the 2024 Winter Economic Forecast, published on 15.02.2024, the European Commission again lowered its economic growth expectations for both the European Union and the Eurozone to 0.5 % in 2023, compared to the expectations for a 0.6 % growth in the autumn forecast. For 2024, the deterioration of the EC's forecasts is more pronounced and while the autumn forecast predicted an increase in EU GDP by 1.3%, the current expectations are for an increase of 0.9%. The Eurozone economy is projected to grow by 0.8% in 2024, compared to the 1.2% predicted in the previous economic forecast. For Bulgaria, the expectations for economic growth in 2023 remain unchanged (2%), and for 2024 GDP is expected to increase by 1.9% compared to the expectation of growth of 1.8% in the autumn forecast. According to the assessment of the European Commission, after almost reaching a technical recession in the second half of 2023, the prospects for the EU economy in the first quarter of 2024 remain weak. The growth rate is expected to stabilize from the second half of 2024 to the end of 2025. In addition, according to EUROSTAT data on an annual basis, in December 2023 compared to December 2022, industrial production increased by 1.2 % in both the euro area and the European Union but the annual average industrial production for 2023 compared to 2022 decreased by 2.4 % in the euro area and by 2.0 % in the EU. In Bulgaria, in December compared to November 2023, production in the industrial sector increased by 3.3 percent, reversing its direction from the previous month, when it decreased by 3.9 percent. In December 2023, compared to December 2022, Bulgarian industrial production weakened by 6.9 percent after a decline of 12.3 percent in November and 5.9 percent in October. Thus, Bulgaria continues being third among the EU countries in terms of the most significant decline in industrial production in December. At the same time, according to preliminary data of the NSI for 2023, Bulgaria's trade with its main trading partners from the EU and third countries shrank for another month in a row in December. A decline was reported both in terms of the export of Bulgarian goods and the import in our country. In 2023, the total export of goods from Bulgaria worth BGN 86 562.7 million decreased by 6.8 % compared to 2022 and the reported decrease in the total import of goods on an annual basis is 10.2%. In December 2023, the total export of goods decreased by 3.5% and the total import of goods decreased by 6.9 % compared to the same month of the previous year. This negative trend in our foreign trade continues reflecting the stagnation of the world's leading economies and indicates problems for the growth of the Bulgarian economy this year. Pursuant to data of the National Statistical Institute, in December 2023, the total business climate indicator decreases by 1.8 percentage points compared to the previous month (from 21.6% to 19.8%) which is due to the unfavorable business climate in the construction, retail trade and service sector. The composite indicator "business climate in industry" preserves approximately its November level (from 8. 20.6% to 20.7%). The expectations of the industrial entrepreneurs about the activity over the next 3 months are worsened. The uncertain economic environment and shortage of labor continue to be the most serious obstacles for the business development. Concerning selling prices in industry, the managers’ forecasts are for certain increase, although the prevailing part of them foresee preservation of their level over the next 3 months. According to preliminary seasonally adjusted data of the NSI, in December 2023 the Industrial Production Index, which measures changes in the output of Bulgarian industrial enterprises and evaluates the average change in production between two time periods, increased by 3.3 % compared to the previous month and reports a decrease by 6.9% compared to December 2022. On an annual basis, a decline in industrial production was recorded in the processing industry - by 8.9 % and in the mining industry - by 8.8 %, while an increase was registered in the production and distribution of electricity and heat energy and gas - by 4.6 %. This negative trend continues with the reported decline of the index by 2.5% in January 2024 compared to the previous month. Compared to January 2023, a decrease of 7.5% was registered in the calendar-adjusted index of industrial production. According to data of the NSI, in December 2023 the Total Producer Price Index in Industry, which measures the average change in the prices of industrial products produced and sold by Bulgarian enterprises, recorded a decrease by 0.6 % compared to previous month and a decrease by 14.6 % compared to the same month of 2022. In the sectors where the main companies in the group of the Stara Planina Hold Plc operate, for December 2023, compared to December 2022, was recorded a decrease by 1.7 % in the production of metal products and a growth by 6.2 % in the production of machines. According to data from the European Commission in December 2023, the Economic Sentiment Indicator (ESI) rose both in the EU (+1.8 points to 95.6) and the euro area (+2.4 points to 96.4). In the European Union, the improvement in ESI was driven by higher confidence among consumers and managers in retail, services and construction. According to EUROFER (European Steel Association), the worsening of the economy and industry outlook in 2023 in the European Union, especially due to high inflation and the subsequent increase in the interest rates by the European Central Bank, has had a limited impact on the output of the steel-using sectors. The construction sector, which accounts for 35 % of EU steel consumption, is the only significant exception. Economic uncertainty is expected to continue affecting the steel market growth in 2024. Although the EU industry proved to be quite resilient until the end of the first half of 2023, the second half of 2023 was characterized by predominantly negative trends, driven by uncertainty in energy prices, weak demand, inflation, geopolitical tensions and economic challenges caused by high interest rates. While in 2022 production grew more than expected (+3%) as of 31.12.2023, EUROFER predicts a slowdown in growth (+0.7%) on an annual basis with large differences between the individual economies of European countries and their industrial sectors. Growth in steel-using sectors is forecast to slow further in 2024 (+0.2%), mainly due to another recession in the construction sector, with growth expected to pick up moderately in 2025 (+1.5%). EUROFER Forecast for the Mechanical Engineering and Metal Goods Sectors (Е-28, % change YoY) 1.6 -2.0 -1.6 0.1 1.4 -0.5 2.4 -3.3 -1.9 -0.4 1.4 1.3 0.1 1.3 Y2023 1Q24 2Q24 3Q24 4Q24 Y2024 Y2025 Mechanical engineering Metal goods 9. In the third quarter of 2023, production in the mechanical engineering sector experienced a slight decline (-0.1%), after ten consecutive quarterly increases (+1.8% in the previous quarter). Led by the overall industrial recovery after COVID, the mechanical engineering sector reported strong production levels, even above those prior to 2019. However, the growth of the sector remains exposed to continued downside risks, including due to the impact of the war in Ukraine and the continued deterioration of the economic and industrial outlook. The mechanical engineering sector is expected to report only moderate growth in 2023 (+1.6%, revised upwards from +0.5%). This sluggish performance is due to continued weakness across the industrial sector, the impact of high interest rates and inflation-driven economic uncertainty. Despite expected growth in the economy and industry in the first half of 2024, the sector is projected to report a decline in production in 2024 (-0.5%) before recovering in 2025 (+2.4%). After a reported decline by 3.3% for 2023, EUROFER's expectations for the metal goods sector in 2024 are for further declines until mid-year, followed by a growth in the third and fourth quarters and nominal growth of 0.1 % on an annual basis. For 2025, expectations are for a more substantial growth of (1.3%). The interest rate risk is related to changes in the levels of the market interest rates, which could lead to an increase in the interest expenses and a corresponding decrease in the financial result of the companies in the Group. At its meeting on 14 December 2023, the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal credit facility and the deposit facility would remain unchanged – 4.50 %, 4.75 % and 4.00 %, respectively. Based on its current assessments, the Governing Council considers that the ECB's key interest rates are at a level which, if sustained long enough, will make a significant contribution to achieving this objective. The main interest rate of the BNB for the nine months of 2023 is presented in the following graph: Source: BNB The change in interest rates reflects depending on the share of attracted bank and commercial loans. At the beginning of 2022, Euribor started its movement from a negative position, and for 5 years its value was only negative, and from September 2011 to the beginning of 2022, the direction of the annual trend was only downward. Since the beginning of 2023, a strong upward trend has been reported, with the highest value since 2009 being reached at the end of September. In the last quarter of the year, the movement is again in a downward direction. 12-month EURIBOR (01.01.2023 - 31.12.2023) 1.42 1.82 2.17 2.47 2.77 2.96 3.12 3.29 3.53 3.64 3.79 3.80 01.01.2023 01.02.2023 01.03.2023 01.04.2023 01.05.2023 01.06.2023 01.07.2023 01.08.2023 01.09.2023 01.10.2023 01.11.2023 01.12.2023 BNB Base Interest Rates 01.01.2023 - 01.12.2023 10. Stara Planina Hold Plc uses optimally the available resource in order to reduce the impact of the interest rate levels. Inflation risk is related to the probability for the purchase prices of goods and services to increase significantly which leads to lower incomes, shrinking consumers’ demand and limiting the country's economy growth. Inflation can directly affect the real return on a given investment since with high inflation, even high nominal incomes can appear to have a negative nominal return. The December 2023 ECB’s staff macroeconomic forecasts for the euro area expect HICP inflation to fall from an average of 5.4 % in 2023 to 2.7 % in 2024 and 2.1 % in 2025, reaching a level of 1.9 % in 2026. After the sharp drop in HIPC inflation to 2.4 % in November, a temporary rise is expected in the shortest term, mainly related to rising base effects in the energy component and the withdrawal of some fiscal support measures. As a result, energy inflation should increase in 2024, partially neutralizing further declines in food inflation and HICP inflation excluding energy and food. This means that headline inflation will gradually decline not until 2024. As from the end of 2024, all core components of inflation are expected to continue weakening, contributing to headline HICP inflation reaching the target level in the second half of 2025. Pursuant to data of the National Statistical Institute, in December 2023, the monthly inflation rate in Bulgaria was 0.3 % compared to the previous month, and the annual inflation rate in December 2023 compared to December 2022 was 5.0 %. The annual average inflation rate for the period January - December 2023 compared to the period January - December 2022 was 8.6%. The World Bank and other institutions have recently warned that precisely the high inflation may prove to be an obstacle for Bulgaria on its way to adopting the euro. Although the indicator is gradually decreasing, it is happening more slowly than necessary. According to the macroeconomic forecast of the Bulgarian National Bank for the annual inflation, measured by the harmonized index of consumer prices (HIPC), it is to slow down to 3.1% at the end of 2024 and to remain at the same level at the end of 2025. The expected downward dynamics of inflation is mainly due to the assumed decrease in the prices of oil and agricultural raw materials on the international markets in 2024. At the same time, in the short and medium term, the BNB predicts the pressure to increase the production costs of companies resulting from the continued high growth of the costs of labor per unit of output and the labor shortage in the country, to remain strong and continue to exert a pro-inflationary influence on consumer prices. The systematic currency risk is the probability of a possible change in the currency regime of the country (currency board) which would lead either to the devaluation of the lev or to the appreciation of the lev against foreign currencies. According to the current legislation in the country, the Bulgarian lev is fixed to the common European currency - euro in the ratio EUR 1 = BGN 1.95583 and the risk of depreciation of the lev against the European currency is minimal, but there is a risk of adverse changes in the euro against other major currencies, such as the US dollar, the Swiss franc, the British pound and others. Given the export orientation of most of the companies in the group of Stara Planina Hold Plc, changes in the values of currencies have a certain effect and are a risk factor for their activities. Exchange rates affect revenues from sales abroad and the cost of deliveries of imported raw materials as they largely compensate each other. Due to the fact that these companies make their main payments in BGN and EUR and realize the main part of their sales revenues in EUR, the impact of this risk on their activity is significantly reduced. The management of the holding observes the movement of the exchange rates and takes measures to avoid the negative consequences of their change. Changes in the values of currencies have a certain effect and are a risk factor for the activity. Exchange rates affect revenues from sales abroad and the cost of supplies of imported raw materials. The annual growth of the average monthly US dollar/BGN exchange rate by the end of 2022 is 6.8 % in favor of the BGN. At the same time, the end of the third quarter of the year, the common European currency reached its lowest level against the US dollar in 20 years - 0.9538 US dollars for 1 euro, and at 11. the end of January 2023, the euro rose to 1.0929 US dollars which is its highest level since April 2022 and represents an increase by more than 14 % from the lowest value in September. The political risk is the probability of occurrence of serious domestic political upheavals that will lead to a negative change in the government's economic program and its priorities for economic development, as a result of which the environment where companies operate will change in a negative direction, and investors will suffer losses. As of the date of this report, the political instability in the country from the last three years does not appear to have been resolved. It continues being assessed as one of the main reasons negatively affecting economic activity and business environment in the country, mainly due to the seriously damaged principle of the rule of law, giving rise to legal uncertainty, including property security. According to the assessment of the World Bank, expressed in the spring report on the development of the economies of Europe and Central Asia of April 11, 2024, the political risks for Bulgaria are increasing again after the failed government rotation between the two governing coalition parties, which led to the fall of the last regular government in March 2024. The country is heading for another early election – the sixth in a row in three years – that threatens to slow reform momentum and jeopardize progress on key policy goals such as joining the eurozone in the near future. In addition, at the beginning of October 2023, with almost a year delay, Bulgaria officially submitted a request to the European Commission for the receipt of the second tranche under the National Recovery and Resilience Plan, intended to provide the member states of the Union with funds under the European recovery and resilience mechanism to support economic recovery. According to the schedule, Bulgaria was supposed to receive the second payment at the end of 2022, and the third and the fourth one - in the past year 2023. As of the date of this report, Bulgaria has not yet received payment under the second tranche, due to a delay in the necessary reforms at the national level, which, along with the financial- economic and geopolitical negative trends, further hinders the possibility of making the necessary investments, for the competitive functioning of the Bulgarian economy and to accelerate the pace of recovery of our country. Along with these factors, the lack of a principled, adequate and sustainable regulatory environment, numerous bureaucratic obstacles for businesses and citizens, high energy cost, the lack of human resources, as well as delayed and relatively insufficient direct support for investments lead to an outflow of capitals from the country and are major obstacles to attracting new ones in the medium and longer term. This hinders the reform program and Bulgaria's ability to fully invest EU funds and could also delay the country's accession to the euro area and significantly weaken the growth potential of the Bulgarian economy. The reduction of regulatory and other administrative burdens, especially for small and medium- sized businesses, including through the introduction of e-government in all areas, the real fight against gray economy, corruption, monopolization and cartelization, the implementation of a structured and balanced approach in the formation and implementation of national policies for a green transition, sustainable energy development of the country taking into account national priorities and guaranteeing energy supplies at minimum prices, easing and speeding up of the procedures for admitting workers from third countries and promoting their sustainable employment in Bulgaria should become real state policies with a view to achieving Bulgaria's strategic priorities for equal membership in the Schengen, the Eurozone and the OECD, thus ensuring acceleration of economic growth and improvement of the quality of life in our country. Internationally, the political risks for Bulgaria stem from the failure to achieve sustainable results in connection with our country's commitments to implement serious structural reforms in accordance with EU policies. Along with the ongoing negative consequences of the military conflict in Ukraine, the escalation of the military conflict in the Middle East appears to be an additional serious risk for our country and the world, given the inevitable negative economic and financial impact it is expected to have, both in line with the prices of oil, its availability and the resulting effects, as well as in terms of intensifying the pressure of refugee waves from the countries of this region. In the baseline scenario of the ECB's December 2023 macroeconomic forecast, this conflict is assumed to be geographically limited and 12. therefore not expected to have a significant economic impact on the euro area economy beyond what has already been observed. In the event of a hypothetical escalation of the conflict, however, ECB experts believe that around a third of the transit of oil and natural gas through the Strait of Hormuz could be disrupted, leading to a tightening of global energy markets. As a result, in the second quarter of 2024, oil prices would rise to nearly $130/barrel and natural gas prices would jump to EUR 83/megawatt hour. According to the European Commission's Winter Economic Forecast, attacks by Houthi rebels in the Red Sea are disrupting one of the main shipping routes for the global economy, which could have a significant negative impact on the EU economy given the fact that in 2022, around 23% of all imports of goods into the EU come by ships from Asia, most of which travel through the Red Sea. From the start of the attacks (October 19, 2023) to the end of January 2024, the average volume of transit trade through the Red Sea decreased by 70%, delivery times between Asia and Europe increased by 10-15 days, and the cost of container transport on several routes from China to Europe have increased by around 400%. Regulatory risk, including increased focus on sustainability: Regulatory risk is related to the impact of the existing regulatory framework at national and European level or its change, as well as the potential possibility of sanctions due to non-compliance with this framework. In recent years, Bulgarian and European businesses have been increasingly affected by intensively strengthening European and national regulation in many directions, including increasing focus on sustainability related issues o. Not infrequently, new requirements take effect faster than they can be implemented into related systems and processes, potentially disrupting normal business processes. In addition, the tendency to continually increase the administrative burden on businesses in the absence of reasonable and adequate relief greatly increases the costs required to comply with the new regulation and related reporting requirements. In addition to the indicated systematic risks, the activities of the companies in the group of Stara Planina Hold Plc are related to non-systematic risks such as industry risk, concerning the state and trends for development of a given industry as a whole and a company risk arising from the specifics of the company. Influence of the main risks and uncertainties According to the December 2023 ECB Economic Bulletin, risks to economic growth are on the downside. Growth may be weaker if the effect of monetary policy turns out to be stronger than expected. A weaker global economy or a further slowdown in global trade could also dampen growth in the eurozone. The war in Ukraine and the military conflict in the Middle East are major sources of geopolitical risk. Risks to higher inflation include increased geopolitical tensions that could push up energy prices in the short term, and extreme weather events, that could cause food prices rise. Inflation may also turn out to be higher than expected if inflation expectations rise above the target level or if wages and the rate of profit rise more than expected. The ECB's December 2023 non-energy commodity price assumptions have been revised upwards for 2024 and downwards for 2025 following the September 2023 projections amid mixed trends in international metal and commodity prices. Metal prices rose mainly due to favorable economic news coming out of China. The World Bank's assessment of Bulgaria, reflected in the autumn forecast for 2023 for the Europe and Central Asia region, indicates that our country needs new policies and ambitious reforms to stimulate economic growth in order to reach middle income levels in the EU in the next 15 years. Bulgaria needs to address its institutional and governance weaknesses and ensure fair competition to increase business efficiency and expand the private sector. The results from a survey as from the end of the year 2023 among the members of the Bulgarian Industrial Capital Association of (BICA) - a nationally representative employer organization uniting the majority of public companies in the country, show rather pessimism regarding growth in the coming year. The data shows that 4/5 of the respondents expect sales to decrease or remain at the 2023 level and regarding the financial result 43 % of the respondents believe that in 2024 it will decrease compared to 13. the financial result in 2023, 33 % believe that it will remain at the same level and only 24% are optimistic that the 2024 financial result will be better. 4 out of 5 of the surveyed entrepreneurs expect that exports will decrease or remain unchanged in 2024 compared to 2023. The expectations related to domestic investment activity are also indicative – 43 % of the members - respondents are considering to keep investments at the 2023 level and 29 % of them believe that the amount of investments in 2024 will decrease compared to 2023. An additional serious factor that will continue having a negative impact on the competitiveness of the Bulgarian business compared to that of other European countries is the decision to partially accept Bulgaria and Romania in the Schengen area. On 30 December 2023 – 12 years after the European Commission first confirmed that the two countries met the criteria, the Council of the European Union adopted a decision that will lead to the abolition of air and sea border controls with the remaining Schengen countries from the end of March 2024 but not to the opportunity to use the economic benefits from the abolition of land borders, through which the main volume of goods passes - about 97% of the parcels. This will continue depriving our country of opportunities to improve the business climate and attract investments, with a value of lost benefits due to the lack of free movement of goods of around BGN 1 billion per year. Factors that will continue influencing the activities in 2024 are the market prices of raw materials and materials for production, the transport of supplies, the regional market price of labor, the prices of energy resources and the security of their supplies. Given the ongoing military conflicts in Ukraine, the Middle East and the obstruction of the transport route through the Red Sea, as of the date of this report, we assess the risks associated with securing the supply of materials, as well as the sale of finished products to partners related to the affected regions as highly elevated. Along with the threat to European and regional stability, the geopolitical situation puts at additional risk the supply of energy resources and the possibilities for sustainable growth of the economy. The effect of the measures taken at the European and national level, as well as the countermeasures imposed accordingly, will have an impact on the activities of the enterprises of the group and may lead to an adjustment of the expected business results. The deteriorating business environment in the European Union, expressed in high energy price levels, the continuous imposition of numerous complicated regulations that significantly increase the administrative burden for business, demotivates entrepreneurial activity and leads to an outflow of capital from Europe, lowering competitiveness and hindering economic growth. Given the negative demographic trend in the country, the lack of a state policy that eases labor immigration and a business-aligned methodology for personnel planning and training, the shortage of human resources continues being one of the main risks that every business in Bulgaria faces with a growing negative impact. Against the background of the described risks, the company's management recognizes high uncertainty regarding the global economic and geopolitical outlook that has deteriorated significantly in the past year due to numerous factors, all of which may continue to intensify. Possible changes in the demand for the manufactured products are also risky due to changes in the price levels, quality, reliability and solvency of the consumers, the technologies used and the organization of the production. No asset sales are anticipated in the near future. II. Consolidated Non-financial Declaration The consolidated non-financial declaration of Stara Planina Hold Plc and the companies in the group has been prepared on the basis of the provision of art. 51 and according to the requirements of art. 48 of the Accountancy Act. The declaration provides description of the policies applied by the group with respect to activities conducted in in the field of ecology, social issues and those related to employees, respect for human rights, fight against corruption and bribery. All companies in the group strive to introduce and apply practices of good corporate governance and social responsibility, applied by Stara Planina Hold Plc as a parent company. 14. Good corporate governance and social responsibility policy The corporate policy of Stara Planina Hold Plc is based on responsible, sustainable and transparent management in accordance with the recognized standards and principles of good corporate governance, changes in the regulatory, financial and economic environment where the companies in the group operate and the principles of corporate social responsibility, reflecting the responsibility of enterprises for their impact on society, environment and the economy as a whole. Stara Planina Hold Plc and the public companies in the group have their own long-term good corporate governance programs, subject to the principles of: • responsibility and independence of the corporate Boards; • shareholders’ rights protection and ensuring equal treatment of all shareholders; • ensuring the recognition of the rights of persons interested in the management and sustainable development of the company and promoting cooperation with them; • ensuring timely and accurate information disclosure about the financial standing, operational results, ownership and management of the company; • effective control over the activities of the board of directors and its accountability to all stakeholders. The activities of the non-public companies in the group are in compliance with the main priorities and directions of the corporate program of Stara Planina Hold Plc. The corporate governance of the group is carried out in accordance with the constitution, laws, by- laws and applicable regulations of the Republic of Bulgaria and the jurisdictions where they operate. In all their actions the companies in the group of Stara Planina Hold Plc comply with the relevant provisions of the current legislation and monitor the renewal and strict application of the requirements concerning their operations. Business model Our mission Stara Planina Hold Plc unites industrial enterprises dedicated to manufacturing of products intended to meet various consumer and business needs. Our investment portfolio includes companies operating in the machine building, electrochemical industry, in the field of finance and in the field of perfumery, cosmetics and textile. We participate in the development of the Bulgarian industry by achieving European and global level of quality, productivity and profitability of our business. Our success is being shared among all parties involved in its achievement. Our values We believe that the world will always need a modern and productive industry that in at the core of wealth throughout the world. We believe that the Bulgarian industry can rise to the challenge of accelerated development imposed by the global economy by focusing on people's knowledge, the resultant innovations and the investments that make them happen and we sustainably implement these policies in all companies in the group. We believe that achieving high goals is a reward for the work and collaboration of all parties involved in our development and that it is possible to share our success on a large scale. Our future Stara Planina Hold Plc will continue managing its subsidiary companies setting high goals in terms of quality, safety, productivity and profitability. Our leading priority is to increase productivity along with increasing the satisfaction of our employees and customers, as well as the quality of the products manufactured. We will continue investing annually in technological renewal, innovation and infrastructure improvements, as well as in the development and training of our employees by providing opportunities for their professional realization. 15. Important task for 2024 again will be to achieve high quality, productivity and profitability of our activities, in order to maintain our market positions. This will require us to continue to offer good prices, high quality and short delivery times. Under these conditions, achieving good financial results with the expected volume of production is the main priority for the companies in the Group, thus guaranteeing the investments of shareholders and increasing their well-being. Organizational structure The corporate governance of Stara Planina Hold Plc is a system with clearly defined functions, rights and responsibilities at all levels - General Meeting of Shareholders, Board of Directors, Audit Committee, employees. Each of the companies in the group of the holding has an operating organizational structure compliant with the legal and organizational form of the company and the nature of the respective business processes. All companies in the group follow the policies of corporate governance and social responsibility of the parent company Stara Planina Hold Plc. General Meeting of Shareholders - the main governing body, enabling shareholders in making decisions on fundamental issues regarding the activities of Stara Planina Hold Plc and the joint stock companies in the group. Board of Directors - defines the strategy for development and management of the holding and the companies in the group by resolving all issues within the scope of activities, except for those that are the exclusive competence of the General Meeting of Shareholders. The Board of Directors is elected by the General Meeting of Shareholders with two of the members being independent directors. In its capacity of a company of public interest and in accordance with the requirements of the Independent Financial Audit Act, an audit committee has been established and operates in Stara Planina Hold Plc. Employees - Stara Planina Hold Plc has an average number of 7 employees under employment contracts. The company has outsourced the legal services to a law firm. All company employees have university degrees and adequate qualifications for the positions occupied. A total of 2353 employees work for the enterprises in the Group of Stara Planina Hold Plc. 2124 of them or 90.27 % work in the three largest companies. In 2023 the number of employees in the group of Stara Planina Hold Plc reported a decrease by 3.96 % compared to the previous year. Number of people employed by all enterprises of the Group of Stara Planina Hold Plc * forecast 2082 1943 2004 2164 2124 1885 2477 2276 2318 2450 2353 2115 2019 2020 2021 2022 2023 2024 Total Three the largest enterprises 16. Labor productivity per employee in the Group (thousand BGN) * forecast Against the background of the indicated increase in the number of employees in the group in 2023, labor productivity reported an increase by 5.2 % compared to the previous 2022 year and a 34.65% growth compared to 2021. With the expected decrease of sales revenues in 2024 by approximately 12%, at this stage we anticipate a decrease in the number of employees by approximately 10 % compared to 2023 with an expected decrease of labor productivity by approximately 24 %. Infrastructure The production and administrative facilities of the enterprises are located on their own territory. The infrastructure of the enterprises of the group consists primarily of: • Technical infrastructure – includes equipment and machinery, storage facilities and transport network on the territory of the enterprises • Social infrastructure – includes activities on the physical working conditions, social interactions, breaks and healthcare. • Information structure – includes reliably built information bases. • Sales infrastructure – The companies in the Group operate in the domestic market, in the European Union and in third countries. The products of our companies are sold in more than 100 countries and are appreciated by customers such as Palfinger, Pinguely, Terex handlers. Production Low-speed, high-torque orbital hydraulic motors Hydrostatic power steering systems Hydraulic valves, breaks and accessories for them Hydraulic piston cylinders Hydraulic telescopic cylinders Hydraulic plunger cylinders Hydraulic rack cylinders Starter batteries Traction batteries Stationary batteries Essential oils - rose oil; lavender oil Natural flower waters Concretes Absolutes Sauces and compositions Perfumery cosmetics Perfume compositions Men's, women's and kid's socks Sport socks Children's tights Women's top knitwear Men's top knitwear Raw materials used Machine building - ferrous metals (steel and cast iron), sintered items, gaskets, springs, sealing elements and other parts made primarily of polyurethane, fitting kits, packaging and auxiliary materials. In very limited cases, non-ferrous metals are used. Sheet metal, rails, pipes, powder coating, fixing 90.6 88.0 119.6 153.1 161.1 122.2 2019 2020 2021 2022 2023 2024 17. elements and plastic elements. Batteries - lead and lead alloys. The raw material is delivered in the form of blocks and is stored on a designated site. Polypropylene and polyethylene are also used in the production of rechargeable batteries for which there are no special transport and storage requirements, nor any special requirements towards their suppliers. Light industry - The main raw materials used in the production of rose oil and the perfume industry are plants and herbs. In the production of vinegar are used quality wine material, apples supplied from farmers, sugar, alcohol and yeast. The packages are made of PET. Textile - Cotton and bamboo yarn, small percentages of lycra, polyamide and elastomer. Wool and combined wool-acryl, wool-polyamide, cotton-acryl, cotton-viscose yarns. Production inputs are accompanied by the necessary quality certificates. The companies work primarily with suppliers and contractors that adhere to high environmental standards and apply the best environmental management practices, including energy efficiency and effective resource utilization, waste reduction and management. Transport used for the delivery of raw materials and chemicals and for the sale of production For delivery of raw materials and chemicals and shipment of finished products is used road and railroad, sea and air transport. The main criterion when choosing a forwarding company is the transit time of transport and delivery, as well as strict compliance with safety standards and relevant regulatory requirements. A sustainable policy of the companies in the group is to partner with companies that have a license for international and domestic transport, disposing with the necessary equipment and reliable certificates to transport dangerous and specialized consignments. Fuel and chemicals used Natural gas - Mainly used for heating. Supplied to the production facilities over gas pipes that are subjected to checks by the State Technical Supervision. Fuels (petrol, diesel, propane-butane) fuels and lubricants. They are used mainly for the purposes of in-house transport. Hydraulic oils - Used as a production input for finished hydraulic products. Concentrated sulfuric acid - Used for the production of batteries. Delivered by a specialized transport and stored in specially constructed tanks. Paints and coatings - Used in painting and galvanization processes. This includes varnished polyurethanes, solvents, hardeners, epoxy primer, specific salts, sodium compounds, acids, etc. Liquefied oxygen and carbon dioxide - Delivered by a specialized transport – tank trucks operated by licensed companies holding special permits (ADR). They are stored in specialized containers which are subjected to checks by the State Technical Supervision. The STIO checks conducted throughout the year did not find any deviations. Cleaning chemicals and detergents for textile items – perchlorethylene and silicone softener. Environmental protection Description of policies and their objectives Stara Planina Hold Plc pays special attention to the impact on the environment that the productions of the enterprises in the group have. They annually report on the assessment of the environmental impact and the measures taken in this direction and annually make investments in the implementation of the common corporate policy for transition to a cleaner and green economy. The main policies of the companies in the group are focused on compliance with the environmental norms and standards for the production activities, reduction of harmful emissions from electricity consumption through construction and commissioning of photovoltaic systems for generating energy for their own needs and implementing other energy efficiency measures. With regard to all new projects and investments of Stara Planina Hold Plc and the companies in the group, including the purchase of new technical equipment, a preliminary assessment is made on the 18. environmental impact. The policies of the production companies in the group require a periodic review of the environmental impact of the energy use and are mainly aimed at: • reducing energy consumption from conventional sources; • increasing energy efficiency; • use of less polluting fuels; • implementation of renewable energy technologies. М+S Hydraulic Plc - The policy of the company on the environmental protection and reduction of harmful environmental effects is an integral part of its Development Program. Integral parts of the Environmental Program are the Environmental Management Action Plan, the Waste Management Program and the Waste Management Action Plan. Activities, measures and tasks are identified in the action plans, and respectively funds are provided, deadlines and responsible persons for their implementation are specified. The management of hazardous waste: oils, lubricating and cooling fluids, filtering elements, rechargeable batteries, residues from lapping and grinding, etc. is at the necessary level: the built sites for the temporary storage of hazardous waste in Kazanlak and the three branches are maintained in good condition, contracts have been concluded with companies certified by the respective Regional Environmental and Water Inspectorates for the handling of such waste, other companies with permits are being sought with the aim of alternative options and/or expanding the range of waste delivered. For 2023, the company's expenses for the transfer of hazardous waste are BGN 94.1 thousand, and the income from the industrial waste transferred for recovery is BGN 983 thousand. A contract is in place with an organization for utilization of packaging waste and thus the requirements arising from the Ordinance on packaging waste are being fulfilled. For 2023 the fees paid to this organization amount to BGN 23.6 thousand. Every year, the company adopts and implements a Plan-program for its own environmental monitoring, covering all structural units and processes. The company has its own wastewater treatment plant, maintained in good technical condition. The company carries out its own monitoring of water purity. The quality control of the company’s waste waters is periodically conducted by the laboratory of the Wastewater Treatment Plant, Kazanlak, located in the village of Ovoshtnik. The funds spent on chemicals in the industrial waste water treatment plant in 2023 are in the total amount of BGN 9.7 thousand. In order to preserve the purity of the atmospheric air, every year an accredited laboratory performs measurements of the concentration of organic carbon released into the atmosphere from organized sources /chimneys / in the areas for painting the products. Based on the results of these measurements, the ecologist prepares a Solvent Management Plan /RMP/, approved by the Regional Environmental and Water Inspectorates - St. Zagora. In order to control the quality of the groundwater used by the company for industrial purposes, an analysis of its quality is carried out regularly on an annual basis by an accredited laboratory. The results of the analysis are presented in the Basin Directorate "Eastern White Sea Region", Plovdiv. The noise emitted by the company along the boundary of the property is regularly measured in order to prepare a noise map and assess the impact of noise in the environment. All environment related activities are defined and conducted in accordance with the publicly disclosed Environmental Policy and the procedures provided for in the Environment Protection Management System (EPMS) operating in the company thus contributing to the systematization and improvement of the environment related activities. The Environment Protection Management System (EPMS) was successfully certified for compliance with the new standard ISO 14001:2015. The Environment Protection Management System which has been developed and implemented in accordance with the requirements of both ISO 14001:2004 and OHSAS 18001:2007 (Occupational Health and Safety Management System) are part of the Integrated Management System which also includes the existing Quality Management System under ISO 9001:2015. Hydraulic Elements and Systems Plc – Since 2005 the company has been maintaining and developing the implemented management system according to the requirements of the international 19. standard ISO 9001-2008 by TÜV Rheinland in all its activities and units, in order to increase the efficiency and quality of work while ensuring healthy and safe working conditions and environmental protection. An audit is performed annually /pursuant to order № 254 /16.11.2021/ analyzing the overall activities of HES Plc for the implementation of the Safety measures management system. The main organization and coordination activities related to risk management, achievement of healthy, safe and environmentally friendly working conditions and compliance with the applicable environmental protection standards related to air, water and waste are reviewed and evaluated. In order to prevent and limit the impact of the activity on the atmospheric air, a solvent management plan has been developed and approved by the Regional Environmental and Water Inspectorates - St. Zagora. The air filters are periodically changed and the technological equipment - checked. An accredited laboratory regularly monitors the metal surfaces coating installation and the installation for deposition of metal coatings - galvanization section. An installation has been built for safe firing and cleaning the painting devices. The paint installation has been replaced with new primer and paint chambers with automated processes with a minimum of human participation. Water consumption is carried out with a permit - № 31530045 /07.07.2008, amended and extended by a decision № RR - 3988 /13.10.2020 for groundwater abstraction. The company has its own plant for galvanic wastewater treatment, maintained in good technical condition. The company carries out its own monitoring of water purity. Control over the quality of the company's wastewater is periodically performed by an accredited laboratory. The chemical analysis of the controlled parameters is within the permissible norms. In 2023, the galvanic section was modernized. A new aspiration was built and a reverse osmosis system was introduced. Software has been introduced to manage the galvanizing, dechroming and washing processes. Chemical pumps and waste water vessels have been replaced at the treatment plant. The premises are air-conditioned. Generated waste is being stored at the place of formation until their transfer to a licensed company holding a document under Art. 35 of the Waste Management Act for subsequent treatment. Periodic inspection of warehouses for storage of hazardous waste is carried out. Elhim-Iskra Plc - The company has a long-term policy in terms of human health and environmental protection. Activities on preventing air, water and soil pollution are one of the major priorities of the company. The company has introduced an Environmental Management System. The system covers implementation of the activities in a way that guarantees protection of the environment; permanent monitoring, inspection, control and management of the processes and activities affecting the environment; analysis and assessment of the impact of the used raw materials and inputs used on the environment; preventive actions so as to avoid environmental pollution; compliance with all laws and regulations, as well as the internal regulations adopted by the Company, including the internal environmental protection company rules; constant research and implementation of new environmental technologies. The environmental system of Elhim-Iskra Plc has been developed in accordance with the requirements of the issued Complex Permit, regulating the emission standards and requiring adoption of good environmental management practices and ensuring a systematic and thorough approach to environmental issues. The company monitors periodically all of the identified aspects of environment: air, water, soil, noise, water use, waste management. Elhim-Iskra Plc has a Waste Management Company Program approved by the Regional Environmental and Water Inspectorates - Pazardzhik. According to the Waste Management Act, the company, as an entity that places products on the market, after the use of which widespread waste is generated, fulfills its obligations through collective systems, represented by waste recovery organizations. For all generated industrial and hazardous waste, the company has concluded contracts with companies that have a permit for their utilization or disposal. During the annual control measurements conducted by accredited laboratories and the company itself, no violations of the emission norms prescribed in the Complex Permit have been found. 20. In 2023, eight inspections of the company were carried out by the Regional Environmental and Water Inspectorates and the Basin Directorate. No sanctions have been imposed for violating the conditions of the permit or non-compliance with the regulations. During the complex inspections of the company in 2023 for the fulfillment of the conditions of the complex permit, no inconsistencies in the fulfillment of the conditions were found. On this basis, the company has paid 30% less water abstraction fee, according to the Law on the Waters. Bulgarian Rose Plc - The company has adopted a Policy on the reduction of the cost of natural resources related both to reducing environmental pollution and reducing the financial costs of energy consumption. The company has an approved Waste Management Program. Special sites have been set up for storing household, industrial and hazardous waste which are collected separately and controlled by the Regional Environmental and Water Inspectorate. For the purpose of recycling packaging waste, the company has a contract with ECOBULPACK - a national-level organization for recycling packaging waste. There is also a permanently operational Industrial and Household Wastewater Treatment Plant. Waste water is regularly subjected to monitoring of physical and chemical indicators by submitting samples for analyses at a licensed laboratory. In order to preserve the air pure, the company conducts regular preventive maintenance and technical activities on its steam plants. Gas emissions released during boiler operation are subjected to technical inspections and monitoring. In order to preserve the purity of the air, the necessary prophylaxis and technical measures of the boilers in the steam power plants of the company are regularly carried out, which are put into operation only during the rese picking campaign. Technical supervision and monitoring of the emissions of gases released during the operation of the boilers is performed. Textile industry - The companies follow a policy on environmental issues which is part of the Program for management of the processes and operations in the company aimed at ensuring environmental protection. The companies comply with the requirements of the current legislation governing the acceptable norms and emissions of substances in accordance with the regulation on industrial wastewater discharge. They have their own treatment plants, the use of which is mandatory is mandatory in dyeing operations. All sensitive processes are subject to continuous assessment: materials, inputs, energy, water, emissions, waste and their alternatives which makes it possible to find ways to reduce the impact of these processes on the environment and reduce them to the necessary and required limits. In 2023, no sanctions have been imposed on any of the companies in the Group for environmental pollution. All industrial enterprises in the Group have waste management programs approved by the Regional Environmental and Water Inspectorates and fulfill the requirements provided in the regulations. The companies have their own policies on the reduction of natural resources costs which costs are related both to the environmental pollution reduction as well as to reduction in the financial costs of energy consumption. The companies in the Group of Stara Planina Hold Plc conduct a responsible policy on environmental protection and reduction of adverse environmental impact of their operations as part of the development strategy. Main activities completed in 2023 The companies report on and update their environmental protection programs on an annual basis. The conducted monitoring covers all structural units and processes. The staff training programs include environmental training at different levels - managers and specialists. There are also practical classes on simulations of environmental emergencies, such as prevention of contamination in case of large-scale spillages, etc. Licensed companies are assigned with measurements of air purity, taking into account the level of concentration of organic carbon in the atmosphere from organized sources (smoke stacks). Accredited laboratories periodically monitor specific processes such as the solvent management system, metal coating installations which falls in the OS consumption category with threshold values above 15 t/y. 21. Accredited laboratories make analysis of the water sources used thereby controlling the chemical parameters in order to achieve compliance with the acceptable limits. Special waste is being stored under control until handed over to licensed companies certified under Art. 35 of the Waste Management Act for further treatment. Planned periodic inspections of facilities and warehouses for storage of hazardous chemicals are carried out. The larger companies have employed an environmental specialist responsible for the control of the activities on the management of waste generated by the companies, compliance with prescriptions and maintenance of relations with the respective state and municipal bodies. The specialist is also responsible for maintaining the internal regulations updated in compliance with the current environmental regulatory framework. The results from the completed activities in the field of environmental protection have been achieved through the implementation of various projects. Energy efficiency improvement leads to reduction in the use of natural raw materials and reduction of the generated waste, rational redistribution of products, separate collection and disposal of waste. In order to reduce the consumption of purchased electricity and for the purpose of efficient use of inexhaustible natural resources, in 2022 and 2023 two "Photovoltaic plants for own needs" with a capacity of 0.800 and 0.998 MW were built and put into operation by M+S Hydraulic Plc. The main investments of the company in this direction in 2023 are: - Construction of a photovoltaic power plant (PPP) for own consumption, with an installed capacity of 999.00 kWp on a metal structure for sun protection above a parking lot in the amount of BGN 936.8 thousand; - Utilization of waste heat by implementing a ventilation system to remove hot air from the furnaces in the amount of BGN 12.5 thousand; - Improving energy efficiency by implementing the energy consumption monitoring system in the amount of BGN 18.7 thousand. In 2021, as part of the investment program of HES Plc, the construction of the first own photovoltaic system with a capacity of 997 kW was completed, which was put into operation in March 2022. The total amount of the investment is BGN 1071 thousand. Through this system, the consumption of purchased electricity from conventional sources has been reduced. In 2022 8.95 % of the company's energy needs were met through its own production of energy from renewable natural sources and in 2023 – 9.17 %. As another step of the company's sustainable development strategy, with the aim of increasing the share of clean and renewable energy generated for the company's own needs, and also with the aim of further reducing dependence on conventional energy carriers, a second photovoltaic plant was built in 2022 - 2023 a 999 kWp system located on the roofs of production buildings and on the structure of the car park. The value of the investment is BGN 1 406 thousand, and commissioning took place in November 2023. In 2021 Elhim-Iskra Plc invested over BGN 680 thousand for the construction of a photovoltaic system with a capacity of 997 kWp that was completed, connected and put into operation and covers 12.2 % of annual electricity consumption for own needs. In 2022, the company made investments in the amount of BGN 2 499 thousand for maintenance and purchase of new assets. At the end of 2023, Elhim-Iskra Plc concluded a contract with the Ministry of Innovation and Growth for the implementation of a project "Construction of new photovoltaic systems for self- consumption in combination with batteries" under the National Recovery and Resilience Plan with the purpose of increasing energy independence, achieving sustainable development and increasing the environmental friendliness of the company's production. The total value of the project is BGN 2 740 102, and the amount of the grant, provided by the European Union under the Recovery and Sustainability Mechanism is BGN 989 898. The investment program of the company includes the construction of a photovoltaic park with a capacity of 1 MWh and an energy storage system for it. The environmental management system is part of the general management system of each company and for 2023 it functioned integrated with the quality management system and the system for health and safety at work at the level of processes, activities and functions. 22. A positive result of the implemented environmental policy is ensuring and simultaneously achieving efficient business, effective cost control, energy saving and reduction of harmful emissions. In accordance with its environmental protection policy, companies make efforts to reduce CO2 emissions by implementing consumption efficiency measures, generating energy by building and commissioning photovoltaic systems to produce energy from renewable sources for own needs. Environmental protection costs (BGN’000s) * forecast In 2023, the total amount of costs of the companies in the group of Stara Planina Hold Plc in the implementation of the environmental protection policies reports an increase by 70.82 % compared to the previous year. The stated costs do not include the investments for construction and commissioning of the photovoltaic systems in order to increase the share of clean and renewable energy, generated for own needs and represent all the costs of the companies in the group, regardless of the requirements of the Taxonomy Regulation and the delegated regulations thereto. We anticipate that in 2024 the costs without the planned investments in this area will be worth BGN 924 thousand which will account for a decrease by about 22 % compared to 2023. Future objectives and upcoming tasks In the field of environmental protection, the Group of Stara Planina Hold Plc is committed to conduct a policy aimed at effective protection and prevention of pollution; effective and efficient utilization of natural resources, including energy, in order to preserve it. The companies will operate in compliance with the regulatory framework in the field of environmental protection. Annually they plan funds for training, awareness and motivation of employees to perform their duties in a high quality, in a safe and environmentally friendly manner and in accordance with the adopted policies and regulatory framework. The companies continue the practical steps on the reduction of natural resources costs which costs are related both to the environmental pollution reduction as well as to reduction in the financial costs of energy resources. The investment programs for technological update adopted with the business plans for the companies will introduce new machinery, equipment and technologies that reduce the adverse impact on the environment, including activities on the streamlining of recirculated use of treated water and closed cooling water cycle. The next step in the implementation of the energy efficiency policy of the companies in the group is the development and implementation of an energy storage system generated from renewable sources, which allows for its intelligent use by connecting the photovoltaic system with storage batteries. Ecological risks Climate change related risk Climate change could adversely affect the activities of the group companies directly and indirectly. Direct risks are associated with natural disasters or permanent changes to the business environment caused by climate change which could lead to endangering the health and lives of people employed in 382 358 509 699 1194 924 2019 2020 2021 2022 2023 2024 23. companies and consumers of manufactured products, as well as to the destruction of infrastructure related to their activity. Such an adverse impact from climate change could require additional costs to address the issues, in addition to sustainable investments in energy efficiency. The indirect effects of climate change can include sudden changes in the prices of energy carriers and other raw materials which will lead to difficulties in supply and demand or to a change in the standards to which products produced by the companies in the group should meet. Climate change may also lead to a shift in the regulatory framework towards imposing excessive and inadequate requirements on production processes, leading to increased operating costs or loss if companies are unable to meet the new requirements . At this stage, the impact of climate change on the activities of the group companies is estimated to be weak in the short term, but in the medium and long term it could increase. Environmental risks arising from the activity The adoption of an environmental management system ensures a continuous process of minimizing the risk of pollution and other adverse effects on the environment, efficient use of resources and higher efficiency of companies’ operations. Risks that could lead to adverse effects on the environment as a result of the companies’ operations are related to water pollution from the wastewater used in the production process in case of an accidental spillage of chemicals or air pollution due to accidental release of harmful emissions. Such risks are minimal but nevertheless the companies have developed early warning mechanisms and environmental incident response plans. The readiness to react immediately in case of events with potentially adverse effects on the environment is subject to an ongoing monitoring. Social issues those related to employees Description of policies and their objectives Stara Planina Hold AD and the companies in the group apply a corporate policy in the social field. The rules of conduct set out in the Code of Ethics of Stara Planina Hold Plc and the companies in the Group are subject to the following basic principles: • Competence – using the knowledge and experience that managers and employees have in performing their functions and continuous improvement of their professional skills. • Confidentiality - protection of the facts and circumstances that have become known to managers and employees during or on the occasion of performance of their duties. • Honesty - honest and ethical behavior in accordance with generally accepted rules. • Independence - not allowing a manager or employee to be influenced by related parties with regard to his work. • Objectivity - true, accurate and impartial collection, analysis and evaluation by the manager and the employee of all facts and circumstances in performance of his duties. The success of enterprises is based on social responsibility that requires consideration of the impact that the company's activities have on the local community, society, environment and the economy as a whole. This approach contributes to achieving the group's long-term goals and sustainable growth, as well as to establishing transparent and honest relationships with all stakeholders. Each company identifies the stakeholders in relation to its activities based on their level and sphere of influence as well as their role and effect on the company’s sustainable development and those which in turn may have an impact on company's operations including shareholders, stakeholders, customers, suppliers, employees, creditors, public groups, and state and local government bodies, etc. In compliance with the requirements of the Law on the Protection of Whistleblowers or Persons Publicly Disclosing Information on Violations (Whistleblower Protection Act), in 2023 the Board of Directors of Stara Planina Hold Plc and the Board of the companies in the Group approved Whistleblowing Rules relevant for the respective company and for the subsequent actions thereto. The companies have created internal channelя through which a signal can be submitted - in writing or verbally. A form for registering a signal for submitting information on violations according to the Whistleblower Protection Act can be found on the companies’ websites, on the website of the Commission for Protection of Personal Data or can be provided in the office of the respective company. Signals are to be submitted 24. to the responsible employee, designated by a decision of the company's Board of Directors. Stara Planina Hold Plc and the companies in the group maintain on their websites up-to-date information under Art. 12, para. 4 of Whistleblower Protection Act which is also available at the companies’ offices. The companies in the group of Stara Planina Hold Plc have approved human resources management policies, aimed mainly at improving working conditions, raising qualifications, raising incomes, social support while respecting basic human rights and carrying out other activities, that contribute to maintaining the health and working capacity of employees. The following policies are applied to the persons employed in the companies in the group of Stara Planina Hold Plc: • The requirements and standards for safe and healthy working conditions have been introduced and applied. All companies in the group undergo a mandatory audit of the provided working conditions in accordance with the requirements of the Bulgarian legislation. Periodically repairs and renovations of the working premises are carried out in order to improve working conditions. • Periodic risk assessments are carried out to identify remaining risks of accidents or illness in the workplace and to reduce the impact of these risks on employees by taking the necessary measures in a timely manner. • The management bodies of the companies in the group maintain effective social dialogue with the trade unions, which, along with the existing collective labor agreements in force, supports the implementation and improvement of good practices for corporate social responsibility, both for the employees themselves and for their families. • All companies adopt and implement annual occupational health and safety programs. • Free medical examinations and care for all employees of the companies are provided and regularly performed. • Equal rights and opportunities for work and career development of employees are provided, based solely on the qualification, personal qualities and results achieved in the work process. Direct or indirect discrimination in employment or at work is not allowed. • The remuneration setting system is based on uniform, objective criteria, and the system for applying bonuses to the payment of employees is based only on the achieved good results at work. • A policy for providing social allowances to the remuneration of employees has been introduced and is being implemented - food vouchers are provided on a monthly basis; travel expenses for distance from the place of work to the permanent address of the employees are paid; treatment aids are provided, as well as for personal occasions; bonuses are provided for the Easter and Christmas holidays. • On the territory of all companies in the group are separated rest areas, conditions for sports activities are provided, which are financed by the companies. In some of the companies, sport teams have been formed in various team sports where each employee has the opportunity to join. • For the employees of the companies in the group, insurances are concluded, such as life insurance, “Accident at work” and “Accident and general illness”. • A policy for continuous promotion of training and qualification is in place - all of the companies in the group organize and conduct introductory trainings, courses for acquiring professional qualification and /or trainings for raising the qualification. • For employees willing to increase their education and qualification in a profession in the company’s scope of activity, the larger enterprises in the Group pay 50% of the semester fees for the respective higher education. • Larger companies work in partnership with vocational secondary technical schools in the respective city, providing conditions for conducting a dual form of education (work-based learning) with students from 11th and 12th grade and provide scholarships for student education from 8th to 10th grade. • Issues related to quality, environment, health and safety are of primary importance and therefore the major companies maintain and develop integrated management systems in compliance with the requirements of leading international standards for quality management (ISO 9001: 2015), environment ISO 14001: 2004), health and safety (OHSAS 18001: 2007), with the active participation of highly qualified specialists and engineers. Stara Planina Hold Plc and the companies in the group annually support the development of the 25. local community by financing various sports and social organizations, cultural events, construction of infrastructure facilities in partnership with the relevant municipal authorities and participate in socially significant donations. Main activities completed in 2023 In 2018 Stara Planina Hold Plc contributed 25% of the capital for the incorporation of a Medical Center for Health Prevention which provides early diagnosis, treatment, rehabilitation and prevention services to the employees of the companies in the Group. The actives during the reporting period are being completed on an annual basis. They include assessment and re-assessment of workplace risk, monitoring staff health, analysis of and recommendations for action and risk-free behavior at the work place in order to prevent risk and reduce morbidity; training and professional qualification as well as incentives and bonuses provided for in the policies. The machine building companies invest additional funds to provide specialists for the production. For workers and employees wishing to increase their education and qualification in a profession in the field of mechanical engineering, the managements of these companies offer the conclusion of a contract for the improvement of qualification. Scholarships are paid to students and pupils in vocational schools, 50% of the higher education fee is covered for employees in specialized universities, internships and practices are organized on the territory of enterprises. The companies traditionally support local structures in financing various social, sport and cultural events. Every year Stara Planina Hold Plc participates in charity events of public importance. Since 2003 the holding has been regularly taking part in all editions of the charity campaign Bulgarian Christmas carried out under the auspices of the President of the Republic of Bulgaria. Every year Stara Planina Hold Plc makes a monetary donation for the Support a Dream initiative launched by the President of the Republic of Bulgaria aimed at organizing a prom night for disadvantaged young people. Every year Stara Planina Hold Plc participates in the charity campaign Easter for Everyone conducted by the Bulgarian Red Cross under the auspices of the Ombudsman of the Republic of Bulgaria. Stara Planina Hold Plc is regularly involved as a major sponsor of the national exhibition Inventions. Transfer. Innovations. Social activities costs (BGN’000) * forecast In 2023, the total value of the costs for social activities of Stara Planina Hold Plc and the companies in the group reported a growth by 14.5 % compared to the previous year. At this stage, we expect that in 2024 the costs of social activities will increase by 3.3% compared to 2023, with an expected decrease in the total number of persons employed in the group by nearly 10%. The active implementation of policies related to the sustainable development of the companies leads to creation of a more favorable social environment and a better quality of life for employees, 3022 2978 3795 5809 6651 6873 2019 2020 2021 2022 2023 2024 26. providing the necessary conditions and prerequisites for performance of employees’ professional duties, mastering good manufacturing practices, motivation and satisfaction with working and payment conditions. Future objectives and upcoming tasks Stara Planina Hold AD and the companies in the group will continue conducting a socially responsible policy to regulate labor and employment issues with a priority attention to its social aspects. In pursuance of the long-term human resources policies, the companies will continue adhering to the corporate social responsibility and applying their long-established traditions in the social sphere as well as the good practices in order to achieve the social objectives. Following the approved policy and business programs, a large part of the activities in the social sphere will thus be aimed at retaining highly qualified specialists and qualified workers and thus generally achieving high efficiency at each workplace. In 2024 we will continue the activities on monitoring the health status of the employees, promoting safe behavior at work; training, qualification upgrade and acquisition of new skills and capacity; improving working conditions and constant monitoring and control on the working environment factors. Increasing corporate culture aims to create and maintain strong motivation, creative environment within the team, high moral and integrity, and confidence in the future. Risks with a potential negative effect on employees’ development The management of the companies in the Group of Stara Planina Hold Plc strives to achieve maximum employee satisfaction. Any worsening of the current economic situation in the country and fluctuations in the markets where our business operates would lead to destabilization of the companies and thus to a decrease in the efficiency of the conducted social policy. We take measures to ensure the health and working capacity of employees, the continuity of our business and activities related to regulatory obligations. Policies with regard to the products and the counterparties of the companies in the group of Stara Planina Hold Plc • The companies in the group of Stara Planina Hold Plc consistently apply a policy aimed at increasing the level of quality and ensuring the safety of manufactured products to meet the growing needs of customers. Joint analyzes are regularly carried out between the product planning, design, engineering and quality assurance departments, on the one hand, and the sales and marketing departments, in order to improve product development, functionality and quality. • The companies in the group of Stara Planina Hold Plc apply quality management systems and carry out their production activities in accordance with the highest standards applicable to the respective production field. • The companies in the group of Stara Planina Hold Plc apply rules for confidentiality and protection of commercial information and personal data in order to protect customers, business partners and other stakeholders. • The companies in the group of Stara Planina Hold Plc group provide their partners with correct and timely information on the basic business rules, products, services and technologies and promote loyal business practices in accordance with the adopted rules for ethical business conduct and the current regulations. • The companies in the group of Stara Planina Hold Plc require their customers to comply with basic internationally recognized anti-corruption standards and those in the field of corporate ethics, environmental protection, human rights protection in order to establish a sustainable partnership. 27. • The companies in the group of Stara Planina Hold Plc operate only with suppliers that fulfill their social responsibilities in the areas: clean supplies, compliance with regulatory requirements and social norms, information security and respect for human rights, labor and safety and health conditions. Human rights issues The corporate policy of Stara Planina Hold Plc and the companies in the group is subject to the principle of respect for and observance of human rights, without any differences based on gender, race, nationality, ethnicity, citizenship, origin, religion, beliefs, political affiliation, personal or social status, age, sexual orientation, marital status, property, social or other status. We support the principles of the UN Universal Declaration of Human Rights, the International Labor Organization (ILO) Declaration on Fundamental Rights and Rights at Work, the UN Guiding Principles on Business and Human Rights, adopted by the UN Human Rights Council. In June 2011 and we apply them in the established labor relations with our employees. Stara Planina Hold Plc and the companies in the group implement policies to promote the equality of women and men by ensuring their equal treatment and preventing gender-based discrimination and violence; equal opportunities for women and men in all company activities; equal access to all resources; balanced representation of women and men in decision-making departments. Stara Planina Hold Plc and the companies in the group do not use or support the use of child labor or any form of forced labor, as well as any form of human trafficking. The companies do not employ children, and young workers are hired only for the purpose of conducting production practices in pre- approved specialties, such as practical training under a dual system of education for the acquisition of professional experience or in short-term internships approved by the companies. The methods of discipline and control in the workplace categorically exclude and do not allow the use of any form of physical, psychological or verbal violence. The group of Stara Planina Hold Plc does not allow discrimination in the workplace, in relations with business contractors - suppliers and customers, as well as in relations with all groups of stakeholders based on discrimination on any grounds. Issues related to fight with corruption and bribery The corporate policy of Stara Planina Hold Plc and the companies in the group is based on the principle of compliance with high ethical standards in all aspects and directions of corporate activities and consistent implementation of transparency policy. No forms of corruption, including bribery, are allowed or tolerated. In accordance with applicable anti-corruption and anti-bribery laws in the countries where the companies operate, any form of bribery between employees, business partners or any other professional practice that could create the appearance of undue influence is not permitted. The management and employees of Stara Planina Hold Plc and the companies in the group consistently apply the rules of conduct set out in the adopted Codes of Ethics and responsible work and business practices in accordance with the adopted rules for ethical business conduct and the current regulations. The standards adopted in the codes of ethics apply equally to all parties the companies have or may have relations with, such as shareholders, potential investors, financial analysts and other stakeholders. Strict accounting is performed in Stara Planina Hold Plc and the companies in the group, subject to annual internal and external independent audit control. All transactions are evaluated in advance and are subject to approval by the relevant corporate Board. Stara Planina Hold Plc has adopted a Policy on Transactions with Interested and Related Parties and a Procedure for Avoidance and Disclosure of Conflicts of Interests as well as a Policy on the Information Provision and Disclosure. They are applied in accordance with our business model and in the interest of the employees’ rights and those of all stakeholder groups. All processes and procedures are conducted in a way that excludes all forms of corruption in the companies in the group. In 2023, no restrictions of the above stated rights were found related to decisions and actions of companies in the Group of Stara Planina Hold Plc. The companies do not apply a diversity policy with respect to their management bodies in relation 28. to aspects such as age, gender or education and professional experience. The management structure is defined in the Articles of the companies. Election of members of the Board of Directors is a right and prerogative of the shareholders. III. Information Disclosure on the Key Performance Indicators (KPIs) under Art. 8 of the Taxonomy Regulation as of 31 December 2023 on a Consolidated Basis 1. Basis For Producing the Information The Paris Agreement adopted under the United Nations Framework Convention on Climate Change (the "Paris Agreement") was approved by the European Union on 5 October 2016. Article 2(1)(c) of the Paris Agreement sets out the goal of more decisive action in response to climate change by aligning capital flows with the goal of achieving low greenhouse gas emissions and climate-resilient development, among other means. In this regard, on 12 December 2019, the European Council adopted conclusions on climate change. In view of this, Regulation (EU) 2020/852 (the Taxonomy Regulation) represents a key step towards achieving the objective of a climate-neutral Union by 2050. Sustainability and the transition to a safe, climate-neutral and climate-resilient circular economy with efficient use of resources are crucial to ensure the long-term competitiveness of the economy of the European Union countries. To promote sustainable investment The Taxonomy Regulation (Regulation (EU) 2020/852) has established a classification system across the whole European Union to identify economic activities that are considered sustainable. According to Article 8 of this regulation, companies are required to publish sustainability indicators from January 1, 2022. Additionally, a Delegated Regulation published by the European Commission on July 6, 2021, specifies the content, calculation methodology and presentation of these indicators (Commission Delegated Regulation (EU) 2021/2178 of 6 July 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by specifying the content and presentation of information to be disclosed by undertakings subject to Articles 19a or 29a of Directive 2013/34/EU concerning environmentally sustainable economic activities, and specifying the methodology to comply with that disclosure obligation, amended by Delegated Regulation (EU) 2023/2486). The requirement to provide sustainability indicators under Article 8 of the Taxonomy Regulation applies to companies that are required to publish non-financial statements in accordance with Article 19a or Article 29a of the Accounting Directive 2013/34/EU. This requirement also applies to enterprises of public interest within the meaning of Directive 2013/34/EU, provided that their average number of employees in the financial year exceeds 500 regardless of the size of the book value of the assets and the net value of sales. Currently Stara Planina Hold Plc falls within the scope of Article 8 of the Taxonomy Regulation on a consolidated basis and prepares a non-financial statement in accordance with the Accounting Directive 2013/34/EU and the Accounting Act transposing Directive 2014/95/EU. At the time of preparation of this document, the Corporate Sustainability Reporting Directive - 2022/2464 has not yet been transposed into the national legislation of the Republic of Bulgaria. The information in this document has been prepared in accordance with Annex III of Delegated Regulation (EU) 2021/2178 - "KPI of Asset Managers". Voluntary disclosure is also included as part of the document in accordance with item 1.2 of Annex I of Delegated Regulation (EU) 2021/2178 - "Definition of the information disclosed together with the KPIs of non-financial enterprises" 2. Definitions, Explanations and Management Statements 2.1. Definitions • “taxonomy-eligible economic activity” - any economic activity included in the regularly updated list of activities covered by the delegated acts of the Taxonomy Regulation (Regulation (EU) 2020/852). 29. In accordance with Article 1, item 5 of Delegated Regulation (EU) 2021/2178, an economic activity is taxonomy-eligible irrespective of whether that economic activity meets any or all of the technical screening criteria laid down in in Delegated Regulation (EU) 2021/2139. At the same time, the fact that a certain economic activity is taxonomy-eligible does not in any way guarantee its sustainability and its compliance with the requirements of Article 3 of the Taxonomy Regulation (Regulation (EU) 2020/852). In principle, if an economic operator generates revenue or invests in capital expenditure (CapEx) or in operating expenditure (OpEx) corresponding to an economic activity described in Delegated Regulation (EU) 2021/2139, the same economic activity can be considered eligible regarding taxonomy eligibility disclosure. Conversely, if an activity is not yet included in the Delegated Act, it should not be considered eligible. • An economic activity is considered a "taxonomy compliant economic activity" if: - contributes significantly to one or more of the six environmental objectives; - does not significantly harm any of the six environmental objectives; - is carried out in accordance with the minimum safeguards ensuring compliance with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the principles and rights established in the eight core conventions set out in the International Labor Organization's Declaration on fundamental principles and rights at work and in the International Charter of Human Rights; and - meets the technical screening criteria - defined in the Climate Delegated Act and its applications (Delegated Regulation (EU) 2021/2139). • "transitional economic activity" is any economic activity for which there is no technologically and economically feasible low-carbon alternative, qualifying as contributing substantially to climate change mitigation where it supports the transition to a climate-neutral economy consistent with a pathway to limit the temperature increase to 1,5ºC above pre-industrial levels, including by phasing out greenhouse gas emissions, in particular emissions from solid fossil fuels, and where that activity: - has greenhouse gas emission levels that correspond to the best performance in the sector or industry; - does not hamper the development and deployment of low-carbon alternatives; and - does not lead to a lock-in of carbon-intensive assets, considering the economic lifetime of those assets. Transitional economic activities can play a key role in mitigating climate change by significantly reducing their current high ecological footprint, including helping to phase out reliance on fossil fuels. • "enabling economic activity" is any economic activity that directly enables other activities to make a substantial contribution to one or more of those objectives, provided that such economic activity: - does not lead to a lock-in of assets that undermine long-term environmental goals, considering the economic life-cycle of those assets; and - has a substantial positive environmental impact, on the basis of life-cycle considerations. Enabling economic activities do not by themselves contribute substantially to climate change mitigation. They play a key role in the decarbonization of the economy by directly enabling other activities with low carbon environmental performance. • The environmental objectives under Article 9 of the Taxonomy Regulation (Regulation (EU) 2020/852) are as follows: - climate change mitigation; - climate change adaptation; - the sustainable use and protection of water and marine resources; - the transition to a circular economy; - pollution prevention and control; - the protection and restoration of biodiversity and ecosystems. • "climate change mitigation" - keeping the rise in global average temperature well below 2°C and continuing efforts to limit it to 1.5°C compared with the pre-industrial levels, as set out in the Paris Agreement. 30. An economic activity that pursues the environmental objective of climate change mitigation should contribute substantially to the stabilization of greenhouse gas emissions through the avoidance or reduction of greenhouse gas emissions or the increase of greenhouse gas removals. Economic activity should be consistent with the long-term temperature targets set out in the Paris Agreement. This environmental objective should be interpreted in accordance with applicable EU legislation, including Directive 2009/31/EC of the European Parliament and of the Council of Europe. • „climate change adaptation“ – the process of adaptation to actual or expected climate change and its effects; An economic activity that pursues the environmental objective of climate change adaptation should contribute substantially to reducing or preventing the adverse impact of current or expected climate trends, or the risks of such an adverse impact on the activity itself or on people, nature or assets. This environmental objective should be interpreted in accordance with applicable EU legislation and the Sendai Framework for Disaster Risk Reduction 2015-2030. • “sustainable use and protection of water and marine resources” - should be interpreted in accordance with applicable EU legislation, including Regulation (EU) No 1380/2013 of the European Parliament and of the Council and Directives 2000/60/EC, 2006/7/EC, 2006/118/EC, 2008/56 /EC and 2008/105/EC of the European Parliament and of the Council, Directives 91/271/EEC, 91/676/EEC and 98/83/EC of the Council and Decision (EU) 2017/848 of the Commission, as well as with the following communications of the Commission: "Meeting the challenges of water scarcity and droughts in the European Union" of 18 July 2007, "Plan for the protection of Europe's water resources" of 14 November 2012 and "Strategic approach of the European Union to pharmaceutical products in the environment" of March 11, 2019. • “ transition to a circular economy ” - should be interpreted in accordance with applicable Union legislation in the areas of circular economy, waste and chemicals, including Regulations (EC) No 1013/2006, (EC) No 1907/2006 and (EU) 2019/1021 of the European Parliament and of Council, and Directives 94/62/EC, 2000/53/EC, 2006/66/EC, 2008/98/EC, 2010/75/EU, 2011/65/EU, 2012/19/EU, (EU) 2019 /883 and (EU) 2019/904 of the European Parliament and of the Council, Council Directive 1999/31/EC, Commission Regulation (EU) No. 1357/2014, Commission Decisions 2000/532/EC and 2014/955/EU and with the communications of the Commission of December 2, 2015 "Closing the Loop - Closing the loop - An EU action plan for the Circular Economy" and "European Strategy for Plastics in the Circular Economy”. • “pollution prevention and control” - should be interpreted in accordance with applicable Union legislation, including Directives 2000/60/EC, 2004/35/EC, 2004/107/EC, 2006/118/EC, 2008/50/EC, 2008/105/EC, 2010/75/EU, (EU) 2016/802 and (EU) 2016/2284/ of the European Parliament and of the Council. • “protection and restoration of biodiversity and ecosystems” – should be interpreted in accordance with applicable Union legislation, including Regulations (EU) No 995/2010, (EU) No 511/2014 and (EU) No 1143/2014 of the European Parliament and of the Council, Directive 2009/147/EC of the European Parliament and of the Council, Council Regulation (EC) No 338/97, Council Directives 91/676/EEC and 92/43/EEC, as well as in accordance with the Commission's communications of May 21, 2003. "Forest Law Enforcement, Governance and Trade (FLEGT)", dated 3 May 2011. "Our life insurance, our natural capital: EU biodiversity strategy to 2020" and from 6 May 2013. "Green infrastructure (EE) - increasing Europe's natural capital", dated February 26, 2016. "EU action plan against wildlife trafficking" and from 23 July 2019 "Strengthening EU action to protect and restore forests worldwide". 2.2. Management explanations and statements The information presented may contain statements that reflect the current view of the members of the Management of Stara Planina Hold Plc regarding the achievement of future non-financial results, the implementation of the business strategy, plans and objectives of the company and the enterprises in the group. 31. These forecasts refer to Stara Planina Hold Plc, as well as to the sector where the companies in the group of the holding operate. Statements that include the words "expects", "intends", "plans", "anticipates", "assumes", "will", "aims", "aims", "may", "could", "continues" and other similar statements related to the future performance of Stara Planina Hold Plc and the companies in the group are forecasts for the purposes of Bulgarian and European legislation or for other purposes. In the event that forecasts are presented, they concern the future performance and results of Stara Planina Hold Plc and the companies in the group, in relation to which there are risks and uncertainties. It is possible that factors and events may arise that could cause a significant difference in the actual results of Stara Planina Hold Plc and the companies in the group from those indicated in the forecast statements. These factors include, but are not limited to, the factors described in the section Risk factors for the activities of the Group of Stara Planina Hold Plc of this Report and should be considered in relation to each other, as well as in relation with all the financial and economic information presented in the Report. 3. Main activities of Stara Planina Hold PLC Stara Planina Hold Plc is a public company within the meaning of Art. 110 of the Public Offering of Securities Act. The company is the legal successor of the Central Privatization Fund Jsc, established on September 27, 1996. The holding company holds shares in the capital of industrial enterprises in various fields of production. It actively participates in the development of Bulgarian industry, achieving European and world level quality and profitability. The economic group of Stara Planina Hold Plc consists of the parent company and its subsidiaries and associated enterprises. The investment portfolio of the holding is distributed mainly in the following branches of industry: mechanical engineering, electrical engineering, light industry, finance. Stara Planina Hold Plc, as a holding company, does not carry out independent commercial activities. The company has focused its activity primarily on the management of subsidiaries and associated enterprises. The main investments in the portfolio of Stara planina hold Plc as of 31.12.2023 are presented in section I, item 2 of the Report - Investment portfolio. 4. Accounting Policy The company prepares and adopts an accounting policy that fully complies with the applicable IFRS adopted in the EU. The current accounting policy includes disclosures regarding IAS 16, IAS 38, IAS 40 and IFRS 16, in relation to the requirements of Delegated Regulation (EU) 2021/2178 and the impact it places on them. The disclosure of the essential accounting policies of the company is presented in more detail in the explanatory notes to the Annual Consolidated Financial Statement as of 31.12.2023. 5. Assessment for Compliance with the Taxonomy Regulation (Regulation (Eu) 2020/852) In accordance with the Taxonomy Regulation (Regulation (EU) 2020/852) and the additional delegated acts thereto, as part of the non-financial declaration, for the first time, the reporting of taxonomy-compliant turnover, capital expenditure and operating expenditure for 2023 of the companies in the group of Stara Planina Hold Plc is included. This Eligibility Disclosure applies to all environmental objectives currently considered in the European Taxonomy under Article 27(2)(a) and (b) of the Taxonomy Regulation (Regulation (EU) 2020/852). The Paris Agreement adopted under the United Nations Framework Convention on Climate Change ("Paris Agreement") was approved by the EU on 5 October 2016. Article 2(1)(c) of the Paris Agreement sets out the goal of stronger action in response to climate change by aligning capital flows with the goal of achieving low greenhouse gas emissions and climate-resilient development, among other means. In this regard, on 12 December 2019, the European Council adopted conclusions on climate change. With this in mind, this regulation represents a key step towards achieving the goal of a climate- neutral European Union by 2050. Sustainability and the transition to a safe, climate-neutral and climate-resilient circular economy with efficient use of resources are crucial to ensure the long-term competitiveness of the EU economy. 32. Sustainability has long been central to the European Union project, and the Treaty on European Union and the Treaty on the Functioning of the European Union (TFEU) reflect its social and environmental dimensions. According to the Taxonomy Regulation (Regulation (EU) 2020/852), an economic activity that pursues the environmental objective of climate change mitigation should contribute substantially to the stabilization of greenhouse gas emissions through the avoidance or reduction of greenhouse gas emissions or the increase of greenhouse gas removals. Economic activity should be consistent with the long-term temperature targets set out in the Paris Agreement. This environmental objective should be interpreted in accordance with applicable EU legislation, including Directive 2009/31/EC of the European Parliament and of the Council of Europe. An economic activity that pursues the environmental objective of climate change adaptation should contribute substantially to reducing or preventing the adverse impact of current or expected climate trends, or the risks of such an adverse impact on the activity itself or on people, nature or assets. This environmental objective should be interpreted in accordance with applicable EU legislation and the Sendai Framework for Disaster Risk Reduction 2015-2030. An economic activity shall qualify as contributing substantially to the sustainable use and protection of water and marine resources where that activity contributes substantially to achieving the good status of bodies of water, including bodies of surface water and groundwater or to preventing the deterioration of bodies of water that already have good status, or contributes substantially to achieving the good environmental status of marine waters or to preventing the deterioration of marine waters that are already in good environmental status. An economic activity that pursues the environmental objective of transition to a circular economy should contribute substantially to prevention of waste generation, to waste reuse and to its recycling. An economic activity shall qualify as contributing substantially to pollution prevention and control where that activity contributes substantially to environmental protection from pollution by preventing or, where that is not practicable, reducing pollutant emissions into air, water or land, other than greenhouse gasses. An economic activity shall qualify as contributing substantially to the protection and restoration of biodiversity and ecosystems where that activity contributes substantially to protecting, conserving or restoring biodiversity or to achieving the good condition of ecosystems, or to protecting ecosystems that are already in good condition. In order to derive the key performance indicators (KPIs) against the objectives of the Taxonomy Regulation in relation to the six environmental objectives of the Taxonomy Regulation, the analysis of the product portfolio of Stara Planina Hold Plc identified a turnover of eligible activities in the sense of the EU taxonomy and in particular of Delegated Regulation (EU) 2021/2139 (amended and supplemented by Delegated Regulation (EU) 2022/1214 and Delegated Regulation (EU) 2023/2485) and Delegated Regulation (EU) 2023/2486 for the companies Hydraulic Elements and Systems Plc (from electricity produced by a photovoltaic plant) and Elhim-Iskra Plc. (from production of storage batteries and from electricity produced by a photovoltaic plant). However, the Management of Stara Planina Hold Plc is aware that the Taxonomy and the Delegated Act on Climate, including its annexes, require non-financial enterprises with economic activities that do not meet the eligibility conditions in the sense of the Taxonomy Regulation and the delegated acts thereto, to report on the part of capital expenditure (CapEx) and operating expenditure (OpEx) related to the purchase of output from taxonomy-compliant economic activities and individual measures helping to make the targeted activities low-carbon or lead to a reduction in greenhouse gases (item 1.1.2.2 letter c) and item 1.1.3.2 letter c) of the Disclosure Regulation (Delegated Regulation (EU) 2021/2178)). Thus, for the purposes of deriving those eligible for the taxonomy and the subsequent assessment of compliance with the six environmental objectives of the key result indicators (KPIs) on capital expenditure (CapEx) and operating expenditure (OpEx) of the companies in the group of the holding, several enabling activities represented by the taxonomy were identified, which are inextricably linked to 33. the main activity and could have an impact on the performance of the Company. The identified activities are: - Activity CCM 3.4./CCA 3.4. - Manufacture of batteries (Elhim-Iskra Plc), - Activity CCM 4.1./CCA 4.1. - Electricity generation using solar photovoltaic technology (Hydraulic Elements and Systems Plc, Elhim-Iskra Plc. and М+S Hydraulic Plc), - Activity CCM 4.10./CCA 4.10. – Storage of electricity (Elhim-Iskra Plc), - Activity CCM 4.16./CCA 4.16. – Installation and operation of electric heat pumps (Bulgarian Rose Plc), - Activity CCM 4.21./CCA 4.21. - Production of heat/cool from solar thermal heating (Bulgarian Rose Plc), - Activity CCM 4.25./CCA 4.25. - Production of heat/cool using waste heat (М+S Hydraulic Plc), - Activity CCM 6.6./CCA 6.6. - Freight transport services by road (Elhim-Iskra Plc and М+S Hydraulic Plc), - Activity CCM 7.2/CCA 7.2/CE 3.2 - Renovation of existing buildings (Hydraulic Elements and Systems Plc, Elhim-Iskra Plc and М+S Hydraulic Plc), - Activity CCM 7.5/CCA 7.5 Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings (М+S Hydraulic Plc), - Activity CCM 7.7/CCA 7.7 - Acquisition and ownership of buildings (SPH Invest Jsc), - Activity CE 3.3. – Demolition and clearing of buildings and other structures (М+S Hydraulic Plc). With regard to the reference of capital expenditure (CapEx) and operating expenditure (OpEx) regarding environmentally sustainable activities (in line with the taxonomy), the compliance of the inextricably linked to the main activity for each of the companies in the group of the holding, eligible enabling activities, specified above, meeting the requirements of item 1.1.2.2 and 1.1.3.2 of Annex I to Delegated Regulation (EU) 2021/2178 were assessed. For each taxonomy-eligible activity, its individual compliance with the technical screening criteria regarding its substantial contribution to climate change mitigation and compliance with the “do no significant harm” principle was analyzed and assessed. When assessing whether each identified activity complies with the “do no significant harm” principle (NSH) in relation to the remaining five environmental objectives under Art. 9 of the Taxonomy Regulation (Regulation (EU) 2020/852), it was found that the activities do not cause significant harm, as the principle of legality in the company's operations is observed and all the requirements of the legislation in the production sector and the environmental protection sector are applied, thereby ensuring that the technical screening criteria are met. In order to avoid double counting of taxonomy-eligible economic activities already counted under the climate change mitigation objective in accordance with point 2, letter c) of Annex I to Delegated Regulation (EU) 2021/2178, the companies in the group of the holding do not consider taxonomy-eligible economic activities in relation to the objective of climate change adaptation. As taxonomy- compliant (environmentally sustainable) capital expenditures (CapEx) were identified: - Manufacture of batteries in the company Elhim-Iskra Plc that meets the technical screenin g criterion as fully rechargeable batteries are manufactured – under Activity CCM 3.4./CCA 3.4; - Construction and exploitation of solar photovoltaic technologies in the companies Hydraulic Elements and Systems Plc, Elhim-Iskra Plc. and М+S Hydraulic Plc – under Activity CCM 4.1./CCA 4.1; - Storage of electricity in the company Elhim-Iskra Plc – under Activity CCM 4.10./CCA 4.10; - Installation and operation of electric heat pumps in the company Bulgarian Rose Plc – under Activity CCM 4.16./CCA 4.16; - Production of heat/cool from solar thermal heating in the company Bulgarian Rose Plc – under Activity CCM 4.21/CCA 4.21; - Production of heat/cool using waste heat in the company М+S Hydraulic Plc – under Activity CCM 4.25/CCA 4.25; - Improving energy efficiency through implementation of an energy consumption monitoring system in the company М+S Hydraulic Plc – under Activity CCM 7.5/CCA 7.5; 34. The activities of freight transport services by road (in the companies Elhim-Iskra Plc and М+S Hydraulic Plc), repair and renovation of existing buildings (in the companies Hydraulic Elements and Systems Plc, Elhim-Iskra Plc. and М+S Hydraulic Plc), the removal of legally owned buildings, unsuitable for use, and the clearing of the terrain in connection with future investment intentions in the property: UPI I-7836, quarter 30 - Industrial zone according to the plan of the city of Kazanlak (in the company М+S Hydraulic Plc), acquisition and ownership of buildings (in the company SPH InvestJsc) refer to the taxonomy- eligible, environmentally unsustainable activities, since they do not correspond both to the technical screening criteria regarding the substantial contribution to any of the environmental objectives, and the “do no significant harm” criteria, especially in relation to the transition to a circular economy. In order to avoid double counting of taxonomy-eligible economic activities already counted under the climate change mitigation objective in accordance with point 2, letter c) of Annex I to Delegated Regulation (EU) 2021/2178, the companies in the group of Stara Planina Hold Plc do not consider taxonomy-eligible economic activities in relation to the other environmental objectives with the exception of Activity CE 3.3. – Demolition and clearing of buildings and other structures. Finally, Stara Planina Hold Plc declares as part of the consolidated non-financial declaration, an integral part of this activity report, that all minimum social guarantees in the field of respect for human rights, anti-corruption, obligations for safe and healthy working conditions, the right to association of workers and employees, compliance with the collective labor agreement have been observed. Given the above, it can be concluded that the principle of compliance with the minimum guarantees has been fulfilled. More information regarding compliance with the minimum social guarantees is included in the consolidated non-financial declaration under Article 48 of the Accounting Act, presented under chapter II of this Report. The conclusions of the analysis of the key performance indicators show that Stara Planina Hold Plc accounts for turnover and capital expenditure (CapEx) eligible for the taxonomy, defined according to Annex III to Delegated Regulation (EU) 2021/2178. Disclosure of Key Performance Indicators (KPIs) is presented item 8 below, in accordance with Annex IV to Delegated Regulation (EU) 2021/2178. The analysis of the key performance indicators regarding the capital expenditure (CapEx) of the company on a consolidated basis shows that Stara Planina Hold Plc and the companies in the group have committed their efforts towards investing in environmentally sustainable assets. The capital expenditure from taxonomy-eligible activities refers to assets and processes related to the purchase of output from taxonomy-compliant economic activities and individual measures that help the targeted activities become low-carbon or lead to a reduction in greenhouse gases. The share of taxonomy- compliant CapEx is 6.52 % of the holding's consolidated total capital expenditure, which is due to investment in modern smart solutions directed towards a low-carbon economy. 6. Contextual Information Delegated Regulation (EU) 2021/2178 defines the key performance indicators (KPIS) for turnover, capital expenditure (CapEx) and operating expenditure (OpEx) for the companies, respectively specified under sections 1.1.1, 1.1.2 and 1.1.3 of the Annex I to this Regulation. The companies in the group of Stara Planina Hold Plc should disclose the part of their net turnover (defined in accordance with 1.1.1. of Annex I to the Delegated Regulation (EU) 2021/2178) that corresponds to their taxonomy-eligible economic activities. The information on the eligible capital expenditure (CapEx) prepared in accordance with section 1.1.2. of Annex I to Delegated Regulation (EU) 2021/2178, covers the following: capital expenditure related to assets and processes related to the purchase of output from taxonomy-compliant economic activities and individual measures helping the targeted activities to become low-carbon or lead to a reduction in greenhouse gases. The information on the eligible operating expenditure (OpEx) prepared in accordance with section 1.1.3. from Annex I to the Delegated Regulation (EU) 2021/2178, including the direct non-capitalized expenditure according to the Business Programs of the companies for the period 2022-2026 and in particular the 2023 repair activities related to the maintenance and current repair of assets serving the 35. main activities of the companies, as well as all other direct expenditure related to the current service of these assets from the category of property, machinery and equipment. Pursuant to Article 10, paragraph 2 of the Delegated Regulation (EU) 2021/2178, in order to ensure reliability and consistency in the reporting of the three key performance indicators (KPIs), the companies eliminate the double reporting of the same amounts when relating them to turnover, capital expenditure and operating expenditure through the created detailed analytical accounting for the purposes of preparing its financial statements. The disclosure regarding the key performance indicators (KPIs) for Stara Planina Hold Plc on a consolidated basis is presented in accordance with items 1.1 and 1.2 of Annex III to Delegated Regulation (EU) 2021/2178, taking into account the weighted average values of turnover and capital expenditure of each from the companies included in the consolidation, according to the shares of the holding company in each of the companies. 7. Methodology for Calculating the Key Performance Indicators Under art. 8 of the Taxonomy The methodology used by the company to calculate the key performance indicators (KPIs) for turnover and capital expenditure (CapEx) is in accordance with item 2 of Annex III to Delegated regulation (EU) 2021/2178. 8. 2023 Key Performance Indicators (KPIs) The weighted average value of all the investments that are directed at funding, or are associated with taxonomy-aligned economic activities relative to the value of total assets covered by the KPI, with following weights for investments in undertakings per below: Turnover-based: 35.93 % CapEx—based: 3.86 % The weighted average value of all the investments that are directed at funding, or are associated with taxonomy-aligned economic activities, with following weights for investments in undertakings per below: Turnover-based: BGN 7 727.73 thousand CapEx-based: BGN 830.41 thousand The percentage of assets covered by the KPI relative to total investments (total AuM). Excluding investments in sovereign entities, Coverage ratio: 71.51 % The monetary value of assets covered by the KPI. Excluding investments in sovereign entities. Coverage: BGN 21 508 thousand Additional, complementary disclosures: breakdown of denominator of the KPI The percentage of derivatives relative to total assets covered by the KPI – NOT APPLICABLE. The value in monetary amounts of derivatives: NOT APPLICABLE. The proportion of exposures to EU financial and non- financial undertakings not subject to Articles 19a and 29a of Directive 2013/34/EU over total assets covered by the KPI: For non-financial undertakings: NOT APPLICABLE For financial undertakings: NOT APPLICABLE Value of exposures to EU financial and non-financial undertakings not subject to Articles 19a and 29a of Directive 2013/34/EU: For non-financial undertakings: NOT APPLICABLE For financial undertakings: NOT APPLICABLE The proportion of exposures to financial and non- financial undertakings from non-EU countries not subject to Articles 19a and 29a of Directive 2013/34/EU over total assets covered by the KPI: For non-financial undertakings: NOT APPLICABLE For financial undertakings: NOT APPLICABLE Value of exposures to financial and non-financial undertakings from non-EU countries not subject to Articles 19a and 29a of Directive 2013/34/EU: For non-financial undertakings: NOT APPLICABLE For financial undertakings: NOT APPLICABLE The proportion of exposures to financial and non- financial undertakings subject to Articles 19a and 29a of Directive 2013/34/EU over total assets covered by the KPI: Value of exposures to financial and non-financial undertakings subject to Articles 19a and 29a of Directive 2013/34/EU: 36. For non-financial undertakings: NOT APPLICABLE For financial undertakings: NOT APPLICABLE For non-financial undertakings: NOT APPLICABLE For financial undertakings: NOT APPLICABLE The proportion of exposures to other counterparties and assets over total assets covered by the KPI: NOT APPLICABLE Value of exposures to other counterparties and assets: NOT APPLICABLE The value of all the investments that are funding economic activities that are not taxonomy-eligible relative to the value of total assets covered by the KPI: 100.00 %. Value of all the investments that are funding economic activities that are not taxonomy-eligible: BGN 21 508 thousand The value of all the investments that are funding taxonomy-eligible economic activities, but not taxonomy-aligned relative to the value of total assets covered by the KPI: 80.31 %. Value of all the investments that are funding Taxonomy- eligible economic activities, but not taxonomy-aligned: BGN 17 274 thousand. Additional, complementary disclosures: breakdown of numerator of the KPI The proportion of Taxonomy-aligned exposures to financial and non-financial undertakings subject to Articles 19a and 29a of Directive 2013/34/EU over total assets covered by the KPI: For non-financial undertakings: Turnover-based: NOT APPLICABLE Capital expenditures-based: NOT APPLICABLE For financial undertakings: Turnover-based: NOT APPLICABLE Capital expenditures-based: NOT APPLICABLE Value of Taxonomy-aligned exposures to financial and non-financial undertakings subject to Articles 19a and 29a of Directive 2013/34/EU: For non-financial undertakings: Turnover-based: NOT APPLICABLE Capital expenditures-based: NOT APPLICABLE For financial undertakings: Turnover-based: NOT APPLICABLE Capital expenditures-based: NOT APPLICABLE The proportion of Taxonomy-aligned exposures to other counterparties and assets over total assets covered by the KPI: Turnover-based: NOT APPLICABLE Capital expenditures-based: NOT APPLICABLE Value of Taxonomy-aligned exposures to other counterparties and assets: Turnover-based: NOT APPLICABLE Capital expenditures-based: NOT APPLICABLE Breakdown of the numerator of the KPI per environmental objective Taxonomy-aligned activities : (1) Climate change mitigation Turnover: 23.96 % CapEx: 19.94 % Transitional activities: A 0 % (Turnover; CapEx) Enabling activities: B Turnover: 23.94 %, CapEx : 6.52% (2) Climate change adaptation Turnover: 0% CapEx:0% Enabling activities: B 0 % (Turnover; CapEx) (3) The sustainable use and protection of water and marine resources Turnover: 0% CapEx:0% Enabling activities: B 0 % (Turnover; CapEx) (4) The transition to a circular economy Turnover: 0% CapEx:0% Enabling activities: B 0 % (Turnover; CapEx) (5) Pollution prevention and control Turnover: 0% CapEx:0% Enabling activities: B 0 % (Turnover; CapEx) (6) The protection and restoration of biodiversity and ecosystems Turnover: 0% CapEx:0% Enabling activities: B 0 % (Turnover; CapEx) 37. IV. Important developments occurred since the beginning of the year After the date of the annual accounting closing, the management of Stara Planina Hold Plc is not aware of any important and material events which may influence the investors’ interest with the exception of the fall of Bulgaria's last regular government in March 2024, leading to a further escalation of political instability as well as the ongoing military conflicts in Ukraine, the Middle East and the obstruction of the transport route through the Red Sea, which increase the risks associated with ensuring the supply of materials and sale of finished products to partners related to the affected region. V. Expected development of the group In the year 2023, our country, Europe and the world were strongly influenced by the effects of dynamic global changes and overlapping crises one after another. Military conflicts in Ukraine and the Middle East, weakening global demand amid tight monetary policy in many countries and worsening terms of trade led to the sharpest contraction in industrial production in about three years and continue to affect the economy with a trend for a negative development and even decline. On a national level, the business activity during the year was conditioned by the unceasing political instability, which continues being assessed as the main cause negatively affecting economic activity and the business environment in Bulgaria. Our country continues to need consistent state policies, ambitious reforms and a clear strategic vision to stimulate economic growth. Against this background, the consolidated sales revenues of the Group for the first half of 2023 reached BGN 211.61 million and reported a 15.4 % growth compared to the sales for the same period of 2022 and almost a 61 % increase compared to the sales for the first half of 2021. In the second half of 2023 we recorded sales revenues in the amount of BGN 167.355 million thus reporting a 12.78 % decrease compared to the second half of the previous year and an increase by 14.09 % compared to the second half of 2021. The consolidated net sales revenues for 2023 reached BGN 378.97 million, reporting a growth by 1 % compared to the sales in 2022 (with a reported decline in industrial production in the EU of 2 % for the same period) and an increase by over 36% compared to consolidated sales in 2021. Regardless of the impact of the negative factors that determined the operations of the companies in the group of Stara Planina Hold Plc in the reporting year, the gross profit of the group for the year 2023 is in the amount of 46.94 million, which represents a decrease by 8.6 % compared to the reported gross consolidated profit for the previous year year and an increase by over 42 % compared to the gross consolidated profit for the year 2021. The level of our exports is directly dependent on the markets where the companies in the group sell - mainly in the European Union. In 2023, we managed to keep our main markets but the expectations and forecasts of our partners in the country, Europe and the world remain reserved and even pessimistic, at least until the middle of 2024, which, together with the negative trends in the industry, gives us reason to expect results with lower values for the current financial year. The state of the German economy, which is the main trading partner of the companies in the group of Stara Planina Hold Plc, continues being particularly worrying. According to the forecast data of the Germany's Federal Statistical Office "Destatis", the country's GDP decreased by 0.3% in the fourth quarter of 2023 compared to the previous quarter, and the forecast of the Bundesbank indicates that the weak performance of the German economy will continue in the first months of 2024. This is likely to make Germany one of the worst performers within the eurozone, with its huge industrial sector, normally an important driver of growth, proving a stumbling block for the entire European economy. The reported results in the first months of 2024, together with the continuing negative impact of the financial-economic and geopolitical factors determining the prospects for the development of the European and world economy, give us reason to lower our forecast for sales in the first quarter of 2024. At this stage, we expect with the consolidated revenues for the first half of 2024 to report a decrease by about 30 % compared to the same period of 2023, and we predict that the consolidated sales revenues 38. of the group for 2024 will be worth about BGN 258.4 million, which means a decrease by about 30 % on an annual basis compared to 2023. Net sales revenue (Quarterly, BGN’000s) * forecast It is possible that our estimates will not be reached due to the influence of external factors. The EU economy continues being exposed to risks, as negative impact have factors such as new difficulties in supply chains, prices of and security of energy resources, weaker demand on external markets, a possible additional tightening of monetary policy, as well as geopolitical factors, related to the military conflicts in Ukraine and the Middle East. In this context in the year 2024 again, we will continue being led by the purpose of achieving high quality, productivity and profitability of our activities, in order to maintain our market positions and at the same time preserve the persons employed in the companies. We will continue offering competitive prices, tailored customer approach, high quality and operational delivery times. In 2023, the investments of our enterprises reached BGN 35.5 million with a 37 % growth on an annual basis, mainly intended for continuous technological renewal, introduction of highly profitable products and productions, acquisition of enterprises and assets, innovations for green and digital transition, increase of labor productivity and a corresponding increase in the remuneration of employed persons. Investments (Quarterly, BGN’000s) * forecast -10000 10000 30000 50000 70000 90000 110000 1Q 2Q 3Q 4Q 2022 2023 2024 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000 22000 2022 2023 2024* 39. In 2024, in the context of the continuing great uncertainty in national and global terms, we have planned a decrease in investments by 23 % to BGN 27.3 million. The main part of the planned investments is intended for new technological equipment and reconstruction, new technologies for digitization of the processes, for a green transition and expansion of production possibilities with a view to increasing the productivity and quality of the manufactured products and reducing the cost price, optimization of the production process and stimulation of the employed persons. The companies plan to participate in procedures under existing and new European operational programs aimed at developing human resources and increasing competitiveness. The sustainable achievement of good financial results with the expected sales will continue being the main task in order to guarantee the investments of the shareholders and their profitability. VI. Research and Development Activity Stara Planina Hold Plc does not perform independent research and development activity. The holding company provides support to the companies in the Group in their research and development activities since it views these activities as an integral part of the annual business plans of the companies. The main enterprises in the group have separate divisions, directorates, departments and laboratories which consistently develop activities to improve production, develop and introduce new products in mass production, as well as new production methods and technologies. In 2023 again the main objectives of the units engaged in development activities in the companies of the group were aimed at meeting the increased requirements and growing expectations of customers in terms of quality, price and variety of products offered. Main achievements of companies from the group of Stara Planina Hold Plc in 2021 in the research and development field M+S Hydraulic Plc In 2023, the company was devoted to technological renewal and optimization of production processes. New blanks, new types of tools and fixtures have been adopted, leading to a reduction in the cost of production. Screwdriving devices were introduced into the assemblies to improve quality and reduce hard physical labor. Main developments of the company for 2023: • developed documentation and test samples for M2V two-speed motors with original casting; • designed motor type HWM motor with increased characteristics, which should successfully replace the wheel motors of the White and Parker companies; • together with the German company Lupold (manufacturers of regulators), the development of new adjustable axial-piston pumps for open hydraulic systems with a geometric volume from 22 cm3 to 28 cm3 has been started; • the development and assimilation of HKUSU and HKUQUS type variable volume hydraulic steering systems has begun and is currently continuing, thus following the pattern of the two main world trends: - with a small working couple for emergency mode of operation and with an additional increase in the working volume of the output of the steering control in normal mode of operation; - with a standard working pair for normal control mode and with a reduction of the geometric volume by shortening the working chambers in emergency mode of operation; • in addition to expanding the range of standard safety valves for hydraulic motors, the development of a new type of valve, type KBC, which is designed to work in the braking systems of motor vehicles, has begun. Hydraulic Elements and Systems Plc The company has respective departments and units that develop activities to improve production, develop and adopt new products. In 2023 again, the main goals of the units carrying out development activities were aimed at satisfying the increased demands of customers with the development of new types of products; improvement of the production technology in order to increase the quality of the range produced so far; 40. optimization of the technological and production process with the aim of reducing the cost of products and competitive price presence on the market. All directions of research and development activities carried out by the enterprise are in accordance with the strategy for sustainable development of the company. In 2023, HES Plc developed and produced over 40 new models of hydraulic cylinders and as many modifications of existing ones, and the majority of them are expected to enter regular production in 2024. Regarding the development activity from a technological point of view, in 2022, HES Plc introduced a high-tech process for super-finish processing of spherical surfaces, which is borrowed from the production of artificial joints for medicine. Elhim-Iskra Plc In 2023, the activities of the development team were aimed at: • Development of new technologies and related implementation of new production capacities with the main purpose of increasing productivity and optimization at each stage of the technological process. • A new range of ELT series semi-traction batteries with armored plates used for autonomous vehicle propulsion were put into production. • New types of OPzS monobloc stationary batteries for small, medium and large capacities, used in providing emergency power supply in Bulgaria and Europe, were developed and put into production. • New types of solar batteries of the ES OPzS type were developed and put into production, for small, medium and large capacities, which are used in the construction of photovoltaic parks for the production of electricity in Bulgaria and Europe and the Middle East. The elements in the modular solutions of Elhim-Iskra Plc type ES OPzS will be manufactured in the company's production facilities, certified according to ISO 9001; compliant with the requirements of IEC 61427 for photovoltaic energy systems; "Long Life" according to the Eurobat classification; fully compliant with the safety requirements of EN 50272-2 for stationary batteries. The company's infrastructure and test base allow full testing of solutions, resulting in quick and efficient installation and launch. Bulgarian Rose Plc In 2023, the objectives of the development unit were aimed at renewing formulations and bringing them into line, according to the new regulatory requirements regarding prohibited substances in cosmetic products, optimization of production technology and quality of manufactured products, compliance with the needs and requirements of distributors in the country and abroad. In 2022, the Company took part in the national stand organized by IANSMP, within the framework of the Beauty World Middle East International Exhibition of Perfumery and Cosmetics, which was held in Dubai in November. The team of specialists in the "Innovations" department will also face new challenges in 2024. The tasks set in the company's business program envisage development of a new cosmetic series in a low- price range; expansion of the existing cosmetic series with new products conditioned by the needs and demands of our customers; development of products under own brand according to a specific assignment of a client. VII. Company shares 1. Own shares. Buy-back The General Meeting of Shareholders of Stara Planina Hold Plc, held on 16.05.2019, adopted a resolution to buy back up to 3 % of the total number of shares issued by the company for a period not longer than 5 years and appointed the Board of Directors to define the specific parameters. During 2023 Stara Planina Hold Plc has not acquired or sold its own shares. As of 31.12.2023 Stara Planina Hold Plc owns 225 337 own shares, representing 1.07 % of the capital of the holding company. 50 000 shares are also hold by the subsidiary company SPH Invest Jsc. Pursuant to the provision of Art. 187a, Para. 3 of the Commercial Act, the exercise of any rights, including the right to vote, on these 275 337 shares shall cease until their transfer. In 2023 no joint stock company in the Group has acquired or transferred own shares. 41. 2. Changes in the share price of the companies The shares of Stara Planina Hold AD are traded on BSE Main Market, Standard segment on the Bulgarian Stock Exchange AD. Exchange code: SPH. In 2023, the movement of the share price was variable between BGN 8.60 and BGN 10.70. The graph shows the movement of the price of the shares of Stara Planina Hold Plc on the BSE for the period 01.01.2023 - 31.12.2023. Share price over Y2023 Source: BSE-Sofia AD ------- closing price ------ weighted-average price The graph shows the price movement of the shares of Stara Planina Hold Plc on the Bulgarian Stock Exchange for the period 01.09.2023 – 31.12.2023. • Start price: BGN 9.6676 (01.09.2023) • Last price: BGN 10.30 (31.12.2023) • Max price: BGN 10.70 (11.08.2023) • Min price: BGN 8.6042 (24.04.2023) • Value change: BGN 0.6324 • Percentage change: 6.5414 %. The market capitalization of the holding as of 31.12.2023 is BGN 216.3 million compared to BGN 195.3 million as of 31.12.2022. Stara Planina hold Plc Market capitalization (BGN million) Price (at closing) per one share of the company at the end of the year 2016 2017 2018 2019 2020 2021 2022 2023 0 50 100 150 200 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 42. 6.49 8.01 6.55 4.76 5.45 10.10 9.30 10.30 Four of the companies in the investment portfolio of the holding company are public companies and their market capitalization is being set by the stock exchange. This allows for the ratio between the market capitalization of the holding company and the market capitalization of its holdings to be calculated. Traditionally the price of the holding is lower than the total price of its holdings. Market capitalization (BGN million) M+S Hydraulic Plc Price (at closing) per one share of the company at the end of the year 2017 2018 2019 2020 2021 2022 2023 8.08 7.65 6.00 6.25 9.15 8.95 11.50 Market capitalization (BGN million) Hydraulic Elements and Systems Plc Price (at closing) per one share of the company at the end of the year 2017 2018 2019 2020 2021 2022 2023 5.19 4.80 4.26 3.84 6.50 6.40 5.95 Market capitalization (BGN million) Elhim Iskra Plc Price (at closing) per one share of the company at the end of the year 2017 2018 2019 2020 2021 2022 2023 1.30 0.98 0.88 0.78 0.80 0.87 0.95 0 50 100 150 200 250 300 350 400 450 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 0 20 40 60 80 100 120 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 0 10 20 30 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 43. Market capitalization (BGN million) Bulgarian Rose Plc Price (at closing) per one share of the company at the end of the year 2017 2018 2019 2020 2021 2022 2023 2.00 2.20 1.89 1.02 1.50 1.70 1.85 3. Dividend policy Stara Planina Hold Plc applies a policy of annual dividend distribution. The Board of Directors assumes that at the regular annual general meeting the shareholders will continue the tradition of distributing part of the financial profit for dividend. For each year of its existence Stara Planina Hold Plc has paid a dividend. The total amount of the distributed dividend until the financial year 2022 incl. is BGN 49.07 million. The initial investment in the holding has a dividend coverage of 28 times. Distributed dividends from Stara Planina Hold Plc (BGN million) For the completed financial years of their existence the companies in the group of Stara Planina Hold Plc have distributed dividends totaling BGN 244.78 million. 0 3 6 9 12 15 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 0.82 0.16 0.19 0.21 0.23 0.23 0.23 0.24 0.24 0.25 0.26 0.18 0.25 0.27 0.29 0.32 1.02 2.10 4.27 4.53 4.75 5.04 5.09 5.09 5.16 6.18 6.54 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2019 2020 2021 2022 44. Distributed dividends Total for the Whole Group (BGN million) 4. Branches. Employees Stara Planina hold Plc and the companies in the group do not have any registerred branches in the country and abroad. Information on the employees is presented in Section II of this report - Non-financial declaration. VІIІ. Financial instruments used by the enterprise 1. Accounting policy In compliance with the accounting legislation in force in Bulgaria, since the beginning of 2003 Stara Planina Hold Plc has been applying the International Financial Reporting Standards. The Consolidated Financial Statements of Stara Planina Hold Plc as of 31.12.2023 have been prepared in compliance with the International Financial Reporting Standards adopted by the European Union. The whole accounting policy of the Company is described in the Explanatory Notes presented together with the Annual Consolidated Financial Statements as of 31.12.2023. Investments in subsidiaries and associates are reported and presented under the acquisition cost method in the separate statements of Stara Planina Hold Plc. Major business operations of the company are sale, purchase and management of shareholdings in companies. Main part of the 2023 revenues is formed by dividend revenues. These current incomes are mainly used for financing the companies in the holding's portfolio, meeting the commitments under the adopted dividend policy, as well as for administrative needs. In the reporting year, the accounting policy of the company has not been changed compared to the previous reporting period. No errors have been found for both the current and previous reporting periods. Therefore, there are no adjustments due to errors. 2. Financial instruments The most essential part of the financial instruments used by the company is taken by the holdings of Stara Planina Hold Plc in the subsidiaries and associates. 1.57 1.35 1.52 1.67 1.77 1.78 1.60 1.54 1.97 2.40 2.50 1.56 2.20 3.88 6.94 9.42 9.74 15.10 17.64 18.86 20.97 22.43 19.1619.16 21.72 26.21 29.23 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2019 2020 2021 2022 45. Financial instruments of the company are detailed in the Explanatory Notes presented together with the Annual Consolidated Financial Statements as of 31.12.2023. Typical for the investments of Stara Planina Hold Plc (BSE code SPH) in subsidiaries and associates is that four of them are public companies with their shared being admitted to trading on the Bulgarian Stock Exchange: M+S Hydraulic Plc (MSH), Hydraulic Elements and Systems Plc (HES), Elhim Iskra Plc (ELHM) and Bulgarian Rose Plc (ROZA). Next, in terms of significance, come the loans granted to the companies in the portfolio of Stara Planina Hold Plc. They are filed as per their nominal value as of the date of occurrence. At the end of the reporting period there is no data on the existence of circumstances for impairment of receivables on them and such has not been made. The Financial Resources Management Policy of Stara Planina Hold Plc is focused mainly on the management of the companies in the portfolio. The free cash amounts are directed towards financing the companies. 3. Liquidity Given the specifics of the activity, the major part of the incoming cash flows is generally formed by dividends received and the outgoing cash flows are used for payment of dividends to the shareholders and for covering administrative expenses related to its maintenance. It is a long-term corporate governance policy of Stara Planina Hold Plc to use the available cash resource to fund projects of its portfolio companies. The company has not undertaken any obligations to incur capital expenses at the end of the reporting period. 4. Exposure of the enterprise to price, credit, liquidity and cash flow risk The management monitors the overall risk and provides ways to minimize potential adverse effects on the financial indicators of the company. The nature of the financial instruments used by the company indicates that the market risk does not have a significant effect on the financial results. The risk of changes in the market price of equity instruments arises from equity securities classified as reported at fair value through other comprehensive income (FVOCI) held for long-term investment. Stara Planina Hold Plc has granted loans to companies included in its portfolio which have a long- term unblemished credit reputation which minimizes the credit risk. Due to the nature of the financial instruments used by Stara Planina Hold Plc, the liquidity risk, the interest rate risk and the cash flow risk are also minimal. Detailed information on the risk factors to which Stara Planina Hold Plc and the companies in the group are exposed is presented under Section I, item 4 of this Report. ІX. Corporate Governance Declaration 1. National Corporate Governance Code Stara Planina Hold Plc implements a long-term Good Corporate Governance Program. The Program provides for the completion of a number of initiatives in several main areas, the implementation of which is subordinated to its priority objectives: • responsibility and independence of the corporate Board, • shareholders' rights protection; • ensuring equal treatment of each shareholder (including minority and foreign shareholders); • ensuring recognition of the rights of the parties interested in the management and sustainable development of the company and promoting the co-operation with them; • ensuring prompt and accurate disclosure of the statutory required information related to Stara Planina Hold Plc regarding important issues of the financial standing, activity results, ownership and management of the company; STARA PLANINA HOLD PLC – sphold.com 46. • supporting the strategic management of Stara Planina Hold Plc, the efficient control over the activity of the Board of Directors and its accountability to all stakeholders. The public companies in the group have also developed and implement their own long-term corporate governance programs and the activity of the non-public companies is in compliance with the main priorities and guidelines of the corporate program of Stara Planina Hold Plc. On 30.10.2007 the Board of Directors of Stara Planina Hold Plc, considering the important role of modern corporate governance to support sustainable development of the national economy of the Republic of Bulgaria, and lead by its willingness to continue implementing the internationally recognized good corporate governance standard, resolved that the holding company will carry out its activity in compliance with the principles and provisions of the National Corporate Governance Code (CGCode_July2021_BG.pdf (nkku.bg). The public companies in the group have also joined the Code. 2. Implementation of the National Corporate Governance Code The management of Stara Planina Hold Plc and the management bodies of the public companies in the group apply the National Code based on the “comply or explain” principle. The application of this principle is based on the Recommendation of the EU Commission on the quality of reporting in corporate governance. The main direction when executing the commitments of the code was to bring the internal acts of the company and its overall activity in accordance with the changing legal regulations. All of the internal regulations listed below may be found in the Corporate Governance section on the company website. Stara Planina Hold Plc participates in discussions of draft amendments and supplements or projects for new acts in the field of public offering of securities presented by the competent authorities. As a member of the National Corporate Governance Committee, Stara Planina Hold Plc participates through its representative in the process of discussion and adoption of amendments to the National Code, effective as of July 1, 2021. Chapter One. Corporate Boards The Board of Directors of Stara Planina Holc Plc and the Boards of the companies in the group direct and control the company in a responsible and independent manner according to the vision, objectives and strategies of the company and in the best interest of all shareholders. It monitors the results of the company's performance and initiates changes in the management of its operations, when necessary. The Board of Directors treats all shareholders equally, acts in their best interest and in a diligent manner. The members of the Board of Directors are guided in their activities by the generally accepted principles of integrity and managerial and professional competence. The company has adopted and adheres to a Code of Ethics. The Board of Directors promotes the implementation and monitors the observance of the adopted principles for sustainable development by the companies in the group; provides and controls the establishment and proper functioning of a risk management system; ensures and controls the integrated functioning of the accounting and financial reporting systems; gives guidelines, approves and controls the business plans implementation of the companies in the Group, the material transactions as well as other activities, required by the company's Rules of Procedure. The Board of Directors reports on its activities to the General Meeting of Shareholders. In case of proposals for election of new members of the Board of Directors, the principles of compliance of the competence of the nominees with the nature of the company’s activities are observed. The contracts for assignment of the management, concluded with the members of the Board of Directors, define their responsibilities and tasks, the criteria for the amount of their remuneration, their obligations for loyalty to the company and the grounds for dismissal. The number of Board members of Stara Planina Hold Plc and those of the Board of the companies in the group is defined by the company’s Articles of Association. The composition of the Boards is structured in a way that guarantees the professionalism, impartiality and independence of its decisions related to the management of the company. The Boards of Directors have allocated the tasks and responsibilities between their members. The independent directors control the executive management STARA PLANINA HOLD PLC – sphold.com 47. and participate effectively in the company's performance in accordance with the shareholders’ interests and rights. The Chairman of the Board of Directors is an independent director. The members of the Board of Directors have appropriate knowledge and experience and after their election the new members are acquainted with the main legal and financial issues related to the company's performance. Enhancing the competence and qualification of the Board members is a constant practice and their training is encouraged. The succession of mandates ensures efficient operation of the company and compliance with the legal requirements. The members of the Board of Directors have sufficient time to perform their tasks and duties. The Rules of Procedure of the Board of Directors define the maximum number of companies outside the portfolio of Stara Planina Hold Plc where Board members may hold management positions, as well as the number of consecutive mandates of the independent members. Such a practice has been adopted and applied by the public companies in the group. The amount and the structure of the remuneration to the members of the Board of Directors are defined by the General Meeting of the Shareholders. They take into account the responsibilities and contribution of each member, the possibility of selection and retention of qualified and loyal members, the need to align the interests of members with the long-term interests of the company. The remuneration of the independent members of the Board of Directors is permanent (fixed). Pursuant to a decision of the Shareholders, it may also have a variable part. The regular annual general meetings of the shareholders of the holding and the public companies of the group, held in 2021, adopted new Remuneration Policies for the members of the Board of Directors, in line with the amendments to the regulations and aimed at contributing to the long-term business goals and promoting behavior that supports value creation for the shareholders, while providing a competitive remuneration sufficient to attract and retain directors with the qualities necessary for the successful management and development of the company. The Remuneration Policies define the principles for setting the amount and the structure of the remuneration and specifies the particular additional incentives which are based on clear criteria and indicators related to the results of the company and the economic group. Information on the remunerations of the members of the Board of Directions of the holding company and those of the public companies in the group is disclosed in an annual report which is a separate document to the Annual Financial Statements of the company. Shareholders and stakeholders have easy access to the adopted policies for defining the remuneration of the board members and the reports on their implementation which are published on the company's website. The companies in the group have adopted general rules for the members of the board of directors where the functions and obligations of the board, the procedure for election and dismissal of members are defined. The Board of Directors of Stara Planina Hold Plc and the Boards of the public companies in the group have adopted procedures to avoid and disclose conflicts of interest. They impose obligations for the members to avoid and not to admit actual or potential conflicts of interest and, if necessary, to immediately disclose conflicts of interest and provide shareholders with access to information on transactions between them and the company or any related party. On the other hand, each conflict of interests in the company should be disclosed to the Board of Directors. Stara Planina Hold Plc and the public companies in the group do not and will not allow transactions between the company and members of the Board of Directors and any related parties thereto. The rules of Stara Planina Hold Plc on the avoidance and disclosure of conflicts of interest are also applied by the non-public companies in the group. Chapter Two. Audit and Internal Control In accordance with the requirements of the current legislation and based on the criteria defined thereof Stara Planina Holc Plc and the public companies in the group have established and operating audit committees with members that meets the legal requirements and specific needs of the company. The audit committee supervises the internal audit activities and monitors the overall relations with the external auditor, including the nature of non-audit services provided by the latter. Its activities are STARA PLANINA HOLD PLC – sphold.com 48. aimed at increasing the efficiency of the financial reporting processes, the internal control and risk management systems. The Audit Committee prepares a written recommendation, based on which the corporate board of the respective public company proposes to the General Meeting the election of an independent auditor to verify and certify the annual financial statements. In the proposals for election of an external auditor, the rotation principle is applied in accordance with the requirements of the relevant regulation. The Audit Committee operates in accordance with its own rules of procedure and work schedule. It supervises the internal audit activities and monitors the overall relationship with the external auditor, including the nature of non-audit services provided by the company's auditor. The Board of Directors of Stara Planina Hold Plc and the boards of the public companies of the group, with the assistance of the audit committees, ensure compliance with the applicable law regarding the independent financial audit. An internal control system has been built and functions in the companies, which guarantees the effective functioning of the reporting and information disclosure systems with a view to identifying the risks accompanying the activities of the companies and supporting their effective management. Chapter Three. Shareholders' Rights Protection The corporate Boards of Stara Planina Hold Plc and the public companies in the group ensure the equal treatment of all shareholders, including minority and foreign shareholders and is responsible for the protection of their rights. They facilitate the exercising of these rights within the limits permitted by the applicable legislation and in accordance with the company's internal rules. The corporate Boards have provided information to all shareholders about their rights, the financial results of the company and corporate events through the information disclosure system and the company's website. All shareholders of the holding company and the public companies in the group have access to information about the rules under which General meetings are convened and held, including voting procedures. The companies provide sufficient and timely information on the date and venue of the General meeting, as well as detailed information on the issues to be discussed and decided on at the meeting. The corporate Boards ensure the right of all shareholders to express their opinion, as well as to ask questions at the general meeting. The invitations for the general meetings of shareholders of Stara Planina Hold Plc and the public companies in the group include the information required under the Commercial Act and the Public Offering of Securities Act, as well as additional information on exercising the right to vote and the possibility to add new items to the agenda under Art. 223a of the Commercial Act. The invitations and the materials for the general meetings of the shareholders of Stara Planina Hold Plc and the public companies in the group are announced through the X3 News media to the public, the Financial Supervision Commission and the regulated securities market. Pursuant to the legal requirements the companies announce a notice for holding a general meeting of the shareholders and for dividend payment, upon a decision adopted by the GMS, also through the corporate actions announcement system of the Central Depository. After presenting the invitation and the materials for the general meeting of shareholders, they are available on the websites of the companies. The texts of the written materials related to the agenda of the General Meeting are particular and clear and do not mislead shareholders. All proposals regarding major corporate events are presented as separate items on the agenda of the General Meeting, including the profit distribution proposal. Shareholders with voting rights have the opportunity to exercise their voting rights at the General Meeting of the company in person or through representatives/proxies. As part of the materials for the General Meeting of Shareholders, the Board of Directors presents a sample power of attorney and Proxy Voting Rules. Rules for Organization and Holding Regular and Extraordinary Sessions of the General Meetings of Shareholders of the holding company and the public companies in the group have been adopter in order to guarantee equal treatment of all shareholders and the right of each shareholder to express opinion on the items in the agenda of the meeting. The rules and procedures for holding a general meeting of shareholders do not complicate or increase the cost of voting unnecessarily. These procedures STARA PLANINA HOLD PLC – sphold.com 49. encourage the participation of shareholders in the general meeting but do not provide the possibility of remote attendance by technical means, insofar as this would make holding of the meeting more expensive. Proxy Voting Rules have been adopted. Following the adopted amendments to the Articles of Association of the company in 2021, the right to vote at the General Meeting of Shareholders may be exercised by correspondence based on a decision of the Board of Directors. All members of the corporate Boards attend the general meetings of the shareholders. When necessary, they assist shareholders with the inclusion of additional items in the agenda of the General Meeting and guarantee the right of the shareholders to be informed on the adopted resolutions. The Rules for Organizing and Holding General Meetings provide a mechanism for assisting the shareholders who have exercised the right to include additional items and propose resolutions on issues already included in the agenda of the meeting. The resolutions of the General Meeting are published on the company’s website for a period of 10 years. The companies have not issued shares of a different class. The companies do not have shareholders with control rights. Increasing the trust of shareholders, investors and stakeholders has been one of the major commitments of the corporate Board. In this regard, the company is continually strengthening its position of a stable institution. In 2022, we continued endorsing and applying various ways to disclose current information on the financial and economic standing of the company and important corporate events as well as their promotion. Chapter Four. Disclosure of Financial and Non-financial Information Stara Planina Hold Plc and the public companies in the group have approved policies and information disclosure systems in accordance with legal requirements. They guarantee equal access to information to all addressees (shareholders, stakeholders, investment community) and do not allow inside information abuse. The information disclosure systems provide complete, timely, accurate and understandable information that allows for objective and informed decisions and assessments. The holding and the public companies in the group have internal rules for preparation of annual and interim reports and information disclosure procedures. The holding annually publishes a non-financial statement on a consolidated basis where detailed information on the activities and initiatives of all companies in the holding's portfolio in the field of non-financial reporting is provided. Stara Planina Hold Plc and the public companies in the group maintain their own websites providing information about the company, the management bodies, shareholder structure and the companies in the portfolio. The corporate governance section on the website of the holding company includes internal regulatory documents, information on the shareholders' rights and their participation in the general meeting, financial statements for the last 10 years, information for dividend payments as well as personal data protection information. Special sections include materials on forthcoming general meetings of the shareholders, information on the resolutions adopted at the general meetings. Data on the initiatives of the companies, auditors and media publishing news about the holding company and the public companies in the group are publicly available. The news section of the holding's website is particularly rich, providing information on the company's periodic publications, upcoming events, as well as any important information related to the holding's activities. The system for asking questions from shareholders and stakeholders and receiving answers electronically proves its effectiveness. There is an order for shareholders to receive dividends for previous years electronically. The practice of sending timely responses to letters and inquiries to shareholders of the holding company and the public companies of the group, including those received by e-mail, and storing them in a register duly maintained by the investor relations director, continues. The practice has been introduced that regardless of the nature of the question asked, the answer should contain a detailed explanation of the rights of the shareholders of the holding company. The procedure for shares inheritance is described in detail. Each shareholder who addresses the holding on a different occasion is being provided with comprehensive information about his rights and receives information on various issues regarding the business activities and the current standing of the company, including the historical prices of the shares of Stara Planina Hold Plc on the stock exchange. STARA PLANINA HOLD PLC – sphold.com 50. Stara Planina Hold Plc and the public companies in the group use the X3 News media that provides equal and timely access to the relevant information to all users. Chapter Five. Stakeholders. Sustainable Development The corporate governance of Stara Planina Hold Plc and the companies in the group ensure effective interaction with the stakeholders, identified by the respective company as such. The stakeholders’ policy complies with the legal requirements in accordance with the principles of transparency, accountability and business ethics. Policies have been developed taking into account the stakeholders’ interests that guarantee the balance between the development of the companies and the environment where they operate. Effective relations are maintained with the stakeholders. The companies periodically inform shareholders, stakeholders and the investment community about various important issues. The shares of Stara Planina Hold Plc and the public companies in the group are not admitted to trading in a different jurisdiction. Stara Planina Hold Plc and the companies in the group take active part in various forms of joint collaboration with state institutions and non-government organizations engaged with corporate governance in the country. Throughout the reporting year we, once again, recognize the benefit from our co-operation and membership in the Bulgarian Industrial Capital Association. The Investor Relations Directors of the holding and the public subsidiaries are members of the Association of Bulgarian Investor Relations Directors. The holding has nominated a representative to the National Corporate Governance Commission. The control related to the information disclosure process on the part of Stara Planina Hold Plc and the public companies in the group is multidirectional. No violations of the provisions and deadlines for disclosure have been found so far. The financial reports are published on the websites immediately after they are presented to the regulating authority and the public which provides a possibility for control by the shareholders, investors and all stakeholders. Another form of control in terms of the information disclosure process is exercised by the members of the Board of Directors over the Investor Relations Directors. The overall policy of the Board of Directors of Stara Planina Hold Plc regarding the management of the companies in the economic group is in accordance with the principles of socially justified and environmentally friendly economic development. The corporate Boards of the companies in the group annually develop and approve business plans of the enterprises which envisage the specific actions and policies regarding the sustainable development of each company. In their investment programs, projects aimed at the environmentally friendly development of the respective company are set and implemented annually, as well as social projects aimed mainly at employees. 3. Assessment of the Implementation of the Code Applying the National Corporate Governance Code by Stara Planina Hold Plc and the public companies in the group is a process to continue throughout the current year as well. The review of the Code in relation to the implementation of the underlying “comply or explain” principle leads to the conclusion that Stara Planina Hold Plc and the public companies in the group comply with the Code as a whole. Implementation of the recommendations in the Code is responsibility of the corporate Boards. In this sense, applying particular texts of the Code does not depend on the corporate Board, insofar as the appointment of members of the Board of Directors is a right and prerogative of the shareholders. In conclusion we can summarize that the activities of the corporate Board of Stara Planina Hold Plc and the public companies in the group throughout 2023 have been in accordance with the National Corporate Governance Code, and the activities of the non-public companies in the group are in accordance with the main priorities and guidelines of the corporate program of Stara Planina Hold Plc. 4. Description of the Internal Control and Risk Management Systems The internal control and risk management systems of the holding company and the companies in the group ensure effective reporting and information disclosure, identification of the risks accompanying the activity of the company and their effective management. Their purpose is to ensure compliance STARA PLANINA HOLD PLC – sphold.com 51. between legal and regulatory requirements and the proper functioning of internal processes. These systems are established in accordance with the specifics of the company - its activities, financial characteristics, industry, needs and resources. The Board of Directors has the primary responsibility for the internal control and risk management systems. The Board performs both a management and guidance function as well as ongoing monitoring, assessing whether the systems are suitable for the company in a changed environment, whether they operate as well as expected and whether they are being adapted periodically to the changed conditions. The management’s responsibility includes implementing an internal control system to prevent, detect and correct errors and misstatements resulting from the actions of the accounting system. In this regard, the management observes the following basic principles in its activity: • adherence to a specific management and accounting policy, disclosed in the financial statements; • performance of all operations in accordance with the laws and statutory regulations; • recording all events and transactions in a timely manner, with the exact amount in the relevant accounts and for the relevant reporting period, so as to allow the financial statements to be prepared in accordance with the specified accounting framework; • observing the principle of prudence in valuation of assets, liabilities, income and expenses; detection and termination of fraud and errors; • completeness and correctness of the accounting information; • preparation of reliable financial information; adherence to international financial reporting standards and compliance with the going concern principle. The respective company's Board of Directors is responsible for the risk management which includes identifying, assessing and controlling potential events or situations that may adversely affect the achievement of the organization's objectives, and is designed to give reasonable assurance that the company's business objectives will be achieved. The corporate Boards of the holding company and the companies in the group prepare annual activity reports as well as financial statements for every financial year that give an accurate and honest estimate of the financial standing of the company at the end of the year, its operational financial results, and the cash flows in compliance with the applicable accounting framework. In order to ensure an independent and objective assessment of the financial statements the annual audit of the holding company and the companies in the group is performed by an independent statutory auditor. All financial statements are prepared in accordance with the International Accounting Standards. The current financial and accounting activities of the companies is subject to periodic control and analysis by the management body. There is an established practice for periodic discussion at meetings of the Board of Directors of the current financial results of the companies' activities, including the implementation of the investment programs. 5. Information Art. 10 of Directive 2004/25/EC The companies in the group do not have significant direct or indirect shareholdings (including indirect shareholdings through pyramid structures and cross-shareholding) within the meaning of Art. 85 of Directive 2001/34/EC. There are no holders of securities with special control rights. There are no restrictions on the voting right. The rules that regulate the appointment and replacement of members of the Board of Directors and the introduction of amendments to the memorandum of association are specified in the published Articles of Association of the company and are not regulated by the corporate Board. According to the Articles of Association of Stara Planina Hold Plc and the companies in the group, only the General Meeting of Shareholders has the right to elect and dismiss members of the Board of Directors of the company and decisions are taken by a majority of 2/3 of the shares represented. Only the General Meeting of Shareholders has the right to make amendments and supplements to the Articles of Association of the company. Decisions are taken by a majority of 2/3 of the shares represented. Resolutions for buy-back procedures or issuance of shares are to be adopted by the shareholders in accordance with the legislation in force. STARA PLANINA HOLD PLC – sphold.com 52. The powers of the Board of Directors are regulated in detail in the Articles of Association of the companies in the group. The Board of Directors of the public company, without being expressly authorized to do so by the General Meeting, may not carry out transactions specified under Art. 114 of the Public Offering of Securities Act. Transactions of the public companies with the participation of interested parties, other than those mentioned above, are subject to prior approval by the Board of Directors. The Articles of Association of Stara Planina Hold Plc also provide for the powers of the Board of Directors to increase the capital of the company by issuing shares. 6. Diversity policy The management structure of Stara Planina Hold Plc is defined in the company's Articles of Association. The Board of Directors consists of three individuals and one legal entity, which has respectively appointed a physical person as its representative. The members of the Board of Directors have the education, qualification, knowledge and professional experience necessary for the responsible and competent performance of their functions and responsibilities. The company does not apply a diversity policy regarding the management body in relation to aspects such as age and gender. The election of the members of the board of directors is the right and prerogative of the shareholders in accordance with the requirements of the law and the Articles of Association. 7. Information on the Board of Directors Stara Planina Hold Plc has a one-tier management system. The Board of Directors is the managing body, responsible for the planning and coordination of the company’s overall performance, as laid down in the scope of its business activity, by means of undertaking all actions for organization, management and control, provided by law and the Articles of Association. The organization of work, as well as all duties, responsibilities and competences are regulated and specified by the Rules of Regulation of the of the Board of Directors of Stara Planina Hold Plc. The Board of Directors takes its decisions at meetings, held at least once every three months, in accordance with the statutory requirements of the terma and procedures for their convocation and holding. As of 31.12.2023 the Board of Directors of Stara Planina Hold Plc includes the following members: • Evgeniy Vasilev Uzunov – Chairman of the Board of Directors • Vasil Georgiev Velev – Member of the Board of Directors and Executive Director • Finance Invest LTD, Plovdiv, UIC 115016144; represented in the Board of Directors by Spas Borisov Videv • Stefan Atanasov Nikolov – Member of the Board of Directors During the reporting year no changes in the members of the Board of Directors have been made. The composition of the Board of Directors elected by the General Meeting guarantees the independence and objectiveness of the assessments and actions of its members in terms of the company’s operation. During the reporting year, members of the Board of Directors or parties related to them have not entered into transactions with the company which are beyond its usual business activity or significantly deviate from the market conditions. The statutory requirement for at least one third of the members of the Board of Directors to be independent persons is observed. There are no changes in the special criteria for election of Board members. In its practice so far, the Board of Directors has not encountered a situation of direct or indirect conflict of interest between a member of the management body and a shareholder. There has not been found any instance of direct or indirect conflicts between the interest of a Board member and the company’s interest. Information about the companies in which the members of the Board of Directors own more than 25% of the capital and about their participation as procurators, managers or board members in other companies or cooperatives is presented in the annual individual activity report as of 31.12.2023 (https://www.sphold.com/FILES/FO/8945006HQ7VN30FUR531-20231231-EN-SEP.xhtml). STARA PLANINA HOLD PLC – sphold.com 53. Х. Additional information on Appendix 2 of Ordinance No 2 of the FSC 1. Information given in value or quantitative terms about the main categories of commodities, products and/or provided services, with indication of their share in the sales revenues of the issuer as a whole and the changes that occurred during the reporting fiscal year As a holding company, Stara Planina Hold Plc does not perform independent commercial operations and has only financial income. 2. Information about the revenues allocated by separate categories of activities, domestic and external markets as well as information about the sources for supply of materials required for the manufacture of commodities or the provision of services with indication of the degree of dependence in relation to any individual seller or buyer/user, where if the share of any of them exceeds 10 per cent of the expenses or revenues from sales, information shall be provided about every person separately about such person’s share in the sales or purchases and his relations with the company As a holding company, Stara Planina Hold Plc does not perform independent commercial operations and has only financial income.The revenues of the companies in the group are formed mainly from sales of production as follows: M+S hydraulic Plc – orbital and hydraulic motors, hydrostatic servo controls and accessories for them axial-piston motors and pumps; HES Plc – piston, plunger, telescopic and rail hydraulic cylinders, hydraulic pumps, precision rotary parts, axial-piston motors and pumps; Elhim Iskra Plc – starter accumulators, traction, semi-traction and stationary batteries and elements therefor; Bulgarian Rose Plc – natural aromatic products, sauces and compositions, perfumery cosmetics, essences and aromas for the food industry; Boryana Jsc – fashion ladies' and man's knitwear; Fazan Jsc – socks and socks items; 3. Information on concluded material transactions In 2023, no transactions of significant importance for the activities of Stara Planina Hold Plc were concluded, with the exception of lending to companies in the Group. Information regarding loans granted to subsidiaries and associated enterprises is presented under item 9 of this section of the report. On 18.07.2023 Stara Planina Hold Plc sold its shareholding, representing 45.00 % of the capital of Ustrem Jsc., UIC: 206417771, Svishtov at the price of BGN 560 000. Buyer of the shares is the company "Raykov" Ltd. UIC: 104697074. The investment in Ustrem Jsc was made by Stara Planina Hold Plc in 2017, with the shareholding in the amount of 45.00 % of the company's capital worth BGN 319 077. After excluding Ustrem Jsc from the consolidation, we expect the consolidated net sales revenues of the holding to fall by about BGN 1.8 million on an annual basis. 4. Information about the transactions concluded between the company and related parties during the reporting period, proposals for conclusion of such transactions as well as transactions which are outside its usual activity or substantially deviate from the market conditions, to which the issuer or its subsidiary is a party, indicating the amount of the transactions, the nature of relatedness and any information necessary for an estimate of the influence over the issuer’s financial status Transactions concluded between Stara Planina Hold Plc and related parties during the reporting period are only the loans granted to subsidiaries and associates, specified under item 9 of this section of the Report. There are no transactions beyond the scope of issuer's usual business activity or transactions which significantly deviate from the market conditions. STARA PLANINA HOLD PLC – sphold.com 54. 5. Information on events and indicators of unusual nature for the issuer which have significant influence on its activity, the realized incomes and accrued expenses; assessment of their impact on the results throughout the current year As a holding company Stara Planina Hold Plc does not perform independent commercial operations and the company has focused its activities primarily on the management of the subsidiaries and associates in the Group. Therefore, a significant effect on the financial standing of Stara Planina Hold Plc has the direct dependence on the financial standing of the subsidiaries and associates whose operations are primarily export-oriented - mainly to the countries of the European Union. In 2023, the operations of the companies in the group were conditioned by serious challenges caused by the ongoing military conflicts in Ukraine and the Middle East, as well as the obstruction of the transport route through the Red Sea, and the resulting negative consequences on the national, European and world economy. Along with difficulties and the possibility of disruption of supply chains, the conflicts have already caused a significant increase in the prices of basic raw materials, appreciably lower growth and even recession, mainly in European economies, strong inflationary pressures and a widespread reduction in investment in most of the economic sectors. On a national level, the business activity during the year was conditioned by the unceasing political instability, which continues to be assessed as the main cause negatively affecting economic activity and the business environment in Bulgaria. There are no other events and indicators of an unusual nature that had a significant impact on the issuer's activity. 6. Information on off-balance kept transactions – nature and business objective, indication of the financial impact of the transactions on the operation, if the risk and benefits of these transactions are substantial for the assessment of the issuer’s financial status There are no such transactions. 7. Information about holdings of the issuer, about its main investments in the country and abroad (in securities, financial instruments, intangible assets and real estate), as well as the investments in equity securities outside its economic group and the sources/ways of financing The investments of Stara Planina Hold Plc are in securities and shareholdings in Bulgarian companies and were made with own funds.The company does not have any real estate property. Information on the shareholdings of Stara Planina Hold Plc is provided under Section І of this Report - Investment Portfolio. 8. Information about the concluded by the issuer, by its subsidiary, in their capacity of borrowers, loan contracts with indication of the terms and conditions thereof, including the deadlines for repayment as well as information on the provided guarantees and assuming of liabilities This information is presented in the Annual activity report to the 2023 Separate Annual Financial Statements (https://www.sphold.com/FILES/FO/8945006HQ7VN30FUR531-20231231-EN-SEP.xhtml). 9. Information on the loans granted by the issuer or its subsidiaries, provision of guarantees or assuming of liabilities in total to one person or its subsidiary, including to related parties, indicating the name or title and UIC of the person, the nature of relationship between the issuer or their subsidiaries and the borrower, the amount of outstanding principal, interest rate, date of conclusion of the contract, repayment period, amount of commitment, specific conditions other than those specified in this provision, and the purpose for which they were granted, in case they are concluded as targets This information is presented in the Annual activity report to the 2022 Separate Annual Financial Statements (https://www.sphold.com/FILES/FO/8945006HQ7VN30FUR531-20231231-EN-SEP.xhtml). 10. Information on the use of the funds from a new issue of securities during the reporting period During the reporting period has not been issued a new issue of securities. STARA PLANINA HOLD PLC – sphold.com 55. 11. Analysis of the ratio between the achieved financial results, reflected in the financial statement for the fiscal year, and previously published forecasts for these results Stara Planina Hold Plc publishes monthly forecasts for the sales of the companies in the Group, the gross profit and accordingly reports the real results compared to the forecasts. In the public notices on the financial standing, as well as in the half-year and annual reports on the activity of the company, information is also presented about the development trends and, if necessary, previously published forecasts are updated on the basis of current data. The analysis shows that the published forecasts correctly reflect the later achieved financial results, including in the company's annual financial report. The public companies in the group of Stara Planina Hold Plc also publish monthly forecasts for their sales and gross profit and accordingly report the real results compared to the forecasts made. The achieved financial results reflected in the financial statements for 202s do not differ from the published forecast results. 12. Analysis and assessment of the policy concerning the management of the financial resources with indication of the possibilities for servicing of the liabilities, eventual jeopardizes and measures which the issuer has undertaken or is to undertake with a view to their elimination The policy of Stara Planina Hold is focused mainly on the management of the companies in its portfolio. Free funds are used for financing the companies. Indicative of this policy are the loans granted to companies from the holding's portfolio. The loans are specified under item 9 of this section of the Report. An expression of this policy is also the deferre dividend payment to Stara Planina Hold Plc in its capacity of a majority or major shareholder on the part of the respective companies. Stara Planina Hold Plc services all of its liabilities in a timely manner hence there are no possible threats necessitating measures for their elimination. 13. Assessment of the possibilities for realization of the investment intentions, indicating the amount of the available funds and stating the possible changes in the structure of the financing of this activity The activity of Stara Planina Hold is focused mainly on the management of its current investments. There are no close plans for new investments to be made by the company. The holding gives priority to the development of the companies in the portfolio. Information on the planned investments of the companies in the group for 2024 is presented under section IV Planned development of the group of this Report. The management of Stara Planina Hold Plc finds the possibilities for realization of these investment intentions as realistic. 14. Information on changes in the major principles for management of the issuer and its economic group occurred during the reporting period Stara Planina Hold manages its investments by setting high but achievable goals in the terms of quality, output and profitability. Particular attention is being paid to the aspect of environmental protection, human resources development and corporate and social responsibility. During the reporting period there are no changes in the basic principles of management of Stara Planina Hold Plc and the companies of the economic group. 15. Information on the main characteristics of the internal control and risk management system applied by issuer in the process of preparation of the financial statements In order to ensure an independent and objective assessment of the financial statements the annual audit of the holding is performed by an independent statutory auditor. All financial statements are prepared in accordance with the International Accounting Standards. The current financial and accounting activity of the company is subject to periodic control and analysis on the part of the management body. The holding has an established practice to periodically discuss the current financial results of the companies included in its strategic investment portfolio in order to ensure implementation of their business programs and accurate analysis of the opportunities for future investment projects. STARA PLANINA HOLD PLC – sphold.com 56. Detailed information on the internal control and risk management systems is presented under Section VIII, item 4 of this Report. 16. Information on the changes in the management and supervision bodies during the reporting fiscal year Stara Planina Hold Plc has a one-tier management system. The Board of Directors includes 4 persons. During the reporting financial year were not made changes in the members of the Board of Directors and the representation of the holding company. Detailed information on the Board of Directors is specified under Section VIII, item 6 of the Report. 17. Information about the owned by the members of the management and of the control bodies, procurators and the senior management shares of the issuer, including the shares held by anyone of them separately or as a percent from the shares of each class, as well as provided to them options on securities of the issuer by the latter – type and amount of the securities over which the options have been set up, price of exercising of the options, purchase price, if any, and term of the options This information is presented in the Annual activity report to the 2023 Separate Annual Financial Statements (https://www.sphold.com/FILES/FO/8945006HQ7VN30FUR531-20231231-EN-SEP.xhtml). 18. Information on the arrangements known to the company (including also after the closure of the fiscal year), as a result of which in future periods may occur changes in the relative portion of shares or debentures owned by shareholders or debenture holders The company is not aware of such arrangements. 19. Information on pending court, administrative or arbitrary proceedings related to obligations or receivables of the issuer amounting to at least 10 percent of its own capital Stara Planina Hold Plc is not involved in any pending court, administrative or arbitrary proceedings as well as in any judgments or requests for dissolution or declaration of liquidation. 20. Information on the Investor Relations Director, including telephone and mailing address Investor Relations Director is Sofia Kirilova Argirova-Atanasova, tel. 02/9634161, 0879899469, address for correspondence: 20, Frederic Joliot Curie Str. 9th floor, 1113 Sofia, Bulgaria, [email protected]. Other information at the discretion of the company The company considers that there is no other information that has not been publicly disclosed by the company and which would be important for shareholders and investors in making an informed investment decision. Media Stara Planina Hold Plc discloses statutory information to the public through information media X3 News. The inside information for Stara Planina Hold Plc under Art. 7 of Regulation (EU) № 596/2014 of the European Parliament and of the Council of 16 April 2014 concerning the circumstances occurred in 2023 is published on the company's website in the News section - https://www.sphold.com/novini, as well as in the X3News media - http://www.x3news.com/?page=Company&target=InsiderInformation&BULSTAT=121227995&MESSAGE_TYPE=2 through which the company publicly discloses inside information. Executive Director: Vasil Velev Digitally signed by Vasil Georgiev Velev Date: 2024.04.25 15:07:51 +03'00' STARA PLANINA HOLD PLC – sphold.com 57. DECLARATION under Art. 100n, para. 4, item 4 of the POSA The undersigned Vasil Georgiev Velev - Executive Director of Stara Planina Hold Plc certify that: a) the annual consolidated financial statements of Stara Planina Hold Plc as of 31.12.2023, prepared in accordance with the applicable accounting standards, accurately and fairly reflect the information on assets and liabilities, financial standing and profit or loss of the issuer and the companies included in the consolidation as a whole; (b) the annual consolidated activity report provides a reliable overview of the development and results of the activities and condition of the companies included in the consolidation as a whole, together with a description of the main risks and uncertainties they face. Declarer: Vasil Velev DECLARATION under Art. 100n, para. 4, item 4 of the POSA The undersigned Kremena Gancheva Dulgerova - Chief Accountant of Stara Planina Hold Plc certify that: a) the annual consolidated financial statements of Stara Planina Hold Plc as of 31.12.2023, prepared in accordance with the applicable accounting standards, accurately and fairly reflect the information on assets and liabilities, financial standing and profit or loss of the issuer and the companies included in the consolidation as a whole; b) the annual consolidated activity report provides a reliable overview of the development and results of the activities and condition of the companies included in the consolidation as a whole, together with a description of the main risks and uncertainties they face. Declarer: Kremena Dulgerova Kremena Gantcheva Dulgerova Digitally signed by Kremena Gantcheva Dulgerova Date: 2024.04.25 15:02:23 +03'00' Digitally signed by Vasil Georgiev Velev Date: 2024.04.25 15:08:10 +03'00' Attn. The shareholders of STARA PLANINA HOLD PLC I I I N N N D D D E E E P P P E E E N N N D D D E E E N N N T T T A A A U U U D D D I I I T T T O O O R R R R R R E E E P P P O O O R R R T T T REPORT ON THE CONSOLIDATED AUDIT OF THE FINANCIAL STATEMENTS Opinion We have audited the consolidated financial statements of Stara Planina Hold PLC (the Company), including the statement of financial position as of 31.12.2023 and the profit and loss, and other comprehensive income statements, the statements on changes in equity and the cash flows statements for the year then ended and the explanatory notes to the financial statements including summary of the significant accounting policies. In our opinion, the enclosed consolidated financial statements present fairly, in all material aspects, the financial position of the Company as of 31.12.2023 and its financial results from business operations and its cash flows for the year then ended, in accordance with the International Financial Reporting Standards (IFRS) adopted for use in the European Union (EU). Basis for the opinion We conducted our audit in accordance with the International Audit Standards (IAS). Our responsibilities under these standards are further described in the section of our report "Responsibilities of the auditor for the audit of the financial statements". We are independent from the Company in accordance with the Code of Ethics for Professional Accountants of the International Ethic Standards for Accountants Council (the Code of IESAC), together with the ethical requirements of the Independent Financial Audit Act (IFAA), applicable to our audit of the financial statements in Bulgaria, while we have also fulfilled our other ethical responsibilities in accordance with the IFAA and the Code of IESAC. We consider that the audit evidence we obtained as sufficient and appropriate to provide a basis for our opinion. Key audit issues The key audit issues are those which as per our professional judgment were of the greatest significance in the audit of the financial statements for the current period. These issues are reviewed as part of our audit of the financial statements as a whole and the formation of our opinion thereof, as we do not provide a separate opinion on these issues. Key issues are indicated in the "Responsibilities of the auditor for the audit of the financial statements" section of this report. Other information different from the financial statements and the auditor report thereon The management is responsible for this other information. The other information includes an activity report (incl.) and a corporate governance declaration and a Report on the implementation of the Remuneration Policy, prepared by the management in accordance with Chapter seven of the Accountancy Act but does not include the financial statements and our auditor report thereon which we received prior to the date of our auditor report. Our opinion on the financial statements does not include the other information and we do not express any conclusion of certainty related thereto, unless explicitly specified in our report and to the extent stated. With regard to our audit of the financial statements, our responsibility is to read this other information and thus to consider whether this other information is materially inconsistent with the financial statements or with our knowledge, gained during the audit, or otherwise it seems to contain substantially incorrect reporting. If based on the work we have performed, we conclude that there is materially incorrect reporting in this other information, we are required to report on this fact. We have nothing to report with this regard. Responsibility of the management and the persons engaged with general management in terms of the consolidated financial statements The management is responsible for the preparation and the fair presentation of these financial statements in accordance with the IFRS applicable in the EU and for such an internal control system as the management has considered being necessary to ensure the preparation of financial statements that are free from material misstatements, whether due to fraud or error. When preparing the consolidated financial statements, the management is responsible for the assessment of the group ability to continue operating as a going concern, disclosing, when applicable, any issues related to the going concern assumption and using the accounting basis on the grounds of the going concern assumption unless the management intends to liquidate the Company or to cease its operations, or if the management does not actually have any alternative but to do so. The persons engaged with general management are responsible for supervising the financial reporting processes of the Companies in the Group. The management is responsible for the fact that the electronic format of the separate financial statements of the Company for the year ending on December 31, 2023, comprised in the attached electronic file „8945006HQ7VN30FUR531-20231231-EN-CON.zip“ has been prepared in all material aspects in accordance with the requirements of the Commission Delegated Regulation (EU) 2019/815 of 17 December 2018 supplementing Directive 2004/109 / EC of the European Parliament and of the Council ("EEEF Regulation"). Responsibilities of the auditor for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance on whether the consolidated financial statements as a whole are free from material misstatements, whether due to fraud or error, and to issue an auditor report that includes our audit opinion. Reasonable assurance is a high level of assurance but it does not guarantee that an audit conducted in accordance with the IAS will always reveal materially incorrect reporting whenever such reporting exists. Incorrect reporting may occur as a result of fraud or error and are considered to be material if it could reasonably be expected that they, individually or in the aggregate, could influence the economic decisions of users based on these financial statements. As part of the audit in accordance with the IAS, we apply professional judgment and maintain professional skepticism during the entire audit. We also: - identify and assess risks from material misstatements in the consolidated financial statements, whether due to fraud or error, develop and implement audit procedures in response to these risks and obtain sufficient and appropriate audit evidence to provide a basis for our opinion. The risk for a given significant misstatement, resulting from fraud, not to be revealed is higher than the risk of material misstatements resulting from error due to the fact that fraud may involve secret collusions, falsification, deliberate omissions, statements intended to mislead the auditor as well as disregard or circumvention of the internal control. - obtain understanding of the internal control related to the audit in order to develop audit procedures that are appropriate under the particular circumstances but not for the purpose of expressing an opinion on the effectiveness internal control of the Companies in the Group. - evaluate the appropriateness of accounting policies used and the reasonableness of the accounting estimates and related disclosures made by the management. - reach a conclusion on the appropriateness of the accounting basis, used by the management, based on the going concern assumption, and, based on the audit evidence obtained as to whether there is a material uncertainty related to events or conditions that might provoke significant doubts on the Companies in the Group ability to continue functioning as a going concern. If we reach the conclusion that there is a significant uncertainty, we are required to draw attention in our audit report to the disclosures related to this uncertainty in the financial statements or in the event that these disclosures are inadequate to modify our opinion. Our conclusions are based on audit evidence obtained before the date of our auditor report. Future events or conditions may, however, cause the Company to suspend its operations as a going concern. - evaluate the overall performance, structure and contents of the financial statements, including the disclosures and whether the financial statements present material transactions and events in a manner that achieves fair presentation. REPORT RELATED TO OTHER LEGAL AND REGULATORY REQUIREMENTS Additional issues subject to reporting pursuant to the Accountancy Act and the Public Offering of Securities Act In addition to our responsibilities and reporting under the International Audit Standards described above under the section "Information other than the financial statements and the auditor report thereon" in terms of the activity report and the corporate governance declaration, we have also implemented procedures, added to those required under the International Audit Standards as per the Guidelines of the professional organization for all Certified Public Accountants and Registered Auditors in Bulgaria – Institute of Certified Public Accountants (ICPA), issued on 29.11.2016 (approved by its Managing Board on 29.11.2016). These procedures concern verifications on the availability as well as verifications on the form and contents of such other information with the objective to assist us in forming our opinion on whether the other information includes disclosures and reports provided for under Chapter Seven of the Accountancy Act and the Public Offering of Securities Act (Art. 100n, para. 10 of the Public Offering of Securities Act in relation to Art. 100n, para. 8, item. 3 and 4 of the Public Offering of Securities Act) as well as art. 100n, para 13 in relation to Art.116c, para.1 of the Public Offering of Securities Act, applicable in Bulgaria. Opinion with regard to Art. 37, Para. 6 of the Accountancy Act Based on the procedures performed, our opinion is that: a) The information included in the activity report for the financial year for which the financial statements are prepared is consistent with the financial statements. b) The activity report is prepared in accordance with the requirements of Chapter seven of the Accountancy Act and Art. 100n, Para. 7 of the Public Offering of Securities Act. c) The corporate governance declaration for the financial year for which the financial statements are prepared presents the information as required by Chapter seven of the Accountancy Act and Art. 100n, Para. 8 of the Public Offering of Securities Act. d) The non-financial declaration for the financial year for which the consolidated financial statements have been prepared is presented and prepared in accordance with the requirements of Chapter seven of the Accountancy Act. Opinion with regard to Art. 100n, Para. 10 and in relation to Art. 100n, Para 8, Items 3 and 4 of the Public Offering of Securities Act Based on the audit procedures performed and the acquired knowledge and understanding of the company's activities and the environment it operates in, our opinion is that the description of the main characteristics of the internal control and risk management systems of the company in relation to the financial reporting process, which is part of the activity report (as part of the contents of the corporate governance declaration) and the information under Article 10, Paragraph 1, Letters "c", "d", "f", "h" and "i" of Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 regarding take- over offers, does not contain materially incorrect reporting. Additional reporting on the financial statements audit in connection with Art. 100n, Para. 4, Item 3 of the Public Offering of Securities Act Statement with regard to Art. 100n, Para. 4, Item 3, letter "b" of the Public Offering of Securities Act Information on related parties’ transactions is disclosed under Enclosure to the financial statements. Based on the audit procedures that we conducted in terms of the related parties’ transactions as part of our audit of the financial statements as a whole, no facts, circumstances or other information has become known to us, based on which to conclude that the related parties’ transactions are not disclosed in the accompanying financial statements for the year ended on 31.12.2023 in all material aspects, in accordance with IAS 24 "Related Party Disclosures". The results from our audit procedures on related parties’ transactions have been reviewed in the context of forming our opinion on the financial statements as a whole, but not to express a separate opinion on related parties’ transactions. Statement with regard to Art. 100n, Para. 4, Item 3, letter "c" of the Public Offering of Securities Act Our responsibilities for the audit of the consolidated financial statements as a whole, described in the section of our report "Responsibilities of the auditor for the audit of the consolited financial statements" include an assessment on whether the financial statements present material transactions and events in a manner that achieves fair presentation. Based on the audit procedures performed on essential transactions underlying the financial statements for the year ended on 31.12.2023, no facts, circumstances or other information has become known to us, based on which to conclude that there are cases of materially incorrect reporting and disclosure in accordance with the requirements of IFRS adopted by the European Union. The results from our audit procedures on the material to the financial statements transactions and events of the Company are reviewed by us in the context of forming our opinion on the financial statements as a whole, but not to express a separate opinion on these material transactions. Statement with regard to Commission Delegated Regulation (EU) 2019/815 of 17 December 2018 supplementing Directive 2004/109/EC of the European Parliament and of the Council ("EEEF Regulation") In addition to our responsibilities and our reporting under IAS, described above in the section "Responsibilities of the auditor for the audit of the financial statements", we have followed the procedures in accordance with the "Guidelines on the expression of the Audit Opinion with regard to the implementation of the Single European Electronic Format (EEEF) for the financial statements of companies whose securities are admitted to trading on a regulated market in the European Union (EU)" of the professional organization of registered auditors in Bulgaria, the Institute of the Certified Public Accountants (ICPA)". These procedures concern verification of the format and whether the readable part of this electronic format corresponds to the audited separate financial statements and expressing an opinion regarding the compliance of the electronic format of the separate financial statements of Stara Planina Hold Plc for the year ended on 31 December 2023 attached in the electronic file „8945006HQ7VN30FUR531-20231231-EN-CON.zip“ with the requirements of Commission Delegated Regulation (EU) 2019/815 of 17 December 2018 supplementing Directive 2004/109 / EC of the European Parliament and of the Council by means of regulatory technical standards to define the uniform electronic format for reporting ("EEEF Regulation"). Based on these requirements, the electronic format of the separate financial statements included in the annual separate report on the activities under Art. 100n, para. 4 of the Public Offering of Securities Act must be provided in XHTML format. Based on the performed procedures, our opinion is that the electronic format of the individual financial statements of Stara Planina Hold AD for the year ending December 31, 2023, contained in the attached electronic file „8945006HQ7VN30FUR531-20231231-EN-CON.zip“, has been prepared in all material aspects in accordance with the requirements of the EEEF Regulation. Reporting under Art. 10 of Regulation (EC) No 537/2014 in relation to the requirements of Art. 59 of the Independent Financial Audit Act Pursuant to the requirements of the Independent Financial Audit Act in relation to Art. 10 of Regulation (EC) No 537/2014, we further report the following information. - Katya Zlatareva as a key auditor was appointed as a statutory auditor of the consolidated financial statement for the year ended on 31.12.2023 of Stara Planina Hold Plc ("the Company") at the General Meeting of Shareholders held on 8.06.2023 for a period of one year. - The audit of the consolidated financial statements for the year ended on 31.12.2023 of the Company represents a third full continuous commitment to a statutory audit of this enterprise, performed by us. - We confirm that our audit opinion is consistent with the additional report provided to the Audit Committee of the Company in accordance with the requirements of Art. 60 of the Independent Financial Audit Act. - We confirm that we have not provided the banned services except for the audit as specified under Art. 64 of the Independent Financial Audit Act. - We confirm that we have preserved our independence in relation to the Company when conducting the audit. Responsible auditor: /Katya Zlatareva, registered auditor, diploma No. 0610/ Sofia, 52, Simeon Radev Str. Date: 26.04.2024 KATYA RAYKOVA ZLATAREVA Digitally signed by KATYA RAYKOVA ZLATAREVA Date: 2024.04.26 07:00:35 +03'00'
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.