Monbat AD

Annual / Quarterly Financial Statement • Mar 28, 2024

MONBAT AD Separate Financial Statements Annual Separate Activity Report Independent Auditor’s Report 31 December 2023 Table of contents Page Separate financial statements Separate statement of profit or loss 1 Separate statement of comprehensive income 2 Separate statement of financial position 3 Separate statement of changes in equity 5 Separate statement of cash flows 6 Notes to the separate financial statements 7-91 Annual separate activity report i Corporate governance statement acc. to art. 100n, (8) of POSA ii Declaration on the implementation of the remuneration policy iii Declaration under Art. 100n, para. 4, item 4 of the Law on Public Offering of Securities to the Shareholders of Monbat AD iv Monbat AD 1 Separate financial statements 31 December 2023 The notes on pages 7 to 91 are an integral part of these financial statements. Separate Statement of profit or loss Note 2023 2022 BGN ‘000 BGN ‘000 Revenue from contracts with customers 25 317 137 327 007 Other operating income 26 906 8 094 Gain on the sale of non-current assets 30 3 9 Expenses for materials 27 (196 586) (204 965) Hired services expenses 29 (22 161) (22 840) Payroll expenses 18.1 (18 668) (17 231) Depreciation and amortization expenses 4, 5, 8 (6 987) (6 681) Changes in the balance of finished goods and work in progress 585 5 487 Costs of goods sold and other current assets 28 (64 642) (77 870) Impairment of financial assets 12, 31, 37 (50) (412) Other expenses 31 (2 297) (1 997) Operating profit 7 240 8 601 Finance costs 32 (9 407) (6 604) Finance income 32 4 174 2 088 Income from the sale of investments - 485 Financial instruments income 34 2 640 589 Other financial items 33 (221) 647 Profit before tax 4 426 5 806 Income tax expense 9 (452) (606) Profit for the year 3 974 5 200 Loss from discontinued operations 7 (1 066) (3 981) Total comprehensive income for the year 2 908 1 219 BGN BGN Earnings per share from continuing operations 35.1 0.10 0.13 Loss per share from discontinued operations 35.1 (0.03) (0.10) Earnings per share 35.1 0.07 0.03 Prepared on 29 March 2024 by: Belnikolov and partners OOD - Petya Belnikolova Executive Member of the Board of Directors: Viktor Spiriev Auditor’s report issued: Grant Thornton OOD, audit firm, registration No 032 Mariy Apostolov, Managing Partner Silvia Dinova, Registered Auditor responsible for the audit Monbat AD 2 Separate financial statements 31 December 2023 The notes on pages 7 to 91 are an integral part of these financial statements. Separate statement of comprehensive income Note 2023 2022 BGN ‘000 BGN ‘000 Profit for the year 2 908 1 219 Other comprehensive income - - Total comprehensive income for the year 2 908 1 219 Prepared on 29 March 2024 by: Belnikolov and partners OOD - Petya Belnikolova Executive Member of the Board of Directors: Viktor Spiriev Auditor’s report issued: Grant Thornton OOD, audit firm, registration No 032 Mariy Apostolov, Managing Partner Silvia Dinova, Registered Auditor responsible for the audit Monbat AD 3 Separate financial statements 31 December 2023 The notes on pages 7 to 91 are an integral part of these financial statements. Separate statement of financial position Assets Notes 31 December 31 December 2023 2022 BGN ‘000 BGN ‘000 Non-current assets Intangible assets 4 10 378 7 799 Property, plant and equipment 5 46 964 48 619 Investments in subsidiaries and associates 6 83 185 83 051 Right-of-use assets 8 2 747 2 358 Deferred tax assets 9 - 1 914 Non-current assets 143 274 143 741 Current assets Short-term related party receivables 37.1 87 342 93 384 Trade receivables 12 44 893 44 725 Inventories 10 34 057 36 043 Tax receivables 13 2 621 4 472 Prepayments 1 053 1 843 Short-term financial assets 11 142 149 Income tax receivables 426 230 Other receivables 14 1 596 2 211 Cash and cash equivalents 15 7 060 2 527 Current assets 179 190 185 584 Non-current assets, included in disposal groups, held for sale 7 40 066 38 867 Total assets 362 530 368 192 Prepared on 29 March 2024 by: Belnikolov and partners OOD - Petya Belnikolova Executive Member of the Board of Directors: Viktor Spiriev Auditor’s report issued: Grant Thornton OOD, audit firm, registration No 032 Mariy Apostolov, Managing Partner Silvia Dinova, Registered Auditor responsible for the audit Monbat AD 4 Separate financial statements 31 December 2023 The notes on pages 7 to 91 are an integral part of these financial statements. Separate statement of financial position (continued) Equity and liabilities Notes 31 December 31 December 2023 2022 BGN ‘000 BGN ‘000 Equity Share capital 16.1 38 966 38 973 Share premium 16.2 28 476 28 498 General reserves 16.3 63 866 63 866 Retained earnings 26 143 27 235 Total equity 157 451 158 572 Liabilities Non-current liabilities Convertible bond 21 26 872 42 265 Borrowings 19 5 371 12 614 Fair value of conversion option 21 - 5 280 Lease liabilities 8 1 960 1 524 Government grants 20 90 295 Warranty provisions 17 147 185 Deferred tax liabilities 9 948 - Non-current liabilities 35 388 62 163 Current liabilities Borrowings 19 90 977 71 136 Fair value of conversion option 21 2 640 - Related party payables 37.2 36 784 39 750 Trade payables 22 13 151 11 282 Convertible Bond 21 17 815 11 818 Contract liabilities 24.1 3 850 3 729 Personnel payables 18.2 2 053 1 781 Warranty provisions 17 106 301 Lease liabilities 8 825 854 Deferred revenue 305 248 Tax liabilities 23 73 73 Government grants 20 204 204 Derivatives 24.3 - 364 Other liabilities 24.2 202 5 917 Current liabilities 168 985 147 457 Liabilities, included in disposal groups, held for sale 7 706 - Total liabilities 205 079 209 620 Total equity and liabilities 362 530 368 192 Prepared on 29 March 2024 by: Belnikolov and partners OOD - Petya Belnikolova Executive Member of the Board of Directors: Viktor Spiriev Auditor’s report issued: Grant Thornton OOD, audit firm, registration No 032 Mariy Apostolov, Managing Partner Silvia Dinova, Registered Auditor responsible for the audit Monbat AD 5 Separate financial statements 31 December 2023 The notes on pages 7 to 91 are an integral part of these financial statements. Separate statement of changes in equity All amounts are presented in BGN ‘000 Balance on 1 January 2023 Share capital Share premium General reserves Retained earnings Total equity 38 973 28 498 63 866 27 235 158 572 Dividends - - - (4 000) (4 000) Repurchased own shares (7) (22) - - (29) Transactions with owners (7) (22) - (4 000) (4 029) Profit for the year - - - 2 908 2 908 Total comprehensive income for the year - - - 2 908 2 908 Balance on 31 December 2023 38 966 28 476 63 866 26 143 157 451 All amounts are presented in BGN ‘000 Share capital Share premium General reserves Retained earnings Total equity Balance on 1 January 2022 39 000 28 611 63 866 31 516 162 993 Dividends - - - (5 500) (5 500) Purchased own shares (27) (113) - - (140) Transactions with owners (27) (113) - (5 500) (5 640) Profit for the year - - - 1 219 1 219 Total comprehensive income for the year - - - 1 219 1 219 Balance on 31 December 2022 38 973 28 498 63 866 27 235 158 572 Prepared on 29 March 2024 by: Belnikolov and partners OOD - Petya Belnikolova Executive Member of the Board of Directors: Viktor Spiriev Auditor’s report issued: Grant Thornton OOD, audit firm, registration No 032 Mariy Apostolov, Managing Partner Silvia Dinova, Registered Auditor responsible for the audit Monbat AD 6 Separate financial statements 31 December 2023 The notes on pages 7 to 91 are an integral part of these financial statements. Separate statements of cash flows Prepared on 29 March 2024 by: Belnikolov and partners OOD - Petya Belnikolova Executive Member of the Board of Directors: Viktor Spiriev Auditor’s report issued: Grant Thornton OOD, audit firm, registration No 032 Mariy Apostolov, Managing Partner Silvia Dinova, Registered Auditor responsible for the audit Notes 2023 2022 BGN ‘000 BGN ‘000 Operating activities Cash receipts from customers 334 207 335 476 Cash paid to suppliers (328 558) (323 178) Cash paid to employees and social security institutions (16 998) (16 546) Payments related to employees’ personal income tax (1 122) (1 037) Proceeds from tax refunds, net 31 176 30 024 Paid corporate income tax (440) (1 657) Other cash payments for operating activities (521) (1 111) Net cash flow from operating activities 17 744 21 971 Investing activities Purchase of property, plant and equipment (5 630) (3 945) Purchase of intangible assets (2 006) (2 641) Acquisition and increase in the share capital of subsidiaries (280) (14 954) Proceeds from sale of shares in other entities 34 - 1 956 Loans granted (4 492) (3 831) Proceeds from loan repayments 2 006 3 775 Interest received 152 238 Dividends received 8 346 - Advances received for the sale of subsidiary 24.2 - 5 526 Net cash flow from investing activities (1 904) (13 876) Financing activities Proceeds from borrowings 39 214 422 171 826 Repayments of borrowings 39 (203 676) (170 962) Payments under a convertible bond issue 39 (10 959) - Repurchased own shares (29) (140) Payment of principal of lease liabilities 8 (937) (901) Interest paid (6 772) (3 763) Dividends paid 35.2 (3 992) (5 434) Other cash inflows/(outflows) from financing activities 708 (728) Net cash flow from financing activities (11 235) (10 102) Net change in cash and cash equivalents 4 605 (2 007) Cash and cash equivalents, beginning of the year 2 527 4 237 Foreign exchange profit on cash and cash equivalents (72) 297 Cash and cash equivalents, end of the year 15 7 060 2 527 Monbat AD Separate financial statements 31 December 2023 7 N otes to the separate financial statements 1. General information and nature of operations The main activities of Monbat AD (“The Company”) include manufacturing, maintenance and sale of batteries; engineering and development activity; production and trade of equipment used in battery manufacturing; domestic and foreign trade and establishment of commercial networks; specialized stores and representative offices. The Company is registered as a joint-stock company in c.c. 4636/1999 in SCC, with UIC: 111028849 in the Bulgarian Trade Register. The Company’s headquarters and registered address is: 32A Cherni Vrah bld., Sofia. The correspondence address is: 32A Cherni Vrah bld., Sofia. The Company was registered at the Bulgarian stock exchange on 22.12.2006. The company is managed through a one-tier management system, consisting of Board of Directors. As at 31.12.2023, the composition of the Board of Directors of the Company is the following: 1. Chavdar Dochev Danev – Chairman 2. Petar Nikolov Bozadzhiev 3. Kyle Anderson 4. Petar Hristov Petrov 5. Viktor Stanimirov Spiriev – Executive Member 6. Evelina Pavlova Slavcheva As of 12.07.2023 Florian Huth is not a member of the Board of Directors. The number of employees as at 31.12.2023 is 430 people. As at 31.12.2023, the Company is being represented separately by Viktor Stanimirov Spiriev and Petar Hristov Petrov. The ultimate parent of the Company is Prista Oil Group B.V. Atanas Bobokov and Plamen Bobokov are the individuals exercising joint control over Prista Oil Group B.V. The management of the Company includes its Board of Directors and its procurators. The principal place of the Company’s activity is the town of Montana, 76 Industrialna str. 2. Basis for the preparation of the separate financial statements The separate financial statements have been prepared on a historical cost basis, except for derivative financial instruments that are measured at fair value. Statement of compliance with IFRS, as adopted by the EU The separate financial statements of the Company (“the financial statements”) have been prepared in accordance with International Financial Reporting Standards (as adopted by the European Union (IFRS as adopted by the EU). Reporting framework "IFRS as adopted by the EU" is essentially the defined national basis of accounting "IAS, as adopted by the EU", specified in the Bulgarian Accountancy Act and defined in paragraph 8 of its Additional provisions. Monbat AD Separate financial statements 31 December 2023 8 The separate financial statements are presented in Bulgarian leva (BGN), which is also the functional currency of the Company. All amounts are presented in thousand Bulgarian leva (BGN ‘000 thousand) (including comparative information for 2022) unless otherwise stated. In addition, when there is a retrospective restatement or reclassification of items in the separate financial statements, the Company presents an additional statement of financial position at the beginning of the earliest presented period. These are the separate financial statements of Monbat AD, where investments in subsidiaries are presented at acquisition cost. In accordance with the requirements of IFRS 10 Consolidated Financial Statements and the Accountancy Act, Monbat AD prepares and presents consolidated financial statements. The consolidated financial statements for the year ended 31 December 2023 are in process of being prepared. Influence of macroeconomic and geopolitical factors The war between Russia and Ukraine, which started on February 24, 2022, caused a wide international response and affected the countries of Europe in various aspects. The ongoing hostilities between Russia and Ukraine, the imposition of sanctions and restrictions by the European Union, the United States, Canada, Great Britain and other countries against Russia, the Russian Central Bank, credit institutions, companies, individuals, caused significant turmoil in the financial markets in 2022 d. As a result, the year 2023 brought continued geopolitical tensions, recalibration of economic growth, inflation, rising interest rates in the US and Europe, and rising commodity prices. Monbat AD has no net investments, subsidiaries or assets in Russia, Belarus and Ukraine, but trades with companies based in Ukraine. To address the aforementioned circumstances, the Company undertook measures, through which to limit the negative consequences on the financial results for 2022 and 2023. Risk analysis and measures and actions taken: • In 2023, there was a normalization of the markets of the main products and goods with which the Company trades, compared to 2022. The following market development was observed: o Increased demand for starter car batteries in Western European markets, where historic record sales of this type of product were achieved. In 2022, demand for these products was significantly depressed by sharp inflationary movements in the region and the associated shift in consumer behaviour. o Substantial decline in sales of larger and more profitable semi-cyclical batteries, representing mainly purchased goods, due to the normalization of the delivery period of US manufacturers of this type of batteries, which was drastically extended in 2022 due to the logistical challenges during the period, and respectively the reorientation of the market back towards US products. o Decline in stationary (telecom) battery sales due to substantial volumes to leading telecom operators and system integrators in Russia in the first two months of 2022, i.e. just before the start of the war in Ukraine. • In 2023, the Company has no sales to Russia, while sales to Ukraine represent 4.7% of total revenue for 2023 (2022: Russia – 2.2%, Ukraine – 2.1%). • In relation to supply chains, the Company is not directly dependent on Russian, Ukrainian or Belarusian suppliers. Monbat AD Separate financial statements 31 December 2023 9 • As a result of inflationary processes and market volatility, in 2023 the average market price of lead was around 1 977 EUR/MT (2022: 2 041 EUR/MT). Monbat AD addresses this volatility and dependence of the price of lead on stock market indices by applying a standard indexation of the selling prices of its production to all its counterparties. • The main c ustomers of the Company have not had financial difficulties directly related to the military conflicts in Ukraine and the Middle East. The assessment of the collectability of trade receivables as of 31 December 2023, is good. • To ensure the collectability of its receivables from Ukrainian counterparties for which trade receivables insurance is not available, the Company adopted a policy of 100% pre- shipment advance payments on all export sales to Ukraine following the outbreak of hostilities in the country. Although towards the end of 2023 and 2022, there are no significant delays in the collection of receivables from customers, the activity of several specific customers in Russia and Ukraine, where even in pre-war periods a delay in collection was noticeable was further complicated by the military conflict and in this connection the Company has recognized impairment costs related to the trade receivables from the same in the amount of BGN 0 in 2023 and BGN 260 thousand in 2022. As of December 31, 2023, the Company has trade receivables from Ukrainian and Russian customers (net of impairments) in the amount of BGN 10 148 thousand. The Company analyzes on an ongoing basis all possible impacts of changing micro- and macroeconomic conditions on the Company's future financial position and results of operations. Inflationary processes, expressed in increased costs of direct materials, energy and labour per unit of production, have a significant impact on the Company's operations. The Company has been able to limit the effect of these negative impacts of the macroeconomic environment by refining its customer and product mix (with a focus on higher-margin products and markets) and, where necessary, applying an indexation of selling prices to its customers. Climate matters This year, the Company reports on climate-related issues, considering this reporting as a long-term commitment to develop and deepen in the future. Legislation, regulatory authorities, the Company's counterparties and users of non- financial information pay close attention to climate change. The European Union adopted the European Green Deal to transition to a more sustainable economic and financial system, and more detailed sustainability disclosures are expected in the coming years as part of the adopted European Sustainability Reporting Standards. Through its production process, the Company emits no significant direct or indirect emissions into the air. Since Monbat AD is not a large emitter of carbon dioxide, the Company does not participate in the EU emissions trading system. However, Management recognizes the important role of the Company in mitigating the effects of climate change and adapting to it. Mitigation is concerned with limiting the rate and magnitude of climate change, and adaptation is concerned with the process of adjusting to actual or expected effects of climate change. The Company is in the process of analyzing the role of business and the activities carried out and their degree of impact, possible risks and ways to actively participate in decision- making related to climate change. Monbat AD Separate financial statements 31 December 2023 10 At the same time, the following steps have been taken during the implementation of the activity, with a view to reducing greenhouse emissions from the energy consumption of the building stock and transport: - Optimizing fuel consumption for heating and transport. All newly purchased cars meet EURO V and VI emission standards. - Optimization of heating, ventilation, cooling, lighting systems. Replacement of heating equipment with more energy efficient ones. - Sanitation of buildings during renovations. Through its annual capital expenditure program, the Company plans and implements investments in new production facilities or the improvement of existing facilities, through which optimization of the consumption of energy resources is achieved. As of 31 December 2023, the Company has not identified significant risks caused by climate change that could have a direct negative and material impact on the Company's separate financial statements. Management continually assesses the impact of climate- related issues. When determining the financial position of the Company as of 31 December 2023, climate- related issues were considered and taken into account when performing the impairment tests, evaluating the useful life and determining the fair value of non-current assets and when determining the net realizable value of inventories. Application of the going concern principle The separate financial statements are prepared under the going concern principle and taking into account the possible long-term effects of the continuing effects of ongoing military conflicts. Under these circumstances, based on available information about the foreseeable future, the Company's management has conducted a comprehensive analysis of the entity's ability to continue its activities as a going concern. The analysis includes judgment supported by the Company's historical experience with financial institutions as well as ongoing negotiations with banks, so the maturity of all short-term borrowings (note 19) is expected to be renegotiated by a minimum of 12 months from their maturity date or the same will be refinanced with attracted resources under terms of maturity of at least 12 months. In these circumstances, the Company's management expects that the Company has sufficient financial resources to continue its operations in the near future and continues to apply the going concern principle in preparing the separate financial statements. Monbat AD Separate financial statements 31 December 2023 11 2.1 New and amended standards and interpretations The Company has adopted the following new standards, amendments and interpretations to IFRS issued by the International Accounting Standards Board and endorsed by EU, which are relevant to and effective for the Company's separate financial statements for the annual period beginning 1 January 2023 but do not have a significant impact on the Company’s financial performance or position: • IFRS 17 Insurance contracts effective from 1 January 2023, adopted by the EU; • Amendments to IFRS 17 Insurance contracts: Initial application of IFRS 17 and IFRS 9 – Comparative information effective from 1 January 2023, adopted by the EU; • Amendments to IAS 1 “Presentation of Financial Statements” and IFRS Practice Statement 2 “Disclosure of accounting policies”, effective from 1 January 2023, adopted by the EU • Amendments to IAS 8 “Accounting policies, changes in accounting estimates and errors: Definition of accounting estimates”, effective from 1 January 2023, adopted by the EU • Amendments to IAS 12 “Income taxes: Deferred tax related to assets and liabilities arising from a single transaction”, effective from 1 January 2023, adopted by the EU • Amendments to IAS 12 “Income taxes: International Tax Reform – Pillar Two Model Rules”, effective from 1 January 2023, adopted by the EU 2.2 Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Company At the date of authorization of these separate financial statements, certain new standards, amendments and interpretations to existing standards have been issued, but are not effective or adopted by the EU for the financial year beginning on 1 January 2022 and have not been applied early by the Company. They are not expected to have a material impact on the Company’s separate financial statements. Management anticipates that all relevant pronouncements will be adopted in the Company’s accounting policies for the first period beginning after the effective date of the pronouncement. The changes refer to the following standards: • Amendments to IAS 1 “Presentation of financial statements: Classification of liabilities as current or non- current”, effective from 1 January 2024, adopted by the EU • Amendments to IAS 1 “Presentation of financial statements: Non -current liabilities with covenants”, effective from 1 January 2024, adopted by the EU • Amendments to IFRS 16 “Leases: Lease Liability in a Sale and Leaseback”, effective not earlier than 1 January 2024, adopted by the EU • Amendments to IAS 7 “Statement of cash flows” and IFRS 7 “Financial instruments: Disclosures: supplier finance arrangements”, effective from 1 January 2024, not yet adopted by the EU • Amendments to IAS 21 “The effects of changes in foreign exchange rates: Lack of exchangeability”, effective from 01 January 2025, not yet adopted by the EU Monbat AD Separate financial statements 31 December 2023 12 3. Significant accounting policies 3.1. General The most significant accounting policies that have been used in the preparation of these separate financial statements are summarized below. The separate financial statements have been prepared using the measurement bases specified by IFRS for each type of asset, liability, income and expense. The measurement bases are fully described in the accounting policies below to the separate financial statement. It should be noted that accounting estimates and assumptions are used for the preparation of the separate financial statements. Although these estimates are based on information, provided to management at the date of preparation of the separate financial statements, actual results may ultimately differ from those estimates. 3.2. Presentation of financial statements The separate financial statements are presented in accordance with IAS 1 “Presentation of Financial Statements”. The Company has elected to present the separate statement of comprehensive income in two statements: a separate statement of profit or loss and a separate statement of comprehensive income. Two comparative periods are presented in the separate statement of financial position when the Company applies an accounting policy retrospectively, makes a retrospective restatement of items in the separate financial statements or reclassifies items in the separate financial statements and this has a material effect on the information in the separate statement of financial position at the beginning of the previous period. 3.3. Investments in subsidiaries Subsidiaries are entities under the control of the Company. An investor, regardless of the nature of its participation in an entity (in the investee), defines whether it is a parent company, by assessing whether it controls the investee. An investor controls the investee when it is exposed to or has rights to variable returns from its involvement with the investee and has the ability to affect that returns through its power over the investee. Therefore, an investor controls an entity (the investee) if and only if the investor has all of the following: a) power over an investee b) exposure, or rights, to variable returns from its involvement with the investee c) ability to use its power over the investee to affect the amount of the investor’s returns The Company recognizes a dividend from a subsidiary in profit or loss in its separate financial statements when the right to receive the dividend has been established. In the Company's separate financial statements, investments in subsidiaries are measured at cost less impairment losses (in accordance with IAS 27, paragraph 10 (a)). Investments in subsidiaries are derecognized and the net result (proceeds from disposal less the carrying amount of the investment) is recognized in profit or loss for the period in which the Company loses control of the company in which it has invested. Monbat AD Separate financial statements 31 December 2023 13 A review for impairment of investments in subsidiaries is performed in accordance with IAS 36 Impairment of assets. 3.4. Investments in associates Associates are those entities over which the Company is able to exert significant influence, but which are neither subsidiaries nor interests in a joint venture. Investments in associates are initially recognized and subsequently measured at acquisition cost or in accordance with IFRS 9 or using the equity method as described in IAS 28. The Company recognizes a dividend from a jointly controlled entity or associate in profit or loss in its separate financial statements when its right to receive the dividend is established. All subsequent changes in the investment share of the entity in the share capital of the associated entity are recognized in the carrying amount of the investment. In the cases when the share of the Company in the realized losses of the associated entity exceed the size of its exposure in this entity, including the unprovided for receivables, the Company shall not recognize its share in the subsequent losses of the associated entity, unless the Company is not legally or factually liable or unless it has made payments on behalf of the associated entity. In case, the latter generates profits in subsequent periods, the Company shall recognize its share as much as the share of the profit exceeds the share of the losses, which were not recognized previously. 3.5. Foreign currency transactions Foreign currency transactions are translated into the functional currency of the Company using the exchange rates prevailing at the dates of the transactions (spot exchange rate as published by the Bulgarian National Bank). Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary items at year-end exchange rates are recognized in profit or loss. Non-monetary items measured at historical cost are translated using the exchange rates at the date of the transaction (not retranslated). Non-monetary items measured at fair value in foreign currency are translated using the exchange rates at the date when fair value was determined. 3.6. Revenue The activity of the Company constitutes sale of goods, materials and services. To determine whether to recognize revenue, the Company follows a 5-step process: 1. Identifying the contract with a customer 2. Identifying the performance obligations 3. Determining the transaction price 4. Allocating the transaction price to the performance obligations 5. Recognize revenue when/ as performance obligation(s) are satisfied. Revenue is recognized either at a point in time or over time, when (or as) the Company satisfies performance obligations by transferring the promised goods or services to its customers. Monbat AD Separate financial statements 31 December 2023 14 Revenue from contracts with customers is recognized when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company has generally concluded that it is the principal in its revenue arrangements, because it typically controls the goods or services before transferring them to the customer, except for certain re-sale of raw materials and recharges of services to related parties for which the Company has concluded that it is acting as an agent as described in Note 3.22.5. Revenue from sale of products, materials and services is described in Note 25. Disclosures about significant accounting estimates, judgements and assumptions related to revenue from contracts with customers are provided in Note 3.22. Sale of finished goods Revenue from sale of finished goods is recognized at the point in time when control of the asset is transferred to the customer, generally on delivery of the finished product. The normal credit term is between 30 to 90 days after delivery. The Company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price for the sale of finished goods, the Company considers the effects of variable consideration, existence of a significant financing component and consideration payable to the customer (if any). If the consideration in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognized will not occur when the associated uncertainty with the variable consideration is subsequently resolved. Some contracts for the sale of finished goods provide customers with volume rebates and a right to return the finished goods. The rights of return and volume rebates give rise to variable consideration. Volume rebates The Company provides retrospective volume rebates to certain customers once the quantity of products purchased during the period exceeds the threshold specified in the contract. Rebates are offset against the amounts payable by the customer. To estimate the variable consideration for the expected future rebates, the Company applies the most likely amount method for contracts with a single volume threshold and the expected value method for contracts with more than one volume threshold. The selected method that best predicts the amount of variable consideration is primarily driven by the number of volume thresholds contained in the contract. The Company then applies the requirements on constraining estimates of variable consideration and recognizes a refund liability for the expected future rebates. Return rights Some contracts give the customer the right to return the goods within a certain period. The Company uses the expected value method to approximately determine the goods that will not be returned, as this method provides the best estimate of the amount of variable consideration that the Company will be entitled to receive. The requirements of IFRS 15 concerning the limitation of estimates of variable remuneration apply in order to determine the amount of variable consideration that can be included in the transaction price. For goods that are expected to be returned, the Company recognizes an obligation to recover rather than income. A right-to-return asset (and the corresponding adjustment in the cost Monbat AD Separate financial statements 31 December 2023 15 of sales) is also recognized with regard to the right to receive back the products from the customer. Sale of materials Revenue from sale of materials is recognized at a certain point in time when control of the asset is transferred to the customer, which is usually the case for the delivery of the materials. The normal credit term is 30 to 60 days after delivery. The Company assesses whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. Rendering of services The services provided by the Company mainly include transportation for the delivery of goods. The Company recognizes the services as a single performance obligation and recognizes revenue from them over time as the client simultaneously receives and consumes the benefits provided by the Company. The Company uses the input method based on the cost incurred, relative to the total amount of input expected to satisfy the performance obligation, in order to assess the progress of the satisfaction of the performance obligation. Contract balances Trade receivables Receivable represents the Company’s right to an amount of consideration that’s unconditional (i.e., only the passage of time is required before payment of the consideration due). Please refer to the accounting policies of financial assets set out in Note 3.13. Contract assets A contract asset is the right to consideration in exchange for the goods or services transferred to the customer. If the Company performs by transferring of the goods or services to a customer before the client pays the consideration or before payment is due, a contract asset is recognized for the earned consideration which is conditional. Contract liabilities A contract liability is the obligation to transfer goods or services to a customer, for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods or services to the customer, a contract liability is recognized when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognized as revenue when the Company performs under the contract. Right of return assets Right-of- return asset represents the Company’s right to recover the goods expected to be returned by customers. The asset is measured at the former carrying amount of the inventory, less any expected costs to recover the goods and any potential decreases in the value of the returned goods. The Company updates the measurement of the asset recorded to its expected level of returns as well as any additional decreases in the value of the returned goods. Monbat AD Separate financial statements 31 December 2023 16 Refund liabilities A refund liability is the obligation to refund some or all of the consideration received (or receivable) from the customer and is measured at the amount the Company ultimately expects it will have to return to the customer. The Company updates its estimates of refund liabilities (and the corresponding change in the transaction price) at the end of each reporting period. Please refer to the variable consideration accounting policy described above. Practical expedients The Company has elected to apply the following practical expedients: • Not to consider significant financial components where the time difference between receiving a consideration and transferring control of the products (or services) to a customer is less than or equal to one year; and • Recognition in the statement of profit or loss of additional costs for contracting when the depreciation period of an asset otherwise recognized would be less than or equal to one year. Finance income Interest income is recognized on an ongoing basis using the effective interest rate method. Dividend income is recognized when the right to receive payment arises. 3.7. Operating expenses Operating expenses are recognized in profit or loss upon utilization of the service or at the date of their origin. Guarantees costs are recognized and charged against the respective provision when the related revenue is recognized. 3.8. Interest expenses and borrowing costs Interest expenses are reported on an accrual basis using the effective interest method. Borrowing costs primarily comprise interest on the Company's borrowings. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period of time that is necessary to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed in the period in which they are incurred and reported in line item 'Finance costs'. 3.9. Intangible assets Intangible assets include software licenses, trademarks and other intangible assets. They are accounted for using the cost model. The cost comprises its purchase price, including any import duties and non-refundable purchase taxes, and any directly attributable expenditure on preparing the asset for its intended use, whereby capitalized costs are amortized on a straight-line basis over their estimated useful lives, as these assets are considered finite. If an intangible asset is acquired in a business combination, the cost of that intangible asset is based on its fair value at the date of acquisition. Subsequent measurement is carried at cost less accumulated depreciation and impairment losses. Allowance for impairment is recorded as an expense and are recognized in the statement of profit or loss for the period. Monbat AD Separate financial statements 31 December 2023 17 Subsequent expenditure on an intangible asset after its purchase or its completion is expensed as incurred unless it is probable that this expenditure will enable the asset to generate future economic benefits in excess of its originally assessed standard of performance and this expenditure can be measured reliably and attributed to the asset. If these two conditions are met, the subsequent expenditure is added to the carrying amount of the intangible asset. Residual values and useful lives of the other intangible assets are defined by the management at each reporting date. Amortization is calculated using the straight-line method over the estimated useful life of individual assets as follows: • Software 2 years • Licenses and prototypes Indefinite useful life • Other 7 years Amortization expenses are included in the statement of profit or loss under the line item “ Depreciation and Amortization expenses ”. The gain or loss arising on the disposal of an intangible asset is determined as the difference between the proceeds and the carrying amount of the asset and is included in the statement of profit or loss under the line “Gain /Loss on the sale of non- current assets”. The recognition threshold adopted by the Company for intangible assets amounts to BGN 700. 3.10. Property, plant and equipment Items of property, plant and equipment are initially measured at cost, which comprises its purchase price and any directly attributable costs of bringing the asset to working condition for its intended use. Subsequent measurement of property, plant and equipment except assets under construction are measured at price of acquisition, less accumulated depreciation and impairment. Subsequent expenditure relating to an item of property, plant and equipment is added to the carrying amount of the asset when it is probable that this expenditure will enable the asset to generate future economic benefits in excess of its originally assessed standard of performance. All other subsequent expenditure is recognized as incurred. The residual value estimates and useful life of property, plant and equipment are measured by management as of each reporting date. Property, plant and equipment acquired under the finance leases contracts conditions are depreciated on the basis of the expected useful life, determined by comparison with similar own assets of the Company, or on the basis of the lease agreement, if its term is shorter. Monbat AD Separate financial statements 31 December 2023 18 Depreciation is calculated using the straight-line method over the estimated useful life of individual assets as follow: • Buildings 25 years • Machines 10 years • Vehicles 7 years • Fixtures 7 years • Computers 2 years • Other 3 years Depreciation expense has been included in the statement of profit or loss within 'Depreciation and amortization expenses'. Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognized in the statement of profit or loss within 'Gain on the sale of non-current assets'. The Company has adopted a threshold of BGN 700 for recognition of property, plant and equipment. 3.11. Accounting for leases The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Company as a lessee The Company applies a single recognition and measurement approach for all lease contracts, except for short-term leases (i.e., leases with a lease term of up to 12 months) and leases of low-value assets. The Company recognizes leases liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. Right-of-use assets The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date, an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets. If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also subject to impairment. Please refer to the accounting policies in Note 3.12 Financial instruments. Monbat AD Separate financial statements 31 December 2023 19 Lease liabilities At the commencement date of the lease, the Company recognizes lease liabilities contracts measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in- substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the company and payments of penalties for terminating the lease, if the lease term reflects the Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognized as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset. Short-term leases and leases of low-value assets The Company applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to rent of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low- value assets are recognized as expense on a straight-line basis over the lease term. Company as a lessor Leases in which the Company does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned. 3.12. Impairment testing of investments in subsidiaries, intangible assets and property, plant and equipment For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. All assets and cash-generating units are tested for impairment at least once annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Monbat AD Separate financial statements 31 December 2023 20 An impairment loss is recognized for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount, which is the higher of fair value less costs to sell and value-in-use. To determine the value-in-use, management estimates expected future cash flows from each cash-generating unit and determines a suitable discount rate in order to calculate the present value of those cash flows. The data used in impairment testing is based on the latest approved budget of the Company, adjusted as necessary to eliminate the effect of future reorganizations and significant improvements in assets. Discount factors are determined individually for each cash-generating unit and reflect their respective risk profiles as assessed by management. Impairment losses for cash-generating units reduce the carrying amount of the assets allocated to that cash-generating unit. For all of the Company's assets, management subsequently assesses whether there is any indication that an impairment loss recognized in prior years may no longer exist or be reduced. An impairment charge is reversed if the cash- generating unit’s recoverable amount exceeds its carrying amount. 3.13. Financial instruments Financial assets and financial liabilities are recognized in the Company’s statement of financial position when the Company becomes a party to the contractual provisions of the instrument. A financial asset is derecognized when control is lost over contractual rights that compound the financial asset, i.e., when rights for receiving cash flows are expired or significant part of risks and rewards from the ownership is transferred. A financial liability is derecognized upon its settlement, repayment, cancellation of the transaction or expiration. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss. All financial assets are recognized on their transaction date. Modification of contractual cash flows When the agreed cash flows of a financial instrument are renegotiated or modified and the renegotiation or modification does not lead to the derecognition of this financial instrument, the Company recalculates the gross carrying amount of the financial instrument and recognizes profit or loss on the modification of the profit or loss. The gross carrying amount of the financial instrument is recalculated as a present value of the renegotiated or modified contractual cash flows, which are discounted with the initial effective interest rate of the financial instrument. Monbat AD Separate financial statements 31 December 2023 21 Changes in the base on which the agreed contractual cash flows are defined as a result of a reform in the base interest rate The base on which the contractual cash flows of a financial asset/liability are defined can change: • With a change in the agreed terms defined at the initial recognition of the financial instrument (for instance the agreed terms change in order to change the corresponding base interest rate with an alternative base interest rate); • According to a method that has not been considered initially or has not been foreseen in the agreed terms at the initial recognition of the financial instrument without changing the agreed terms (for instance the method for calculating the base interest rate is changed, without changing the contractual terms); and/or • Due to the entering into force of an existing contractual term (for instance entering into force the existing reserve clause). In these cases of a reform of the base interest rate, the entity does not recognize profit or loss. Instead, it recalculates the cash flows applying a revised effective interest rate. The financial assets and financial liabilities are valued as shown below. 3.13.1 Financial assets All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. All recognized financial assets are measured subsequently in their entirety at either amortized cost or fair value, depending on the classification of the financial assets. Debt instruments that meet the following conditions are measured subsequently at amortized cost: • The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Debt instruments that meet the following conditions are measured subsequently at fair value through other comprehensive income (FVTOCI): • The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; and • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. By default, all other financial assets are measured subsequently at fair value through profit or loss (FVTPL). Despite the foregoing, the Company may make the following irrevocable election/ designation at initial recognition of a financial asset: • The Company may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income if certain criteria are met; and • The Company may irrevocably designate a debt investment that meets the amortized cost or FVTOCI criteria as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch. Monbat AD Separate financial statements 31 December 2023 22 The amortized cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. The gross carrying amount of a financial asset is the amortized cost of a financial asset before adjusting for any loss allowance. All income and expenses relating to financial assets are recognized in profit or loss when acquired regardless how the financial assets’ carrying amount is measured and are presented within 'Finance costs', 'Finance income' or 'Other financial items', except for impairment of trade receivables which is presented within 'Other expenses'. Classification of financial assets Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition these are measured at amortized cost using the effective interest method, less provision for impairment. The Company’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments. Discounting is omitted where the effect of discounting is immaterial. The Company recognizes a loss allowance for expected credit losses on investments in debt instruments that are measured at amortized cost or at FVTOCI, lease receivables, trade receivables and contract assets, as well as on financial guarantee contracts. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. The Company always recognizes lifetime expected credit loss (ECL) for trade receivables, contract assets and lease receivables. The expected credit losses on these financial assets are estimated using a provision matrix based on the Company’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate. Lifetime ECL for individually significant receivables is based on factors that are specific for the debtors. For all other financial instruments, the Company recognizes lifetime ECL when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month ECL. Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date. Impairment losses of trade receivables are presented within 'Other expenses'. Monbat AD Separate financial statements 31 December 2023 23 3.13.2 Financial liabilities The Company's financial liabilities include bank loans and borrowings including bank overdrafts, trade and other payables and finance lease liabilities and convertible bond obligations. Financial liabilities are recognized when the Company becomes a party to the contractual agreements for payment of cash amounts or another financial asset to another company or contractual liability for exchange of financial instruments with another company under unfavorable terms. All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within 'Finance costs' or 'Finance income'. Financial liabilities are measured subsequently at amortized cost using the effective interest method, except for financial liabilities held for trading or designated at fair value through profit or loss, that are carried subsequently at fair value with gains or losses recognized in profit or loss. Bank loans are received to provide long- term funding of the Company’s operations. They are recognized in the statement of financial position of the Company, net of any costs. Trade payables are recognized initially at their nominal value and subsequently measured at amortized cost less settlement payments. Dividends payable to shareholders are recognized when the dividends are approved at the general meeting of the shareholders. Compound Instruments The Company makes the following accounting policy choices with regards to analysis of embedded derivative separation requirements: a) each embedded derivative is assessed on individual basis b) the host contract includes these embedded features which do not require separation The component parts of convertible loan notes issued by the Company are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. A conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Company’s own equity instruments is an equity instrument. Conversion features that fail equity classification and are accounted for as derivative liabilities are accounted for separately from the host instruments. A conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a variable number of the Company’s own equity instruments is a derivative instrument. The embedded derivative liability is calculated first and the residual value is assigned to the debt host liability component. The embedded derivative liability is accounted for at fair value through profit or loss and is remeasured at each reporting date. Transactions costs related to the derivative liability component are expensed as incurred. Transaction costs relating to the liability component are included in the carrying amount of the liability component and are amortized over the lives of the convertible loan notes using the effective interest method. Monbat AD Separate financial statements 31 December 2023 24 The embedded derivative is presented as a non-current asset liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realized or settled within 12 months. The debt host liability component is measured at amortized cost after adjusting for transaction costs attributable to the debt host liability using the effective interest method. 3.13.3 Derivative financial instruments Derivatives are initially recognized at fair value and subsequently reported at fair value in the statement of financial position. The changes in the fair value of the derivatives are recognized in the profit or loss for the period (except for derivatives which are defined and are effective as hedging instruments). The Company treats the exercise (or the lack of exercising thereof) of the ‘call’ and ‘put’ derivative options after the balance date as a non-adjusting event and does not consider it when calculating their fair value as of the balance date. 3.13.4 Contracts for the sale and redemption of securities Securities can be sold or rented if a commitment is made for their redemption (repo). Those securities continue to be recognized in the statement of financial position, when all material risks and benefits, arising from the rights on those shares, remain for the Company. In such case a liability to the other counterparty is recognized in the statement of financial position, when the Company receives the remuneration. Similarly, the Company rents or buys securities by committing to re-sell them back to the seller (reverse repo) but does not acquire the material risks and benefits of the securities. The transactions with securities are treated as collateralized loans, when the monetary remuneration is paid. In this case, the securities are not recognized in the statement of financial position. The difference between the selling and redemption price is recognized as installments for the whole term of the agreement, by using the effective interest rate method. The securities, rented to counterparties, are recognized in the statement of financial position. The borrowed securities are not recognized in the statement of the financial position, excluding the case in which they are sold to third parties, where the redemption obligation is recognized as a trade liability at fair value and the subsequent gain or loss is included in the net operating activities’ result. 3.14. Inventories Inventories include raw materials, work in progress, production and goods. Cost of inventories includes all expenses directly attributable to the purchase or manufacturing process, recycling and other direct expenses connected to their delivery as well as suitable portions of related production overheads, based on normal operating capacity. Financing costs are not included in the cost of the inventories. At the end of every accounting period, inventories are carried at the lower of cost and net realizable value. The amount of impairment of inventories to their net realizable value is recognized as an expense for the period of impairment. Monbat AD Separate financial statements 31 December 2023 25 Net realizable value is the estimated selling price of the inventories less any applicable selling expenses and cost of completion. In case inventories have already been impaired to their net realizable value and in the following period the impairment conditions are no longer present, then the new net realizable value is adopted. The reversal amount can only be up to the carrying amount of the inventories prior to their impairment. The reversal of the impairment is accounted for as decrease in inventory expenses for the period in which the reversal takes place. The Company determines the cost of inventories by using weighted average cost. When inventories are sold, the carrying amount of those inventories is expensed in the period in which the related revenue is recognized. 3.15. Income taxes Current income tax Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries where the Company operates and generates taxable income. Management analyzes the individual items in the tax return for which the applicable tax provisions are interpreted and recognizes provisions when appropriate. Current taxes are recognized directly in equity or in other comprehensive income (not in profit or loss) when the tax relates to items that were recognized directly in equity or in other comprehensive income. Deferred tax assets and liabilities Deferred taxes are recognized using the balance sheet method for all temporary differences at the reporting date that arise between the tax bases of assets and liabilities and their carrying amounts. Deferred tax liabilities are recognized for all taxable temporary differences, except for: • When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; • In respect to deductible temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized. Monbat AD Separate financial statements 31 December 2023 26 Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except for: • deductible temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized. • In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity. The Company offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity. Value Added Tax (VAT) Revenues, expenses and assets are recognized net of the amount of value added tax (VAT) except for: • Where the VAT incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the VAT is recognized as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • Receivables and payables that are stated with the amount of VAT included The net amount of VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. 3.16. Cash and cash equivalents Cash and cash equivalents comprise cash on hand, current bank accounts and term deposits up to 3 months. Monbat AD Separate financial statements 31 December 2023 27 3.17. Equity, reserves and dividend payments Share capital represents the nominal value of shares that have been issued. Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits. General reserves include legal reserves required by the Bulgarian legislation and other general reserves from generated profit or loss incurred from prior years. Retained earnings include financial result and accumulated profit and uncovered losses from prior years. Dividend payables to shareholders are included in Other payables when the dividends have been approved at the general meeting of shareholders prior to the reporting date. All deals with the owners of the Company are presented separately in the statement of changes in equity. 3.18. Post-employment and short-term employee benefits Short-term employee benefits include salaries, interim and annual bonuses, social security contributions and annual compensated absences for current employees expected to be settled wholly within twelve months after the end of the reporting period. They are recognized as an employee benefit expense in the profit or loss or included in the cost of an asset when service is rendered to the Company and measured at the undiscounted amount of the expected cost of the benefit. Information on short-term employee benefits is disclosed in Note 18. The Company operates a defined benefit plan arising from the requirement of the Bulgarian labor legislation to pay two or six gross monthly salaries to its employees upon retirement, depending on the length of their service. If an employee has worked for the Company for 10 years, the retirement benefit amounts to six gross monthly salaries upon retirement, otherwise, two gross monthly salaries. These retirement benefits are unfunded. The cost of providing benefits under the retirement benefit plan is determined using the projected unit credit method. Re-measurements, comprising of actuarial gains and losses, are recognized immediately in the statement of financial position with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Reassessments are not reclassified to profit or loss in subsequent periods. Past service costs are recognized in profit or loss on the earlier of: - The date of the plan amendment or curtailment, and - The date that the Company recognized restructuring-related costs Interest expense is calculated by applying the discount rate to the defined benefit liability. The Company recognizes the following changes in the defined benefit obligation in profit or loss for the period: - Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non- routine settlements within “Employee benefits expense”. - Interest expenses are included under “Finance costs” in the Statement of profit or loss. Monbat AD Separate financial statements 31 December 2023 28 3.19. Provisions, contingent assets and contingent liabilities Provisions are recognized when present obligations as a result of a past event will probably lead to an outflow of economic resources from the Company and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events, for example, product warranties granted, legal disputes or onerous contracts. Restructuring provisions are recognized only if a detailed formal plan for the restructuring has been developed and implemented, or management has at least announced the plan's main features to those affected by it. Provisions for future operating losses are not recognized. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material. Any reimbursement that the Company can be virtually certain to collect from a third party with respect to the obligation is recognized as a separate asset. However, this asset may not exceed the amount of the related provision. All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognized. Contingent liabilities are subsequently measured at the higher amount of a comparable provision as described above and the amount initially recognized, less any amortization. Possible inflows of economic benefits to the Company that do not yet meet the recognition criteria of an asset are considered contingent assets and are presented in Note 38. 3.20. Government grants A government grant is a grant provided by the government that is initially recognized as deferred income (financing) when there is reasonable assurance that it will be received by the Company and that the latter has complied with the conditions attaching to it. The government grant that compensates the Company for expenses incurred is recognized in current profit or loss on a systematic basis in the same period in which the expenses are recognized. The government grant that compensates investment expenses incurred to acquire an asset is recognized in current profit or loss on a systematic basis over the useful life of the asset usually at the amount of the recognized depreciation expense. Monbat AD Separate financial statements 31 December 2023 29 3.21. Non-current assets and liabilities classified as held for sale and discontinued operations When the Company intends to sell a non-current asset or a group of assets (a disposal group), and if sale within 12 months is highly probable, or when the Company intends to dispose of assets or business activity in certain geopraphical regions, the assets or disposal groups are classified as held for sale/discontinued operations and presented separately in the statement of financial position. Liabilities are classified as “held for sale” and presented as such in the statement of financial position if they are directly associated with a disposal group. Assets classified as “held for sale” are measured at the lower of their carrying amounts immediately prior to their classification as held for sale and their fair value less costs to sell. However, some “held for sale” assets such as financial assets or de ferred tax assets, continue to be measured in accordance with the Company’s accounting policy for those assets. Once classified as “held for sale”, the assets are not subject to depreciation or amortization. 3.22. Significant management judgements in applying accounting policies The following are significant management judgments in applying the accounting policies of the Company that have the most significant effect on the separate financial statements. The main sources of uncertainty in the use of accounting estimates are described in the notes. 3.22.1 Sale and leaseback transactions The Company has concluded lease agreements related fixed tangible assets sold to leasing institutions. In cases where management's assessment is that the criteria in IFRS 15 for revenue recognition are not met because control over the assets sold has not been transferred, the leases are classified as short-term or long-term loans and are therefore outside the scope of IFRS 16 with a repayment schedule that corresponds to the concluded lease agreements and collateral for the sold & lease backed asset. 3.22.2 Deferred tax assets The assessment of the probability of future taxable income in which deferred tax assets can be utilized is based on the Company's latest approved budget forecast, which is adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilized without a time limit, that deferred tax asset is usually recognized in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances. Monbat AD Separate financial statements 31 December 2023 30 3.22.3 Determining a method for estimating the variable consideration and assessing the restriction on the sale of lead-acid batteries on the Bulgarian market Revenues from the sale of lead-acid batteries on the Bulgarian market include a variable consideration component within the scope of IFRS 15, which arises from a regulatory requirement in relation to an Ordinance to determine the order and amount of payment of a product fee for products through the use of which mass waste is generated. In estimating the variable consideration, the Company is required to use either the expected value method or the most probable amount method. The method used should better predict the amount of consideration that the Company will be entitled to. The Company has determined that the most probable amount method is an appropriate method that can be used to evaluate these transactions. Before including any amount of variable consideration in the transaction price, the Company assesses whether the amount of variable consideration is constrained. The management believes that there is a degree of certainty that the fee due for 2023 will be remitted by an order of the Minister of Environment and Water in 2024, as the Company continues to comply with the requirements of the Waste Management Act. In addition, the uncertainty of variable consideration will be resolved within a short period of time. According to the Regulation on establishing the terms and conditions for payment of product fees for products whose use generates mass waste as of 31 December 2022. The fee was not paid effectively to the Ministry of Environment and Water, as the Company has met the requirements of the Waste Management Act and has carried out activities for collection, transportation, temporary storage, pre-treatment, dismantling and disposal of waste. By order № RD 601 of 17.08.2023 of the Minister of Environment and Water, the accrued product fee for 2022 has been remitted. 3.22.4 Provision for expected credit losses for trade receivables (ECL) The company uses a provisioning matrix to calculate the ECL for trade receivables. Provisioning percentages are based on overdue days for groups of different customer segments that have similar loss patterns (e.g., geographical principle, product type, customer type and rating, and coverage by letters of credit and other forms of credit insurance). The provisioning matrix was initially based on the percentages of arrears observed by the Company historically. The Company refined the matrix to adjust historical experience with credit losses by including forecast information. For example, if forecasts of economic conditions (eg gross domestic product) are expected to deteriorate next year, which may lead to more arrears in the manufacturing sector, historical arrears are adjusted. Historical percentages of arrears are updated at each reporting date and changes in estimated estimates are analyzed. The assessment of the correlation between historical default rates, forecasts of economic conditions and ECL is a significant estimate. The size of the ECL is sensitive to changes in circumstances and projected economic conditions. The Company's historical experience in terms of credit losses and forecasts of economic conditions may also not be representative of the client's actual arrears in the future. Information on the Company's trade receivables is disclosed in note 12 and 37. Monbat AD Separate financial statements 31 December 2023 31 3.22.5 Principal-agent consideration The Company enters contracts on behalf of its customers for the acquisition of materials and raw materials (lead, lead alloys, etc.). Under these contracts Monbat AD provides delivery services (i.e., coordinates the selection of suitable suppliers and manages the procurement and delivery of materials). The company has determined that it does not control the materials before they are transferred to customers and is unable to manage the use of the materials or to receive the benefits thereof. The factors listed below indicate that the Company does not control the materials before they are transferred to the customers. Therefore, it has determined that it acts as an agent in these contracts. • The Company has no primary responsibility for fulfilling the promise to provide the materials. • The company does not bear the risk for inventories before or after they are transferred to the customer, as it purchases materials only after approval by the customer, and the supplier ships the materials directly to customers. • The Company does not exercise discretion in determining the cost of materials. Its remuneration under these contracts is based solely on the difference between the maximum purchase price set by the client and the final price agreed between the Company and the supplier. In addition, the Company makes sales to third parties of materials purchased from related parties. As the Company does not control the materials before they are transferred to customers and does not exercise discretion in setting the price, Monbat AD acts as an agent. In these cases, sales revenue is presented net of cost of materials sold. The Company has concluded that it transfers control of the services (i.e., the organization for the provision of the materials by the foreign provider) at a certain point in time, upon receipt of the materials by the client, as this is the moment when the client receives the benefits of the Company's services as an agent. 3.22.6 Leases Contracts under which the Company is a lessee Determining the lease term of contracts with renewal and termination options The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain it would not to be exercised. The Company has several lease contracts that include extension and termination options. The Company applies judgement in evaluating whether it is reasonably certain whether or not it will exercise the option to renew or terminate the lease. The Company considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customization to the leased asset). Monbat AD Separate financial statements 31 December 2023 32 Estimating the incremental borrowing rate The Company cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of- use asset in a similar economic environment. The IBR therefore reflects what the Company ‘would have to pay’, which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. The Company estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity- specific estimates (such as the subsidiary’s stand -alone credit rating). 3.23. Estimation uncertainty In preparing the separate financial statements, management makes a number of assumptions, estimates and judgements about the recognition and measurement of assets, liabilities, income and expenses. Actual results may differ from management's assumptions, estimates, and judgements and, in rare cases, are consistent with previously estimated results. Information about the significant assumptions, estimates and assumptions that have the most significant impact on the recognition and measurement of assets, liabilities, income and expenses is presented below. 3.23.1 Impairment of non-current non-financial assets An impairment loss is the amount by which the carrying amount of an asset or cash- generating unit exceeds its recoverable amount, which is the higher of its fair value less selling cost and its value in use. To determine the value in use, the Company's management calculates the expected future cash flows for each cash-generating unit and determines the appropriate discount factor in order to calculate the present value of these cash flows (see Note 3.12). In calculating expected future cash flows, management makes assumptions about future gross profits. These assumptions are related to future events and circumstances. Actual results may vary and require significant adjustments to the Company's assets in the next reporting year. In most cases, the determination of the applicable discount factor assesses the appropriate adjustments in relation to market risk and risk factors that are specific to individual assets. As of December 31, 2023, the Company's management has performed an impairment review of its net investment in Monbat Holding GmbH, and the Company's management believes that there is no need to recognize an impairment (note 7). As of December 31, 2023, Monbat AD performed impairment tests in accordance with the requirements of IAS 36 "Impairment of Assets" for its investments in Monbat Immobilien GmbH. Indications of impairment have been identified due to the specific nature of the main asset owned by the subsidiary – an investment property in Austria. The management determined that the book value of the asset exceeds its recoverable amount, based on an assessment of the property's fair value prepared by a licensed appraiser. For this reason, the Company reported impairment costs in the amount of BGN 2 944 thousand in 2023 (2022: BGN 2 424 thousand), included in "Loss from discontinued operations" in the standalone statement of profit or loss (note 7). Monbat AD Separate financial statements 31 December 2023 33 In August 2023, the Board of Directors of Monbat AD decided to take actions to terminate the activities of Energy Batteries Nigeria Ltd., a company operating in Nigeria, distributing the Company's products on the local market. The Company expects the performance of Energy Batteries Nigeria Ltd. to be terminated within one calendar year after the end of the reporting period. As a result of a review of the recoverable amount of the assets included in the disposal group and the related liabilities, the Company recognizes an impairment in the amount of BGN 2 063 thousand, included in the line "Loss from discontinued operations" in the standalone statement of profit or loss (note 7). In December 2023, the Board of Directors of Monbat AD decided to take actions to terminate the activities of Monbat South Africa Proprietary Ltd., a company operating in South Africa, distributing the Company's products on the local market. The Company expects the activities of Monbat South Africa Proprietary Ltd. to be terminated within one calendar year after the end of the reporting period. As a result of a review of the recoverable amount of the assets included in the disposal group and the related liabilities, the Company recognizes an impairment in the amount of BGN 1 261 thousand, included in the line "Loss from discontinued operations" in the standalone statement of profit or loss (note 7). 3.23.2 Useful lives of depreciable assets Management reviews the useful lives of depreciable assets at each reporting date. As of 31 December 2023, the management assessed that the useful lives represent the expected utilization of the assets by the Company. The carrying amounts are analyzed in notes 4, 5 and 8. Actual results, however, may vary due to technical obsolescence, particularly relating to software and IT equipment. 3.23.3 Inventories Inventories are measured at the lower of cost and net realizable value. In estimating net realizable values, management takes into account the most reliable evidence available at the time the estimates are made. The Company's core business is affected by changes in technology which may cause selling prices to change rapidly. Moreover, future realization of the carrying amounts of inventory amounting to BGN 34 057 thousand (2022: BGN 36 043 thousand) is affected by the fluctuations of the prices of lead and lead component markets (Note 10). 3.23.4 Fair value of financial instruments Management uses valuation techniques in measuring the fair value of financial instruments where active market quotations are not available. In applying the valuation techniques management makes maximum use of market inputs, and uses estimates and assumptions that are, as far as possible, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses its best estimate about the assumptions that market participants would make. These estimates may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date. Monbat AD Separate financial statements 31 December 2023 34 3.23.5 Provisions Provisions for warranties represent amounts, which the Company expects to incur as an expense for servicing and repair of defects of the basic products in subsequent periods. The amount recognized as a warranty provided to customers for the cost of repairs is estimated based on management's past experience and the future expectations of defects. 3.23.6 Employee retirement benefits Retirement benefit is determined by actuarial valuation and assumptions are made about the discount rate, future wage increases, staff turnover and mortality rates. Due to the long-term nature of staff income at retirement, these assumptions are subject to significant uncertainty. As of 31 December, 2023 and 2022, the management has reviewed the Company's retirement benefit liability and has assessed the effect as immaterial. 3.23.7 Estimating variable consideration for returns and volume rebates The Company estimates variable considerations to be included in the transaction price for the sale of electronic equipment with rights of return and volume rebates. During the period, the Company has recognized as a decrease in revenue from production due to volume rebates for customer contracts with the calendar year ending on 31 December 2023 and 2022, which represent a significant part of the customer portfolio. The volume rebates expected by the Company are analyzed on a customer basis for contracts that are subject to a single volume threshold. Determining whether a customer is likely to receive a rebate depends on the customer's historical rebate rights and the accumulated purchases so far. The Company applied the statistical model for estimating expected volume rebates for contracts with more than one volume threshold. The model uses the historical purchasing patterns and rebates entitlement of customers to determine the expected rebate percentages and the expected value of the variable consideration. For contracts concluded for a non-calendar year, which represent a small portion of the client's portfolio, the Company recognized a decrease in revenue from the sale of products and trade receivables. The Company has developed a statistical model for forecasting sales returns. The model uses the historical return data of each product to come up with expected return percentages. These percentages are applied to determine the expected value of the variable consideration. Any significant changes in experience as compared to historical return pattern will impact the expected return percentages estimated by the Company. Estimates of returned goods and volume rebates are sensitive to changes in circumstances and the Company's experience with these elements may not be representative of actual goods and rebates returned by customers. As of December 31, 2023, the Company has assessed the amount of reimbursement obligations for expected returned goods as immaterial (2022: immaterial). Monbat AD Separate financial statements 31 December 2023 35 3.23.8 Measurement of expected credit losses Credit losses are defined as the difference between all the contractual cash flows that are due to the Company and the cash flows that it actually expected to be received. Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses that require the Company’s judgment. The Company's management has analyzed the expected effect of the coronavirus pandemic, and the military conflict in Ukraine and Russia, both on economic growth and on the credit quality of its counterparties. The analysis performed by the management of the Company is mainly focused on assessments and assumptions for potential deterioration of the credit quality of counterparties and the potential effect on the expected credit losses from exposures to counterparties. The management of the Company considers that in the short term no significant deterioration of the credit risk of the counterparties is expected, mainly due to expected quick recovery of the economies and the expected stimulus from the EU countries. Nevertheless, the Company observes worsening in the debt collection from clients in Russia and Ukraine. The scope of the Company is limited to the extent that the estimation of the expected credit losses in this case is hampered by the inability to obtain sufficient reliable information about certain counterparties in these geographic regions. 4. Intangible assets The Company's intangible assets comprise software licenses, trademarks and other intangible assets. The carrying amounts for the reporting periods under review can be analyzed as follows: As of 31 December 2023 Software Trademarks Advances for licensing rights Others Total BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Gross carrying amount Balance as of 1 January 2023 706 713 5 814 1 728 8 961 Newly acquired assets, purchased 254 - 1 363 389 2 006 Transfer from Property, plant and equipment - - - 864 864 Balance as of 31 December 2023 960 713 7 177 2 981 11 831 Amortization Balance as of 1 January 2023 (457) (583) - (122) (1 162) Amortization expense (233) (34) - (24) (291) Balance as of 31 December 2023 (690) (617) - (146) (1 453) Balance as of 31 December 2023 270 96 7 177 2 835 10 378 Monbat AD Separate financial statements 31 December 2023 36 As of 31 December 2022 Software Trademarks Advances for licensing rights Others Total BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘ 000 BGN ‘000 Gross carrying amount Balance as of 1 January 2022 556 713 4 415 710 6 394 Newly acquired assets, purchased 222 - 1 399 1 062 2 683 Assets written off (72) - - (44) (116) Balance as of 31 December 2022 706 713 5 814 1 728 8 961 Amortization Balance as of 1 January 2022 (304) (547) - (103) (954) Amortization expense (153) (36) - (19) (208) Balance as of 31 December 2022 (457) (583) - (122) (1 162) Balance as of 31 December 2022 249 130 5 814 1 606 7 799 Advances for licensing rights In 2019, the Company signed a contract for the purchase of licensing rights for the acquisition of technology for the production of accumulators with bipolar plates. The recorded value in relation to the purchased license rights as of 31.12.2023 amounts to BGN 7 177 thousand or USD 4 000 thousand. (2022: BGN 5 814 thousand or USD 3 250 thousand) In 2023 and 2022, 3 of the agreed license installments of USD 250,000 each were made, with a total value of BGN 1 363 thousand (2022: BGN 1 399 thousand). In 2022, the Company signed an agreement with the same supplier for the production of bipolar plate battery prototypes to be made available to customers during the commercialization of the new production. As of December 31, 2023, advances amounting to BGN 887 thousand (USD 459 thousand) have been paid under this contract, presented under category “Others” . The production of the prototypes is expected to be completed in 2024. Licensing rights and prototypes have an indefinite useful life (note 3.9) In accordance with IAS 36, since the licensing rights have an indefinite useful life, following the tests for impairment as of 31.12.2023, no impairment has been recognized. A model based on the business plan has been developed, which foresees the establishment of a manufactory for the production of accumulators utilizing a bipolar technology and the corresponding capital expenses and cash outflows related to them. Additionally, this model foresees the realization (sale) of the produced accumulators and the corresponding cash inflows and outflows. A discount rate of 12% was used. The developed model includes all expected contract costs for maintaining the license after its commercialization. The Company already has specific results from testing its prototypes which are part of the pre-commercial production. These tests provide the Company with the assurance, that soon it will be able to start its preparation for mass production. The licensing rights will grant the opportunity to produce different types of conventional batteries, especially batteries with an improved energy density and power per unit weight, prolonged useful life and lower production cost. There is not a foreseeable period limit during which it is expected for the asset to generate net cash flows for the asset. The licensing rights are granted based on an agreed contract with an unlimited period. Based on this analysis of the corresponding factors, the Company considers the licensing rights as having unlimited useful life. All depreciation expenses for intangible assets are included in the separate financial statement for profit and loss under article “Depreciation and amortization expenses ”. The Company has not pledged any of its intangible assets as a collateral for its liabilities. Monbat AD Separate financial statements 31 December 2023 37 5. Property, plant & equipment Company's property, plant and equipment comprise land, buildings, machines and equipment, other equipment, vehicles, fixtures and acquisition expenses. The carrying amount can be analyzed as follows: Land Buildings Machines & equipment Other equipment Vehicles Fixtures Assets under construction Total BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Gross carrying amount Balance 1 January 2023 7 262 27 460 93 800 6 457 3 339 3 140 2 999 144 457 Newly acquired assets - 63 198 84 27 108 4 979 5 459 Transfer of assets - 843 3 554 48 6 119 (4 570) - Transfer to Intangible Assets - - - - - - (864) (864) Assets written off - - - - (34) (3) (436) (473) Balance 31 December 2023 7 262 28 366 97 552 6 589 3 338 3 364 2 108 148 579 Depreciation Balance 1 January 2023 - (10 777) (76 596) (2 661) (2 960) (2 844) - (95 838) Depreciation - (1 058) (4 272) (257) (113) (111) - (5 811) Depreciation written-off - - - - 34 - - 34 Balance 31 December 2023 - (11 835) (80 868) (2 918) (3 039) (2 955) - (101 615) Carrying amount 31 December 2023 7 262 16 531 16 684 3 671 299 409 2 108 46 964 Monbat AD Separate financial statements 31 December 2023 38 Land Buildings Machines & equipment Other equipment Vehicles Fixtures Assets under construction Total BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Gross carrying amount Balance 1 January 2022 7 304 27 231 92 008 6 351 3 157 3 064 1 709 140 824 Newly acquired assets - 79 604 18 156 77 3 140 4 074 Transfer of assets - 150 1 188 88 26 - (1 452) - Disposals (42) - - - - (1) (398) (441) Balance 31 December 2022 7 262 27 460 93 800 6 457 3 339 3 140 2 999 144 457 Depreciation Balance 1 January 2022 - (9 736) (72 497) (2 405) (2 837) (2 739) - (90 214) Depreciation - (1 041) (4 099) (256) (123) (105) - (5 624) Balance 31 December 2022 - (10 777) (76 596) (2 661) (2 960) (2 844) - (95 838) Carrying amount 31 December 2022 7 262 16 683 17 204 3 796 379 296 2 999 48 619 Monbat AD Separate financial statements 31 December 2023 39 As of 31 December 2023 and 2022, the Company does not have any material contractual commitments related to acquisition of items of property, plant and equipment. Based on the performed review for impairment of the Property, plant & equipment, the Management has not identified indicators that the book value of the assets exceeds their recoverable amount. The most significant part of the expenses for the acquisition of intangible assets of the Company includes expenses, related to the ongoing reconstruction and modernization of the newly built plant in Montana. As of 31 December 2023, the expenses for the acquisition of non-current assets are at the amount of BGN 2 108 thousand (2022: BGN 2 999 thousand) and are distributed as follows: · Gas transmission network for alternative fuel – BGN 771 thousand (2022 – BGN 257 thousand) · Water management facility for the treatment of underground water – BGN 639 thousand (2022 – none) · Pipe route for settling of a push pipeline – BGN 220 thousand (2022 – 0 none) · Strip line for the production of wide rolled strip – BGN 0 (2022 – BGN 654 thousand) · Construction of factory for casting lead stripes – BGN 0 (2022 – BGN 422 thousand) · Other reconstructions – BGN 478 thousand (2022 – 1 666 thousand) The carrying amount of the Company’s property, plant and equipment pledged as security for its borrowings (see Note 19), is presented as follows: Land Buildings Machines and equipment Assets under construction Total BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Carrying amount on 31 December 2023 5 518 4 426 5 870 188 16 002 Carrying amount on 31 December 2022 3 268 3 147 7 562 654 14 631 All property, plant & equipment of the Company is located in Bulgaria. Monbat AD Separate financial statements 31 December 2023 40 6. Investments in subsidiaries and associates Monbat AD has the following investments in subsidiaries and associates: Country Main activities 2023 Share 2022 Share BGN ‘000 % BGN ‘000 % Name of the subsidiary Monbat Recycling EAD Bulgaria Lead recycling 50 829 100 50 829 100 Societe Nouvelle de l'accumulateur Nour Tunisia Production of batteries and lead recycling 21 280 60 21 280 60 Start AD Bulgaria Production of batteries 4 887 97.80 4 887 97.80 STC Srl. Italy R&D 3 083 66.66 3 083 66.66 Monbat Romania Srl Romania Trade of batteries 194 99 194 99 Monbat NBP EAD Bulgaria Production of batteries 50 100 50 100 Monbat Sped EOOD Bulgaria Transportation of batteries 50 100 50 100 ARTMonbat AD Bulgaria Batteries 26 51 26 51 Monbat New Power AD Bulgaria Production of batteries 25 51 25 51 Energy Battery Nigeria Ltd, net of impairment Nigeria Trade of batteries - 100 - 100 Monbat SA Proprietary Ltd, net of impairment South Africa Trade of batteries - 51 146 51 80 424 80 570 Name of the associated entity Leventa OOD Bulgaria Services 2 761 46 2 481 46 Total investments in subsidiaries and associates 83 185 83 051 The investments in subsidiaries and associates are presented in the separate financial statement of financial position of the Company, using the cost method, net of impairment. The subsidiaries and associates are not listed on a stock exchange since their fair value cannot be estimated. In 2023 the Company has not received dividend from its investments in subsidiaries and associates. The Company has no contingent liabilities or other liabilities related to investments in subsidiaries and associates (note 38). As of December 31, 2023, the investments of Monbat AD in the subsidiary companies Monbat Holding GmbH, Monbat Immobilien GmbH, Energy Battery Nigeria Ltd. and Monbat SA Proprietary Limited are presented as Non-current assets, included in disposal groups (note 7). As of December 31, 2022, the Company's investments in the subsidiaries Monbat Holding GmbH and Monbat Immobilien GmbH are presented as Non-current assets included in disposal groups classified as held for sale (note 7). Monbat AD Separate financial statements 31 December 2023 41 7. Non-current assets and liabilities included in disposal groups groups, held for sale 7.1. Monbat Holding GmbH, Germany In May 2022 the Company entered into an agreement to sell its investment in the subsidiary company Monbat Holding GmbH. This company owns 100% of EAS Batteries GmbH (EAS) and Monbat New Power GmbH (MNP). The agreement was concluded with the British company Britishvolt. As a result of a sales agreement with Britishvolt, the Company received an advance payment of a EUR 3 000 thousand as a non-refundable deposit /EUR 2 825 thousand net after deducting legal and consulting fees/. In January 2023, Britishvolt entered legal administration under the UK Insolvency Act 1986 to restructure the company's operations due to insolvency arising from cash flow problems. In late February 2023, the company Recharge Industries acquired Britishvolt as part of the administration process. On 22 March 2023, Monbat AD, together with its subsidiary Monbat Recycling Bulgaria EAD, which owns 10% of the capital of Monbat Holding GmbH, sent a notice to Britishvolt to terminate the contract for the sale of Monbat Holding GmbH, due to non-fulfillment of the agreed conditions by Britishvolt side. As a result of the termination of the sales contract, the company has recognized income in the amount of BGN 5 281 thousand and current tax expense in the amount of BGN 526 thousand on the line "Loss from discontinued operations" in the separate statement of profit or loss. The amount of revenue recognized represents 90% of the amount of the non-refundable deposit received by Britishvolt in 2022. The remaining 10% of the received deposit (BGN 587 thousand) is presented by Monbat AD as a liability to Monbat Recycling EAD on the line "Related party payables" in the separate statement of financial position. In 2023, the Company recognized expenses related to the sale of Monbat Holding GmbH in the amount of BGN 208 thousand on the line "Loss from discontinued operations" in the separate statement of profit or loss. As of December 31, 2023, the Company's management has not changed its intentions to sell its investment in Monbat Holding GmbH. The carrying amount of the assets and liabilities related to the Company's investment in Monbat Holding GmbH, as well as the income and expenses related to the unrealized sale in 2023, are as follows: 2023 2022 BGN ‘000 BGN ‘000 Investment in Monbat Holding GmbH 27 265 27 265 Assets included in disposal groups 27 265 27 265 2023 2022 BGN ‘000 BGN ‘000 Trade and other payables 48 - Tax liabilities 507 - Liabilities included in disposal groups 555 - Monbat AD Separate financial statements 31 December 2023 42 2023 2022 BGN ‘000 BGN ‘000 Income recognized, related to non-refundable deposit 5 281 - Expenses, related to sale (208) - Income tax expense (507) - Result from discontinued operations 4 566 - 7.2. Monbat Immobilien GmbH, Austria In April 2022 the General Meeting of Shareholders resolved on the sale of Monbat Immobilien GmbH subject to an appropriate price offer from a potential buyer. In 2022 the Company entered into an agreement for the sale of the Austrian company's assets, with a total transaction value of EUR 7 200 thousand. As at 31 December 2023, the transaction has not been completed and there has been no change in the Company's intention to complete a sale of its investment in Monbat Immobilien GmbH. In 2023, based on an assessment prepared by a licensed appraiser of the fair value of the main asset of the Austrian company - a specific property - Monbat AD recognized an impairment charge of BGN 2 944 thousand (2022: BGN 3 424 thousand), included in line "Loss from discontinued operations" in the separate statement of profit or loss. The Company has granted a loan to Monbat Immobilien GmbH with a maturity date of 31 December 2023 and a utlizied principal amount of BGN 887 thousand. The applicable interest rate is 5% per annum. The outstanding principal balance at 31 December 2023 is BGN 0 net of impairment. The carrying amount of the assets and liabilities related to the Company's investment in Monbat Immobilien GmbH, as well as the expenses related to this non-current asset, are as follows: 2023 2022 BGN ‘000 BGN ‘000 Investment in Monbat Immobilien GmbH, net of impairment 9 119 11 602 Deferred tax assets 2 416 - Assets included in disposal groups 11 535 11 602 2023 2022 BGN ‘000 BGN ‘000 Impairment expense (2 944) (3 424) Deferred tax income 295 343 Result from discontinued operations (2 649) (3 081) 7.3. Energy Batteries Nigeria Ltd., Nigeria In August 2023 the Board of Directors of Monbat AD resolved to take action to wind up the operations of Energy Battieries Nigeria Ltd, a company operating in Nigeria. The Company expects that the operations of Energy Batteries Nigeria Ltd. will cease within one calendar year of the end of the reporting period. Monbat AD Separate financial statements 31 December 2023 43 As a result of a review of the recoverable amount of the investment, the Company recognized an impairment charge in the amount of BGN 2 063 thousand. In accordance with the requirements of IFRS 5 "Non-current assets held for sale and discontinued operations", the costs related to the discontinuation of the activity of Energy Batteries Nigeria Ltd . for the current and comparable period are presented on the line "Loss from discontinued operations" in the separate statement of profit or loss. The carrying amount of the assets and liabilities related to the Company's investment in Energy Batteries Nigeria Ltd., as well as the costs related to the cessation of operations, are as follows: 2023 2022 BGN ‘000 BGN ‘000 Trade receivables net of impairment 143 - Deferred tax assets 462 - Assets included in disposal groups 605 - 2023 2022 BGN ‘000 BGN ‘000 Impairment expense (2 063) (1 000) Deferred tax income 206 100 Result from discontinued operations (1 857) (900) 7.4. Monbat South Africa Proprietary Ltd., South Africa In December 2023 the Board of Directors of Monbat AD resolved to take action to wind up the operations of Monbat South Africa Proprietary Ltd., a company operating in South Africa. The Company expects that the operations of Monbat South Africa Proprietary Ltd. will cease within one calendar year of the end of the reporting period. As a result of a review of the recoverable amount of the investment, the Company recognized an impairment charge in the amount of BGN 1 251 thousand. According to the requirements of IFRS 5 "Non-current assets held for sale and discontinued operations", the costs related to the discontinuation of Monbat SA Proprietary Limited for the current and comparable period are presented on the line "Loss from discontinued operations" in the separate statement of profit or loss. The Company has granted a loan to Monbat SA Proprietary Limited with a maturity date of 31 December 2023 and a principal amount of BGN 978 thousand. The applicable interest rate is 5% per annum. The outstanding principal balance at 31 December, 2023 is BGN 0 net of impairments. The carrying amount of the assets and liabilities related to the Company's investment in Monbat SA Proprietary Limited. as well as the costs related to the cessation of activity are as follows: 2023 2022 BGN ‘000 BGN ‘000 Trade receivables net of impairment 536 - Deferred tax assets 125 - Assets included in disposal groups 661 - Monbat AD Separate financial statements 31 December 2023 44 2023 2022 BGN ‘000 BGN ‘000 Trade obligations 151 - Liabilities included in disposal groups 151 - 2023 2022 BGN ‘000 BGN ‘000 Impairment expense (1 251) - Deferred tax income 125 - Result from discontinued operations (1 126) - 8. Lease liabilities and right-of-use assets The Company has lease contracts as a lessee for office spaces, machinery and equipment, vehicles and other equipment used in its operations. Rents of office spaces and motor vehicles generally have lease term between 3 and 5 years, while machinery and other equipment generally have lease terms up to 1 and 3 years. The Company also has certain lease contracts of machinery with terms of 12 months or less and rent of office equipment with low value. The Company applies the ‘short -term lease’ and ‘lease of low - value assets’ recognition expedients for these leases. Set out below are the carrying amounts of right-of-use assets recognized and the movements during the period: Right-of- use assets (BGN ‘000) Buildings Motor vehicles Machinery and equipment Total As at 1 January 2023 1 543 707 108 2 358 Additions 1 110 375 - 1 485 Written off (211) - - (211) Depreciation expense (489) (335) (61) (885) As at 31 December 2023 1 953 747 47 2 747 Right-of- use assets (BGN ‘000) Buildings Motor vehicles Machinery and equipment Total As at 1 January 2022 279 844 - 1 123 Additions 1 779 169 136 2 084 Depreciation expense (515) (306) (28) (849) As at 31 December 2022 1 543 707 108 2 358 Monbat AD Separate financial statements 31 December 2023 45 Set out below are the carrying amounts of lease liabilities and the movements during the period: 2023 2022 Lease liabilities BGN ‘000 BGN ‘000 Long-term liabilities 1 960 1 524 Short-term liabilities 825 854 2 785 2 378 2023 2022 Lease liabilities BGN ‘000 BGN ‘000 2 378 1 021 Additions 1 456 2 166 Written off (215) - Accrued interest expenses 103 92 Payments (937) (901) As at 31 December 2 785 2 378 The Company does not have leases that include variable payments. Future minimum lease payments as at 31 December 2023 are as follows: Minimum lease payments Up to 1 Year 1-2 Years 2-3 Years 3-4 Years 4-5 Years Total BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN 000 31 December 2023 Lease payments 907 752 651 609 48 2 967 Finance costs (82) (54) (32) (13) (1) (182) Net value 825 698 619 596 47 2 785 31 December 2022 Lease payments 923 846 690 42 - 2 501 Finance costs (69) (39) (14) (1) - (123) Net value 854 807 676 41 - 2 378 The Company has several leases, which include termination options. The purpose of the management is to ensure flexibility in the lease portfolio by using termination options in the contracts. Management exercises substantial discretion in determining whether it is reasonably certain that these extension and termination options will be exercised. The Company considers that in the following reporting periods the options for terminating the contracts will not be exercised. The following are the amounts recognized in profit or loss: 2023 2022 BGN ‘000 BGN ‘000 Depreciation expense of right-of-use assets 885 849 Interest expense on lease liabilities (note 32) 103 92 Total amount recognized in profit or loss 988 941 The Company’s total cash outflows related to leases amounts are BGN 937 thousand in 2023 (2022: BGN 901 thousand). Monbat AD Separate financial statements 31 December 2023 46 9. Income tax The main components of income tax expense for the years ended 31 December 2023 and 2022 are: 2023 2022 BGN ‘000 BGN ‘ 000 Current income tax expense (592) (669) Deferred tax income 140 63 Income tax expense recognized in profit or loss (452) (606) The applicable income tax rate for 2023 is 10% (2022: 10%). The reconciliation between income tax expense and accounting profit multiplied by the applicable tax rate for the years ended 31 December 2023 and 31 December 2022 is set out below: 2023 2022 BGN ‘000 BGN ‘000 Profit before tax 4 426 5 806 Tax rate 10% 10% Expected tax expense (443) (581) Effect of expenses not recognized for tax purposes (149) (88) Recognition of deferred taxes 140 63 Tax expense (452) (606) Income tax includes Current tax expenses (592) (669) Effect of temporary differences 140 63 Current income tax expense (452) (606) Effective tax rate 10% 10% The deferred tax balances as of 31.12.2023 and 31.12.2022 are related to the following: Statement of financial position Statement of profit or loss BGN ‘000 2023 2022 2023 2022 Deferred tax liabilities Subsequent valuation of assets and liabilities (1 105) (1 355) 250 90 Deferred tax assets Government grants 2 23 (21) (15) Annual paid leave liability (29) 30 (59) 28 Impairment of receivables 170 824 5 41 Warranty provisions 14 49 (35) (81) Impairment of investments - 2 343 - - Deferred tax income 140 63 Deferred tax assets/liabilities, net (948) 1 914 Monbat AD Separate financial statements 31 December 2023 47 Calculation of deferred tax liabilities: 2023 2022 BGN ‘000 BGN ‘000 Deferred tax assets at 1 January 1 914 1 408 Deferred taxes recognized in profit or loss for the period 140 63 Reclassified to disposal groups (3 002) - Other - 443 Deferred tax assets/(liabilities) at 31 December (948) 1 914 The company has not recognized tax losses that can be carried forward and deducted from future taxable profits. 10. Inventories Inventories recognized in the statement of financial position can be analyzed as follows: 2023 2022 BGN ‘000 BGN ‘000 Materials 17 545 12 775 Production 10 297 14 020 Work in progress 5 930 9 130 Goods 285 118 34 057 36 043 A pledge has been founded on a combination of raw materials and inventories – lead, lead composites and accumulator batteries and similar products, owned by Monbat AD, pledged as collateral for the liabilities under working capital overdraft from 07.12.2004 with Eurobank Bulgaria AD (note 19). The carrying amount of the inventories, pledged as a collateral for borrowings (note 19), amounts to BGN 20 859 thousand as at 31.12.2023 (31.12.2022 – BGN 20 868 thousand). 11. Short-term financial assets In the reporting periods under review, short-term financial assets include equity investments and loans: 2023 2022 BGN ‘000 BGN ‘000 Shares 50 50 Trade loan granted to Advanced Research and technologies 92 99 142 149 Monbat AD Separate financial statements 31 December 2023 48 Contract from 29.04.2021 with Advanced Research and Technologies Utilized principal: BGN 92 thousand Contract duration: four months Interests & commissions: fixed annual interest rate Balance of the principal as of 31.12.2023: BGN 92 thousand. Redemption: Single payment at the maturity date of the contract. 12. Trade receivables 2023 2022 BGN ‘000 BGN ‘000 Trade receivables, gross 48 403 48 214 Expected credit losses (3 510) (3 489) 44 893 44 725 All trade receivables are short-term. The net carrying value of trade receivables is considered a reasonable approximation of their fair value. During 2023, trade receivables amounting to BGN 29 thousand (2022: BGN 52 thousand) were written-off. The Company has used the simplified approach, allowed by IFRS 9 (note 3.13) to measure the expected credit loss with respect to trade receivables whose credit risk has not increased significantly. The result of the assessment is an impairment at the amount of BGN 50 thousand in 2023 (2022: BGN 411 thousand), that has been recognized within “Impairment of financial assets ” in the separate statement of profit or loss. The movement in the allowance for credit losses can be reconciled as follows: 2023 2022 BGN ‘000 BGN ‘000 Balance on 1 January (3 489) (3 078) Receivables written-off 29 - Impairment expense (50) (411) Balance on 31 December (3 510) (3 489) The carrying amount of trade receivables pledged as collateral for loans (Note 19) amounts to BGN 23 482 thousand as of 31 December 2023 (2022: BGN 24 178 thousand). 13. Tax receivables 2023 2022 BGN ‘000 BGN ‘000 VAT receivables 2 591 4 319 Personal Income Tax 29 117 Customs duties 1 35 Withholding tax - 1 2 621 4 472 Monbat AD Separate financial statements 31 December 2023 49 14. Other receivables 2023 2022 BGN ‘000 BGN ‘000 Guarantees 1 129 1 572 Prepayments 199 389 Advances to employees 51 10 Other 217 240 1 596 2 211 As of 31 December 2023, the Company has provided guarantees in favor of counterparties in the form of deposited cash in the amount of BGN 611 thousand (2022: BGN 1 098 thousand) 15. Cash and cash equivalents Cash and cash equivalents include the following components 2023 2022 BGN ‘000 BGN ‘000 Cash at bank and in hand - EUR 2 298 1 703 - BGN 4 180 464 - USD 581 358 - GBP 1 2 7 060 2 527 The Company has assessed the expected credit losses on cash and cash equivalents. The estimated value of the expected credit losses of the gross value of the cash deposited with financial institutions is determined as immaterial and is not recorded in the separate financial statements of the Company. As at 31 December 2023, the Company has blocked cash totaling BGN 200 thousand in cash under the Waste Management Act (31 December 2022 – BGN 200 thousand). 16. Equity 16.1 Issued capital The issued capital of the Company consists only of 39 000 000 fully paid ordinary shares with a nominal value of BGN 1 BGN. All shares are equally eligible to receive dividends and the repayment of capital and represent one vote at the General assembly of the shareholders of the Company. 2023 2022 Number of shares Number of shares Number of shares issued and fully paid: At the beginning of the year 38 973 000 39 000 000 Reacquired own shares (6 545) (27 000) Total number of shares authorized as at 31 December 38 966 455 38 973 000 Monbat AD Separate financial statements 31 December 2023 50 The main shareholders of the Company are as follows: 31 December 31 December 31 December 31 December 2023 2023 2022 2022 Number of shares % Number of shares % Prista Oil Holding EAD 16 666 371 42.73 16 666 371 42.73 PRISTA HOLDCO COOPERATIEF U.A 8 103 758 20.78 8 103 758 20.78 Monbat Trading OOD 2 785 650 7.14 2 752 800 7.06 UPF Doverie 2 582 864 6.62 2 582 864 6.62 ZUPF Allianz Bulgaria 2 105 403 5.40 2 105 403 5.40 Other individuals and legal entities 6 755 954 17.33 6 788 804 17.41 39 000 000 100 39 000 000 100 Repurchased own shares (33 545) (0.08) (27 000) (0.07) 38 966 455 99.92 38 973 000 99.93 The total number of shares and votes held directly and through related parties by Prista Oil Holding EAD is 19 422 021 shares or 49.87%. There is a pledge established under the Financial Collateral Agreements Act in favor of UniCredit Bulbank AD on the shares owned by Monbat Trading OOD and Prista Oil Holding EAD. The pledge has been constituted in relation to a loan granted by UniCredit Bulbank AD to Prista Invest 2016 AD. The Board of Directors of Monbat AD has adopted a decision to carry out a buyback of own shares up to 3% of the registered capital or up to 1 170 000 shares at a minimum buyback price of BGN 4.51 and a maximum buyback price of BGN 8.75 with an initial term of 26.09.2022 and a deadline of up to 180 calendar days with the possibility of extending the deadline. In 2023, the Company repurchased 6 545 shares (2022: 27 000 shares). 16.2 Share premium Share premium of the Company consists of proceeds, received in addition to nominal value of the shares issued in 2006. The proceeds are included in share premium, less any registration and other regulatory fees. The excess over the nominal value of BGN 1, for each redeemed share and the fees for the investment intermediary, increase the share premium value to BGN 28 476 thousand at 31.12.2023 and BGN 28 498 thousand at 31.12.2022. Monbat AD Separate financial statements 31 December 2023 51 16.3 General reserves Legal reserves Other reserves Total reserves BGN ‘000 BGN ‘000 BGN ‘000 Balance on 1 January 2022 3 900 59 966 63 866 Balance on 31 December 2022 3 900 59 966 63 866 Balance on 31 December 2023 3 900 59 966 63 866 Legal reserves Legal reserves represent 10% from the current earnings as required by the Commercial law until it reaches 10% of the share capital. Other reserves Other reserves at 31.12.2023 amount to BGN 59 966 thousand and are formed by the retained earnings of the Company in 2006, 2008, 2009, 2010, 2012, 2013 and other changes. 17. Warranty provisions The carrying amount of the provisions can be summarized as follows: 2023 2022 BGN ‘000 BGN ‘000 Carrying amount on 1 January 486 1 297 Reversal of provisions (233) (815) Accrued provision - 4 Carrying amount on 31 December 253 486 2023 2022 BGN ‘000 BGN ‘000 Non-Current Carrying amount 147 185 2023 2022 BGN ‘000 BGN ‘000 Current Carrying amount 106 301 Warranty provisions represent amounts, which are expected by the Company to be incurred for warranty service and replacement of the main products in the next years. Recognized provision is calculated on the best estimate basis, which the Company’s management can make based on previous experience and anticipated product sales. Monbat AD Separate financial statements 31 December 2023 52 18. Employees’ remuneration 18.1 Payroll expenses 2023 2022 BGN ‘000 BGN ‘000 Salary expenses 15 886 14 548 Social security expenses 2 782 2 683 Payroll expenses 18 668 17 231 18.2 Personnel payables Personnel payables recognized in the statement of financial position consist of the following: 2023 2022 BGN ‘000 BGN ‘000 Salaries payables 1 160 1 129 Social security payables 352 354 Annual paid leave liability 541 298 Personnel payables 2 053 1 781 19. Borrowings Borrowings include the following financial liabilities, measured at amortized cost: Current Non-current 2023 2022 2023 2022 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Bank loans 89 643 70 200 3 912 11 733 Loans from other financial institutions 1 334 936 1 459 881 Total carrying amount 90 977 71 136 5 371 12 614 Monbat AD Separate financial statements 31 December 2023 53 19.1 Summary of bank loan contracts 1. UBB AD Contract dated 25.02.2014 Maturity date: 15.02.2016 Loan amount: EUR 3 200 000 revolving loan Interest: 1-month EURIBOR + mark-up Collateral: Rank collateral of mortgage of own real estate, cadaster № 48489.5.597, cadaster № 48489.5.281, cadaster № 48489.5.396, together with buildings on it, on the territory of Montana str. Industrialna. With annex N 4/ 30.06.2016 the amount of the loan was increased to EUR 4 200 000 With annex m.06.2016 the amount of the loan was increased to EUR 9 200 000: Maturity date: 31.07.2027 Pledge on fixed assets owned by Monbat AD and Monbat Recycling Bulgaria. First rank pledge agreement on Monbat’s receivables on bank accounts held with the bank. Utilized amount as of 31.12.2023: BGN 17 700 049 or EUR 9 049 892 – entirely short- term. 2. Eurobank Bulgaria AD Contract № 339/07.12.2004 Maturity date: 01.09.2006 Loan amount: EUR 2 200 000 Type of credit: Credit line Interest: Variable reference interest rate + mark-up Collateral: Pledge on assets and inventories owned by Monbat AD With annex from 16.06.2017 the amount of the loan was increased to BGN 18 971 401 With an annex dated 13.01.2023, valid until 30.09.2023, the amount of the loan is increased to BGN 30 706 381. Maturity date: 31.01.2024, with an annex dated 2024 extending the term to 30.06.2024. Utilized amount as of 31.12.2023: BGN 18 962 544 – entirely short-term. 3. Eurobank Bulgaria AD Contract № 100 -972 / 23.11.2010 Maturity date: 23.11.2011 Amount borrowed: EUR 1 000 000 working capital loan Interest: 3-month EURIBOR + mark-up Collateral: Real estate 1: ½ ideal part of land with identification N48489.282 on the cadastral map of Montana, buildings and factories, warehouse currently owned by Monbat AD, approved with Directive № RD -18-19-/05.04.2006 of the Procurator of AK. Real estate 2: ½ ideal part of land with identification N48489.282 on the cadastral map of Montana, buildings and factories, warehouse currently owned by Monbat AD, approved with Directive № RD -18-19-/05.04.2006 of the Procurator of AK. Pledge 1: Machines, installations and vehicles, located in the factory of Monbat AD in Montana, 72 “Industrial” str. Pledge 2: Vehicle weighing machine and security room with an area of 102 sq.m., according to documentary evidence and inventory number 300000003 Pledge 3: Unloading area, with an area of 1980 sq.m., according to documentary evidence and property inventory number 3000000004. A special pledge entered in the Central Register of Special Pledges- fixed assets, machinery and equipment, movables. Maturity date: 31.01.2024, extended to 30.06.2024 with an annex dated 2024 Amount borrowed: BGN 1 955 830 Interest: Variable reference interest rate + mark-up Collateral: Promissory Note for the amount of BGN 1 955 830 Utilized amount as of 31.12.2023: BGN 1 930 570 – entirely short-term. Monbat AD Separate financial statements 31 December 2023 54 4. DSK Bank EAD Contract №1675/16.09.2015 Maturity date: 10.09.2024 Loan amount: EUR 2 500 000 Type of credit: For working capital Interest: 1 M EURIBOR + mark-up Collateral: Pledge agreement on receivables and property, plant and equipment Utilized amount as of 31.12.2023 at the amount of EUR 2 500 000 or BGN 4 889 575 - entirely short-term. 5. DSK Bank EAD Contract №1674/16.09.2015 Maturity date: 10.09.2016 Loan amount: BGN 2 000 000 Type of credit: For working capital Interest: Variable reference interest rate + mark-up – solely short-term. With annex from 13.11.2019 a loan amount of up to BGN 9 000 000 is increased. Maturity date: 10.09.2024 First rank pledge on the fixed assets of Monbat AD Next in line special pledge on receivables. Utilized amount as of 31.12.2023: BGN 8 999 883 – entirely short-term. 6. UBB AD Contract dated 09.11.2015 Maturity date: 15.12.2025 Loan amount: BGN 490 000 overdraft Interest: Variable reference interest rate + mark-up Collateral: No collateral Utilized amount as of 31.12.2023: BGN 487 239 – entirely short-term. 7. Eurobank Bulgaria AD Contract 359/2017 dated 05.10.2017 Loan amount: EUR 2 556 459 credit line Interest: 3 M EURIBOR + mark-up Maturity date: 31.01.2024 Collateral: First pledge agreement for Monbat’s receivables from the third parties. Utilized amount as of 31.12.2023: BGN 2 196 657 or EUR 1 123 133 – entirely short-term. 8. UBB AD Contract 20F-00428 dated 10.04.2020 Loan amount: EUR 2 000 000 Type of credit: Credit line Interest: 1 M EURIBOR + mark-up Collateral: Pledge on receivables on all borrower's accounts opened in the bank; insurance with BAEZ, covering the exposure under the contract up to EUR 2 million. With an annex of 15.12.2020, the amount of the loan is divided into two sub-limits of 1 million euro with the right to draw down the first sub-limit until 31.12.2023 and final repayment until 31.12.2023 and with the right to draw down the second sub-limit in case of successful review, which the bank will carry out until 31.12.2023 Maturity date: 31.07.2024 Utilized amount as of 31.12.2023: BGN 3 911 018 or EUR 1 999 672 – entirely short-term. Monbat AD Separate financial statements 31 December 2023 55 9. UBB AD Contract dated 10.04.2020 Maturity date: 30.09.2026 Loan amount: EUR 13 000 000 credit line Interest: 6 M EURIBOR + mark-up Collateral: Another mortgage of land with an area of 38 665 m2, owned by Start AD and Monbat Recycling EAD, together with the buildings and improvements built on it and the future buildings planned for construction. Another mortgage on land with an area of 11 343 m2, owned by Start AD and Monbat Recycling EAD Another mortgage of a building with an area of 3 510 m2, owned Monbat Recycling EAD warehouse. Special pledge on machinery, equipment and equipment, means of transport, business inventory owned by Start AD First special pledge of items and inventories, with a carrying amount of EUR 4 million, owned by Start AD Special pledge on receivables on all accounts of the borrower, opened with the bank. With an annex of 15.12.2020 the amount of the loan was changed to EUR 10 000 000 and the loan is divided into two sub-limits of TEUR 5 833 and TEUR 4 167 respectively with the right to draw down the first sub-limit by 30.12.2020 and repayment of EUR 1 million on a 6-month basis starting on 30 January 2021 and with the right to draw down the second sub-limit in case of successful review, which the Bank will carry out by 31.12.2023. After a successful review, the maturity date is 30.07.2025. Utilized amount as of 31.12.2023: BGN 7 823 320 or EUR 4 000 000 of which BGN 3 911 660 (EUR 2 000 000) is short-term. 10. Investbank AD Contract dated 21.07.2021 Maturity date: 26.03.2024, extended by one year with annex dated 2024 Loan amount: EUR 5 000 000 credit line Interest: 3 M EURIBOR + mark-up Collateral: First rank contractual mortgage of a property with an area of 39 998 sq. m., owned by Monbat AD, for the purpose of building a bipolar battery manufactory. First rank pledge on 50 829 042 shares in line with the Commercial Law with voting rights with a nominal price of BGN 1, owned by Monbat AD as shares in Monbat Recycling EAD. First rank pledge on current and future receivables available in all open accounts held by Monbat AD. Utilized amount as of 31.12.2023: BGN 9 779 150 (EUR 5 000 000) - entirely short-term. 11. Investbank AD Contract dated 25.02.2022. Maturity date: 26.03.2024, extended by one year with annex dated 2024 Loan amount: EUR 5 000 000 credit line Interest: 3 M EURIBOR + mark-up Collateral: First rank contractual mortgage of a property with an area of 48489,11,537 an area of 782 sq. m., owned by Monbat Recycling EAD. First rank pledge on current and future receivables available in all open accounts held by Monbat AD, Monbat Recycling EAD and Prista oil Holding EAD Pledge on receivables on all borrower's accounts opened in the bank; insurance with BAEZ, covering the exposure under the contract up to EUR 4 million. Utilized amount as of 31.12.2023: BGN 9 779 150 (EUR 5 000 000) - entirely short-term Monbat AD Separate financial statements 31 December 2023 56 12. UBB AD Contract 20F-00102 dated 01.02.2023 Maturity Date 01.08.2024 Loan amount: EUR 437 840 EU Type of credit: Investment Interest: 3 M EURIBOR + mark-up Collateral: Pledge on fixed assets for the amount of 437 840 EUR situated on an area of 48489,5,597, which are gas installation Utilized amount as of 31.12.2023: BGN 644 041 or EUR 329 292 – entirely short-term. 13. UBB AD Contract 20F-00103 dated 01.02.2023 Maturity Date 01.02.2024 Loan amount: EUR 97 298 EUR Type of credit: VAT credit line Interest: 3 M EURIBOR + mark-up Collateral: Pledge on receivables Utilized amount as of 31.12.2023: BGN 0 14. UBB AD Contract 23F-000767 dated 21.08.2023. Date of maturity: 14.08.2024. Credit amount: 3 500 000 EU Type of credit : Investment Type Interest: 1M EURIBOR+add ons Collateral: Land property with identifier 72624.603.372 property of Start AD Utilized amount as of 31.12.2023: BGN 6 441 125 or EUR 3 293 295 – entirely short- term). 12.Bank credit card accounts with credit limits BGN 50 000 and utilized amounts as of 31.12.2023 at the amount of BGN 10 thousand. According to the agreements concluded with DSK Bank EAD under contract №1674 / 16.09.2015 and UBB AD under contract of 25.02.2014, Monbat AD should maintain a covenant in connection with the consolidated net debt ratio of the Monbat Group to EBITDA, which should be lower than 3. The preliminary unaudited consolidated financial statements of the Company show that the Company is in violation of this covenant. The loan is classified as short-term and this does not affect the classification in the separate financial statements. Based on historical experience and in view of the long-term business relations with the banks, the Company does not believe that such non-compliance would lead to significant consequences. 19.2 Summary of loan contracts from other financial institutions: 16. UBB Interlease EAD Contract dated 18.10.2019 Maturity Date: 19.11.2024 Amount of Credit: EUR 1 271 250 credit line Interest: Fixed interest Collateral: assembly line for lead-acid accumulators and lead-acid furnace Utilized amount to 31.12.2023: EUR 211 875 or BGN 414 391, entirely short-term Monbat AD Separate financial statements 31 December 2023 57 17. UBB Interlease EAD Contract dated 29.11.2019 Maturity Date: 29.12.2024 Amount of credit: EUR 219 999 Type of credit: credit line Interest: Fixed interest Collateral: Rectifier Systems Type CDR400/420V-8CH - 4 pcs. and rectifier Systems Type CDR400/360V-10CH -5 pcs. Utilized amount to 31.12.2023: EUR 44 000 or BGN 86 056, entirely short-term 18. UBB Interlease EAD Contract dated 26.11.2021 Maturity Date: 26.11.2025 Amount of credit: EUR 420 366 credit line Interest: Fixed interest Collateral: 13 machines Utilized amount to 31.12.2023: EUR 170 100 or BGN 332 687 from which BGN 164 000 is short-term. 19. UBB Interlease EAD Contract dated 27.09.2022 Maturity Date: 31.10.2024 Amount of credit: EUR 114 735 Type of credit: credit line for fixed assets Interest: 3M EURIBOR + mark-up Collateral: Computer equipment Utilized amount to 31.12.2023: EUR 47 018 or BGN 91 960, entirely short-term 20. UBB Interlease EAD Contract dated 11.11.2022 Maturity Date: 30.04.2027 Amount of credit: EUR 1 094 544 Type of credit: credit line for fixed assets Interest: 3M EURIBOR + mark-up Collateral: Machines and equipment Utilized amount up to 31.12.2023: EUR 858 292 or BGN 1 678 673 of which BGN 557 000 is short-term. 21. OTP Leasing Contract dated 18.01.2023 Maturity Date: 05.11.2028 Amount of credit: EUR 96 150 Type of credit: credit line for fixed assets Interest: Variable reference interest rate + mark-up Collateral: Installation for reverse osmosis Utilized amount up to 31.12.2023: EUR 96 150 or BGN 188 000 of which BGN 21 000 is short-term. Monbat AD Separate financial statements 31 December 2023 58 20. Government grants In 2012, Under Operational Program “Development of the competitiveness of the Bulgarian economy 2007 –2013”, Monbat AD received a grant in the sum of BGN 4 227 thousand under the procedure “Technology upgrade in large enterprises”. The purpose of the grant is to invest in new equipment for production of grating and plates for dry-charged and lead-acid batteries. In 2013, Monbat AD won a project under Procedure BG161PO003- 1.1.07 “Implementation of innovations in enterprises”, OP “Development of the competitiveness of the Bulgarian economy” worth BGN 4 112 thousand. The value of the grant under the project procedure is BGN 2 053 thousand and was received in 2015. The project is for the production of two types of batteries with AGM technology - stationary batteries (telecommunication) and car batteries with AGM technology. The short-term and long-term part of the financing can be presented in the following way: 2023 2022 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Current Non- Current Current Non- Current Government grants received for non-current assets 204 90 204 295 204 90 204 295 2023 2022 BGN ‘000 BGN ‘000 On 1 January 499 653 Recognized in the separate statement of profit or loss (Note 26) (205) (154) On 31 December 294 499 As of the date of approval of the report, there are no unfulfilled conditions related to these grants. 21. Convertible bonds and fair value of conversion option The Company issued first order corporate convertible bonds with ISIN BG2100023170, issued under the conditions of initial public offering as follows: Number of bonds: 28 015 (twenty-eight thousand and fifteen) with denomination EUR 1 000 (one thousand) each. The issue Date: 20.01.2018; Maturity Date: 20.01.2025 Type of bonds: convertible, ordinary, registered, dematerialized, interest-bearing, freely transferable, unsecured. Term to maturity: 84 (eighty-four) months. Interest rate: floating rate of 6M EURIBOR plus premium of 300 basis points, but not less than 3.00 % on an annual basis. Interest payment date: 20 January and 20 July of each year until the Maturity Date. If the Interest Payment Date is not a Business Day, the Interest Payment Date shall be postponed to the next Business Day. Monbat AD Separate financial statements 31 December 2023 59 Repayment: in three installments at the end of the 5th, the 6th, and the 7th year of the life of the bond; at 20%, 30% and 50% of the nominal value, respectively, which corresponds to the following Interest Payment Dates: 20/01/2023, 20/01/2024 and 20/01/2025. In the event of conversion, the principal repayments will be calculated on the basis of the current bond issue's nominal value at the date of the respective principal payment. In this case, the last principal installment at the end of the 7th year will be equalized and will repay the entire outstanding nominal value of the issue, if such outstanding nominal value exists. Conversion option: Each bondholder may request the conversion of the bonds they hold according to their current nominal amount at the Conversion Price on the 48th, 66th and 78th month after issuance, corresponding to the following Interest Payment Dates, respectively: 20/01/2022, 20/07/2023 and 20/07/2024. Conversion price: equal to 90% of the weighted average price of a MONBAT AD`s share on the BSE for the six months preceding the respective conversion date if the conversion option is exercised. Minimum conversion threshold: 5% of the outstanding nominal amount of all Bonds on each of the respective conversion dates. Call option: The Company may redeem the residual outstanding part of the Bond issue on the 60 th month after issuance at 101% of the current outstanding principal amount. The date of the Call option corresponds with the interest and principal payment on the 60 th month or 20.01.2023 with the call option taking into account the corresponding 20% principal instalment. The Company has not exercised the right to redeem the residual outstanding part of the Bond issue on the 60 th month after issuance. The convertible bond liabilities can be presented in the following way: 2023 2022 BGN ‘000 BGN ‘000 Non- current Non- current Carrying amount of amortized bond liability 26 872 42 265 Fair value of conversion option - 5 280 26 872 47 545 2023 2022 BGN ‘000 BGN ‘000 Current Current Carrying amount of amortized bond liability 16 438 10 959 Interest liability 1 377 859 Fair value of a conversion option 2 650 - 20 455 11 818 The initial fair value of the conversion option of the convertible bond is assessed through the valuation model that presumes that the price of a share of the Company follows Brown’s motion. The valuation model uses an iterative Monte Carlo simulation using a large number of sample results to approximate the aim solution. The fair value of the convertible option falls within level 3 of the hierarchy of the fair value. Further evaluations of the convertible option will be performed using the same model. In 2023, the Company has reported an income from the change in the fair value at the amount of BGN 2 640 thousand . The amount is included under art. “Financial instruments income” in the separate statement of profit or loss (2022: BGN 587 thousand). Monbat AD Separate financial statements 31 December 2023 60 The fair values of the conversion options in the 48 th , 66 th & 78 th months after the bond issuance have been assessed. The 48th month and 66th month post-bond loan conversion option were not exercised in 2022 and 2023. The fair value of the conversion option is subtracted from face value of the bond obligation and the residual value is assigned to the debt host liability component which is measured at amortized cost using the effective interest method. For the remaining embedded features (e.g., call option (with regards to prepayment) and floor option (with regards to minimal level of interest rate), the Company concluded they are closely related to host contract. The difference in the amortized cost of debt host contract including cash flows resulting from executing the call option (at each date for which it is applicable) was assumed as insignificant compared to amortized cost of debt host contract before relevant call option execution. Floor options were assessed as not being in-the-money at initial recognition date, i.e., options strike price (6M EURIBOR plus 300 b.p.) was assessed as being lower than interest rate level required for comparable plain vanilla debt. Transaction costs related to the conversion option derivative liability component to the amount of BGN 47 thousand have been expensed as part of “Interest Expenses” in 2018. Transaction costs to the amount of BGN 353 thousand related to the liability component of the Bond are included in the carrying amount of the liability component and are amortized over the life of the convertible bond note using the effective interest method. The calculated and applied effective interest rate on the bond liability component carried at amortized costs is equal to app. 6% per annum. The initial time horizon for calculation of the effective interest rate was 5 years from the bond obligation issue since the Management expected that the call option at year 5 of the bond obligation will be exercised. In 2023, as a result of a change in market conditions - an increase in the 6M EURIBOR interest rate, the Company has recalculated the amortised cost of the bond debt. The revised effective interest rate starting from 2023 is approximately 9% per annum (2022:8%). The recalculation of the debt at the revised effective interest rate does not require the recognition of a one-off effect in the Profit or loss statement in 2023. The applicable accounting policy is reported under note 3.13. Note 34 provides information concerning the financial period in which the Company has generated income related to the convertible bond & convertible option. 22. Trade payables 2023 2022 BGN ‘000 BGN ‘000 Payables to suppliers 13 151 11 282 Monbat AD Separate financial statements 31 December 2023 61 23. Tax liabilities 2023 2022 BGN ‘000 BGN ‘000 Tax on expenses 61 29 Withholding tax 12 22 Other taxes - 22 Tax liabilities 73 73 24. Contract liabilities and other liabilities 24.1 Contract liabilities 2023 2022 BGN '000 BGN ‘000 Advances received 3 850 3 729 Contract liabilities 3 850 3 729 24.2 Other liabilities 2023 2022 BGN ‘000 BGN ‘000 Dividends payable 92 35 Other short-term liabilities 110 16 Advance received for sale of subsidiary - 5 866 Other liabilities 202 5 917 24.3 Fair value of hedging instruments 2023 2022 BGN ‘000 BGN ‘000 Fair value of lead LME swap - 364 Other liabilities - 364 In 2023 and 2022, the Company used LME lead cash flow swaps, negotiating a fixed reference price, to limit the risk of a decline in the London Metal Exchange lead index, which would affect the selling price of the Company's production. All transactions, concluded in 2023, as well as all open transactions as of December 31, 2022, were realized as of December 31, 2023. The open transactions as of December 31, 2022 were valued at fair value, as a result of which the Company reports a liability of derivative instrument. Monbat AD Separate financial statements 31 December 2023 62 25. Revenue from contracts with customers 2023 2022 BGN ‘000 BGN ‘000 Type of revenue Revenue from sale of finished goods 238 680 235 499 Revenue from sale of goods 72 295 85 409 Revenue from sale of materials 3 119 3 108 Revenue from rendering of services 2 611 2 988 Other revenue 432 3 Total revenue from contracts with customers 317 137 327 007 In 2023, sales of materials to related parties for BGN 41 740 thousand (2022: BGN 50 339 thousand) and reinvoiced services for BGN 888 thousand (2022: BGN 188 thousand) were reported net of the carrying amount of materials sold and reported materials costs and reinvoiced expenses. The realized profit of the transactions to the amount of BGN 196 thousand (2022: BGN 46 thousand) is included in line “Revenue from rendering of services” (Note 3.22.5). In 2023, revenues from sales to third parties of goods purchased from related parties in the amount of BGN 12 633 thousand (2022: BGN 0) were recorded net of the book value of goods sold (Note 3.22.5). 2023 2022 BGN ‘000 BGN ‘000 Geographic markets Bulgaria 40 283 46 092 Germany 29 861 30 477 Other countries 246 993 250 438 Total revenue from contracts with customers 317 137 327 007 2023 2022 BGN ‘000 BGN ‘000 Timing for revenue recognition Finished goods and materials transferred at a point in time 314 094 324 016 Services transferred over time 2 611 2 988 Other income transferred at a point in time 432 3 Total revenue from contracts with customers 317 137 327 007 The Board of Directors is the chief operational decision maker of Monbat AD. The chief operational decision maker determines the operating segments based on the production activity of the Company. The Board of Directors monitors the performance of its business units separately for the purposes of decision-making regarding the allocation of resources and evaluation of performance. The information on revenues by segments of districts can be analyzed for the presented reporting periods as follows: 2023 Starter and stationary batteries Technological waste and semi-finished goods Materials Services Other Total BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Segment revenue: 287 702 23 273 3 119 2 611 432 317 137 Monbat AD Separate financial statements 31 December 2023 63 2022 Starter and stationary batteries Technological waste and semi-finished goods Materials Services Other Total BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Segment revenue: 296 972 23 936 3 108 2 988 3 327 007 In 2023 and 2022 the Company did not have any major customers that would account for 10% or more of the total revenue. Contract balances 2023 2022 BGN ‘000 BGN ‘000 Trade receivables (note 12) 44 893 44 725 Related party receivables (note 37) 87 342 93 384 Contract liabilities (note 24.1) (3 850) (3 729) Trade receivables are noninterest-bearing and are usually settled between 0 and 90 days. Contract liabilities represent short-term advance payments received for providing finished goods. In 2023 the Company recognized revenues from contracts with customers, which were included in the contract liabilities at the beginning of the period, amounting to BGN 3 570 thousand (2022: BGN 1 578 thousand). In 2023 and 2022 the Company has not reported revenue from contracts with customers recognized during the reporting periods from performance obligations that have been satisfied (or partially satisfied) in previous periods (for example, changes in the transaction price). Performance obligations The information about the Company’s performance obligations is summarized below: Battery production The Company manufactures and sells a wide range of starter and stationary batteries on the market. Revenue from sales of finished goods is recognized when control of the products has been transferred and there is no unsatisfied obligation that could affect the customer's acceptance of the products. The performance obligation is satisfied upon delivery of the finished good, when the products are shipped to the specific place, the risks are transferred to the customers who have accepted the products in accordance with the sales contract, acceptance provisions have expired, or the company has objective evidence that all criteria for acceptance are met. Sales are made with a payment term of 0 to 90 days, which is in line with market practice, and do not lead to the recognition of a significant financing component. Some contracts provide the customers with a right to return and volume rebates, which gives rise to variable remuneration subject to restriction. The Company's obligation to repair or replace defective products under standard warranty conditions is recognized as a provision under IAS 37 (Note 17). Monbat AD Separate financial statements 31 December 2023 64 Production of by-products and semi-finished products The performance obligation is satisfied upon delivery of the products. Sales are made with a payment term of 30 days, and do not lead to the recognition of a significant financing component. Materials and others The performance obligation is satisfied upon delivery of materials. Sales are made with a payment period of 30 to 60 days, and do not lead to the recognition of a significant financing component. Services The performance obligation is satisfied over time, the payment is usually due upon completion of the service and its acceptance by the client. Some contracts require short- term advances before a service can be provided. 26. Other operating income 2023 2022 BGN ‘000 BGN ‘000 Revenue from financing under program for compensating commercial users of electricity 467 7 869 Revenue from financing in connection to investment programs (Note 20) 205 154 Reversal of provisions (Note 17) 233 - Others 1 71 906 8 094 The main portion of other operating income of the Company are beyond the scope of IFRS 15 and are recognized according to other standards. “Revenue from financing under program for compensating commercial end clients of electricity” at the amount of BGN 467 thousand in 2023 and BGN 7 869 thousand in 2022 is related to governmental grant under Council of Ministers’ Decree (CMD) № 739, amended with Decree №771 on 06.11.2021. The aim of the program is to alleviate commercial clients’ electricity burdens & support them with overcoming the consequences of the substantial & unfavorable volatilities in the prices of electricity. Monbat AD Separate financial statements 31 December 2023 65 27. Cost of materials 2023 2022 BGN ‘000 BGN ‘000 Raw materials (183 829) (180 957) Electricity (7 289) (16 601) Fuels and lubricants (3 240) (4 712) Spare parts and accessories (1 223) (1 529) Packaging and other materials (213) (307) Other costs (792) (859) (196 586) (204 965) 28. Cost of materials and cost of goods sold and other current assets 2023 2022 BGN ‘000 BGN ‘000 Goods, purchased from Start AD 60 648 76 376 Materials 3 029 1 323 Other goods 965 171 64 642 77 870 29. Hired Services expenses 2023 2022 BGN ‘000 BGN ‘000 Distribution (16 144) (16 991) Other consulting services (946) (1 080) Insurance (841) (656) Repair & maintenance (678) (708) Governmental fees, customs duties & others (474) (474) Subscription fees (telephone, internet & others) (582) (514) Advertising (410) (439) Fees on civil contracts (261) (364) Financial audit (210) (197) Rentals (125) (145) Other expenses (1 490) (1 272) (22 161) (22 840) Other expenses include security costs, courier services and other services. The remuneration of the independent auditor for 2023 is BGN 210 thousand. During the year, there were not any tax consultation services or other services unrelated to the audit. These separate financial statements are prepared in line with the requirements under art. 30 of the Accountancy Act. Monbat AD Separate financial statements 31 December 2023 66 30. Gain on the sale of non-current assets 2023 2022 BGN ‘000 BGN ‘000 Sales revenue 6 51 Carrying amount of non-current assets sold (3) (42) Gain on the sale of non-current assets 3 9 31. Other expenses 2023 2022 BGN ‘000 BGN ‘000 Representative expenses (458) (284) Inventories written-off (433) (275) Business trips (405) (319) Bad debt expense (50) (130) Donations (27) (20) Warranty service provision - (4) Others (974) (965) (2 347) (1 997) Other costs include expenses not related to the Company’s main activity, VAT for personal use, social expenses, penalties and samples costs. 32. Finance income and finance cost Finance costs for the presented reporting periods can be analyzed as follows: 2023 2022 BGN ‘000 BGN ‘000 Costs for borrowings at amortized cost: Bank loans at amortized cost: (4 491) (2 129) Loans from other financial institutions (274) (62) Convertible bond (3 799) (3 529) Total interest expenses for financial liabilities, not carried at fair value through profit or loss (8 564) (5 720) Interest expense on lease liabilities (note 8) (103) (98) Other finance costs (740) (786) Finance costs (9 407) (6 604) Finance income may be analyzed as follows for the presented reporting periods: 2023 2022 BGN ‘000 BGN ‘000 Interest income on financial assets carried at amortized cost 2 589 1 572 Total interest income for financial assets, not carried at fair value through profit or loss 2 589 1 572 Other financial instruments – derivatives, net 1 585 516 Finance income 4 174 2 088 Monbat AD Separate financial statements 31 December 2023 67 The proportional coupon payments calculated at the coupon rate of the obligation for bonds for 2023 amounted to BGN 2 754 thousand (2022: BGN 1 763 thousand). Total interest expense on the convertible bond issue is BGN 3 799 thousand (2022: BGN 3 529 thousand). The difference between coupon payments and calculated interest expense is due to the effective interest rate due to the expected fair value of the Conversion option (note 21). Other financial instruments – derivatives represent the net effect of commodity swap transactions entered into in 2023 and 2022 to hedge the downside risk in the LME Lead Index. The effect of completed transactions is reported on a cash flow exchanged basis. Open transactions at the period end are reported against their fair value (note 24.3) 33. Other financial items 2023 2022 BGN ‘000 BGN ‘000 (Loss)/Gain from exchange rate differences on receivables and payables (221) 645 Other financial income - 2 Other financial items (221) 647 34. Financial instruments income 2023 2022 BGN ‘000 BGN ‘000 Changes in the fair value of a conversion option, through fair value as profit or loss 2 640 589 Income from sale of investments - 485 Financial instruments income 2 640 1 074 In 2023 and 2022, as a result of a change in market conditions - an increase in the 6M EURIBOR interest rate, the Company has recalculated the amortized cost of the convertible bond. The revised effective interest rate starting from 2023 is approximately 9% per annum (2022: 8%). The recalculation of the debt at the revised effective interest rate does not require the recognition of a one-off effect in the Profit or loss statement in 2023. Note 21 provides information on the carrying value of the bond and the conversion option. The gain on sale of investment relates to the sale of 7.2% interest in the Italian company COBAT s.p.a. to a third party. The total sale price is BGN 1 956 thousand. 35. Earnings per share and dividends 35.1 Earnings per share Basic earnings per share are calculated using the profit attributed to shareholders of the Company as the numerator. The weighted average number of shares used for the calculation of basic and diluted earnings per share, as well as the net profit attributable to ordinary shareholders, is presented as follows: Monbat AD Separate financial statements 31 December 2023 68 2023 2022 Profit from continuing operations, attributable for the purposes of calculating basic earnings per share (BGN) 3 974 000 5 200 000 Loss from discontinued operations (1 066 000) (3 981 000) Profit attributable for the purposes of calculating basic earnings per share (BGN) 2 908 000 1 219 000 Effect of potential diluted shares: Interest on convertible bond loan (net of tax effect) 3 419 100 3 176 100 Profit attributable for the purposes of calculating diluted earnings per share (BGN) 6 327 100 4 395 100 Weighted average number of shares for the purposes of calculating basic earnings per share 38 970 229 38 993 378 Effect from potential shares with reduced value: Convertible Bond Loan 10 387 218 11 102 853 Weighted average number of shares for the purpose of calculating diluted earnings per share 49 357 447 50 096 231 Basic earnings per share from continuing operations (BGN per share) 0.10 0.13 Basic loss per share from discontinued operations (BGN per share) (0.03) (0.10) Basic earnings per share (BGN per share) 0.07 0.03 Potential ordinary shares are treated as diluted shares only if their conversion into ordinary shares would reduce the profit or increase the loss of a share from continuing ordinary activities. The effect of the conversion, exercise of rights or other issue of potential ordinary shares, that would be directed against a reduction in the amount of net earnings per share, is not taken into account in the calculation of the net earnings per diluted share. Based on the calculations made, the Company has estimated that the issue of a convertible bond loan and its conversion into ordinary shares would increase the profit, so it does not disclose earnings per diluted shares. 35.2 Dividends At the General Meeting of the Shareholders, which took place on 29 June 2023, a decision has been taken to distribute a dividend at the amount of BGN 4 000 thousand, which is part of the profit for 2022 at the amount of BGN 1 219 thousand and previous years at the amount of BGN 2 781 thousand. This amount represents a payment of BGN 0.10 per share. In 2023, the Company has paid out a dividend at the amount of BGN 3 992 thousand. At the General Meeting of the Shareholders, which took place on 14 June 2022, a decision has been taken to distribute a dividend at the amount of BGN 5 500 thousand, which is part of the profit for 2021 at the amount of BGN 1 195 thousand, and from previous years at the amount of BGN 4 304. thousand This amount represents a payment of BGN 0.14 per share. In 2022, the Company has paid out a dividend at the amount of BGN 5 434 thousand. Monbat AD Separate financial statements 31 December 2023 69 36. Related party transactions The Company's related parties include its shareholders, subsidiaries, companies under common control, key management and others as described below: Related party Country Type of relation Prista Oil Holding EAD Bulgaria Parent company Prista Oil Group B.V. The Netherlands Ultimate parent company Atanas Stoilov Bobokov Bulgaria Person exercising joint control over the Parent Company Plamen Stoilov Bobokov Bulgaria Person exercising joint control over the Parent Company YU Monbat DOO Serbia Subsidiary Start AD Bulgaria Subsidiary Monbat Recycling Romania Srl Romania Subsidiary Monbat Plc DOO Serbia Subsidiary Energy Battery Nigeria Ltd. Nigeria Subsidiary Monbat New Power AD Bulgaria Subsidiary Monbat Recycling EAD Bulgaria Subsidiary Monbat Romania Srl Romania Subsidiary Monbat Sped EOOD Bulgaria Subsidiary Monbat Holding GmbH Germany Subsidiary Monbat New Power GmbH Germany Subsidiary EAS GmbH Germany Subsidiary Monbat Italy Srl Italy Subsidiary Piombifera Italiana Srl Italy Subsidiary STC Srl Italy Subsidiary Monbat Immobilien GmbH Austria Subsidiary ARTMonbat AD Bulgaria Subsidiary Monbat SA Proprietary Ltd South Africa Subsidiary Monbat NBP EAD Bulgaria Subsidiary Societe Nouvelle des Accumulateurs Nour Tunisia Subsidiary Société NOUR Distribution Tunisia Subsidiary Société Technique et Ingénierie de Précision Tunisia Subsidiary Société NOUR des Batteries Industrielles Tunisia Subsidiary Société NOUR Recycling Tunisia Subsidiary Leventa OOD Bulgaria Associate Chavdar Dochev Danev Bulgaria Member of the BoD of Monbat AD Viktor Stanimirov Spiriev Bulgaria Member of the BoD of Monbat AD Petar Hristov Petrov Bulgaria Member of the BoD of Monbat AD Kyle Anderson USA Member of the BoD of Monbat AD Petar Nikolov Bozadzhiev Bulgaria Member of the BoD of Monbat AD Evelina Pavlova Slavcheva Bulgaria Member of the BoD of Monbat AD Monbat Trading OOD Bulgaria Company under common control, shareholder Monbat AD Separate financial statements 31 December 2023 70 Related party Country Type of relation Prista Holdco Cooperatief U.A. Netherlands Other related parties and shareholder Holdco Investment EOOD Bulgaria Sole shareholder in Prista Holdco Cooperatief U.A. Prista Invest 2016 AD Bulgaria Sole owner of Parent Company Alliance Energy Companies AD Bulgaria Company under common control Torlashka Sreshta EOOD Bulgaria Controlled by person exercising joint control over the Parent Company Monbat Eco Projects OOD Bulgaria Controlled by person exercising joint control over the Parent Company Black Star International AD Bulgaria Company under common control Sales to and purchases from related parties are made at negotiated prices. The outstanding balances at the year end are unsecured, interest free (excluding loans) and are settled in cash. No guarantees are given or received for amounts due from or to related parties, except as described in note 37.1.4. An impairment review is carried out each financial year based on an analysis of the related party's financial position and the market in which it operates. 36.1. Transactions with parent company 2023 2022 BGN ‘000 BGN ‘000 Prista Oil Holding EAD - sale of services 8 9 - sale of finished goods - 186 - purchase of materials 35 20 - purchase of services 21 24 - interest accrued 1 283 739 - dividend paid 1 711 2 350 - dividend refunded 280 - 36.2. Transactions with subsidiaries 2023 2022 BGN ‘000 BGN ‘000 Start AD - sale of finished goods 4 652 4 751 - sale of services and other 176 47 - purchase of materials 4 279 7 389 - purchase of goods 62 626 76 066 - purchase of services 137 10 - purchase of non-current assets 90 37 - other purchases - 1 Monbat AD Separate financial statements 31 December 2023 71 In 2023, sales of materials to Start AD for BGN 39 990 thousand (2022: BGN 49 582 thousand) and re-invoiced services for BGN 113 thousand (2022: BGN 188 thousand) are recorded net of the carrying amount of materials sold, and net of reported costs of materials and services. The gain from the transactions at the amount of BGN 176 thousand (2022: BGN 47 thousand) is included under "Sale of services". 2023 2022 BGN ‘000 BGN ‘000 Monbat Plc DOO - purchase of materials 50 882 51 264 - purchase of services - 12 Monbat SA Proprietary Limited - sale of goods 11 353 - sale of finished product 203 1 604 - sale of services 8 27 - interest accrued 49 39 - purchases of goods 151 - YU Monbat DOO - sale of finished product 4 541 2 682 - sale of goods 328 667 Monbat Recycling Romania Srl - purchase of materials 46 481 50 430 - purchase of services 109 107 Monbat Recycling EAD - rendering of services 32 496 - sale of materials - 1 710 - sale of other (lead-containing semi-finished/technological waste) 23 511 23 397 - purchase of materials 81 509 76 305 - purchase of services 181 173 - purchase of other 124 117 In 2023, sales to third parties of materials, purchased from Monbat Recycling EAD, at the amount of BGN 12 633 thousand (2022: BGN 0) are presented net from the carrying amount of materials sold. 2023 2022 BGN ‘000 BGN ‘000 Monbat Romania Srl - sale of finished product 1 570 1 929 - sale of goods 146 286 Monbat Holding GmbH - interest accrued - 27 - repaid loan - 1 878 Monbat AD Separate financial statements 31 December 2023 72 2023 2022 BGN ‘000 BGN ‘000 Monbat Sped EOOD - repaid loan, incl. interest 218 124 - interest accrued 16 18 - purchase of services 5 948 2 266 - purchase of materials 14 11 - other purchases 3 1 - rendering of services 10 25 - sale of materials 1 1 - sale of goods 4 6 ARTMonbat AD - loan granted 1 661 1 184 - interest accrued 284 169 - purchase of materials 3 28 - purchase of services 3 2 Monbat Holding Tunisia BV - repaid loan - 20 - interest accrued - 1 Energy Battery Nigeria Ltd - rendering of services - 29 - sale of finished goods - 1 324 Monbat Immobilien GmbH - loan granted 438 292 - interest accrued 30 9 Monbat NBP EAD - loan granted - 150 - repaid loan 940 - - interest accrued 106 148 Societe Nouvelle des Accumulateurs Nour - purchase of materials 1 690 444 - sale of materials 634 496 - sale of finished goods 19 233 - sale of services 20 90 Societe Nour Distribution - sale of materials 306 120 - sale of finished goods 106 282 - sale of services - 16 Monbat AD Separate financial statements 31 December 2023 73 36.3 Transactions with related parties under common control and other shareholders 2023 2022 BGN ‘000 BGN ‘000 Prista Invest 2016 AD - loan granted - 1 580 - interest accrued 185 89 Aliance Energy Companies AD - loan granted - 700 - interest accrued 55 1 Torlashka Sreshta EOOD - interest accrued 10 6 Monbat Trading OOD - purchase of goods & services 3 999 3 456 - dividend distribution 286 388 - sales of services 49 48 - advance provided 50 703 - repaid loan 587 594 - interest accrued 134 125 - interest paid 133 126 36.4 Transactions with key management personnel The key management personnel includes the Board of Directors of the Company and the procurators. Key management personnel remuneration includes the following expenses: 2023 2022 BGN ‘000 BGN ‘000 Short-term employee benefits: Salaries including bonuses 1 873 1 809 Social security expenses 21 21 Company car allowance 31 33 Total remuneration 1 925 1 863 37. Related party balances at year-end 37.1. Current receivables from related parties Note 2023 2022 BGN ‘000 BGN ‘000 Receivables from subsidiaries 37.1.1 46 697 55 353 Receivables from the Parent Company 37.1.2 23 879 23 126 Receivables from persons exercising joint control over the parent company 37.1.3 6 240 5 911 Receivables from other related parties 37.1.4 10 526 8 994 Receivables from related parties 87 342 93 384 Monbat AD Separate financial statements 31 December 2023 74 37.1.1 Current receivables from subsidiaries 2023 2022 BGN ‘000 BGN ‘000 Receivables from subsidiaries: - Monbat Recycling EAD – trade receivables 15 637 11 624 - Monbat Recycling EAD – receivables from cession contracts 19 030 19 615 - Monbat Recycling EAD – dividend receivables 114 8 455 - Monbat Sped EOOD – funds provided 286 486 - Monbat Sped EOOD - interest 7 10 - ARTMonbat AD – trade receivables 3 1 - ARTMonbat AD – loan granted 6 464 4 921 - ARTMonbat AD – interest 694 410 - MONBAT NBP EAD – funds provided 1 760 2 700 - MONBAT NBP EAD – interest 399 293 - MONBAT DOO PLC – interest 356 356 - YU Monbat PLC – trade receivables - 755 - Monbat Romania Srl – trade receivables 81 397 - Monbat Holding GmbH – interest - 10 - Piombifera Italiana Srl – trade receivables 1 1 - Monbat SA Proprietary Limited – trade receivables - 856 - Monbat SA Proprietary Limited – funds provided - 978 - Monbat SA Proprietary Limited – interest - 78 - Energy Battery Nigeria Ltd. – trade receivables - 2 702 - Societe Nouvelle des Accumulateurs Nour – trade receivables 903 338 - Societe Nour Distribution – trade receivables 661 367 - STC Srl – trade receivables 3 - - STC Srl – funds provided 293 - - STC Srl – interest 5 - Total current receivables from subsidiaries 46 697 55 353 As of 31.12.2023, trade and other receivables from Monbat Holding GmbH – BGN 10 thousand, Monbat SA Proprietary Limited – BGN 536 thousand and Energy Battery Nigeria Ltd. – BGN 143 thousand, net of impairments, are presented on the line "Non-current assets included in disposal groups, held for sale" in the separate statement of financial position (note 7). 37.1.2 Current receivables from the Parent Company 2023 2022 BGN ‘000 BGN ‘000 - Prista Oil Holding EAD – deposit 19 751 20 030 - Prista Oil Holding EAD – interest 4 125 2 841 - Prista Oil Holding – trade receivables 3 255 Current receivables from the Parent Company 23 879 23 126 Monbat AD Separate financial statements 31 December 2023 75 37.1.3 Current receivables from persons exercising joint control over the Parent Company 2023 2022 BGN ‘000 BGN ‘000 - Plamen Bobokov – funds granted 1 830 1 830 - Plamen Bobokov – interest 382 264 - Atanas Bobokov – funds granted 3 269 3 269 - Atanas Bobokov – interest 759 548 Current receivables from persons exercising joint control over the Parent Company 6 240 5 911 37.1.4 Current receivables from related parties under common control and other shareholders 2023 2022 BGN ‘000 BGN ‘000 Receivables from other related parties - Monbat Trading OOD – trade receivables 760 707 - Monbat Trading OOD – funds provided 2 689 3 276 - Monbat Trading OOD - interest 10 10 - Monbat Eco Projects OOD – funds provided 222 222 - Monbat Eco Projects OOD – interest 70 56 - Torlashka sreshta EOOD – funds provided 160 160 - Torlashka sreshta EOOD – interest 32 22 - Torlashka sreshta EOOD – trade receivables 8 8 - Prista Invest 2016 AD – funds provided 3 695 3 695 - Prista Invest 2016 AD – interest 281 96 - Prista Holdco Cooperative U.A. – funds provided 13 - - Prista Holdco Cooperative U.A. – interest - - - Black Star International AD – funds provided 978 - - Black Star International AD – interest 59 - - Alliance Energy Companies AD – funds provided 700 700 - Alliance Energy Companies AD – interest 56 1 - Holdco Investment EOOD – funds provided 767 40 - Holdco Investment EOOD – interest 26 1 Current receivables from other related parties 10 526 8 994 The main contracts for loans granted to related parties are presented as follows: 1. Prista Oil Holding EAD • Contracts dated 2013 Deposits granted to Prista Oil Holding EAD Deposited amount: BGN 17 594 thousand Credit term: 31.05.2025, with anex dated 01.02.2019, the liability is to be paid on demand by Monbat AD. Interest: 6% annual interest rate Balance on the principal as of 31.12.2023: BGN 11 766 thousand As of 01.02.2019, the annual interest rate is 6M EURIBOR plus a surcharge of 3.5%. Monbat AD Separate financial statements 31 December 2023 76 • Contracts dated 2014 Deposits granted to Prista Oil Holding EAD Deposited amount: BGN 2 900 thousand Credit term: 31.05.2025, with anex dated 01.02.2019, the liability is to be paid on demand by Monbat AD. Interest: 6% annual interest rate Balance on the principal as of 31.12.2023: BGN 2 900 thousand As of 01.02.2019, the annual interest rate is 6M EURIBOR plus a surcharge of 3.5%. • Contracts dated 2017 Deposits granted to Prista Oil Holding EAD Deposited amount: BGN 5 085 thousand Credit term: 31.05.2025, with anex dated 01.02.2019, the liability is to be paid on demand by Monbat AD. Interest: 6% annual interest rate Balance on the principal as of 31.12.2023: BGN 5 085 thousand As of 01.02.2019, the annual interest rate is 6M EURIBOR plus a surcharge of 3.5%. The recoverability of the receivables from the parent company Prista Oil Holding EAD at the amount of BGN 23 879 thousand was assessed based on a recoverability scenario, which includes repayment based on cash flows generated by the operating activities of the company, cash flows generated from investing and financing activities for a five- year period which also include the expected dividend income (Monbat Group's dividend distribution capacity estimate based on its projected cash flows over a five-year period) and loan proceeds. In assessing the recoverability of the receivables from the parent company, the contractual guaranteed agreement related to shares of Project Ruse AD, property of Atanas Bobokov and Prista Old Holding EAD, is considered. The monetary value of this agreement concluded between the Company and Prista Oil Holding EAD is comparable to net exposition of the receivables of the Company from Prista Oil Holding EAD, Prista Invest 2016 AD, Atanas Bobokov, Plamen Bobokov, Aliance Energy Company AD and Black Star International AD. 2. Monbat Eco Projects • Contracts dated 2016 Utilized principal: BGN 222 thousand Credit term: 31.12.2023, extended to 31.12.2024 with an anex dated March 2024 Interest: 4% annual interest rate Balance on the principal as of 31.12.2023: BGN 222 thousand Repayment: no repayment plan As of 01.02.2019, the annual interest rate is 6M EURIBOR plus a surcharge of 3.5%. 3. Monbat Sped EOOD • Contracts dated 2019 Utilized principal: BGN 390 thousand Credit term: 31.12.2023, extended to 31.12.2024 with an anex dated March 2024 Interest: 3.5% annual interest rate Balance on the principal as of 31.12.2023: BGN 286 thousand Repayment: no repayment plan As of 01.02.2019, the annual interest rate is 6M EURIBOR plus a surcharge of 3.5%. Monbat AD Separate financial statements 31 December 2023 77 4. ARTMonbat AD • Contracts dated 2019 Utilized principal: BGN 2 869 thousand Credit term: 26.04.2026 with the possibility of early repayment at the request of Monbat AD Interest: 3.5% annual interest rate Balance on the principal as of 31.12.2023: BGN 2 869 thousand • Contracts dated 2021 Utilized principal: BGN 670 thousand Credit term: 26.04.2026 with the possibility of early repayment at the request of Monbat AD Interest: 3.5% annual interest rate Balance on the principal as of 31.12.2023: BGN 670 thousand • Contracts dated 2022 Utilized principal: BGN 1 382 thousand Credit term: 26.04.2026 with the possibility of early repayment at the request of Monbat AD Interest: 3.5% annual interest rate Balance on the principal as of 31.12.2023: BGN 1 184 thousand • Annex dated 2023 Utilized principal: BGN 1 742 thousand Credit term: 26.04.2026 with the possibility of early repayment at the request of Monbat AD Interest: 3.5% annual interest rate Balance on the principal as of 31.12.2023: BGN 1 742 thousand With annex dated 01.09.2023, the interest rate was changed to 6.0%. 5. Monbat Trading OOD • Contracts dated 2019 Utilized principal: BGN 3 000 thousand Credit term: on demand, not later than 01.12.2024 With annex dated March 2024, the term was extended to 31.12.2024. Interest: 3.5% annual interest rate Balance on the principal as of 31.12.2023: BGN 1 505 thousand With annex dated 01.01.2023, the interest rate was changed from 3.5% to 4.5%. • Contracts dated 2020 Utilized principal: BGN 1 082 thousand Credit term: on demand, not later than 01.12.2024 With annex dated March 2024, the deadline was extended to 31.12.2024 Interest: 3.5% annual interest rate Balance on the principal as of 31.12.2023: BGN 1 082 thousand With annex dated 01.01.2023, the interest rate was changed from 3.5% to 4.5%. Monbat AD Separate financial statements 31 December 2023 78 6. Torlashka sreshta EOOD • Contracts dated 2019 Utilized principal: BGN 160 thousand Term of the loans: 31.12.2023, extended to 31.12.2024 with annex dated March 2024. Interest:3.5 % annual interest rate Balance on the principal as of 31.12.2023: BGN 160 thousand Repayment: no repayment plan As of 01.01.2023, the annual interest rate is 6M EURIBOR plus a surcharge of 3.5%. 7. Alliance Energy Companies AD • Contracts dated 2022 Utilized principal: BGN 700 thousand Term of the loans: 31.12.2023, extended to 31.12.2024 with annex dated March 2024. Interest: 4.0% annual interest rate Balance on the principal as of 31.12.2023: BGN 700 thousand With annex dated 11.01.2023, the interest rate was changed from 4% to 8%. 8. Holdco Investment EOOD • Contracts dated 2022 Utilized principal: BGN 767 thousand. Term of the loans: 31.12.2023, with an annex from March 2024, the term has been extended to 31.12.2024. Interest: 6M EURIBOR plus 3.5% surcharge Principal balance as of 31.12.2023: BGN 767 thousand. Repayment: no approved repayment plan 9. Atanas Bobokov • Contracts dated 2018, 2019 and annexes Utilized principal: BGN 4 136 thousand Term of the loans: 31.12.2023, extended to 31.12.2024 with annex dated March 2024. Interest: 3.5% annual interest rate Balance on the principal as of 31.12.2023: BGN 3 219 thousand As of 01.01.2023, the annual interest rate is 6M EURIBOR plus a surcharge of 3.5%. • Contract dated 2020 Utilized principal: BGN 50 thousand Term of the loan: 31.12.2023, extended to 31.12.2024 with annex dated March 2024. Interest: 3.5% annual interest rate Balance on the principal as of 31.12.2022: BGN 50 thousand Repayment: no repayment plan As of 01.01.2023, the annual interest rate is 6M EURIBOR plus a surcharge of 3.5%. Monbat AD Separate financial statements 31 December 2023 79 10. Plamen Bobokov • Contracts dated 2018, 2019 and annexes Utilized principal: BGN 2 080 thousand Term of the loan: 31.12.2023, extended to 31.12.2024 with annex dated March 2024. Interest: 3.5% annual interest rate Balance on the principal as of 31.12.2023: BGN 1 830 thousand Repayment: no repayment plan As of 01.01.2023, the annual interest rate is 6M EURIBOR plus a surcharge of 3.5%. In March 2024, the loans granted to the companies under common control and the persons exercising joint control over the parent company, maturing as of 31.12.2023, were renewed with the signing of additional agreements with a new maturity date of 31.12.2024. Loans to subsidiaries due on 31.12.2023 have been renegotiated with an extended maturity until 31.12.2024. Management has reviewed the recoverability of receivables from related parties, taking into account the specific business development plans of the respective companies, collateral provided and the Company's historical experience with credit losses from related parties by incorporating forecast information. In view of the expected development of the business activity of the subsidiary companies Energy Battery Nigeria Ltd and Monbat SA Proprietary Limited, the Company reported in 2023 expenses for impairment of trade receivables for BGN 2 063 thousand (2022: BGN 1 000 thousand) and BGN 1 105 thousand (2022: BGN 0), included in the line "loss from discontinued operations". In the same order, the Company also recorded a write-down of receivables from the subsidiary Monbat Immobilien GmbH in the amount of BGN 176 thousand (2022: BGN 318 thousand). 37.2. Current related party payables 2023 2022 BGN ‘000 BGN ‘000 - Start AD – trade payables 14 539 12 168 - Monbat Recycling Romania Srl – trade payables 14 416 19 766 - Monbat Plc DOO – trade payables 5 005 6 702 - Societe Nouvelle des Accumulateurs Nour – trade payables 1 364 - - Monbat Sped EOOD – trade payables 869 572 - YU Monbat DOO – trade payables 560 - - Prista Oil Holding EAD – Trade payables 31 - - Prista Holdco Cooperatief U.A. – loan received - 395 - Monbat New Power GmbH – other payables - 48 - ART Monbat AD – trade payables - 25 Current liabilities to subsidiaries 36 784 39 676 - Dividends to shareholders - 74 Related party liabilities 36 784 39 750 Monbat AD Separate financial statements 31 December 2023 80 As of 31.12.2023, trade and other payables from Monbat SA Proprietary Limited of BGN 151 thousand and trade and other payables from Monbat New Power GmbH in the amount of BGN 48 thousand are presented in the line "Non-current liabilities included in disposal groups” in the standalone statement of financial position (note 7). 38. Contingent assets and contingent liabilities No warranty and legal claims were brought against the Company during the year. Monbat AD is a co-debtor under the contact for credit line N196/2016 dated 17.09.2016 between Monbat Recycling EAD and Piraeus Bank/ Eurobank Bulgaria AD Maturity date: 31.01.2024 Loan amount: EUR 2 500 000 Type of credit: for working capital Collaterals: First rank pledge of trade receivables. Interest rate and commission: 3 M EURIBOR + fixed mark-up Repayment schedule: Currently paid depending on the available cash and cash equivalents. Balance as at 31.12.2023 at the amount of EUR 2 404 405 or BGN 4 702 607. Monbat AD is a co-debtor under the contact for credit line N17803 dated 15.12.2022 between Monbat Recycling EAD and UBB Interlease EAD Maturity date: 31.07.2026 Loan amount: BGN 585 000 Type of credit: finance lease Collaterals: Machinery per listing Interest rate and commission: 3 M EURIBOR + fixed mark-up Repayment schedule: annuity payments Balance as at 31.12.2023 at the amount of 1 026 515 BGN. Monbat AD is a co-debtor under the contact for finance lease N60451 dated 04.10.2021 between Monbat Recycling EAD and OTP Leasing EOOD Maturity date: 05.06.2027 Loan amount: EUR 518 500 Type of credit: finance lease Collaterals: Leased assets per listing Interest rate and commission: 3 M EURIBOR + fixed mark-up Repayment schedule: annuity payments Balance as at 31.12.2023 at the amount of EUR 317 923 or BGN 621 802 Monbat AD is a guarantor of the contract for credit N1317 by the 18.03.2016 , concluded between Start AD and UBB AD. Maturity Date: 20.01.2028 Amount of Credit: EUR 4 500 000 Type of credit: for working capital Interest: 3 m EURIBOR + mark up Collateral: Land property with an identification number 72624.603.300, 72624.603.190, 72624.603.191, 72624.603.193, 72624.603.196, together with the buildings built on it. Special bet on DMA. Pledge on cash balances on the accounts in UBB JSC. Balance to 31.12.2023 in the amount of EUR 4 500 000 or BGN 8 801 235. Monbat AD Separate financial statements 31 December 2023 81 Monbat AD is an aval of the contract for leasing N2454239 dated 05.06.2020 , concluded between Monbat Sped EOOD and VFS Bulgaria EOOD. Maturity Date: 16.06.2025 Amount of leasing: EUR 176 490 Type of credit: closed-end financial leasing Collateral: Lease assets (annex 1 to contract 2454239) Interest: - For traction-engines – 12 M EURIBOR + mark-up 2.065% - For semi-trailers – 12 M EURIBOR + mark-up 2.465% Repayment schedule: annuity payments Balance to 31.12.2023 at the amount of EUR 59 710 or BGN 116 782. Monbat AD is an aval of the contract for leasing N2274306 dated 07.10.2019 , concluded between Monbat Sped EOOD and VFS Bulgaria EOOD. Maturity Date: 16.11.2024 Amount of leasing: EUR 442 125 Type of credit: closed-end financial leasing Collateral: Lease assets (annex 1 to contract 2274306) Interest: - For traction-engines – 12 M EURIBOR + mark-up 2.511% - For semi-trailers – 12 M EURIBOR + mark-up 2.918% Repayment schedule: annuity payments Balance to 31.12.2023 at the amount of EUR 101 862 or BGN 199 225. Monbat AD is a co-debtor under the contact for financial leasing N0026504/H/30.06.2021 between START AD and Monbat Interlease EAD. Maturity date: 25.07.2025 Amount of leasing: EUR 425 479 Type of credit: financial leasing Collaterals: Lease assets (Annex A to contract 0026504/H/30.06.2021) Interest: 3 M EURIBOR + fixed mark-up 2.40% Repayment schedule: equal monthly installments Balance as at 31.12.2023 at the amount of EUR 200 036 or BGN 391 236. Monbat AD is a co-debtor under financial lease agreement 85671 dated 25.10.2023 , between Start AD and OTP Leasing EOOD. Maturity date: 25.10.2027 Amount of the loan: EUR 775 373 Type of loan: Financial leasing Interest: 3M EURIBOT + fixed mark-up Collateral: ConCost line Balance as at 31.12.2023 at the amount of EUR 760 917 or BGN 1 488 225 Monbat AD Separate financial statements 31 December 2023 82 Monbat AD is a co-debtor under financial lease agreement 23941384968 dated 13.10.2023, between Monbat Recycling EAD and OTP Leasing EOOD. Maturity date: 13.10.2028 Amount of the loan: EUR 852 541 credit line Interest: 3M EURIBOR + fixed mark-up Collateral: Installation for the production of tin Balance as at 31.12.2023 at the amount of EUR 827 779 or BGN 1 618 995 Monbat AD is a co-debtor under financial lease agreement 17803 dated 06.05.2023 , between Monbat Recycling EAD and UBB Interlease EAD Maturity date: 06.12.2026 Loan amount: EUR 100 000 Interest: 3M EURIBOR + fixed mark-up Equipment: RBS steam compressor Balance as at 31.12.2023 in the amount of EUR 90 000 or BGN 176 024. Tax obligations The latest tax audits of the Company were performed by the tax administration as follows: • Corporate tax - full tax audit for the period 01.01.2014 - 31.12.2019; • VAT - full tax audit for the period 01.12.2014 - 31.05.2020; • Personal income tax - until 31 December 2019; • Social security - until 31 December 2019 The management of the Company does not consider that there are significant risks as a result of the dynamic fiscal and regulatory environment in Bulgaria, which would require adjustments in the separate financial statements for the year ended 31 December 2023. 39. Categories of financial assets and liabilities The carrying amounts compared to the fair values of the Company's financial assets and liabilities carried at amortized cost can be presented in the following categories: Note 2023 2022 Book value Fair value Book value Fair value BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Financial assets Debt instruments carried at amortized cost Trade receivables 12 44 893 44 893 44 725 44 725 Short-term financial assets 11 92 92 99 99 Related party receivables 37 87 342 87 342 93 384 93 384 Cash and cash equivalents 15 7 060 7 060 2 527 2 527 Total financial assets 139 387 139 387 140 735 140 735 Monbat AD Separate financial statements 31 December 2023 83 Note 2023 2022 Book value Fair value Book value Fair value BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Financial liabilities Debt instruments carried at amortized cost Interest-bearing loans 19 96 348 96 348 83 750 83 750 Convertible bond 21 44 687 45 207 54 083 55 646 Related party payables 37 36 784 36 784 39 750 39 750 Trade payables 22 13 151 13 151 11 282 11 282 Lease liabilities 8 2 785 2 785 2 378 2 378 Other payables 24.2 202 202 5 917 5 917 Total liabilities 193 957 194 477 197 160 198 723 Fair value measurement of financial instruments The balance sheet values of the Company's financial assets and liabilities, measured at fair value, can be presented in the following categories: 31 December 2023 Note Level 1 Level 2 Level 3 Total BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Financial assets Shares 11 - - 50 50 Total assets - - 50 50 Financial liabilities Fair value of convertible option 21 - - 2 640 2 640 Total liabilities - - 2 640 2 640 31 December 2022 Note Level 1 Level 2 Level 3 Total BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Financial assets Shares 11 - - 50 50 Total assets - - 50 50 Financial liabilities Fair value of convertible option 21 - - 5 280 5 280 Derivatives 24.3 364 - - 364 Total liabilities 364 - 5 280 5 644 Due to the short-term nature of cash, trade receivables, short-term financial assets, short- term receivables from related parties, trade payables, liabilities to related parties, current loans, current liabilities under financial leasing and other liabilities, their fair value is close to the respective carrying amount. The fair value of long-term loans, non-current liabilities under lease liabilities and non- current receivables from related parties is close to the respective carrying amount, as the interest rates associated with these liabilities are close to market rates. Monbat AD Separate financial statements 31 December 2023 84 The fair value of related party loans and interest-bearing loans from financial institutions is based on an analysis of the agreed interest rates against the interest rates currently available for debt with similar terms and remaining maturity. On this basis, management has determined that the fair value approximates the carrying amount. The fair value of loans granted, and interest-bearing loans received falls into level 3 of the fair value hierarchy. The fair value of the exchange-traded convertible bond is determined using the relevant quotation in an active market at the end of the reporting period. The fair value is close to the carrying value of the debenture loan. The fair value of the debenture loan falls at level 1 of the fair value hierarchy. The fair value of the conversion option falls at level 3 of the fair value hierarchy (note 21). There is no change in the fair value measurement model of the conversion option in 2022 and 2023 (note 21). In 2023, the Company reports income from the change in the fair value of the option in the amount of BGN 2 640 thousand under the line "Income from financial instruments" (2022: BGN 587 thousand). Derivative liabilities reflect open lead swap transactions at 31 December 2022, measured at fair value. The fair value has been estimated based on London Metals Exchange (LME) quoted lead prices. The Company does not record financial assets at fair value through profit and loss at 2023 and 2022 Refer to note 3.13 about information related to the accounting policy for each category financial instruments. Description of the risk management objectives and policies of the Company related to the financial instruments is presented in note 40. Changes in liabilities arising from financing activities The following table summarizes changes in liabilities arising from financial activities, including changes in cash flows and non-monetary changes, and contains a reconciliation of the opening and closing balances in the statement of financial position of financial liabilities for the year ending 31 December 2023. 1 January 2023 Cash inflows Cash Outflows Accruals using the effective interest method Others 31 December 2023 BGN ’000 BGN ’000 BGN ’000 BGN ’000 BGN ’000 BGN ’000 Loans and borrowings 83 750 214 422 (203 676) - 1 852 96 348 Lease liabilities (note 8) 2 378 - (937) 103 1 241 2 785 Convertible bond 54 083 - (10 959) 2 112 (549) 44 687 Conversion option 5 280 - - - (2 640) 2 640 Derivatives 364 - - - (364) - Total liabilities from financing acitivity 145 855 214 422 (215 572) 2 215 (460) 146 460 Monbat AD Separate financial statements 31 December 2023 85 1 January 2022 Cash inflows Cash Outflows Accruals using the effective interest method Others 31 December 2023 BGN ’000 BGN ’000 BGN ’000 BGN ’000 BGN ’000 BGN ’000 Loans and borrowings 81 794 171 826 (170 962) 83 1 009 83 750 Lease liabilities (note 8) 1 021 - (901) 92 2 166 2 378 Convertible bond 51 458 - - 3 529 (904) 54 083 Conversion option 5 867 - - - (587) 5 280 Derivatives - - - - 364 364 Total liabilities from financing acitivity 140 140 171 826 (171 863) 3 704 2 048 145 855 40. Financial instruments risks Risk management objectives and policies The Company is exposed to various risks in relation to financial instruments. The Company's financial assets and liabilities by category are summarized in note 39. The main types of risks are credit risk and liquidity risk. The Company's risk management is coordinated at its headquarters, in close co-operation with the Board of Directors. 40.1. Market risk analysis Most of the Company’s transactions are carried out in Bulgarian leva (BGN) and Euro (EUR). Exposures to currency exchange rates arise from the Company's overseas sales and purchases, which are primarily denominated in US dollars. To mitigate the Company's exposure to foreign currency risk, non-BGN cash flows are monitored, and forward exchange contracts are entered into in accordance with Company’s risk management policies. Generally, Company’s risk management procedures distinguish short-term foreign currency cash flows (due within 6 months) from longer-term cash flows. Where the amounts to be paid and received in a specific currency are expected to largely offset one another, no further hedging activity is undertaken. The amounts shown are those reported to key management translated into Bulgarian leva at the closing rate: Short-term exposure USD BGN ‘ 000 31 December 2023 Assets 4 709 Liabilities (226) Total exposure 4 483 31 December 2022 Assets 5 237 Liabilities - Total exposure 5 237 The following table illustrates the sensitivity of post-tax profit for the year and other components of equity in regard to the Company's financial assets and financial liabilities and the USD/BGN exchange rate all other things being equal. Monbat AD Separate financial statements 31 December 2023 86 It assumes a +/- 5% change of the BGN/USD exchange rate as of 31 December 2023 (2022: 5 %). Both of these percentages have been determined based on the average market volatility in exchange rates in the previous 12 months. The sensitivity analysis is based on the Company's foreign currency financial instruments held at each reporting date and also takes into account. If the BGN had strengthened against the USD by 5% (2022: 5 %) then this would have had the following impact: Effect on financial performance for the year USD BGN ‘000 31 December 2023 224 31 December 2022 262 If the BGN had weakened against the USD by 5% (2022: 5%) then this would have had the following impact: Effect on the financial performance for the year USD BGN ‘000 31 December 2023 (224) 31 December 2022 (262) Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the Company's exposure to currency risk. 40.2 Foreign currency risk The Company's policy is to minimize interest rate cash flow risk exposures on long-term financing. As of 31 December 2023, the Company is exposed to changes in market interest rates through bank borrowings at variable interest rates. All other financial assets and liabilities of the Company are at fixed interest rates. The following table includes the carrying amount of the financial instruments by type of interest rate: Fixed yield instruments 2023 2022 BGN ‘000 BGN ‘000 Financial assets 113 439 120 755 Financial liabilities (53 755) (62 120) Net exposure 59 684 58 635 Floating rate instruments 2023 2022 BGN ‘000 BGN ‘000 Financial assets 25 998 20 030 Financial liabilities (142 842) (135 041) Net exposure (116 844) (115 011) Monbat AD Separate financial statements 31 December 2023 87 The table below presents an analysis of the sensitivity to possible changes in interest rates with their effect on pre-tax profit (through the effect on loans and borrowings with floating interest rates), provided that all other variables are assumed to be constant. There is no effect on the other components of the Company's equity. Period Increase/decrease in interest rates Effect on profit before taxes BGN ‘000 2023 + 1% (1 168) 2022 - 1% 1 168 2022 + 1% (1 150) 2022 - 1% 1 150 The estimated baseline movement for the sensitivity analysis to possible changes in interest rates is based on the currently observed market environment, showing significantly higher volatility compared to previous years. 40.3 Credit risk Credit risk is the risk that counterparty fails to discharge an obligation to the Company. The Company is exposed to this risk for various financial instruments, for example by granting loans and receivables to customers, placing deposits, etc. The Company's maximum exposure to credit risk is limited to the carrying amount of financial assets recognized at the reporting date. Trade receivables and contract assets The Company continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporate this information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on customers and other counterparties are obtained and used. The Company's policy is to deal only with creditworthy counterparties. The Company's management considers that all the above financial assets that are not impaired or past due for each of the reporting dates under review are of good credit quality. Outstanding receivables from customers and contractual assets are monitored on an ongoing basis and all deliveries to large customers are generally covered by credit insurance or letters of credit received from reputable banks and other financial institutions. At each reporting date, an analysis is made of the need for impairment when using a provision matrix or expected credit loss model for the entire term of the instrument of certain exposures for the purpose of estimating expected credit losses. Provisions percentages are based on days in arrears for the purpose of grouping different customer segments with similar loss models (i.e., by geographical area, product type, customer type and rating, as well as collateral and letters of credit and other forms of credit insurance). The calculation reflects the probability-weighted result, the value of money over time, and the reasonable and supportive information available at the reporting date for past events, present conditions and forecasts for future economic conditions. In general, trade receivables are written off if they are past due for more than one year and are not subject to enforcement action. Letters of credit and other forms of credit insurance are considered an integral part of trade receivables and are taken into account in the calculation of impairment. As of 31 December 2023, 80% of the Company's trade receivables, analyzed by the simplified matrix, are covered by letters of credit and other forms of credit insurance (2022: 78%). Monbat AD Separate financial statements 31 December 2023 88 These credit extensions received by the Company lead to a reduction of the expected credit losses. The Company assesses the concentration of risk with respect to trade receivables as low, as its clients are located in several jurisdictions and operate substantially in independent markets. As of 31 December 2023, the aging analysis of trade receivables and contract assets with customers, where the matrix of provisions is used, is presented in the table: Trade receivables at 31.12.2023 (BGN ‘000) Days overdue < 90 days 91-180 days 181-365 days > 365 days Total Expected % credit loss 0.09% 1.18% 96.05% 98.15% 1.06% Gross carrying amount of trade receivables 34 839 2 116 76 271 37 302 Expected credit loss (ECL) (32) (25) (73) (266) (396) As of 31 December 2022, the aging analysis of trade receivables and contract assets with customers, where the matrix of provisions is used, is presented in the table: Trade receivables at 31.12.2022 (BGN ‘000) Days overdue < 90 days 91-180 days 181-365 days > 365 days Total Expected % credit loss 0.07% 8.83% 90.81% 98.43% 1.00% Gross carrying amount of trade receivables 33 990 211 3 306 34 510 Expected credit loss (ECL) (24) (19) (3) (301) (346) The Company has estimated provisions for loss for certain trade receivables from customers from Russian Federation whose credit risk has increased significantly using the expected credit losses for the entire life of the instrument (ECL approach). The amount of the gross book value of trade receivables estimated under this approach is BGN 2 595 thousand (2022: BGN 2 595 thousand). The accrued impairment of these receivables as of 31.12.2023 amounts to BGN 2 595 thousand (2022: BGN 2 335 thousand). In 2023, the Company has not calculated expected credit loss (ECL) for receivables from Ukrainian companies at the amount of BGN 7 987 thousand (net of impairment for the amount of 519 BGN thousand). Due to the war in Ukraine, that began on 24 February 2024, the Company is not able to estimate the ECLs in line with IFRS 9 and has not tested theses receivables for impairment. The Company has BGN 2 080 thousand of overdue trade receivables from a Russian counterparty, which are insured with the Bulgarian Export Insurance Agency (BAEZ) EAD and according to an agreement of 22 June 2023 concluded with the insurer, these receivables will be paid after the conclusion of a court case concerning the terms and performance of delivery led by Monbat AD against the Russian counterparty. According to the legal counsel of the Company, the claim in the commercial case will be granted in full. Financial instruments and cash deposits The credit risk of balances with banks and financial institutions is managed by the financial department of the Company in accordance with its policy. Investments in excess funds are made only with approved counterparties and within approved credit limits for each counterparty. The counterparty credit limits are reviewed annually by the Company's Monbat AD Separate financial statements 31 December 2023 89 Board of Directors and may be updated throughout the year, subject to approval by the Company's Finance Committee. The limits are set in order to minimize the concentration of risks and therefore to mitigate the financial loss from the potential inability of the counterparty to make payments. The credit risk for cash and cash equivalents, money market funds, debentures and derivate financial instruments is considered negligible, since the counterparties are reputable banks with high quality external credit ratings. 40.4 Liquidity Risk Liquidity risk is the risk arising from the Company not being able to meet its obligations. The Company manages its liquidity needs by monitoring scheduled debt servicing payments for long-term financial liabilities as well as forecast cash inflows and outflows due in day-to-day business. Liquidity needs are monitored daily. Cash needs are compared with available loans to identify surpluses or deficits. This analysis determines whether the available loans will be sufficient to cover the needs of the Company for the period. The Company maintains cash and marketable securities to meet its liquidity requirements for 30-day periods at a minimum. Funding for long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long- term financial assets. The amounts of the liabilities on their maturity dates reported in this analysis represent the pre-discounted cash flows agreed in the contracts, which could deviate from the carrying amounts of the liabilities as of the reporting date. As of 31 December 2023, the Company's liabilities have contractual maturities (including interest payments where applicable) as summarized below: Current Current Non-current 31 December 2023 up to 6 months 6 to 12 months 1 to 5 years BGN ‘000 BGN ‘000 BGN ‘000 Bank loans 46 892 51 469 30 813 Convertible bonds 17 972 935 28 341 Fair value of conversion option - 2 640 - Related party payables 36 784 - - Trade payables 13 151 - - Total 114 799 55 044 59 154 In prior reporting periods the Company's liabilities have contractual maturities (including interest payments where applicable) as summarized below: Current Current Non-current 31 December 2022 up to 6 months 6 to 12 months 1 to 5 years BGN ‘000 BGN ‘000 BGN ‘000 Bank loans 22 168 49 426 14 534 Convertible bonds 11 818 - 42 265 Fair value of conversion option of bonds - - 5 280 Monbat AD Separate financial statements 31 December 2023 90 Related party payables 39 750 - - Trade payables 11 282 - - Derivatives 364 - - Total 85 382 49 426 62 079 Financial assets used for managing liquidity risk The Company considers expected cash flows from financial assets in assessing and managing liquidity risk, in particular its cash resources and trade receivables. The Company's existing cash resources and trade receivables do not significantly exceed the current cash outflow requirements. Cash flows from trade and other receivables are all contractually due within six months. 41. Capital management policies and procedures The Company’s management objectives are: • To ensure the Company’s ability to continue as a going concern, and • To provide an adequate return to the shareholder by pricing products and services in accordance with the level of risk. The Company monitors capital on the basis of the ratio between net debt and shareholders’ equity. Net debt is calculated as total debt less the carrying amount of cash and cash equivalents. Interest-bearing debt includes bank loans, loans from financial institutions and the convertible bond. The Company manages the capital structure and makes adjustments to it in accordance with changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the number of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to decrease debt. The equity may be analyzed as follows for the presented reporting periods: 2023 2022 BGN ‘000 BGN ‘000 Equity 157 451 158 572 Interest-bearing debt 141 035 137 833 - Cash and cash equivalents (7 060) (2 527) Net debt 133 975 135 306 Net debt to equity 0.85 0.85 The ratio in 2023 remains flat, compared to the prior period, due to the decrease in the equity following the distribution of the dividends during the year, as well as due to the increase in the cash and cash equivalents. The interest-bearing debt has not undergone significant changes. Monbat AD Separate financial statements 31 December 2023 91 42. Events after the reporting period No adjusting or significant non-adjusting events occurred between the date of the individual financial statements and the date of approval for publication, except for the following non-adjusting events: - On 22 January 2024, a General Meeting of the bondholders of the convertible bond issue was held, at which a decision was made to postpone the payment of the second installment of the principal in the amount of EUR 8 404 500 by sixty calendar days starting from 20 January 2024, in order to draw down funds under a contractual loan with a financial institution, through which the payment will be partially financed. As at the date of approval of the individual financial statements, payment to the bondholders has not yet been made, as the procedure for utilizing funds from the financial institution has not been completed. 43. Authorization of the separate financial statements The separate financial statements for the year ended 31 December 2023 (including comparatives) were approved by the Board of Directors on 29 March 2024. i ANNUAL SEPARATE ACTIVITY REPORT OF MONBAT AD, SOFIA FOR THE FINANCIAL 2023 THIS ACTIVITY REPORT WAS PREPARED IN ACCORDANCE WITH THE PROVISIONS OF ARTICLE. 39 OF THE ACCOUNTANCY ACT, ARTICLE 100N, PARAGRAPH 7 OF THE PUBLIC OFFERING OF SECURITIES ACT AND ORDINANCE № 2 FROM 09.11.2021 OF FSC THIS DOCUMENT IS A TRANSLATION OF THE ORIGINAL BULGARIAN TEXT, IN CASE OF DIVERGENCE THE BULGARIAN TEXT SHALL PREVAIL. 1 FORWARD-LOOKING STATEMENTS The Annual Separate Activity Report may contain statements which reflect the current vision of the Company’s Board of Directors of MONBAT AD,regarding the achievement of future financial results, execution of business strategy, plans and objectives of the management. These forward-looking statements are related to the operations of MONBAT AD, as well as the sectors where the Company operates. Statements that include the words “expects”, “intends”, “plans”, “projects”, “accepts”, “will”, “aims”, “strives”, “can”, “could be”, “continues”, and other similar statements with regard to the future presentation of the company are forecasts for the purposes of the Bulgarian securities legislation and other. Where forward-looking statements are presented, they concern the future performance of the company which involves risks and uncertainties. It is possible that different factors and events may arise that could cause a significant difference between the actual results of MONBAT AD and those specified in the forward-looking statements. These factors include but are not limited only to the one described in the section entitled RISK FACTORS and should be considered an integral part of the whole financial and economic information presented in this document. The forward-looking statements are up to date as of the date of the Annual Report. In compliance with the obligations under Bulgarian legislation and the approved policy of MONBAT AD, the company’s Board of Directors will continue to announce publicly, under the legally provided procedure, new forecasts as well as updating already presented forward-looking statements that need to be corrected. Before making an investment decision, potential investors should carefully consider the factors stated in the Annual Separate Report which may cause the actual results of MONBAT AD to differ from the ones presented in this document. PRESENTATION OF FINANCIAL, MARKET, ECONOMIC AND STATISTICAL INFORMATION The financial information in the Annual Separate Activity Report has been prepared in compliance with the International Financial Reporting Standards (IFRS). The market, economic and statistical information, as well as information regarding the financial and economic situation in the Republic of Bulgaria and the Bulgarian securities market used in the Report has been extracted from various sources, explicitly referred in the respective parts where such information is presented. Information presented in this document regarding a part of the systematic risks for MONBAT AD is extracted from publicly available information, including publications and information disclosed in compliance with the requirements of the applicable securities legislation and other regulations. The information presented in this Report regarding the economic sectors where MONBAT AD operates is extracted from publicly available information, including publications and information disclosed in compliance with the requirements of the applicable securities legislation and other regulations. MONBAT AD does not guarantee the accuracy and completeness of this information or the presence of complete uniformity in the information from all these sources. In this regard, MONBAT AD takes responsibility only for the accurate reproduction of extracts from relevant sources of information. 2 The Board of Directors of MONBAT AD confirms that the information extracted from publications and other publicly available sources is reproduced correctly by the relevant sources and, to the best of its knowledge, no facts which could render the reproduced information inaccurate or misleading are missed. Nevertheless, the Board of Directors of MONBAT AD informs that it has relied on the accuracy of this information without conducting an independent review. DEAR SHAREHOLDERS, We, the members of the Board of Directors of MONBAT AD, led by the desire to manage the Company in the interest of its shareholders and pursuant to the provisions of art. 39 of the Accountancy Act, article 100m, paragraph 7 of the POSA and Appendix № 2 to the artical10, item 1 from Ordinance 2/ 09.11.2021 of FSC, prepared this Annual Separate Activity Report (“the Report”). The Report presents comments and analysis of the separate financial statements and other essential information regarding the financial situation and the operational results of the Company. The Report reflects correctly the state and the development prospects of the Company. In 2023 circumstances have occurred that the Company's management believes could be of relevance for investors in taking a decision to acquire, sell or continue holding publicly traded securities. These circumstances have been disclosed within the terms and procedures as provided by the POSA to the investors, the regulated securities market and the Financial Supervision Commission. The same are also available on the Company’s website www.monbatgroup.com. In 2023 MONBAT AD generated revenue from contracts with customers on a stand- alone basis of BGN 317 137 thousand, which is a decrease of 3.0% compared to the generated in 2022 revenue from contracts with customers of BGN 327 007 thousand. Profit before tax of MONBAT AD for 2023 is BGN 4 426 thousand, which is a decrease of 23.8% compared to the individual profit before tax for 2022 (BGN 5 806 thousand). The net profit of MONBAT AD on an individual basis for 2023 amounts to BGN 2 908 thousand and shows an increase of 139% compared to the net profit of the Company on an individual basis for 2022 (BGN 1 219 thousand). I. GENERAL INFORMATION ABOUT THE COMPANY The Company was incorporated in the Republic of Bulgaria in accordance with the Bulgarian legislation. The legal and organizational form of MONBAT AD is a joint stock public company. The Company has its registered office and business address at 32A Cherni vrah Blvd., 1407 Sofia. Telephone: + 359 2 962 1150; + 359 2 988 24 13 Fax: + 359 2 962 1146 E-mail: investorrelations@monbat.com Website: www.monbatgroup.com 3 As of the date of the preparation of this Activity Report the share registered capital of the company is BGN 39 000 000, distributed in 39 000 000 dematerialized registered shares with a nominal value of BGN 1.00 each. In 2023 and during the comparative period 2022, there were no changes in the amount of the capital of MONBAT AD. As of 31.12.2023 there is one legal entity that has control over the public company MONBAT AD. This entity is PRISTA OIL HOLDING EAD, Sofia. PRISTA OIL HOLDING EAD controls another shareholder with considerable share rights, namely MONBAT TRADING OOD. As of 31.12.2023 the capital structure of MONBAT AD is the following: Тable № 1 Name of the shareholder Number of shares Percentage of the capital PRISTA OIL HOLDING EAD, Sofia 16 666 371 42.73% PRISTA HOLDCO COOPERATIEF U.A. 8 103 758 20.78% MONBAT TRADING OOD, Sofia 2 785 650 7.14% UPF Doverie 2 582 864 6.62% MUPF Allianz 2 105 403 5.40% Other individuals and legal entities 6 755 954 17.33% Own shares (33 545) (0.08%) Т he Board of Directors of MONBAT AD is the following: Chavdar Danev – Chairman of the Board of Directors Petar Hristov Petrov – Member of the Board of Directors Evelina Slavcheva – Member of the Board of Directors Peter Bozadzhiev – Member of the Board of Directors Kyle Anderson– Member of the Board of Directors Viktor Spiriev – Executive member of the Board of Directors Florian Huth – Member of the Board of Directors until 12.07.2023 II. OVERVIEW OF THE ACTIVITIES AND THE STATE OF THE COMPANY 1. Principal Activity The principal activity of MONBAT AD is production of lead-acid starter and stationary batteries and their servicing. The products of the Company can be divided in the following main groups: 4 Starter Batteries The extensive production range of starter batteries of MONBAT AD includes the series for cars of any class under the name Monbat AGM Stop/Start, EFB Stop/Start, Monbat P, Monbat F and Monbat D, and a series for commercial vehicles Monbat EFB, SMF, SHD and HD. Concerning usage, the batteries cover the full range of cars, trucks and agricultural vehicles and machines, operated in both normal and extreme environmental conditions. Stationary Batteries Valve-regulated, lead-acid batteries, with immobilized in the separator electrolyte (AGM), designed and manufactured by modern technology in accordance with the following technological standards: IEC 60 896-21 / 22; IEC 61427 - 1/2; EN 50272 - 2; IEC 61056- 1; BS 6290-4. Applied production standards: ISO 9001; ISO 14001; OHSAS 18001; AQAP 2110. Product specification according to EUROBAT: Very Long Life. The hull elements are made of the highest class, non-combustible, ABS-FR UL 94 V0, material. The product range includes 2, 4, 6, 8 and 12-volt batteries with capacities from 50 to 600 Ah for the following applications: • Telecom; • Reserved power supplies; • High-cycle batteries for photovoltaic and solar installations; • High-power uninterruptible power supplies (UPS) batteries. 5 High-Rate Power UPS Batteries A battery backup, or uninterruptible power supply (UPS), is primarily used to provide a backup power source to important equipment. In addition to acting as a backup power source, most battery backup devices also operate in network conditioning mode (ON LINE), guaranteeing the parameters of the power supply to consumers. MONBAT AD produces a range of HIGH-RATE POWER UPS BATTERIES especially for UPS applications. Deep Cycle Batteries AGM Deep Cycle range features advanced AGM technology with absorbed electrolyte. Designed for reliable storage solutions for renewable energy applications. Monbat Semi-traction range is specially designed for applications requiring a permanent and long-lasting supply of electrical energy. Monbat Deep Cycle range is specifically designed for powering electrical equipment for longer periods of time with increased ability of deep discharge cycles. Special Batteries Batteries for military application, suitable for tanks and armored vehicles of NATO. 6 Leisure batteries The Monbat Leisure & Hobby range is characterized with special design, reliable in demanding charge/discharge cycling conditions, typical for recreational and leisure equipment. Perfect for seasonal use. Ideal for motorboats, canal boats, yachts, motorhomes, and caravans. 2. Major raw materials The major raw materials essential to the Company’s activities are lead with purity of 99.99% and 99.985%, lead alloys – tin, antimony and calcium, regranulate, polyethylene separator and sulfuric acid. The availability of these materials that MONBAT AD holds, ensures the production process for a period of between 15 and 30 days. Prices of lead and lead alloys are variable and directly dependent on the exchange prices of lead on the London Metal Exchange. During the last few years, the management of MONBAT AD has made considerable capital expenditure to ensure resource availability of lead and propylene from own production. This is being executed by building Monbat's own recycling facilities, namely by opening of two recycling lead facilities in Romania and Serbia, and by acquiring production facilities licensed for the separation of scrap batteries in Italy. The share of own recycled lead, that MONBAT AD buys mainly from its subsidiaries, used in the production for 2022, represents 98.0% of total lead consumption, and the share of the recycled polypropylene (regranulate) produced in the facilities of the Company’s subsidiaries is 99.80%. The share of own recycled lead, that MONBAT AD buys mainly from its subsidiaries, used in the production for 2023, represents 93.4% of total lead consumption, and the share of the recycled polyropylene (regranulate) produced in the facilities of the Company’s subsidiaries is nearly 90%. By creating its own recycling facilities, the management of the company strives to reduce the risk of change in the price of major raw materials, as well as to generate more added value when selling lead-acid batteries. 7 The movement of the lead price in 2023 is shown in the following diagram: * Average lead price for the period 01.01.2023 – 31.12.2023 is – 2 137.18 USD/MT During 2023 lead represented approximately 65% of the cost structure per single battery unit. The production is dependent on the price of electricity and natural gas, which are currently state-regulated. Bulgarian energy sector is of key importance for the future development and sustainability of the economy in the country and for MONBAT AD as well. State energy policy in the sector is implemented through the National Assembly and the Council of Ministers, according to Article 3 of the Energy Act (EA). The main risk in the sector is the country's dependence on imported natural gas and important energy resources for this sector. The main objectives in the sector are to achieve high-tech, secure and reliable energy system that makes maximum use of the resources available in Bulgaria and protects Bulgarian consumers as much as possible. Fluctuations in the prices of electricity (excluding the effect of government subsidy, if applicable) and natural gas can have a significant impact on the formation of the cost price. In 2023, their weight in the cost of the finished product is: 3.6% of the cost of the final product is determined by the cost of electricity and 1.3% - by the cost of natural gas MARKETS AND SALES As a result of its marketing and distribution strategy MONBAT AD has good market diversification; with sales in more than 70 countries. The major markets include France, Germany, Romania and Spain. With its well-developed distributor’s network MONBAT AD generates sales in all major markets in the EU and the Middle East. Starter batteries are sold mainly through automotive retailers and repair shops. Stationary batteries are sold directly to telecom companies and other entities. The Company grants deferred payment terms for the domestic market up to 30 days and for the foreign market – up to 90 days. In case of deferred payments, a significant part of the sales is insured by BAEZ AD (the Bulgarian Export Insurance Agency) or COFACE. A direct competitor on the Bulgarian market is Elhim-Iskra AD. As of 31.12.2023 MONBAT AD owns 97.80% of the share capital of the third largest producer in the lead- acid batteries business in Bulgaria – START AD, Dobrich. 8 In 2023 MONBAT AD reported revenues from contracts with customers on a stand- alone basis of BGN 317 137 thousand, which represents a decrease by 3.0% compared to sales revenues generated in 2022 of BGN 327 007 thousand. Sales revenues on the domestic market in 2023 are BGN 40 283 thousand and represent 12.7% of total sales. Sales revenues realized on the domestic market include technological waste and scrap sold to Monbat Recycling Bulgaria, as well as materials, goods and services resold to other related parties. Export sales, including intra-community supplies, amount to BGN 276 854 thousand and represent 87.3% of the Company's net sales revenues. MONBAT AD is geographically diversified with a market presence in more than 70 countries. Regarding the ongoing military conflict between Ukraine and Russia, it should be borne in mind that during 2023, the Company has not made sales to Russian customers, while sales to Ukrainian counterparties represent 4.0% of the total revenues for 2023 (2022: Russia - 2.2%, Ukraine – 2.1%). Тable № 2 2023 2022 Country Export % Export % ('000 EUR) ('000 EUR) FRANCE 15 697 11.09 11 220 7.81 GERMANY 15 268 10.79 15 583 10.85 ROMANIA 9 549 6.75 7 844 5.46 SPAIN 9 252 6.54 9 763 6.80 ITALY 8 677 6.13 6 059 4.22 POLAND 7 929 5.60 8 547 5.95 GREAT BRITAIN 7 475 5.28 6 299 4.39 NETHERLANDS 7 003 4.95 7 405 5.16 UKRAINE 6 564 4.64 3 592 2.50 SWEDEN 5 040 3.56 3 970 2.76 SERBIA 3 704 2.62 3 101 2.16 ALGERIA 3 469 2.45 2 363 1.65 HUNGARY 2 804 1.98 2 608 1.82 IRELAND 2 259 1.60 2 283 1.59 SAUDI ARABIA 2 147 1.52 7 854 5.47 PORTUGAL 2 133 1.51 1 564 1.09 FINLAND 2 114 1.49 2 201 1.53 IRAQ 2 053 1.45 243 0.17 CZECH REPUBLIC 1 861 1.31 1 429 0.99 OTHER 26 555 18.76 39 701 27.64 TOTAL 141 553 100 143 629 100 In 2023 the major market of MONBAT AD was FRANCE, where the Company generated revenues of EUR 15 697 thousand, which represents 11.09% from export sales on a stand-alone basis. 9 QUALITY ISO 9001 MONBAT AD continuously strives to improve the way it operates in all possible areas: developing innovative products and technologies; increasing market share; managing risk more effectively; improving customer satisfaction. The established quality management system provides a reliable framework which is capable of monitoring and improving performance in the area of activity. AQAP 2110 Allied Quality Assurance Publications certificate verifies that MONBAT AD operates in compliance with regulations for the development, construction and production, as well as for the quality inspection and final testing of military goods. IATF 16949:2016 This technical specification certificate incorporates existing US, German, French and Italian automotive quality system standards within the global automotive industry. It specifies the quality system requirements for the design/development, production, installation and servicing of automotive-related products. ISO 14001 The internationally accepted standard sets out that MONBAT AD puts in place an effective Environmental Management System. The standard was established to address the delicate balance between maintaining efficiency and reducing the impact on the environment by committing the entire organisation to achieve both objectives. ISO 45001 Developed by leading trade and certification bodies based on international regulations, and aiming to address the omission whereby no common international policy exists, this certificate verifies that MONBAT AD complies with the internationally recognized assessment specification for occupational health and safety management systems. OPERATING RESULTS In 2023 the Company reported increased demand for automotive batteries in Western European markets, where historically record sales of this product type were achieved. In 2022, demand for these products was significantly depressed by sharp inflationary movements in the region and the associated change in consumer behavior. In addition, there was a significant decline in sales of the larger and more profitable semi-cyclical batteries, representing mainly purchased goods, due to the normalization of the delivery period for US manufacturers of this type of batteries, which was drastically extended in 2022 due to logistical challenges during the period, and a reorientation of the market back towards US products respectively. The Company also reported a decline in sales of stationary (telecom) batteries due to the substantial volumes sold to leading telecom operators and system integrators in Russia in the first two months of 2022, i.e., immediately prior to the beginning of the war in Ukraine. 10 As a result of the above, MONBAT AD reports an increase in battery sales volumes in 2023 (Table 13) and a decrease in normalized EBITDA (before impairments) on an individual basis from continuing operations. Profit before tax of MONBAT on an individual basis from continuing operations for 2023 is BGN 4 426 thousand, which represents a decrease of 23.8% compared to the Company’s profit before tax for 2022 (BGN 5 806 thousand). Net profit of MONBAT AD for 2023 is BGN 2 908 thousand - an increase of 138.56% compared to the Company's net profit for 2022 of BGN 1 219 thousand. Table № 3 FINANCIAL INDICATORS 2023 2022 2021 Normalized EBITDA (before impairment) from continuing operations 14 277 15 694 21 166 EBIT from continuing operations 7 240 8 601 -6 534 Revenue from contracts with customers 317 137 327 007 351 010 Amounts presented in thousand BGN. Table № 4 (BGN '000) SHAREHOLDERS' EQUITY 2023 % 2022 % 2021 Share capital 38 966 -0.02% 38 973 -0.07% 39 000 Premium reserve 28 476 -0.08% 28 498 -0.39% 28 611 General reserves 63 866 0.00% 63 866 0.00% 63 866 Retained earnings 26 143 -4.01% 27 235 -13.58% 31 516 TOTAL SHAREHOLDERS' EQUITY 157 451 -0.71% 158 572 -2.71% 162 993 Re ve n ue f ro m m ai n act i vi ty by c ate g or y Table № 5 (BGN '000) REVENUES 2023 % 2022 Revenue from sales of products 238 680 1.35% 235 499 Revenue from the sale of goods 72 295 -15.35% 85 409 Revenue from sales of materials 3 119 0.35% 3 108 Revenue from the provision of services 2 611 -12.62% 2 988 Other sales revenue 432 >100% 3 TOTAL REVENUE FROM CONTRACTS WITH CUSTOMERS 317 137 -3,02% 327 007 11 Ope r ati n g ex p en d i tu re s by c ate g or y Table № 6 (BGN '000) EXPENSES 2023 % 2022 Materials 196 586 -4.09% 204 965 External services 22 161 -2.97% 22 840 Staff costs 18 668 8.34% 17 231 Depreciation and impairment of non - financial assets 6 987 4.58% 6 681 Changes in stock of finished goods and work in progress -585 -89.34% -5 487 Cost of goods sold and other current assets 64 642 -16.99% 77 870 Other expenses 2 347 -2.59% 2 409 TOTAL EXPENSES 310 806 -4.81% 326 509 Mai n s u pp l i er s of m ate r i al s Table № 7 SUPPLIER 2023 2022 2021 Monbat Recycling EAD 34.36% 33.67% 34.53% MONBAT PLC D.O.O 21.19% 22.62% 17.87% MONBAT RECYCLING S.R.L 19.33% 22.25% 20.35% EL BAT AD <10% <10% <10% AKUMSAN PLASTIK URUNLER SAN VE TIC A.S. <10% <10% <10% MONPLAST ООD <10% <10% <10% The main supplier of MONBAT AD for materials necessary for the production of batteries is Monbat Recycling EAD, a fully owned subsidiary of MONBAT AD. Due to the diversification of the client portfolio, MONBAT AD has no main customers that would account for 10 percent or more of total revenues. The remuneration for the independent financial audit, carried out by Grant Thornton OOD, Bulgaria, amounts to BGN 210 thousand. No tax consultations or other services unrelated to the audit were provided during the year. This disclosure is in compliance with the requirements of Art. 30 of the Accounting Act. III. ANALYSIS OF FINANCIAL AND NON-FINANCIAL KEY INDICATORS ON THE RESULTS FROM THE ACTIVITIES RELATED TO THE BUSINESS INCLUDING INFORMATION ON ISSUES RELATED TO ECOLOGY AND HUMAN RESOURCES. IN THE PREPARATION OF THE MANAGEMENT REPORT THERE MIGHT BE REFERENCE TO THE AMOUNT OF EXPENDITURE INLCLUDED IN THE STAND-ALONE FINANCIAL STATEMENTS 12 1. FINANCIAL RATIOS LIQUIDITY Table № 8 LIQUIDITY RATIOS 31.12.2023 31.12.2022 31.12.2021 Current liquidity ratio 1.29/1 1.52/1 1.56/1 Quick liquidity ratio 1.09/1 1.28/1 1.28/1 Cash liquidity ratio 0.04/1 0.02/1 0.04/1 Immediate liquidity ratio 0.04/1 0.02/1 0.04/1 The trend of the liquidity ratio over time provides valuable information. Liabilities to creditors of MONBAT AD are being paid off in cash rather than using inventories or equipment. i.e., these factors describe the Company’ s ability to pay off its debts on time. CURRENT LIQUDITY RATIO The current liquidity ratio is one of the earliest formulated ratios and is universal. The current liquidity ratio represents the ratio of current assets to current liabilities. It could be expected that current assets will be at least equal to current liabilities, whereas it is normal for them to be even slightly higher than current liabilities. Therefore, optimal values of this ratio are over 1-1.5. However, some entities operate with ratios less than 1. For 2023 the current ratio is 1.29 and decreases in comparison with the ratio of 1.52 for 2022. The registered decrease in the value of this ratio is due to a decrease in the amount of current assets of the company by 2.3% while the value of current liabilities increase by 15.1%. 13 QUICK LIQUIDITY RATIO The quick liquidity ratio represents the ratio of current assets minus inventories to current liabilities. Its traditional rate, which sets the company as stable, is between 1 and 1.5 but much higher rates would indicate that company’s assets are not being used in the most efficient manner. The Company's 2023 Quick Liquidity Ratio is 1.09, down from 2022's value of 1.28. In 2023, compared to 2022, current assets decreased by 2.3%, inventories decreased by 5.5%, while current liabilities increased by 15.1%. CASH LIQUIDITY RATIO The cash liquidity ratio is calculated as the ratio between cash and short-term liabilities and indicates the company’s ability to meet its short -term liabilities with its available cash. The company's cash liquidity ratio for 2023 is 0.04. Compared to 2022, the cash and cash equivalents of the Company at 31.12.2023 increased by 179%, with an increase in current liabilities by 15.1%. IMMEDIATE LIQUIDITY RATIO The value of the immediate liquidity ratio of MONBAT AD for 2023 is 0.04 and has increased compared to its value for 2022, which was 0.02. Cash and cash equivalents increase by 179%, while current liabilities increase by 15.1%, and financial assets remain at prior year levels. CAPITAL RESOURCES The financial autonomy and financial leverage indicators show the ratio between own funds and borrowed funds in the capital structure of the company. High rates of the financial autonomy indicator, respectively, the low rates of the financial leverage indicator, provide assurance both for the investors /creditors/ and for the owners themselves, for the ability of the company to regularly pay its long-term liabilities. The effect of using borrowed funds (debt) by the company with a view to increase the final total net income from the funds involved in the activity (equity and borrowings) is called financial leverage. The benefit of using financial leverage appears when the company benefits from the investment of borrowed funds more than the expenses (interest) on their attraction. When a company achieves higher profitability by using borrowed funds in its capital structure, than the expenses for their borrowing, leverage is justified and should be considered in a positive way (with the remark that the rate of leverage does not significantly influence other financial indicators of the company in a negative way). 14 FINANCIAL LEVERAGE RATIOS Table № 9 LEVERAGE RATIOS 31.12.2023 31.12.2022 31.12.2021 Debt to equity ratio 1.30 1.32 1,16 Debt to assets ratio 0.57 0.57 0,54 Equity to debt ratio 0.77 0.76 0,86 DEBT TO EQUITY RATIO Indicators of the proportion of capital raised through borrowings show what proportion of total capital is borrowed. The higher the proportion of long-term debt compared to equity, the higher the probability of default on fixed liabilities. The value of the debt to equity ratio of MONBAT AD for 2023 is 1.30 and decreases compared to 2022. In 2023, the value of the debt decreased by 2.2%, and the reduction of the company's equity is 0.7%. EQUITY TO DEBT RATIO The equity to debt ratio shows what percentage of total liabilities is the Company's equity. As of 31.12.2023 the value of the equity to debt ratio of the Company is 0.77 compared to its prior year value of 0.76. During the reported financial period, the value of the ratio increased compared to the previous financial year, which is due to a decrease in equity by 0.7% and a decrease in the Company's liabilities by 2.2%. DEBT TO TOTAL ASSETS RATIO This ratio shows what part of the assets is being financed through debt. As of 31.12.2023 the value of the Debt/Assets ratio slightly decreased compared to 2022. The decrease is a result of a decrease in the Company's liabilities by 2.2% and a decrease in the Company's assets by 1.5%. 15 PROFITABILITY RATIOS Table№ 10 PROFITABILITY RATIOS 31.12.2023 31.12.2022 31.12.2021 Profitability of capital 0.0746 0.0313 0.0307 Return on equity (ROE) 0.0185 0.0077 0.0070 Return assets (ROA) 0.0080 0.0033 0.0034 RETURN ON EQUITY (ROE) The Return on Equity ratio is calculated by taking the profit after tax from the statement of comprehensive income as a percentage of the company's equity. This ratio measures the return to shareholders in terms of their absolute investment. For 2023, the value of the Return on Equity ratio is 0.0185 and shows an increase compared to its rate of 0.0077 in 2022. The increase is due to an increase in the company's net profit by 139% while a decrease in equity of 0.7%. RETURN ON ASSETS (ROA) The Return on Assets indicator shows the efficiency of use of total assets in the company. The increase in the value of the Return on Assets indicator in 2023 compared to 2022 is due to an increase in the Company’s net profit by 139% with a decrease in assets by 1.5%. PROFITABILITY OF CAPITAL As of 31.12.2023 the profitability of capital ratio is 0.0746 and increases compared to 2022. In 2023 compared to 2022, the net profit reported by the company increased by 139% with a decrease in the fixed capital by 0.02% compared to prior year. KEY RATIOS Summarized information on the financial indicators of MONBAT AD for the last two financial years is presented in the following table: 16 Table № 11 Indicators 31.12.2023 31.12.2022 Revenue from contracts with customers 317 137 327 007 Total revenue 324 860 338 272 Operating expenses 310 806 326 509 Total expenses 320 434 332 466 Normalized Earnings Before Interest, Taxes and Depreciation (EBITDA) from continuing operations 14 277 15 694 Operating profit from continuing operations 7 240 8 601 Net profit 2 908 1 219 Non-current assets 143 274 143 741 Current assets 219 256 224 451 Equity 157 451 158 572 Non-current liabilities 35 388 62 163 Current liabilities 169 691 147 457 Working capital 10 205 38 127 Cash and cash equivalents 7 060 2 527 Total debt 205 079 209 620 Net debt 133 975 135 306 Inventories 34 057 36 043 Short-term receivables 138 073 147 014 Expenses for materials 196 586 204 965 Expenses for personnel 18 668 17 231 Interest expenses 8 667 5 818 Capital raised/Equity 1.302 1.322 Net Debt/EBITDA on an annualized basis 9.384 8.622 EBITDA/Revenue 0.045 0.048 Operating profit/Revenue 0.023 0.026 Profitability of sales * 0.92% 0.37% Revenue efficiency 0.986 0.983 Cost efficiency 1.014 1.017 Earnings per share from continuing operations 0.102 0.133 Earning per share 0.075 0.031 P/E * 37.46 34.34 P/BV * 0.95 1.13 P/S * 0.47 0.55 Financial leverage ratio * 0.065 0.240 ROFA * 2.03% 0.85% 17 P/E, P/BV & P/S ratios are calculated based on the average share price of MONBAT AD as of 31.12.2023, 31.12.2022 * Profitability of sales - net profit/net sales x100; * Financial leverage ratio – working capital/shareholders’ equity; ROFA (return on non-current assets) – net profit/non-current assets; P/S – (market capitalization/net sales)х100 P/BV – market capitalization/shareholders' equity P/E – market capitalization/net profit from continuing operations IV. MAJOR RISKS WHICH THE ISSUER FACES SYSTEMATIC RISKS Systematic risks are related to the market and the macro environment in which the entity operates, therefore they cannot be managed or controlled by the company's management. The following are examples of systematic risks: political risk, macroeconomic risk, inflation risk, currency risk, interest rate risk, tax risk. Risk type Description POLITICAL RISK Political risk is the possibility of a change of Government, or a sudden change in its policies, domestic political shocks and adverse changes in European and/or national legislation, as a result of which the environment in which local businesses operate may change negatively and investors may suffer losses. Political instability may affect macroeconomic growth and the business environment in Bulgaria. In this regard, if uncertainty is created in the Bulgarian economy - regarding fiscal and/or monetary policy, the rule of law and law enforcement, the level of corruption and bureaucratic burdens, etc. - this could lead to a decline in investment, capital outflow from the country and more conservative behaviour on the part of investors/customers. This in turn could lead to a slowdown in economic growth or even a recession and a reduction in employment and disposable income, which would reduce economic activity and worsen the creditworthiness of certain economic entities. In this regard, it is possible that some entities may report weaker financial results than expected. Following three unsuccessful attempts by political parties to form a cabinet, early parliamentary elections were held on 2 April 2023. As of the date of this document, there is a functioning Bulgarian government supported by the largest parliamentary groups in the Bulgarian Parliament. The impossibility to predict the duration of the new Bulgarian government, given the constant contradictions between the political parties behind it in the National Assembly, determines the relative uncertainty regarding the implementation of the state policy to control inflation and the growing budget deficit. The observed political uncertainty calls into question the possibility to carry out adequate reforms in administration, education and health, which form the main budget expenditures. The war in Ukraine and the government's stated willingness to support Ukraine by all means is an additional budgetary pressure. Minimal GDP growth is expected in 2024, which will not allow for a recovery of the national economy due to rising energy costs and supply chain problems. In this regard, attention should be paid to actual growth - whether it will meet the government's projections; the expected rise in exports; the government's ability to borrow favourably in international markets; and the ongoing efforts to moderate the recovery in domestic consumption. The uncertainty in the government's priorities also puts at risk the possibility to implement reforms in structurally decisive sectors in the country in order to optimise 18 the process of efficient absorption of EU funds. Attention should be paid to reforms in the inefficient pension and social security system, the health system and education; administrative coordination and rules for project financing, including improving the process of allocating, coordinating and managing EU funds. A key issue facing the new regular Bulgarian government is to find support among the parliamentary forces in the fight against corruption, and there are applications to make a number of legal changes in this regard, including to the Constitution of the Republic of Bulgaria. OVERALL MACROECONOMI C RISK According to the National Statistical Institute as of 29.12.2023, the overall business climate indicator decreased by 1.8 points compared to the previous month (from 21.6% to 19.8%) due to the unfavorable business climate in the construction, retail and service sectors. Business climate – total Source: NIS In December 2023, the composite indicator "business climate in industry" maintained approximately its November level (from 20.6% to 20.7%). Industrial entrepreneurs rate current manufacturing activity as favourable, while their expectations for activity over the next three months are slightly deteriorated. The uncertain economic environment and labour shortages continue to be the most serious obstacles to business development. As regards industrial selling prices, managers' forecasts are for a slight increase, although the majority of them foresee their level to be maintained over the next three months. In December 2023, the composite indicator "business climate in construction" decreased by 1.2 points (from 23.6% to 22.4%), due to the reserved assessments of construction contractors about the current business situation of enterprises. At the same time, however, their expectations for both the business situation of enterprises over the next six months and construction activity over the next three months are improving. The uncertain economic environment, material prices and labour shortages remain the main constraints to activity, with a reduction in the negative impact of the first and third factors compared to November. In terms of construction selling prices, a majority of managers expect them to remain unchanged over the next three months. In December 2023, the composite indicator "business climate in the services sector" declined by 2.5 points (from 15.9% to 13.4%), due to unfavourable assessments and expectations of managers about the business situation of enterprises. At the same time, however, their expectations for demand for services over the next three months improved slightly. The uncertain economic environment, competition in the industry and labour shortages remain the main factors limiting the activity of enterprises, with their negative impact decreasing over the last month. Compared to November, the share of 19 managers who expect selling prices in the services sector to increase over the next three months is increasing. According to the macroeconomic forecasts of the Euro system experts, set out in the Economic Bulletin No. 8/2023 of the European Central Bank, average annual real GDP growth is expected to slow down - from 3.4% in 2022 to 0.6% in 2023, then to recover to 0.8% in 2024 and to stabilise at 1.5% in 2025 and 2026. Compared with the September 2023 forecasts, GDP growth forecasts have been revised down slightly for 2023-2024 on the basis of the latest published data and adverse surveillance data, while they remain unchanged for 2025. As the energy crisis recedes, governments should continue to withdraw related support measures. This is essential to prevent inflationary pressures from increasing in the medium term, which would require even greater monetary tightening. Fiscal policies should be geared towards achieving greater productivity in the euro area economy and a gradual reduction in high public debt. According to the experts' macroeconomic forecasts, it is essential to accelerate progress towards the creation of a capital markets union and the completion of the bank union. INTEREST RISK Interest risk is related to possible contingent negative changes in interest rate levels, implemented by the financial institutions of the Republic of Bulgaria. At its meeting on 14 December 2023 the Management Board of the European Central Bank decided to keep unchanged the ECB's three key interest rates. The Management Board is determined to ensure a timely return of inflation to the 2% target in the medium term. On the basis of its current assessment, the Management Board considers that interest rates are at levels that, if maintained for a sufficiently long time, would contribute significantly to a timely return of inflation to the target level. Future decisions of the Governing Council will ensure that the ECB's key interest rates will be set at sufficiently restrictive levels for as long as necessary to ensure this timely return. The ECB experts' December 2023 macroeconomic forecasts for the euro area foresee inflation declining gradually throughout 2024 before approaching the Management Board's 2% target in 2025. Overall, the Euro system experts expect general inflation to average 5.4% in 2023, 2.7% in 2024, 2.1% in 2025 and 1.9% in 2026. Compared to the ECB experts' September 2023 macroeconomic forecasts for the euro area, this represents a downward revision for 2023 and especially for 2024. The restrictive monetary policy of the Management Board continues to be strongly reflected in the overall financing conditions. Lending rates rose again in October, to 5.3% for corporate loans and 3.9% for mortgage loans. Higher lending rates, weak loan demand and tighter supply conditions are leading to a further weakening of credit dynamics. Sourse:BNB INFLATION RISK Inflation risk is an overall increase in prices, where money is devaluated and there is a probability of households and companies to accrue losses. 20 According to preliminary data of the NSI, in January 2023 the monthly inflation is 1.1% compared to the previous month, and the annual inflation for January 2023 compared to January 2022 is 16.4%. The average annual inflation rate for the period February 2022- January 2023 compared to the period February 2021-January 2022 is 15.9%. According to preliminary data from the NSI, monthly inflation measured by the Harmonised Index of Consumer Prices (HICP) in January 2023 was 1.0% compared to the previous month, and annual inflation for January 2023 compared to January 2022 was 14.1%. Annual average inflation for the period February 2022 to January 2023 compared to the period February 2021 to January 2022 is 13.5%. In February 2023, the monthly inflation rate was 0.8% compared to the previous month and the annual inflation rate for February 2023 compared to February 2022 was 16.0%. Year-to-date inflation (February 2023 versus December 2022) is 2.1% and the average annual inflation rate for March 2022 - February 2023 versus March 2021 - February 2022 is 16.4%. According to the Harmonised Index of Consumer Prices, monthly inflation in February 2023 was 0.7% compared to the previous month and annual inflation for February 2023 compared to February 2022 was 13.7%. Year-to-date inflation (February 2023 versus December 2022) is 1.9%, and the annual average inflation rate for March 2022-February 2023 versus March 2021-February 2022 is 14.0%. In March 2023, the monthly inflation rate is 0.5% compared to the previous month and the annual inflation rate for March 2023 compared to March 2022 is 14.0%. Year-to-date inflation (March 2023 versus December 2022) is 2.6% and the average annual inflation rate for April 2022-March 2023 versus April 2021-March 2022 is 16.5%. According to the March 2023 HICP, monthly inflation was 0.6% from the previous month and annual inflation for March 2023 compared to March 2022 was 12.1%. Year-to-date inflation (March 2023 vs. December 2022) is 2.5% and the average annual inflation rate for April 2022-March 2023 vs. April 2021-March 2022 is 14.1%. In April 2023, the monthly inflation rate was 0.3% from the previous month and the annual inflation rate for April 2023 compared to April 2022 was 11.6%. Year-to-date inflation (April 2023 versus December 2022) is 3.0% and the average annual inflation rate for May 2022 to April 2023 versus May 2021 to April 2022 is 16.3%. According to the April 2023 HICP, the monthly inflation rate is 0.5 percent from the previous month and the annual inflation rate for April 2023 compared to April 2022 is 10.3 percent. Year-to-date inflation (April 2023 versus December 2022) is 3.0% and the average annual inflation rate for May 2022-April 2023 versus May 2021-April 2022 is 13.9%. In May 2023, monthly inflation was -0.1% compared to the previous month and annual inflation for May 2023 compared to May 2022 was 10.1%. Year-to-date inflation (May 2023 versus December 2022) is 2.8% and the average annual inflation rate for June 2022- May 2023 versus June 2021-May 2022 is 15.8%. According to the May 2023 HICP, monthly inflation was -0.2% compared to the previous month and annual inflation for May 2023 versus May 2022 was 8.6%. Year-to-date inflation (May 2023 versus December 2022) is 2.8% and the average annual inflation rate for June 2022-May 2023 versus June 2021-May 2022 is 13.5%. 21 In June 2023, the monthly inflation rate was -0.4% from the previous month and the annual inflation rate for June 2023 compared to June 2022 was 8.7%. Year-to-date inflation (June 2023 versus December 2022) is 2.4% and the average annual inflation rate for July 2022-June 2023 versus July 2021-June 2022 is 15.0%. According to the June 2023 HICP, monthly inflation was 0.1% from the previous month and annual inflation for June 2023 compared to June 2022 was 7.5%. Year-to-date inflation (June 2023 versus December 2022) is 2.9% and the average annual inflation rate for July 2022 to June 2023 versus July 2021 to June 2022 is 12.9%. In July 2023, the monthly inflation rate was 0.9% compared to the previous month, and the annual inflation rate for July 2023 compared to July 2022 was 8.5%. Year-to-date inflation (July 2023 versus December 2022) is 3.3%, and average annual inflation for August 2022-July 2023 compared to August 2021-July 2022 is 14.3%. According to the July 2023 HICP, the monthly inflation rate was 1.2% from the previous month and the annual inflation rate for July 2023 compared to July 2022 was 7.8%. Year- to-date inflation (July 2023 compared to December 2022) is 4.1% and the average annual inflation rate for August 2022-July 2023 compared to August 2021-July 2022 is 12.3%. In August 2023, the monthly inflation rate was 0.4% from the previous month and the annual inflation rate for August 2023 compared to August 2022 was 7.7%. Year-to-date inflation (August 2023 compared to December 2022) is 3.7% and the average annual inflation rate for September 2022-August 2023 compared to September 2021-August 2022 is 13.4%. According to the August 2023 HICP, the monthly inflation rate is 0.5% from the previous month and the annual inflation rate for August 2023 compared to August 2022 is 7.5%. Year-to-date inflation (August 2023 compared to December 2022) is 4.6% and the average annual inflation rate for September 2022-August 2023 compared to September 2021-August 2022 is 11.6%. In September 2023, monthly inflation was -0.1% from the previous month, and annual inflation for September 2023 compared to September 2022 was 6.3%. Year-to-date inflation (September 2023 compared to December 2022) is 3.6% and the average annual inflation rate for October 2022-September 2023 compared to October 2021-September 2022 is 12.4%. According to the September 2023 HICP, monthly inflation was -0.3% from the previous month and annual inflation for September 2023 compared to September 2022 was 6.4%. Year-to-date inflation (September 2023 compared to December 2022) is 4.2% and the average annual inflation rate for October 2022-September 2023 compared to October 2021-September 2022 is 10.8%. In October 2023, monthly inflation is 0.4% and annual inflation for October 2023 compared to October 2022 is 5.8%. Year-to-date inflation (October 2023 versus December 2022) is 4.1% and average annual inflation for November 2022 to October 2023 versus November 2021 to October 2022 is 11.4%. According to the October 2023 HICP, monthly inflation is 0.2% and annual inflation for October 2023 compared to October 2022 is 5.9%. Year-to-date inflation (October 2023 versus December 2022) is 4.4% and the average annual inflation rate for November 2022 to October 2023 versus November 2021 to October 2022 is 10.1%. November 2023 monthly inflation is 0.3% and November 2023 annual inflation relative to November 2022 is 5.4%. Year-to-date inflation (November 2023 versus December 22 2022) is 4.4%, and the average annual inflation rate for December 2022-November 2023 versus December 2021-November 2022 is 10.5%. According to the November 2023 HICP, monthly inflation is 0.2% and annual inflation for November 2023 compared to November 2022 is 5.5%. Year-to-date inflation (November 2023 versus December 2022) is 4.7% and the average annual inflation rate for December 2022-November 2023 versus December 2021-November 2022 is 9.4%. In December 2023, the monthly inflation rate is 0.3% and the annual inflation rate for December 2023 compared to December 2022 is 4.7%. Annual average inflation for the period January to December 2023 compared to the period January to December 2022 is 9.5% According to the December 2023 HICP, monthly inflation is 0.3% and annual inflation for December 2023 compared to December 2022 is 5.0%. The average annual inflation rate for the period January - December 2023 compared to the period January - December 2022 is 8.6%. *Source: NIS CURRENCY RISK The currency risk exposure is the dependence on and the effects of the currency exchange rates changes. The systematic currency risk is the probability of possible change in the currency regime of the Country (Currency Board), which would result either in devaluation of the Bulgarian lev (BGN) or in appreciation of the BGN against foreign currencies. Currency risk will have impact on companies with market shares, which are completed in a currency other than BGN and EUR. Due to the laws in force in the country, the Bulgarian lev is fixed to the Euro at an exchange rate of EUR 1 = BGN 1.95583, and the Bulgarian National Bank has to maintain a level of Bulgarian leva in turnover equal to the currency reserves of the bank, the risk of devaluation of the BGN compared to the European currency is minimum, and for the most part consists in a possible elimination of the currency board in the country. At this stage, this appears to be very unlikely because the Currency Board is expected to be removed at the time of accepting the Euro as official legal tender in Bulgaria. At its meeting on 30 June 2021, the Coordination Council for preparation of the Republic of Bulgaria for euro area membership adopted a draft National Plan for the introduction of the euro in the Republic of Bulgaria. Bulgaria's commitment to adopt the single European currency is reaffirmed in the Treaty on the Accession of the Republic of Bulgaria and Romania to the European Union, after it was initially stated at the start of our country's EU membership negotiations. Preparations for Bulgaria's accession to the euro area are on target for January 1, 2025. The changes are made in a decree of the Council of Ministers on the establishment of a coordination council for our preparations for euro area membership, submitted for public discussion. Our country missed the previous target date for the introduction of the euro in our country - January 1, 2024, 23 after the caretaker government failed to submit a report on the fulfilment of the eurozone membership criteria in February. The introduction of the euro is planned without a transitional period as the date of adoption of the euro will coincide with its introduction as the official unit of payment. The conversion will be done by applying the irrevocably fixed exchange rate between the euro and the lev. And after the introduction of the euro within a month, the lev and the euro will be legal tender at the same time. The National Plan for the Introduction of the Euro in Bulgaria is the strategic document based on which the operational work for the replacement of the lev with the euro will be implemented. The document has been prepared and adopted within the deadline of 30 June 2021, set in Decree № 103 of the Council of Ministers of 25 March 2021 amending and supplementing Decree № 168 of the Council of Ministers of 2015 on the establishment of a Coordination Council for the preparation of Republic of Bulgaria for euroarea membership (SG, issue 52 of 2015). On 11.11.2022 the Coordinating Council for the preparation of the Republic of Bulgaria for euro area membership adopted the Communication Strategy for information and publicity of Bulgaria's accession to the euro area. The adoption of the Communication Strategy is an important step on the path of our country's accession to the euro area and corresponds with the decision of the National Assembly adopted on 27.10.2022, which obliges the Council of Ministers, in coordination with the Bulgarian National Bank, to accelerate the consultations and negotiations with the European institutions and to speed up the technical preparations for the introduction of the euro. It is based on the National Plan for the introduction of the euro in the Republic of Bulgaria adopted by the Council of Ministers and describes the principles and tasks of a comprehensive information and communication campaign; the responsible institutions that will implement the different activities within the overall campaign; the stages for the implementation of the activities; the target groups; the channels for the dissemination of information, etc. The Council of Ministers of the Republic of Bulgaria by Decision No 797 of 13 November 2023 adopted an updated National Plan for the introduction of the euro in Bulgaria. The update is made in order to clarify the texts of the Plan in relation to the change of the indicative date for the introduction of the euro to 1 January 2025, as well as to reflect the progress achieved until now in the technical preparations for the introduction of the euro and to adapt the remaining preparatory activities to the new indicative date. As an annex to the Plan, 'Methodological guidance to administrative authorities on adapting information systems to the euro' is included to ensure the accurate and uniform application of the euro introduction requirements by administrative authorities when adapting their information systems to work with the euro. The national plan for the introduction of the euro in the Republic of Bulgaria foresees the implementation of a large-scale communication and information campaign which will inform citizens about all practical aspects of the introduction of the euro as the official means of payment by providing accurate, accessible and timely information. In the framework of his working visit to Brussels in early November, Finance Minister Assen Vassilev held a meeting with Eurogroup President Pascal Donahue, with European Commission Executive Vice President Valdis Dombrovskis, with Economy Commissioner Paolo Gentiloni and with Piero Cipollone, member of the Executive Board of the European Central Bank. At the meeting, the representatives of the Commission and the ECB expressed full support for Bulgaria's accession to the euro area. 24 On 28.10.2023, according to the Ministry of Finance, Fitch Ratings affirmed Bulgaria's long-term foreign and local currency sovereign credit rating at 'BBB' with a positive outlook. The positive outlook reflects the country's plans to join the euro area, which could lead to further improvements in the country's external position indicators. On the other hand, the low investment-to-GDP ratio and unfavourable demographic factors weigh on potential economic growth and public finances in the longer term. Despite a downward trend, inflation in Bulgaria remains significantly above that in the three lowest EU Member States and does not currently meet the price stability criterion. Given the considerable uncertainty regarding inflation developments, Fitch Ratings remains questionable about the fulfilment of the price stability criterion in mid-2024 (the key date for euro area accession in 2025). According to forecasts, Bulgaria is likely to meet all other nominal euro adoption criteria (public finances, interest rate and exchange rate). In this regard, the agency's analysts consider the adoption of the euro to be supportive of the rating, as, all else being equal, it would improve the country's rating by around two grades. According to BNB data as of 31.01.2024, gross external debt at the end of November 2023 amounts to €44,402.6 million (46.5% of GDP2), which is €448.5 million (1%) more than at the end of November 2022 (43,954.2 million euros, 51.2% of GDP). At end- November2023, short-term liabilities are € 7,174.2 million (16.2% of gross debt, 7.5% of GDP) and decreased by €1,362.2 million (16%) compared to November 2022 (€8,536.5 million, 19.4 % of debt, 9.9% of GDP). Long-term liabilities amount to €37,228.4 million (83. 8% of gross debt, 38.9% of GDP), increasing by €1,810.7 million (5.1%) compared to the end of November 2022 (€35,417.7 million, 80.6% of debt, 41.3% of GDP). TAX RISK Preservation of the current taxation regime is of defining importance for the financial result of the companies. There is no guarantee that the tax laws, which are of direct consequence for the operation of the company, would not be changed in a direction which would result in a significant overhead expense, and respectively would have an adverse effect on the profit of the company. The taxation system in Bulgaria is still undergoing the process of development and consequently the existence of contradictory tax practices is a possibility. RISKS RELATED TO MILITARY CONFLICTS IN THE MIDDLE EAST AND UKRAINE The outbreak of military conflict in the Middle East, in addition to the simmering Russia- Ukraine conflict, has the potential to deal a new blow to economic confidence at a time when hopes have been growing for a containment of price rises triggered by Russia's invasion of Ukraine in 2022. The conflict that erupted, accompanied by hundreds killed when Hamas fighters invaded from their enclave and Israel responded with force, added the possibility of a wider Middle East conflict to the sense of global instability caused by the military actions in Ukraine that began more than 20 months ago. Depending on the duration of the conflict and how intense it appears to become, it will be assessed whether it has the capacity to spread to other parts of the region. At present, it is not possible to outline the scale of the effects and manifestations of the conflict on oil and share prices. The raging conflict in Gaza has the potential to add an unpredictable set of negative risks to a global economy that is already slowing. The conflict risks higher oil prices and risks to inflation, including affecting the growth prospects of the global economy. Oil and gas price increases caused by military conflicts not only reduce the purchasing power of populations and companies, but also raise the cost of food production. 25 Nations are now struggling with unusually high levels of debt, weak private investment and the slowest recovery in trade for five decades, reducing the chances of an early recovery. Higher interest rates are the result of central bank efforts to tame inflation, making it harder for governments and private companies to access credit and to prevent defaults. Adding to the economic problems, which are fuelled by deepening geopolitical conflicts, are tensions between the United States and China over technology transfer and security, which complicate efforts to work together on other issues such as climate change, debt relief or the prevention of regional conflicts. The U.S. and U.K. attack launched in early 2024 against Yemeni Houthi rebel targets risks significantly expanding the conflict in Gaza. The attacks were the first major act of revenge since the Houthis began attacking merchant ships in the Red Sea - through which about 15% of the world's sea traffic passes. US and UK forces have attacked anti- aircraft surveillance systems, radars and arsenals of drones, cruise and ballistic missiles in various parts of Yemen under the control of Houthi rebels. At the same time, car manufacturers Tesla and Volvo have already announced the temporary suspension of some of their production in Europe due to component shortages resulting from changes in sea traffic through the Red Sea. The attacks undertaken by the United States and the United Kingdom not only increase the scope of the conflict to other actors and geographical spaces, but open the gap between the United States and almost the entire Arab world. Geopolitical tension, combined with the outbreak of active military actions in multiple regions, contribute to an unstable global order characterized in undermining trust and uncertainty. Recent events, combined with the ongoing and deepening impact of extreme meteorological conditions, are increasing cost of living pressures and increasing economic uncertainty in many parts of the world. To these risks should be added the risks associated with the misinformation of societies, which have become increasingly evident in societies that have been politically and economically weakened in recent years. These risks will become increasingly difficult to overcome as global cooperation erodes. At the same time, the consequences of an increasingly fragmented world affect the ability to manage emerging global risks precisely because of a lack of consensus and cooperation. RISK OF ELECTRICITY PRICE INCREASES Rising electricity and energy prices, which have become particularly pronounced since Russia's invasion of Ukraine, have put pressure on European consumers after two years of coronavirus, production blockages and employment problems. In 2023, the global instability was increased by the armed conflict in Gaza, which threatened energy supplies. The expansion of the war in Gaza and the involvement of the Houthis from Yemen and the subsequent bombing by the US and the UK, has led to serious risks for shipping in the Red Sea, and hence the avoidance of this route by oil suppliers. The mentioned military conflicts lead to serious uncertainties in the supply of oil and gas, and thus affect their price, respectively the price of electricity. In case the Red Sea is closed to shipping, even for a short period of time, this will cause a new rise in energy prices. 26 UNSYSTEMATIC RISKS RISK OF PRICE CHANGES IN THE BASIC PRIME AND RAW MATERIALS The main activity of MONBAT AD is the production of and trading with accumulator and lead-acid batteries – starter batteries, stationary batteries for telecom application, semi-traction batteries, specialized batteries – army power range and locomotive batteries. The main materials used in the entity’s production process are lead and lead alloys, polypropylene, polyethylene separator and sulfuric acid. Over the last three years the cost of lead as a share of the total cost structure per unit of finished goods is as follows: 2021 – 70%, 2022 – 61%, and 2023 – 65%. The risk of price change in the main raw material – lead is being managed by means of own recycling facilities and by monthly indexation of the sales prices of batteries. In 2023 the used lead produced by own recycling facilities is 91%. DEPENDENCE OF MONBAT AD ON DISTRIBUTORS, SUPPLIERS, CUSTOMERS There is no dependence of MONBAT AD on customers because the Company’s sales are made directly to customers, but through an extensive distribution network in the country and abroad. Significant part of the sales with deferred payment in the country and abroad are insured by the Bulgarian Export Insurance Agency (BAEZ) and COFACE which mitigates the risk of non-payment. MONBAT AD is an export-oriented company. The Company exports most of its products, with the most significant markets in 2023 being France, Germany, Romania and Spain. DEPENDENCE OF MONBAT AD ON KEY PERSONNEL The professional activities and efforts, qualifications, motivation and reputation of the members of the Board of Directors and the senior officials of MONBAT AD and other entities within the group are essential for achieving the strategic and investment objectives of the Company. The leave or release of any member of Board of Directors or key executive official would negatively affect the smooth conduct of the Company’s business activities in the short term. Nevertheless, the established management system and consistently applied corporate policy for provision of incentives to motivate employees within the group, guarantee to a certain extent the long-term participation of Board of Directors members and key management personnel in the activities of the Company. RISK OF CHANGE IN THE DEMAND AND INTRODUCTION OF NEW TECHNOLOGIES This risk is related to demographic, economic, technological changes or the introduction of new products which may affect the demand for Company’s products over time. With introduction of new technologies in the automotive industry (hybrid and electric cars), consistent with environmental protection and reduction carbon dioxide emissions to a minimum, the need for alternative energy sources, such as new generation lead-acid batteries grows. At the same time, the need for multifunctional products - accumulator batteries - as a back-up source for photovoltaic power supply and lighting systems also grows. These new generation products could negatively affect the demand for existing and 27 approved products, as a result of the fact that they are perceived by consumers as more effective, more refined, combining new features, as well as due to the fact that they are more advertised. MONBAT AD has not yet been exposed to such a risk, but in the future could be relatively exposed to such a risk since the principal products of the Company are lead-acid batteries for various applications: starter batteries, stationary batteries for telecommunication application, semi-traction batteries, and special batteries for military application. LIQUIDITY RISK Liquidity risk consists of the likelihood that MONBAT AD is unable to pay its current liabilities. The absolute liquidity ratio indicates the company’s ability to meet its short-term liabilities with its available cash. The cash ratio of the Company for 2023 is 0.04. As of 31.12.2023 the cash and cash equivalents of the Company increased by 179% compared to 2022, and current liabilities increase by 15.1%. CREDIT RISK Credit risk is the risk that a counterparty will not pay its obligation to the Company. MONBAT AD regularly monitors the non-fulfillment of obligations of its customers and other counterparties, established individually or in groups, and uses this information to control credit risk. The customer's creditworthiness is assessed based on an internal credit rating methodology, and individual credit limits are determined in accordance with this assessment. It is the policy of MONBAT AD to carry out transactions only with counterparties with a good credit rating. A significant part of sales with deferred payment in the country and abroad are insured by the Bulgarian Export Insurance Agency /BAEZ/ or COFACE, which is why the risk of non-payment by customers is limited. The Company assesses the concentration of risk in relation to trade receivables as low, as its customers are located in several jurisdictions and operate to a significant extent in independent markets. The credit risk of balances in banks and financial institutions is managed by the central administration of the Company in cooperation with the Board of Directors. Investments of excess funds are made only with approved counterparties and within approved credit limits for each counterparty. The credit risk related to cash and cash equivalents is considered immaterial, as the counterparties are banks with a good reputation and a high external credit rating. ECOLOGICAL RISK The responsibility of MONBAT AD as the largest producer of accumulator batteries in Bulgaria and a dynamically developing public company is also oriented towards environment. Management of MONBAT AD considers the activities directed towards pollution prevention or reduction aimed at achieving a maximum level of human health and environmental protection as a major priority and a crucial factor in the long-term and sustainable development. It is the Company’s long -standing practice to provide clear and accurate environmental information on its products, services and activities to customers, suppliers, and the public. 28 A key objective of the Company's management is to align its activities with European legislation regulating the integration of climate risks into value creation mechanisms and the drive towards a more sustainable global economy. The Company's management actively monitors the European regulatory framework introducing the obligation for non-financial reporting and, where necessary, adopts internal rules detailing the procedures and responsibilities of its members in the preparation of sustainability reports. FORCE MAJEURE A few force majeure circumstances such as natural disasters, accidents, epidemics or intentional acts, could cause substantial property damages that could lead to temporary suspension and even cessation of the activities of the company. MONBAT AD has a full property insurance of the production facilities and storages of materials and production but in case of a continuous violation of the sequence of production activities, that fact could hardly compensate the lost profits. EFFECT OF INTERNATIONAL CONFLICTS The war between Russia and Ukraine, which started on 24 February 2022, has caused a wide international response and has affected countries in Europe in various aspects. The ongoing hostilities between Russia and Ukraine, the imposition of sanctions and restrictions by the European Union, the United States, Canada, the United Kingdom and other countries on Russia, the Russian Central Bank, credit institutions, companies and individuals caused significant disruption in the financial markets in 2022. As a result, 2023 brought continued geopolitical tensions, recalibration of economic growth, inflation, rising interest rates in the U.S. and Europe, and rising commodity prices. MONBAT AD has no net investments, subsidiaries or assets in Russia, Belarus, or Ukraine, but carries out trade with companies based in Ukraine. To address the aforementioned circumstances, the Company undertook measures, through which to limit the negative consequences on the financial results for 2022 and 2023. Risk analysis and measures and actions taken: • In 2023, there was a normalisation in the markets for the main products and goods sold by the Company compared to 2022. The following market developments were observed: o Increased demand for starter car batteries in Western European markets, where historic record sales of this type of product were achieved. In 2022, demand for these products was significantly depressed by sharp inflationary movements in the region and the associated shift in consumer behaviour. 29 o Substantial decline in sales of larger and more profitable semi-cyclical batteries, representing mainly purchased goods, due to the normalization of the delivery period of US manufacturers of this type of batteries, which was drastically extended in 2022 due to the logistical challenges during the period, and respectively the reorientation of the market back towards US products. o Decline in stationary (telecom) battery sales due to substantial volumes to leading telecom operators and system integrators in Russia in the first two months of 2022, i.e. just before the start of the war in Ukraine. • During 2023 MONBAT AD has no sales to Russian customers, while sales to customers based in Ukraine represent 4.0% of total sales revenue. (2022: Russia – 2.2%, Ukraine – 2.1%). • In relation to supply chains, the Company is not directly dependent on Russian, Ukrainian or Belarusian suppliers and has not experienced any bottlenecks or interruptions in supply from Russian or Ukrainian counterparties resulting in interruptions in the production process. • As a result of inflationary developments and market volatility, the average market price of lead in 2023 was around EUR 1 977/MT (2022: EUR 2 041/MT). MONBAT AD addresses this volatility and the dependence of the lead price on stock market indices by applying a standard indexation of its sales prices to all its counterparties. • The Company's main customers have not experienced financial difficulties directly related to the military conflicts in Ukraine and the Middle East. • To ensure the collectability of its receivables from Ukrainian counterparties for which trade receivables insurance is not available, the Company adopted a policy of 100% pre-shipment advance payments on all export sales to Ukraine following the outbreak of hostilities in the country. Although towards the end of 2023 and 2022, there are no significant delays in the collection of receivables from customers, the activity of several specific customers in Russia and Ukraine, where even in pre-war periods a delay in collection was noticeable was further complicated by the military conflict and in this connection the Company has recognized impairment costs related to the trade receivables from the same in the amount of BGN 0 in 2023 and BGN 260 thousand in 2022. As of December 31, 2023, the Company has trade receivables from Ukrainian and Russian customers (net of impairments) in the amount of BGN 10 148 thousand. The Company analyzes on an ongoing basis all possible impacts of changing micro- and macroeconomic conditions on the Company's future financial position and results of operations. Inflationary processes, expressed in increased costs of direct materials, energy and labour per unit of production, have a significant impact on the Company's operations. The Company has been able to limit the effect of these negative impacts of the macroeconomic environment by refining its customer and product mix (with a focus on higher-margin products and markets) and, where necessary, applying an indexation of selling prices to its customers. V. IMPORTANT EVENTS WHICH OCCURRED AFTER THE DATE OF THE ANNUAL SEPARATE FINANCIAL STATEMENTS All important events, which have occurred after the date of the annual separate financial statements, were disclosed through the information disclosure system of MONBAT 30 AD, namely - to the regulated securities market, the Financial Supervision Commission and the public. The information is also available on the website of the Company www.monbatgroup.com. No adjusting or significant non-adjusting events occurred between the date of the individual financial statements and the date of approval for their publication, except for the following non-adjusting event: • On 22 January 2024, a General Meeting of the bondholders of the convertible bond issue was held, at which a decision was made to postpone the payment of the second installment of the principal in the amount of EUR 8 404 500 by sixty calendar days starting from 20 January 2024, in order to utilize funds under a contractual loan with a financial institution, through which the payment will be partially financed. As at the date of approval of the individual financial statements, payment to the bondholders has not yet been made, as the procedure for utilizing funds from the financial institution has not been completed. VI. CURRENT TRENDS AND PROBABLE FUTURE DEVELOPMENT OF THE COMPANY In the upcoming years the entity is expected to enter a new stage and implement new approach to access target markets through a hybrid strategy for growth (production and distribution), as well as to create conditions for specialization in three categories: products derived from the recycling activities of the company, carried out by the subsidiaries of MONBAT AD; adoption of new technologies for the production of batteries; and to increase the number of product and technology solutions in the field of energy management. Monbat Group will use its financial strength and excellent relations with customers across more than 70 countries to enrich its portfolio of products and services in order to meet emerging trends in the battery industry. VII. RESEARCH AND DEVELOPMENT ACTIVITIES The management of MONBAT AD highly appreciates the importance of continuous development through elaborating new technologies and continuously invests significant resources and efforts in this direction. The activities related to development and adoption of new products is being carried out jointly by the Marketing and Communications Department, Sales Department, Technology Department, Production, Operations and Projects Department and Testing Laboratory. The company’s own research and development laboratory – MGLab, is equipped with modern, specialized electronic devices. The highly qualified staff of both MONBAT AD and MGLab ensures the Company’s technological and innovative growth. We conduct various chemical, physical and electrical tests required under the internationally recognized standards for lead-acid batteries. The Research and Development department of MONBAT AD works in close cooperation with the Institute of Electrochemistry and Energy Systems (IEES) of the Bulgarian Academy of Sciences. The expenditure incurred on research and development activities until 2023 is part of the overall amount spent on remunerations for the experts in the Marketing and Communications Department, Sales Department, Technology Department, Production, Operations and Projects Department and Testing Laboratory of MONBAT AD. Investments 31 in research and development activities form a part of the overall expenditure of the company for the respective periods. As a result, the following expenditure cannot be explicitly presented. VIII. INFORMATION REQUIRED PURSUANT TO ART. 187D AND ART. 247 OF THE COMMERCIAL LAW 1. The number and the nominal value of the acquired and transferred through the year own stocks; the share of the capital which they represent, as well as the price at which the acquisition or transfer have been executed On 21.09.2022, the Board of Directors of MONBAT AD based on Art. 17, para. 2 and para. 3 of the Company’s Articles of Association with reference to art. 187b of the Commercial Act and on the grounds of art 111, paragraph 5 of the Public Offering of Securities Act, the Board of Directors adopted a decision for a new buy-back procedure of Company’s own shares to be performed within the limits, set up under the provision of art. 17 of the Company’s Articles of Association, as follows: Number of shares liable to buy back under the current procedure – up to 3% of the Company’s registered capital or up to 1 170 000 shares. • Minimum price for the buyback – BGN 4.51 • Maximum price for the buyback – BGN 8.75 • Initial term for the buyback – 26.09.2022 • Implementation period – 180 calendar days with the possibility of extension 2. The grounds for the acquisitions made through the year Pursuant to the provisions of the Company’s Articles of Association the Board of Directors of MONBAT AD has the power to initiate redemption procedures. 3. The number and the nominal value of the possessed own stocks and the share of the capital which they represent The total number of own shares owned by the Company as of 31.12.2023 is 33 545 or 0.09% of the voting rights of MONBAT AD 32 4. The total remuneration received during the year by the members of the boards In 2023 the members of the Board of Directors and the Procurator have received the following remuneration: Table № 12 Full name Position Gross amount in BGN Net amount in BGN 1 Evelina Pavlova Slavcheva Member of the BoD 40 000 36 000 2 Chavdar Dochev Danev Member of the BoD 40 000 36 000 3 Viktor Stanimirov Spiriev Member of the BoD 40 000 36 000 4 Peter Nikolov Bozadzhiev Member of the BoD 40 000 36 000 5 Petar Hristov Petrov Member of the BoD 40 000 36 000 6 Kyle Patrick Anderson Member of the BoD 40 000 36 000 7 Florian Huth Member of the BoD 40 000 36 000 8 Viktor Stanimirov Spiriev Executive Member of the BoD 737 195 655 903 9 Peter Nikolov Bozadzhiev Group Operations Director 481 418 425 704 10 Petar Hristov Petrov Battery Division Director 279 858 244 300 11 Chavdar Dochev Danev Finance Director for Liaison with Financial Institutions 94 111 84 700 5. The acquired, possessed and transferred stocks and bonds of the company by the members of the Board of Directors during the year As of 31.12.2023, the members of the Board of Directors do not own shares of the capital of MONBAT AD. 6. The rights of the members of the Board of Directors to acquire stocks and bonds of the company Members of the Board of Directors of the Company may freely acquire shares of the company’s capital on the regulated securities market subject to the provisions of the Market abuse regulation and the Law on Public Offering of Securities. 7. The participation of the members of the board of directors in commercial companies as unlimited liable partners, the possession of more than 25 percent of the capital of another company, as well as their participation in the management of other companies or cooperation as procurators, managers or members of boards CHAVDAR DANEV – CHAIRMAN OF THE BOARD OF DIRECTORS Names of all the companies and partnerships of which Mr. Danev has been a partner as of 31.12.2023: He has not participated in companies and partnerships as an unlimited liability partner; He has not held more than 25% of the shares of commercial companies. 33 Information of all the companies and partnerships of which Mr. Danev has been a member of the administrative, management or supervisory bodies and /or other senior manager as of 31.12.2023: • Member of the Managing Board of Prista Oil Holding EAD, UIC 121516626; • Member of the Board of Directors of Zahar Invest AD, UIC 104119736 • Member of the Board of Directors of BST – Bulgaria AD, UIC 200635286 PETAR PETROV – MEMBER OF THE BOARD OF DIRECTORS Names of all the companies and partnerships of which Mr. Petrov has been a partner as of 31.12.2023: He has not participated in companies and partnerships as an unlimited liability partner; He has not hold more than 25% of the shares of commercial companies Information of all the companies and partnerships of which Mr. Petrov has been a member of the administrative, management or supervisory bodies and /or other senior manager as of 31.12.2023: • Member of the Board of Directors of Start AD, UIC 124712007 FLORIAN HUTH – MEMBER OF THE BOARD OF DIRECTORS until 12.07.2023 Names of all the companies and partnerships of which Mr. Huth has been a partner as of 31.12.2023: • Owner of Valens 2017 EOOD, UIC: 204670224, 32A Cherni Vrah Blvd, Sofia; Has not participated in companies and partnerships as an unlimited liability partner; Information of all the companies and partnerships of which Mr. Huth has been a member of the administrative, management or supervisory bodies and/or other senior manager as of 31.12.2023: • Member of the Supervisory Board of PRISTA OIL HOLDING EAD, UIC: 121516626, 20 Zlaten Rog Str., Sofia; • Member of the BoD of SETCAR HOLDINGS LTD, Cyprus; • Member of the Supervisory board of AND GNG EAST UKRAINE LTD, BVI • Manager of Valens 2017 EOOD, UIC: 204670224, 32A Cherni Vrah Blvd, Sofia 34 PETER BOZADZHIEV – MEMBER OF THE BOARD OF DIRECTORS Names of all the companies and partnerships of which Mr. Bozadzhiev has been a partner as of 31.12.2023: • Owner of PARVA KLAPA EOOD, UIC 204947066, 21 Ivan Rilski Str. Sofia Has not participated in companies and partnerships as an unlimited liability partner; Information of all the companies and partnerships of which Mr. Bozadzhiev has been a member of the administrative, management or supervisory bodies and /or other senior manager as of 31.12.2023: • MONBAT NEW POWER AD, UIC: 204333335; 32A Cherni Vrah Blvd., Sofia; • Manager of PARVA KLAPA EOOD UIC 204947066, 21 Ivan Rilski Str. Sofia • Member of the BoD of Societe Nouvelle de l’accumulateur Nour, UIC 1027384F, Tunisia EVELINA SLAVCHEVA - MEMBER OF THE BOARD OF DIRECTORS Names of all the companies and partnerships of which Ms. Slavcheva has been a partner as of 31.12.2023: She has not participated in companies and partnerships as an unlimited liability partner; She holds more than 25% of the shares of the following companies: • Managing partner with 50% in ELHIM ENERGY, OOD: 200171341, 12 Ivan Milanov Str., 1505 Sofia; Information of all companies and partnerships of which Ms. Slavcheva has been a member of the administrative, management or supervisory bodies and /or other senior manager as of 31.12.2023: • Managing partner in ELHIM ENERGY, UIC: 200171341, 12 Ivan Milanov Str., 1505 Sofia; 35 KYLE ANDERSON – MEMBER OF THE BOARD OF DIRECTORS Names of all the companies and partnerships of which Mr. ANDERSON has been a partner as of 31.12.2023: He has not participated in companies and partnerships as an unlimited liability partner; He holds more than 25% of the shares of the following companies: • Balkan Investment Group, Inc. USA • KPA CPA LLC, USA • GOOD SHEPHERD TAX AND FINANCIAL SERVICES LLC, USA • KPI REAL ESTATE SERVICES LLC, USA • LIBERTY PORT HOLDINGS LLC, USA • FAE MEADOW FARMS LLC, USA • SAINT NICHOLAS TRAIDING COMPANY INC, USA • SAINT NICHOLAS FONDATION INC, USA • DALLAS & LUISE ANDERSON FONDATION INC, USA • LCA PARTNERSHIP LP, USA • D&L PARTNERSHIP LP, USA • PRISTA OIL TRADING OOD, UIC 204588474 • PRISTA PORT OOD, UIC 203258566 • PRISTA PORT BUCHANAN LLC Information of all the companies and partnerships of which Mr. ANDERSON has been a member of the administrative, management or supervisory bodies and /or other senior manager as of 31.12.2023: • Balkan Investment Group, Inc. USA • KPA CPA LLC, USA • GOOD SHEPHERD TAX AND FINANCIAL SERVICES LLC, USA • KPI REAL ESTATE SERVICES LLC, USA • LIBERTY PORT HOLDINGS LLC, USA • FAE MEADOW FARMS LLC, USA • SAINT NICHOLAS TRAIDING COMPANY INC, USA • SAINT NICHOLAS FONDATION INC, USA • DALLAS & LUISE ANDERSON FONDATION INC, USA • LCA PARTNERSHIP LP, USA • D&L PARTNERSHIP LP, USA • PRISTA OIL TRADING OOD, UIC 204588474 • PRISTA PORT OOD, UIC 203258566 • PRISTA PORT BUCHANAN LLC 36 VIKTOR SPIRIEV – EXECUTIVE MEMBER OF THE BOARD OF DIRECTORS Names of all the companies and partnerships of which Mr. SPIRIEV has been a partner as of 31.12.2023: He has not participated in companies and partnerships as an unlimited liability partner; He holds more than 25% of the shares of the following companies: Kauchein OOD, UIC 205521176 Information of all the companies and partnerships of which Mr. SPIRIEV has been a member of the administrative, management or supervisory bodies and /or other senior manager as of 31.12.2023: • SPIRIEV AD, UIC 117599580 - member of the board of directors • ARTMONBAT AD, UIC 205774610 - member of the board of directors • MONBAT NBP EAD, UIC 206010099 - member of the board of directors • STS SRL Italy UIC 0244198078 - member of the board of directors • Societe Nouvelle de l’accumulateur Nour Tunisia, UIC 1027384F – member of the BoD 8. Executed contracts in 2023 with members of the Board of Directors or their related persons beyond the usual activity of the company or substantially diverted from the market requirements In 2023 no contracts with members of the Board of Directors or their related persons beyond the usual activity of the company or substantially diverted from the market requirements have been executed. 9. Planned economic policy for the next year, including the expected investments and development of the personnel, the expected revenue from investments and development of the company, as well as the forthcoming transactions of substantial importance for the activity of the company The company presents a development forecast on a consolidated basis. IX. PRESENCE OF BRANCHES OF THE ENTERPRISE The company does not have registered branches in Bulgaria or abroad. X. FINANCIAL INSTRUMENTS USED BY THE COMPANY In 2023 MONBAT AD has used instruments, namely commodity swaps on lead to hedge cash flows and limit the risk of a change in the London Metal Exchange price of lead. The Company has not used any material financial instruments to hedge the risks of changes in foreign exchange rates, interest rates or other cash flows. The Company could have exposure to liquidity, market, interest rate, currency and operational risks arising from the use of financial instruments. 37 XI. INFORMATION UNDER APPENDIX NO 2 OF ORDINANCE NO 2 OF FSC 1. Information given in value or quantitative terms about the main categories of commodities, products and/or provided services, with indication of their share in the revenues from sales of the issuer as a whole and the changes that occurred during the reporting fiscal year. SALES OF LEAD-ACID BATTERIES FOR THE PERIOD OF 2021- 2023 Table № 13 TYPE OF SALE 2023 2022 2021 Number of batteries sold 2 750 513 2 642 814 3 429 234 BREAKDOWN OF SALES BY TYPES OF BATTERIES Table № 14 BREAKDOWN OF SALES BY TYPES OF BATTERIES (share of quantity sold) 2023 2022 2021 Starter Batteries 87.36% 82.60% 84.12% Stationary Batteries 4.62% 6.44% 6.05% Semi traction Batteries 8.02% 10.96% 9.83% Total: 100% 100% 100% Table № 15 BREAKDOWN OF SALES BY TYPES OF BATTERIES (share of sales revenue) 2023 2022 2021 Starter Batteries 73.10% 64.09% 67.13% Stationary Batteries 13.38% 17.81% 17.24% Semi traction Batteries 13.52% 18.10% 15.63% Total: 100% 100% 100% In 2023 the weighted average capacity per unit of battery sold is 84 Ah (2022 - 84 Ah) 2. Information about the revenues allocated in separate categories of activities, domestic and external markets as well as information about the sources for supply of materials required for the manufacture of commodities or the provision of services with indication of the degree of dependence in relation to any individual seller or buyer/user, where if the share of any of them exceeds 10 per cent of the expenses or revenues from sales, information shall be provided about every person separately about such person’s share in the sales or purchases and his relations with the issuer Information on revenues distributed by main categories of activities is provided in Table №5. Information about the revenues based on market segmentation is provided in Table № 2. 38 3. Information about concluded material transactions In 2023, MONBAT AD did not conclude significant transactions within the meaning of Ordinance 2 of the FSC, with the exception of those disclosed in the separate financial statements: - On 22 March 2023, the Company, together with its subsidiary Monbat Recycling Bulgaria EAD, which owns 10% of the capital of Monbat Holding GmbH, sent a notice to Britishvolt to terminate the contract for the sale of Monbat Holding GmbH due to non-fulfillment of the agreed terms by Britishvolt party (Note 7.1 of the Individual Financial Statements) 4. Information about the transactions concluded between the issuer 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 state. In 2023 MONBAT AD has concluded transactions with the following related parties: Table № 16 Related party Type of relation Transactions Monbat Trading OOD Shareholder in MONBAT AD Purchase of goods and services, sale of services and accrued interest on loan granted by MONBAT AD Prista Oil Holding EAD Shareholder in MONBAT AD and ultimate parent company Purchase of goods and services; sale of finished goods and services, accrued interest on deposits granted by MONBAT AD START AD Subsidiary company of MONBAT AD Sale of finished goods and services. Purchase of materials, services, fixed assets and goods by MONBAT AD MONBAT PLC DOO Subsidiary company of Monbat Recycling EAD Purchase of materials and services by MONBAT AD YU Monbat DOO Subsidiary company of Monbat PLC DOO Sale of finished goods by MONBAT AD SC MONBAT RECYCLING SRL Subsidiary company of Monbat Recycling EAD Purchase of materials and services by MONBAT AD MONBAT RECYCLING EAD Subsidiary company of MONBAT AD, where the shareholding interest is 100% Sale of materials, services and technological waste. Purchase of materials, services, and others by MONBAT AD SC MONBAT ROMANIA SRL Subsidiary company of SC MONBAT RECYCLING SRL Sale of production and goods by MONBAT AD MONBAT SPED EOOD Subsidiary company of MONBAT AD Sale of services and goods; purchase of services and materials by MONBAT AD 39 Related party Type of relation Transactions Monbat SA Proprietary Limited Subsidiary company of MONBAT AD Sale of finished goods and services; purchase of goods by MONBAT AD ARTMonbat AD Subsidiary company of MONBAT AD Loan granted and purchase of materials by MONBAT AD Monbat Immobilien GmbH Subsidiary company of MONBAT AD Loan granted by MONBAT AD Monbat NBP EAD Subsidiary company of MONBAT AD Accrued interest on loan granted by MONBAT AD Societe Nouvelle des Accumulateurs Nour Subsidiary company of MONBAT AD Sale of finished goods, materials and services; purchase of materials by MONBAT AD Societe Nour Distribution Subsidiary company of Societe Nouvelle des Accumulateurs Nour Sale of materials, production and services by MONBAT AD Alliance Energy Companies AD Company under common control Accrued interest on loan granted by MONBAT AD Prista Invest 2016 AD Sole owner of the parent company Accrued interest on loan granted by MONBAT AD Torlashka Sreshta EOOD Company controlled by a person, exercising joint control over the parent company Accrued interest on loan granted by MONBAT AD Monbat Eco Projects OOD Company controlled by a person, exercising joint control over the parent company Accrued interest on loan granted by MONBAT AD Black Star International AD Company under common control Loan granted by MONBAT AD Holdco Investment EOOD Sole owner of Prista Holdco Cooperatief U.A. Loan granted by MONBAT AD Prista Holdco Cooperatief U.A. Shareholder in Monbat AD Loan granted by MONBAT AD Atanas Bobokov A person exercising joint control over Prista Oil Holding EAD Accrued interest on loans granted by MONBAT AD Plamen Bobokov A person exercising joint control over Prista Oil Holding EAD Accrued interest on loans granted by MONBAT AD No transactions with related parties have been concluded which are outside Monbat’s usual activity or substantially deviate from the market conditions. Information about the transactions concluded between the company and the related parties during the reporting period can be found in the published separate financial statements of the issuer. 5. Information about events and indicators of unusual for the issuer nature, having substantial influence over its operation and the realized by it revenues and expenses made; assessment of their influence over the results during the current year In 2023 no unpredictable and unforeseen circumstance of an extraordinary nature occurred that had an impact on the Company. 40 6. Information about off-balance kept transactions – nature and business purpose, indication of the financial impact of the transactions on the activity, if the risk and benefits of these transactions are substantial for the assessment of the issuer’s financial state. In 2023 no off-balance transactions were concluded. 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 As of 31.12.2023 MONBAT AD has direct and indirect holdings in the following subsidiaries within the economic group of the issuer: Table № 17 Company’s name Principal activity Capital share or percentage of votes at the General Assembly as of 31.12.2023 1 START AD, Sofia Production, service and marketing of accumulator batteries; engineering and development-implementation activities; production and marketing of equipment for production of accumulator batteries; foreign and domestic trade and setting up commercial networks, specialized stores and representation offices. 97.80% of the voting shares 2 SC MONBAT RECYCLING SRL Recycling of accumulator batteries and lead scrap, lead alloys, polyethylene and polypropylene materials, trading in accumulator batteries, batteries, lead, polyethylene and polypropylene scrap and materials on the territory of the Republic of Romania as well as export and import from and to the Republic of Romania of scrap, materials and finished goods. 100% of the capital 3 MONBAT RECYCLING EAD Recycling of batteries and lead scrap, lead alloys, polyethylene and polypropylene materials, trading in accumulator batteries, batteries, lead, polyethylene and polypropylene scrap and materials on the territory of Bulgaria. 100% of the capital 4 MONBAT PLC DOO Recycling of accumulator batteries and lead scrap, lead alloys, polyethylene and polypropylene materials, trading in accumulator batteries, batteries, lead, polyethylene and polypropylene scrap and materials on the territory of the Republic of Serbia as well as export and import from and to the Republic of Serbia of scrap, materials and finished goods. 100% of the capital 5 MONBAT ROMANIA SRL Trade company with scope of activity: trading, service and marketing of accumulator batteries, lead, polyethylene and polypropylene scrap. 100% of the capital 6 MONBAT NEW POWER AD Trading company 51% of the capital 7 Energy Batteries Nigeria Limited Sale of batteries and other battery-related materials. 100% of the capital 8 MONBAT HOLDING GmbH Holding Company which holds the equity interest in EAS BATTERIES GmbH and MONBAT NEW POWER GmbH. 100% of the capital 9 EAS BATTERIES GmbH Production, trade and R&D in the field of Li-ion Batteries. 100% of the capital 10 „MONBAT NEW POWER“ GmbH Production, trade and R&D in the field of Li-ion Batteries. 100% of the capital 11 Monbat Italy Srl. Holding Company which holds the equity interest in Piombifera Italiana. 100% of the capital 12 PIOMBIFERA ITALIANA SPA Production, processing and trade of metal alloys, color and ferrous metals, semi, intermediate processing plastics, anhydrous sodium sulfate, and all products, products and / or waste resulting from the 100% of the capital 41 Company’s name Principal activity Capital share or percentage of votes at the General Assembly as of 31.12.2023 processing cycle; the exercise of commissioning systems in reserve, pre-storage, handling and utilization of hazardous waste and / or toxic and harmful and / or dangerous waste, consisting of sludge and waste of used batteries, and / or waste, including scrap minerals or alloys containing lead and / or heavy metals; management of plants for secondary lead smelting slag, including inertia chairs, aimed at producing concrete and / or produced products and / or bituminous products and manufacture of lead acid batteries. 13 YU Monbat DOO Trade company with the following activities: trade, service and sale of lead-acid batteries, battery, lead polyethylene and polypropylene scrap 100% of the capital 14 MONBAT SPED LTD Transport services, internal and external transport, spedition, export and import of special goods and objects, opening of a warehouse network in the country, commercial agency and intermediation. 100% of the capital 15 ARTMONBAT AD Manufacturing, trade, development of research activities in the field of nanostructured materials; sales of nanostructured additives in various industries 51% of the capital 16 Monbat Immobilien GmbH Trading company 100% of the capital 17 STC S.R.L Manufacturing, installation, research and development in the field of chemical and electrochemical, metallurgical and environmental industries; sale and installation of machinery 66.66% of the capital 18 Monbat South Africa Proprietary Limited Sale of batteries and other battery-related materials 51% of the capital 19 Monbat NBP EAD Development of bi-polar batteries 100% of the capital 20 Battery Pro South Africa LTD Trading with different types of batteries and accessories 20.4% of the capital 21 Leventa OOD Services provider 46% of the capital 22 Société Nouvelle des Accumulateurs (SNA) A holding company, which owns majority steaks, and controls companies from the Nour Group. Production, servicing and sales of batteries, engineering and development and implementation activities, production and trade of equipment for the manufacturing of batteries, foreign and domestic trade and construction of trade networks, specialized stores and representative offices. 60% of the capital 23 Société NOUR Distribution (SND) Sales of batteries on the Tunisian market by building trade networks, specialized stores and representative offices. 59.85% of the capital 24 Société Technique et Ingénierie de Précision (TIP) Provision of engineering and support services to Nour Group companies. 55% of the capital 25 Société NOUR des Batteries Industrielles (NBI) Provision of services to Nour Group companies. 44.31% of the capital 26 Société NOUR Recycling (SNR) Recycling of batteries and lead scrap, lead alloys, polyethylene and polypropylene materials, trade in batteries, battery, lead polyethylene and polypropylene scrap and materials in the territory of Tunisia. 30.50% of the capital 42 8. Information on the loan agreements concluded by the issuer, respectively the person under § 1d of the Additional Provisions of the Public Offering of Securities Act, by its subsidiary, in its capacity of borrowers, indicating the terms and conditions, including payment deadlines, as well as information for provided guarantees and commitments 8.1. Loan contracts of MONBAT AD in its capacity as a borrower: Summary of bank loan contracts 1. UBB AD Contract dated 25.02.2014 Maturity date: 15.02.2016 Loan amount: EUR 3 200 000 Type of credit: Revolving loan Interest: 1-month EURIBOR + mark-up Collateral: Rank collateral of mortgage of own real estate, cadaster № 48489.5.597, cadaster № 48489.5.281, cadaster № 48489.5.396, together with buildings on it, on the territory of Montana str. Industrialna. With annex N 4/ 30.06.2016 the amount of the loan was increased to EUR 4 200 000 With annex m.06.2016 the amount of the loan was increased to EUR 9 200 000: Maturity date: 31.07.2027 Pledge on fixed assets owned by MONBAT AD and Monbat Recycling Bulgaria. First rank pledge agreement on Monbat’s receivables on bank accounts held with the bank. Utilized amount as of 31.12.2023 at the amount of BGN 17 700 049 or EUR 9 049 892 – entirely short-term. 2. Eurobank Bulgaria AD Contract № 339/07.12.2004 Maturity date: 01.09.2006 Loan amount: EUR 2 200 000 Type of credit: Credit line Interest: Variable reference interest rate + mark-up Collateral: Pledge on assets and inventories owned by MONBAT AD With annex from 16.06.2017 the amount of the loan was increased to BGN 18 971 401 Maturity date: 01.10.2023 With an annex dated 13.01.2023, valid until 30.09.2023, the amount of the loan is increased to BGN 30,706,381. Maturity date: 31.01.2024, with an annex dated 2024 extending the term to 30.06.2024. Utilized amount as of 31.12.2023 at the amount of BGN 18 962 544 – entirely short-term. 3. Eurobank Bulgaria AD Contract № 100 -972/23.11.2010 Maturity date: 23.11.2011 Amount borrowed: EUR 1 000 000 Type of credit: Working capital Interest: 3-month EURIBOR + mark-up Collateral: Real estate 1: ½ ideal part of land with identification N48489.282 on the cadastral map of Montana, buildings and factories, warehouse currently owned by MONBAT AD, approved with Directive № RD-18-19-/05.04.2006 of the Procurator of AK. Real estate 2: ½ ideal part of land with identification N48489.282 on the cadastral map of Montana, buildings and factories, warehouse currently owned by MONBAT AD, approved with Directive № RD -18-19-/05.04.2006 of the Procurator of AK. Pledges: 43 Pledge 1: Machines, installations and vehicles, located in the factory of MONBAT AD in Montana, 72 “Industrial” str. Pledge 2: Vehicle weighing machine and security room with an area of 102 sq.m., according to documentary evidence and inventory number 300000003 Pledge 3: Unloading area, with an area of 1980 sq.m., according to documentary evidence and property inventory number 3000000004. A special pledge entered in the Central Register of Special Pledges- fixed assets, machinery and equipment, movables. There is annex from 29.07.2014 and the loan is transferred from EUR in BGN. Maturity date: 31.01.2024, extended to 30.06.2024 by annex dated 2024 Amount borrowed: BGN 1 955 830 Type of credit: Credit line Interest: Variable reference interest rate + mark-up Collateral: Promissory Note for the amount of BGN 1 955 830 Utilized amount as of 31.12.2023 at the amount of BGN 1 930 570 – entirely short-term. 4. DSK Bank EAD Contract №1675/16.09.2015 Maturity date: 10.09.2024 Loan amount: EUR 2 500 000 Type of credit: For working capital Interest: 1 M EURIBOR + mark-up Collateral: Pledge agreement on receivables and property, plant and equipment Utilized amount as of 31.12.2023 at the amount of EUR 2 500 000 or BGN 4 889 575 - entirely short-term. 5. DSK Bank EAD Contract №1674/16.09.2015 Maturity date: 10.09.2016 Loan amount: BGN 2 000 000 Type of credit: For working capital Interest: Variable reference interest rate + mark-up – solely short-term. With annex from 13.11.2019 a loan amount of up to BGN 9 000 000 is increased. Maturity date: 10.09.2024 First rank pledge on the fixed assets of MONBAT AD Next in line special pledge on receivables. Utilized amount as of 31.12.2023 at the amount of BGN 8 999 883 – entirely short-term. 6. UBB AD Contract dated 09.11.2015 Maturity date: 15.12.2025 Loan amount: BGN 490 000 overdraft Interest: Variable reference interest rate + mark-up Collateral: No collateral Utilized amount as of 31.12.2023 at the amount of BGN 487 239 – entirely short-term. 44 7. Eurobank Bulgaria AD Contract 359/2017 dated 05.10.2017 Loan amount: EUR 2 556 459 credit line Interest: 3 M EURIBOR + mark-up Maturity date: 31.01.2024 Collateral: First pledge agreement for Monbat’s receivables from the third parties. Utilized amount as of 31.12.2023 at the amount of BGN 2 196 657 or EUR 1 123 133 – entirely short-term. 8. UBB AD Contract 20F-00428 dated 10.04.2020 Loan amount: EUR 2 000 000 Type of credit: Credit line Interest: 1 M EURIBOR + mark-up Collateral: Pledge on receivables on all borrower's accounts opened in the bank; insurance with BAEZ, covering the exposure under the contract up to EUR 2 million. With an annex of 15.12.2020, the amount of the loan is divided into two sub-limits of 1 million euro with the right to draw down the first sub-limit until 31.12.2023 and final repayment until 31.12.2023 and with the right to draw down the second sub-limit in case of successful review, which the bank will carry out until 31.12.2023 Maturity date: 31.07.2024 Utilized amount as of 31.12.2023 at the amount of BGN 3 911 018 or EUR 1 999 672 – entirely short-term. 9. UBB AD Contract dated 10.04.2020 Maturity date: 30.09.2026 Loan amount: EUR 13 000 000 Type of credit: Credit line Interest: 6 M EURIBOR + mark-up Collateral: Another mortgage of land with an area of 38 665 m2, owned by Start AD and Monbat Recycling EAD, together with the buildings and improvements built on it and the future buildings planned for construction. Another mortgage on land with an area of 11 343 m2, owned by Start AD and Monbat Recycling EAD Another mortgage of a building with an area of 3 510 m2, owned Monbat Recycling EAD warehouse. Special pledge on machinery, equipment and equipment, means of transport, business inventory owned by Start AD First special pledge of items and inventories, with a carrying amount of EUR 4 million, owned by Start AD Special pledge on receivables on all accounts of the borrower, opened with the bank. With an annex of 15.12.2020 the amount of the loan was changed to EUR 10 000 000 and the loan is divided into two sub-limits of TEUR 5 833 and TEUR 4 167 respectively with the right to draw down the first sub-limit by 30.12.2020 and repayment of EUR 1 million on a 6-month basis starting on 30 January 2021 and with the right to draw down the second sub-limit in case of successful review, which the Bank will carry out by 31.12.2023. With a successful review, the maturity date is 30.07.2025. Utilized amount as of 31.12.2023 at the amount of BGN 7 823 320 or EUR 4 000 000 of which BGN 3 911 660 (EUR 2 000 000) - short-term. 45 10. Investbank AD Contract dated 21.07.2021 Maturity date: 26.03.2024, extended by one year with annex dated 2024 Loan amount: EUR 5 000 000 Type of credit: Credit line Interest: 3 M EURIBOR + mark-up Collateral: First rank contractual mortgage of a property with an area of 39 998 sq. m., owned by MONBAT AD, for the purpose of building a bipolar battery manufactory. First rank pledge on 50 829 042 shares in line with the Commercial Law with voting rights with a nominal price of BGN 1, owned by MONBAT AD as shares in Monbat Recycling EAD. First rank pledge on current and future receivables available in all open accounts held by MONBAT AD. Utilized amount as of 31.12.2023 at the amount of BGN 9 779 150 (EUR 5 000 000) - entirely short-term. 11. Investbank AD Contract dated 25.02.2022 Maturity date: 26.03.2024, extended by one year with annex dated 2024 Loan amount: EUR 5 000 000 credit line Interest: 3 M EURIBOR + mark-up Collateral: First rank contractual mortgage of a property with an area of 48489,11,537 an area of 782 sq. m., owned by Monbat Recycling EAD. First rank pledge on current and future receivables available in all open accounts held by MONBAT AD, Monbat Recycling EAD and Prista oil Holding EAD Pledge on receivables on all borrower's accounts opened in the bank; insurance with BAEZ, covering the exposure under the contract up to EUR 4 million. Utilized amount as of 31.12.2023 at the amount of BGN 9 779 150 (EUR 5 000 000) - entirely short-term 12. UBB AD Contract 20F-00102 dated 01.02.2023 Maturity Date 01.08.2024 Loan amount: EUR 437 840 EU Type of credit: Investment Interest: 3 M EURIBOR + mark-up Collateral: Pledge on fixed assets for the amount of 437 840 EUR situated on an area of 48489,5,597, which are gas installation Utilized amount as of 31.12.2023 at the amount of BGN 644 041 or EUR 329 292 – entirely short-term. 13. UBB AD Contract 20F-00103 dated 01.02.2023 Maturity Date 01.02.2024 Loan amount: EUR 97 298 EUR Type of credit: VAT credit line Interest: 3 M EURIBOR + mark-up Collateral: Pledge on receivables Utilized amount as of 31.12.2023 at the amount of BGN 0 46 14. UBB AD Contract 23F-000767 dated 21.08.2023 Date of maturity: 14.08.2024 Credit amount: 3 500 000 EU Type of credit : Investment Type Interest: 1 М EURIBOR+add ons Collateral: Land property with identifier 72624.603.372 property of Start AD Utilized amount as of 31.12.2023 at the amount of BGN 6 441 125 or EUR 3 293 295 – entirely short-term). 15. Bank credit card accounts with credit limits BGN 50 000 and utilized amounts as of 31.12.2023 at the amount of BGN 10 thousand. Summary of loan contracts from other financial institutions: 16. UBB Interlease EAD Contract dated 18.10.2019 Maturity Date: 19.11.2024 Amount of Credit: EUR 1 271 250 credit line Interest: Fixed interest Collateral: assembly line for lead-acid accumulators and lead-acid furnace Utilized amount to 31.12.2023 in the amount of EUR 211 875 or BGN 414 391, from which BGN 414 391 is short-term. 17. UBB Interlease EAD Contract dated 29.11.2019 Maturity Date: 29.12.2024 Amount of credit: EUR 219 999 Type of credit: credit line Interest: Fixed interest Collateral: Rectifier Systems Type CDR400/420V-8CH - 4 pcs. and rectifier Systems Type CDR400/360V-10CH -5 pcs. Utilized amount to 31.12.2023 in the amount of EUR 44 000 or BGN 86 056, entirely short- term. 18. UBB Interlease EAD Contract dated 26.11.2021 Maturity Date: 26.11.2025 Amount of credit: EUR 420 366 credit line Interest: Fixed interest Collateral: 13 machines Utilized amount to 31.12.2023 in the amount of EUR 170 100 or BGN 332 687 from which BGN 164 000 is short-term. 19. UBB Interlease EAD Contract dated 27.09.2022 Maturity Date: 31.10.2024 Amount of credit: EUR 114 735 Type of credit: credit line for fixed assets Interest: 3M EURIBOR + mark-up Collateral: Computer equipment Utilized amount to 31.12.2023 in the amount of EUR 47 018 or BGN 91 960, entirely short- term. 47 20. UBB Interlease EAD Contract dated 11.11.2022 Maturity Date: 30.04.2027 Amount of credit: EUR 1 094 544 Type of credit: credit line for fixed assets Interest: 3M EURIBOR + mark-up Collateral: Machines and equipment Utilized amount up to 31.12.2023 - EUR 858 292 or BGN 1 678 673 of which BGN 557 000 is short-term. 21. OTP Leasing Contract dated 18.01.2023 Maturity Date: 05.11.2028 Amount of credit: EUR 96 150 Type of credit: credit line for fixed assets Interest: Variable reference interest rate + mark-up Collateral: Installation for reverse osmosis Utilized amount up to 31.12.2023 - EUR 96 150 or BGN 188 000 of which BGN 21 000 is short-term. Loan contracts of the subsidiaries of MONBAT AD, in their capacity as borrowers: 1. UBB AD Contract N 1317/18.03.2016 Borrower: Start AD Maturity date: 31.01.2028 Loan amount: EUR 4 500 000. Type of loan: working capital Interest: 3 М EURIBOR+mark-up Collateral: Land with identification № 72624.603.300., including the buildings on it. Land with identification 72624.603.190., including the buildings on it. Land with identification 72624.603.191., including the buildings on it. Land with identification 72624.603.193., including the buildings on it. Land with identification 72624.603.196., including the buildings on it. Special pledge on fixed assets. Pledges on bank accounts held with the UBB AD. Balance as of 31.12.2023 at the amount of EUR 4 500 000 or BGN 8 801 235 2. UBB AD Contract 27.09.2022 Borrower: Start AD Maturity date: 25.03.2028 Loan amount: EUR 546 000 investment loan Interest: 3 М EURIBOR+mark-up Collateral: fixed assets Balance as of 31.12.2023 at the amount of EUR 463 764 or BGN 907 043. 3. UBB AD Contract. 23F00100 /01.02.2023 г Borrower: Start AD Maturity date:. 01.08.2024 Loan amount: EUR 332 114 investment loan Interest : 3 М EURIBOR+ mark up Collateral: Long-term assets Utillized amount as of 31.12.2023 BGN 383 099 (EUR 195 875). 48 4. UBB AD Contract. 23F00101 /01.02.2023 Borrower: Start AD Maturity date: 01.02.2024 Loan amount: EUR 73 803 VAT credit line Interest: 3 М EURIBOR+ mark up Collaterall: Pledge on all current and future credit and debit cards in UBB AD Utillized amount as of 31.12.2023 BGN 11 286 (EUR 5 770). 5. Raiffeisen Bank SA Romania Contract N 80046/IS/2017 Borrower: SC Monbat Recycling S.R.L. Maturity date: 29.11.2024 Loan amount: EUR 5 000 000 Type of loan: Credit line Interest: 1 - week EURIBOR + mark-up Collaterals: Corporate guarantee issued by Prista Oil Holding EAD as well as - recycling equipment for recycling of scrap batteries Special pledge on receivables and inventory Balance as of 31.12.2023 at the amount of EUR 3 996 769 or BGN 7 817 000. 6. UBB AD Contract from 15.07.2015 Borrower: Monbat Recycling EAD Maturity date: 30.07.2024 Loan amount: EUR 3 000 000 Type of credit: Credit line Interest: 1 М EURIBOR + mark-up Collaterals: first rang pledge on receivables to the bank Third rang pledge on Engitec installation First rang pledge on inventory. Balance as of 31.12.2023 at the amount of EUR 3 000 000 or BGN 5 867 490 7. Eurobank Bulgaria AD Contract N 196/2016 Borrower: Monbat Recycling EAD Maturity date: 31.01.2024, extended to 30.06.2024 with annex dated 2024 Loan amount: EUR 1 500 000 Type of loan: working capital Interest: 3 М EURIBOR +mark-up By annex dated on 27.09.2017 the loan amount is increased up to EUR 2 500 000 Repayment: ongoing basis depending on the amount of available cash. Collateral: First rang on receivables from third parties. Balance as of 31.12.2023 at the amount of EUR 2 404 405 or BGN 4 702 607 8. Raiffeisen Bank Serbia Contract from 15.04.2019 Borrower: Monbat PLC DOO Maturity date: 14.04.2024 Loan amount: EUR 2 000 000 Type of loan: working capital Interest: 1 М EURIBOR +mark-up Collateral: first rang pledge on inventory Balances as of 31.12.2023 at the amount of EUR 2 000 000 or BGN 3 911 660. 49 9. Procredit Bank Serbia Contract from 27.02.2023 Borrower: Monbat PLC DOO Maturity date: 01.03.2028 Loan amount: EUR 700 000 Type of loan: working capital Interest: 1 М EURIBOR +mark-up Collateral: Promissory note issued by the company Balance as of 31.12.2023 at the amount of EUR 641 958 or BGN 1 255 561 10. Procredit Bank Serbia Contract from 30.03.2023 Borrower: Monbat PLC DOO Maturity date: 01.04.2028 Loan amount: EUR 400 000 Type of loan: Revolving Interest: 1 М EURIBOR + mark-up Collateral: Promissory note issued by the company Balance as of 31.12.2023 at the amount of EUR 366 462 or BGN 716 737 11. Procredit Bank Serbia Contract from 24.06.2023 Borrower: Monbat PLC DOO Maturity date: 24.06.2028 Loan amount: EUR 300 000 Type of loan: Revolving Interest: 1 М EURIBOR +mark-up Collateral: Assets Balance as of 31.12.2023 at the amount of EUR 300 000 or BGN 586 749 12. Procredit Bank Serbia Contract from 10.11.2021 Borrower: Monbat PLC DOO Maturity date: 10.11.2024 Loan amount: EUR 1 100 000 Type of loan: working capital Interest: 1 М EURIBOR +mark-up Balance as of 31.12.2023 at the amount of EUR 1 100 000 or BGN 2 151 413 13. MEDIOCREDITO ITALIANO S.P.A. Contract from 30.04.2019 Borrower: Piombifera Italiana Spa Maturity date: 31.03.2029 Loan amount: EUR 3 500 000 Type of loan: working capital Interest: 3M EURIBOR+mark-up Balance as of 31.12.2023 at the amount of EUR 1 925 014 or BGN 3 765 000 14. MEDIOCREDITO CENTRALE SPA Contract from 30.06.2018 Borrower: Piombifera Italiana Spa Maturity date: 08.06.2028 Loan amount: EUR 457 688 Type of loan: working capital Interest: fixed interest rate Balance as of 31.12.2023 at the amount of EUR 0 or BGN 0. 50 15. STB Contract from 13.04.2018 Borrower: Societe Nouvelle des Accumulateurs Nour Maturity date: 30.04.2025 Loan amount: TND 2 500 000 Type of loan: investment Interest: Reference interest rate (TMM)+mark-up Balance as of 31.12.2023 at the amount of BGN 360 514 16. STB Contract from 10.07.2018 Borrower: Societe Nouvelle des Accumulateurs Nour Maturity date: 31.07.2025 Loan amount: TND 1 250 000 Type of loan: investment Interest: Reference interest rate (TMM)+mark-up Balance as of 31.12.2023 at the amount of BGN 240 342 17. STB Contract from 15.06.2022 Borrower: Societe Nouvelle des Accumulateurs Nour Maturity date: 15.03.2024 Loan amount: TND 3 700 000 Type of loan: investment Interest: Reference interest rate (TMM)+mark-up Balance as of 31.12.2023 at the amount of BGN 2 134 266 18. STB Contract from 15.06.2022 Borrower: Societe Nouvelle des Accumulateurs Nour Maturity date: 15.03.2024 Loan amount: TND 4 000 000 Type of loan: working capital Interest: Reference interest rate (TMM)+mark-up Balance as of 31.12.2023 at the amount of 2 307 315 BGN. 19. STB Contract from 13.04.2021 and 10.07.2021 Borrower: Societe Nour Distribution Loan amount: TND 3 500 000 Type of loan: working capital Interest: Reference interest rate (TMM)+mark-up Balance as of 31.12.2023 at the amount of BGN 2 456 998. 20. STB Contract from 10.07.2021 Borrower: Societe Nour Distribution Loan amount: TND 2 000 000 Type of loan: receivables discount/advance line Interest: Reference interest rate (TMM)+mark-up Balance as of 31.12.2023 at the amount of BGN 1 651 998. 51 21. STB Contract from September 2022 Borrower: Societe Nour Recycling Maturity date: 2029 Loan amount: TND 7 300 000 Type of loan: investment loan Interest: Reference interest rate (TMM)+mark-up Balance as of 31.12.2023 at the amount of BGN 3 634 021 22. STB Contract from 15.09.2022 Borrower: Societe Nouvelle des Accumulateurs Nour Maturity date: 15.03.2024 Loan amount: TND 2 300 000 Type of loan: working capital Interest: Reference interest rate (TMM)+mark-up Balance as of 31.12.2023 at the amount of BGN 1 326 706. 23. STB Contract from September 2022 Borrower: Societe Nouvelle des Accumulateurs Nour Maturity date: September 2027 Loan amount: TND 1 890 000 Type of loan: investment loan Interest: Reference interest rate (TMM)+mark-up Balance as of 31.12.2023 at the amount of BGN 576 829 24. STB Contract from September 2022 Borrower: Societe Nouvelle des Accumulateurs Nour Maturity date: March 2024 Loan amount: TND 1 333 000 Type of loan: working capital Interest: Reference interest rate (TMM)+mark-up Balance as of 31.12.2023 at the amount of BGN 768 586 25. STB Contract from September 2022 Borrower: Societe Nouvelle des Accumulateurs Nour Date fo maturity: March 2024 Loan amount 1 000 000 TND Type of credit: working capital Interest: Refferenced interest rate (TMM) + mark up Balance as of 31.12.2023 г.: 255 535 BGN. 26. Others In addition to the bank borrowings described above, STC S.R.L. utilizes secured and unsecured short-term and long-term bank borrowings of various types, structures and maturities, from various banking institutions, amounting to BGN 622 thousand as of 31 December 2023. 52 Loan agreements from other financial institutions: 27. UBB Interlease EAD Contract 0026504/E/30.03.2020 Borrower: Start AD Maturity date: 30.03.2024 Loan amount: EUR 334 779 Type of loan: credit line Interest: fixed Collateral: machinery and equipment for the production of lead-acid batteries Utilized amount as of 31.12.2023 at the amount of EUR 16 588 or BGN 32 443 28. UBB Interlease EAD Contract 0026504/D/13.01.2020 Borrower: Start AD Maturity date: 13.01.2025 Loan amount: EUR 321 557 credit line Interest: fixed Collateral: tooling for casting ConCast grids and rectifier systems. Utilized amount as of 31.12.2023 at the amount of EUR 62 704 or BGN 122 638 29. UBB Interlease EAD Contract 0026504/H/2021/30.06.2021 Borrower: Start AD Maturity date: 30.06.2025 Loan amount: EUR 654 584 Type of loan: credit line Interest: fixed Collateral: BETTER separator for AGM plates and equipment for it Utilized amount as of 31.12.2023 at the amount of EUR 200 036 or BGN 391 236 30. UBB Interlease EAD Contract 0026504/I/2021/21.12.2021 Borrower: Start AD Maturity date: 20.12.2025 Loan amount: EUR 78 845 Type of loan: credit line Interest: fixed Collateral: Check Tester – Short Circuit Utilized amount as of 31.12.2023 at the amount of EUR 40 750 or BGN 79 701. 31. UBB Interlease EAD Contract 0026504/L/2022/29.09.2022 Borrower: Start AD Maturity date: 25.09.2026 Loan amount: EUR 196 297 Type of loan: credit line Interest: fixed Collateral: Cutting machine with templates and drum Utilized amount as of 31.12.2023 at the amount of BGN 108 254 or BGN 211 727. 53 32. UBB Interlease EAD Contract 0026504/N/2022/14.12.2022 Borrower: Start AD Maturity date: 14.12.2027 Loan amount: EUR 50 990 Type of loan: credit line Interest: fixed Collateral: Electrocar, high-lift trucks Utilized amount as of 31.12.2023 at the amount of EUR 37 635 or BGN 73 608. 33. OTP Leasing EOOD Contract 85671 /25.10.23 Borrower: Monbat Recycling EAD Maturity date: 25.10.2027 Loan amount: EUR 775 373 Type of loan: credit line Interest: fixed Collateral Concost Line Utilized amount as of 31.12.2023 at the amount of EUR 760 917 or BGN 1 488 225 34. UBB Interlease EAD Contract 0026504/O/10.04.2023 Borrower: Start AD Maturity date: 05.12.2026 Loan amount: EUR 134 200 Type of loan: credit line Interest: fixed Collateral Horizontal warming tunnel TO 2000 Utilized amount as of 31.12.2023 at the amount of EUR 120 780 or BGN 236 225. 35. VFS Bulgaria ЕООD Contract 2274306 from 07.10.2019 Borrower: Monbat Sped EOOD Maturity date: 16.11.2024 Loan amount: EUR 491 250. Type of loan: credit line Interest: fixed Collateral: 5 pcs. Trucks Volvo Utilized amount as of 31.12.2023 at the amount of EUR 101 862 or BGN 199 225. 36. VFS Bulgaria ЕООD Contract 2454239-4 from 05.06.2020 Borrower: Monbat Sped EOOD Maturity date:16.06.2025 Loan amount: EUR 182 304 Type of loan: credit line Interest: fixed Collateral: 2 pcs trucks Volvo and 2pcs. Trailers Utilized amount as of 31.12.2023 at the amount of EUR 59 710 or BGN 116 782. 54 37. VFS Bulgaria ЕООD Contract 2705097 Borrower: Monbat Sped EOOD Maturity date:16.06.2025 Loan amount: EUR 104 210 Type of loan: credit line Interest: fixed Collateral: Volvo L60H Utilized amount as of 31.12.2023 at the amount of EUR 44 580 or BGN 87 192. 38. VFS Bulgaria ЕООD Contract 3098965 Borrower: Monbat Sped EOOD Maturity date:16.11.2027 Loan amount: EUR 167 220 Type of loan: credit line Interest: 1M EURIBOR + mark-up Collateral: 2 pcs. Trucks Volvo Utilized amount as of 31.12.2023 at the amount of EUR 136 673 or BGN 267 309. 39. VFS Bulgaria ЕООD Contract 3028975 Borrower: Monbat Sped EOOD Maturity date: 31.12.2027 Loan amount: EUR 113 400 Type of loan: credit line Interest: 1M EURIBOR + mark-up Collateral: 5 pcs. Semitrailers Schmitz Utilized amount as of 31.12.2023 at the amount of EUR 92 289 or BGN 180 501. 40. VFS Bulgaria ЕООD Contract 3028965-4 Borrower: Monbat Sped EOOD Maturity date: 16.02.2028 Loan amount: EUR 83 610 Type of loan: credit line Interest: 1M EURIBOR + mark-up Collateral: truck Volvo Utilized amount as of 31.12.2023 at the amount of EUR 71 031 or BGN 138 924. 41. VFS Bulgaria ЕООD Contract 3028965-5 Borrower: Monbat Sped EOOD Maturity date: 16.02.2028 Loan amount: EUR 83 610 Type of loan: credit line Interest: 1M EURIBOR + mark-up Collateral: truck Volvo Utilized amount as of 31.12.2023 at the amount of EUR 71 031 or BGN 138 924. 55 42. VFS Bulgaria ЕООD Contract 3028965B Borrower: Monbat Sped EOOD Maturity date: 16.11.2027 Loan amount: EUR 83 610 Type of loan: credit line Interest: 1M EURIBOR + mark-up Collateral: truck Volvo Utilized amount as of 31.12.2023 at the amount of EUR 71 108 or BGN 139 075. 43. VFS Bulgaria EOOD Contract. 3149823/13.07.2023 Borrower: Monbat Sped EOOD Date of maturity : 16.08.2028 Loan amount 66 600 EUR Type of credit – credit line Interest: 1M EURIBOR + mark up Collaterall: 4 .trailers Utillized amount from 31.12.2023 EUR 62 955 or BGN 123 129. 44. OTP Leasing EOOD Contract 21941360451 Borrower: Monbat Recycling EAD Maturity date: 05.06.2027 Loan amount: EUR 518 500 Type of loan: credit line Interest: fixed Collateral: Plant for pre-treatment by physical methods of PE separator and production of ABS mill. Utilized amount as of 31.12.2023 at the amount of EUR 317 923 or BGN 621 802. 45. UBB Interlease EAD Contract 17803 Borrower: Monbat Recycling EAD Maturity date: 31.07.2026 Loan amount: EUR 585 000 Type of loan: credit line Interest: 3M EURIBOR + mark-up Collateral: Crystalization system Utilized amount as of 31.12.2023 at the amount of EUR 524 849 or BGN 1 026 515. 46. OTP Leasing EOOD Contract 23941384968/13.10.2023 Borrower: Monbat Recycling EAD Maturity date: 13.10.2028 Loan amount: EUR 852 541 Type of loan: credit line Interest:: 3M EURIBOR + mark-up Collateral: Installation for producing tin Utilized amount as of 31.12.2023 at the amount of EUR 827 779 or BGN 1 618 995 56 47. UBB Interlease EAD Contract 17803 D Borrower: Monbat Recycling EAD Maturity date: 06.12.2026 Loan amount: EUR 100 000 Type of loan: credit line Interest: 3M EURIBOR + mark-up Collateral: Steam compressor RBS Utilized amount as of 31.12.2023 at the amount of EUR 90 000 or BGN 176 024 48. Tunisia – car leasing Contract – 5 pcs from 2022 and 3 pcs from 2023 Borrower: Societe Nouvelle des Accumulateurs Nour Maturity date: 2026 Loan amount: TND 511 091 Type of loan: leasing Interest: Reference interest rate Balance as of 31.12.2023 amounted of BGN 343 999. Information on loan agreements concluded by subsidiaries and the ultimate parent company, as borrowers, can be found in the published reports of the respective companies. 9. Information on the loans granted by the issuer, or by their subsidiaries, providing guarantees or assuming obligations in total to one person or his subsidiary, including related parties or name and UIC of the person, the nature of the relationship between the issuer, respectively the person under § 1e of the additional provisions of the POSA, or their subsidiaries and the borrower, the amount of outstanding principal, interest rate, contract date, repayment deadline, the amount of the commitment, specific conditions other than those referred to in this provision, as well as the purpose for which they were granted, in case they were concluded as target. I. Loan contracts of MONBAT AD, in its capacity as lender: Table № 18 As at 31.12.2023 in BGN Thousand 2023 2022 Loan to Monbat Sped EOOD 286 486 Loan to ARTMonbat AD 6 464 4 921 Loan to Holdco Investment EOOD 767 40 Loan to Monbat Trading OOD 2 689 3 276 Loan to Monbat SA Proprietary Ltd - 978 Loan to Torlashka Sreshta EOOD 160 160 Loan to Monbat Eco Project OOD 222 222 Loan to Monbat NBP EAD 1 760 2 700 Loan to Atanas Bobokov 2 369 3 269 Loan to Plamen Bobokov 1 830 1 830 Deposit to Prista Oil Holding EAD 19 751 20 030 Loan to Prista Invest 2016 AD 3 695 3 695 Loan to Advanced Research and Technologies 97 97 Loan to Prista Holdco Cooperatief U.A. 13 - 57 As at 31.12.2023 in BGN Thousand 2023 2022 Loan to Black Star International AD 978 - Loan to STC Srl 293 - Loan to Alliance Energy Companies 700 700 Information about the loan terms is contained in the annual separate financial statements of MONBAT AD. II. Loan contracts of MONBAT AD’s subsidiaries, in their capacity as lenders: • Contract dated 26.02.2020 Loan granted to Recycling Company EOOD Lender: Start AD Utilized principal: BGN 50 000 Maturity term: 1 year Outstanding balance as at 31.12.2023: BGN 50 thousand • Contract dated 06.01.2020 Loan granted to Prista Oil Holding EAD Lender: Start AD Utilized principal: BGN 825 000 Utilized principal: EUR 600 000 Maturity term: 5 years Outstanding balance as at 31.12.2023 BGN 1 014 thousand • Contract dated 2012 Loan granted to Prista Oil Holding EAD Lender: Monbat Recycling EAD Utilized principal: BGN 3 911 thousand Interest rate: 3.5 % annual interest rate. Maturity term: 31.12.2024 Outstanding balance as at 31.12.2023: BGN 4 774 thousand Repayment: no repayment schedule • Contract dated 2019 Loan granted to Prista Oil Holding EAD Lender: Monbat Recycling EAD Deposited amount: BGN 100 thousand Maturity term: on request but no later than 1.12.2024 Interest rate: reference rate + 1.5%, but no less than 3.5% annual interest rate Outstanding balance as at 31.12.2023: BGN 100 thousand Repayment: no repayment schedule • Contract dated 2021 Loan granted to Prista Oil Holding EAD Lender: Monbat Recycling EAD Utilized principal: BGN 180 thousand Interest rate: 3.5% annual interest rate Maturity term: 31.12.2024 Outstanding balance as at 31.12.2023: BGN 180 thousand 58 • Contract dated 2023 Loan granted to Black Star International AD Lender: Monbat Recycling EAD Utilized principal: BGN 102 thousand Interest rate: 6.0% annual interest rate Maturity term: no later than 31.12.2023 Outstanding balance as at 31.12.2023: BGN 102 thousand Information on loan agreements concluded by subsidiaries and the ultimate parent company, as lenders, can be found in the published reports of the respective companies. 10. Information on the use of the funds from a new issue of securities carried out At the end of 2017 the company has issued a new issue of bonds. MONBAT AD, has issued first order corporate convertible bonds with ISIN BG2100023170, issued under the conditions of initial public offering as follows: Principal amount of the issue: EUR 28 015 000 (twenty-eight million and fifteen thousand). Number of bonds: 28 015 (twenty-eight thousand and fifteen). Denomination: EUR 1 000 (one thousand) each Issue Date: 20/01/2018 Maturity Date: 20/01/2025 Type of bonds: convertible, ordinary, registered, dematerialized, interest-bearing, freely transferable, unsecured. Term to maturity: 84 (eighty-four) months. Interest rate: floating rate of 6M EURIBOR plus premium of 300 basis points, but not less than 3.00 % on an annual basis. Interest payment date: 20 January and 20 July of each year during the Maturity Date. If the Interest Payment Date is not a Business Day, the Interest Payment Date shall be postponed to the next Business Day. Amortization: in three installments at the end of the 5th, the 6th, and the 7th year of the life of the bond; at 20%, 30% and 50% of the nominal value, respectively, which corresponds to the following Interest Payment Dates: 20/01/2023, 20/01/2024 and 20/01/2025. In the event of conversion, the principal repayments will be calculated on the basis of the current bond issue's nominal value at the date of the respective principal payment. In this case, the last principal installment at the end of the 7th year will be equalized and will repay the entire outstanding nominal value of the issue, if such outstanding nominal value exists. Conversion option: Each bondholder may request the conversion of the bonds he/she holds according to their current nominal amount at the Conversion Price on the 48th, 66th and 78th month after issuance, corresponding to the following Interest Payment Dates, respectively: 20/01/2022, 20/07/2023 and 20/07/2024. Conversion price: equal to 90% of the weighted average price of a MONBAT AD’s share on the BSE for the six months preceding the respective conversion date. Minimum conversion threshold: 5% of the outstanding nominal amount of all Bonds on each of the respective conversion dates. 59 Call option: The Issuer may redeem the residual outstanding part of the Bond issue on the 60th month after issuance at 101% of the current outstanding principal amount. The date of the Call option corresponds with the interest and principal payment on the 60th month or 20.01.2023 with the call option considering the corresponding 20% principal instalment. On 20.01.2018, the public offering has concluded successfully, and on 29.01.2018, the new bond loan has been declared as concluded in the Commercial Register. “Monbat” AD has raised 28 015 000.00 Euro, representing 54 792 577.45 equivalence in BGN, with fixed exchange rate of BNB 1.95583/ЕUR. Utilization of the funds raised from the bond issue issued by “Monbat” AD has started on 26.06.2018, when “Monbat” AD has taken part in the acquisition of shares in the capital of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 5 400 000 Euro. The next utilization has been conducted on 05.12.2018 when “Monbat” AD has taken part in the acquisition of shares in the capital of “Monbat Recycling” EAD (parent company of Monbat Italy S.R.L), to the amount of 8 000 000 EUR. On 07.12.2018, “Monbat Recyc ling” EAD participated in the increase of capital of „Monbat Italy“S.R.L. (the parent company of Piombifera Italiana) through the acquisition of shares amounting to 8 000 000 EUR. The next utilization has been conducted on 25.03.2019 when “Monbat” AD has taken part in the acquisition of shares in the capital of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 2 227 500 Euro. The next utilization to the amount of 1 340 533 EUR has been conducted on 25.07.2019 when “Monbat” AD acquired 66.66% of the share capital of STC S.r.l. for an effective cash consideration of 1 340 533 EUR and contingent consideration of 236 529 EUR. The next utilization has been conducted on 19.09.2019 when “Monbat” AD has taken part in the acquisition of shares in the capital of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 1 800 000 Euro. The next utilization has been conducted on 11.03.2020 when “Monbat” AD has taken part in the capital increase of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 1 800 000 Euro. The next utilization has been conducted on 26.03.2020 when “Monbat” AD has taken part in the capital increase of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 200 000 Euro. The next utilizations have been conducted on 02.04.2020, 29.04.2020, 13.05.2020 and on 06.08.2020 when “Monbat” AD has taken part in the capital increase of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 700 000 Euro. The next utilizations have been conducted on 27.10.2020, 06.11.2020 and on 11.12.2020 when “Monbat” AD has taken part in the capital increase of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 400 000 Euro. The next utilizations have been conducted on 07.01.2021 and on 22.02.2021 when “Monbat” AD has taken part in the capital increase of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 250 000 Euro. The next utilizations have been conducted on 12.04.2021 and on 28.05.2021 when “Monbat” AD has taken part in the capital increase of “Monbat Holding Germany” GmbH (parent company to EAS Germany GmbH (“EAS”), to a full amount of 250 000 Euro. 60 The next utilization to the amount of 4 100 00 EUR has been conducted in 2021 when “Monbat” AD acquired 23.30% of the share capital of “Societe Nouvelle des Accumulateurs Nour”. Final utilization has been conducted in 2022 to the amount of 1 310 438 EUR (representing only partial amount for the acquisition of the additional shares) when “Monbat” AD acquired at total 60% of the share capital of “Societe Nouvelle des Accumulateurs Nour. 11. Analysis of the ratio between the achieved financial results reflected in the separate financial statement for the financial year, and previously published forecasts for these results The Company has not published a forecast for 2023 on an individual basis. 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 threats and measures that the issuer has undertaken or is to undertake with a view to eliminate them Management of the financial resources is subject to the requirement of achieving maximum efficiency with the simultaneous observance of agreed payment terms both with suppliers and customers. This means the predominant use of own funds which leads to lower financial costs. As a result of such policy related to managing the financial resources, there is reduction in the period for collection of receivables compared to the period for payment of liabilities. This leads to an effective increase of the cash in the entity and to the possibility for the investment costs to be financed without additional financing from banks, which reduces the interest expense. On the other hand, there are finance reserves from unused credit lines, which could be used for both current and investment costs which maintains high liquidity of payments. 13. Assessment of the possibilities for realization of the investment intentions, indicating the amount of the available funds and stating the possible changes in the structure of the financing of this activity In 2024 the management of MONBAT AD plans to implement an investment program as follows: Table № 19 Investment Program 2024, MONBAT AD BGN ('000) EUR ('000) Capacity increase 1 719 879 Increase in production effectiveness and quality 1 329 679 Improvements of infrastructure 97 50 Development of new products 474 243 Total MONBAT AD 3 619 1 851 Group level projects related to software enhancements 1 145 586 Total investment program 2024 4 764 2 437 61 14. Information about occurred during the reporting period changes in the base principles for management of the issuer and its economic group There is no change occurred in the base principles for management of the company. 15. Information about the main characteristics of the applied by the issuer internal controls risk management systems in the process of preparation of the separate financial statements The company has a functioning internal control and risk management system /ICRM system/ that guarantees the efficient functioning of reporting and information disclosure systems. The ICRM system was created and functions also with a view to identify relevant business risks and managing them. Senior management has the main responsibility and role in terms of developing the internal control and risk management system. It performs both managing, directing and ongoing monitoring function. The ongoing monitoring of controls by senior management serves the purpose to assess whether the ICRM system is still suitable for the company in a changed environment, whether it acts as expected and whether it is periodically adjusted to changed conditions. Evaluation of selected areas carried out in this context as a responsibility of the senior management complies with the priorities of the company. Evaluation is also proportionate to the characteristics of the company and the impact of the risks identified. The senior management reports to the audit committee on the main characteristics of the ICRM system and also on key issues, including main incidents established and the respectively approved or applied corrective measures. 16. Information on the changes in the composition of the Board of Directors in 2023 On 12.7.2023, a change in the composition of the Board of Directors was entered in the Commercial Register and the Register of Non-Profit Legal Entities, deleting Florian Huth. As of at 31.12.2023 - members of the Board of Directors are: 1. Chavdar Danev - Chairman of the Board of Directors 2. Petar Hristov Petrov - member of the Board of Directors 3. Evelina Slavcheva - member of the Board of Directors 5. Petar Bozadjiev - member of the Board of Directors 6. Kyle Anderson - member of the Board of Directors 7. Viktor Spiriev - Executive member of the Board of Directors As of 31 December 2023, the Company was represented by Viktor Stanimirov Spiriev - Executive Director and Petar Petrov - Procurator. 62 17. Information on the amount of the remunerations, rewards and/or the benefits of everyone of the members of the management and control bodies for the fiscal year under review, paid by the Company and its subsidiaries, irrespective of whether they have been included in the issuer’s expenses or rise from profit distribution, including: a) received amounts and non-monetary remuneration; b) contingent or deferred remuneration occurred during the year, even if the remuneration is due in a later period; c) amount owed by the issuer or its subsidiaries for payment of pensions, retirement benefit or other similar compensations: In 2023, the members of the Board of Directors of MONBAT AD received remuneration as management personnel by MONBAT AD as follows: Table № 20 Full name Position Gross amount in BGN Net amount in BGN 1 Evelina Pavlova Slavcheva Member of the BoD 40 000 36 000 2 Chavdar Dochev Danev Member of the BoD 40 000 36 000 3 Viktor Stanimirov Spiriev Member of the BoD 40 000 36 000 4 Peter Nikolov Bozadzhiev Member of the BoD 40 000 36 000 5 Petar Hristov Petrov Member of the BoD 40 000 36 000 6 Kyle Patrick Anderson Member of the BoD 40 000 36 000 7 Florian Huth Member of the BoD 40 000 36 000 8 Viktor Stanimirov Spiriev Executive Member of the BoD 737 195 655 903 9 Peter Nikolov Bozadzhiev Group Operations Director 481 418 425 704 10 Petar Hristov Petrov Battery Division Director 279 858 244 300 11 Chavdar Dochev Danev Finance Director for Liaison with Financial Institutions 94 111 84 700 In 2023, the members of the Board of Directors of MONBAT AD received remuneration as management personnel from subsidiaries of MONBAT AD as follows: Table № 21 Name Position Gross BGN Net BGN 1 Petar Nikolov Bozadzhiev Monbat Holding GmbH 87 188 87 188 2 Petar Hristov Petrov START AD 76 000 68 400 3 Florian Huth Monbat Holding GmbH 75 550 75 550 63 18. Information about the owned by the members of the management and of the control bodies, procurators and the senior management shares of the issuer, including the shares held by anyone of them separately or as a percent from the shares of each class, as well as provided to them options on securities of the issuer by the latter – type and amount of the securities over which the options have been set up, price of exercising of the options, purchase price, if any, and term of the options As of 31.12.2023 there are no shares of the capital of MONBAT AD held by members of the Board of Directors. 19. Information about the known to the company agreements (including also after the fiscal year closing) as a result of which changes may occur at a future time in the owned percent of shares or bonds by current shareholders and bondholder The management of the company does not have any information about agreements which may lead to future change of ownership of shares by current shareholders. 20. Information about pending legal, administrative or arbitration proceedings relating to issuer’s liabilities or receivables at the amount of at least 10 percent of its equity; if the total amount of the issuer’s liabilities or receivables under all initiated proceedings exceeds 10 per cent of its equity, information shall be submitted for each procedure separately There are no pending legal, administrative or arbitration proceedings relating to the issuer’s liabilities or receivables at the amount of at least 10 percent of its equity. 21. Information about the investor relations director Daniela Ilcheva Peeva Tel. +359 2 9882413 ; e-mail: investorrelations@monbat.com 1407 Sofia, 32 A Cherni vrah Blvd., fl. 4 22. Other non-financial information A. ECOLOGY MONBAT AD has a responsibility towards the environment, being the largest producer of accumulator batteries in Bulgaria and a dynamically developing public company. The management of MONBAT AD considers the activities directed towards pollution prevention or reduction aimed at achieving a maximum level of human health and environmental protection as a major priority and a crucial factor in the long-term and sustainable development. It is the company’s long-standing practice to provide clear and accurate environmental information on its products, services and activities to customers, suppliers and the general public. 64 The management of MONBAT AD makes efforts to reduce the company’s impact on the environment through: • effective use of electricity and heat power/thermal energy; • minimizing and recycling of waste; • preventing pollution through reducing and minimizing of detrimental emission in the air and water; • using the best available techniques and best management practices when expanding the production; • internal monitoring regarding air, water and soil pollution; Self-control system - the establishment and operation of an internal control system is designed to achieve continuous compliance with the environmental, health and safety regulations based on an Integrated Management System. The self-control system evaluates the efficiency and effectiveness of the management system and the operations of MONBAT AD in general. Pursuant to the requirements of the Law for Healthy and Safe Labor Conditions and the respective subordinate legislation, MONBAT AD has developed an emergency plan to carry out rescue and emergency activities in case of disasters, emergencies and accidents which may occur in the production process. The purpose of the protection plan is to preventively ensure the necessary materials, equipment and resources in order to effectively prevent the consequences of accidents; preparation of the personnel on the site for action; notification and preparation of the personnel; managing the personnel’s activities; procedures for putting the plan into action and informing the competent authorities; means and procedures for notifying, when possible, the endangered population near the site; procedure for carrying out the relevant rescue and emergency activities on the territory of the site; procedures for restoring the activities on the site; ensuring the necessary measures for recreation of the environment. The development strategy of MONBAT AD includes participation in long-term socially useful projects within the environment protection area. The Company has a system for separate waste collection and disposal via building a system of containers for collecting old accumulator batteries through the distributors of MONBAT AD. Waste batteries are among the widespread harmful waste and the company significantly contributes to the environmental protection by collecting, neutralizing and recycling such batteries. The recycled materials, e.g. lead and polypropylene, are re-used in the production of new batteries and thus waste has been efficiently utilized. The company has established the only individual system in Bulgaria for collecting old batteries and operates under its own Program for management of used lead-acid batteries. The Company has successfully passed the certification process under ISO 14001 - an internationally recognized standard defining how a company can create and implement an effective management regarding the environment’s protection. ISO 14001 focuses on the delicate balance between maintaining efficiency and reducing environmental impact by engaging all levels of the organization to achieve both objectives. B. HUMAN RESOURCES The number of the employees of the Company as of 31.12.2023 is 430 (2022: 428). As MONBAT AD is a manufacturing entity, focus is kept on employees involved in the production cycle, providing relevant administrative support. 65 COMPENSATIONS AND BENEFITS The structure of remuneration packages differs among the organizational hierarchy and depends both on the specific position and on the individual’s personal contribution to the value creation in the Company. For all employee grades there are predefined ranges of remuneration. The remuneration of each employee is structured within these limits based on their personal experience, skills, knowledge and performance. Making employees part of the company's economic success, Monbat offers wages that are usually above the average level. PROFESSIONAL DEVELOPMENT MONBAT AD enhances the potential for professional growth and the career development for all employees through training courses and the opportunity to study while working. An additional supplement to the development of employees is the mentoring program for practical knowledge sharing and personal development planning. This is based on assessment results and its main goal is to close the gap between expectations and actual performance. Sometimes even the smallest project can bring you together with colleagues and inspire you to take a step forward. MONBAT AD actively supports all professional and personal development, as well as enhancement opportunities for its employees. GLOBAL WORK Exciting opportunities can look up at your current place of residence or guide you to a new home via MONBAT AD’s relocation program. For all relevant positions the Company supports its candidates with relocation packages based for the respective position. WORK-LIFE BALANCE Individual needs and flexible working conditions complement the personal approach throughout the job-matching process. Placing quality and responsibility at the heart of its operations, MONBAT AD always chooses to support to the utmost its employees in their efforts to deliver high performance, regardless of their field of work. HEALTH MANAGEMENT Regardless of position, location or age, being healthy and active is considered a core value within the Company. As a result, MONBAT AD takes illness prevention and health promotion seriously. The Company has successfully passed the certification process under ISO 45001 - an internationally recognized standard for occupational health and safety. 66 C. NON-FINANCIAL DISCLOSURE In compliance with the requirements of Directive 2014/95/EU of the European Parliament for reporting non-financial information and the provisions of the Accounting Act, an obligation occurs for some of the companies to publish non-financial information independently or as part of the as part of the annual activity reports. This obligation is essential for large entities of public interest, which as of December 31 of the reporting period have surpassed the criteria for average number of employees during the financial year of 500 or more employees. Entities of public interest are: public companies and other issuers of securities; lending institutions; financial institutions; insurers and re-insurers, pension security companies and funds managed by pension security companies; investment intermediaries; commercial companies, which produce, transfer and sell electric and heating power; commercial companies importing, transferring, distributing and transiting natural gas; commercial companies, which provide water supply, sewerage and telecommunication services; “Bulgarian State Railways” EAD and its subsidiary companies. Entities which have net sales revenue of 76 million BGN or carrying amount of the assets of 38 million BGN have been defined as large entities. Based on the principles of the Accounting Act, there is no obligation for MONBAT AD to report non-financial information on a stand-alone basis or as part of the Management Report. The non-financial declaration will be presented as part of the Annual Consolidated report of the Monbat Group. XII. CHANGES IN THE PRICE OF THE COMPANY’S SHARES FOR THE PERIOD The company considers that there is no other information that is not publicly disclosed by the Company and which would be important for shareholders and investors in making an informed investment decision. XIII. INFORMATION UNDER APPENDIX NO 3 OF ORDINANCE NO 2 OF FSC 1. Information for securities which are not listed on the regulated market in Bulgaria or other EU member state As of 31.12.2023 the share capital of MONBAT AD amounts to BGN 39 000 000, divided into 39 000 000 ordinary, registered, dematerialized shares with nominal value of 67 BGN 1.00 each of them. All shares of the company are one class and each share is entitled to one vote at the general assembly of shareholders, the right to receive dividend and a liquidation quota, proportionate to the nominal value of the share. All 39 000 000 shares were registered for trading on the on the "Premium" Market segment from the BSE. No other securities which are not listed on the regulated market in Bulgaria or other EU member state. 2. Information on the direct and indirect holding of 5 or more percent of the voting rights in the company’s general assembly, including data about the shareholders, the amount of their holding and the way the shares are owned As of 31.12.2023 the capital structure of MONBAT AD is the following: Тable № 22 Shareholder Number of shares Percentage of the capital PRISTA OIL HOLDING EAD, Sofia 16 666 371 42.73% PRISTA HOLDCO COOPERATIEF U.A. 8 103 758 20.78% MONBAT TRADING Ltd., Sofia 2 785 650 7.14% UPF Doverie 2 582 864 6.62% MUPF Allianz 2 105 403 5.40% Other individuals and legal entities 6 755 954 17.33% Own shares (33 545) (0.08%) Prista Oil Holding EAD indirectly owns 49.88% of the voting rights in the General Assembly of MONBAT AD. 3. Information regarding the shareholders with special control rights and description of these rights MONBAT AD does not have any shareholders with special control rights. 4. Agreements among the shareholders, which are known to the company and which may result in limitations over the transfer of shares or the voting right The Company is not aware of agreements among shareholders which may result in limitations over the transfer of shares or the voting right. 5. Agreements between the company and its management bodies or employees for payment of compensation upon leaving or dismissing without legal basis or upon termination of the employment relationship for reasons related to tender offering. There are no agreements between MONBAT AD and the members of the Board of Directors and employees of the company for payment of compensation upon leaving or dismissal without legal basis or upon termination of the labor relations for reasons related to tender offering. ………………………………... 29.03.2024 Viktor Spiriev / Executive member of the Board of Directors / 68 INFORMATION UNDER ART. 10, Item 4 of ORDINANCE № 2 OF 09.11.2021 Electronic link to the place on the website of the public company where the internal information under Art. 7 of Regulation (EU) № 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (Market Abuse Regulation) and repealing Directive 2003/6 / EC of the European Parliament and of the Council and Directive 2003 (124 / EC, 2003/125 / EC and 2004/72 / EC of the Commission (OJ L 173/1 of 12 June 2014) (Regulation (EU) № 596/2014) on the circumstances of the past year, or an electronic link to the news agency or other media chosen by the issuer, through which the company publicly discloses inside information. During the period 01.01.2023 - 31.12.2023 MONBAT AD discloses inside information through the information platform x3news.com, available at - http://www.x3news.com as well as on the corporate website of the company, available at https://www.monbatgroup.com/bg 29.03.2024 ………………………………... Viktor Spiriev / Executive member of the Board of Directors / ii CORPORATE GOVERNANCE DECLARATION OF "MONBAT" AD PURSUANT TO THE REQUIREMENT OF THE PROVISIONS OF ART. 100N, PARA. 8 OF THE PUBLIC OFFERING OF SECURITIES ACT 1 1. Information on whether MONBAT AD complies as appropriate with the Corporate Governance Code, approved by the Deputy Chairman, or another corporate governance code MONBAT AD complies as appropriate with the National Corporate Governance Code and operates in full compliance with the principles and provisions of the Code. 2. Information regarding the corporate governance practices, which are applied by MONBAT AD in addition to the National Corporate Governance Code MONBAT AD does not apply other corporate governance practices in addition to the National Corporate Governance Code. 3. Explanation by MONBAT AD as to which parts of the National Corporate Governance Code does not comply with and as to what the grounds for this non-compliance are In 2023 the activities of the Board of Directors of "Monbat" AD were implemented in full compliance with the regulatory requirements set out in the Public Offering of Securities Act and the respective implementing by-laws, in its Articles of Association and the National Corporate Governance Code. The corporate Board of MONBAT AD considers that there are no parts of the National Corporate Governance Code that the company does not comply with. The National Corporate Governance Code is being applied subject to the “comply or explain” principle . This means that the company complies with the Code and in case of any deviation its corporate board should explain the reasons for that. CHAPTER ONE – CORPORATE BOARDS MONBAT AD has a one-tier management system. The Company is being managed by a Board of Directors including the following members as at 31.12.2023: Chavdar Danev – Chairman of the Board of Directors Petar Petrov – Member of the Board of Directors Evelina Slavcheva – Member of the Board of Directors Peter Bozadzhiev – Member of the Board of Directors Kyle Anderson– Member of the Board of Directors Viktor Spiriev – Executive member of the Board of Directors Functions and Obligations The Board of Directors directs and controls the Company in a responsible and independent manner according to the vision, goals and strategies of the company and in the best interest of all shareholders. The Board of Directors monitors the performance of the Company on a quarterly and yearly basis and initiates changes in the management of its activities, when necessary. The Board of Directors treats all shareholders equally, acts in their interest and in a diligent manner. 2 The members of the Board of Directors base their actions on common principles of integrity and managerial and professional competence. The Board has adopted and follows an Ethics Code. The Company has an integrated and functioning risk management system, including internal audit as well as a financial-information system. The Board of Directors has established and controls the integrated functioning of the financial and accounting systems. The Board of Directors provides guidelines, approves and controls the implementation of the company's business plan, the material transactions and all other operations and actions required by the company's by-laws. Pursuant to the requirements of the Public Offering of Securities Act the Board of Directors monitors all material transactions, making them approved. In case of transactions that individually or collectively exceed the thresholds specified under Art. 114, para. 1 of the Public Offering of Securities Act, the Board of Directors prepares a motivated report and adopts a decision to convene a General Meeting of Shareholders, where to be authorized by the shareholders to perform these transactions. In 2023 such transactions have not been executed and therefore no decision of the General Assembly for approval thereof has been adopted. The Board of Directors reports on its activities to the General Meeting of Shareholders by presenting for approval by the shareholders the Annual management Report, the Report on the Implementation of the Remuneration Policy as well as any other enclosures and documents, required by the legislation in force. Election and Removal of Members of the Board of Directors The General Meeting of Shareholders elects and removes members of the Board of Directors in compliance with the law and the company's Articles of Association, while respecting the principles of continuity and sustainability of the Board of Directors' work. Upon proposing new members of the Board of Directors, the principles of compliance of the candidates' competencies with the nature of the company's activities pursuant to the National Corporate Governance Code are being followed. All members of the Board of Directors meet the legal requirements for taking up their duties. The functions and duties of the corporate board as well as its structure and competence are in accordance with the requirements of the Code. The management contracts concluded with members of the Board of Directors specify their duties and tasks, the criteria for their remuneration, their duties of loyalty to the company and the grounds for dismissal. During the financial year under review MONBAT AD has applied the Remuneration policy for the members of the Board of Directors in compliance with the legal requirements for public companies, the objectives, long-term interests and the strategy for the future development of the company as well as in compliance with its financial and economic standing in the context of the national and European economic situation, while respecting the recommendations of the National Corporate Governance Code. 3 In 2023, the company has consistently complied with Remuneration Policies, namely: After the amendments to Ordinance № 48 of the FSC, the company has implemented its Remuneration policy to the Board of Directors in compliance with the regulatory requirements and has adopted an amendment to it by a decision of the General Assembly on 18.09.2020. The remuneration of the members of the Board of Directors and information on their amount are part of the annual individual Management Report of the Board of Directors during the reporting year. The Company discloses a report on the implementation of the remuneration policy which is presented for approval by the General Meeting of Shareholders. Structure and Competence The number of members and the structure of the Board of Directors is specified in the company’s Articles of Association. The composition of the Board of Directors is structured in a way that ensures the professionalism, independence and impartiality of its resolutions related to the management of the company. The functions and obligations of the corporate board as well as its structure and competence are in compliance with the requirements of the Code. The Board of Directors ensure the tasks and obligations of its members are properly distributed. The Board of Directors consists of: • Executive member of the Board of Directors – engaged with the current representation of the company and the day-to-day management of the business processes; • Chairman and Vice chairman of the Board of Directors – engaged with the corporate vision and expanding the markets. • The independent members of the Board of Directors control the functions carried out by executive management and contribute effectively to the company's performance in compliance with the interest of all shareholders and in respect of their rights. The Chairman of the Board of Directors is not an independent director, as the same is representative of the majority shareholder of the company, and in 2023 performed the functions of the Executive Director. Given the current capital structure of the company, the members of the Board of Directors deem appropriate, the Chairman of this body not to be an independent director. The competence, rights and responsibilities of the members of the Board of Directors must comply with the law and the company's by-laws and follow good professional standards and practice. The members of the Board of Directors have the knowledge and experience required for the position they take. Information on the professional qualifications and experience is disclosed yet with the proposal for election of a member of the Board of Directors and the latter I s part of the written materials for the general meeting. After election of the new members of the Board of Directors they are being introduced to the basic legal and financial issues related to the company's activities and performance. Continued professional training of members of the Board of Directors is their constant priority. 4 The members of the Board of Directors are able to devote sufficient time to carry out their tasks and duties although that the company's by-laws do not limit the number of management positions the members of the Board are allowed to hold. These circumstances are being monitored when nominating and electing new members of the Board of Directors. The election of members of the Board of Directors is done through a transparent procedure which ensures timely and complete information regarding the personal and professional qualities of the nominees. As part of the materials for the general meeting where the election of a new member of the Board of Directors is proposed, are presented all declarations, criminal record certificate and CV of the nominee required by the Public Offering of Securities Act and the Commercial Act. When electing members of the Board of Directors, the nominees confirm by means of a declaration or personally to shareholders the correctness of the data and information presented. The election procedure is conducted in open voting and the votes "For", "Against" and "Abstained" are being counted. The voting results are announced with the minutes of the General Meeting of Shareholders. The number of consecutive terms of the members of the Board of Directors provides for the company's efficient functioning and compliance with legal requirements. The company’s by-laws do not limit the number of consecutive terms of the independent Board members but this fact is being observed in the proposal for election of independent members. Remuneration The Board of Directors develops clearly defined and specific remuneration policy with regard to its members which is subject to General Meeting of Shareholders' approval. The policy defines the principles of setting up the remunerations' amount and structure. In accordance with the legal requirements and best corporate governance practices the amount and structure of remuneration account: the obligations, workload, commitment and involvement of the members in the company's management, as well as the contribution of each member of the Board of Directors in the operations and results of the company; the possibility to select and retain qualified and loyal members of the Board of Directors; the necessity for conformity of the interests of the Board members and the long-term interests of the company. Pursuant to the Board Member Remuneration Policy, the Company has not granted any shares, share options or other financial instruments as additional incentives to the Executive Director. The remuneration of the independent directors has been mostly basic remuneration, without additional incentives, and has reflected their participation in meetings, as well as the performance of their tasks regarding the regulation of the operation of the executive management. Description of the terms and conditions in the Remunerations Policy, effective since 18.09.2020 MONBAT AD shall disburse to the Members of the Board of Directors fixed remuneration, the particular amount of which shall be approved by the General Meeting of the shareholders of the Company and the following shall be taken into consideration: • the obligations and the contribution of each Member of the Board in the Company operations and the Company results; 5 • the possibility for recruitment and retention of qualified and loyal Members of the Board; • the existence of consistency in the interests of the members of the Board and the long-term interests of the Company. For 2023, the amount of the fixed monthly remunerations of the members of the Board shall be determined as follows: net monthly remuneration of the members of the Board of Directors, to the amount of 3 000 (three thousand) BGN. The net monthly remuneration of members of the Board of Directors, who are awarded the management and representation of the Company shall be determined with a decision of the General Meeting of the shareholders in the Company. MONBAT AD may pay the members of the Board of Directors additional variable annual remuneration. The variable remuneration is an element of the total remuneration in the form of royalties/bonuses and shall be paid on the grounds of the criteria for evaluation of the performance of the activity. MONBAT AD may pay the members of the Board of Directors additional variable annual remuneration in the form of shares or share options. The application and the performance of this provision shall be deferred until such time that a particular scheme for allocation of additional variable remuneration in the form of shares or stock options with a particular decision of the General Meeting is adopted. The amount of the annual variable remuneration disbursed to the Members of the Board of Directors shall not exceed the sum total of 1 500 000 (one million and five hundred thousand) BGN for the whole Board of Directors. Other than their apportioned part of the variable remuneration, additional bonuses may also be disbursed to the Executive Director, the amount of which shall not exceed 300% (three hundred percent) of the fixed annual gross remuneration of the respective member for the respective year. The variable remuneration of the member of the Board of Directors of MONBAT AD shall be accrued and paid in compliance with the following criteria: • In conjunction with the disbursement of the variable remuneration, financial and non-financial criteria for the results achieved shall be used. The criteria for disbursement of variable remuneration are objective and measurable and shall include indicators which are significant for the long- term operation of the Company, and the criteria shall be measures for a period of three years. Defining and implementation of the criteria, followed on the basis of the increase of the value of a particular indicator over the course of a given period, shall be based on the Compound Annual Growth Rate (CAGR) method. The criteria shall follow the long-term strategic planning of the Company, as communicated with the market and the public, and shall be selected in such a manner that they contribute to the stability and performance of the strategy of the Company over a long term. 6 • The criteria bound with financial indicators shall be selected in compliance with the manner that they reflect the creation of a value by the Company and how this refers to market capitalization. The financial indicators may include, but shall not be limited to, the criteria on the basis of the consolidated profit before taxes, interest, and amortization (EBITDA), growth of consolidated income, consolidated profit, efficiency, and value of a new business. The non-financial criteria are selected in compliance with the strategy of the Company to contribute to stable, inclusive, and sustainable practices in the economy and in society. The non-financial criteria may include, but shall not be limited to, criteria related to clients, employees (such as engagement, leadership, talent development and diversity), length of service in the Company and the Group, operational efficiency, corporate social responsibility and sustainable environment, compliance with the applicable rules and procedures, stable and sustainable development of the Company and the Group in economic, social, and environmental aspect. The Board of Directors on a daily basis should determine the values of performance indicators for each calendar year at the start of the same year on the basis of an analysis of the approved budget and strategy for the following three-year period and offers them for approval by the General Meeting of the shareholders. The assessment regarding the implementation of the financial criteria for results achieved shall be performed on an annual basis by the Board of Directors on the basis of the consolidated financial statement of the Company, certified by a registered auditor. The assessment regarding the implementation of the non-financial criteria for the results achieved, shall be performed on an annual basis by the Board of Directors on the basis of an analysis of the results achieved, based on the assigned non-financial criteria. After performance of the assessment, the Board of Directors shall propose on an annual basis to GMS to determine a particular amount of the variable remuneration for the previous year, for each member of the Board of Directors, including for the Executive Director. The General Meeting of shareholders shall have the right with its own decision to adjust the amount of the variable remuneration designated for disbursement to a particular Member of the Board of Directors in case the Member of the Board of Directors is responsible for a conduct, which was harmful to the Company to a significant extent. The General Meeting of the shareholders may stop the disbursement of up to 50% of the outstanding or non-provided variable remuneration to a particular Member of the Board of Directors in the following cases: • significant impairment of the financial status of the Company on a consolidated basis, which is the result of actions/failure to act by the respective member of the Board of Directors; • the respective member of the Board of Directors shall take part, or shall be responsible for conduct which has resulted in significant losses for the Company, or any of its subsidiaries; • in case of regulatory changes which have necessitated the limitation of the amount of the variable remuneration, subject to disbursement. 7 With a decision of the General Meeting of the shareholders, return of up to 100% of paid or provided variable remuneration to a particular member of the Board of Directors may be requested in the following cases: • the respective member of the Board of Directors has performed actions which are considered as abuse or fraud, including crimes against property against the Company and its subsidiaries; • specific conduct which has resulted in a significant (reputational) harm to the Company or any of its subsidiaries; • the respective member of the Board of Directors shall take part, or shall be responsible for conduct which has resulted in significant losses for the Company, or any of its subsidiaries; • the variable remuneration has been provided on the basis of data presented by the respective member of the Board of Directors, which have subsequently proven to be untrue. With the purpose of achieving stable financial results, the disbursement of 40% of the variable remuneration shall be rescheduled into equal instalments for a period of 3 years, starting as of the date of the decision by GMS. As stated above, disclosure of information on the remunerations of the members of the Board of Directors is done in accordance with the law and the company's by-laws – by means of disclosing the Report on the implementation of the Remuneration Policy and the annual Management Report. Shareholders have easy access to the adopted company policy concerning the determination of remunerations and bonuses of the board members as well as to information about the annual remunerations and variable incentives received by the members through the selected media for information disclosure and the company’s website. Conflict of Interests The members of the Board of Directors avoid and do not admit any real or potential conflict of interests. The procedures for avoidance and disclosure of conflicts of interests are stipulated in the company's by-laws. Members of the Board of Directors immediately disclose conflicts of interest and provide shareholders access to information about transactions between the company and members of the Board of Directors or related parties by presenting a declaration under Art. 114b of the Law on Public Offering of Securities. The Board of Directors has not developed a particular written procedure for avoiding conflicts of interest in case of transactions with interested parties and information disclosure in case of such transactions but controls the execution of material transactions by means of voting and approving such transactions. Committees There is an audit committee functioning in the Company. With regard to the requirements of the legislation in force and based on the criteria set by the legislation, the Board of Directors proposes to the company’s General Meeting of Shareholders an audit committee with a composition that meets the new legislative requirements and the company’s needs. 8 The Audit Committee is established on the basis of written terms of reference, scope of tasks, way of operation and reporting procedures detailed in the Statute of the Audit Committee. CHAPTER TWO – AUDIT AND INTERNAL CONTROL The Board of Directors of MONBAT AD is being assisted by an audit committee. The Audit Committee motivates in writing its proposal for selection of an auditor in the General Meeting, guided by the established requirements for professional conduct. The Board of Directors ensures compliance with applicable independent financial audit law. Regarding the recommendation to selection of an external auditor, the audit committee of the company is led by the rotation principle. The audit committee supervises the internal audit process and monitors the overall relations with the external auditor, including the nature of non-audit services, provided by the auditor of the Company. The company has developed and applies an internal control system that also identifies risks the company might face in its activities and fosters their efficient management. This system also ensures effective functioning of the reporting and disclosure of information systems. Description of the major characteristics of the internal control and risk management systems is presented under item 4 - Description of the main characteristics of the internal control system and the risk management system of the issuer in connection with the financial reporting process of this Corporate Governance Declaration. CHAPTER THREE – SHAREHOLDERS RIGHTS’ PROTECTION The Board of Directors guarantees equal treatment of all company’s shareholders, including minority and foreign investors, protects their rights and facilitates their exercise within the limits permitted by applicable law and in accordance with the company’s Articles of Association. The invitation for the General Meeting of Shareholders contains all the required information under the Commercial Act and the Public Offering of Securities Act and additional information on exercising the right to vote and the possibility to add new items to the agenda pursuant to Art. 223a of the Commercial Act. The Board of Directors provides information to all shareholders on their rights by the information posted on the company's website. The disclosed Articles of Association of the company and the invitation for any particular general meeting of shareholders. Shareholders may exercise their right to vote by proxy or by correspondence. General Meeting of Shareholders All shareholders are being informed about the rules under which the General Meetings of Shareholders shall be convened and held, including voting procedures by means of the Company’s Articles of Association and the invitation for any particular general meeting of the shareholders. The corporate Board provides sufficient and timely information concerning 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. 9 The invitation and the materials for the General Meeting of Shareholders is being disclosed through X3News, the company website, and the corporate profile of MONBAT AD in Facebook thus reaching the public, the Financial Supervision Commission and the regulated securities market. After presenting the invitation and the materials for the General Meeting of Shareholders they are available on the website of the company. The invitation to the General meeting of shareholders is also presented to Central Depository AD. As obvious from the minutes for the General Meetings of Shareholders of the Company, the Board of Directors and the elected chairman ensure that each shareholder is in possession of their right to express opinion and ask questions during the General Meeting of Shareholders, corporate management should. Shareholders holding voting shares have the opportunity to exercise their voting rights directly or through the use of a proxy or by correspondence at the General Meeting of Shareholders. As part of the materials for the General Meeting of Shareholders the Board of Directors provides a sample of a proxy, Proxy voting Rules and Rules for voting through correspondence. Pursuant to the company’s Articles of Association it is possible for the general meeting of the company’s shareholders to also be held by using electronic means. However, this method of exercising the right to vote is not yet used, since it would make the process of convening and holding a general meeting extremely expensive and in view of the small number of shareholders who participate annually in the work of the meeting it appears that the use of this means is economically unjustified. The Board of Directors exercises effective control and ensure that necessary arrangements are made to facilitate voting by authorised representatives (proxies) in accordance with the instructions of the shareholders and in compliance with the law. The Board of Directors appoints an elected commission that registers shareholders for any particular session of the General Meeting of Shareholders and proposes to the General Meeting - a Chairman, Secretary and Teller of the votes. The Chairman and the Secretary of the General Meeting closely monitor the lawful conduct of the General Meeting, including the voting of authorized persons. Upon finding differences between the will of the principal and the vote of the authorized person this fact is recorded in the minutes and the will of the principal is respected. The Board of Directors has prepared and adopted a set of documents for the organization and holding of regular and in extraordinary session of the General Meeting of Shareholders that ensure equal treatment of all shareholders and the right of each shareholder to express its views on the items in the agenda for the General Meeting. The Board of Directors organizes the rules and procedures for conduct of the General Meeting of Shareholders in a manner which does not make the voting procedure unnecessarily difficult or expensive. The Board of Directors encourages the participation of shareholders at the General Meeting of Shareholders and has provided a possibility for remote exercising the right to vote in the General Meeting. The members of the board of Directors attend the sessions of the General Meeting of shareholders. 10 Written materials for the General Meeting of Shareholders The texts in the written materials related to the agenda of the General Meeting of Shareholders are clear, accurate and do not to mislead the shareholders. All proposals concerning major corporate events are presented as separate items on the agenda of the General Meeting of Shareholders, including the proposal for the distribution of profit. The company maintains a special section on its website www.monbatgroup.com describing the rights of shareholders and the rules and procedures for their participation in the General Meeting of Shareholders. The Board of Directors co-operates with shareholders, who have the right under law, in placing additional items on the agenda of the General Meeting and proposing additional decisions on items already on the agenda by undertaking all necessary legal and factual measures to announce the additionally added items on the agenda for a General Meeting that has already been convened. The Board of Directors guarantees the right of all shareholders to be informed on a timely basis about the decisions that have been made at the General Meeting of Shareholders by means of disclosing the minutes of the General Meeting of Shareholders through the selected media agencies and posting the minutes on the company’s website. Equal treatment of shareholders of the same class Pursuant to the provisions of the Articles of Association all shareholders of the same class are being treated equally. The Board of Directors guarantees that enough information is given to the shareholders about the rights all shares give before their acquisition by means of the information posted on the Company’s website as well as by having conversations and personal meetings with the corporate board and/or with the Investor Relations Director. Consultation between shareholders about main shareholder rights The Board of Directors does not hinder shareholders, including institutional investors, to consult each other on matters, related to their main shareholder rights in a manner, which does not allow misuse. Controlling rights shareholders ’ transactions and abusive transactions The Board of Directors of MONBAT AD does not allow transactions of shareholders with controlling rights, which violate the rights and/or legal interests of other shareholders, including when the controlling shareholder is negotiating with themselves. When executing such transactions an explicit resolution of the Board of Directors is necessary, as the interested party does not have the right to vote. In case of any indication for exceeding the statutory thresholds under art. 114, para. 1 of the Public Offering of Securities Act, the Board of Directors prepares a motivated report and initiates convening and holding of a general meeting of shareholders to vote the transactions. In 2023 such transactions have not been executed and such procedures have not been performed. 11 CHAPTER FOUR – DISCLOSURE OF FINANCIAL AND NON – FINANCIAL INFORMATION The Board of Directors has adopted a financial information disclosure policy in compliance with legal requirements and the company's by-laws. In compliance with the adopted policy the corporate board has created and supports a financial information disclosure system The information disclosure system guarantees equal access to information to the addressees (shareholders, stakeholders and the investment community) and does not allow for any abuse of inside information. Inside information is disclosed in the statutory forms, order and terms through selected media agencies. The Company benefits single point of disclosing information electronically, thereby information reaches both in uncorrected form to the public, the FSC and the regulated securities market. Information in uncorrected form and in the same volume is published on the website of the company. Thus, the executive management of the company guarantees that the information disclosure system provides comprehensive, timely, true and understandable information that allows for objective and well-informed decision-making and assessment. The Company announces annually corporate calendar which sets out specific dates for regulated information disclosure and the disclosures related to convening and holding a General Meeting of Shareholders. The executive management and the Board of Directors promptly disclose information about the capital structure of the company and agreements that lead to exercising control, according to its information disclosure rules. Disclosure is made through the means as provided by the Public Offering of Securities Act and its implementing by- laws as well as in compliance with the applicable European regulation. The Board of Directors guarantees through the control exercised over the implementation of the information disclosure policy that the rules and procedures under which are conducted acquisition of corporate control and extraordinary transactions such as mergers and sales of substantial part of the assets are clearly and timely disclosed. Corporate management approves and controls together with the financial director and IR director rules for preparation of annual and interim reports and the procedure for disclosure of information. The Company discloses nonfinancial information on consolidated base pursuant to the Art. 49 of the Accountancy Act . The company has a website www.monbatgroup.com with approved contents, scope and frequency of information disclosed. The content of the website is set in conformity with the requirements of the National Corporate Governance Code. The company has an English version of the corporate website with the same contents. The Company periodically discloses information on the corporate governance. The Board of Directors finds that, with its overall activities in 2023, it has established preconditions for a sufficient transparency in its relations with current shareholders of the company, potential investors, financial mass media and capital market analysts. 12 CHAPTER FIVE – STAKEHOLDERS. SUSTAINABILITY The Corporate board ensures effective interaction with the company's stakeholders. This category includes certain interested parties who are directly influenced by the company and who are in a position to influence the company themselves. MONBAT AD identifies as stakeholders, interested in its activities, all persons/entities which are interested in the economic prosperity of the company: Customers, Workers and employees, creditors, Suppliers and other contracting parties, local community and other interested parties. MONBAT AD regularly discloses non-financial information. The company has developed the following documents: 1. Policy on Safety and Health at Work in MONBAT AD; 2. Quality Policy; 3. Environmental Policy. The company’s policy towards stakeholders is in compliance with the existing laws, based on the principles of transparency, accountability and business ethics. 4. Description of the main characteristics of the internal control system and the risk management system of the issuer in connection with the financial reporting process When describing the general characteristics of the internal control and risk management systems it should be taken into account that neither the Law on Public Offering of Securities nor the National Corporate Governance Code define internal control framework to be followed by the public companies in Bulgaria. Therefore, for the purpose of implementing the companies’ obligations under Art. 100m, para. 8 item 4 of the Public Offering of Securities Act to describe the general characteristics of the systems are used the frames of the International Auditing Standard 315. General description of the internal control and risk management systems There is a functioning internal control and risk management system/the system/ which ensures the effective functioning of the reporting and information disclosure systems. The system was built and functions in order to identify the risks that the company might face in its operation and support their effective management. The Board of Directors has the primary responsibility and role in terms of elaborating the internal control and risk management system. The Board has both managing and guiding function as well as ongoing monitoring function. Ongoing monitoring on the part of the corporate board consists of assessment whether the system is still suitable for the company in the changed environment, whether it acts as expected and whether it is periodically adjusted to the changed conditions. Assessment is proportionate to the characteristics of the company and the influence of the risks identified. 13 Control environment The control environment includes the general management and particular management functions as well as the attitude, awareness and operations of the corporate board responsible for the management in a broad sense and the responsible management in terms of the internal control. • The personal integrity and professional ethics of management and staff. The executive member of the company's Board of Directors (CEO) and those involved in the internal control and risk management process have the necessary knowledge and skills to perform the tasks required by the process, which define an individual's job description. The company's CEO monitors the competency levels for specific jobs and how these levels translate into required skill and knowledge requisites. • Management philosophy and management style. The sense of control in the company is significantly influenced by those charged with general management. The CEO's responsibilities are set out in the company's articles of association and management contract. The Board of Directors of the company is entrusted with the functions of planning, organizing and controlling the overall activities of the company. In addition, the company's Internal Rules for Financial Management and Control allocate functions between the Managing Director and the Chief Accountant in order to operate the procedures for prior control and for the full, true, accurate and timely accounting of all transactions, as well as the double signature system. • An organizational structure that ensures separation of responsibilities, hierarchy and clear rules, rights, obligations and reporting levels. Establishing an appropriate organisational structure involves taking into account key areas of authority and responsibility and appropriate hierarchical levels of accountability and reporting. The Chief Executive Officer shall assess the appropriateness of the Company's organizational structure by proposing to the Company's Board of Directors that such structure be updated to reflect the size and nature of the Company's operations. In assigning authority and responsibilities to other officers of the Company, consideration shall be given to business practices applicable to the sector, the knowledge and experience of the officers and the resources available within the Company. • Human resource management policies and practices. In selecting staff, consideration is given primarily to educational background, previous work experience, past performance and evidence of integrity and ethical conduct. This also reflects the Company's commitment to recruit competent and reliable employees. • Staff competence. Staff shall carry out their work competently, objectively and conscientiously, striving to continuously improve their performance in the interests of the citizen. Employees shall conduct themselves in a manner that does not bring the Company into disrepute, not only in the performance of their duties but also in their public and private lives. In the performance of their duties, employees shall treat everyone with courtesy, manners and respect, respecting the rights and dignity of the individual and avoiding any form of discrimination. 14 Risk management The risk valuation process on the part of the Board of Directors represents the basis regarding the way the corporate board of the Company specifies the risks that need to be managed. The Board of the Company identifies the following types of risks relevant to the Company and its operations: general (systematic) and specific (unsystematic) risks. Systematic risks are related to the macro environment where the company operates, therefore in most cases they are not subject to control by the management team. Unsystematic risks are directly relevant to the Company's operations and depend mainly on the management. In order to minimize their effect the company relies on increasing the efficiency of internal corporate planning and forecasting which provides capabilities to overcome the possible negative consequences of a risk event that has occurred. The general plan of the Company’s management for risk management focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial position of the Company. Each of the risks associated with the country - political, economic, credit, inflation, currency – has its independent significance but their overall consideration and the interaction between them form an overall picture of the economic fundamentals, market conditions, competitive conditions in the country where the company operates. A detailed description of the risks specific to the activities of MONBAT AD is presented in the annual activity report. Control activities The Company has appropriate controls in place as required and assessed by risk assessment and in accordance with regulatory requirements. Pursuant to the requirements of Article 13 of the FINANCIAL MANAGEMENT AND CONTROL IN THE PUBLIC SECTOR ACT and in accordance with the Company's internal rules, control activities are implemented, which include: • dual signature system; • rules for access to assets and information; • policies and procedures for prior control of legality; • Policies and procedures for ongoing monitoring of financial commitments and contracts; • policies and procedures for ex-post performance evaluations; • policies and procedures for the objective, accurate, complete, reliable and timely accounting of all business transactions; • human resources management policies and procedures; • policies and procedures for maintaining personal integrity and professional ethics. 15 Information and communication The information and communication systems developed in the company enable all officials to perform their duties, ensuring traceability of actions and processes. The information system essential for financial reporting purposes, which includes the accounting system, consists of procedures and documentation developed and established for the purpose of: • identifying, collecting and disseminating, in an appropriate form and timeframe, reliable and credible information to enable each official to take specific responsibility; • effective communication that flows horizontally and vertically to all hierarchical levels of the organization; • making clear and precise instructions and directives available to all staff regarding their roles and responsibilities in relation to financial management and control; • implementation of a documentation and document management system containing rules for the compilation, formatting, circulation, use and archiving of documents; • document all operations, processes and transactions to ensure an adequate audit trail for traceability and monitoring; • robust reporting, which includes: levels and timelines for reporting; types of reports to be submitted to management; forms of reporting when errors, irregularities, fraud or abuse are detected. The communication on the part of the Company of the roles and responsibilities in terms of financial reporting and the related important issues, involves understanding of the individual roles and responsibilities related to the internal control. Communication includes such questions as the extent to which the accounting team understands how its activities in the information system for financial reporting are related to the work of the others and the means for reporting on exceptions to the corporate board. Open communication channels help ensure that exceptions are reported and respective actions are undertaken with this regard. Current monitoring of the controls Current monitoring of the controls is a process of evaluating the effectiveness of the results from the internal control functioning over time. It includes timely valuation of the controls effectiveness and undertaking the necessary remedial action. The corporate board carries out current monitoring of the controls through ongoing activities, separate valuations or a combination of both. Ongoing monitoring activities are often built into the normal recurring activities of the company and include regular management and supervisory activities. 16 5. 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 5.1. Information under Article 10, Paragraph 1, Letter "c" of Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 regarding take-over offers Significant direct and indirect shareholdings (including indirect shareholdings through pyramid structures and cross shareholdings) within the meaning of Article 85 of Directive 2001/34/EC As of 31.12.2023 the capital structure of MONBAT AD is the following: Тable № 23 Name of the shareholder Number of shares Percentage of the capital PRISTA OIL HOLDING AD, Sofia 16 666 371 42.73% PRISTA HOLDCO COOPERATIEF U.A. 8 103 758 20.78% MONBAT TRADING Ltd., Sofia 2 785 650 7.14% UPF Doverie 2 582 864 6,62% MUPF Allianz 2 105 403 5.40% Other individuals and legal entities 6 755 954 17.33% Own shares (33 545) (0.08%) Prista Oil Holding EAD and Monbat Trading OOD are related parties and together they hold 49.88 % from the shares and voting rights. 5.2. Information under Article 10, Paragraph 1, Letter "d" of Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 regarding take-over offers. The holders of any securities with special control rights and a description of those rights MONBAT AD does not have any shareholders with special control rights. 5.3. Information under Article 10, Paragraph 1, Letter "f" of Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 regarding take-over offers. Any restrictions on voting rights, such as limitations of the voting rights of holders of a given percentage or number of votes, deadlines for exercising voting rights, or systems whereby, with the company’s cooperation, the financial rights attaching to securities are separated from the holding of securities There are no limitations over the voting rights of any shareholder of MONBAT AD. In order to participate in the General Meeting, shareholders must identify themselves with the documents attesting their identity and representative authority as provided by the law, the Articles of Association and the invitation for the General Meeting and must be registered by the mandate commission on the list of attending shareholders prior to the beginning of the General Meeting. 17 5.4. Information under Article 10, Paragraph 1, Letter "h" of Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 regarding take-over offers The rules governing the appointment and replacement of board members and the amendment of the articles of association Pursuant to the provisions of the Articles of Association, the General Meeting approves the number, elects and releases the Board members and their remunerations as well. According to the Company’s Articles of Association, the Board of Directors is elected for up to five years. The General Meeting of Shareholders may at any time decide to make changes in the number of the members and the composition of the Board of Directors as members of the Board may be re-elected without limitations. Member of the Board of Directors may be a legally capable natural person and legal entity that complies with the law and have the necessary professional qualifications in relation to the activities of the company. 5.5. Information under Article 10, Paragraph 1, Letter "i" of Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 regarding take-over offers The powers of board members, and in particular, the power to issue or buy back shares The Articles of Association of the Company specifies all powers of the Board of Directors. Pursuant to the provisions of the Articles of Association of the Company the Board of Directors does not have the right to decide on a capital increase of the Company. This is done by a resolution of the General Meeting of Shareholders. Pursuant to the Articles of Association of the Company the Board of Directors is authorized to adopt resolutions for buy back procedures of company’s own shares. 6. The composition and functioning of the administrative, managerial and supervisory bodies and their committees MONBAT AD has a one-tier management system. The Company is being managed and represented by a Board of Directors which as of the date of preparing this declaration includes the following members: Chavdar Danev – Chairman of the Board of Directors Petar Hristov Petrov – Member of the Board of Directors Evelina Slavcheva – Member of the Board of Directors Peter Bozadzhiev – Member of the Board of Directors Kyle Anderson– Member of the Board of Directors Viktor Spiriev – Executive member of the Board of Directors 18 The Board of Directors adopts Rules of Procedure and elects a Chairman and Vice Chairman among its members. The Board of Directors holds at least one meeting per 3 months in order to discuss the condition and development of the company. Each board member may request the Chairman to convene a meeting to discuss specific issues. The Board of Directors may pass resolutions if at least half the members are present, whether in person or represented by another member. No present member may represent more than one absent member. The Board of Directors may pass resolutions in absence, if all directors have stated in writing their approval for the resolution. 7. Description of the diversity policy applied as regards the administrative, managerial and supervisory bodies of the issuer in connection with aspects such as age, gender or education and professional experience, the objectives of such diversity policy, its method of application and the results therefrom during the reporting period; when no such policy is applied, the declaration shall contain an explanation regarding the reasons for that The Company has developed a number of internal documents that can be classified as a diversity policy in terms of the Board of Directors in relation to aspects such as age, gender or education and professional experience. Such internal documents are: Rules of Procedure of the Board of Directors, Recruitment Policy, Code of Ethics, Personal Data Processing Rules, Rules on the structure of the internal organization. Each of these documents individually and together with the other documents form the company’s diversity policy in terms of the management and supervisory bodies in relation to aspects such as age, gender or education and professional experience, the objectives of this diversity policy. The internal documents require the company to apply a balanced policy for nominating members of the corporate board who have education and skills that respond to the company’s nature of work, its long-term objectives and business plan. The internal documents of the company encourage establishment of gender balance at all management levels. The Company does not discriminate members of the corporate boards based on the criterion of age. 29.03.2024 …………………………………………. Viktor Spiriev / Executive member of the Board of Directors / iii REPORT OF THE BOARD OF DIRECTORS OF MONBAT REGARDING APPLICATION OF THE REMUNERATION POLICY FOR THE MEMBERS OF THE BOARD OF DIRECTORS IN THE COMPANY, DEVELOPED IN COMPLIANCE WITH THE REQUIREMENTS OF ORDINANCE NO. 48 OF THE FINANCIAL SUPERVISION COMMISSION DATED MARCH 20, 2013 REGARDING REQUIREMENTS TO REMUNERATION The Remuneration Policy has been amended and supplemented most recently with a decision of the General Meeting of the shareholders held on 18.09.2020 1 This report contains an overview of the manner in which the remuneration policy for the members of the Board of Directors has been applied for the accounting year 2023 and a program for application of the policy in the next financial year. This report reflects the factual application of objective principles for formation of the remuneration in view of attracting and retaining qualified and loyal members of the Board of Directors and their motivation to work in the interest of the company and the shareholders, by avoiding a potential and real conflict of interests. The remunerations of the Board of Directors in MONBAT AD for 2023 have been formed only by fixed remuneration. No additional bonuses and variable remunerations have been paid. No changes to the remuneration policy of the Board of Directors of MONBAT AD are stipulated in 2024. Information under article 13 of Ordinance No. 48 of FSC regarding the requirements to the remunerations: 1. Information regarding the decision-making process in determining the remuneration policy, including, if applicable, information about the mandate and the members of the remunerations committee, the names of the external consultants, the services of which have been used in determining the remuneration policy The remuneration policy for the members of the Board of Directors of MONBAT AD, and each of its amendments and supplements shall be developed by the Board of Directors of the company and shall be approved by the General Meeting of the shareholders. The currently effective Policy has been developed by the Board of Directors of the company based on the decision-making procedure by the corporate governance, designated in the Statute of the Company. In compliance with the regulatory requirements, the Policy has been adopted by the regular annual meeting of the shareholders, held on 27.06.2016 and has been amended with a decision of the General Meeting of the shareholders dated 18.09.2020. When developing the remuneration policy for the members of the Board of Directors of MONBAT AD, all regulatory requirements have been complied with, as well as the recommendations of the National Corporate Governance Code. According to the current remuneration policy for the members of the Board of Directors of MONBAT AD, the company has not established a remunerations committee. For determining the Policy, the Board of Directors of MONBAT AD has not used external consultants. The remuneration policy for the members of the Board of Directors of MONBAT AD has the objective of establishing objective criteria in determining the remunerations of corporate governance of the company, in view of attracting and retaining qualified and loyal members of the Board and incentivizing them to work in the interest of the company and the shareholders, by avoiding potential and real conflict of interests. During the financial year, MONBAT AD applies the remuneration policy for the members of the Board of Directors in compliance with the regulatory requirements for public companies, the objectives, the long-term interests and the strategy for future development of the company, as well as its financial and economic status in the context of the national and European economic juncture, according to the recommendations of the National Corporate Governance Code. 2 2. Information about the relative burden of the variable and fixed remuneration of the members of the managing and regulatory bodies According to the effective remuneration policy for the members of the Board of Directors of MONBAT AD during the reporting financial year, the company has paid to the members of the Board of Directors fixed remuneration, the amount of which has been approved by the General Meeting of the shareholders of the Company. Given the financial and economic condition of the company, as well as given the commitment of the members of the Board of Directors of MONBAT AD, for the financial year 2023, the amount of the monthly remunerations of the members of the Board shall be determined as follows: net monthly remuneration of the members of the Board of Directors – equal to BGN 3 000. During the reporting year, the members of the Board of Directors of MONBAT AD have not received variable remuneration. 3. Information regarding the criteria for the results achieved, on the basis of which options on shares, shares of the company, or another type of variable remuneration are provided, and an explanation on how the criteria set forth in article 14, paragraphs 2 and 3 of Ordinance 48 contribute to the long-term interests of the company According to the effective remuneration policy, an option for providing shares or options on shares as a type of additional remuneration of the members of the Board of Directors has been stipulated. The provision of article 2.4 of the Policy stipulates the possibility of MONBAT AD to pay to members of the Board of Directors additional variable annual remuneration in the form of shares or options over shares, as well as the application and implementation of this provision shall be postponed until such time that the General Meeting of shareholders approved a particular scheme for allocation of additional variable remuneration in the form of shares or options over shares. 4. Explanation of the methods applied for assessment of fulfilment of the criteria for the achieved results During the reporting year, the members of the Board of Directors of MONBAT AD have only received fixed remuneration. 5. Clarification regarding the dependency between the remuneration and the results achieved According to the current Remuneration Policy, the Board of Directors shall determine on an annual basis the values of the performance indicators for each calendar year at the start of the same year on the basis of an analysis of the approved budget and strategy for the following three-year period and offers them for approval by the General Meeting of the shareholders. In 2023 no new performance indicators have been proposed and approved. During the expired year, the members of the Board of Directors of MONBAT AD have not received variable remuneration. 3 6. The main payments and justification of the annual bonus disbursement and/or scheme for disbursement of all other non-financial additional remunerations During the reporting year, the members of the Board of Directors of MONBAT AD have only received fixed remuneration. The General Meeting of the shareholders of the Company has not adopted a decision for accrual or payment and additional remuneration of the members of the Board of Directors for 2023. 7. A description of the main characteristics of the scheme for additional voluntary pension security and information regarding the paid and/or outstanding payables by the company to the benefit of the director for the respective financial year, when applicable As regards to the members of the Board of Directors of MONBAT AD, there is no commitment by the company for additional voluntary pension insurance by members of the board and the company does not have obligations for making instalments to the benefit of directors for the reporting financial year. 8. Information about the periods for repayment of variable remunerations According to the current Remuneration Policy, the payment of the variable remuneration shall be made by having 60% of the remuneration accrued for the respective year being paid after a decision by the general meeting of the shareholders, respectively 40% of the remuneration accrued for the respective year, shall be paid in equal instalments for a term of 3 years, starting as of the date of taking the decision by the general meeting of the shareholders for its provision. During the reporting year, the members of the Board of Directors of MONBAT AD have not received variable remuneration. 9. Information about the remuneration policy when terminating the agreements According to the current remuneration policy for the members of the Board of Directors of MONBAT AD, the following terms and conditions and compensations have been stipulated in terminating the agreement only with the company executive director, namely in case of termination of the agreement with an executive director prior to the expiration of the term, for which it has been concluded, due to a cause other than the fault of that member, the Company shall owe liquidated damages according to the stipulations in the Agreement, but the general amount of the remuneration shall not exceed the paid annual fixed gross remunerations of the person for the past two years. 4 10. Information about the period in which the shares may not be transferred and options over shares may not be exercised in variable remunerations based on shares In case the General Meeting of the shareholders has adopted the particular scheme for allocation of additional variable remuneration in the form of shares or options over shares, it shall also include rules regarding the period in which the shares may be transferred and the options over shares may not be exercised. The respective rules shall be compliant with both the regulations and with the interests of the company. 11. Information about the policy for preservation of a particular number of shares to the end of the mandate of the members of the managing and regulatory bodies after expiration of the period set forth in article 10 In case the General Meeting of the shareholders has adopted a particular scheme for allocation of additional variable remuneration in the form of shares or options over shares, it shall also include rules regarding the policy for retention of a certain number of shares until the expiration of the mandate of members of the Board of Directors. 12. Information about the agreements of the members of managing and regulatory bodies, including the term of each agreement, the term of the advance notice for termination and details regarding compensations and/or other outstanding payments in case of advance termination The mandate of the members of the Board of Directors is 5 years and it starts from the time of registering those in the Commercial Register. At the time of drafting this document no mandates that have been expired. All remunerations of the members of the Board of Directors have been designated in compliance with the remuneration policy for the members of the Board of Directors and the decision of the General Meeting. The liquidated damages payable for the pro-term termination of agreements by members of the Board of Directors shall be completed in accordance with the remuneration policy for the members of the Board of Directors. 13. The complete amount of the remuneration and of the other tangible incentives of the members of the Board of Directors for the respective financial year For 2023, the members of the Board of Directors of the Company, the following remunerations have been paid: 5 Table № 24 Full name Position Gross amount in BGN Net amount in BGN 1 Evelina Pavlova Slavcheva Member of the BoD 40 000 36 000 2 Chavdar Dochev Danev Member of the BoD 40 000 36 000 3 Viktor Stanimirov Spiriev Member of the BoD 40 000 36 000 4 Peter Nikolov Bozadzhiev Member of the BoD 40 000 36 000 5 Petar Hristov Petrov Member of the BoD 40 000 36 000 6 Kyle Patrick Anderson Member of the BoD 40 000 36 000 7 Florian Huth Member of the BoD 40 000 36 000 8 Viktor Stanimirov Spiriev Executive Member of the BoD 737 195 655 903 9 Peter Nikolov Bozadzhiev Group Operations Director 481 418 425 704 10 Petar Hristov Petrov Battery Division Director 279 858 244 300 11 Chavdar Dochev Danev Finance Director for Liaison with Financial Institutions 94 111 84 700 For 2023, the members of the Board of Directors of the Company have not received other material incentives. 14. Information for the remuneration of each person, who has been a member of the managing or regulatory body in a public company for a particular period of time during the respective financial year: a) the complete amount of the paid remuneration for the entity for the respective financial year The complete amount of the paid remunerations to the members of the Board of Directors has been indicated in article 13 of this report. No material incentives have been paid. No other types of remuneration have been calculated, other than the fixed remuneration. b) the remuneration and other tangible and intangible incentives received by the person by companies from the same group In 2023, the members of the Board of Directors of MONBAT AD received remuneration as management personnel from subsidiaries of MONBAT AD as follows: Table № 25 Name Position Gross BGN Net BGN 1 Petar Nikolov Bozadzhiev Monbat Holding GmbH 87 188 87 188 2 Petar Hristov Petrov START AD 76 000 68 400 3 Florian Huth Monbat Holding GmbH 75 550 75 550 6 c) remuneration received by the person in the form of profit allocation and/or bonuses and grounds for allocating them In 2023, none of the members of the Board of Directors of MONBAT AD has received remuneration by the Company in the form of allocation of profit and/or other bonuses. d) all additional payments for services provided by the person outside of its regular functions, when such payments are permitted according to the contract concluded with that person Petar Hristov Petrov – member of the Board of Directors of MONBAT AD has received in 2023 net remuneration for employment with MONBAT AD as a Battery Division Director to the amount of BGN 312 700. Petar Bozadzhiev – member of the Board of Directors of MONBAT AD has received in 2023 net remuneration for employment with MONBAT AD as a Group Operations Director and Manager of Monbat Holding GmbH to the amount of BGN 512 892. Chavdar Danev - member of the Board of Directors of MONBAT AD received in 2023 net remuneration for employment with MONBAT AD as Financial Director for relations with financial institutions to the amount of BGN 84 700. Florian Huth - member of the Board of Directors of MONBAT AD until 12.07.2023 received in 2023 net remuneration as Manager of Monbat Holding GmbH to the amount of BGN 75 550. e) the paid and/or accrued compensation as regards to suspension of his functions during the last financial year In 2023 no remuneration has been paid as regards to suspension of functions by a member of the Board of Directors. f) total assessment of all non-financial benefits, equal to remunerations outside of the ones indicated in letters a through e In 2023 no member among the members of the Board of Directors of MONBAT AD has received non-financial benefits, equal to remunerations, outside of the ones indicated in letters “ a ” through “ d ” . g) information regarding all loans provided, payments to social and living costs and guarantees by the company, or by its affiliates, or other companies, which are the subject of consolidation in its annual financial statement, including data regarding the outstanding unpaid portion and interests In 2023, there have been no payments to social and living costs and guarantees to members of the Board of Directors by the company, or its affiliates, or other entities, which are the subject of consolidation in its annual financial statement. 7 15. Information regarding the shares and/or the options over shares and/or other incentive schemes based on shares: a) number of the offered options on shares, or shares provided by the company during the respective financial year and the conditions under which they have been offered and provided, respectively; b) number of options exercised over shares during the respective financial year and for each of them, the number of shares and the price of exercising the option, or the value of the interest rate under the scheme for incentivizing based on shares as at the end of the financial year; c) number of non-exercised options over shares as at the end of the financial year, including data regarding their price and date of exercising, and material terms and conditions for exercising rights; d) all changes in terms and conditions on existing options over shares, adopted during the financial year; Both in 2023 and in previous reports, additional variable annual remuneration has been paid in the form of shares or options on shares. Respectively, the General Meeting of the shareholders has not approved a particular scheme for allocation of additional variable remuneration in the form of shares or options over shares. 16. Annual change in the remuneration, the results of the company and the average amount of the remunerations based on full-time employment of other company employees, who are not directors, as a minimum during the past five financial years, presented jointly in a manner that allows comparison. Table № 26 Year 1.Gross remuneration of all members of the BoD for the year in BGN 2.Average monthly remuneration for a member of the BoD for the year in BGN 3.Financial result of MONBAT AD – net profit in BGN 4. Gross remuneration based on full – time employment of company employees – not directors for the year in BGN 5.Average monthly remuneration based on full-time employment of company employees – not directors for the year in BGN 2018 1 353 706 14 101 9 732 000 10 118 388 2 092 2019 1 243 537 12 953 6 981 000 11 900 565 2 163 Change 2019 to 2018 (%) -8.14% -8.14% -28.27% 17.61% 3.39% 2020 1 096 333 15 226 5 356 000 13 144 654 2 321 Change 2020 to 2019 (%) -11.84% 17.55% -23.28% 10.45% 7.28% 2021 1 198 192 17 620 1 196 000 13 806 767 2 342 Change 2021 to 2020 (%0,00%) 9.29% 15.72% -77.67% 5.04% 0.92% 2022 974 166 11 597 1 219 000 13 178 654 2 334 Change 2022 to 2021 (%) -18.70% -34.18% 1.92% -4.55% -0.33% 2023 1 017 194 13 041 2 908 000 14 843 645 2 611 Change 2023 to 2022 (%) 4.42% 12.45% 138.56% 12.63% 11.85% 8 17. Information regarding exercising the option to request refund of variable remuneration. During the past year, the option of requesting refund of variable remuneration has not been exercised. 18. Information about all deviations from the procedure for application of the remuneration policy in conjunction with extraordinary circumstances set forth in article 11, paragraph 13, including for clarification of the nature of the extraordinary circumstances and indication of the particular components, which are not applied. In 2023 no extraordinary circumstances have occurred, in conjunction with which the company has deviated from the procedure of applying the Remuneration Policy. 19. Program for application of the Remuneration Policy for the next financial year. The Company shall agree to follow the underlying rules in the remuneration policy for the members of the Board of Directors of MONBAT AD regarding disbursement of remunerations for the following financial year. The management is of the opinion that the current principles underlying in the policy for determining the remunerations are effective. The members of the Board of Directors accept that in case of significant change in the business environment, the financial indicators and risks, and in relation to the requirements set forth in article 11, paragraph 4 of Ordinance No. 48, dated March 20, 2013, the Remuneration Policy shall be reviewed and the changes stipulated shall be proposed for voting by the general meeting of the shareholders, of which the public shall be informed in compliance with the provisions of the Law on Public Offering of Securities. Taking into consideration the prevailing economic situation in which the company shall exercise its activity in 2024, the Board of Directors does not consider it expedient to determine the values per performance indicators in 2024, in view of receiving additional variable remuneration. 29.03.2024 …………………………………………. Viktor Spiriev / Executive member of the Board of Directors / iv DECLARATION under Art. 100n, para. 4, item 4 of the PUBLIC OFFERING OF SECURITIES ACT The undersigned, 1. Viktor Spiriev– Executive member of the Board of Directors of MONBAT AD 2. Petya Belnikolova – Chief accountant of MONBAT AD DECLARE that, to the best of our knowledge: 1. The 2023 annual separate financial statement prepared in accordance with the applicable set of accounting standards gives a true and fair view of the assets, liabilities, financial position and profit of MONBAT AD. 2. The 2023 activity report includes a fair review of the development and the performance of the business and the position of MONBAT AD together with a description of the principal risks and uncertainties that the company faces. 29.03.2024 Declarers: 1. Viktor Spiriev 2. Petya Belnikolova 1 Grant Thornton OOD A 26, Cherni Vrah Blvd, 1421 Sofia A 111 Knyaz Boris I Blvd., 9000 Varna T (+3592) 987 28 79, (+35952) 69 55 44 F (+3592) 980 48 24, (+35952) 69 55 33 E office@bg.gt.com W www.grantthornton.bg INDEPENDENT AUDITOR’S REPORT To the shareholders of MONBAT AD Sofia, 32А, Cherni Vrah Blvd. Report on the Audit of the Separate Financial Statements Qualified Opinion We have audited the separate financial statements of „Monbat“ AD („the Company“), which comprise the separate statement of financial position as of 31 December 2023 and the separate statement of profit or loss, separate statement of comprehensive income, separate statement of changes in equity and separate statement of cash flows for the year then ended, and notes to the separate financial statements, comprising material accounting policy information and other explanatory information. In our opinion, except for the possible effects of the matter described in the “Basis for Qualified Opinion” section of our report, the accompanying separate financial statements give a true and fair view of the financial position of the Company as of 31 December 2023, its financial performance and cash flows for the year then ended, in accordance with International Financial Reporting Standards (IFRS), as adopted from the EU and Bulgarian legislation. Basis for Qualified Opinion As of 31 December 2023, the Company has overdue trade receivables from Ukrainian counterparties with carrying value of BGN 7 987 thousand, of which BGN 5 469 thousand are overdue more than two years and BGN 2 518 thousand are overdue more than one year. No payments have been received as of the date of this report. We were unable to obtain sufficient appropriate audit evidence regarding the recoverability of these trade receivables. We conducted our audit in accordance with International Standards on Auditing (ISA). Our responsibilities under these standards are further described in the “Auditor’s Responsibilities for the Audit of the Separate Financial Statements” section of our report. We are independent of the Company in accordance with the International Code of Ethics for Professional Accountants (including International Independent Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), together with the ethical requirements of Bulgarian Independent Financial Audit Act, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion. Key Audit Matters Key audit issues are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the “Basis for Qualified Opinion” section we have determined the matters described below to be the key audit matters to be communicated in our report. 2 Related parties of Monbat AD: disclosure and assessment of the recoverability of receivables from related parties The disclosures of the Company regarding the related parties, as well as the assessment of the recoverability of receivables from them are presented in notes 36 and 37.1 to the separate financial statements. Key audit matter How this matter was addressed during the audit The Company's operations include significant transactions and balances with related parties, as presented in notes 36 and 37 to the separate financial statements. The identification of the relationships and the nature of the transactions are essential for the completeness and appropriateness of the presentation and disclosure of related parties. This process requires management to analyse the contractual arrangements, as well as specific facts and circumstances, on the basis of which to assess the financial impact of the transactions, balances and necessary disclosures. As of 31 December 2023, the carrying amount of the receivables from related parties is BGN 87 342 thousand, which is 24% of the total assets of the Company. Of these, BGN 30 119 thousand are loans and receivables from the group of the ultimate parent company Prista Oil Holding AD, which is outside the group of Monbat AD. IFRS 9 requires the Company to determine at each reporting date the impairment loss of its financial assets, based on a change, if any, in the credit risk of the financial instrument. As disclosed in note 37.1 “Related party receivables” to the separate financial statements, the Company has determined that no impairment loss on loans and trade receivables from related parties outside the Group of "Monbat" AD is required, based on the assessment of the recoverability as of 31 December 2023. This assessment is related to a complex analysis and various judgements made by Company's management regarding the expected time and amount of repayments by related parties, based on different scenarios, as well as considerations for the existence of additional non-operational sources of repayment (e.g. possible sales of businesses or assets other than the main activity). Management's analysis and judgements focus on the recoverability assessment scenario that includes repayment over a period of time and is based on the projected cash flows of Prista Oil Group's lubricants business for the period 2024-2028, as well as assessment of the dividend distribution capacity of Monbat Group, based on its projected cash flows for the same five- year period. Due to the significance of the disclosures and balances of loans and trade receivables from related parties, as well as the annual assessment of their recoverability, including complex analysis and multiple assumptions by Company's management, we have identified this area as a key audit matter. In this area, our audit procedures included, among others: • analysis of the Company's contractual agreements with related parties, as well as specific facts and circumstances, in order to identify the nature of the transactions and their effect on the financial condition and results of operations of the Company; • receipt of confirmation letters on related party transactions and balances, as well as management’s statements , which we analysed in the context of the available documentation for these transactions; • analysis of certain documents and registers selected by us in order to identify relationships and transactions with related parties that have not been previously identified or disclosed by management; • we focused on the assessment of the presentation and disclosure of transactions and balances with related parties in view of their consistency with our understanding of the business model of the Company, as well as the results of our audit procedures in other relevant areas; • regarding management's assessment of the recoverability of loans and receivables from related parties outside Monbat Group, we included our internal valuation specialists in the audit procedures, and focused in particular on: - gaining an understanding of the different scenarios considered by management in their analysis of recoverability and assessing the applicability of the methods used, in particular, discounted cash flows in the scenario that includes repayment over a period of time; - analysis of the projected cash flows for the period 2024 - 2028 of the lubricants business of Prista Oil Group by reviewing the reasonableness of the key assumptions used such as revenue, expenses, profitability before interest, taxes and depreciation against historical data and industry data. We also performed a test for the relevance of the recoverability of Prista Oil loans and receivables, using an estimate of the value of Prista Oil Group's equity using market analogues and net assets methods, as well as an analysis of the sensitivity of Prista Oil's ability to repay amounts due to assumptions about adverse effects on its operating activities. We also considered the availability of additional non-operational sources of repayment 3 (e.g. possible sales of businesses or assets outside the main business), which are included as other considerations in the analysis of recoverability by management. - assessment of the dividend capacity of the Monbat Group, based on projected cash flows for the period 2024-2028, by analysing the reasonableness of key assumptions such as income, expenses, earnings before interest, taxes and depreciation against historical data and data from the industry. We also took into account the history of distributed dividends and the dividend distribution policy of Monbat Group. • procedures for assessment of the adequacy of Company’s disclosures in the attached separate financial statements regarding related parties, including the assessment of the recoverability of loans and receivables from them. Information Other than the Separate Financial Statements and Auditor’s Report Thereon Management is responsible for the other information. The other information consists of the annual separate activity report, including the corporate governance statement and the report on the implementation of the remuneration policy prepared by management in accordance with the Accounting Act, Public Offering of Securities Act and other applicable legal requirements, but does not include the separate financial statements and our auditor’s report thereon. Our opinion on the separate financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the separate financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the separate financial statements or whether our knowledge obtained in the audit may indicate that there is a material misstatement or otherwise the other information appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. As described in the "Basis for Qualified Opinion" section of this report, we were unable to obtain sufficient appropriate audit evidence on the matter identified in this section. Accordingly, we are unable to determine whether the other information does not contain material misstatement in this regard. Responsibilities of Management and Those Charged with Governance for the Separate Financial Statements Management is responsible for the preparation and fair presentation of these separate financial statements in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU and Bulgarian law, and for such internal control system as management deems necessary to enable the preparation of the separate financial statements that are free from material misstatements, whether due to fraud or error. In preparing the separate financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process of the Company. Auditor’s Responsibilities for the Audit of the Separate Financial Statements Our objectives are to obtain a reasonable degree of assurance as to whether the separate financial statements as a whole do not contain material misstatements, whether due to fraud or error, and to issue an audit report that includes our audit opinion. A reasonable level of assurance is a high level of assurance, but there is no guarantee that an audit performed in accordance with ISA and the Independent Financial Audit Act will always reveal material misstatement, where such exists. Incorrect readings may arise as a result of fraud or error and 4 are considered material if it could reasonably be expected that they, alone or as a whole, could influence the economic decisions of consumers made on the basis of this financial statement. report. As part of our audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: − identify and assess the risks of material misstatement in the separate financial statements, whether due to fraud or error, develop and perform audit procedures in response to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our audit opinion. The risk of not disclosing material misstatement resulting from fraud is higher than the risk of material misstatement resulting from error, as fraud may include collusion, falsification, intentional omissions, introductory statements the auditor's misrepresentation, as well as neglect or circumvention of internal control; − obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control; − evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management; − conclude on the appropriateness of management's use of the accounting base based on the going concern assumption and, based on the audit evidence obtained, whether there is material uncertainty about events or conditions that could give rise to significant doubts about the Company's ability to continue to operate as a going concern. If we conclude that there is material uncertainty, we are required to draw attention in our audit report to the disclosures related to this uncertainty in the separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our audit report. However, future events or conditions may cause the Company to cease to operate as a going concern; − evaluate the overall presentation, structure and content of the separate financial statements, including the disclosures, and whether the separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements In addition to our responsibilities for reporting under ISAs, described above in section “Information Other than the Separate Financial Statements and Auditor’s Report Thereon”, regarding the annual separate activity report, we have performed the additional procedures contained in the Guidelines of the professional organisation of certified public accountants and registered auditors in Bulgaria - Institute of Certified Public Accountants (ICPA). The procedures on the existence, form and contents of the other information have been carried out in order to state whether the other information includes the elements and disclosures in accordance with Chapter Seven of Bulgarian Accountancy Act and Article 100m, paragraph (10) in relation to Article 100m, paragraph (8), subparagraphs (3) and (4) of Bulgarian Public Offering of Securities Act, as well as Article 100m, paragraph 14 in relation to Article 116c, paragraph (1) of Bulgarian Public Offering of Securities Act. Statement Pursuant to Article 37, Paragraph (6) of Bulgarian Accountancy Act Based on the procedures performed, we describe the outcome of our work: (a) the information in the annual separate activity report is consistent with the separate financial statements for the same reporting period, on which we have issued qualified opinion in the section “Report on the Audit of the Separate Financial Statements” above; (b) the annual separate activity report is prepared in accordance with the applicable legal requirements; 5 (c) as a result of the acquired knowledge and understanding of the Company's activities and the environment in which it operates, we have not identified cases of material misstatement in the annual separate activity report, except for the possible effect described in "Information Other than the Separate Financial Statements and Auditor’s Report Thereon " in "Report on the Audit of the Separate Financial Statements"; (d) the corporate governance statement for the financial year contains the required information in accordance with the applicable legal requirements, including Article 100m, paragraph (8) of Bulgarian Public Offering of Securities Act; (e) the report on the implementation of the remuneration policy has been prepared in accordance with the requirements of the Ordinance pursuant to Article 116c, paragraph 1 of Bulgarian Public Offering of Securities Act and the information in it is consistent with the separate financial statements for the same reporting period. Statement Pursuant to Article 100m, Paragraph (10) of Bulgarian Public Offering of Securities Act Based on the procedures performed and our knowledge of the Company and the environment in which it operates, in our opinion, there is no material misstatement in the description of the main characteristics of the internal control system and of the risk management system of the Company in connection with the financial reporting process and also in the information pursuant to Article 10, paragraph 1, items “c”, “d”, “f”, “h” and “i” of Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids, which are included in the corporate governance statement, being a component of the annual management report. Additional reporting concerning the audit of financial statements in connection with Article 100m, paragraph (4), subparagraph (3) of Bulgarian Public Offering of Securities Act − Statement on Article 100m, paragraph 4, subparagraph (3), item "b" of Public Offering of Securities Act Related party transactions are disclosed in note 36 to the separate financial statements. Based on the performed audit procedures on related party transactions as part of our audit of separate financial statements as a whole, no facts, circumstances or other information have come to our attention that caused us to conclude that the related party transactions are not disclosed in the accompanying separate financial statements for the year ended on 31 December 2023, in all material respects, in accordance with the requirements of IAS 24 „Related Party Disclosures “. The results of our audit procedures on related party transactions were taken into consideration for the purposes of issuing an auditor’s opinion on the separate financial statements as a whole, not for issuing a separate opinion only on related party transactions. − Statement on Article 100m, paragraph (4), subparagraph 3, item "c" of Public Offering of Securities Act Our responsibilities for audit of the separate financial statements as a whole, described in our report in section „Responsibilities of the Auditor for the Audit of Separate Financial Statements“, include assessment whether the financial statements present fairly the significant transactions and events. Based on the performed audit procedures on the significant transactions, which are fundamental to the separate financial statements for the year ended on 31 December 2023, no facts, circumstances or other information have come to our attention that caused us to conclude that there are instances of unfair presentation and disclosure in accordance with the requirements of IFRS, as adopted by the European Union. The results of our audit procedures on the significant transactions and events of the Company, which are material to the separate financial statements, were taken into consideration for the purposes of issuing an auditor’s opinion on the separate financial statements as a whole, not for issuing a separate opinion only on the significant transactions. Reporting on compliance of the electronic format of the separate financial statements included in the annual separate financial report on the activity under Art. 100n, para 4 of Bulgarian Public Offering of Securities Act with the requirements of ESEF Regulation In addition to our responsibilities and reporting under ISA, described above in the section "Auditor's Responsibilities for the Audit of the Separate Financial Statements", we have followed the procedures in accordance with the Guidelines on Issuing of Audit Opinion regarding the Implementation of the European Single Electronic Format ( ESEF) for the financial statements of companies whose securities are admitted to trading on a regulated market in the European Union (EU)" of Bulgarian Institute of Chartered Accountants (ICPA) in Bulgaria". These procedures include verifying the electronic file format and whether the human readable part of it corresponds to the audited separate financial statements and expressing an opinion regarding the compliance of the electronic format of the separate financial statements of Monbat AD for the year ending 31 December 2023, contained in the electronic file “ 213800ZH4VUOQOUVYX93-20231231-BG- 6 SEP .xhtml“ , 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 with regard to regulatory technical standards on the specification of a single electronic reporting format (“ESEF Regulation”). Based on these requirements, the electronic format of the separate financial statements included in the annual separate financial report on the activity under Art. 100n, para. 4 of Bulgarian Public Offering of Securities Act, must be submitted in XHTML format. The management of the Company is responsible for the application of the requirements of ESEF Regulation when preparing the electronic format of the separate financial statements in XHTML. Our opinion is only regarding the electronic format of the separate financial statements included in the electronic file “213800ZH4VUOQOUVYX93-20231231-BG-SEP .xhtml“ and does not include the other information contained in the annual separate financial report on the activity under art. 100n, para. 4 of Bulgarian Public Offering of Securities Act. Based on the performed procedures, our opinion is that the electronic format of the separate financial statements of the Company for the year ended 31 December 2023, contained in the attached electronic file “213800ZH4VUOQOUVYX93-20231231-BG-SEP .xhtml“ , on which we are issuing a qualified audit opinion, has been prepared in all material respects in accordance with the requirements of the ESEF Regulation. Reporting Pursuant to Article 59 of Bulgarian Independent Financial Audit Act in relation to Article 10 of Regulation (ЕС) № 537/2014 In accordance with the requirements of Bulgarian Independent Financial Audit Act and in relation with Article 10 of Regulation (ЕС) № 537/2014, we report additionally the information as follows: − Grant Thornton OOD was appointed as statutory auditor of the separate financial statements of "Monbat" AD for the year ended on 31 December 2023 by the general meeting of shareholders, held on 29 June 2023, for a period of one year. − The audit of the separate financial statements of the Company for the year ended on 31 December 2023 of the Company represents fourth, consecutive year of continuous commitment for statutory audit of this company, performed by us. − In support of the audit opinion, we have provided in the "Key Audit Matter" section a description of the most significant assessed risks, a summary of the auditor's response and important observations regarding those risks, where appropriate. − We confirm that our audit opinion is consistent with the additional report to the audit committee of the Company, which was provided in accordance with Article 60 of Bulgarian Independent Financial Audit Act. − We declare that prohibited non-audit services referred to in Article 64 of Bulgarian Independent Financial Audit Act were not provided. − We confirm that we remained independent of the Company in conducting the audit. − For the period for which we were engaged as statutory auditors, we have not provided any other services to the Company and its controlled undertakings in addition to the statutory audit. Mariy Apostolov Silvia Dinova Managing partner Registered auditor responsible for the audit Grant Thornton Ltd., registered № 032 Audit firm 29 March 2024 Bulgaria, Sofia, 26, Cherni Vrah Blvd.