Monbat AD

Annual Report (ESEF) • May 9, 2024

Monbat AD ENG - 213800ZH4VUOQOUVYX93 - 2023 213800ZH4VUOQOUVYX932022-01-012022-12-31213800ZH4VUOQOUVYX932023-01-012023-12-31213800ZH4VUOQOUVYX932023-12-31213800ZH4VUOQOUVYX932022-12-31213800ZH4VUOQOUVYX932022-12-31ifrs-full:IssuedCapitalMember213800ZH4VUOQOUVYX932022-12-31ifrs-full:SharePremiumMember213800ZH4VUOQOUVYX932022-12-31ifrs-full:StatutoryReserveMember213800ZH4VUOQOUVYX932022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember213800ZH4VUOQOUVYX932022-12-31ifrs-full:RetainedEarningsMember213800ZH4VUOQOUVYX932022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800ZH4VUOQOUVYX932022-12-31ifrs-full:NoncontrollingInterestsMember213800ZH4VUOQOUVYX932023-01-012023-12-31ifrs-full:IssuedCapitalMember213800ZH4VUOQOUVYX932023-01-012023-12-31ifrs-full:SharePremiumMember213800ZH4VUOQOUVYX932023-01-012023-12-31ifrs-full:StatutoryReserveMember213800ZH4VUOQOUVYX932023-01-012023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember213800ZH4VUOQOUVYX932023-01-012023-12-31ifrs-full:RetainedEarningsMember213800ZH4VUOQOUVYX932023-01-012023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800ZH4VUOQOUVYX932023-01-012023-12-31ifrs-full:NoncontrollingInterestsMember213800ZH4VUOQOUVYX932023-12-31ifrs-full:IssuedCapitalMember213800ZH4VUOQOUVYX932023-12-31ifrs-full:SharePremiumMember213800ZH4VUOQOUVYX932023-12-31ifrs-full:StatutoryReserveMember213800ZH4VUOQOUVYX932023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember213800ZH4VUOQOUVYX932023-12-31ifrs-full:RetainedEarningsMember213800ZH4VUOQOUVYX932023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800ZH4VUOQOUVYX932023-12-31ifrs-full:NoncontrollingInterestsMember213800ZH4VUOQOUVYX932021-12-31ifrs-full:IssuedCapitalMember213800ZH4VUOQOUVYX932021-12-31ifrs-full:SharePremiumMember213800ZH4VUOQOUVYX932021-12-31ifrs-full:StatutoryReserveMember213800ZH4VUOQOUVYX932021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember213800ZH4VUOQOUVYX932021-12-31ifrs-full:RetainedEarningsMember213800ZH4VUOQOUVYX932021-12-31ifrs-full:OtherEquityInterestMember213800ZH4VUOQOUVYX932021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800ZH4VUOQOUVYX932021-12-31ifrs-full:NoncontrollingInterestsMember213800ZH4VUOQOUVYX932021-12-31213800ZH4VUOQOUVYX932022-01-012022-12-31ifrs-full:IssuedCapitalMember213800ZH4VUOQOUVYX932022-01-012022-12-31ifrs-full:SharePremiumMember213800ZH4VUOQOUVYX932022-01-012022-12-31ifrs-full:StatutoryReserveMember213800ZH4VUOQOUVYX932022-01-012022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember213800ZH4VUOQOUVYX932022-01-012022-12-31ifrs-full:RetainedEarningsMember213800ZH4VUOQOUVYX932022-01-012022-12-31ifrs-full:OtherEquityInterestMember213800ZH4VUOQOUVYX932022-01-012022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember213800ZH4VUOQOUVYX932022-01-012022-12-31ifrs-full:NoncontrollingInterestsMember213800ZH4VUOQOUVYX932022-12-31ifrs-full:OtherEquityInterestMemberiso4217:BGNxbrli:sharesiso4217:BGN MONBAT AD Annual Consolidated Financial Statements Annual Consolidated Management Report Independent Auditor’s Report 31 December 2023 Table of contents Page Consolidated Financial Statements Consolidated statement of profit and loss 1 Consolidated statement of comprehensive income 2 Consolidates statement of financial position 3 Consolidated statement of changes in equity 6 Consolidated statement of cash flows 8 Notes to the consolidated financial statements 9 Annual consolidated management report i Consolidated corporate governance declaration of Monbat AD of Art. 100n, Para.8 of the Law on Public Offering of Securities ii Consolidated non-financial declaration and information under Art. 8 of the Taxonomy Regulation iii Declaration under Art. 100n, para. 4 of the Law on Public Offering of Securities iv Monbat AD Consolidated Financial Statements 31 December 2023 1 The accompanying notes on pages 9 to 123 are an integral part of the consolidated financial statements. Consolidated statement of profit or loss Note 2023 2022 BGN ‘000 BGN ‘000 Revenue from contracts with customers 28 383 547 369 661 Other operating income 28.1 4 076 13 639 Cost of materials 29.1 (254 971) (258 637) Hired services expenses 30 (38 367) (38 856) Employee benefits expenses 22.1 (48 377) (44 844) Depreciation and amortization expenses 8, 10, 11 (22 245) (20 235) Cost of goods sold and other current assets 29.2 (3 813) (4 180) Changes in finished goods and work-in-progress 4 811 1 996 Capitalization of internally constructed tangible fixed assets 10 111 2 976 Gain on sale of non-current assets 31 3 9 Impairment of financial assets 16 (383) (481) Other expenses 32 (7 118) (6 336) Operating profit 17 274 14 712 Income from investments accounted for using the equity method - 46 Financial instruments income 33 2 640 1 074 Loss on revaluation of investment to fair value - (225) Finance costs 34 (13 242) (9 217) Finance income 34 3 936 1 906 Other financial items 35 (277) 355 Profit before tax 10 331 8 651 Income tax expense 13 (5 811) (1 669) Profit for the year from continuing operations 4 520 6 982 Profit / (Loss) for the year from discontinued operations 6 1 521 (3 031) Profit for the year 6 041 3 951 Profit / (loss) for the year, attributed to: Non-controlling interest (269) (583) Owners of the parent 6 310 4 534 Earnings per share: BGN BGN Basic earnings per share from continuing operations 36 0.12 0.19 Basic earnings / (loss) per share from discontinued operations 37 0.04 (0.07) Basic earnings per share 36 0.16 0.12 Monbat AD Consolidated Financial Statements 31 December 2023 2 The accompanying notes on pages 9 to 123 are an integral part of the consolidated financial statements. Consolidated statement of comprehensive income 2023 2022 BGN 000 BGN000 Profit for the year 6 041 3 951 Other comprehensive income: Items that will be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations (2 479) (164) Other comprehensive loss for the year (2 479) (164) Total comprehensive income for the year 3 562 3 787 Total comprehensive income/(loss) for the year, attributed to: Non-controlling interest (586) (583) Owners of the parent 4 148 4 370 Monbat AD Consolidated Financial Statements 31 December 2023 3 The accompanying notes on pages 9 to 123 are an integral part of the consolidated financial statements. Consolidated statement of financial position Assets Note 31 December 2023 31 December 2022 BGN ‘000 BGN ‘000 Non-current assets Property, plant and equipment 10 182 402 184 380 Intangible assets 8 16 236 13 889 Goodwill 9 3 349 3 419 Right-of-use assets 11 4 135 3 822 Investments in associates accounted for using the equity method 5 2 877 2 733 Financial assets measured at fair value through other comprehensive income 12 68 71 Other non-current receivables 101 161 Non-current assets 209 168 208 475 Current assets Inventory 14 106 258 105 398 Trade receivables 16 69 963 64 856 Related party receivables 38 55 780 52 902 Tax receivables 17 8 705 10 261 Other receivables 18 3 574 5 350 Advances 5 095 4 432 Trade loan receivables 15 158 149 Income tax receivables 31 619 Cash and cash equivalents 19 12 717 8 137 Current assets 262 281 252 104 Assets, included in disposal groups, classified as held for sale 6 33 157 33 618 Total current assets 295 438 285 722 Total assets 504 606 494 197 Monbat AD Consolidated Financial Statements 31 December 2023 4 The accompanying notes on pages 9 to 123 are an integral part of the consolidated financial statements. Consolidated statement of financial position (continued) Equity and liabilities Note 31 December 2023 31 December 2022 BGN ‘000 BGN ‘000 Equity Share capital 20.1 38 955 38 962 Share premium 20.2 28 403 28 425 General reserves 20.3 69 056 69 056 Foreign currency translation reserve (8 496) (6 334) Retained earnings 79 279 76 969 Equity attributable to owners of the parent 207 197 207 078 Non-controlling interest 14 342 14 928 Total equity 221 539 222 006 Liabilities Non-current liabilities Convertible bond 24 26 872 42 265 Long-term borrowings 23 30 101 31 165 Fair value of conversion option 24 - 5 280 Deferred tax liabilities 13 3 281 4 172 Government grants 23.3 211 598 Lease liabilities 11 2 815 2 346 Non-current payables to personnel 22.3 1 303 1 116 Provisions 21 264 302 Related party payables 38 - 7 Non-current liabilities 64 847 87 251 Monbat AD Consolidated Financial Statements 31 December 2023 5 The accompanying notes on pages 9 to 123 are an integral part of the consolidated financial statements. Consolidated statement of financial position (continued) Liabilities Note 31 December 2023 31 December 2022 BGN ‘000 BGN ‘000 Current Short-term borrowings 23 131 385 108 320 Trade payables 25 39 228 35 456 Convertible bond 24 17 815 11 818 Fair value of conversion option 24 2 640 - Current payables to personnel 22.2 5 147 4 698 Contract liabilities 27 6 188 6 503 Provisions 21 3 358 3 443 Tax liabilities 26 1 833 2 666 Lease liabilities 11 1 442 1 539 Corporate income tax payable 13 4 058 59 Government grants 23.3 357 341 Other payables 27 1 086 7 084 Derivatives 27 - 364 Related party payables 38 31 404 Current liabilities 214 568 182 695 Liabilities, included in disposal groups, classified as held for sale 6 3 652 2 245 Total current liabilities 218 220 184 940 Total liabilities 283 067 272 191 Total equity and liabilities 504 606 494 197 Monbat AD Consolidated Financial Statements 31 December 2023 6 The accompanying notes on pages 9 to 123 are an integral part of the consolidated financial statements. Consolidated statement of changes in equity All amounts are presented in BGN ‘000 Share capital Share premium General reserves Foreign currency translation reserve Retained earnings Total equity attributable to owners of the parent Non-controlling interest Total equity Balance as of 1 January 2023 38 962 28 425 69 056 (6 334) 76 969 207 078 14 928 222 006 Dividends - - - - (4 000) (4 000) - (4 000) Reacquired own shares (7) (22) - - - (29) - (29) Transaction with owners (7) (22) - - (4 000) (4 029) - (4 029) Profit for the year - - - - 6 310 6 310 (269) 6 041 Other comprehensive loss for the year - - - (2 162) - (2 162) (317) (2 479) Total comprehensive income for the year - - - (2 162) 6 310 4 148 (586) 3 562 Balance as of 31 December 2023 38 955 28 403 69 056 (8 496) 79 279 207 197 14 342 221 539 Monbat AD Consolidated Financial Statements 31 December 2023 7 The accompanying notes on pages 9 to 123 are an integral part of the consolidated financial statements. Consolidated statement of changes in equity (continued) All amounts are presented in BGN ‘000 Share capital Share premium General reserves Foreign currency translation reserve Retained earnings Other reserves Total equity attributable to owners of the parent Non-controlling interest Total equity Balance as of 1 January 2022 38 989 28 538 69 056 (6 170) 76 527 1 408 208 348 1 360 209 708 Dividends - - - - (5 500) - (5 500) - (5 500) Non-controlling interest arising on business combinations - - - - - - - 14 151 14 151 Reacquired own shares (27) (113) - - - - (140) - (140) Transaction with owners (27) (113) - - (5 500) - (5 640) 14 151 8 511 Profit for the year - - - - 4 534 - 4 534 (583) 3 951 Other comprehensive loss for the year - - - (164) - - (164) - (164) Total comprehensive income for the year - - - (164) 4 534 - 4 370 (583) 3 787 Other changes - - - - 1 408 (1 408) - - - Balance as of 31 December 2022 38 962 28 425 69 056 (6 334) 76 969 - 207 078 14 928 222 006 Monbat AD Consolidated Financial Statement 31 December 2023 8 The accompanying notes on pages 9 to 123 are an integral part of the consolidated financial statements. Consolidated statement of cash flows Note 2023 2022 BGN ‘000 BGN ‘000 Operating activities Cash receipts from customers 402 772 402 126 Cash paid to suppliers (325 494) (325 397) Cash paid to employees and social security institutions (52 288) (47 234) Proceeds from tax refunds, net 11 509 14 965 Payments of corporate income tax (1 490) (5 229) Proceeds from grants 4 057 3 730 Other payments for operating activities (382) (2 598) Net cash flow from operating activities 38 684 40 363 Investment activities Purchase of non-current assets (22 760) (25 377) Loans granted (2 209) (2 340) Loan repayment received 866 694 Interest received 134 126 Acquisition of subsidiaries and associates net of cash and cash equivalents 4, 5 (465) (10 020) Proceeds from sale of financial assets 33 - 1 956 Advance received for the sale of subsidiary - 5 526 Other proceeds from investing activities 202 - Net cash used in investing activities (24 232) (29 435) Financing activities Proceeds from borrowings 40 265 391 242 130 Repayment of borrowings 40 (248 568) (240 459) Repayment of convertible bond (10 959) - Payment on leases 11 (2 154) (1 869) Interest paid (9 890) (5 717) Payments for reacquisition of shares (29) (140) Dividends paid 36.2 (3 992) (5 434) Proceeds from issue of shares belonging to non-controlling interest - 353 Other proceeds from financing activities 587 18 Net cash from financing activities (9 614) (11 118) Net change in cash and cash equivalents 4 838 (190) Cash and cash equivalents, beginning of year 9 050 9 025 (Loss)/profit from exchange difference (177) 215 Cash and cash equivalents, end of year included in disposal groups 6 994 913 Cash and cash equivalents, end of year from continuing operations 19 12 717 8 137 Monbat AD Consolidated Financial Statements 31 December 2023 9 Notes to the consolidated financial statements 1.General information and nature of operations The main activities of Monbat AD (Parent company) and its subsidiaries (“The Group”) 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; recycling of lead and lead containing alloys. The parent company Monbat AD (“The Company”) has the same main activity. The Company is registered as a joint stock company under company file 4636/1999 of the Sofia City court, UIC 111028849. During the period there was no change in the name of the parent company Monbat AD. The headquarters of the Company is: Bulgaria, Sofia, 32 A Cherni Vrah Blvd. The Company’s registered address is: Bulgaria, Sofia, 32 A Cherni Vrah Blvd. The principal place of the Company’s activity is the town of Montana, 76 ‘Industrialna’ str. The correspondence address is: 32A Cherni Vrah bld., Sofia. The Company was registered at the Bulgarian stock exchange on 22.12.2006 with stock symbol MONB. The Company is managed through a one-tier management system consisting of Board of Directors. As of 31.12.2023 the Board of Directors of the Parent company is the following: 1. Chavdar Dochev Danev – Chairman 2. Viktor Stanimirov Spiriev – Executive member 3. Petar Nikolov Bozadjiev 4. Petar Hristov Petrov 5. Evelina Pavlova Slavcheva 6. Kyle Anderson As of 12.07.2023 Florian Huth is not a member of the Board of Directors. As of 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., located in the Netherlands. 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. Monbat AD Consolidated Financial Statements 31 December 2023 10 Information related to the name, country of settlement, shareholding and voting rights of each subsidiary included in the consolidation is provided under note 4 “Basis of consolidation”. The activity of neither of the subsidiaries part of the Group is not restricted with a deadline or a terminated participation. 2.Basis of preparation of the consolidated financial statements The consolidated financial statements of the Group have been prepared on a historical cost basis, except for derivative financial instruments that are measured at fair value. The consolidated financial statements are presented in Bulgarian leva (BGN), which is also the functional currency of the Group. All amounts are presented in thousands of Bulgarian leva (BGN ‘000) (including the comparative information for 2022), unless otherwise stated. In addition, when there is a retrospective restatement or reclassification of items in the consolidated financial statements, the Group presents an additional statement of financial position at the beginning of the earliest presented period. Statement of compliance with IFRS, as adopted by the EU The consolidated financial statements of the Group (“financial statement”) 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. Basis of consolidation The consolidated financial statements comprise the financial statements of the Group as of 31 December 2023. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has: •Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee) •Exposure, or rights, to variable returns from its involvement with the investee •The ability to use its power over the investee to affect its returns. Monbat AD Consolidated Financial Statements 31 December 2023 11 Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: •The contractual arrangement(s) with the other vote holders of the investee •Rights arising from other contractual arrangements. •The Group’s voting rights and potential voting rights. The Group re-assesses whether it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. Profit or loss and each component of other comprehensive income (OCI) are attributed to the owners of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses, and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognized in profit or loss. Any investment retained is recognized at fair value. Monbat AD has prepared and presented separate financial statements for the year ended 31 December 2023, where investments in subsidiaries are presented at acquisition cost less accumulated impairment losses. The individual financial statements of Monbat AD were authorized for issuance by a decision of the Board of Directors on 29 March 2024. Impact of macroeconomic and geopolitical factors: The war between Russia and Ukraine, which started on 24 February 2022, 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. The Group has no net investments, subsidiaries or assets in Russia, Belarus or Ukraine, but trades with companies in Ukraine. Monbat AD Consolidated Financial Statements 31 December 2023 12 To address the above-mentioned crises, the Group is taking measures to limit their negative impacts on 2023 results. Analysis of risks and measures and actions taken: •In 2023, there was a normalization of the markets for the main products and commodities traded by the Group compared to 2022. The following market developments were observed: •Increased demand for starter automotive batteries in markets in Western Europe, where historically record sales of this product type were achieved. In 2022, demand for these products was significantly depressed by inflationary movements in the region and the associated change in consumer behavior. •There was a significant decline in sales of the larger and more profitable semi-cyclical batteries due to the normalization of the delivery period of US manufacturers of this type of battery, which was dramatically extended in 2022 due to logistical challenges during the period, and a re-orientation of the market back towards US products. •A decline in sales of stationary (telecom) batteries 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 Group did not realize any sales to Russia, while sales to Ukraine represent 3.3% of total revenues for 2023 (2022: Russia - 2.0%, Ukraine - 1.9%). •In relation to supply chains, the Group is not directly dependent on Russian, Ukrainian or Belarusian suppliers. •As a result of inflationary processes and market volatility, the average exchange price of lead in 2023 was around EUR 1 977/MT (2022: EUR 2 041/MT). The Group addresses this volatility and the dependence of the price of lead on stock market indices by applying a standard indexation of the selling prices of its products to all its counterparties. •The Group's major customers have not experienced financial difficulties directly related to the military conflicts in Ukraine and the Middle East. The estimate of trade receivables collectability at 31 December 2023 is good. •To ensure the collectability of its receivables from Ukrainian counterparties for which trade receivables insurance is not available, the Group adopted a policy of 100% pre-shipment advance payments on all export sales to Ukraine following the commencement of hostilities in the country. Whilst there have been no material delays in the collection of trade receivables from customers at the end of 2023 or the end of 2022, the activities of a number of specific customers in Russia and Ukraine, where delays in collection were already evident in prior periods, have been further complicated by the military conflict and in this regard the Group has recorded impairment charges relating to trade receivables from the same of 0 BGN in 2023 and BGN 260 thousand in 2022. As of 31 December 2023, the Group had trade receivables from Ukrainian and Russian customers (net of impairments) amounting to BGN 10 148 thousand. Monbat AD Consolidated Financial Statements 31 December 2023 13 The Group continuously analyses all possible impacts of changing micro- and macroeconomic conditions on the Group's future financial position and results of operations. The Group's operations are materially impacted by inflationary processes expressed in increased direct material, energy and labor costs per unit of production. The Group manages to limit the effect of these negative impacts of the macroeconomic environment by refining its customer and product mix (with a focus on high-margin products and markets) and, where necessary, indexing selling prices to its customers. Climate matters This year, the Group reports on climate-related issues, considering this reporting as a long-term commitment to develop and deepen in the future. Legislation, regulatory authorities, the Group'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 Group does not emit significant direct and indirect emissions to the air. As Group companies are not large emitters of carbon dioxide, the Group does not participate in the EU emissions trading scheme. However, Management recognizes the important role the Group plays in climate change mitigation and adaptation. 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 Group 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. At the same time, the following steps are set out in the implementation of the activity, with a view to reducing greenhouse gas emissions from energy consumption from the building stock and transport: •Fuel consumption optimization for heating and transport. All newly purchased vehicles comply with EURO Norm VI emission standards. •Optimization of heating, ventilation, cooling and lighting systems. Replacement of heating equipment with more energy efficient equipment. •Renovation of buildings. Through its annual capital expenditure program, the Group plans and implements investments in new production facilities or improvements to existing facilities that optimize the consumption of energy resources. As at 31 December 2023, the Group has not identified any significant risks arising from climate change that could have a direct negative and material impact on the Group's financial statements. Management continually assesses the impact of climate related issues. Monbat AD Consolidated Financial Statements 31 December 2023 14 In determining the Group's financial position as at 31 December 2023, climate related issues have been considered and taken into account in performing impairment testing, assessing the useful life and determining the fair value of non-current assets and in determining the net realizable value of inventories. Application of the going concern principle The consolidated financial statements have been prepared under the going concern basis, taking into account the possible long-term effects of the subsequent impacts of the ongoing military conflicts and the impact of macro-economic indicators. In these circumstances, the Group’s management has made an analysis and assessment of the Group’s ability to continue its activities as a going concern based on available information about the foreseeable future. The analysis includes an assessment, supported by historical experience that the Group has with financial institutions, as well as ongoing negotiations and agreements, that the maturity of all short-term loans (Note 23) will be renegotiated by a minimum of 12 months from their due date, or they will be refinanced with a borrowed resource at maturity of at least 12 months. In view of the above, management expects that the Group has sufficient financial resources to continue its operating activities in the near future and continues to apply the going concern principle in the consolidated financial statements. 2.1. New and amended standards and interpretations The Group 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 Group’s consolidated financial statements for the annual period beginning 1 January 2023 but do not have a significant impact on the Group’s financial performance or position: •IFRS 17 Insurance contracts effective 1 January 2023 adopted by the EU; •Amendments to IFRS 17 Insurance contracts: Initial application of IFRS 17 and IFRS 9 - Comparative information effective 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. Monbat AD Consolidated Financial Statements 31 December 2023 15 2.2. Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Group At the date of authorization of these consolidated 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 2023 and have not been applied early by the Group. They are not expected to have a material impact on the Group’s consolidated financial statements. Management anticipates that all relevant pronouncements will be adopted in the Group’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. 3.Significant accounting policies 3.1. Overall considerations The most significant accounting policies that have been used in the preparation of these consolidated financial statements are summarized below. The consolidated financial statements have been prepared using the measurement bases specified by IFRS for each type of asset, liability, income and expense. The measurement bases are fully described in the accounting policies below. It should be noted that accounting estimates and assumptions are used for the preparation of the financial statements. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates. 3.2. Presentation of consolidated financial statements The consolidated financial statements are presented in accordance with IAS 1 “Presentation of Financial Statements”. The Group has elected to present the statement of comprehensive income in two statements: a statement of profit or loss and a statement of comprehensive income. Two comparative periods are presented in the consolidated statement of financial position when the Group applies an accounting policy retrospectively, retrospectively restates financial statement items or reclassifies financial statement items and this has a material effect on the information in the individual statement of financial position at the beginning of the previous period. Monbat AD Consolidated Financial Statements 31 December 2023 16 3.3. Business combinations and goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in hired services expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IFRS 9 Financial Instruments, is measured at fair value with the changes in fair value recognized in the statement of profit or loss in accordance with IFRS 9. Other contingent consideration that is not within the scope of IFRS 9 is measured at fair value at each reporting date with changes in fair value recognized in profit or loss. Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognized at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognized in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill has been allocated to a cash-generating unit (CGU) and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained. Monbat AD Consolidated Financial Statements 31 December 2023 17 3.4. Transactions with non-controlling interests Changes in the Group's share in the equity of a subsidiary that do not result in a loss of control are treated as transactions with owners of the Group. The carrying amounts of the Group's interest and non-controlling interests are adjusted to reflect the change in their relative share in the subsidiary's capital. Any difference between the amount by which the non-controlling interests are changed and the fair value of the consideration received or paid is recognized directly in equity and relates to the owners of the parent. 3.5. Investments in associates Associates are those entities in which the Group has significant influence, but not control or joint control. Investments in associates are initially recognized at cost and then accounted for using the equity method. The cost of the investments includes transaction costs. Goodwill or adjustments to the fair value of the Group's interest in the associate are included in the cost of the investment. All subsequent changes in the amount of the Group's interest in the equity of the associate are recognized in the carrying amount of the investment. Changes due to the profit or loss realized by the associate are reflected in the consolidated statement of profit or loss and other comprehensive income of the line "Other operating income" or "Other expenses". These changes include the subsequent depreciation or impairment of the fair value of the assets and liabilities of the associate determined at acquisition. Changes in other comprehensive income of the associate and in items recognized directly in equity of the associate are recognized in other comprehensive income or in equity of the Group, respectively. Where the Group's share of the realized losses of the associate exceeds the amount of its interest in the associate, including unsecured receivables, the Group does not recognize its share of further losses of the associate unless the Group has contractual or constructive obligations or has made payments on behalf of the associate. If the associate subsequently realizes profits, the Group recognizes its share to the extent that the share of profits exceeds the cumulative share of losses not previously recognized. Unrealized gains and losses on transactions between the Group and its associates are eliminated to the extent of the Group's interest in those associates. When unrealized losses on sales of assets are eliminated, the related assets are tested for impairment from the Group's perspective. Amounts recorded in the financial statements of associates have been restated where necessary to ensure consistency with the Group's accounting policies. Upon loss of significant influence over an associate, the Group measures and recognizes any retained investment in it at fair value. Any difference between the carrying amount of the investment in the associate in the event of a loss of significant influence and the amount of the fair value of the retained interest and the proceeds of the write-off is recognized in profit or loss. If the interest in the associate is reduced but without loss of significant influence, only a proportionate part of the amounts recognized in other comprehensive income is reclassified to profit or loss. Monbat AD Consolidated Financial Statements 31 December 2023 18 3.6. Foreign currency translations Foreign currency transactions are translated into the functional currency of the respective Group entity, using the exchange rates prevailing at the dates of the transactions (the official spot exchange rate of the Bulgarian National Bank). Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items denominated in foreign currency at period-end exchange rates are recognized in profit or loss. Non-monetary measured at historical cost are translated using the exchange rates at the transaction date (not revalued). Non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined. The functional currencies of entities within the Group have remained unchanged during the reporting period. On consolidation, assets and liabilities have been translated into BGN at the closing rate at the reporting date. Income and expenses have been translated into the presentation currency at the average rate over the reporting period. Exchange differences are charged or credited to other comprehensive income and recognized in the currency translation reserve in equity. On disposal of a net investment in a foreign operation, cumulative translation differences recognized in equity are reclassified to profit or loss and recognized as part of the gain or loss on disposal. Goodwill and adjustments related to fair value measurements at the acquisition date are treated as assets and liabilities of the foreign operation and translated into Bulgarian levs at the closing rate. The Bulgarian lev is fixed to the euro in the ratio 1 EUR = 1.95583 BGN 3.7. Revenue The Group's activity is related to the sale of products, materials and services. To determine whether and how to recognize revenue, the Group 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 Group satisfies performance obligations by transferring the promised goods or services to its customers. 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 Group expects to be entitled in exchange for those goods or services. In general, the Group has concluded that it is the principal in its revenue arrangements as it generally controls the goods or services before transferring them to the customer, with the exception of certain sales and repurchases of materials and re-invoicing of services for which the Group has concluded that it is acting as an agent as referred to in note 3.26. Revenues from finished goods, materials and services are described in note 28. Monbat AD Consolidated Financial Statements 31 December 2023 19 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 Group 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 Group 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 Group 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 Group 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 Group 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 Group then applies the requirements on constraining estimates of variable consideration and recognizes a refund liability for the expected future rebates. Rights of return Certain contracts provide customers with a right to return the goods within a specified period. The Group uses the expected value method to estimate the goods that will not be returned because this method best predicts the amount of variable consideration that the Group will be entitled. The requirements of IFRS 15 on constraining estimated of variable consideration are also applied in order to determine the amount of variable consideration that can be included in the transaction price. A refund liability, instead of revenue, is recognized for the goods that are expected to be returned. A right of return asset (and corresponding adjustment to cost of sales) is also recognized for the right to recover the goods from a customer. Monbat AD Consolidated Financial Statements 31 December 2023 20 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 Group 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 Group mainly include transportation for the delivery of goods. The Group 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 Group. The Group 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 service. Contract balances Trade receivables Receivable represents the Group’s right to an amount of consideration that is 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 3.15. Contract assets A contract asset is the right to consideration in exchange for the goods or services transferred to the customer. If the Group 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 Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group 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 Group performs under the contract. Right of return assets Right-of-return asset represents the Group’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 Group 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 Consolidated Financial Statements 31 December 2023 21 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 Group ultimately expects it will have to return to the customer. The Group 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 Group uses the following practical expedients: •Not to consider significant financing 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 consolidated 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. 3.8. 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. 3.9. 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 Group's borrowings. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period 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”. 3.10.Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses. Internally generated intangibles, excluding capitalized development costs, are not capitalized and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred. Monbat AD Consolidated Financial Statements 31 December 2023 22 The Group has adopted a threshold of BGN 700 for recognition of intangible assets. The useful lives of intangible assets are assessed by the Group as either finite or indefinite. Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statement of profit or loss in the expense category that is consistent with the function of the intangible assets. Depreciation is calculated using the straight-line method over the estimated useful life of individual assets as follows: •Development costsup to 10 years. •Trademarksup to 10 years or indefinite useful life. •Othersup to 7 years. •Softwareup to 2 years. •Licenses and prototypesindefinite useful life. •Customer network up to 5 years. Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. An intangible asset is derecognized upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Any gain or loss arising upon derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss. Research and development costs Research costs are expenses as incurred. Development expenditures on an individual project are recognized as an intangible asset when the Group can demonstrate: •The technical feasibility of completing the intangible asset so that the asset will be available for use or sale. •And its intention to complete and its ability and intention to use or sell the asset. •How the asset will generate future economic benefits •The availability of resources to complete the asset. •The ability to measure reliably the expenditure during development. Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete, and the asset is available for use. It is amortized over the period of expected future benefit. Monbat AD Consolidated Financial Statements 31 December 2023 23 Amortization is recorded in cost of sales. During the period of development, the asset is tested for impairment annually. Patents and licenses The Group made upfront payments to acquire licenses. Licenses for the use of intellectual property are granted for indefinite period. As a result, those licenses are assessed as having an indefinite useful life. 3.11.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 leases are depreciated on the basis of the expected useful life, determined by comparison with similar own assets of the Group, or on the basis of the lease agreement, if its term is shorter. Depreciation is calculated using the straight-line method over the estimated useful life of individual assets as follow: •Buildingsup to 40 years •Equipment up to 20 years •Machinesup to 10 years •Vehiclesup to 7 years •Fixtures up to 7 years •Computersup to 2 years •Othersup to 3 years Depreciation has been included in the statement of profit or loss within 'Depreciation, amortization and impairment of non-financial assets'. Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognized in the statement of profit or loss within 'Gain/(Loss) on sale of non-current assets'. The Group has adopted a threshold of BGN 700 for recognition of property, plant and equipment. Monbat AD Consolidated Financial Statements 31 December 2023 24 3.12.Investment properties Investment properties are properties held to earn rentals or for capital appreciation or both. Investment properties are measured initially at cost, including transaction costs. The costs of replacing part of an existing investment property are recognized in it carrying amount at the time that cost is incurred if the recognition criteria are met. Subsequent to initial recognition, investment properties are stated at cost model. Depreciation of investment properties is calculated using the straight-line method over the estimated useful life of individual assets as follows: •Investment propertiesup to 40 years Depreciation expenses are included in the statement of profit or loss under the line item „Depreciation and amortization expenses”. The residual value and useful lives of investment properties are reviewed by Management at each reporting period. Investment properties are derecognized either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. Profit or loss arising from withdrawal from use or disposal of the investment property is recognized in the statement of profit or loss at the time of withdrawal from use or disposal. The Group transfers investment property to inventory (property held for sale) only when there is a change in use evidenced by commencement of development with a view to sale. When investment property is transferred to inventory, the property's deemed cost for subsequent accounting is its fair value at the date of the change in use. On transfer from inventories to investment property, the difference between the fair value of the property at that date and its previous carrying amount is recognized in the consolidated statement of profit or loss. When the Group begins to redevelop an existing investment property with a view to its continued future use as such, the property remains classified as investment property during development. When the Group decides to sell an investment property without developing it and the criteria for classification as held for sale are met, the property is classified as held for sale and measured at the lower of their carrying amount immediately after their designation as held for sale and their fair value less costs to sell. In April 2022, the General Meeting of Shareholders of Monbat resolved to sell its subsidiary Monbat Immobilien GmbH subject to an appropriate price offer from a potential buyer. In 2022, the Group entered into an agreement for the sale of the Austrian company's assets representing investment property, with a total transaction value of EUR 7 200 thousand. As of 31 December 2023, the transaction has not been completed and there has been no change in the Group's intention to complete the sale of its investment in Monbat Immobilien GmbH. Accordingly, as of 31 December 2023 and 2022, the Group classifies the investment property owned by Monbat Immobilien GmbH as an asset held for sale. Monbat AD Consolidated Financial Statements 31 December 2023 25 As of 31 December 2023, the Group performed impairment tests in accordance with the requirements of IAS 36 "Impairment of Assets" for the asset held for sale, being investment property. Indications of impairment due to the specific nature of this asset have been identified. Management has determined that the carrying value of the asset exceeds its recoverable amount as determined from a fair value estimate prepared by a licensed appraiser. For this reason, the Group recorded an impairment charge of BGN 2 641 thousand in 2023 (2022: BGN 3 169 thousand) included in “Result from discontinued operations” in the consolidated statement of profit or loss. 3.13.Leases The Group 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. The Group as a lessee The Group applies a single recognition and measurement approach for all leases, except for short-term leases (i.e., leases with a lease term up to 12 months) and leases of low- value assets. The Group recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. Right-of-use assets The Group 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 the recognized lease liability, the initial direct costs incurred and lease payments made on or before the commencement date of the lease, estimated costs which would be incurred by the lessee for dismantling and transportation of the asset, restoration of the site on which it is located or restoration of the asset to the condition required under the lease terms, 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 Group 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. The accounting policy for impairment is disclosed in Note 3.15 “Financial Instruments”. Monbat AD Consolidated Financial Statements 31 December 2023 26 Lease liabilities At the commencement date of the lease, the Group recognizes lease liabilities 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 Group and payments of penalties for terminating the lease, if the lease term reflects the Group 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 Group 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 Group 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 leases 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. The Group as a lessor Leases in which the Group 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. 3.14.Impairment of non-financial assets The Group assesses at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. Monbat AD Consolidated Financial Statements 31 December 2023 27 An asset’s recoverable amount is the higher of an assets or CGU’s fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators. The Group bases its impairment calculation on most recent budgets and forecast calculations, which are prepared separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. A long-term growth rate is calculated and applied to project future cash flows after the fifth year. Impairment losses of continuing operations are recognized in the statement of profit or loss in expense categories consistent with the function of the impaired asset, except for properties previously revalued with the revaluation taken to OCI. For such properties, the impairment is recognized in OCI up to the amount of any previous revaluation. For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognized impairment losses no longer exist or have decreased. If such indication exists, the Group estimates the assets or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statement of profit or loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase. Goodwill is tested for impairment annually as of 31 December and when circumstances indicate that the carrying value may be impaired. Impairment for goodwill is determined by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods. Intangible assets with indefinite useful lives are tested for impairment annually as of 31 December at the CGU level, as appropriate, and when circumstances indicate that the carrying value may be impaired. As disclosed in Note 6, the Group recorded impairment charges on assets held for sale of BGN 3 526 thousand in 2023 (2022: BGN 3 169 thousand), included in 'Result from discontinued operations' in the consolidated statement of profit or loss. Monbat AD Consolidated Financial Statements 31 December 2023 28 3.15.Financial instruments Financial assets and liabilities are recognized when the Group becomes party to the contractual provisions of the instrument. A financial asset is derecognized when the contractual rights to receive the cash flow from the financial asset, i.e., the rights to receive cash flows from the asset have expired or the Group has transferred substantially all the risks and rewards of the asset. 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 agreed cash flows When the agreed cash flows of a financial instrument are being renegotiated or modified and the changes agreed upon do not lead to the writing-off of the financial instrument in place, the Group recalculates the gross carrying amount of the financial instrument and recognizes the profit or loss from the modification in the statement of profit or loss. The gross carrying amount of the financial instrument is recalculated to the present value of the renegotiated or modified cash flows, which are discounted with the initial effective interest rate. Changes in the base on which the agreed cash flows are defined in the event of a reform of the base interest rate. The base for defining the agreed cash flows of a financial asset or a financial liability can be changed: •With an amendment of the agreed clauses, agreed upon at the initial recognition of the financial instrument (for instance, the agreed clauses are altered in order to replace the corresponding base interest rate with the alternative base interest rate). •In a way, which has not been considered or foreseen in the agreed clauses during the initial recognition of the financial instrument, without changing the agreed clauses (for instance, the method of calculating the base interest rate could be changed, without changing the agreed clauses); and/or •As a result of triggering an existing contract clause (for instance, triggering the existing reserve clause) In these cases of a reform of the base interest rate, the Group does not recognize profit or loss. Instead, it recalculates the cash flows with a revised effective interest rate. The financial assets and financial liabilities are subsequently measured as described below. Monbat AD Consolidated Financial Statements 31 December 2023 29 3.15.1.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 subsequently measured at fair value through profit or loss (FVTPL). Despite the foregoing, the Group may make the following irrevocable election/designation at initial recognition of a financial asset: •The Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income if certain criteria are met. •The Group may irrevocably designate a debt investment that meets the amortized cost or FVOCI criteria as measured at FVPL if doing so eliminates or significantly reduces an accounting mismatch. 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 'Impairment of financial assets and advances’. Monbat AD Consolidated Financial Statements 31 December 2023 30 Classification of financial assets Loans and receivables Loans and receivables originated by the Group 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 Group’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 Group 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 guaranteed 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 Group 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 Group’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 Group 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 Group 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 'Impairment of financial assets’. 3.15.2.Financial liabilities The Group's financial liabilities include bank loans, overdrafts, trade and other payables, finance lease liabilities and convertible bonds. Financial liabilities are recognized when the Group becomes a party to the contractual agreements for payment of cash amounts or another financial asset to another company or contractual liability for exchange of financial instruments with another company under unfavorable terms. Monbat AD Consolidated Financial Statements 31 December 2023 31 All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within “Finance costs” or “Finance income”. Financial liabilities are measured subsequently at amortized cost using the effective interest method, except for financial liabilities held for trading or designated at fair value through profit or loss, that are carried subsequently at fair value with gains or losses recognized in profit or loss. Bank loans are raised for support of long-term funding of the Group’s operations. They are recognized in the consolidated statement of financial position of the Group, net of any costs. Trade payables are recognized initially at their nominal value and subsequently measured at amortized cost less settlement payments. Dividends payable to shareholders are recognized when the dividends are approved at the general meeting of the shareholders. Embedded derivatives The Group makes the following accounting policy choices with regards to analysis of embedded derivative separation requirements: a) each embedded derivative is assessed on an individual basis b) host contract includes these embedded features which do not require separation The component parts of convertible loan notes issued by the Group 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 Group’s own equity instruments is 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 variable number of the Group’s own equity instruments is a derivative instrument. Conversion features that fail equity classification and are accounted for as derivative liabilities are accounted for separately from the host instruments. 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 Consolidated Financial Statements 31 December 2023 32 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. 3.15.3.Derivative financial instruments Derivatives are initially recognized at fair value and subsequently measured at fair value in the consolidated statement of financial position. Changes in the fair value of derivatives are recognized in profit or loss for the period (except for derivative financial instruments, which are defined and effective as hedging instrument). In the case of call and put options, the Group considers their exercise or the lack of exercise thereof after the balance date, as a non-adjusting event and it does not take it into consideration when measuring the fair value of these derivatives as of the balance date. 3.15.4.Contracts for 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, continue to be property of the Group. In such case a liability to the other counterparty is recognized in the statement of financial position, when the Group receives the remuneration. Similarly, the Group 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. Monbat AD Consolidated Financial Statements 31 December 2023 33 3.16.Inventory Inventories include raw materials, work in progress, and goods. Cost of inventories includes all expenses directly attributable to the purchase or manufacturing process, recycling and other direct expenses connected to their delivery as well as suitable portions of related production overheads, based on normal operating capacity. Financing costs are not included in the cost of the inventories. At the end of every accounting period, inventories are carried at the lower of cost and net realizable value. The amount of the impairment of inventory up to its net realizable value is recognized as an expense for the period of the impairment. Net realizable value is the estimated selling price of the inventories less any applicable selling expenses and cost of completion. When inventory have already been impaired up to the net realizable value and when in a subsequent reporting period it is clear that the circumstances that have led to the impairment no longer exist, then the new net realizable value is adopted. The amount of the reversal may only be up to the carrying amount of the inventory before impairment. The reversal of the write-down is accounted for as decrease in inventory expenses for the period in which the reversal takes place. The Group determines the cost of inventories by using the weighted average cost. When inventories are sold, the carrying amount of those inventories is expensed in the period in which the related revenue is recognized. 3.17.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. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date. Management evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. Current taxes are recognized directly in equity or in other comprehensive income (not in the statement of profit and loss) when tax relates to items recognized directly in equity or in other comprehensive income. Deferred income tax Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax liabilities are recognized for all taxable temporary differences, except: •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; and •In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Monbat AD Consolidated Financial Statements 31 December 2023 34 Deferred tax assets are recognized for all deductible temporary differences, unused tax credit carryforwards and unused tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax credit carryforwards and unused tax losses can be utilized: •When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of 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 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 Group 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) Expenses and assets are recognized net of the amount of VAT, except: •When the VAT incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the sales tax is recognized as part of the cost of acquisition of the asset or as part of the expense item, as applicable, and •When receivables and payables are stated with the amount of VAT included The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Monbat AD Consolidated Financial Statements 31 December 2023 35 3.18.Cash and cash equivalents Cash and cash equivalents comprise cash in hand, current bank accounts and deposits up to 3 months. 3.19.Non-current assets and liabilities, classified as held for sale and discontinued operations. The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction or discontinuation rather than through continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal of an asset (disposal group), excluding finance costs and income tax expense. The criteria for discontinued operations or held for sale classification is regarded as met only when the sale/disposal is highly probable, and the asset or disposal group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the plan to sell the asset and the sale expected to be completed within one year from the date of the classification. Property, plant and equipment and intangible assets are not depreciated or amortized once they are included in disposal groups and classified as held for sale. Assets and liabilities, included in disposal groups and classified as held for sale are presented separately as current items in the statement of financial position. A disposal group qualifies as discontinued operation if it is a component of an entity that either has been disposed of, or is classified as held for sale, and: •Represents a separate major line of business or geographical area of operations. •Is part of a single plan to dispose of a separate major line of business or geographical area of operations. or •Is a subsidiary acquired exclusively with a view to resale. Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of profit or loss. All other notes to the consolidated financial statements include information about continuing operations, unless otherwise stated. Monbat AD Consolidated Financial Statements 31 December 2023 36 3.20.Equity, reserves and dividend payments. The Share capital of the Group represents the nominal value of shares that have been issued by the parent company Monbat AD. Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from paid share capital, net of any related income tax benefits. The revaluation reserve includes gains and losses from the revaluation of non-current assets. General reserves include legal reserves required by the Bulgarian legislation, general reserves from generated profit or loss incurred from prior years. Retained earnings include financial performance and accumulated profit and uncovered losses from prior years. Dividend payables to shareholders are included in 'Related party payables' in the statement of financial position when the dividends have been approved at the general meeting of shareholders prior to the reporting date. All transactions with owners of the parent are recorded separately within statement of owner’s equity. Own equity instruments that are repurchased (own shares) are recognized at cost and deducted from equity. The Group recognizes no gain or loss on the purchase, sale, issuance, or cancellation of its own equity instruments. Any difference between the carrying amount and the consideration, in the event of re-issuance, is recognized as a premium reserve. 3.21.Post-employment benefits and short-term employee benefits Short-term employee benefits include salaries, wages, interim bonuses, social security contributions. 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 Group and measured at the undiscounted amount of the expected cost of the benefit. Information on short-term employee benefits is disclosed in Note 22. The Group 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 Group 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. Monbat AD Consolidated Financial Statements 31 December 2023 37 Past service costs are recognized in profit or loss on the earlier of: •the date of the plan amendment or curtailment, and •the date the Group recognizes restructuring costs. Interest expense is calculated by applying the discount rate to the defined benefit liability. The Group 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 “Payroll expense”. •Interest expense within “Finance costs”. The Group operates a defined contribution plan arising from the requirement of the Italian labor legislation. Contribution payables to a defined contribution plan are recognized as an expense in the statement of comprehensive income as a percentage of the incurred salary expenses of the Group’s employees. 3.22.Provisions, contingent liabilities and contingent assets Provisions are recognized when present obligations as a result of a past event will probably lead to an outflow of economic resources from the Group and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events, for example, product warranties granted, legal disputes or onerous contracts. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material. Any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is recognized as a separate asset. However, this asset may not exceed the amount of the related provision. All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Restructuring provisions Restructuring provisions are recognized only when the Group has a constructive obligation, which is when: (i) there is a detailed formal plan that identifies the business or part of the business concerned, the location and number of employees affected, the detailed estimate of the associated costs, and the timeline; and (ii) the employees affected have been notified of the plan’s main features. Provisions are not recognized for future operating losses. Monbat AD Consolidated Financial Statements 31 December 2023 38 Onerous contracts If the Group has a contract that is onerous, the present obligation under the contract is recognized and measured as a provision. However, before a separate provision for an onerous contract is established, the Group recognizes any impairment loss that has occurred on assets dedicated to that contract. An onerous contract is a contract under which the unavoidable costs (i.e., the costs that the Group cannot avoid because it has the contract) of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it. The cost of fulfilling a contract comprises the costs that relate directly to the contract (i.e., both incremental costs and an allocation of costs directly related to contract activities). Contingent assets and liabilities 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. Probable inflows of economic benefits that do not meet the criteria for asset recognition are considered contingent liabilities. They are described together with Group’s contingent liabilities in note 39. Contingent liabilities recognized in a business combination. A contingent liability recognized in a business combination is initially measured at its fair value. Subsequently, it is measured at the higher of the amount that would be recognized in accordance with the requirements for provisions above or the amount initially recognized less (when appropriate) cumulative amortization recognized in accordance with the requirements for revenue recognition. 3.23.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 Group and that the latter has complied with the conditions attaching to it. Funding related to the offsetting of investment costs for the acquisition of an asset is recognized in current profit or loss on a systematic basis over the useful life of the asset, usually in the amount of depreciation expense recognized. When the grant relates to an expense item, it is recognized as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the Group receives grants of non-monetary assets, the asset and the grant are recorded at nominal amounts and released to profit or loss over the expected useful life of the asset, based on the pattern of consumption of the benefits of the underlying asset by equal annual instalments. Monbat AD Consolidated Financial Statements 31 December 2023 39 3.24.Fair value measurement The Group measures financial instruments at fair value at each balance sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: •In the principal market for the asset or liability, or •In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: •Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities. •Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable. •Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. For assets and liabilities that are recognized in the consolidated financial statements at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period and determined whether there is a need to transfer from one level to another. The Management of the Group determines the policies and procedures for both recurring fair value measurement and for non-recurring measurement, such as assets held for sale/ distributions to owners. Monbat AD Consolidated Financial Statements 31 December 2023 40 Typically, external independent valuers are engaged to measure the fair value of significant assets such as non- current assets and liabilities classified as held for sale and their involvement is determined annually by the Group’s Management. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. Management decides, after discussions with the Group’s external valuers, which valuation techniques and inputs to use for each case. At each reporting date, management analyses the movements in the values of assets and liabilities which are required to be remeasured or re-assessed as per the Group’s accounting policies. This includes verification of the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents. For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy, as explained above. 3.25.Current and non-current classification The Group presents a classified statement of financial position, separating current and non-current assets and liabilities. Current assets are assets that are: •expected to be realized or is held for sale or use in the normal operating cycle. •held primarily for commercial purpose. •expected to be realized within 12 months after the reporting period or •Cash and cash equivalents unless there are a restriction on exchanging or using it to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current assets. A liability is classified as current when: •expected to be settled within the Group’s normal operating cycle. •held primarily for commercial purpose. •expected to be realized within 12 months after the reporting period, or •the entity does not have an unconditional right to defer settlement of the liability for a period of at least twelve months after the reporting period. Settlement by the issue of equity instruments does not impact classification of the liability. All other liabilities are classified by the Group as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities. Monbat AD Consolidated Financial Statements 31 December 2023 41 3.26.Significant accounting judgements, estimates and assumptions The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. Judgements In the process of applying the Group’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognized in the consolidated financial statements: Sale of property, plant and equipment and conclusion of lease agreements The Group 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. Deferred tax assets The assessment of the probability of future taxable income in which deferred tax assets can be utilized is based on the Group’s latest approved budget forecast, which is adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. 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. Determining a method for estimating 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 Group 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 Group will be entitled to. The Group has determined that the most probable amount method is an appropriate method that can be used to evaluate these transactions. Monbat AD Consolidated Financial Statements 31 December 2023 42 In previous periods the Group has reported a liability for product fee and has decreased the revenues from sales of batteries on the Bulgarian market. Before including any amount of variable consideration in the transaction price, the Group assesses whether the amount of variable consideration is constrained. Management believes that there is a high level of certainty that the product fee due for 2023 will be remitted by order of the Minister of Environment and Water in 2024, as the Group continues to comply with the requirements of the Waste Management Act. In addition, the uncertainty of the variable remuneration 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 31.12.2022. The fee was not paid effectively to the Ministry of Environment and Water, as the Group 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. With an order № RD 601 dated 17.08.2023 of the Minister of Environment and Water, the product fee for 2022 has been remitted. Provision for expected credit losses for trade receivables. The Group 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 Group historically. The Group refined the matrix to adjust historical experience with credit losses by including forecast information. For example, if forecasts of economic conditions (e.g., 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 Group’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 Group's trade receivables is disclosed in Note 16 and Note 41. Principal-agent consideration The Group enters into tolling agreements with certain material suppliers. Under these contracts, the Group provides its suppliers with specific specifications and raw materials required for the production of lead-acid battery materials. Once the suppliers produce the required materials, the Group purchases them back. Monbat AD Consolidated Financial Statements 31 December 2023 43 As, under an existing contractual commitment, the suppliers only use the purchased raw materials to produce materials whose specification is defined in the contracts, the Group has determined that it does not transfer control over the raw materials when they are transferred to the suppliers and, in substance, these transactions should not be recognized as revenue from contracts with customers. For this reason, the Group presents the value of raw materials transferred to suppliers as a reduction in the purchase price of the materials. Impairment of non-financial assets Impairment exists when the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The calculation of fair value less costs to sell is based on available evidence of arm's length sales transactions for similar assets or observable market prices less the inherent costs of disposing of the asset. The value in use calculation is based on a discounted cash flow (DCF) model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the performance of the assets of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. These estimates are most relevant to goodwill and other intangibles with indefinite useful lives recognized by the Group. Useful life of depreciable assets Group 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 Group. The carrying amounts are analyzed under Notes 8, 10 and 11. The actual useful life may differ from the estimate due to technical and moral obsolescence, mainly of software products and computer equipment. Inventory Inventory is 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 Group’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 106 258 thousand. (2022: BGN 105 398 thousand) is affected by the fluctuations of the prices of lead and lead component markets. Monbat AD Consolidated Financial Statements 31 December 2023 44 Financial instruments at fair value through other comprehensive income 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. Warranty provisions Warranties represent amounts, which the Group 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. Leases Determining the lease term of contracts with renewal and termination options- Group as a lessee The Group defines the term of the lease 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 that the option will be exercised, or any periods covered by an option to terminate the lease if it is reasonably certain that the option will not be exercised. The Group has several lease contracts that include extension and termination options. The Group applies judgement in evaluating whether it is reasonably certain whether or not it will exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Group 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). Estimating the incremental borrowing rate The Group 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 Group 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 Group ‘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 Group 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). Monbat AD Consolidated Financial Statements 31 December 2023 45 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, the management has reviewed the Group’s retirement benefit liability and has assessed the effect as immaterial (2022 – immaterial). Estimating variable consideration for returns and volume rebates. The Group determines the estimated variable consideration to be included in the transaction price for the sale of production with volume rebates and return rights. During the period, the Group 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 Group 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 Group 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 Group recognized a decrease in revenue from the sale of products and trade receivables. The Group 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 Group. Estimates of returned goods and volume rebates are sensitive to changes in circumstances and the Group's experience with these elements may not be representative of actual goods and rebates returned by customers. As of 31 December 2023, the Group has assessed the amount of reimbursement obligations for expected returned goods as immaterial (2022 – immaterial). Development costs Development expenditures on an individual project are recognized as an intangible asset. The initial recognition of costs is based on management’s assessment of confirmed technical and commercial feasibility, usually when a product development project has reached a certain milestone in accordance with an established project management model. Determining the amounts to be capitalized requires management to make assumptions about the expected cash inflow from the project in the future, the discount rates to be applied and the expected benefit periods. Monbat AD Consolidated Financial Statements 31 December 2023 46 As of 31 December 2023, the carrying amount of capitalized development expenditures amounts to BGN 2 426 thousand (2022: BGN 2 517 thousand). Measurement of estimated credit losses Credit losses represent the difference between all contractual cash flows due to the Group and all cash flows which the Group expects to receive. Expected credit losses are a probability-weighted estimate of credit losses that require the Group's judgment. The Group's management has analyzed the expected impact of the effects of the Coronavirus pandemic and the conflict between Ukraine and Russia on both economic growth and the credit quality of its counterparties. The analysis performed by the Group's management is primarily focused on judgements and assumptions about the potential deterioration in the credit quality of counterparties and the potential effect on expected credit losses on exposures to counterparties. The Group's management believes that no significant deterioration in the credit quality of counterparties is currently expected in the short term. However, the Group has seen deterioration in the collectability of receivables from certain counterparties in Russia and Ukraine. The Group's scope is limited to the extent that the measurement of expected credit losses in this case is hampered by the inability to obtain sufficient reliable information on certain counterparties in these geographical regions. Control of subsidiaries Note 4 discloses that Société NOUR des Batteries Industrielles (NBI) and Société NOUR Recycling (SNR) are subsidiaries of the Group, although the Parent Company, Monbat indirectly holds 44.31% and 30.50% of the share capital of these companies respectively. The principal shareholder in both companies is the Group's subsidiary Societe Nouvelle de l'accumulateur Nour (SNA), which holds 73.85% of the capital of Société NOUR des Batteries Industrielles (NBI) and 50.84% of the capital of Société NOUR Recycling (SNR) and has the practical ability to manage the activities of both companies on a sole basis. In deciding whether there is control over Société NOUR des Batteries Industrielles (NBI) and Société NOUR Recycling (SNR), Management has taken into account the fact that the Parent Company, Monbat can exercise control over the major shareholder in NBI and SNR, Societe Nouvelle de l'accumulateur Nour (SNA), as it holds 60% of the share capital of the company. Management has therefore concluded that the Group has the practical ability to manage the respective activities of Société NOUR des Batteries Industrielles and Société NOUR Recycling on a sole basis, and thus control is present. 4.Basis of consolidation Subsidiaries The Consolidated financial statements of the Group include the following subsidiaries: Monbat AD Consolidated Financial Statements 31 December 2023 47 Subisiary name Country of incorporation Main activity Equity share % 2023 2022 Start AD Bulgaria Production of lead-acid batteries 97.80 97.80 Monbat PLC DOO Serbia Production and recycling of lead and lead alloys 100 100 SC Monbat Recycling S.R.L. Romania Production and recycling of lead and lead alloys 100 100 Monbat Recycling EAD Bulgaria Production and recycling of lead and lead alloys 100 100 YU Monbat DOO Serbia Trade of batteries 100 100 SC MONBAT ROMANIA S.R.L. Romania Trade of batteries 100 100 Energy Batteries Nigeria Limited Nigeria Trade of batteries 100 100 Monbat New Power AD Bulgaria Production of lead-acid batteries 51 51 Monbat New Power GmbH Germany Production of lithium-ion batteries 100 100 EAS Batteries GmbH Germany Production of lithium-ion batteries 100 100 Monbat Holding GmbH Germany Production of lithium-ion batteries 100 100 Monbat Italy S.R.L. Italy Production and recycling of lead and lead alloys 100 100 Piombifera Italiana SPA Italy Production and recycling of lead and lead alloys 100 100 Monbat Sped EOOD Bulgaria Transport and forwarding 100 100 Monbat Immobilien GmbH Austria Investments 100 100 STC S.R.L. Italy Production of equipment for recycling lead and lead alloys 66.67 66.67 Monbat SA Proprietary Ltd South Africa Trade of batteries 51 51 ARTMonbat AD Bulgaria Production of lead-acid batteries 51 51 Monbat NBP EAD Bulgaria Production of lead-acid batteries 100 100 Societe Nouvelle de l'accumulateur Nour Tunisia Production of lead-acid batteries and production and recycling of lead and lead alloys 60 60 Société NOUR Distribution Tunisia Trade of batteries 59.85 59.85 Société Technique et Ingénierie de Précision Tunisia Production of equipment 55 55 Société NOUR des Batteries Industrielles Tunisia Production of equipment 44.31 44.31 Société NOUR Recycling Tunisia Production and recycling of lead and lead alloys 30.50 30.50 Monbat AD Consolidated Financial Statements 31 December 2023 48 The Group includes one subsidiary, "Societe Nouvelle de l'accumulateur Nour" with a significant non-controlling interest (NCI). The Group acquires a controlling interest in the company in 2022. Subsidiary name Proportion of ownership interests and voting rights held by the NCI Total comprehensive income allocated to NCI Accumulated NCI 2023 2022 2023 2022 2023 2022 % % BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000. Societe Nouvelle de l'accumulateur Nour 40 40 294 (142) 14 304 14 010 No dividends were paid to the NCI during the years ended 2023. Summarized financial information for "Societe Nouvelle de l'accumulateur Nour" before intragroup eliminations, is set out below: 2023 2022 BGN’000 BGN’000 Non-current assets 28 782 27 574 Current assets 29 257 24 226 Total assets 58 039 51 800 Non-current liabilities 5 956 3 921 Current liabilities 18 691 15 461 Total liabilities 24 647 19 382 Equity attributable to owners of the parent 19 088 18 408 Non-controlling interests 14 304 14 010 Revenue 35 704 22 837 Total comprehensive profit for the year attributable to owners of the parent 680 51 Total comprehensive profit/(loss) for the year attributable to NCI 294 (142) Total comprehensive profit/(loss) for the year 974 (91) Net cash from operating activities 1 290 (1 317) Net cash from investing activities (4 635) (823) Net cash from financing activities 3 374 3 492 Net cash inflow 29 1 352 Monbat AD Consolidated Financial Statements 31 December 2023 49 5.Investments in associates The companies listed below have a share capital consisting only of ordinary shares that are not traded on stock exchanges. The country of incorporation is also their main place of activity, and the share of ownership in the in the companies is the same as the share of the voting rights held. Name of associate Country of incorporation Main activity 2023 Equity share 2022 Equity share BGN ‘000 % BGN ‘000 % Leventa OOD Bulgaria Services 2 693 46 2 412 46 Akumplast Industry Tunisia Manufacture of plastic products 184 14.4 - - Battery Pro South Africa LTD South Africa Trade of rechargeable batteries - - 321 40 2 877 2 733 In 2023, the Group participated in the capital increase of Leventa OOD through cash contributions in the amount of BGN 281 thousand, while the Group's participation in the capital of Leventa OOD remains unchanged at 46%. In 2023, the Group acquired a 14.4% interest in the capital of Akumplast Industry, Tunisia through a cash payment of BGN 184 thousand made by the subsidiary Societe Nouvelle de l'accumulateur Nour. The Group's interest in associates is reported for in the consolidated financial statements using the equity method. 2023 2022 BGN ‘000 BGN ‘000 As of 1 January 2 733 10 963 Loss from the investment measured through the equity method - (231) Increase in the fair value of the investment in Leventa OOD 281 - Acquisition of shares in Akumplast Indsutry, Tunisia 184 - Acquisition of controlling share in Societe Nouvelle de l'accumulateur Nour - (8 019) Transfer to disposal groups (321) - Foreign exchange difference - 20 As of 31 December 2 877 2 733 Associate companies need the consent of the Group to distribute their profits. The Group does not anticipate giving such consent at the reporting date. The associates do not have any contingent or capital liabilities as of 31 December 2023 and 2022. Monbat AD Consolidated Financial Statements 31 December 2023 50 6.Assets and liabilities held for sale Assets, included in disposal groups, classified as held for sale 31.12.2023 31.12.2022 BGN ‘000 BGN ‘000 Monbat Holding GmbH 20 038 19 138 Monbat Immobilien GmbH 12 099 14 480 Energy Batteries Nigeria Ltd. 194 - Monbat SA Proprietary Limited 826 - 33 157 33 618 Liabilities included in disposal groups classified as held for sale 31.12.2023 31.12.2022 BGN ‘000 BGN ‘000 Monbat Holding GmbH 2 886 2 245 Monbat Immobilien GmbH - - Energy Batteries Nigeria Ltd. 40 - Monbat SA Proprietary Limited 726 - 3 652 2 245 31.12.2023 31.12.2022 Operating result from discontinued operations BGN ‘000 BGN ‘000 Monbat Holding GmbH 5 909 499 Monbat Immobilien GmbH (2 797) (3 128) Energy Batteries Nigeria Ltd. (352) (222) Monbat SA Proprietary Limited (1 239) (180) 1 521 (3 031) 31.12.2023 31.12.2022 Net change in cash and cash equivalents, included in disposal groups BGN ‘000 BGN ‘000 Cash and cash equivalents in the begining of the year, included in disposal groups 913 - Net change in cash and cash equivalents Monbat Holding GmbH (293) 913 Monbat Immobilien GmbH - - Energy Batteries Nigeria Ltd. 90 - Monbat SA Proprietary Limited 284 - 81 913 Cash and cash equivalents at the end of the year, included in disposal groups 994 913 Monbat AD Consolidated Financial Statements 31 December 2023 51 Lithium-ion Division In May 2022 the Group 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 Group 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 the Group 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 Group has recognized income in the amount of BGN 5 868 thousand and current tax expense in the amount of BGN 587 thousand on the line "Result from discontinued operations" in the consolidated statement of profit or loss. In 2023, the Group recognized expenses related to the sale of Monbat Holding GmbH in the amount of BGN 208 thousand on the line "Result from discontinued operations" in the consolidated statement of profit or loss. As of 31 December 2023, the Group's management has not changed its intentions to sell its investment in Monbat Holding GmbH. The carrying amount of the assets and liabilities of the Lihium-ion Division at 31 December 2023 is as follows: 31 December 2023 31 December 2022 BGN000 BGN ‘000 Property, plant and equipment 7 597 7 351 Other intangible assets 7 439 6 741 Inventory 2 952 2 942 Trade receivables 1 261 870 Cash and cash equivalents 620 913 Tax receivables 31 41 Other receivables 138 280 Total assets, included in disposal groups 20 038 19 138 Monbat AD Consolidated Financial Statements 31 December 2023 52 31 December 2023 31 December 2022 BGN ‘000 BGN ‘000 Deferred tax liabilities 925 925 Trade liabilities 285 485 Tax liabilities 662 80 Other liabilities 1 014 755 Total liabilities, included in disposal groups 2 886 2 245 Revenues and expenses related to the operations of the Lithium-Ion Division for 2023 and 2022 are as follows: 2023 2022 BGN ‘000 BGN ‘000 Sales revenue 8 513 7 009 Recognized income on non-refundable deposit 5 868 - Other revenue - 784 Costs of ordinary activity (7 686) (6 872) Cost of selling, related to assets held for sale (208) (413) Financial expenses - (5) Income tax expense (578) (4) Profit from operation 5 909 499 Investment property in Austria In April 2022, the General Meeting of Shareholders of Monbat AD resolved on the sale of Monbat Immobilien GmbH subject to a suitable price offer from a potential buyer. In 2022, the Group entered into an agreement for the sale of the assets of the Austrian company with a total transaction value of EUR 7 200 thousand. As of 31 December 2023, the transaction has not been completed and there has been no change in the Group's intention to complete the sale of its investment in Monbat Immobilien GmbH. As of 31 December 2023, the Group performed impairment tests on the carrying value of the assets of Monbat Immobilien GmbH. Based on a prepared by a licensed appraiser, valuation of the fair value of the underlying asset held by the subsidiary - an investment property in Austria - the Group recognised impairment charge of BGN 2 641 thousand (2022: BGN 3 169 thousand) included in the line "Result from discontinued operations" in the consolidated statement of profit or loss. Monbat AD Consolidated Financial Statements 31 December 2023 53 The carrying amount of assets related to the investment property classified as held for sale as of 31 December 2023, is as follows: 31 December 2023 31 December 2022 BGN000 BGN ‘000 Investment property, net from impairment 9 701 12 342 Deferred tax assets 2 398 2 138 Total assets, included in disposal groups 12 099 14 480 Revenues and expenses related to investment property included in disposal groups as of December 31, 2023 are as follows: 2023 2022 BGN ‘000 BGN ‘000 Impairment of non-financial assets (2 641) (3 169) Costs of ordinary activity (420) (289) Income tax gain 264 330 Loss from operation (2 797) (3 128) Energy Batteries Nigeria Ltd., Nigeria In August 2023 the Board of Directors of Monbat AD resolved to take action to discontinue the activity of Energy Battieries Nigeria Ltd, a company operating in Nigeria. The Group's management expects the operations of Energy Batteries Nigeria Ltd. to be discontinued within one calendar year of the end of the reporting period. Following a review of the recoverable amount of the assets, the Group recognized an impairment charge of BGN 101 thousand included in the 'Result from discontinued operations' line in the consolidated statement of profit or loss. In 2023, Energy Batteries Nigeria Ltd. reported a loss from operations of BGN 352 thousand. As required by IFRS 5 'Non-current assets held for sale and discontinued operations', the financial result of Energy Batteries Nigeria Ltd. for the current and comparative period (2022) is presented in the line 'Result from discontinued operations' in the consolidated statement of profit or loss. The carrying amounts of assets and liabilities and the amounts of income and expenses relating to the operations of Energy Batteries Nigeria Ltd. are as follows: 31 December 2023 31 December 2022 BGN 000 BGN ‘000 Deferred tax assets 10 - Trade receivables net of impairment 6 - Inventory 45 - Tax receivables 43 - Cash and cash equivalents 90 - Total assets, included in disposal groups 194 - Monbat AD Consolidated Financial Statements 31 December 2023 54 31 December 2023 31 December 2022 BGN000 BGN ‘000 Other liabilities 40 - Total liabilities, included in disposal groups 40 - 2023 2022 BGN 000 BGN ‘000 Sales revenue 1 294 2 031 Costs of ordinary activity (1 554) (2 249) Impairment costs (101) - Financial expenses (1) (4) Income tax revenue 10 - Loss from operation (352) (222) Monbat SA Proprietary Limited, South Africa In December 2023. The Board of Directors of Monbat AD resolved to take action to discontinue the business of Monbat SA Proprietary Limited, a company operating in South Africa. Group management expects the operations of Monbat SA Proprietary Limited to be discontinued within one calendar year of the end of the reporting period. Following a review of the recoverable amount of the assets of Monbat SA Proprietary Limited, the Group recognised an impairment charge of BGN 291 thousand included in the 'Result from discontinued operations' line in the consolidated statement of profit or loss. In 2023, Monbat SA Proprietary Limited reported a loss from operations of BGN 1 239 thousand. As required by IFRS 5 'Non-current assets held for sale and discontinued operations', the financial result of Monbat SA Proprietary Limited for the current and comparative period (2022) is presented in the 'Result from discontinued operations' line in the consolidated statement of profit or loss. Monbat AD Consolidated Financial Statements 31 December 2023 55 The carrying amounts of assets and liabilities and the amounts of income and expenses relating to the operations of Monbat SA Proprietary Limited are as follows: 31 December 2023 31 December 2022 BGN000 BGN ‘000 Property, plant and equipment 3 - Deferred tax assets 29 - Inventory 119 - Trade receivables 282 - Cash and cash equivalents 284 - Tax receivables 19 - Other receivables 90 - Total assets, included in disposal groups: 826 - 31 December 2023 31 December 2022 BGN000 BGN ‘000 Trade liabilities 726 - Total liabilities, included in disposal groups: 726 - 2023 2022 BGN000 BGN ‘000 Sales revenue 1 572 4 088 Costs of ordinary activity (1 858) (4 222) Impairment costs (784) - Financial expenses (201) (46) Financial revenue 3 - Income tax revenue 29 - Loss from operation (1 239) (180) Monbat AD Consolidated Financial Statements 31 December 2023 56 7.Segment reporting For management purposes, the Group is organized into business units based on its products and services and has four reportable segments, as follows: •Lead-acid battery manufacturing segment, which produces a wide product range of starter and stationary batteries, as well as batteries with cyclic application. •Recycling of industrial materials segment which produces lead, lead alloys, sodium sulphate and regranulated polypropylene for the production needs of the lead-acid batteries segment and for sale to external customers, as well as the production of equipment for recycling industrial materials. •Industrial group Nour segment, for the production and recycling of lead-acid batteries. •A segment Others, which include the logistics and foreign trade companies of the Group and companies with auxiliary activity. The Board of Directors of Monbat AD is the Chief Operating Decision Maker (CODM) and monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on normalized EBITDA (profit or loss before interest, taxes, depreciation, and amortization) which is calculated excluding certain one-off effects such as the impairment of financial assets and advances, one-off provisions and others and is measured consistently with profit or loss before interest, taxes, depreciation, and amortization in the consolidated financial statements. Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties. Inter-segment revenues are eliminated on consolidation and are reflected in column “Adjustments and eliminations”. All other adjustments and eliminations are part of the detailed equation presented below: Monbat AD Consolidated Financial Statements 31 December 2023 57 31 December 2023 Production of lead-acid batteries Recycling of industrial materials Industrial group Nour Others Total segments Adjustments and eliminations Consolidated BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Revenues External customers 281 079 56 722 33 859 15 963 387 623 - 387 623 Inter-segment 162 004 222 755 1 844 18 324 404 927 (404 927) - Total revenue 443 083 279 477 35 703 34 287 792 550 (404 927) 387 623 Expenses Expenses for materials, cost of materials and goods sold (373 918) (232 360) (22 483) (19 507) (648 268) 394 295 (253 973) Expenses for hired services and other expenses (25 849) (16 750) (2 232) (10 862) (55 693) 10 208 (45 485) Payroll expenses (25 214) (16 284) (4 446) (2 435) (48 379) 2 (48 377) Gain on sale of non-current assets 3 - - - 3 - 3 Capitalized internally constructed tangible fixed assets - 111 - - 111 - 111 Segment EBITDA 18 105 14 194 6 542 1 483 40 324 (422) 39 902 Total assets 257 655 249 742 57 882 20 152 585 431 (113 982) 471 449 Total liabilities 75 923 134 514 7 560 13 918 231 915 47 500 279 415 Other disclosures Investment in associates (Note 5) 2 692 - 185 - 2 877 - 2 877 Monbat AD Consolidated Financial Statements 31 December 2023 58 31 December 2022 Production of lead-acid batteries Recycling of industrial materials Industrial group Nour Others Total segments Adjustments and eliminations Consolidated BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Revenues External customers 297 935 47 448 22 393 15 524 383 300 - 383 300 Inter-segment 177 862 243 934 444 18 245 440 485 (440 485) - Total revenue 475 797 291 382 22 837 33 769 823 785 (440 485) 383 300 Expenses Expenses for materials, cost of materials and goods sold (406 084) (251 477) (15 573) (22 281) (695 415) 434 594 (260 821) Expenses for hired services and other expenses (25 321) (18 144) (1 208) (7 454) (52 127) 6 935 (45 192) Payroll expenses (23 188) (16 600) (2 669) (2 387) (44 844) - (44 844) Gain on sale of non-current assets 9 - - - 9 - 9 Capitalized internally constructed tangible fixed assets - 2 578 - - 2 578 398 2 976 Segment EBITDA 21 213 7 739 3 387 1 647 33 986 1 442 35 428 Total assets 255 510 257 227 51 800 24 377 588 914 (128 335) 460 579 Total liabilities 75 229 145 975 6 075 21 630 248 909 21 037 269 946 Other disclosures Investment in associates (Note 5) 2 412 - - 321 2 733 2 733 Monbat AD Consolidated Financial Statements 31 December 2023 59 Depreciation expense Impairment of financial assets Tax expense 20232022 20232022 20232022 Segment BGN ‘000BGN ‘000 BGN000BGN ‘000 BGN ‘000BGN ‘000 Production of lead-acid batteries (10 398)(9 886) (50)(422) (359)(745) Recycling of industrial materials (8 270)(7 755) (20)- (4 985)(279) Industrial group Nour (2 956)(2 196) (292)- (386)(321) Others (653)(430) (21)(59) (131)(212) Total segments (22 277)(20 267) (383)(481) (5 861)(1 557) Adjustments and eliminations 3232 -- 50(112) Consolidated (22 245)(20 235) (383)(481) (5 811)(1 669) Financial income and costs are not allocated to individual segments as the underlying instruments are managed on a group level and are not presented to the CODM at operating segment level. Certain financial assets and liabilities, investment properties and deferred taxes are not allocated to these segments as they are also managed on a group basis. Reconciliation of profit 2023 2022 BGN ‘000 BGN ‘000 Segment Profit before interest, taxes, depreciation andamortization 39 902 35 428 Impairment of financial assets and advances (Note 17.1,41) (383) (481) Depreciation and amortization expense (Notes 8,10,11) (22 245) (20 235) Financial revenues (Note 34) 3 936 1 906 Financial expenses (Note 34) (13 242) (9 217) Loss from investment revaluation - (225) Other financial items (Note 35) (277) 355 Financial instrument revenues (Note 33) 2 640 1 074 Profit share of an associate - 46 Profit before tax from continuing operations 10 331 8 651 Income tax expenses (5 811) (1 669) Profit from continuing operations 4 520 6 982 Reconciliation of assets 31 December 2023 31 December 2022 BGN ‘000 BGN ‘000 Segment operating assets 585 431 588 914 Intragroup eliminations and adjustments (169 830) (181 308) Eliminations of receivables from related parties (note 38) 55 780 52 902 Eliminations of other financial assets 68 71 Profit before tax from continued operations 471 449 460 579 Monbat AD Consolidated Financial Statements 31 December 2023 60 Reconciliation of liabilities 31 December 2023 31 December 2022 BGN ‘000 BGN ‘000 Segment operating liabilities 231 915 248 909 Intragroup eliminations and adjustments (166 211) (185 009) Deferred tax liabilities (Note 13) 3 281 4 172 Bond obligation (Note 24) 44 687 53 224 Fair value of conversion option (Note 24) - 5 280 Lease liabilities (Note 11) 4 257 3 885 Loans carried at amortized cost (note 23) 161 486 139 485 Total liabilities 279 415 269 946 Geographic information 2023 2022 BGN ‘000 BGN ‘000 Revenue from customers Bulgaria 30 147 37 400 Germany 34 125 33 259 France 36 343 21 944 Others 287 008 290 697 Total revenue 387 623 383 300 The revenue information above is based on the locations of the customers. In 2023 and 2022 the Group did not have major customers that accounting for 10% or more of the total revenue. 31 December 2023 31 December 2022 Non-current assets* BGN ‘000 BGN ‘000 Bulgaria 116 233 114 457 Romania 14 103 13 882 Serbia 11 137 12 184 Italy 33 264 34 614 Tunisia 31 385 30 342 Others - 31 Total non-current assets 206 122 205 510 *Non-current assets include property, plant and equipment, right-of-use assets, investment properties, intangible assets and goodwill. Monbat AD Consolidated Financial Statements 31 December 2023 61 8.Intangible assets Intangible assets of the Group include software licenses, trademarks, licensing rights, R&D expenses, and other intangible assets. The carrying amount for the reporting periods under review can be analyzed as follows: For the year ended 31 December 2023 Software Trademarks Customer network R&D costs Advances for licensing rights Others Total BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Gross carrying amount Balance on 1 January 1 491 4 270 1 140 2 757 5 946 1 333 16 937 Newly acquired assets 343 45 - - 1 363 491 2 242 Written–off assets - - - (45) - (39) (84) Transfer of assets from Property, plant and equipment - - - - - 864 864 Currency exchange rate conversions (1) (74) (7) - - - (82) Balance on 31 December 1 833 4 241 1 133 2 712 7 309 2 649 19 877 Amortization Balance on 1 January (1 112) (1 370) (173) (240) - (153) (3 048) Amortization for the year (243) (57) (226) (46) - (24) (596) Written-off amortization - - - - - 3 3 Balance on 31 December (1 355) (1 427) (399) (286) - (174) (3 641) Carrying amount as of 31 December 478 2 814 734 2 426 7 309 2 475 16 236 For the year ended 31 December 2022 Software Trademarks Customer network R&D costs Advances for licensing rights Others Total BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Gross carrying amount Balance on 1 January 1 499 1 564 - 9 289 4 415 315 17 082 Reclassified to discontinued operations (165) - - (6 667) - - (6 832) Newly acquired assets 222 7 - 135 1 531 1 062 2 957 Acquired by Business combination 8 2 717 1 148 - - - 3 873 Written–off assets (73) - - - - (44) (117) Currency exchange rate conversions - (18) (8) - - - (26) Balance on 31 December 1 491 4 270 1 140 2 757 5 946 1 333 16 937 Amortization Balance on 1 January (1 036) (1 319) - (1 574) - (131) (4 060) Reclassified to discontinued operations 144 - - 1 338 - - 1 482 Amortization for the year (220) (51) (173) (4) - (22) (470) Balance on 31 December (1 112) (1 370) (173) (240) - (153) (3 048) Carrying amount as of 31 December 379 2 900 967 2 517 5 946 1 180 13 889 Monbat AD Consolidated Financial Statements 31 December 2023 62 Advances for licensing rights In 2019, the Group signed a contract for the purchase of licensing rights for the acquisition of technology for the production of batteries with bipolar plates. The reported amount paid for the acquired licensing rights as of 31.12.2023 is BGN 7 309 thousand or USD 4 000 thousand (2022: BGN 5 946 thousand or USD 3 250 thousand). In 2023 and 2022, three of the agreed license payments of USD 250 thousand each were made, in total amount of BGN 1 363 thousand (2022: BGN 1 531 thousand). In 2022, the Group signed an agreement with the same supplier for the production ofbipolar plate battery prototypes to be made available to customers during thecommercialization of the new production. As of 31 December 2023, advances amountingto BGN 887 thousand (USD 459 thousand) have been paid under this contract and were presented in group “Others” of intangible assets. The production of the prototypes is expected to be completed in 2024. Licensing rights and prototypes have an indefinite useful life (note 3.10). In accordance with IAS 36, as the licence rights have an indefinite useful life, these have been tested for impairment and as of 31 December 2023 no impairment has been recorded as such. A model-based business plan has been developed which includes the construction of a bipolar technology battery manufacturing plant and the associated capital expenditure and related cash outflows and the realisation of the battery manufactured and the associated cash inflows and outflows. A discount factor of 12% was used. The model developed includes all the expected contractual costs of maintaining the licence after commercialisation. The group already has specific testing results on prototypes that are part of pre-series production. These give the Group the certainty that it will be able to start preparations for series production. The licensing rights will enable the Group to produce different battery types with improved energy density and power per unit weight, extended useful life and lower cost. There is no foreseeable limit on the period over which the asset is expected to generate net cash flows for the Group. Licensing rights are granted on the basis of an indefinite term contract. Based on this analysis of relevant factors, the Group considers the licence rights to have an indefinite useful life. R&D Costs R&D costs in the Industrial Materials Recycling segment (reported in STC S.R.L) of BGN 2 426 thousand (2022: BGN 2 517 thousand) include the development of new sulphate paste desulphurization technologies and other process improvements for the separation and refining of lead-containing materials. Trademarks In 2022, the Group acquired the Tunisian company Societe Nouvelle de l'accumulateur Nour. As a result of the fair value measurement of the acquired company's identifiable assets, for which the Group engaged external experts, management identified intangible assets of BGN 2 717 thousand representing the acquired company's trademarks, which are recognizable and have a significant share of the rechargeable battery market in Tunisia. Monbat AD Consolidated Financial Statements 31 December 2023 63 The fair value on 31 December of the acquired trademarks was determined by calculating the present value of future royalty cash flows at market conditions, for the amount of expected sales in the local market in Tunisia. The calculation ignores synergy effects and assumes a royalty rate of 2.75% of expected net sales. A discount rate of 23% was used. Trademarks acquired through business combinations have an indefinite useful life. Customer network As a consequence of the acquisition of Societe Nouvelle de l'accumulateur Nour in 2022, the Group's management identified intangible assets of BGN 1 148 thousand, which represent a customer network comprising multiple distributors in the local Tunisian battery market. The fair value of the acquired intangible assets on 31 December was determined by calculating the present value of the future cash flows of the expected sales associated with the acquired customer network. The calculation ignores synergy effects and assumes a rate of return and change in working capital commensurate with historical data and an approved business plan. A discount rate of 23% was used. The customer network is amortized over a five-year period. All intangible asset amortization expense is included in the consolidated statement of profit or loss in the line 'Depreciation and amortization expense'. The Group has not pledged any intangible assets as collateral for its liabilities. 9.Goodwill Goodwill BGN ‘000 Balance on 1 January 2023 3 419 Currency foreign conversion (70) Balance on 31 December 2023 3 349 Goodwill BGN ‘000 Balance on 1 January 2022 516 Acquisition of subsidiary company Nour 2 903 Balance on 31 December 2022 3 419 The Group assesses whether indicators of impairment exist and tests annually whether goodwill should be impaired. As of 31 December 2023, and 31 December 2022, the recoverable amount of the cash generating units was determined based on 'value in use' calculations which require the use of a number of assumptions. The calculations use projected cash flows based on financial budgets approved by management and covering a five-year period. Cash flows beyond the five-year period are extrapolated at forecast growth rates. 10.Property, plant and equipment The Group's property, plant and equipment includes land, buildings, plant and equipment, plant and equipment, vehicles, inventories and acquisition costs of property, plant and equipment. Their carrying amounts can be analyzed as follows: Monbat AD Consolidated Financial Statements 31 December 2023 64 For year ended on 31 December 2023 Land Buildings Machinery 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 on 1 January 2023 19 484 94 103 174 764 42 179 14 098 8 068 24 837 377 533 Acquired assets - 485 3 931 448 473 708 13 157 19 202 Capitalized borrowings and other 102 - - - - - 1 035 1 137 Disposals - (29) (947) (493) (441) (3) (475) (2 388) Transfers 911 2 069 9 651 2 166 553 135 (15 485) - Transfers to intangible assets - - - - - - (864) (864) Reclassified to discontinued operations - - (15) - - (79) - (94) Currency exchange rate conversion (151) (201) (125) (35) (13) (7) (41) (573) Balance on 31 December 2023 20 346 96 427 187 259 44 265 14 670 8 822 22 164 393 953 Depreciation Balance on 1 January 2023 - (32 168) (125 377) (19 825) (9 162) (6 621) - (193 153) Reclassified to discontinued operations - 13 - - 62 - 75 Depreciation for the year - (4 278) (11 434) (2 419) (962) (578) - (19 671) Disposal depreciation - - 512 333 353 - - 1 198 Balance on 31 December 2023 - (36 446) (136 286) (21 911) (9 771) (7 137) - (211 551) Carrying amount as of 31 December 2023 20 346 59 981 50 973 22 354 4 899 1 685 22 164 182 402 Monbat AD Consolidated Financial Statements 31 December 2023 65 For year ended on 31 December 2022 Land Buildings Machinery 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 on 1 January 2022 13 403 86 606 164 994 41 433 12 336 7 833 18 142 344 747 Acquired assets 1 729 578 4 310 1 313 1 645 429 12 689 22 693 Acquired with business combinations 4 703 8 449 7 253 301 434 96 1 097 22 333 Disposals (42) (31) (603) (92) (329) (162) (474) (1 733) Reclassified to discontinued operations (302) (4 025) (4 164) (1 453) (13) (130) (400) (10 487) Transfer to assets - 2 535 2 978 675 26 - (6 214) - Currency exchange rate conversion (7) (9) (4) 2 (1) 2 (3) (20) Balance on 31 December 2022 19 484 94 103 174 764 42 179 14 098 8 068 24 837 377 533 Depreciation Balance on 1 January 2022 - (28 871) (116 664) (18 288) (8 559) (6 307) - (178 689) Depreciation for the year - (4 023) (10 357) (2 267) (793) (603) - (18 043) Reclassified to discontinued operations - 726 1 421 666 6 132 - 2 951 Disposal depreciation - - 223 64 184 157 - 628 Balance on 31 December 2022 - (32 168) (125 377) (19 825) (9 162) (6 621) - (193 153) Carrying amount as of 31 December 2022 19 484 61 935 49 387 22 354 4 936 1 447 24 837 184 380 Monbat AD Consolidated Financial Statements 31 December 2023 66 All depreciation expenses are included in the consolidated statement of profit or loss under note “Depreciation and amortization expenses”. As at 31.12.2023 and 31.12.2022 the Group has no contractual commitments to acquire assets. Based on the review for impairment of property, plant and equipment, the Group's management has not identified any indications that the carrying amount of the assets exceeds their recoverable amount. Assets under construction Assets under construction are machinery and equipment that have not yet been put into operation, as well as costs for major repairs of existing assets that have not been completed as of 31 December 2023. The segmentation is as follows: •Assets under construction in the segment “Production of lead-acid batteries” amounts to BGN 2 258 thousand (2022: BGN 4 166 thousand) •Assets under construction in the segment “Recycling of industrial materials” amounts to BGN 11 454 thousand (2022: BGN 14 876 thousand) •Asset under construction in the segment “Industrial group Nour” amounts to BGN 4 352 thousand (2022: BGN 1 745 thousand) •Assets under construction in the segment “Other” amounts to BGN 4 100 thousand (2022: BGN 4 050 thousand). Pledged assets The carrying amount of property, plant and equipment pledged as collateral for loans (refer to Note 23) is presented as follows: 2023 2022 BGN ‘000 BGN ‘000 Land 14 321 12 115 Buildings 32 043 32 911 Machinery 39 216 41 050 Vehicles 3 152 932 Assets under construction 5 035 3 507 Carrying amount 93 767 90 515 Capitalized non-current assets in the amount of BGN 111 thousand include costs for materials BGN 44 thousand, labor costs BGN 41 thousand and costs for external services BGN 26 thousand. 11. Lease liabilities and right-of-use assets The Group has lease agreements as a lessee for office spaces, machinery and equipment, vehicles and other equipment used in its operations. Leases of motor vehicles and office spaces generally have lease term between 3 and 5 years, while machinery and other equipment generally have lease term between 1 and 3 years. The Group’s liabilities under its leases are secured by the lessor’s title to the leased assets. The Group also has certain Monbat AD Consolidated Financial Statements 31 December 2023 67 leases of machinery with lease terms of 12 months or less and leases of office equipment with low value. The Group applies the ‘short-term lease’ and ‘lease of low-value assets’ recognition exemptions under IFRS 16 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 Buildings Vehicles Machinery Total BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 As of 1 January 2023 1 689 1 758 375 3 822 Acquired 1 623 709 285 2 617 Disposal (211) (5) (110) (326) Depreciation expense (736) (754) (488) (1 978) As of 31 December 2023 2 365 1 708 62 4 135 Right-of-use assets Buildings Vehicles Machinery Total BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 As of 1 January 2022 279 1 732 - 2 011 Acquired 2 037 1 169 789 3 995 Disposal - (410) (22) (432) Depreciation expense (627) (733) (392) (1 752) As of 31 December 2022 1 689 1 758 375 3 822 Set out below are the carrying amounts of lease liabilities and the movements during the period: 2023 2022 Lease liabilities BGN ‘000 BGN ‘000 Non-current liabilities 2 815 2 346 Current liabilities 1 442 1 539 4 257 3 885 2023 2022 Lease liabilities BGN ‘000 BGN ‘000 As of 1 January 3 885 1 710 Acquisitions 2 655 4 111 Disposals (319) (234) Interest accrued 190 167 Payments (2 154) (1 869) As of 31 December 4 257 3 885 The Group does not have leases that include variable payments. The Group has several lease contracts that include termination options. The aim of the management is to provide flexibility in the lease portfolio by using termination options in the contracts. Management makes significant judgment in determining whether it is reasonably certain that these extension and termination options will be exercised. The Group considers that Monbat AD Consolidated Financial Statements 31 December 2023 68 in the next reporting period the options for termination of 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 1 978 1 752 Interest expenses on lease liabilities 190 167 Total amount, recognized in profit and loss 2 168 1 919 The total cash outflows for leases of the Group are BGN 2 154 thousand in 2023 (2022: BGN 1 869 thousand). Future minimum lease payments as of 31 December 2023 and 31 December 2022 were as follows: Minimum lease payments due Within 1 year 1-2years 2-3years 3-4years 4-5years After 5 years Total BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN ‘000 31 December 2023 Lease payments 1 574 1 216 907 758 76 - 4 531 Financial expenses (132) (81) (44) (16) (1) - (274) Net present value 1 442 1 135 863 742 75 - 4 257 31 December 2022 Lease payments 1 656 1 356 965 102 9 - 4 088 Financial expenses (117) (63) (21) (2) - - (203) Net present value 1 539 1 293 944 100 9 - 3 885 12. Financial assets at fair value through other comprehensive income The amounts recognized in the consolidated statement of financial position relatate to long-term assets, measured at fair value through other comprehensive income, and can be summarized as follows: 2023 2022 BGN ‘000 BGN ‘000 Non-listed equity share 68 71 Non-listed equity shares include investments in shares in equity of private companies operating in Bulgaria and Italy. The Group has non-controlling interests (up to 10%) in these companies. These investments are irrevocably measured at fair value in other comprehensive income as the Group considers them to be strategic in nature. Monbat AD Consolidated Financial Statements 31 December 2023 69 In 2022, the Group sold its minority stake in the Italian company COBAT s.p.a. to a third party, recording a gain of BGN 485 thousand, shown in the line "Gains on sale of investment", representing the difference between the cash amount received and the fair value of this investment on 31 December 2022. 13. Income tax The major components of income tax expense for the years ending 31 December 2023 and 2022 are as follows: 2023 2022 Statement of Profit or Loss BGN ‘000 BGN ‘000 Current income tax expense (2 644) (1 514) Tax liability provision expense (4 058) - - Deferred tax income/ (expense) 891 (155) Income tax expense in the statement of profit or loss (5 811) (1 669) In 2023, the nominal income tax rates for Bulgaria, Italy, Serbia, Romania and Tunisia are 10%, 27.9%, 15%, 16% and 15% (2022: 10%, 27.9%, 15%, 16% and 15%). The reconciliation between income tax expense and book profit multiplied by the applicable tax rate for the years ending 31 December 2023 and 31 December 2022 is presented below: 2023 2022 BGN ‘000 BGN ‘000 Profit before tax 10 331 8 651 Tax rate 10% 10% Expected tax expense (1 033) (865) Revenues and expenses not deductible for tax purposes, not recognized deferred tax assets and effect of difference of the applicable tax rates (720) (804) Tax liability provision expense (4 058) - Income tax expense (5 811) (1 669) Income tax expense include: Current income tax charge (2 644) (1 514) Tax liability provision expense (4 058) - Deferred tax income/(expense): Effect of temporary differences 891 (155) Income tax expense (5 811) (1 669) Effective tax rate 56.25% 19.29% Income tax expense in the consolidated statement of profit or loss (5 811) (1 669) Monbat AD Consolidated Financial Statements 31 December 2023 70 The deferred tax as of 31.12.2023 and 31.12.2022 are presented to the following: Reconciliation of deferred taxes, net 2023 2022 BGN ‘000 BGN ‘000 On 1 January (4 172) (1 845) Deferred taxes recognized in profit or loss for the period 891 (155) Deferred assets acquired through business combinations - (1 293) Deferred assets classified as assets and liabilities held for sale and included in disposal groups - (879) On 31 December (3 281) (4 172) In May 2022, Piombifera Italiana Spa, a company of the Group, received from the Italian Revenue Agency, Province of Varese, summons number 117/2022/90021964 for the payment of corporate tax liabilities amounting to EUR 3 539 thousand. The summons was received by Piombifera Italiana Spa in its capacity as joint debtor with an unrelated party, Piombifera Bresciana Srl, which entity received, but did not pay, tax audit certificates in 2016 relating to the tax years 2009, 2010 and 2011. The Italian Revenue Agency considers Piombifera Italiana Spa and Piombifera Bresciana Srl to be jointly and severally liable insofar as in March 2012 Piombifera Bresciana Srl was transformed into Piombifera Italiana Spa following a decision of the then shareholders of Piombifera Bresciana Srl. The Group of Monbat AD, through its subsidiary Monbat Italy Srl, acquired Piombifera Italiana Spa in November 2017. Through its lawyers, in June 2022 Piombifera Italiana Spa disputed the payment invitation received. In September 2023, by judgment number 246/2023, the court of first instance in Varese dismissed Piombifera Italiana Spa's appeal and demanded payment of the tax amounts in question. In October 2023, Piombifera Italiana Spa challenged, at second instance, before the Regional Court of Lombardy the dismissal of the action, in terms of the joint liability of Piombifera Italiana Spa and Piombifera Bresciana Srl in respect of the tax assessment notices issued and in terms of the maximum amount of Piombifera Italiana Spa's liability. According to Italian law, the maximum liability should be up to the amount of the transformed company's equity, namely EUR 2 075 thousand. It is the expectation of the Group and its tax and legal collaborators that the Court will confirm the existence of the joint and several indebtedness of Piombifera Italiana Spa in respect of the tax liabilities established for Piombifera Bresciana Srl, limiting the liability, respectively the obligation of Piombifera Italiana Spa, to the maximum liability, namely EUR 2 075 thousand. In this respect, the Group has recognised a provision for tax liabilities of BGN 4 058 thousand in 2023 (2022: nil), shown in line "Income tax expense" in the consolidated statement of profit or loss, and a liability of the same amount in line "Corporate income tax payable" in the consolidated statement of financial position. Monbat AD Consolidated Financial Statements 31 December 2023 71 Pursuant to the agreement defining the terms and conditions of the acquisition of the ownership of Piombifera Italiana Spa in 2017, entered into between the Group and the Seller, the Group has obtained representations and warranties of the absence of material tax liabilities in the acquired company by the Seller. The management of the Group is considering bringing a claim for damages against the Seller, due to the incorrect and/or incomplete information provided during the sale process. 14. Inventories Inventories, recognized in the consolidated statement of financial position can be analyzed as follows: 2023 2022 BGN ‘000 BGN ‘000 Materials 42 712 36 373 Work in progress 38 694 38 117 Production 21 714 28 604 Goods 952 1 092 Goods and materials in transit 2 186 1 212 Inventories 106 258 105 398 The balance sheet value of inventories pledged as collateral is BGN 59 878 thousand as at 31 December 2023 (31 December 2022: BGN 58 490 thousand). For details, refer to note 23. A special pledge has been established on a set of raw materials and inventories - lead, lead alloys and rechargeable batteries and their derivatives, owned by Monbat AD, as security for obligations under a bank loan agreement for working capital dated 07.12.2004 with Eurobank Bulgaria AD. A special pledge has been established on a set of raw materials and inventories owned by Monbat Recycling Bulgaria EAD as security for obligations under a bank loan agreement dated 09.11.2015, concluded with UBB AD. A specific pledge has been established on a set of raw materials and inventories owned by Monbat Recycling Romania as security for obligations under bank loan agreement N80046/IS/2017 concluded with Raiffeisen bank Romania. A specific pledge has been established on a set of raw materials and inventories owned by Monbat Recycling Serbia as security for obligations under a bank loan agreement dated 15 April 2019, concluded with Raiffeisen bank Serbia. A special pledge has been established on a set of raw materials and inventories owned by Start AD as security for obligations under a bank loan agreement dated 14.01.2022, concluded with UBB AD. Inventories in the amount of BGN 10 592 thousand owned by Nour Tunis Group were provided as collateral for working capital loans obtained from STB Tunisia. Monbat AD Consolidated Financial Statements 31 December 2023 72 15. Trade loan receivables Short term commercial loans granted are, as follows: 2023 2022 BGN ‘000 BGN ‘000 Advanced Research and Technologies 92 99 Recycling Company EOOD, incl. interests 66 50 158 149 Description of contracts: •Contract dated 29.04.2021 with Advanced Research and Technologies Principal amount drawn down: BGN 92 thousand Loan term: 31.12.2024. Interest and commission: fixed annual interest rate Principal balance at 31.12.2023: BGN 92 thousand. Repayment: one-off repayment on expiry of the contract. The loan has not yet been repaid. •Contract of 26.02.2020 with Recycling Company EOOD Principal amount drawn down: BGN 50 thousand. Loan term: 31.12.2024. Interest and commission: fixed annual interest rate Principal balance at 31.12.2023: BGN 50 thousand. Repayment: one-off repayment upon expiry of the contract. The loan has not yet been repaid. 16. Trade receivables 2023 2022 BGN ‘000 BGN ‘000 Trade receivables, gross 74 969 69 523 Allowance for credit losses (5 006) (4 667) Trade receivables 69 963 64 856 All amounts are short-term. The net carrying value of trade receivables is considered a reasonable approximation of fair value. During 2023, trade receivables amounting to BGN 44 thousand were written-off (2022: BGN 0). For trade receivables with net amount of BGN 61 976 thousand the Group used the simplified approach allowed by IFRS 9 (Note 3.15.1), to measure the loss allowance with respect to trade receivables whose credit risk has not increased significantly (Note 41). Monbat AD Consolidated Financial Statements 31 December 2023 73 The value of the impairment as of 31.12.2023, calculated using the simplified approach is BGN 1 892 thousand (2022: BGN 1 553 thousand), as the Group recognized an impairment charge in 2023 in the amount of BGN 196 thousand on the line "Impairment of financial assets" in the consolidated statement of profit or loss. For the remaining part of the trade receivables, the Group has calculated the provisions for losses in respect of individual trade receivables whose credit risk has increased significantly, using the expected credit losses over the life of the instrument (ECL approach). The result is an impairment in the amount of BGN 0 in 2023 (2022: BGN 481 thousand), which is recognized in the consolidated statement of profit or loss under the line "Impairment of financial assets". The movement in the allowance for credit losses can be reconciled as follows: 2023 2022 BGN ‘000 BGN ‘000 Balance at 1 January (4 667) (4 186) Written-off impairment 44 - Impairment loss (383) (481) Balance at 31 December (5 006) (4 667) The carrying amount of trade receivables pledged as collateral for loans (refer to note 23), amounts to BGN 37 818 thousand (2022: BGN 35 278 thousand). 17. Tax receivables 2022 2021 BGN ‘000 BGN ‘000 VAT recoverable 8 573 9 117 Customs collections 1 62 Other taxes 131 1 082 8 705 10 261 Significant part of tax receivables is VAT recoverable for the period December 2023. The tax has been recovered in 2024. Monbat AD Consolidated Financial Statements 31 December 2023 74 18. Other receivables 2023 2022 BGN ‘000 BGN ‘000 Guarantees 1 326 2 619 Prepaid expenses 760 1 118 Others 1 488 1 613 3 574 5 350 As at 31.12.2023 the Group has provided guarantees in favor of counterparties in the form of deposited cash in the amount of BGN 611 thousand (31.12.2022: BGN 1 098 thousand) 19.Cash and cash equivalents. Cash and cash equivalents include the following components: 2023 2022 BGN ‘000 BGN ‘000 Cash at bank and in hand: - Bulgarian Lev 4 799 1 801 - Euro 5 792 4 225 - US Dollar 590 817 - Romanian Lei and Serbian Dinar 152 588 - British Pound 1 2 - Nigerian Naira - 90 - South African rand - 76 - Tunisian Dinar 1 383 538 Cash and cash equivalents 12 717 8 137 The Group has estimated expected credit losses on cash and cash equivalents as at 31 December 2023. The estimated amount of credit losses on cash deposited with financial institutions has been determined to be immaterial and therefore has not been charged to the Group's consolidated financial statements. As at 31 December 2023, the Group has cash and cash equivalents of BGN 1 369 thousand (31 December 2022: BGN 1 369 thousand) blocked with the Ministry of the Environment in Italy. Restrictions related to blocked funds have not been removed and at the date of approval of the consolidated financial statements. Monbat AD Consolidated Financial Statements 31 December 2023 75 20. Equity 20.1Share capital The issued capital of the Group consists of 39 000 000 ordinary shares with a nominal value of BGN 1 per share. All shares are equally eligible to receive dividends and liquidation proceeds and represent one vote at the shareholders’ meeting of the Group. 2023 2021 Number of shares Number of shares Number of shares issued and fully paid Beginning of the year 38 962 054 38 989 054 Repurchased shares during the period (6 545) (27 000) Total number of shares authorized as at 31 December 38 955 509 38 962 054 The list of the principal shareholders of the parent company is 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 entities 6 755 954 17.33 6 788 804 17.41 39 000 000 100 39 000 000 100 Own shares purchased (44 491) (0.11) (37 946) (0.10) 38 955 509 99.89 38 962 054 99.90 The total number of shares with voting rights held directly and through related parties by Prista Oil Holding EAD is 19 452 021 or 49.87%. The shares held by Monbat Trading Ltd. and Prista Oil Holding EAD are subject to a pledge agreement under the Financial Collateral Contracts Act (FCCA) in favor of UniCredit Burbank AD in connection with a loan granted by UniCredit Burbank AD to Prista Invest 2016 AD. In 2022 The Board of Directors of Monbat adopted a resolution to repurchase treasury shares up to 3% of the registered capital or up to 1 170 000 shares at a minimum repurchase price of BGN 4.51 and a maximum repurchase price of BGN 8.75 with a starting date of 26 September 2022 and term of execution up to 180 calendar days with the possibility of extending. In 2023 Monbat re-purchased 6 545 shares (2022: 27 000 shares). Monbat AD Consolidated Financial Statements 31 December 2023 76 20.2Share premium The Group's premium reserve represents proceeds received in addition to the nominal value of shares issued in 2006. The proceeds are included in the premium reserve net of registration and other regulatory fees. The excess over the nominal amount of BGN 1 for each share sold and investment intermediary fees have been accounted for in an increase in the value of the premium reserve to BGN 28 403 thousand at 31 December 2023 (31 December 2022: BGN 28 425 thousand). In 2023, the Group repurchased 6 545 shares (2022: 27,000 shares). In 2015 the Group repurchased 10 946 shares through the subsidiary Start AD. The excess over the nominal amount of BGN 1 per share has been accounted for as a reduction in the value of the share premium reserve. 20.3General reserves All amounts are in BGN ‘000 Legal reserves Other reserves Total Balance on 1 January 2022 3 900 65 156 69 056 Balance on 31 December 2022 3 900 65 156 69 056 Balance on 31 December 2023 3 900 65 156 69 056 Legal reserves Legal reserves represent 10% legal reserves set aside from current earnings as required by the Commercial law until it reaches 10% of the share capital. Other reserves Other reserves at 31.12.2023 amounted to BGN 65 156 thousand are formed by the retained earnings of the Group from past periods. Foreign currency translation reserve The reserve from foreign currency translation includes currency translation differences, resulting from the Group’s foreign activities. As of 31.12.2023 exchange differences amounted of BGN 8 813 thousand (2022: BGN 6 334 thousand) were generated from the translation of non-monetary items measured at fair value in foreign currencies and carried at the exchange rate at the date on which their fair value was determined. Monbat AD Consolidated Financial Statements 31 December 2023 77 21. Provisions Provision carrying amounts can be presented as follows: Warranty provisions Provisions for the disposal of hazardous waste Provision for reutilization of separator Others Total BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Carrying amount at 1 January 2023 1 049 1 429 1 037 230 3 745 Reversal of provisions (450) (121) - - (571) Charged amounts - - 268 180 448 Carrying amount at 31 December 2023 599 1 308 1 305 410 3 622 Warranty provisions Provisions for the disposal of hazardous waste Provision for reutilization of separator Others Total BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Carrying amount at 1 January 2022 1 297 3 043 1 540 14 5 894 Subsidiary acquired 563 - - 216 779 Reversal of provisions (811) (1 614) (503) - (2 928) Carrying amount at 31 December 2022 1 049 1 429 1 037 230 3 745 2023 BGN ‘000 2022 BGN ‘000 Non-current Warranty provision 147 185 Provision for reutilization of separator 117 117 264 302 2023 2022 BGN ‘000 BGN ‘000 Current Provision for the disposal of hazardous waste 1 308 1 429 Provision for reutilization of separator 1 188 920 Warranty provision 452 864 Others 410 230 3 358 3 443 Provisions for warranties represent recognized amounts that the Group expects to incur as warranty service and replacement costs in the event of a defect in the underlying products. Provisions recognized are calculated based on the best estimate that the Group's management can make based on past experience and expected realization of the products. Provisions for hazardous waste disposal represent recognized amounts that the Group expects to incur as costs for the disposal of separator and slag. Monbat AD Consolidated Financial Statements 31 December 2023 78 The provisions recognized have been calculated based on the best estimate that the Group's management can make of the expected cost of disposing of the hazardous waste available at the end of the reporting period. 22. Personnel 22.1.Payroll expenses Payroll expenses include: 2023 2022 BGN ‘000 BGN ‘000 Salaries (40 281) (37 012) Social security costs (7 980) (7 517) Defined contribution plan (116) (315) Payroll expenses (48 377) (44 844) 22.2.Current payables to personnel Payables to staff for salaries and untaken leave included in the consolidated statement of financial position consist of the following amounts: 2023 2022 BGN ‘000 BGN ‘000 Salaries 3 076 2 958 Social security costs 1 252 1 144 Annual paid leave liability 819 596 Payables to personnel and social security institutions 5 147 4 698 The current portion of these liabilities represents the Group’s liabilities to its employees that are expected to be settled during 2024. Other short-term personnel payables arise mainly from accrued paid leave at the end of the reporting period. 22.3.Non-current payables to personnel 2023 2022 BGN ‘000 BGN ‘000 As at 1 January 1 187 872 Defined contribution plan 116 244 As at 31 December 1 303 1 116 The Group has a defined contribution plan arising from an obligation under Italian labor law. Liabilities for contributions to defined contribution plans are recognized as expenses in the consolidated statement of profit or loss as a percentage of employees' remuneration. The Group's subsidiaries in Italy have a workforce of less than fifty, which allows for no mandatory contributions to the state pension fund in respect of this specific obligation. Under Italian law, employees may elect not to make the required contributions to a private pension fund, and the obligation will be paid directly to the employees upon the occurrence of an event by the company. Employees of the Italian subsidiaries have elected not to make the contributions due to pension funds. Monbat AD Consolidated Financial Statements 31 December 2023 79 23. Borrowings and government grants Borrowings include the following financial liabilities: Current Non-current 2023 2022 2023 2022 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Financial liabilities measured at amortized cost: Bank loans 127 903 105 313 22 867 27 842 Loans from other financial institutions 3 482 3 007 7 234 3 323 Total carrying amount 131 385 108 320 30 101 31165 23.1.Borrowings carried at amortized cost Summary of bank loan contracts 1. UBB AD Agreement dated 25.02.2014. Maturity date: 15.02.2016 Loan amount: 3 200 000 EUR Type of loan: Revolving Interest and commission: 1 M EURIBOR + mark-up Collaterals: Rank collateral of mortgage of own real estate, cadaster № 48489.5.597, cadaster № 48489.5.281, cadaster № 48489.5.396, together with the buildings constructed thereon, located in Montana str. Industrialna, owned by Monbat AD and Monbat Recycling EAD. By an annex dated 30.6.2016, the loan amount was increased to 4 200 000 EUR. By an annex of month of June 2017, the amount of the loan was increased to 9 200 000 EUR. Maturity date: 31.07.2027 Pledge on machinery plant and equipment owned by Monbat AD and Monbat Recycling EAD. First ranking pledge on all present and future receivables on accounts with the bank. Utilized amount as at 31.12.2023 at the amount of 17 700 049 BGN. 2. Eurobank Bulgaria AD Agreement № 339/07.12.2004 Maturity date: 07.06.2006 Loan amount: 2 200 000 EUR Type of loan: Credit line Interest: Variable reference interest rate + mark-up Collateral: Pledge on assets and inventories owned by Monbat AD By annex dated 16.06.2017 the amount of the loan was increased to BGN 18 971 401 By annex dated 13.01.2023, valid until 30.03.2023, the amount of the loan was increased to BGN 30 706 381. Maturity date: 31.01.2024, by annex from 2024 the maturity date was extended till 30.06.2024. Utilized amount as of 31.12.2023 at the amount of 18 962 544 BGN. Monbat AD Consolidated Financial Statements 31 December 2023 80 3. Eurobank Bulgaria AD Agreement № 100-972 from 23.11.2010 Maturity date: 23.11.2011 Loan amount: 1 000 000 EUR Type of loan: working capital Interest: 3 month EURIBOR + mark-up Collateral: Real estate 1: 1/2 ideal part of land with identification №48489.282 on the cadastral map of Montana, approved with Directive № RD-18-19-/05.04.2006 of the Procurator of AK. Real estate 2:1/2 ideal part of land with identification №48489.282 on the cadastral map of Montana, approved with Directive № RD-18-19-/05.04.2006 of the Procurator of AK Pledges: 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 dated 29.07.2014 and the loan is transferred from EUR in BGN Maturity date: 31.01.2024, by annex from 2024 the maturity date was extended till 30.06.2024. Loan amount: 1 955 830 BGN Type of loan: credit line Interest: Variable reference interest rate + mark-up Collateral: Promissory Note for the amount of 1 955 830 BGN. Utilized amount as of 31.12.2023 at the amount of 1 930 570 BGN. 4. DSK Bank AD Contract №1675/16.09.2015 Loan amount: 2 500 000 EUR Type of credit: for working capital Maturity date: 10.09.2024 Interest: 1 М EURIBOR + mark-up Collateral: Pledge agreement on receivables and fixed assets. Utilized amount as of 31.12.2023 at the amount of 4 889 575 BGN (2 500 000 EUR). 5. DSK Bank AD Contract №1674/16.09.2015 Maturity date: 10.09.2016 Loan amount: 2 000 000 BGN Type of loan: for working capital Interest: Variable reference interest rate + mark-up By Annex dated 13.11.2019 a loan amount is increased up to 9 000 000 BGN. Maturity date: 10.09.2024 First rang pledge fixed assets owed by Monbat AD. Next in line special pledge on receivables. Utilized amount as of 31.12.2023 at the amount of 8 999 883 BGN. Monbat AD Consolidated Financial Statements 31 December 2023 81 6. UBB AD Contract from 09.11.2015 Loan amount: 490 000 BGN Type of credit: Overdraft Interest: Variable reference interest rate + mark-up Maturity date: 15.12.2025 Collateral: Unsecured Utilized amount as of 31.12.2023 amounted of 487 239 BGN. 7. Eurobank Bulgaria AD Contract 359/2017 from 05.10.2017 Loan amount: 2 556 459 EUR Type of loan: credit line Interest: 3 М EURIBOR+mark up Maturity date: 31.01.2024, by annex from 2024 the maturity date was extended to 30.06.2024. Collateral: First rang pledge to receivables from third parties. Utilized amount as of 31.12.2023 amounted of 2 196 657 BGN (1 123 133 EUR). 8. UBB AD Contract 20F-00428 from 10.04.2020 Loan amount: 2 000 000 EUR Type of loan: credit line Interest: 1 М EURIBOR + mark-up Collateral: Pledge of receivables on all accounts of the borrower opened with the bank; insurance with BAEZ securing the exposure under the contract up to EUR 2 million. By an annex dated 15.12.2020, the loan amount is divided into two sub-limits of EUR 1 million each with the right to draw the first sub-limit until 31.12.2023 and final repayment until 31.12.2023 and with the right to draw the second sub-limit upon successful review, which the bank will carry out until 31.12.2023. Maturity date: 31.07.2024. Utilized amount as of 31.12.2023 amounted of 3 911 018 BGN (1 999 672 EUR). 9. UBB AD Contract from 10.04.2020 Maturity date: 30.09.2026. Loan amount: 13 000 000 EUR. Type of loan: Credit line Interest: 6 М 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 Pledge on borrower receivables to all bank accounts opened in a bank. By an annex dated 15.12.2020, the amount of the loan was changed to EUR 10 000 000 and the loan was divided into two sub-limits of EUR 5 833 thousand and EUR 4 167 thousand, respectively, with the right to draw the first sub-limit by 30.12.2020 and repay EUR 1 million on a 6-month basis starting from 30.01.2021 and with the right to draw the Monbat AD Consolidated Financial Statements 31 December 2023 82 second sub-limit in case of a successful review, which the bank will carry out by 31.12.2023. In case of successful review, the maturity date is 30.07.2025. Utilized amount as of 31.12.2023 in the amount of BGN 7 823 320 (EUR 4 000 000). 10. Investbank AD Contract from 21.07.2021 Maturity date: 26.03.2024, by annex from 2024 the term was extended by 1 year. Loan amount: 5 000 000 EUR Type of loan: Credit line Interest: 3 М 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. By Annex 2 dated 14.07.2022 the loan amount was increased to EUR 8 315 000. Utilized amount as of 31.12.2023 amounted of 9 779 150 BGN (5 000 000 EUR). 11. Investbank AD Contract from 25.02.2022 Maturity date: 26.03.2024, by annex from 2024 the term was extended by 1 year. Loan amount: 5 000 000 EUR Type of loan: Credit note Interest: 3 М EURIBOR+mark-up Collateral: First rank contractual mortgage of a land with cadastral № 48489,11,537 with area 782 sq. m, owed by Monbat Recycling EAD. First rank pledge on current and future receivables available in all open accounts in Investbank AD held by Monbat AD, Monbat Recycling EAD and Prista oil Holding EAD. Insurance policy for financial risk issued by BAEZ in favor to the bank, with credit limit amount not less than 4 000 000 EUR. Utilized amount as of 31.12.2023 amounted to 9 779 150 BGN (5 000 000 EUR). 12. UBB AD Contract N 20F-00102/01.02.2023 Maturity date: 01.08.2024 Loan amount: 437 840 EUR Type of loan: investment credit Interest: 3 M EURIBOR + mark-up Collateral: a special pledge to future fixed assets amounting to 437 840 EUR, located on land with identifier 48489.5.597, representing propane-butane gas installation. Utilized amount as of 31.12.2023 amounted of 644 041 BGN (329 292 EUR). 13. UBB AD Contract N 20F-00103/01.02.2023 Maturity date: 01.02.2024 Loan amount: 97 298 EUR Type of loan: VAT credit line Interest: 3 M EURIBOR + mark-up Collateral: pledge on receivables Utilized amount as of 31.12.2023 amounted of 0 BGN. Monbat AD Consolidated Financial Statements 31 December 2023 83 14. UBB AD Contract N 23F-000767/21.08.2023 Maturity date: 14.08.2024 Loan amount: 3 500 000 EUR Type of loan: working capital Interest: 1 M EURIBOR + mark-up Collateral: Land property with identification № 72624.603.372, owned by Start AD. Utilized amount as at 31.12.2023 amounted of 6 441 125 BGN (3 293 295 EUR). 15. Bank credit cards accounts with credit limits BGN 50 thousand and utilized amounts as of 31.12.2023 at the amount of 10 000 BGN. 16. UBB AD Contract N 1317/18.03.2016 Maturity date: 31.01.2028 Loan amount: 4 500 000 EUR. 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 receivables on all bank accounts held with the UBB AD. Balance as of 31.12.2023 at the amount of 4 500 000 EUR or 8 801 235 BGN. 17. UBB AD Contract 27.09.2022 Maturity date: 25.03.2028 Loan amount: 546 000 EUR Type of loan: Investment Interest: 3 М EURIBOR+mark-up Collateral: fixed assets Balance as of 31.12.2023 at the amount of 463 476 EUR or 907 043 BGN. 18. UBB AD Contract N 23F00100/01.02.2023. Maturity date: 01.08.2024 Loan amount: 332 114 EUR Type of loan: Investment Interest: 3 M EURIBOR + mark-up Collateral: fixed assets Utilized amount as of 31.12.2023 amounted of 383 099 BGN (195 875 EUR). 19. UBB AD Contract N 23F00101/01.02.2023. Maturity date: 01.02.2024 Loan amount: 73 803 EUR Type of loan: VAT credit line Interest: 3 M EURIBOR + mark-up Collateral: Pledge on receivables with right of use on receivables on all current and future bank accounts in UBB AD. Utilized amount as at 31.12.2023 amounted of 11 286 BGN (5 770 EUR). Monbat AD Consolidated Financial Statements 31 December 2023 84 20. Raiffeisen Bank SA Romania Contract N 80046/IS/2017 Maturity date: 29.11.2024 Loan amount: 5 000 000 EUR 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 3 996 769 EUR or 7 817 000 BGN. 21. KBC Bank AD Contract from 15.07.2015 Maturity date: 30.07.2024 Loan amount: 3 000 000 EUR 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 instalation First rang pledge on inventory. Balance as of 31.12.2023 at the amount of 3 000 000 EUR or 5 867 490 BGN. 22. Eurobank Bulgaria AD Contract N 196/2016 Maturity date: 31.01.2024, extended till 30.06.2024 by annex from 2024. Loan amount: 1 500 000 EUR 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 2 500 000 EUR 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 2 404 405 EUR or 4 702 607 BGN. 23. Raiffeisen Bank Serbia Contract from 15.04.2019 Maturity date: 14.04.2024 Loan amount: 2 000 000 EUR 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 2 000 000 EUR or 3 911 660 BGN. 24. Procredit Bank Serbia Contract from 27.02.2023 Maturity date: 01.03.2028 Loan amount: 700 000 EUR Type of loan: working capital Interest: 1 М EURIBOR + mark-up Collateral: Promissory note issued by the group Balance as of 31.12.2023 at the amount of 641 958 EUR or 1 255 561 BGN. Monbat AD Consolidated Financial Statements 31 December 2023 85 25. Procredit Bank Serbia Contract from 30.03.2023 Maturity date: 01.04.2028 Loan amount: 400 000 EUR Type of loan: Revolving Interest: 1 М EURIBOR + mark-up Collateral: Promissory note issued by the group Balance as of 31.12.2023 at the amount of 366 462 EUR or 716 737 BGN. 26. Procredit Bank Serbia Contract from 24.06.2023 Maturity date: 24.06.2028 Loan amount: 300 000 EUR. Type of loan: revolving Interest: 1 М EURIBOR + mark-up Collateral: fixed assets Balance as of 31.12.2023 at the amount of 300 000 EUR or 586 749 BGN. 27. Procredit Bank Serbia Contract from 10.11.2021 Maturity date: 10.11.2024 Loan amount: 1 100 000 EUR. Type of loan: working capital Interest: 1 М EURIBOR + mark-up Balance as of 31.12.2023 at the amount of 1 100 000 EUR or 2 151 413 BGN 28. MEDIOCREDITO ITALIANO S.P.A. Contract from 30.04.2019 Maturity date: 31.03.2029 Loan amount: 3 500 000 EUR Type of loan: working capital Interest: 3M EURIBOR + mark-up Balance as of 31.12.2022 at the amount of 1 925 014 EUR or 3 765 000 BGN. 29. MEDIOCREDITO CENTRALE SPA Contract from 30.06.2018 Maturity date: 08.06.2028 Loan amount: 457 688 EUR Type of loan: working capital Interest: fixed interest rate Balance as of 31.12.2023 at the amount of 0 EUR or 0 BGN. 30. STB Contract from 13.04.2018 Maturity date: 30.04.2025 Loan amount: 2 500 000 TND Type of loan: investment Interest: Reference interest rate (TMM)+mark-up Balance as of 31.12.2023 at the amount of 360 514 BGN. 31. STB Contract from 10.07.2018 Maturity date: 31.07.2025 Loan amount: 1 250 000 TND investment loan Interest: Reference interest rate (TMM)+mark-up Balance as of 31.12.2023 at the amount of 240 342 BGN. Monbat AD Consolidated Financial Statements 31 December 2023 86 32. STB Contract from 15.06.2022 Maturity date: 15.06.2024 Loan amount: 3 700 000 TND Type of loan: working capital Interest: Reference interest rate (TMM) + mark-up Balance as of 31.12.2023 at the amount of 2 134 266 BGN. 33. STB Contract from 15.06.2022 Maturity date: 15.06.2024 Loan amount: 4 000 000 TND 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. 34. STB Contracts from 13.04.2021 and 10.07.2021 Loan amount: 3 500 000 TND Type of loan: working capital, with the possibility of overdraft financing above the loan amount Interest: Reference interest rate (TMM) + mark-up Balance as of 31.12.2023 at the amount of 2 456 998 BGN. 35. STB Contract from 10.07.2021 Loan amount: 2 000 000 TND Type of loan: Line for discounting/advancing of receivables Interest: Reference interest rate (TMM) + mark-up Balance as of 31.12.2023 at the amount of 1 651 998 BGN. 36. STB Contract from September 2022 Maturity date: according repayment schedule till 30.09.2029 Loan amount: 7 300 000 TND Type of loan: investment Interest: Reference interest rate (TMM) + mark-up Balance as of 31.12.2023 at the amount of 3 634 021 BGN. 37. STB Contract from 15.09.2022 Maturity date: 15.06.2024 Loan amount: 2 300 000 TND Type of loan: working capital Interest: Reference interest rate (TMM) + mark-up Balance as of 31.12.2023 at the amount of 1 326 706 BGN. 38. STB Contract from September 2022 Maturity date: according to repayment schedule till 30.05.2030 Loan amount: 1 890 000 TND Type of loan: investment Interest: Reference interest rate (TMM) + mark-up Balance as of 31.12.2023 at the amount of 576 829 BGN. Monbat AD Consolidated Financial Statements 31 December 2023 87 39. STB Contract from September 2022 Maturity date: September 2024 Loan amount: 1 333 000 TND Type of loan: working capital Interest: Reference interest rate (TMM) + mark-up Balance as of 31.12.2023 at the amount of 768 586 BGN. 40. STB Contract from September 2022 Maturity date: September 2024 Loan amount: 1 000 000 TND Type of loan: working capital Interest: Reference interest rate (TMM) + mark-up Balance as of 31.12.2023 at the amount of 255 535 BGN. 41. 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 621 thousand as of 31 December 2023. Pursuant to the agreements entered into with DSK Bank EAD under contract no. 1674/16.09.2015 and UBB AD under contract dated 25.02.2014, the Group shall maintain a financial ratio, calculated as the ratio of the consolidated net debt of the Monbat Group to EBITDA, which ratio shall be lower than 3. The Group is in breach of this requirement. The loan is short-term, and this does not affect the classification in the consolidated financial statements. Based on historical experience and in view of the long-term business relationships with the banks, the Group does not believe that such non-compliance would result in material consequences. 23.2.Loan agreements from other financial institutions: 42. UBB Interlease EAD Contract from 18.10.2019 Maturity date: 19.11.2024 Loan amount: 1 271 250 EUR. Type of loan: credit line Interest: fixed Collateral: lead-acid battery assembly line and lead-acid battery lead plate processing furnace Utilized amount as of 31.12.2023 at the amount of 211 875 EUR or 414 391 BGN. 43. UBB Interlease EAD Contract from 29.11.2019 Maturity date: 29.12.2024 Loan amount: 219 999 EUR Type of loan: credit line Interest: fixed Collateral: Rectifier systems type CDR400/420V-8CH – 4 pcs. And rectifier systems type CDR400/360V-10CH-5 pcs. Utilized amount as of 31.12.2023 at the amount of 44 000 EUR or 86 056 BGN. Monbat AD Consolidated Financial Statements 31 December 2023 88 44. UBB Interlease EAD Contract from 26.11.2021 Maturity date: 26.11.2025 Loan amount: 420 366 EUR Type of loan: credit line Interest: fixed Collateral: Machines (13 pcs.) Utilized amount as of 31.12.2023 at the amount of 170 100 EUR or 332 687 BGN. 45. UBB Interlease EAD Contract 27.09.2022 Maturity date: 31.10.2024 Loan amount: 114 735 EUR. Type of loan: Financing for acquired assets. Interest: 3 M EURIBOR + mark-up Collateral: Computer equipment Utilized amount as of 31.12.2023 at the amount 47 018 EUR or 91 960 BGN. 46. UBB Interlease EAD Contract from 11.11.2022 Maturity date: 30.04.2027 Loan amount: 1 094 544 EUR. Type of loan: Financing for acquired assets. Interest: 3 M EURIBOR + mark-up collateral: Production line for wide rolled strip Utilized amount as of 31.12.2023 at the amount of 858 292 EUR or 1 678 673 BGN. 47. OTP Leasing EAD Contract from 18.01.2023 Maturity date: 05.11.2028 Loan amount: 96 150 EUR Type of loan: financing for acquired assets Interest: reference interest rate + mark-up Collateral: Reverse osmosis installation Utilized amount as of 31.12.2023 at the amount of 96 150 EUR or 188 000 BGN 48. UBB Interlease EAD Contract 0026504/E/30.03.2020 Maturity date: 30.03.2024 Loan amount: 334 779 EUR 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 16 588 EUR or 32 443 BGN. 49. UBB Interlease EAD Contract 0026504/D/13.01.2020 Maturity date: 13.01.2025 Loan amount: 321 557 EUR Type of loan: credit line Interest: fixed Collateral: tooling for casting ConCast grids and rectifier systems. Utilized amount as of 31.12.2023 at the amount of 62 704 EUR or 122 638 BGN. Monbat AD Consolidated Financial Statements 31 December 2023 89 50. UBB Interlease EAD Contract 0026504/H/2021/30.06.2021 Maturity date: 30.06.2025 Loan amount: 654 584 EUR 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 200 036 EUR or 391 236 BGN. 51. UBB Interlease EAD Contract 0026504/I/2021/21.12.2021 Maturity date: 20.12.2025 Loan amount: 78 845 EUR Type of loan: credit line Interest: fixed Collateral: Check Tester – Short Circuit Utilized amount as of 31.12.2023 at the amount of 40 750 EUR or 79 701 BGN. 52. UBB Interlease EAD Contract 0026504/L/2022/29.09.2022 Maturity date: 25.09.2026 Loan amount: 196 297 EUR 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 108 254 EUR or 211 727 BGN. 53. UBB Interlease EAD Contract 0026504/N/2022/14.12.2022 Maturity date: 14.12.2027 Loan amount: 50 990 EUR Type of loan: credit line Interest: fixed Collateral: Electrocar, high-lift trucks Utilized amount as of 31.12.2023 at the amount of 37 635 EUR or 73 608 BGN. 54.OTP Leasing EOOD Contract 85671/25.10.2023 Maturity date: 25.10.2027 Loan amount: 775 373 EUR Type of loan: credit line Interest: fixed Collateral: ConCost line Utilized amount as of 31.12.2023 at the amount of 760 917 EUR or 1 488 225 BGN. 55. UBB Interlease EAD Contract 0026504/O/10.04.2023 Maturity date: 05.12.2026 Loan amount: 134 200 EUR Type of loan: credit line Interest: fixed Collateral: Horizontal heating tunnel TO 2000. Utilized amount as of 31.12.2023 at the amount of 120 780 EUR or 236 225 BGN. Monbat AD Consolidated Financial Statements 31 December 2023 90 56. VFS Bulgaria ЕООD Contract 2274306 from 07.10.2019 Maturity date: 16.11.2024 Loan amount: 491 250 EUR. Type of loan: credit line Interest: fixed Collateral: 5 pcs. Trucks Volvo Utilized amount as of 31.12.2023 amounted of 101 862 EUR or 199 225 BGN. 57. VFS Bulgaria ЕООD Contract 2454239-4 from 05.06.2020 Maturity date:16.06.2025 Loan amount: 182 304 EUR 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 59 710 EUR or 116 782 BGN. 58. VFS Bulgaria ЕООD Contract 2705097 Maturity date:16.06.2025 Loan amount: 104 210 EUR Type of loan: credit line Interest: fixed Collateral: Volvo L60H Utilized amount as of 31.12.2023 at the amount 44 580 EUR or 87 192 BGN 59. VFS Bulgaria ЕООD Contract 3098965 Maturity date:16.11.2027 Loan amount: 167 220 EUR Type of loan: credit line Interest: 1M EURIBOR + mark-up Collateral: 2 pcs. Trucks Volvo Utilized amount as of 31.12.2023 amounted of 136 673 EUR or 267 309 BGN. 60. VFS Bulgaria ЕООD Contract 3028975 Maturity date: 31.12.2027 Loan amount: 113 400 EUR 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 92 289 EUR or 180 501 BGN. 61. VFS Bulgaria ЕООD Contract: 3028965-4 Maturity date: 16.02.2028 Loan amount: 83 610 EUR Type of loan: credit line Interest: 1M EURIBOR + mark-up Collateral: Volvo Truck Utilized amount as of 31.12.2023 at the amount of 71 031 EUR or 138 924 BGN. Monbat AD Consolidated Financial Statements 31 December 2023 91 62. VFS Bulgaria ЕООD Contract: 3028965-5 Maturity date: 16.02.2028 Loan amount: 83 610 EUR Type of loan: credit line Interest: 1M EURIBOR + mark-up Collateral: Volvo Truck Utilized amount as of 31.12.2023 at the amount of 71 031 EUR or 138 924 BGN. 63. VFS Bulgaria ЕООD Contract 3098965B Maturity date: 16.11.2027 Loan amount: 83 610 EUR Type of loan: credit line Interest: 1M EURIBOR + mark-up Collateral: truck Volvo Utilized amount as of 31.12.2023 at the amount of 71 103 EUR or 139 075 BGN. 64. VFS Bulgaria ЕООD Contract 3149823/13.07.2023 Maturity date: 16.08.2028 Loan amount: 66 600 EUR Type of loan: credit line Interest: 1M EURIBOR + mark-up Collateral: 4 psc trailers Utilized amount as of 31.12.2023 at the amount of 62 955 EUR or 123 129 BGN. 65. OTP Leasing EOOD Contract 21941360451 Maturity date: 05.06.2027 Loan amount: 518 500 EUR 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 317 923 EUR or 621 802 BGN. 66. UBB Interlease EAD Contract: 17803 Maturity date: 31.07.2026 Loan amount: 585 000 EUR Type of loan: credit line Interest: 3M EURIBOR + mark-up Collateral: Crystallization system Utilized amount as of 31.12.2023 at the amount of 524 849 EUR or 1 026 515 BGN. 67. OTP Leasing EOOD Contract 23941384968/13.10.2023 Maturity date: 13.10.2028 Loan amount: 852 541 EUR Type of loan: credit line Interest: 3M EURIBOR + mark-up Collateral: Tin production installation. Utilized amount as of 31.12.2023 at the amount of 827 779 EUR or 1 618 995 BGN. Monbat AD Consolidated Financial Statements 31 December 2023 92 68. UBB Interlease EAD Contract: 17803 D Maturity date: 06.12.2026 Loan amount: 100 000 EUR Type of loan: credit line Interest: 3M EURIBOR + mark-up Collateral: Compressor RBS Utilized amount as of 31.12.2023 at the amount of 90 000EUR or 176 024 BGN. 69. STB – car leasing Contract – 5 pcs from 2022 and 3 pcs from 2023 Maturity date: 2026 Loan amount: 511 091 TND Type of loan: leasing Interest: Reference interest rate Balance as of 31.12.2023 amounted of 343 999 BGN. 70. Caterpillar Financial Services Sp. Zoo Contract FL/RB-052181 Maturity date: 01.02.2025 Loan amount 129 900 EUR Interest: 3M EURIBOR + mark-up Collateral: Caterpillar 926M loader Utilized amount as at 31.12.2023 amounted of 30 381 EUR or 59 421 BGN. 71. BRD Sogelease IFN S.A. Contract SGL135005 Maturity date: 30.04.2028 Loan amount: 35 000 EUR Interest: 3M EURIBOR + mark-up Collateral: Forklift Heli CPCD40-M4H Utilized amount as at 31.12.2023 amounted of 28 867 EUR or 52 547 BGN. 23.3.Government grants In 2013 Monbat AD and Start AD won projects under Procedure BG161PO003-1.1.04 “Support for the introduction into production of innovative products, processes and innovative services”, OP “Development of the Competitiveness of the Bulgarian Economy” for a total amount of BGN 7 093 thousand. The value of grant funding under the procedure for both projects is BGN 3 543 thousand, allocated in 2015. The project is for the production of two types of batteries with AGM technology – stationary batteries (telecommunication) and automotive batteries with AGM technology. 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. Monbat AD Consolidated Financial Statements 31 December 2023 93 The short-term and long-term portion of the government grants can be presented in the following way: 2023 2023 BGN ‘000 BGN ‘000 Current Non-current Book value 357 211 357 211 2022 2022 BGN ‘000 BGN ‘000 Current Non-current Book value 341 598 341 598 2023 2022 BGN ‘000 BGN ‘000 On 1 January 939 1 262 Released to the consolidated statement of profit or loss (Note 28.1) (371) (323) On 31 December 568 939 There are no unfulfilled conditions or contingencies attached to these grants at the authorization date of these consolidated financial statements. 24. Convertible bonds Monbat AD 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 1 000 (one thousand) euro 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. Repayment: in three instalments at the end of the 5th, 6th and 7th years of 20%, 30% and 50% of the nominal amount of the issue respectively, which corresponds to the following Interest Payment Dates: 20/01/2023, 20/01/2024 and 20/01/2025. Monbat AD Consolidated Financial Statements 31 December 2023 94 In the event of conversion, principal repayments will be calculated based on the current nominal amount of the bond issue on the relevant principal payment date. In this case, the last principal payment at the end of the 7th year will be equalizing and will repay the entire remaining face amount of the issue, if any. 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 MONBATs 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 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 taking into account the corresponding 20% principal instalment. 2023 2022 BGN ‘000 BGN ‘000 Non-current Non-current Carrying amount of convertible bond 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 convertible bond 16 438 10 959 Interest liability 1 377 859 Fair value of conversion option 2 640 - 20 455 11 818 Monbat AD has not exercised the option to redeem the remaining portion of the issue at the expiry of the 60th month after the date of issue of the bonds. The fair value of the bond conversion option at initial recognition has been estimated using a valuation model assuming that the Group’s share price follows a Brownian motion. The valuation model uses an iterative Monte Carlo simulation using a large number of trial outcomes to approximate the target solution. The fair value of the conversion option falls within Level 3 of the fair value hierarchy. Monbat AD Consolidated Financial Statements 31 December 2023 95 The subsequent measurement of the conversion option follows the same model as in 2023. The Group reports income from the change in fair value of the option in the amount of BGN 2 640 thousand presented as “Financial instruments income” (2022: BGN 589 thousand). The fair values of the conversion options at 48, 66 and 78 months after issuance are estimated. Conversion option 48 months after issuance of the bond loan, not exercised in 2022 or 2023. The fair value of the conversion option is deducted from the nominal value of the bond obligation, and the residual value of the bond loan obligation is valued at amortized cost using the effective interest method. For other features (e.g. repurchase option (regarding the prepayment of the debt) and zero or positive 6M EURIBOR option (regarding the minimum interest rate level) the Group believes that they are closely related to the underlying contract. The difference between the amortized value of the debt, including the cash flows resulting from the exercise of the repurchase option (on each applicable date), is assumed to be insignificant compared to the amortized value of the underlying debt contract prior to the exercise of the repurchase option. On the date of initial recognition, the zero or positive 6M EURIBOR option was valued as “out-of-the-money", i.e. the exercise price of the option (6M EURIBOR plus 300 b.p.) was valued below the level of the interest rate required for a comparable bond without an option for conversion. The transaction costs of issuing the bond loan, related to the component of the derivative instrument for conversion in the amount of BGN 47 thousand were recorded as an expense in "Interest expenses" in 2018. The transaction costs in the amount of BGN 353 thousand, relating to the debt component of the Bond, are included in the balance sheet value of the debt component. They are amortized over the term of the convertible bond using the effective interest method. Upon initial recognition of the liability, the calculated and applied effective interest rate on the bond debt component, accounted for at amortized value, is equal to approximately 6% per annum. The initial time horizon for calculating the effective interest rate was equal to 5 years from the issuance of the bond due to the fact that the Group's management expected that the redemption option on the 5th year of the issued bond loan would be exercised. In 2023 and 2022, as a result of a change in market conditions – an increase in the 6M EURIBOR interest rate, the Group recalculated the amortized value of the bond debt. The revised effective interest rate from 2023 is around 9% per annum (2022: around 8% per annum). The recalculation of debt with a revised effective interest rate does not require the reporting of a one-time effect in the statement of profit and loss in 2023 and 2022. Monbat AD Consolidated Financial Statements 31 December 2023 96 25. Trade payables Trade payables reflected in the consolidated statement of financial position include: 2023 2022 BGN ‘000 BGN ‘000 Payables to suppliers 39 228 35 456 The net book value of the trade payables is considered to be a reasonable approximate estimate of their fair value. Trade payables are non- interest bearing and are usually settled within 60 days. 26. Tax liabilities 2023 2022 BGN ‘000 BGN ‘000 VAT 1 346 2 339 Natural persons income tax 190 5 Other taxes 297 322 1 833 2 666 27. Other liabilities 2023 2022 BGN ‘000 BGN ‘000 Advances received for the sale of subsidiary - 5 866 Dividends payable to shareholders 92 35 Other liabilities 994 1 183 1 086 7 084 27.1.Contract liabilities Contract liabilities can be summarized as follows: 2023 2022 BGN ‘000 BGN ‘000 Advances received 6 188 6 503 Monbat AD Consolidated Financial Statements 31 December 2023 97 27.2.Fair value of hedging instruments 2023 2022 BGN ‘000 BGN ‘000 Fair value of lead swap - 364 Other obligations - 364 In 2023 and 2022, the Group used LME lead cash flow swaps, agreeing a fixed reference price, to limit the risk of a decline in the London Metal Exchange lead index, which would have an impact on the selling price of the Group's output. All transactions concluded in 2023, as well as open transactions as of 31 December 2022, were realized as of 31 December 2023. Open transactions as of 31 December 2022 were valued at fair value, as a result of which the Group reports a liability of derivative instrument. 28. Revenues from contracts with customers The Group's revenue from contracts with customers is presented below: 2023 2022 BGN ‘000 BGN ‘000 Revenue from sale of finished goods 366 080 351 910 Revenue from sale of materials 4 583 5 414 Revenue from rendering of services 9 452 9 732 Other revenue 3 432 2 605 Total revenue from contracts with customers 383 547 369 661 2023 2022 BGN ‘000 BGN ‘000 Timing of for revenue recognition Finished goods and materials transferred ata certain point in time 370 663 357 324 Services transferred over time 9 452 9 732 Other income transferred at a certain point in time 3 432 2 605 Total revenue from contracts with customers 383 547 369 661 The Board of Directors of Monbat AD is the chief operational decision maker. The chief operational decision maker determines the operating segments based on the production activity of the Group. 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. Monbat AD Consolidated Financial Statements 31 December 2023 98 The information on revenues by segments of districts can be analyzed for the presented reporting periods as follows: 2023 Lead-acid batteries Lead, semi-finished goods and by-products Materials Services Others Total Revenue: BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 External sales 396 809 307 265 18 373 20 700 11 005 754 152 Inter-segment adjustments and eliminations (78 801) (259 193) (13 790) (11 248) (7 573) (370 605) Total revenue from contracts with customers 318 008 48 072 4 583 9 452 3 432 383 547 2022 Lead-acid batteries Lead, semi-finished goods and by-products Materials Services Others Total Revenue: BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 External sales 410 177 311 647 17 486 17 359 3 234 759 903 Inter-segment adjustments and eliminations (97 002) (272 912) (12 072) (7 627) (629) (390 242) Total revenue from contracts with customers 313 175 38 735 5 414 9 732 2 605 369 661 In 2023 and 2022, the Group did not have any customers that would account for 10% or more of the total revenue. Contract balances 2023 2022 BGN ‘000 BGN ‘000 Trade receivables (Note 16) 70 150 64 856 Trade receivables from related parties (Note 38) 55 780 52 902 Contract liabilities (Note 27.1) 6 188 6 503 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 Group recognized revenue from contracts with customers, which was included in the balance of contract payables at the beginning of the period, amounting to BGN 6 344 thousand (2022: BGN 2 583 thousand). In 2023 and 2022, the Group has not reported any revenue from customer contracts recognized in the periods from performance obligations that were satisfied (or partially satisfied) in prior periods (e.g. changes in transaction price). Performance obligations The information about the Group’s performance obligations is summarized below: Monbat AD Consolidated Financial Statements 31 December 2023 99 Finished goods - batteries The Group manufactures and sells a wide range of starter, stationary as well as lithium-ion 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 Group 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 Group's obligation to repair or replace defective products under standard warranty conditions is recognized as a provision under IAS 37 (refer to note 21). Lead, semi-finished goods and by-products The performance obligation is satisfied upon delivery of the product. Sales are made with a payment term of 0 to 60 days, and do not result in 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. 28.1.Other operating income 2023 2022 BGN ‘000 BGN ‘000 Income from financing under a program to compensate non-residential final customers of electricity 608 10 481 Income from financing – subsidy for scrap battery processing 2 906 2 613 Income from grants related to investment programs (note 23.2) 398 307 Other income from financing 147 146 Other operating income 17 92 Total operating income 4 076 13 639 Monbat AD Consolidated Financial Statements 31 December 2023 100 In 2021, 2022 and 2023 the Group, through a subsidiary in the Republic of Serbia, purchased and processed certain quantities of scrap batteries. An acceptable guarantee for the fulfillment of the requirements for receiving a grant was obtained in 2022 and 2023, after the Group received an approval for receiving a government grant from the administration of Republic of Serbia. After approval, the Group recognized income from financing in the amount of BGN 2 906 thousand in 2023 and BGN 2 613 thousand in 2022, and the amounts was received in full in 2023 and 2022. Revenues are reported under line “Income from financing – subsidy for scrap battery processing”. In 2017 STC S.R.L. concluded a contract for research and development financing with the Ministry of Economic Development of the Italian Republic. Under the signed agreement, the Department of Economic Development reimbursed a percentage of the research and development costs incurred by STC S.R.L. for the respective period. The Group’s management has assessed the criteria for fulfillment of the obligations for financing on the basis of the present contract and the historical experience of STC S.R.L. with a similar type of funding. As a result of the analysis made STC S.R.L. recognizes revenue from financing on a pro rata basis from research and development costs incurred. 29. Cost of materials and cost of goods sold and other current assets 29.1.Cost of materials 2023 2022 BGN ‘000 BGN ‘000 Raw materials (216 402) (201 236) Electricity (16 051) (29 480) Fuels and lubricants (12 574) (16 841) Spare parts and accessories (6 039) (6 373) Packaging and other materials (1 938) (2 568) Other expenses (1 967) (2 139) (254 971) (258 637) 29.2.Cost of goods sold and other current assets 2023 2022 BGN ‘000 BGN ‘000 Materials (3 813) (4 180) (3 813) (4 180) Monbat AD Consolidated Financial Statements 31 December 2023 101 30. Hired services expenses 2022 2021 BGN ‘000 BGN ‘000 Distribution (22 139) (22 955) Other consulting services (2 777) (2 524) Maintenance and repair (2 140) (2 677) Government fees, customer duties and others (2 073) (1 852) Insurance (1 643) (1 397) Subscriptions and recurring services (1 223) (994) Fees on civil contracts (766) (939) Advertising (638) (634) Audit fees (452) (349) Rent (395) (300) Other expenses (4 121) (4 235) (38 367) (38 856) „Other expenses“ include costs of security, couriers, membership fees and others. 31. Gain on the sale of non-current assets 2023 2022 BGN ‘000 BGN ‘000 Sales revenue 6 54 Carrying amount of the non-current assets sold (3) (45) Gain/(loss) on the sale of non-current assets 3 9 32.Other expenses Other expenses include: 2023 2022 BGN ‘000 BGN ‘000 Business trips (1 664) (1 503) Representative expenses (677) (517) Inventory written-off (560) (84) Impairment of inventories (186) (275) Donations (72) (69) Others (3 959) (3 888) (7 118) (6 336) Included in "Other costs" are social costs, non-recoverable VAT, sample costs, scrapping costs, etc. Monbat AD Consolidated Financial Statements 31 December 2023 102 33. Financial instruments income 2023 2022 BGN ‘000 BGN ‘000 Change in fair value of convertible bond option measured at fair value through profit or loss 2 640 589 Gain on the sale of investment - 485 Finance 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 Group reassessed the amortized value of the bond debt. The revised effective interest rate from 2023 is around 9% per annum (2022: around 8% per annum). The restatement of debt at a revised effective interest rate does not require the reporting of a one-time effect in the consolidated statement of profit and loss in 2023 and 2022. Note 24 provides information on the carrying amount of the bond loan and the conversion option. In 2023, the Group reports income from the change in fair value of the conversion option to the bond loan in the amount of BGN 2 640 thousand (2021: BGN 589 thousand). The profit from the sale of an investment is related to the sale of a share of 7.2% in the Italian company COBAT s.p.a. to an unrelated person in 2022. The price of the transaction is BGN 1 956 thousand. 34. Financial income and cost Finance costs for the presented reporting periods can be analyzed as follows: 2023 2022 BGN ‘000 BGN ‘000 Interest expense (12 149) (8 066) Other finance costs (1 093) (1 151) Finance cost (13 242) (9 217) 2023 2022 BGN ‘000 BGN ‘000 Interest income on financial assets carried at amortized cost 2 351 1 390 Other financial instruments – derivatives, net 1 585 516 Finance income 3 936 1 906 Other financial instruments - derivatives, net 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 27.2) Monbat AD Consolidated Financial Statements 31 December 2023 103 35. Other financial items 2022 2021 BGN ‘000 BGN ‘000 (Loss)/Gain from exchange differences on loans and receivables (277) 353 Other financial income - 2 Other financial items (277) 355 36. Earnings per share and dividends 36.1 Earnings per share Basic earnings per share is calculated using the profit attributed to shareholders of the Group’s parent 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: 2023 2022 Net Profit, subject to distribution, from continuing operations (in BGN) 4 789 000 7 565 000 Net Profit, subject to distribution (in BGN) 6 310 000 4 534 000 Weighted average number of shares 38 959 283 38 982 432 Basic earnings per share from continuing operations (BGN per share) 0.12 0.19 Basic earnings per share (BGN per share) 0.16 0.12 Diluted earnings per share is calculated by dividing net income for the year attributable to holders of common stock (after adjustments for interest on convertible bonds) by the weighted average number of common shares for the year multiplied by the weighted average number of common stock shares that would be issued upon conversion of all potential convertible bonds. The calculations are made as follows: 2023 2022 Interest expenses on convertible bonds, net of taxes(in BGN) 3 419 000 3 176 100 Net profit from continuing operations, attributable to owners of the parent (in BGN) 8 208 100 10 741 100 Net profit attributable to owners of the parent (in BGN) 9 729 100 7 710 100 Monbat AD Consolidated Financial Statements 31 December 2023 104 Number of shares 2023 2022 Weighted average number of ordinary shares as at 31 December 38 959 283 38 982 432 Weighted average effect of dilution from convertible bonds 10 393 259 11 102 853 Weighted average number of ordinary shares adjusted for the effect of dilution 49 352 542 50 085 285 Diluted earnings per share from continuing operations attributable to owners of the parent (in BGN) 0.17 0.21 Diluted earnings per share attributable to owners of the parent (in BGN) 0.20 0.15 36.2. Dividends At the General Meeting of Shareholders which took place on 29th June 2023, a decision was made to distribute a dividend in the amount of BGN 4 000 thousand, which is part of the profit for 2022 in the amount of BGN 1 219 thousand and from previous years in the amount to BGN 2 781 thousand. This amount represents a payment of 0.10 BGN per share. In 2023 Monbat AD has paid out dividends in the amount of BGN 3 992 thousand. At the General Meeting of Shareholders, held on 14th June 2022, a decision was made to distribute a dividend in the amount of BGN 5 500 thousand, which is part of the profit for 2021 in the amount of BGN 1 195 thousand and from previous years in the amount of BGN 4 305 thousand. This amount represents a payment of 0.14 BGN per share. In 2022 Monbat AD paid out dividends in the amount of BGN 5 434 thousand. 37. Related party transaction The Group's related parties include the parent company, associates, key management personnel, and other related parties, as described below. Unless otherwise stated, none of the transactions incorporate special terms and conditions and no guarantees were given or received. Outstanding balances are usually settled by bank accounts. The related parties of the Group are described below: Monbat AD Consolidated Financial Statements 31 December 2023 105 Related party as of 31 December 2023 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 Ultimate parent Company Plamen Stoilov Bobokov Bulgaria Person exercising joint-control over the Ultimate parent Company Leventa OOD Bulgaria Associate Battery Pro South Africa Ltd. South Africa 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 Bozadjiev Bulgaria Member of the BoD of Monbat AD Evelina Pavlova Slavcheva Bulgaria Member of the BoD of Monbat AD Prista Holdco Cooperatief U.A Netherland Shareholder in Monbat AD Holdco Investment EOOD Bulgaria Sole owner of Prista Holdco Cooperatief U.A. Monbat Trading OOD Bulgaria Other related parties and a shareholder Prista Invest 2016 AD Bulgaria Sole owner of the 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 37.1 Transactions with parent company 2023 2022 BGN ‘000 BGN ‘000 Prista Oil Holding EAD - purchase of materials 88 111 - purchase of services 21 25 - purchase of goods 5 19 - sale of services 124 267 - sale of production - 170 - sale of goods - 16 - interest accrued 1 283 875 - dividend paid 1 711 2 350 - deposits and loans refunded 280 - Monbat AD Consolidated Financial Statements 31 December 2023 106 37.2 Transactions with key management personnel The key management personnel include the Board of Directors of Monbat AD and the procurator of Monbat AD. Key management personnel remuneration includes the following expenses: 2023 2022 BGN ‘000 BGN ‘000 Short-term compensation: - salaries 2 111 2 298 - social security costs 21 21 - company car allowance 31 33 Total compensation 2 163 2 352 37.3. Transactions with immaterial subsidiaries 2023 2022 BGN ‘000 BGN ‘000 Monbat Holding Tunisia B.V. - loan granted - 20 - interest accrued - 1 - loan reimbursed - 1 37.4 Transactions with companies under common control 2023 2022 BGN ‘000 BGN ‘000 Monbat Trading OOD - purchase of goods and services 3 999 3 456 - dividend distributed 286 388 - sale of services 49 48 - advances paid 50 703 - loan reimbursed 587 594 - interest accrued 134 125 - interest paid 133 126 38.Related party balances at year-end Current receivables: 2023 2022 BGN ‘000 BGN ‘000 Receivables from the parent company - Prista Oil Holding EAD – deposits and loans 25 820 26 100 - Prista Oil Holding EAD – interest 4 259 2 940 - Prista Oil Holding EAD – trade receivables 8 838 8 953 Total current receivables from the parent Company 38 917 37 993 Monbat AD Consolidated Financial Statements 31 December 2023 107 2023 2022 BGN ‘000 BGN ‘000 Receivables from persons exercising joint control over the parent company: - Atanas Bobokov– funds granted 3 269 3 269 - Atanas Bobokov– interest 759 548 - Plamen Bobokov- funds granted 1 830 1 830 - Plamen Bobokov– interest 382 264 Total current receivables from persons exercising joint control over the parent company: 6 240 5 911 2023 2022 BGN ‘000 BGN ‘000 Receivables from other related parties - Monbat Trading OOD - trade receivables 755 707 - Monbat Trading OOD - funds granted 2 689 3 276 - Monbat Trading OOD - interest 10 10 - Prista Invest 2016 AD – funds granted 3 695 3 695 - Prista Invest 2016 AD – interest 281 96 - Black Star International AD – funds granted 1 080 - - Black Star International AD – interest 59 - - Alliance Energy Companies AD – funds granted 700 700 - Alliance Energy Companies AD – interest 56 1 - Monbat Eco Projects OOD - funds granted 222 222 - Monbat Eco Projects OOD – interest 70 56 - Torlashka Sreshta EOOD – funds granted 160 160 - Torlashka Sreshta EOOD – interest 32 22 - Torlashka Sreshta EOOD – trade receivables 8 8 - Holdco Investment EOOD – funds granted 767 40 - Holdco Investment EOOD – interest 26 1 - Prista Holdco Cooperatief U.A – funds granted 13 - - Others – funds granted - 4 Total current receivables from other related parties 10 623 8 998 Total receivables from related parties 55 780 52 902 Monbat AD Consolidated Financial Statements 31 December 2023 108 2023 2022 BGN ‘000 BGN ‘000 Non-current payables to: - Other related parties - 7 - 7 Current payables to: - Prista Oil Holding EAD – trade payables 31 9 - Prista Holdco Cooperative U.A. – funds granted - 389 - Prista Holdco Cooperative U.A. – interest - 6 31 404 Total related party payables 31 411 The main contracts for loans granted to related parties are presented as follows: 1.Prista Oil Holding EAD •Contract from 2012 Loan granted to Prista Oil Holding EAD Utilized principal: BGN 3 911 thousand Interest: 5 % annual interest rate Maturity date: on demand but no later than 31.12.2024 Balance on the principal as at 31.12.2023 at the amount of BGN 4 774 thousand •Contracts from 2013 Deposits granted to Prista Oil Holding EAD Deposit 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 deposit as at 31.12.2023 at the amount of BGN 11 766 thousand Since 01.02.2019 the annual interest rate is changed to 6M EURIBOR + 3.5% mark-up •Contracts from 2014 Deposits granted to Prista Oil Holding EAD Deposit 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 deposit as at 31.12.2023 at the amount of BGN 2 900 thousand With an annex dated 01.02.2019 the annual interest rate is changed to 6M EURIBOR + 3.5% mark-up Monbat AD Consolidated Financial Statements 31 December 2023 109 •Contracts from 2017 Deposits granted to Prista Oil Holding EAD Deposit 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: 4 % annual interest rate Balance on the deposit as at 31.12.2023 at the amount of BGN 5 085 thousand With an agreement dated 01.02.2019, the annual interest rate is changed to 6M EURIBOR + 3.5% mark-up •Contract from 2019 Deposit granted to Prista Oil Holding EAD Deposit amount: BGN 100 thousand Credit term: on demand, but no later than 01.12.2024 Interest: 3.5 % annual interest rate Balance on the deposit as at 31.12.2023 at the amount of BGN 100 thousand. •Contract from 2020 Deposit granted to Prista Oil Holding EAD Deposit amount: BGN 825 thousand and EUR 600 thousand Credit term: 01.12.2024 Interest: 3.5 % annual interest rate Balance as at 31.12.2023 at the amount of BGN 1 014 thousand •Contract from 2021 Deposit granted to Prista Oil Holding EAD Deposit amount: BGN 180 thousand Credit term: on demand, but no later than 31.12.2024 Interest: 3.5 % annual interest rate Balance as at 31.12.2023 at the amount of BGN 180 thousand. The recoverability of the receivables from the parent company Prista Oil Holding EAD at the amount of BGN 38 917 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 Group and Prista Oil Holding EAD is comparable to net exposition of the receivables of the Group from Prista Oil Holding EAD, Prista Invest 2016 AD, Atanas Bobokov, Plamen Bobokov, Alliance Energy Companies AD and Black Star International AD. Monbat AD Consolidated Financial Statements 31 December 2023 110 2.Monbat Eco Projects OOD •Contracts from 2016 Utilized principal: BGN 222 thousand Credit term: 31.12.2023, with annex from March 2024, the term is extended till 31.12.2024. Interest: 4 % annual interest rate Balance on the principal as of 31.12.2023 at the amount of BGN 222 thousand. Since 1st of January 2023 the annual interest rate is changed to 6M EURIBOR + 3.5% mark-up. 3.Monbat Trading OOD •Contracts from 2019 Utilized principal: BGN 3 000 thousand Credit term: on demand but not later than 1.12.2024, by annex the term was extended till 31.12.2024. Interest: 3.5 % annual interest rate Balance on the principal as of 31.12.2023 at the amount of BGN 1 505 thousand By annex dated 01.01.2023 the interest rate is changed from 3.5% to 4.5%. •Contracts from 2020 Utilized principle: BGN 1 082 thousand Credit term: on demand but not later than 1.12.2024, by annex the term was extended till 31.12.2024. Interest: 3.5 % annual interest rate Balance on the principal as of 31.12.2023 at the amount of BGN 1 082 thousand By annex dated 01.01.2023 the interest rate is changed from 3.5% to 4.5%. 4.Torlashka Sreshta EOOD •Contracts from 2019 Utilized principle: BGN 160 thousand Credit term: 31.12.2023, by annex from March 2024 the term is extended till 31.12.2024. Interest: 3.5% annual interest rate. Balance on the principal as of 31.12.2023 – BGN 160 thousand By annex dated 01.01.2023 the interest rate is changed from 3.5% to 6M EURIBOR + 3.5% mark-up. 5.Atanas Bobokov •Contracts dated 2018, 2019 and annexes to them Utilized principal: BGN 4 136 thousand Credit term: 31.12.2023, by annex from March 2024 the term is extended till 31.12.2024. Interest: 3.5% annual interest rate. Balance on the principal as of 31.12.2023 at the amount of BGN 3 219 thousand Repayment: no repayment plan By annex dated 01.01.2023 the interest rate is changed from 3.5% to 6M EURIBOR + 3.5% mark-up. Monbat AD Consolidated Financial Statements 31 December 2023 111 •Contract dated 2020 Utilized principal: BGN 50 thousand Credit term: 31.12.2023, by annex from March 2024 the term is extended till 31.12.2024. Interest: 3.5% annual interest rate. Balance on the principal as of 31.12.2023 at the amount of BGN 50 thousand Repayment: no repayment plan By annex dated 01.01.2023 the interest rate is changed from 3.5% to 6M EURIBOR + 3.5% mark-up. In 2020, the subsidiary Monbat NBP EAD provided a guaranteed deposit in the amount of BGN 2 million in connection with a certain measure of remand for Atanas Bobokov by the Appellate Specialized Court on 26.11.2020 in pre-trial proceedings. On 08.06.2021, BGN 1 million was reimbursed to the account of the company Monbat NBP EAD in connection with the reduction of the guarantee under the restraint measure from BGN 2 million to BGN 1 million. In 2022 the amount of BGN 200 thousand was reimbursed to the account of the company Monbat NBP EAD in connection with the reduction of the guarantee under the restraint measure from BGN 1 million to BGN 800 thousand. In 2023, BGN 750 thousand was reimbursed in connection with the reduction of the guarantee under the restraint measure from BGN 800 thousand to BGN 50 thousand. 6.Plamen Bobokov •Contracts dated 2018, 2019 and annexes to them Utilized principle: BGN 2 080 thousand. Credit term: 31.12.2023, by annex from March 2024 the term is extended till 31.12.2024. Interest: 3.5 % annual interest rate. Balance on the principal as of 31.12.2023 at the amount of BGN 1 830 thousand. By annex dated 01.01.2023 the interest rate is changed from 3.5% to 6M EURIBOR + 3.5% mark-up. 7.Alliance Energy Companies AD •Contracts dated 2022 Utilized principle: BGN 700 thousand. Credit term: 31.12.2023, by annex from March 2024 the term is extended till 31.12.2024. Interest: 4 % annual interest rate. Balance on the principal as of 31.12.2023 at the amount of BGN 700 thousand. By annex dated 11.01.2023 the interest rate is changed from 4% to 8%. 8.Holdco Investment EOOD •Contracts dated 2022 Utilized principle: BGN 767 thousand. Credit term: 31.12.2023, by annex from March 2024 the term is extended till 31.12.2024. Interest: 6M EURIBOR+3.5 % mark-up. Balance on the principal as of 31.12.2023 at the amount of BGN 767 thousand. Monbat AD Consolidated Financial Statements 31 December 2023 112 9.Black Star International AD •Contracts dated 2022 Utilized principle: BGN 1 080 thousand. Credit term: 31.12.2023, by annex the term is extended till 31.12.2024. Interest: 6M EURIBOR+3.5 % mark-up. Balance on the principal as of 31.12.2023 at the amount of BGN 1 080 thousand. 10.Prista Invest 2016 AD •Contracts dated 2021 and 2022 Utilized principle: BGN 3 695 thousand. Credit term: 31.12.2023, by annex the term is extended till 31.12.2024. Interest: 5% annual interest rate. Since 01.01.2024 the annual interest rate is changed to 6M EURIBOR+3.5 % mark-up. Balance on the principal as of 31.12.2023 at the amount of BGN 3 695 thousand. 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. 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 Group's historical experience with credit losses from related parties by incorporating forecast information. Transaction terms with related parties Sales and purchases from related parties are based on contractually agreed prices. Outstanding balances at the end of the year are unsecured, interest-free (excluding loans) and will be settled in cash. No guarantees have been provided or received for receivables from or liabilities to related parties, except for those disclosed below. The Group did not report any impairment of receivables from related parties in 2023 (2022: 0 BGN). An impairment review is performed each financial year based on an analysis of the financial position of the related party and the market in which it operates. Monbat AD Consolidated Financial Statements 31 December 2023 113 39. Contingent assets and liabilities During the period there were no warranty or legal claims posed to the Group. In June 2020, the National Revenue Agency ("NRA") launched a full tax audit of Monbat Recycling EAD for the period 2014-2019. On 8th of June 2022, a Revision act (RA) was issued to Monbat Recycling EAD with No. R-29002921005573-091-001 for a total value of BGN 3,233 thousand, which repeats No. R-29002920003271-091-001 of 12th of March 2021 in connection with non-recognition of the right to deduct a tax credit in the amount of BGN 1 140 thousand, and the related expenditure under the Corporate Income Tax Law in the amount of BGN 939 thousand for supplies of lead-containing raw materials from certain contractors, for which during the cross-checks certain deviations were identified by the revenue authorities and late payment interest in the amount of BGN 1 154 thousand was charged. The same was confirmed by the Director of the "Appeal and tax-insurance practice" Directorate - Sofia city at the NRA Central Committee with Decision No. 1884/02.12.2022. Through its lawyers, "Monbat Recycling" EAD appealed the RA issued to the company before the Administrative Court Sofia - city. The Group's lawyers prepared and submitted a complaint against RA to the ASSG on 20.12.2022. At the date of these consolidated financial statements, several court hearings have been held, including the examination of witnesses, the appointment and consideration of forensic technical and forensic accounting experts. The next hearing is scheduled for 8 May 2024. The expectations of the Group are that the appealed audit act will be annulled. 40. Categories of financial assets and liabilities The carrying amounts compared to the fair values of the Group's financial assets and liabilities carried at amortized cost can be presented in the following categories: Note 2023 2022 Carrying amount Fair value Carrying amount Fair value BGN 000 BGN000 BGN 000 BGN000 Financial Assets Debt instruments carried at amortized cost Trade receivables 16 69 963 69 963 64 856 64 856 Short-term financial assets 15 158 158 149 149 Related party receivables 38 55 780 55 780 52 902 52 902 Cash and cash equivalents 19 12 717 12 717 8 137 8 137 Total financial assets 138 618 138 618 126 044 126 044 Financial liabilities Debt instruments carried at amortized cost Interest-bearing loans 23.1 161 486 161 486 139 485 139 485 Convertible bond 24 44 687 45 207 54 083 55 646 Related party payables 38 31 31 411 411 Trade payables 25 39 228 39 228 35 456 35 456 Lease liabilities 11 4 257 4 257 3 885 3 885 Other payables 27 1 086 1 086 1 218 1 218 Total financial liabilities 250 775 251 295 234 538 236 101 Monbat AD Consolidated Financial Statements 31 December 2023 114 Fair value measurement of financial instruments The balance sheet values of the Group's financial assets and liabilities, reported at fair value, can be presented in the following categories: 31 December 2023 Note Level 1 Level 2 Level 3 Level 4 BGN 000 BGN000 BGN 000 BGN000 Financial assets Shares 12 - - 68 68 Total assets - - 68 68 Financial liabilities Fair value of conversion option 24 - - 2 640 2 640 Total liabilities - - 2 640 2 640 31 December 2022 Note Level 1 Level 2 Level 3 Level 4 BGN 000 BGN000 BGN 000 BGN000 Financial assets Shares 12 - - 71 71 Total assets - - 71 71 Financial liabilities Fair value of conversion option 24 - - 5 280 5 280 Derivatives 27 364 - - 364 Total liabilities 364 - - 364 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. The fair value of loans to related parties and interest-bearing loans from financial institutions is based on an analysis of the contractual interest rates relative to interest rates currently available for debt with similar terms and remaining terms to maturity. Based on this, management has determined that the fair value approximates the carrying amount. The fair value of loans granted, and bank loans received and loans from other financial institutions falls within level 3 of the fair value hierarchy. The fair value of the exchange-traded bond can be determined using the relevant quotation in an active market at the end of the reporting period. The fair value of the bond loan falls within level 1 of the fair value hierarchy. The fair value of the conversion option falls within Level 3 of the fair value hierarchy (Note 24). There is no change in the fair value valuation model of the conversion option in 2022 and 2023. In 2023, the Group reported income from a change in the fair value of the option in the amount of BGN 2 640 thousand on the line "Income from financial instruments" (2022: BGN 587 thousand). Monbat AD Consolidated Financial Statements 31 December 2023 115 Derivative liabilities reflect open lead swaps at 31 December 2022, measured at fair value. Fair value is estimated based on London Metals Exchange (LME) lead quotations. Refer to note 3.15 for information on the accounting policy for each category of financial instruments. A description of the Group's risk management policy and objectives regarding financial instruments is presented in note 41. 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 Interest-bearing loans (Note 23) 139 485 265 391 (248 568) - 5 178 161 486 Lease liabilities (Note 11) 3 885 - (2 154) 190 2 336 4 257 Convertible bond (Note 24) 54 083 - (10 959) 2 112 (549) 44 687 Fair value of conversion option (Note 24) 5 280 - - - (2 640) 2 640 Derivatives 364 - - - (364) - Total financial liabilities 203 097 265 391 (261 681) 2 302 3 961 213 070 1 January 2022 Cash inflows Cash outflows Accruals using the effective interest method Others 31 December 2022 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Interest-bearing loans (Note 23) 129 254 242 130 (240 459) 83 8 477 139 485 Lease liabilities (Note 11) 1 710 - (1 869) 167 3 877 3 885 Convertible bond (Note 24) 51 458 - - 3 529 (904) 54 083 Fair value of conversion option (Note 24) 5 867 - - - (587) 5 280 Derivatives - - - - 364 364 Total financial liabilities 188 289 242 130 (242 328) 3 779 11 227 203 097 Monbat AD Consolidated Financial Statements 31 December 2023 116 41. Financial instruments risks Risk management objectives and policies The Group is exposed to various types of risks in relation to its financial instruments. The most significant financial risks to which the Group is exposed are credit and liquidity risk. The Group's risk management is carried out by the Group's central administration in cooperation with the Board of Directors. Market risk analyses Currency risk Currency risk is the risk that the fair value or future cash flows of an exposure will vary due to changes in exchange rates. The Group's exposure to the risk of changes in exchange rates is mainly related to its operating activities (when income or expense is denominated in a foreign currency) and its net investments in foreign subsidiaries. The Group makes significant purchases, sales, granting and borrowing in foreign currencies – Euro, US Dollar, Romanian Lei, Tunisian Dinar, Serbian Dinar, Nigerian Naira, and South African Rand. The main part of these operations is carried out in euros. Since the BGN/EUR exchange rate is fixed at 1.95583, the currency risk arising from the Group's euro exposures is minimal. To reduce currency risk, the Group monitors short- and long-term foreign currency non-euro cash flows. The Group's exposure to currency risk is set out in the table below: US Dollar Serbian Dinar Romanian Lei Tunisian Dinar Nigerian Naira South African Rand BGN 000 BGN000 BGN 000 BGN000 BGN 000 BGN000 31 December 2023 Financial assets 2 727 3 139 758 15 428 239 566 Financial liabilities (295) (1 327) (1 785) (3 889) (111) (726) Net exposure 2 432 1 812 (1 027) 11 539 128 (160) US Dollar Serbian Dinar Romanian Lei Tunisian Dinar Nigerian Naira South African Rand BGN 000 BGN000 BGN 000 BGN000 BGN 000 BGN000 31 December 2022 Financial assets 2 900 1 741 1 214 9 860 945 719 Financial liabilities (249) (2 627) (2 405) (1 321) (68) (143) Net exposure 2 651 (886) (1 191) 8 539 877 576 Monbat AD Consolidated Financial Statements 31 December 2023 117 The table presented below shows the sensitivity of the net financial result for the period before taxes in relation to the financial assets and liabilities of the Group, to the exchange rate of foreign currencies and the Bulgarian lev, other things being equal. The percentages used are determined on the basis of the average exchange rates for the last 12 months for the respective year. There is no effect on the other components of the Group's equity. The table presented below shows the sensitivity of the net financial result for the period before taxes in relation to the financial assets and liabilities of the Group to the exchange rate of foreign currencies and the Bulgarian lev, other things being equal. US Dollar Change in USD Effect on pre- tax equityBGN ‘000 2023 + 5% 122 2023 - 5% (122) 2022 + 5% 133 2022 - 5% (133) Serbian Dinar Change in RSD Effect on pre- tax equityBGN ‘000 2023 + 5% 91 2023 - 5% (91) 2022 + 5% (44) 2022 - 5% 44 Romanian Lei Change in RON Effect on pre- tax equityBGN ‘000 2023 + 5% (51) 2023 - 5% 51 2022 + 5% (60) 2022 - 5% 60 Tunisian Dinar Change in TND Effect on pre- tax equityBGN ‘000 2023 + 5% 577 2023 - 5% (577) 2022 + 5% 427 2022 - 5% (427) South African Rand Change in ZAR Effect on pre- tax equityBGN ‘000 2023 + 5% (8) 2023 - 5% 8 2022 + 5% 29 2022 - 5% (29) Nigerian Naira Change in NGN Effect on pre- tax equityBGN ‘000 2023 + 100% 128 2023 - 100% (128) 2022 + 100% 877 2022 - 100% (877) Monbat AD Consolidated Financial Statements 31 December 2023 118 Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the Group’s exposure to currency risk. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The following table includes the carrying amount of financial instruments by type of interest rate: Fixed rate instruments 2023 2022 BGN ‘000 BGN ‘000 Financial assets 112 688 106 085 Financial liabilities (45 435) (41 829) Net exposure 67 253 64 256 Floating rate instruments 2023 2022 BGN ‘000 BGN ‘000 Financial assets 25 998 20 030 Financial liabilities (207 980) (198 353) Net exposure (181 982) (178 323) The Group’s policy is to minimize interest rate cash flow risk exposures on long-term financing. As of 31 December 2023, the Group is exposed to changes in market interest rates through bank borrowings at variable interest rates. All other financial assets and liabilities of the Group, including cash and cash equivalents, carry fixed interest rates, as they were in the previous year. The following table demonstrates the sensitivity to a possible change 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 held constant. There is no effect on the other components of the Group’s equity. With all other variables held constant, the Group’s profit before tax is affected through the impact on floating rate borrowings, as follows: Year Increase/(Decrease) in interest rates Effect on profit before tax BGN ‘000 2023 + 1% (1 820) 2023 - 1% 1 820 2022 + 1% (1 783) 2022 - 1% 1 783 Monbat AD Consolidated Financial Statements 31 December 2023 119 The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility than in prior years. Credit risk Credit risk is the risk that a counterparty will not meet its obligations to the Group. The Group is exposed to credit risk from its various financial instruments such as providing loans, receivables from customers, deposit of funds and others. The Group’s exposure to credit risk is limited to the carrying amount of financial assets recognized at the end of the reporting period, as set out below: Financial assets Note 2023 2022 BGN ‘000 BGN ‘000 Financial assets carried at FVOCI 12 68 71 68 71 Debt instruments carried at amortized cost -Trade loan receivables 15 158 149 -Trade and other receivables 16 69 963 64 856 -Related party receivables 38 55 780 52 902 -Cash and cash equivalents 19 12 717 8 137 138 618 126 044 The Group continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporates this information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on customers and other counterparties are obtained and used. The Group’s policy is to deal only with creditworthy counterparties. The Group’s management considers that all the above financial assets that are not impaired or past due for each of the reporting dates under review are of good credit quality. The Group has pledged its financial assets as collateral for other transactions. 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. Monbat AD Consolidated Financial Statements 31 December 2023 120 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, 55% of the Group’s trade receivables, where the provision matrix was used, are covered by letters of credit and other forms of credit insurance. These credit extensions received by the Group lead to a reduction of the expected credit losses. The Group 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 provision matrix is used, is presented in the table: Trade receivables as of 31.12.2023 Days overdue < 90 days 91-180 days 181-365 days > 365 days Total BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Expected % credit loss 0.09% 1.16% 16.27% 85.47% 2.96% Gross carrying amount of trade receivables 58 459 2 853 547 2 009 63 868 Expected credit loss (ECL) (53) (33) (89) (1 717) (1 892) As of 31 December 2022, the aging analysis of trade receivables and contract assets with customers, where the provision matrix is used, is presented in the table: Trade receivables as of 31.12.2022 Days overdue < 90 days 91-180 days 181-365 days > 365 days Total BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 BGN ‘000 Expected % credit loss 0.08% 2.93% 1.51% 79.06% 2.86% Gross carrying amount of trade receivables 51 519 637 358 1 884 54 398 Expected credit loss (ECL) (39) (19) (5) (1 490) (1 553) The Group has assessed expected credit losses in respect of certain trade receivables from customers from the Russian Federation, whose credit risk has increased significantly in 2022. The amount of the gross book value of these trade receivables is BGN 2 595 thousand (2022: BGN 2 595 thousand). The accrued impairment of these receivables as of 31.12.2023 is BGN 2 595 thousand (2022: BGN 2 595 thousand). In 2023 and 2022, the Group did not test for impairment receivables from Ukrainian companies in the amount of BGN 7 987 thousand (net of accrued impairment in the amount of BGN 519 thousand). Receivables are uninsured and unsecured. In connection with the ongoing military conflict in Ukraine, which began on 24 February 2022, the Group is unable to determine expected credit losses as required by IFRS 9 and has not tested these receivables for impairment. Monbat AD Consolidated Financial Statements 31 December 2023 121 The Group 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 the Group against the Russian counterparty. According to the legal counsel of the Group, the claim in the commercial case will be granted in full. The credit risk of balances in banks and financial institutions is managed by the central administration of the Group 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. Counterparty credit limits are reviewed by the Group's Board of Directors annually and may be updated throughout the year, subject to approval by the Group's Finance Committee. The limits are set in order to minimize the concentration of risks and, therefore, mitigate the financial loss from a potential inability of the counterparty to make payments. Credit risk regarding cash and cash equivalents is considered immaterial, as counterparties are banks with a good reputation and a high external credit rating. Liquidity risk Liquidity risk is the risk that the Group will not be able to repay its obligations. The Group meets its liquidity needs by carefully monitoring the repayment plans of long-term financial obligations, as well as the inflows and outflows of cash arising in the course of operating activities. Liquidity needs are monitored for different time periods on a daily and weekly basis, as well as based on 60-day forecasts. Long-term liquidity needs - for periods of 180 and 360 days - are determined monthly. Cash needs are compared with available loans to determine surpluses or deficits. This analysis determines whether the borrowings available will be sufficient to cover the Group's needs for the period. The Group holds cash to meet its liquidity needs for periods of up to 30 days. Funds for long-term liquidity needs are provided through loans and bonds in the appropriate amount. As of 31 December 2023 and 31 December 2022, the Groups's liabilities have contractual maturities (including interest payments where applicable) as summarized below: 31 December 2023 Short-term Long-term Long-term Up to 12 months 1 to 5 years More than 5 years BGN ‘000 BGN ‘000 BGN ‘000 Bank loans, incl lease liabilities 143 699 30 514 8 193 Convertible bonds 18 907 28 341 - Fair value of conversion option 2 640 - - Related party payables 31 - - Trade and other liabilities 40 314 - - Total 205 591 58 855 8 192 Monbat AD Consolidated Financial Statements 31 December 2023 122 31 December 2022 Short-term Long-term Long-term Up to 12 months 1 to 5 years More than 5 years BGN ‘000 BGN ‘000 BGN ‘000 Bank loans, incl lease liabilities 109 859 22 207 11 304 Convertible bonds 11 818 42 265 - Fair value of conversion option 2 640 2 640 - Related party payables 404 7 - Trade and other liabilities 36 674 - - Total 161 395 67 119 11 304 The amounts disclosed in this liability maturity analysis represent the undiscounted contractual cash flows that may differ from the carrying amounts of the liabilities at the reporting date. Financial assets used for managing liquidity risk The Group considers expected cash flows from financial assets in assessing and managing liquidity risk, in particular its cash resources and trade receivables. The Group’s existing cash resources and trade receivables do not significantly exceed the current cash outflow requirements. Cash flows from trade and other receivables are all contractually due within six months. 42. Capital management policies and procedures The Group’s capital management objectives are: •To ensure the Group’s ability to continue as a going concern; and •To provide an adequate return to the shareholder by pricing products and services in accordance to the level of risk. The Group monitors capital based on the ratio of net debt to equity. Net debt is calculated as the difference between interest-bearing debt less the book value of cash and cash equivalents. Interest-bearing debt includes bank loans, loans from financial institutions and bond loans. The Group manages the capital structure and makes the necessary adjustments in accordance with the changes in the economic situation and the risk characteristics of the relevant assets. In order to maintain or adjust the capital structure, the Group may change the amount of dividends paid to owners, return capital to shareholders / owners, issue new shares / units or sell assets to reduce its liabilities. Monbat AD Consolidated Financial Statements 31 December 2023 123 The net debt to equity ratio at 31.12.2023 and 31.12.2023 is presented below: 2023 2022 BGN ‘000 BGN ‘000 Equity 221 539 222 006 +Debt 206 173 193 568 - Cash and cash equivalents (12 717) (8 137) Net debt 193 456 185 431 Net debt to equity 0.87 0.84 The change in the ratio in 2023 is primarily due to a decrease in equity due to the distribution of dividends during the year and an increase in interest-bearing debt, offset by an increase in cash and cash equivalents. 43. Events after the reporting period No adjusting or significant non-adjusting events occurred between the date of the consolidated 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. The payment of the second installment of the principal for EUR 8 404 500 was made on 5 April 2024. 44. Authorization of the consolidated financial statements The consolidated financial statements for the year ended 31 December 2023 (including comparatives for 2022) were approved by the Board of Directors on 29 April 2024. i ANNUAL CONSOLIDATED ACTIVITY REPORT OF MONBAT AD, SOFIA FOR THE FINANCIAL YEAR 2023 THIS CONSOLIDATED ACTIVITY REPORT WAS PREPARED IN ACCORDANCE WITH THE PROVISIONS OF ARTICLE 39 OF THE ACCOUNTANCY ACT, ARTICLE 100N, PARAGRAPH 7 OF THE LAW ON PUBLIC OFFERING OF SECURITIES AND ORDINANCE № 2 DATED 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 Consolidated Activity Report (The Report) may contain statements that reflect the current vision of the 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 and its subsidiaries (The Group), as well as the sectors where the Companies operate. Statements that include the words “expects”, “intends”, “plans”, “projects”, “accepts”, “will”, “aims”, “strives”, “can”, “could be”, “continues”, and other similar statements related to the future performance of the company constitute forecasts for purposes of Bulgarian securities legislation or otherwise. Where forward-looking statements are presented, they concern the future performance and results of the Group 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 the Group of MONBAT AD and those specified in the forward-looking statements. These factors include but are not limited only to the ones described in the section entitled RISK FACTORS and should be considered as 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 Consolidated Annual Report. In compliance with the obligations under Bulgarian legislation and the approved policy of the Group MONBAT AD, the parent company’s Board of Directors will continue announcing 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 Consolidated Annual 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 Consolidated Report has been prepared in compliance with the International Financial Reporting Standards (IFRS), as adopted by EU. 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 consolidated Report has been extracted from various sources, explicitly referred in the respective parts where such information is presented. The information presented in this document relating to some of the systematic risks for the Group of MONBAT AD has also been extracted from publicly available information, including publications and information disclosed in accordance with the requirements of the applicable securities legislation and other regulations. The information presented in this consolidated Report regarding the economic sectors in which MONBAT AD and its subsidiaries operate is extracted from publicly available information, including publications and information disclosed in compliance with the requirements of the applicable securities legislation and other regulations. MONBAT AD does not guarantee the accuracy and 2 exhaustiveness of this information as well as the presence of complete uniformity in the information from all these sources. With this regard, MONBAT AD takes responsibility only for the accurate reproduction of extracts from relevant sources of information. The Board of Directors of MONBAT AD confirms that the information extracted from publications and other publicly available sources has been fairy reproduced from the relevant sources and, so far as it is aware, no facts which could render the reproduced information inaccurate or misleading are missed. Nevertheless, the Board of Directors of MONBAT AD informs that is 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 Group in the interest of its shareholders and pursuant to the provisions of art. 39 of the Accountancy Act, article 100n, paragraph 7 of the LPOS and Appendix № 2 to Аrticle 11, item 1 from Ordinance 2/ 09.11.2021 on initial and subsequent disclosure of information in the event of public offerings of securities and admission of securities to trading on a regulated market, we have prepared this Annual Consolidated Report (“the Report”). The Consolidated Report presents comments and analysis of the consolidated financial statements and other essential information regarding the financial situation and the operational results of the Group. The Report reflects correctly the state and the development prospects of the Group. In 2023 circumstances have occurred that the Group'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 LPOS 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 3 In 2023 MONBAT AD reports consolidated revenue from contracts with customers of BGN 383 547 thousand, which is an increase of 3.8% compared to 2022, when revenues from contracts with customers on a consolidated basis were BGN 369 661 thousand. Profit from continuing operations before taxes on consolidated basis is BGN 10 331 thousand, which is an increase of 19.42% compared to the consolidated profit from continuing operations for 2022 of BGN 8 651 thousand. The net profit of MONBAT AD on a consolidated basis for 2023 is BGN 6 041 thousand and shows an increase of 52.9% compared to the net profit of the Group on a consolidated basis for 2022, which is BGN 3 951 thousand. I.GENERAL INFORMATION ABOUT THE PARENT COMPANY Mobat AD (The Parent Company) was incorporated in the Republic of Bulgaria in accordance with Bulgarian legislation. The legal and organizational form of MONBAT AD is a joint stock public company. The company has its registered seat and business address at № 32A, Cherni Vrah, Blvd., 1407 in 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 As of the date of the preparation of this Consolidated Activity Report the registered share capital of the parent 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 the previous period 2022 there were no changes in the amount of the capital of MONBAT AD. As of 31.12.2023, one legal entity exercises 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 16 666 371 42.73% Prista Holdco Cooperatief U.A. 8 103 758 20.78% Monbat Trading OOD 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% Repurchased own shares (33 545) (0.08%) 4 The Board of Directors of Monbat AD consists of: 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 Florian Huth – Member of the Board of Directors until 12.07.2023 II. OVERVIEW OF THE ACTIVITIES AND THE STATE OF MONBAT GROUP 1.Principal Activity As of 31.12.2023 Monbat Group consists of the following companies: Тable № 2 № Company’s name Principal activity Share capital percentage or voting rights at the General Assembly as of 31.12.2023 1 Start AD Production, service and sales of accumulator batteries; engineering and development-implementation activities, foreign and domestic trade 97.80% of the voting shares 2 SC Monbat Recycling S.R.L Recycling of accumulator batteries and lead scrap, lead alloys, polyethylene and polypropylene materials, trading in accumulator 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, 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, 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 SC Monbat Romania S.R.L. Trade company with scope of activity: trading, service and sales 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 Trade in various types of batteries and other 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 Recycling of battery and lead scrap, trading of battery, battery, lead, polyethylene and polypropylene scrap and materials in Italy, as well 100% of the capital 5 № Company’s name Principal activity Share capital percentage or voting rights at the General Assembly as of 31.12.2023 as export and import to and from Italy of scrap and materials derived from scrap 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 EOOD Transport services, internal and external transport, forwarding, 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 Trade in various type 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 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 21 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 22 Société Technique et Ingénierie de Précision (TIP) Provision of engineering and support services to Nour Group companies. 55% of the capital 23 Société NOUR des Batteries Industrielles (NBI) Provision of services to Nour Group companies. 44.31% of the capital 24 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 The main activity of the Group is divided into four segments: •Lead-acid battery manufacturing segment, which produces a wide product range of starter and stationary batteries, as well as batteries with cyclic application. •Recycling of industrial materials segment which produces lead, lead alloys, sodium sulphate and regranulated polypropylene for the production needs of the lead-acid batteries segment and for sale to external customers, as well as the production of equipment for recycling industrial materials. •Industrial group Nour segment for the production and recycling of lead-acid batteries. •A segment Others, which include the logistics and foreign trade companies of the Group and companies with auxiliary activity. The production of the lead-acid batteries production segment can be divided into the following main groups: 6 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. Regarding application, 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 electrolyte immobilized in the separator (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. 7 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 when the power goes out, most battery backup devices also operate in network conditioning mode (ON LINE), guaranteeing the parameters of the power supply to consumers. Monbat AD produce 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 electrical energy. Monbat Deep Cycle range is specially design for powering electrical equipment for longer periods of time with increased ability of deep discharge cycles. Special Batteries Batteries with military applications, suitable for tanks and armored vehicles of NATO. 8 Leisure batteries The Monbat Leisure & Hobby range is provided with a special design reliable to demanding charge/discharge cycling conditions peculiar to 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 the Group 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 in Romania, Serbia and Tunisia, 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) from own production is 99.8%. 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 polypropylene (regranulate) from own production is 90.0%. 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 values when selling lead-acid batteries. 9 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 USD/MT As of 31.12.2023 lead takes 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. The Bulgarian energy sector is key to the future development and sustainability of the entire economy in the country and fir Monbat as well. State policy in the energy 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 a good market diversification, with sales in more than 70 countries in 2023. Major markets for 2023 include France, Germany, Romania, Spain, Italy and Tunisia. With its well-developed distributor’s network Monbat generates sales from all the major markets in the EU, the Middle East and North Africa. Starter batteries are sold mainly through automotive retailers and repair shops. Stationary batteries are sold directly to telecom companies and other entities. The Group has granted 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 being 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 97.8% of the equity of the third largest producer in the lead-acid batteries business in Bulgaria – START AD, Dobrich. MONBAT AD reported revenue from contracts with customers on a consolidated basis of BGN 383 547 thousand in 2023, which represents an increase by 3.8% compared to sales revenues generated in 2022 of BGN 369 661 thousand. 10 Sales revenues on the domestic market on a consolidated basis in 2023 are BGN 30 149 thousand and represent 8% of total sales. Sales revenues realized on the domestic market include mainly sale of batteries to third parties, and materials and goods sold to third parties or other related parties. Sales revenues abroad amount to BGN 353 398 thousand and represent 92% of Group's net sales revenues. MONBAT AD is a geographically diversified group with global market presence. Regarding the ongoing military conflict between Ukraine and Russia, it should be borne in mind that during 2023, the Group has not made sales to Russian customers, while sales to Ukrainian counterparties represent 3.3% of the total revenues for 2023 (2022: Russia - 2.0%, Ukraine – 1.9%). Revenue from contracts with customers on the foreign market for 2023 by country has the following distribution: Тable № 3 2023 2021 Country Export % Export % ('000 EUR) ('000 EUR) FRANCE 18 582 10.28 11 220 6.39 GERMANY 17 448 9.66 17 005 9.69 ITALY 12 748 7.06 13 496 7.69 TUNISIA 12 452 6.89 9 835 5.61 ROMANIA 10 498 5.81 8 509 4.85 SPAIN 9 253 5.12 9 765 5.57 POLAND 8 630 4.78 8 877 5.06 GREECE 8 108 4.49 4 873 2.78 GREAT BRITAIN 7 520 4.16 6 299 3.59 NETHERLANDS 7 003 3.88 7 411 4.22 AUSTRIA 6 632 3.67 4 223 2.41 UKRAINE 6 564 3.63 3 592 2.05 SWEDEN 5 040 2.79 3 971 2.26 SERBIA 4 886 2.70 6 606 3.76 ALGERIA 3 754 2.08 2 363 1.35 SAUDI ARABIA 2 822 1.56 7 854 4.48 HUNGARY 2 805 1.55 2 609 1.49 IRELAND 2 258 1.25 2 282 1.30 PORTUGAL 2 133 1.18 1 564 0.89 OTHER 31 553 17.46 43 106 24.57 TOTAL 180 689 100.00 175 460 100.00 In 2023, the Group's main market is France with EUR 18 582 thousand in sales revenue, which represents 10.3% of the Group's total exports on a consolidated basis. 11 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 states 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 certification 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 organization to achieve both objectives. ISO 45001 Developed by selected 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 complies with the internationally recognized assessment specification for occupational health and safety management systems. OPERATING RESULTS In 2023 the the Group 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 behaviour. 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. The Group 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. 12 As a result of the above, the Group reports an increase in battery sales volumes in 2023 (Table 15) and an increase in normalized EBITDA (before impairments) on a consolidated basis from continuing operations for. MONBAT AD registered consolidated profit before tax from continuing operations of BGN 10 331 thousand in 2023, which is an increase by 19.4% compared to the consolidated profit before tax from continuing operations for 2022 of BGN 8 651 thousand. The net profit of MONBAT on a consolidated basis for 2023 is BGN 6 041 thousand, which represents an increase by 52.9% compared to the Group’s consolidated net profit for 2022 at the amount of BGN 3 951 thousand. The total comprehensive income of MONBAT AD on a consolidated basis for 2023 is BGN 3 562 thousand, which is a decrease of 5.9% compared to the total comprehensive income of the Group for 2022, BGN 3 787 thousand. The table below shows the change in financial positions of the Group in 2023 compared to 2022 to the effect on the reported profits from continuing operations in 2023 and 2022. Table № 4 FINANCIAL INDICATORS 2023 2022 Deviation (absolute value) Deviation % Comment NORMALIZED EBITDA 39 902 35 428 4 474 12.6% Impairment of financial assets and advances (383) (481) 98 (20.4%) Depreciation and amortization expenses: (22 245) (20 235) (2 010) 9.9% Property, plant and equipment (19 671) (18 013) (1 658) 9.2% 1) Right-of-use assets (1 978) (1 752) (226) 12.9% Intangible assets (596) (470) (126) 26.8% PROFIT FROM OPERATING ACTIVITIES 17 274 14 712 2 562 17.4% Finance income, income from financial instruments and gain on investments 3 936 1 906 2 030 106.5% 2) Finance costs (13 242) (9 217) (4 025) 43.7% 3) Gain on sale of investment - 485 (485) (100.0%) Loss on revaluation of investment - (225) 225 (100.0%) Other financial positions (277) 355 (632) (178.0%) Income from financial instruments 2 640 589 2 051 348.2% 4) Share of the profit of associates - 46 (46) (100%) PROFIT FROM CONTINUING OPERATIONS BEFORE TAXES 10 331 8 651 1 680 19.4% Income tax expense (5 811) (1 669) (4 142) 248.1% 5) PROFIT FROM CONTINUING OPERATIONS 4 520 6 982 (2 462) (35.3%) 13 COMMENTS ON CHANGES / REFERENCE TO THE DESCRIPTION OF THE EFFECTS: 1)Higher depreciation expense mainly due to the absence of expense during part of the comparative period in the subsidiary Societe Nouvelle des Accumulateurs Nour, which was acquired on 31 March 2022. Increase in the carrying amount of property, plant and equipment used in the Batteries Division as at 31.12.2023. 2) Reported financial income in relation to the positive net effect of commodity swap transactions entered into in 2023 to mitigate the downside risk in the LME lead index. Higher interest income as a result of the rise in base interest rates. 3) Higher finance costs mainly due to the rise in interest rates on floating rate financial liabilities. 4) Higher income from financial instruments, mainly due to the change in the fair value of the bond conversion option. 5) Recognized expense for tax liability provision in the amount of BGN 4 058, related to the subsidiary Piombifera Italiana Spa (Note 13 of the consolidated financial statements). Table № 5 Data presented in BGN ‘000 FINANCIAL INDICATORS 2023 2022 2021 Normalized EBITDA from continuing operations (before impairments) 39 902 35 428 46 014 EBIT from continuing operations 17 274 14 712 27 057 Revenue from contracts with customers 383 547 369 661 367 362 Table № 6 (in BGN '000) EQUITY 2023 % 2022 % 2021 Equity Share capital 38 955 0.0% 38 962 (0.1%) 38 989 Premium reserve 28 403 (0.1%) 28 425 (0.4%) 28 538 General reserves 69 056 0.0% 69 056 0.0% 69 056 Reserve from foreign currency translation (8 496) 34.1% (6 334) 2.7% (6 170) Other reserves - 0.0% - (100.0%) 1 408 Retained earnings 79 279 3.0% 76 969 0.6% 76 527 Equity attributable to the owners of the parent 207 197 0.1% 207 078 (0.6%) 208 348 Non-controlling interest 14 342 (3.9%) 14 928 >100% 1 360 Total equity and non-controlling interest 221 539 (0.2%) 222 006 5.9% 209 708 14 Revenue from contracts with customers Table № 7 (BGN '000) REVENUES 2023 % 2022 Revenue from sales of finished goods 366 080 4.0% 351 910 Revenue from sales of materials 4 583 (15.3%) 5 414 Revenue from rendering of services 9 452 (2.9%) 9 732 Other sales revenue 3 432 31.7% 2 605 Total revenue from contracts with customers 383 547 3.8% 369 661 Operating expenses by category Table № 8 (BGN '000) EXPENSES 2023 % 2022 Cost of materials 254 971 (1.4%) 258 637 Hired services expenses 38 367 (1.3%) 38 856 Depreciation and amortization costs 22 245 9.9% 20 235 Wages and salaries 40 397 8.2% 37 327 Social security costs 7 980 6.2% 7 517 Book value of assets sold (excluding production) 3 813 (8.8%) 4 180 Change in stocks of production and work in progress (4 811) 141.0% (1 996) Other expenses 7 387 92.8% 3 832 Total expenses 370 349 0.5% 368 588 Main suppliers of materials The Group procures a large part of the main raw materials required for production through the recycling of waste batteries carried out by companies in the Group. The main Group’s suppliers of raw materials are Cobat s.p.a (scrap batteries), El Bat AD (lead and alloys), Dixon Batteries (lead and alloys), Akumsan Plastik (lids and boxes), Microporous GmbH (polyethylene separator). Due to the diversification of the client portfolio, the Group has no main clients that would account for 10 percent or more of its total revenue. The remuneration for the independent financial audit of 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. 15 III.ANALYSIS OF FINANCIAL AND NON-FINANCIAL KEY INDICATORS ON THE RESULTS FROM THE ACTIVITIES RELATED TO THE BUSINESS 1.FINANCIAL RATIOS LIQUIDITY Table № 9 LIQUIDITY RATIOS 31.12.2023 31.12.2022 31.12.2021 Current liquidity ratio 1.35 1.54 1.62 Quick liquidity ratio 0.87 0.98 0.94 Cash liquidity ratio 0.06 0.04 0.06 Immediate liquidity ratio 0.06 0.04 0.06 The trend of the liquidity ratio over time provides the most valuable information. Liabilities to creditors of Monbat Group are being paid off in cash rather than using inventories or equipment. i.e., these factors describe the Group'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 the 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 1.35 and decreases in comparison with the ratio for 2021. The registered decrease in the value of this ratio for 2023 compared to 2022 is due to an increase in the amount of current assets of the group by 3.4% with an increase in the value of current liabilities by 18.0%. 16 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 1.5 and 2 but much higher rates would indicate that company’s assets are not being used in the best way. The quick liquidity ratio of the Group for 2023 is 0.87 and registers a decrease compared to its rate of 0.98 for 2022. In 2023 compared to 2022 current assets increased by 3.4%, inventories increased by 0.8%, while current liabilities increased by 18.0%. IMMEDIATE LIQUIDITY RATIO The value of the immediate liquidity ratio of MONBAT AD Group for 2023 is 0.06 and increases compared to its rate from 2022. The increase in the value is due to the increase in cash and cash equivalents by 56.3%, partially offset by an increase in current liabilities by 18.0%. CASH LIQUIDITY RATIO The cash liquidity ratio is calculated as the ratio between cash and short-term liabilities and indicates Group’s ability to meet its short-term liabilities with its available cash. The Group’s cash ratio for 2023 is 0.06. As of 31.12.2023 Group’s cash increased by 56.3% compared to 2022 with an increase in current liabilities by 18.0%. CAPITAL RESOURCES The financial autonomy and financial leverage indicators show the ratio between own funds and borrowed funds in the capital structure of the Group. High rates of the financial autonomy indicator, respectively, the low rates of the financial leverage indicator, provide guarantee both for the investors /creditors/ and for the owners themselves, for the ability of the Group 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 known as 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 are, 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). 17 FINANCIAL LEVERAGE RATIOS Table № 10 LEVERAGE RATIOS 31.12.2023 31.12.2022 31.12.2021 Debt to Equity Ratio 1.28 1.23 1.19 Debt to Assets Ratio 0.56 0.55 0.54 Equity to Debt Ratio 0.78 0.82 0.84 DEBT TO EQUITY RATIO The indicator shows what part of the Group’s capital is borrowed. The higher the share of long-term debt compared to shareholders’ equity is, the higher will be the likelihood of failure in the payment of fixed liabilities. As of 31.12.2023 the value of the debt ratio of the MONBAT AD Group is 1.28 and decreases insignificantly compared to 2022. In 2023 the value of the liabilities increased by 4.0%, while equity decreased by 0.2%. EQUITY TO DEBT RATIO The equity to debt ratio provides information regarding what percentage of the total liabilities is the entity’s equity. As of 31.12.2023 the value of the financial autonomy ratio of the Group is 0.78 compared to its value of 0.82 reached as of 31.12.2022. The increase in the ratio is due to a decrease in equity by 0.2% with an increase of liabilities by 4.0%. DEBT TO TOTAL ASSETS RATIO The debt to assets ratio shows what part of the assets is being financed through debt. As of 31.12.2023, the value of the Debt/Assets ratio remains at the level of the 2022 value. 18 PROFITABILITY RATIOS Table № 11 PROFITABILITY RATIOS 31.12.2023 31.12.2022 31.12.2021 Profitability of capital 0.155 0.101 0.077 Return on equity (ROE) 0.027 0.018 0.015 Return on assets (ROA) 0.012 0.008 0.007 RETURN ON EQUITY (ROE) The Return on Equity ratio is calculated by relating the net profit as a percentage of the company's shareholders’ equity. This ratio measures the return to shareholders in terms of their absolute investments. This ratio reports stable high rates for the last three financial periods due to the generated profit for these years. For 2023 the Return on Equity ratio increased to 0.027 compared to its rate of 0.018 in 2022. The increase is due to the increase in Group’s net profit by 52.9% and decrease in equity by 0.2%. RETURN ON ASSETS (ROA) The Return on Assets indicator shows the effectiveness of using the total assets in the Group. The increase of the return on assets indicator in 2023 compared to 2022 is due to an increase in Group's net profit by 52.9% with an increase in assets by 2.1%. PROFITABILITY OF CAPITAL As of 31.12.2023 the Return on Equity ratio is 0.155 and is increasing compared to 2022. In 2023, compared to 2022, the net profit reported by the Group increased by 52.9%, while the issued capital remained flat. 19 KEY RATIOS A summary of the financial performance of Monbat Group for the last two financial years is presented in the following table: Table № 12 (in BGN'000) Indicators 31.12.2023 31.12.2022 Revenue from contracts with customers 383 547 369 661 Other operating income 4 076 13 639 Operating expenses 370 349 368 588 Cost of materials 254 971 258 637 Non-current assets 209 168 208 475 Current assets 295 438 285 722 Equity 221 539 222 006 Non-current liabilities 64 847 87 251 Current liabilities 218 220 184 940 Working capital 47 713 69 409 Cash and cash equivalents 12 717 8 137 Total liabilities 283 067 272 191 Net debt 193 456 185 431 Interest expenses 12 149 8 066 Inventories 106 258 105 398 Short-term receivables 143 306 138 569 P/E * 32.96 25.58 P/BV * 0.67 0.80 P/S * 0.39 0.48 Financial leverage ratio * 0.22 0.31 Profitability of sales * 1.58% 1.07% ROFA * 2.89% 1.90% The P/E, P/BV and P/S indicators are calculated based on the average share price of MONBAT AD as of 31.12.2023, 31.12.2022. P/E – market capitalization/net profit from continuing operations P/BV – market capitalization/shareholders' equity P/S – (market capitalization/net sales) Financial leverage coefficient – working capital/shareholders’ equity; ROFA (return on non-current assets) – net profit/non-current assets; Profitability of sales - net profit/net sales revenues 20 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 group's management. The systematic risks are political risk, macroeconomic risk, inflation risk, currency risk, interest rate risk, and 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 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. 21 OVERALL MACROECONOMIC 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: NISIn 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 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 22 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. 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 23 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%. 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 24 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 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%. 25 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, 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 26 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. 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 27 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. 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, 28 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. UNSYSTEMATIC RISKS RISK OF PRICE CHANGES IN MAIN RAW MATERIALS The main activity of MONBAT AD and the companies within the Group 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 from the total cost structure per unit of battery is as follow: for 2021 – 70%, for 2022 – 61% and for 2023 – 65%. 29 The risk of price change in the main raw material used for production – lead is being managed by means of own recycling facilities and by monthly indexation of the sales prices of the batteries. In 2023 the used lead produced by own recycling facilities is 91%. DEPENDENCE OF THE GROUP FROM DISTRIBUTORS, SUPPLIERS, CUSTOMERS There is no dependence of the Group of MONBAT AD from customers because the group’s sales are not being made directly to end customers but through the mediation of an extensive distribution network in the country and abroad. Significant part of the sales of MONBAT AD with deferred payment in the country and for export are being insured in the Bulgarian Export Insurance Agency (BAEZ) or COFACE which mitigates the risk of non-payment. MONBAT AD is an export-oriented group of companies. The Group exports a large part of its production. The main markets in 2023 are France, Germany, Spain, Italy and Tunisia. DEPENDENCE OF MONBAT GROUP ON KEY PERSONNEL The professional activities and efforts, qualifications, motivation and reputation of the members of board of directors and the senior officials of MONBAT AD and companies of the group are essential for achieving the strategic and investment objectives of the Group. The leave or release of any member of boards of directors or key executive official would negatively affect the smooth conduct of the 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 director members and key management personnel in the activities of the entity. RISK OF CHANGE IN THE DEMAND AND INTRODUCTION OF NEW TECHNOLOGIES This risk is related to demographic, economic, technological changes or 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 of the separate carbon dioxide emissions to a minimum, the need for alternative energy sources such as new generation lead-acid batteries grows. At the same time, the need for multifunctional products - accumulator batteries - as a spare source for the photovoltaic power supply and lighting systems also grows. These new generation products could negatively affect the demand for an existing and approved product as a result of the fact that they are or at least they are perceived by consumers as more effective, more refined, combining new features, as well as due to the fact that they are more advertised. The Group 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 Group are lead-acid batteries for various applications: starter batteries, stationary batteries for telecommunication application, semi-traction batteries, special batteries for military application and locomotive batteries. 30 LIQUIDITY RISK Liquidity risk consists of the probability that the Group is unable to pay its current liabilities. The absolute liquidity ratio is calculated as the ratio of cash and short-term liabilities and indicates Group’s ability to meet its short-term liabilities with its available cash. The absolute liquidity ratio on the consolidated basis for 2023 is 0.06. For 2023, the cash of the Group increased by 56.3% compared to the previous year 2022, with a reported increase in current liabilities by 18.0%. CREDIT RISK Credit risk is the risk that a counterparty will not pay its obligation to the Group. The economic group of 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 the Group 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 Group 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 Group 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 and the production companies of the Group as large producers of batteries and a dynamically developing structure is also oriented towards the environment. The management of MONBAT AD considers the activities directed towards pollution prevention or reduction aimed at achieving a maximum level of human health and environmental protection as a major priority and a crucial factor in the long-term and sustainable development. It is a Group’s long-standing practice to provide clear and accurate environmental information on its products, services and activities to customers, suppliers, and the public. A key objective of the Group'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 group'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. 31 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 Group. 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. The Group 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 Group 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 Group compared to 2022. The following market developments were observed: oIncreased 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. oSubstantial 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. oDecline 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 3.3% of total sales revenue. (2022: Russia – 2.0%, Ukraine – 1.9%). •In relation to supply chains, the Group is not directly dependent on Russian, Ukrainian or Belarusian suppliers. 32 •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). The Group 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 Group'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 Group 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 Group has recognized impairment charges 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 Group has trade receivables from Ukrainian and Russian customers (net of impairments) in the amount of BGN 10 148 thousand. The Group analyzes on an ongoing basis all possible impacts of changing micro- and macroeconomic conditions on the Group'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 Group's operations. The Group 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 PREPARATION OF THE ANNUAL CONSOLIDATED FINANCIAL STATEMENTS All important events, which occurred after the end of the reporting period, were disclosed through the information disclosure system of MONBAT AD, namely - to the regulated securities market, the Financial Supervision Commission and the public. The information is also available on the website of the company www.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. The payment of the second installment of the principal for EUR 8 404 500 was made on 5 April 2024. 33 VI.CURRENT TRENDS AND PROBABLE FUTURE DEVELOPMENT OF THE GROUP In the upcoming three 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 group, carried out by the subsidiaries of Monbat AD; adoption of new technologies for the production of batteries and 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 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 “Sales Department”, “Marketing and Communications Department”, “Technology Department”, “Production”, “Operations and Projects Department and Testing Laboratory”. The Group’s own research and development laboratory – MGLab, is equipped with modern, specialized electronic devices. The highly qualified staff of both Monbat and MGLab ensures company’s technological and innovative growth. We conduct various chemical, physical and electrical tests required under the internationally recognized standards for lead-acid batteries. Monbat Research and Development department works in close cooperation with the Institute of Electrochemistry and Energy Systems (IEES) of the Bulgarian Academy of Sciences. The amount spent on research and development activities until 2023 forms a part of the overall amount spent on remunerations for the experts in the separate departments “Sales Department”, “Marketing and Communications Department”, “Technology Department”, “Production”, “Operations and Projects Department” and “Testing Laboratory”. Investments in research and development activities form a part of the overall expenditure of the group 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 34 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. 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 44 491 or 0.11% of the voting rights of MONBAT AD 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 procurators have received the following remuneration: Table № 13 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 During 2023 the Members of the Board of Directors and Procurators have received the following remuneration from other entities in the Group: 35 Table № 14 Full name Position Gross amount in BGN Net amount in BGN 1 Peter 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 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. 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 36 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 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: 37 •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; 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 38 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 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 39 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 were concluded with members of the Board of Directors or their related persons beyond the usual activity of the Group or substantially diverted from the market requirements. 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 Group presents consolidated data on achieved sales revenue, net profit and EBITDA, usually once a year in the second half of the year, an Investor Day is held, where forecasts are presented 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 GROUP In 2023 MONBAT AD has used instruments, representing commodity swaps on lead to hedge cash flows and limit the risk of a change in the London Metal Exchange price of lead. The Group has not used any material financial instruments to hedge the risks of changes in foreign exchange rates, interest rates or other cash flows. The Group could have exposure to liquidity, market, interest rate, currency and operational risks arising from the use of financial instruments. XI.INFORMATION UNDER APPENDIX NO 2 TO 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. CONDOLIDATED SALES OF LEAD-ACID BATTERIES FOR THE PERIOD OF 2021- 2023 Table № 15 TYPE OF SALES: 2023 2022 2021 Number of batteries sold 3 113 067 2 879 814 3 429 234 40 BREAKDOWN OF CONSOLIDATED SALES BY TYPES OF BATTERIES Table № 16 BREAKDOWN OF SALES BY TYPES OF BATTERIES (%) 2023 2022 2021 Starter Batteries 88.8% 84.0% 84.1% Stationary Batteries with telecommunication and UPS application 4.1% 5.9% 6.1% Semi traction Batteries 7.1% 10.1% 9.8% Total: 100.0% 100.0% 100.0% Table № 17 BREAKDOWN OF REVENUE BY TYPES OF BATTERIES SOLD: 2023 2022 2021 Starter Batteries 76.0% 66.7% 67.1% Stationary Batteries with telecommunication and UPS application 11.9% 16.5% 17.3% Semi traction Batteries 12.1% 16.8% 15.6% Total: 100.00% 100.00% 100.00% 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 consolidated 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 presented in Table 7. Information about the revenues based on market segmentation is represented in Table 3. 3.Information about concluded considerable transactions In 2023, MONBAT AD did not conclude significant transactions within the meaning of Ordinance 2 of FSC, except for those disclosed in the consolidated financial statements: -On 22 March 2023, the Group 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 6 of the consolidated financial statements). 41 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 the Group has concluded transactions with the following related parties: Table № 18 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 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 Group’s usual activity or substantially deviate from the market conditions. Information about the transactions concluded between the group and the related parties during the reporting period can be found in the published report 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 42 In 2023 no unpredictable and unforeseen circumstance of an extraordinary nature occurred that had an impact on the Group. 6.Information about off-balance kept transactions in 2023 – 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 and associated within the economic group of the issuer: Table № 19 Company’s name Principal activity Capital share or percentage of votes at the General Assembly as of 31.12.2023 1 START AD 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 43 Company’s name Principal activity Capital share or percentage of votes at the General Assembly as of 31.12.2023 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 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. 100% of the capital 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 44 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 Loan contracts of Monbat AD and the companies of the Group in their capacity as borrowers: Summary of bank loan contracts 1. UBB AD Agreement dated 25.02.2014. Maturity date: 15.02.2016 Loan amount: 3 200 000 EUR Type of loan: Revolving Interest and commission: 1 M EURIBOR + mark-up Collaterals: Rank collateral of mortgage of own real estate, cadaster № 48489.5.597, cadaster № 48489.5.281, cadaster № 48489.5.396, together with the buildings constructed thereon, located in Montana str. Industrialna, owned by Monbat AD and Monbat Recycling EAD. By an annex dated 30.6.2016, the loan amount was increased to 4 200 000 EUR. By an annex of month of June 2017, the amount of the loan was increased to 9 200 000 EUR. Maturity date: 31.07.2027 Pledge on machinery plant and equipment owned by Monbat AD and Monbat Recycling EAD. First ranking pledge on all present and future receivables on accounts with the bank. Utilized amount as at 31.12.2023 at the amount of 17 700 049 BGN (9 049 892 EUR). 2. Eurobank Bulgaria AD Agreement № 339/07.12.2004 Maturity date: 07.06.2006 Loan amount: 2 200 000 EUR Type of loan: Credit line Interest: Variable reference interest rate + mark-up Collateral: Pledge on assets and inventories owned by Monbat AD By annex dated 16.06.2017 the amount of the loan was increased to BGN 18 971 401 By annex dated 13.01.2023, valid until 30.03.2023, the amount of the loan was increased to BGN 30 706 381. Maturity date: 31.01.2024, by annex from 2024 the maturity date was extended till 30.06.2024. Utilized amount as of 31.12.2023 at the amount of 18 962 544 BGN. 45 3. Eurobank Bulgaria AD Agreement № 100-972 from 23.11.2010 Maturity date: 23.11.2011 Loan amount: 1 000 000 EUR Type of loan: working capital Interest: 3 month EURIBOR + mark-up Collateral: Real estate 1: 1/2 ideal part of land with identification №48489.282 on the cadastral map of Montana, approved with Directive № RD-18-19-/05.04.2006 of the Procurator of AK. Real estate 2:1/2 ideal part of land with identification №48489.282 on the cadastral map of Montana, approved with Directive № RD-18-19-/05.04.2006 of the Procurator of AK Pledges: 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 dated 29.07.2014 and the loan is transferred from EUR in BGN Maturity date: 31.01.2024, by annex from 2024 the maturity date was extended till 30.06.2024. Loan amount: 1 955 830 BGN Type of loan: credit line Interest: Variable reference interest rate + mark-up Collateral: Promissory Note for the amount of 1 955 830 BGN. Utilized amount as of 31.12.2023 at the amount of 1 930 570 BGN. 4. DSK Bank AD Contract №1675/16.09.2015 Loan amount: 2 500 000 EUR Type of credit: for working capital Maturity date: 10.09.2024 Interest: 1 М EURIBOR + mark-up Collateral: Pledge agreement on receivables and fixed assets. Utilized amount as of 31.12.2023 at the amount of 4 889 575 BGN (2 500 000 EUR). 5. DSK Bank AD Contract №1674/16.09.2015 Maturity date: 10.09.2016 Loan amount: 2 000 000 BGN Type of loan: for working capital Interest: Variable reference interest rate + mark-up By Annex dated 13.11.2019 a loan amount is increased up to 9 000 000 BGN. Maturity date: 10.09.2024 First rang pledge fixed assets owed by Monbat AD. Next in line special pledge on receivables. Utilized amount as of 31.12.2023 at the amount of 8 999 883 BGN. 46 6. UBB AD Contract from 09.11.2015 Loan amount: 490 000 BGN Type of credit: Overdraft Interest: Variable reference interest rate + mark-up Maturity date: 15.12.2025 Collateral: Unsecured Utilized amount as of 31.12.2023 amounted of 487 239 BGN. 7. Eurobank Bulgaria AD Contract 359/2017 from 05.10.2017 Loan amount: 2 556 459 EUR Type of loan: credit line Interest: 3 М EURIBOR+mark up Maturity date: 31.01.2024, by annex from 2024 the maturity date was extended to 30.06.2024. Collateral: First rang pledge to receivables from third parties. Utilized amount as of 31.12.2023 amounted of 2 196 657 BGN (1 123 133 EUR). 8. UBB AD Contract 20F-00428 from 10.04.2020 Loan amount: 2 000 000 EUR Type of loan: credit line Interest: 1 М EURIBOR + mark-up Collateral: Pledge of receivables on all accounts of the borrower opened with the bank; insurance with BAEZ securing the exposure under the contract up to EUR 2 million. By an annex dated 15.12.2020, the loan amount is divided into two sub-limits of EUR 1 million each with the right to draw the first sub-limit until 31.12.2023 and final repayment until 31.12.2023 and with the right to draw the second sub-limit upon successful review, which the bank will carry out until 31.12.2023. Maturity date: 31.07.2024. Utilized amount as of 31.12.2023 amounted of 3 911 018 BGN (1 999 672 EUR). 9. UBB AD Contract from 10.04.2020 Maturity date: 30.09.2026. Loan amount: 13 000 000 EUR. Type of loan: Credit line Interest: 6 М 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 Pledge on borrower receivables to all bank accounts opened in a bank. By an annex dated 15.12.2020, the amount of the loan was changed to EUR 10 000 000 and the loan was divided into two sub-limits of EUR 5 833 thousand and EUR 4 167 thousand, respectively, with the right to draw the first sub-limit by 30.12.2020 and repay EUR 1 million on a 6-month basis starting from 30.01.2021 and with the right to draw the 47 second sub-limit in case of a successful review, which the bank will carry out by 31.12.2023. In case of successful review, the maturity date is 30.07.2025. Utilized amount as of 31.12.2023 in the amount of BGN 7 823 320 (EUR 4 000 000). 10. Investbank AD Contract from 21.07.2021 Maturity date: 26.03.2024, by annex from 2024 the term was extended by 1 year. Loan amount: 5 000 000 EUR Type of loan: Credit line Interest: 3 М 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. By Annex 2 dated 14.07.2022 the loan amount was increased to EUR 8 315 000. Utilized amount as of 31.12.2023 amounted of 9 779 150 BGN (5 000 000 EUR). 11. Investbank AD Contract from 25.02.2022 Maturity date: 26.03.2024, by annex from 2024 the term was extended by 1 year. Loan amount: 5 000 000 EUR Type of loan: Credit note Interest: 3 М EURIBOR+mark-up Collateral: First rank contractual mortgage of a land with cadastral № 48489,11,537 with area 782 sq. m, owed by Monbat Recycling EAD. First rank pledge on current and future receivables available in all open accounts in Investbank AD held by Monbat AD, Monbat Recycling EAD and Prista oil Holding EAD. Insurance policy for financial risk issued by BAEZ in favor to the bank, with credit limit amount not less than 4 000 000 EUR. Utilized amount as of 31.12.2023 amounted to 9 779 150 BGN (5 000 000 EUR). 12. UBB AD Contract N 20F-00102/01.02.2023 Maturity date: 01.08.2024 Loan amount: 437 840 EUR Type of loan: investment credit Interest: 3 M EURIBOR + mark-up Collateral: a special pledge to future fixed assets amounting to 437 840 EUR, located on land with identifier 48489.5.597, representing propane-butane gas installation. Utilized amount as of 31.12.2023 amounted of 644 041 BGN (329 292 EUR). 13. UBB AD Contract N 20F-00103/01.02.2023 Maturity date: 01.02.2024 Loan amount: 97 298 EUR Type of loan: VAT credit line Interest: 3 M EURIBOR + mark-up Collateral: pledge on receivables Utilized amount as of 31.12.2023 amounted of 0 BGN. 48 14. UBB AD Contract N 23F-000767/21.08.2023 Maturity date: 14.08.2024 Loan amount: 3 500 000 EUR Type of loan: working capital Interest: 1 M EURIBOR + mark-up Collateral: Land property with identification № 72624.603.372, owned by Start AD. Utilized amount as at 31.12.2023 amounted of 6 441 125 BGN (3 293 295 EUR). 15. Bank credit cards accounts with credit limits BGN 50 thousand and utilized amounts as of 31.12.2023 at the amount of 10 000 BGN. 16. UBB AD Contract N 1317/18.03.2016 Maturity date: 31.01.2028 Loan amount: 4 500 000 EUR. 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 receivables on all bank accounts held with the UBB AD. Balance as of 31.12.2023 at the amount of 4 500 000 EUR or 8 801 235 BGN. 17. UBB AD Contract 27.09.2022 Maturity date: 25.03.2028 Loan amount: 546 000 EUR Type of loan: Investment Interest: 3 М EURIBOR+mark-up Collateral: fixed assets Balance as of 31.12.2023 at the amount of 463 476 EUR or 907 043 BGN. 18. UBB AD Contract N 23F00100/01.02.2023. Maturity date: 01.08.2024 Loan amount: 332 114 EUR Type of loan: Investment Interest: 3 M EURIBOR + mark-up Collateral: fixed assets Utilized amount as of 31.12.2023 amounted of 383 099 BGN (195 875 EUR). 19. UBB AD Contract N 23F00101/01.02.2023. Maturity date: 01.02.2024 Loan amount: 73 803 EUR Type of loan: VAT credit line Interest: 3 M EURIBOR + mark-up Collateral: Pledge on receivables with right of use on receivables on all current and future bank accounts in UBB AD. Utilized amount as at 31.12.2023 amounted of 11 286 BGN (5 770 EUR). 49 20. Raiffeisen Bank SA Romania Contract N 80046/IS/2017 Maturity date: 29.11.2024 Loan amount: 5 000 000 EUR 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 3 996 769 EUR or 7 817 000 BGN. 21. KBC Bank AD Contract from 15.07.2015 Maturity date: 30.07.2024 Loan amount: 3 000 000 EUR 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 instalation First rang pledge on inventory. Balance as of 31.12.2023 at the amount of 3 000 000 EUR or 5 867 490 BGN. 22. Eurobank Bulgaria AD Contract N 196/2016 Maturity date: 31.01.2024, extended till 30.06.2024 by annex from 2024. Loan amount: 1 500 000 EUR 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 2 500 000 EUR 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 2 404 405 EUR or 4 702 607 BGN. 23. Raiffeisen Bank Serbia Contract from 15.04.2019 Maturity date: 14.04.2024 Loan amount: 2 000 000 EUR 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 2 000 000 EUR or 3 911 660 BGN. 24. Procredit Bank Serbia Contract from 27.02.2023 Maturity date: 01.03.2028 Loan amount: 700 000 EUR Type of loan: working capital Interest: 1 М EURIBOR + mark-up Collateral: Promissory note issued by the group Balance as of 31.12.2023 at the amount of 641 958 EUR or 1 255 561 BGN. 50 25. Procredit Bank Serbia Contract from 30.03.2023 Maturity date: 01.04.2028 Loan amount: 400 000 EUR Type of loan: Revolving Interest: 1 М EURIBOR + mark-up Collateral: Promissory note issued by the group Balance as of 31.12.2023 at the amount of 366 462 EUR or 716 737 BGN. 26. Procredit Bank Serbia Contract from 24.06.2023 Maturity date: 24.06.2028 Loan amount: 300 000 EUR. Type of loan: revolving Interest: 1 М EURIBOR + mark-up Collateral: fixed assets Balance as of 31.12.2023 at the amount of 300 000 EUR or 586 749 BGN. 27. Procredit Bank Serbia Contract from 10.11.2021 Maturity date: 10.11.2024 Loan amount: 1 100 000 EUR. Type of loan: working capital Interest: 1 М EURIBOR + mark-up Balance as of 31.12.2023 at the amount of 1 100 000 EUR or 2 151 413 BGN 28. MEDIOCREDITO ITALIANO S.P.A. Contract from 30.04.2019 Maturity date: 31.03.2029 Loan amount: 3 500 000 EUR Type of loan: working capital Interest: 3M EURIBOR + mark-up Balance as of 31.12.2022 at the amount of 1 925 014 EUR or 3 765 000 BGN. 29. MEDIOCREDITO CENTRALE SPA Contract from 30.06.2018 Maturity date: 08.06.2028 Loan amount: 457 688 EUR Type of loan: working capital Interest: fixed interest rate Balance as of 31.12.2023 at the amount of 0 EUR or 0 BGN. 30. STB Contract from 13.04.2018 Maturity date: 30.04.2025 Loan amount: 2 500 000 TND Type of loan: investment Interest: Reference interest rate (TMM)+mark-up Balance as of 31.12.2023 at the amount of 360 514 BGN. 31. STB Contract from 10.07.2018 Maturity date: 31.07.2025 Loan amount: 1 250 000 TND investment loan Interest: Reference interest rate (TMM)+mark-up Balance as of 31.12.2023 at the amount of 240 342 BGN. 51 32. STB Contract from 15.06.2022 Maturity date: 15.06.2024 Loan amount: 3 700 000 TND Type of loan: working capital Interest: Reference interest rate (TMM) + mark-up Balance as of 31.12.2023 at the amount of 2 134 266 BGN. 33. STB Contract from 15.06.2022 Maturity date: 15.06.2024 Loan amount: 4 000 000 TND 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. 34. STB Contracts from 13.04.2021 and 10.07.2021 Loan amount: 3 500 000 TND Type of loan: working capital, with the possibility of overdraft financing above the loan amount Interest: Reference interest rate (TMM) + mark-up Balance as of 31.12.2023 at the amount of 2 456 998 BGN. 35. STB Contract from 10.07.2021 Loan amount: 2 000 000 TND Type of loan: Line for discounting/advancing of receivables Interest: Reference interest rate (TMM) + mark-up Balance as of 31.12.2023 at the amount of 1 651 998 BGN. 36. STB Contract from September 2022 Maturity date: according repayment schedule till 30.09.2029 Loan amount: 7 300 000 TND Type of loan: investment Interest: Reference interest rate (TMM) + mark-up Balance as of 31.12.2023 at the amount of 3 634 021 BGN. 37. STB Contract from 15.09.2022 Maturity date: 15.06.2024 Loan amount: 2 300 000 TND Type of loan: working capital Interest: Reference interest rate (TMM) + mark-up Balance as of 31.12.2023 at the amount of 1 326 706 BGN. 38. STB Contract from September 2022 Maturity date: according to repayment schedule till 30.05.2030 Loan amount: 1 890 000 TND Type of loan: investment Interest: Reference interest rate (TMM) + mark-up Balance as of 31.12.2023 at the amount of 576 829 BGN. 52 39. STB Contract from September 2022 Maturity date: September 2024 Loan amount: 1 333 000 TND Type of loan: working capital Interest: Reference interest rate (TMM) + mark-up Balance as of 31.12.2023 at the amount of 768 586 BGN. 40. STB Contract from September 2022 Maturity date: September 2024 Loan amount: 1 000 000 TND Type of loan: working capital Interest: Reference interest rate (TMM) + mark-up Balance as of 31.12.2023 at the amount of 255 535 BGN. 41. 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 621 thousand as of 31 December 2023. Loan contracts from other financial institutions 42. UBB Interlease EAD Contract from 18.10.2019 Maturity date: 19.11.2024 Loan amount: 1 271 250 EUR. Type of loan: credit line Interest: fixed Collateral: lead-acid battery assembly line and lead-acid battery lead plate processing furnace Utilized amount as of 31.12.2023 at the amount of 211 875 EUR or 414 391 BGN. 43. UBB Interlease EAD Contract from 29.11.2019 Maturity date: 29.12.2024 Loan amount: 219 999 EUR Type of loan: credit line Interest: fixed Collateral: Rectifier systems type CDR400/420V-8CH – 4 pcs. And rectifier systems type CDR400/360V-10CH-5 pcs. Utilized amount as of 31.12.2023 at the amount of 44 000 EUR or 86 056 BGN. 44. UBB Interlease EAD Contract from 26.11.2021 Maturity date: 26.11.2025 Loan amount: 420 366 EUR Type of loan: credit line Interest: fixed Collateral: Machines (13 pcs.) Utilized amount as of 31.12.2023 at the amount of 170 100 EUR or 332 687 BGN. 53 45. UBB Interlease EAD Contract 27.09.2022 Maturity date: 31.10.2024 Loan amount: 114 735 EUR. Type of loan: Financing for acquired assets. Interest: 3 M EURIBOR + mark-up Collateral: Computer equipment Utilized amount as of 31.12.2023 at the amount 47 018 EUR or 91 960 BGN. 46. UBB Interlease EAD Contract from 11.11.2022 Maturity date: 30.04.2027 Loan amount: 1 094 544 EUR. Type of loan: Financing for acquired assets. Interest: 3 M EURIBOR + mark-up collateral: Production line for wide rolled strip Utilized amount as of 31.12.2023 at the amount of 858 292 EUR or 1 678 673 BGN. 47. OTP Leasing EAD Contract from 18.01.2023 Maturity date: 05.11.2028 Loan amount: 96 150 EUR Type of loan: financing for acquired assets Interest: reference interest rate + mark-up Collateral: Reverse osmosis installation Utilized amount as of 31.12.2023 at the amount of 96 150 EUR or 188 000 BGN 48. UBB Interlease EAD Contract 0026504/E/30.03.2020 Maturity date: 30.03.2024 Loan amount: 334 779 EUR 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 16 588 EUR or 32 443 BGN. 49. UBB Interlease EAD Contract 0026504/D/13.01.2020 Maturity date: 13.01.2025 Loan amount: 321 557 EUR Type of loan: credit line Interest: fixed Collateral: tooling for casting ConCast grids and rectifier systems. Utilized amount as of 31.12.2023 at the amount of 62 704 EUR or 122 638 BGN. 50. UBB Interlease EAD Contract 0026504/H/2021/30.06.2021 Maturity date: 30.06.2025 Loan amount: 654 584 EUR 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 200 036 EUR or 391 236 BGN. 54 51. UBB Interlease EAD Contract 0026504/I/2021/21.12.2021 Maturity date: 20.12.2025 Loan amount: 78 845 EUR Type of loan: credit line Interest: fixed Collateral: Check Tester – Short Circuit Utilized amount as of 31.12.2023 at the amount of 40 750 EUR or 79 701 BGN. 52. UBB Interlease EAD Contract 0026504/L/2022/29.09.2022 Maturity date: 25.09.2026 Loan amount: 196 297 EUR 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 108 254 EUR or 211 727 BGN. 53. UBB Interlease EAD Contract 0026504/N/2022/14.12.2022 Maturity date: 14.12.2027 Loan amount: 50 990 EUR Type of loan: credit line Interest: fixed Collateral: Electrocar, high-lift trucks Utilized amount as of 31.12.2023 at the amount of 37 635 EUR or 73 608 BGN. 54.OTP Leasing EOOD Contract 85671/25.10.2023 Maturity date: 25.10.2027 Loan amount: 775 373 EUR Type of loan: credit line Interest: fixed Collateral: ConCost line Utilized amount as of 31.12.2023 at the amount of 760 917 EUR or 1 488 225 BGN. 55. UBB Interlease EAD Contract 0026504/O/10.04.2023 Maturity date: 05.12.2026 Loan amount: 134 200 EUR Type of loan: credit line Interest: fixed Collateral: Horizontal heating tunnel TO 2000. Utilized amount as of 31.12.2023 at the amount of 120 780 EUR or 236 225 BGN. 56. VFS Bulgaria ЕООD Contract 2274306 from 07.10.2019 Maturity date: 16.11.2024 Loan amount: 491 250 EUR. Type of loan: credit line Interest: fixed Collateral: 5 pcs. Trucks Volvo Utilized amount as of 31.12.2023 amounted of 101 862 EUR or 199 225 BGN. 55 57. VFS Bulgaria ЕООD Contract 2454239-4 from 05.06.2020 Maturity date:16.06.2025 Loan amount: 182 304 EUR 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 59 710 EUR or 116 782 BGN. 58. VFS Bulgaria ЕООD Contract 2705097 Maturity date:16.06.2025 Loan amount: 104 210 EUR Type of loan: credit line Interest: fixed Collateral: Volvo L60H Utilized amount as of 31.12.2023 at the amount 44 580 EUR or 87 192 BGN 59. VFS Bulgaria ЕООD Contract 3098965 Maturity date:16.11.2027 Loan amount: 167 220 EUR Type of loan: credit line Interest: 1M EURIBOR + mark-up Collateral: 2 pcs. Trucks Volvo Utilized amount as of 31.12.2023 amounted of 136 673 EUR or 267 309 BGN. 60. VFS Bulgaria ЕООD Contract 3028975 Maturity date: 31.12.2027 Loan amount: 113 400 EUR 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 92 289 EUR or 180 501 BGN. 61. VFS Bulgaria ЕООD Contract: 3028965-4 Maturity date: 16.02.2028 Loan amount: 83 610 EUR Type of loan: credit line Interest: 1M EURIBOR + mark-up Collateral: Volvo Truck Utilized amount as of 31.12.2023 at the amount of 71 031 EUR or 138 924 BGN. 62. VFS Bulgaria ЕООD Contract: 3028965-5 Maturity date: 16.02.2028 Loan amount: 83 610 EUR Type of loan: credit line Interest: 1M EURIBOR + mark-up Collateral: Volvo Truck Utilized amount as of 31.12.2023 at the amount of 71 031 EUR or 138 924 BGN. 56 63. VFS Bulgaria ЕООD Contract 3098965B Maturity date: 16.11.2027 Loan amount: 83 610 EUR Type of loan: credit line Interest: 1M EURIBOR + mark-up Collateral: truck Volvo Utilized amount as of 31.12.2023 at the amount of 71 103 EUR or 139 075 BGN. 64. VFS Bulgaria ЕООD Contract 3149823/13.07.2023 Maturity date: 16.08.2028 Loan amount: 66 600 EUR Type of loan: credit line Interest: 1M EURIBOR + mark-up Collateral: 4 psc trailers Utilized amount as of 31.12.2023 at the amount of 62 955 EUR or 123 129 BGN. 65. OTP Leasing EOOD Contract 21941360451 Maturity date: 05.06.2027 Loan amount: 518 500 EUR 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 317 923 EUR or 621 802 BGN. 66. UBB Interlease EAD Contract: 17803 Maturity date: 31.07.2026 Loan amount: 585 000 EUR Type of loan: credit line Interest: 3M EURIBOR + mark-up Collateral: Crystallization system Utilized amount as of 31.12.2023 at the amount of 524 849 EUR or 1 026 515 BGN. 67. OTP Leasing EOOD Contract 23941384968/13.10.2023 Maturity date: 13.10.2028 Loan amount: 852 541 EUR Type of loan: credit line Interest: 3M EURIBOR + mark-up Collateral: Tin production installation. Utilized amount as of 31.12.2023 at the amount of 827 779 EUR or 1 618 995 BGN. 68. UBB Interlease EAD Contract: 17803 D Maturity date: 06.12.2026 Loan amount: 100 000 EUR Type of loan: credit line Interest: 3M EURIBOR + mark-up Collateral: Compressor RBS Utilized amount as of 31.12.2023 at the amount of 90 000EUR or 176 024 BGN. 57 69. STB – car leasing Contract – 5 pcs from 2022 and 3 pcs from 2023 Maturity date: 2026 Loan amount: 511 091 TND Type of loan: leasing Interest: Reference interest rate Balance as of 31.12.2023 amounted of 343 999 BGN. 70. Caterpillar Financial Services Sp. Zoo Contract FL/RB-052181 Maturity date: 01.02.2025 Loan amount 129 900 EUR Interest: 3M EURIBOR + mark-up Collateral: Caterpillar 926M loader Utilized amount as at 31.12.2023 amounted of 30 381 EUR or 59 421 BGN. 71. BRD Sogelease IFN S.A. Contract SGL135005 Maturity date: 30.04.2028 Loan amount: 35 000 EUR Interest: 3M EURIBOR + mark-up Collateral: Forklift Heli CPCD40-M4H Utilized amount as at 31.12.2023 amounted of 28 867 EUR or 52 547 BGN. 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, under § 1d, 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 § 1d 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 and the Group, in their capacity as lenders: Table № 20 As at 31.12.2023 in BGN Thousand 2023 2022 Loan to Holdco Investment EOOD 767 40 Loan to Monbat Trading OOD 2 689 3 276 Loan to Torlashka Sreshta EOOD 160 160 Loan to Monbat Eco Projects OOD 222 222 Loan to Atanas Bobokov 2 369 3 269 Loan to Plamen Bobokov 1 830 1 830 Deposit to Prista Oil Holding EAD 25 820 26 100 Loan to Prista Invest 2016 AD 3 695 3 695 58 As at 31.12.2023 in BGN Thousand 2023 2022 Loan to Advanced Research and Technologies 97 97 Loan to Prista Holdco Cooperatief U.A. 13 - Loan to Black Star International AD 1 080 - Loan to Alliance Energy Companies 700 700 Information about the loan terms is contained in the annual consolidated financial statements of Monbat AD. 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, Monbat AD issued the first issue of convertible corporate bonds with ISIN BG2100023170, issued under the conditions of an initial public offering with the following parameters: Principal amount of the issue: EUR 28 015 000 (twenty-eight million and fifteen thousand euro). 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`s share on the BSE for the six months preceding the respective conversion date. 59 Minimum conversion threshold: 5% of the outstanding nominal amount of all Bonds on each of the respective conversion dates. 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/EUR. 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 Recycling” 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. 60 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. The next utilization to the amount of 4,100,000 EUR has been conducted when “Monbat” AD acquired 23.30% of the share capital of “Societe Nouvelle des Accumulateurs Nour”. The final utilization was 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 financial statement for the financial year, and previously published forecasts for these results Monbat AD presents quarterly consolidated data on sales revenue and profit. In 2023 an analysis of the ratio between the achieved financial results and previously published forecasts, have not been published. 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. Because the 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 Group 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 61 In 2023 the management of MONBAT AD plans to implement a consolidated investment program as follows: Table № 21 Consolidated investment program 2024 BGN ‘000 EUR ‘000 Production of lead-acid batteries division 4 669 2 388 Capacity increase 1 758 899 Improving production efficiency and quality 2 002 1 024 Infrastructure improvements 781 399 New product development and R&D 128 66 Recycling of industrial materials division 8 704 4 450 Capacity increase 2 362 1 208 Improving production efficiency and quality 3 789 1 937 Infrastructure improvements 2 553 1 305 Industrial group Nour 1 928 986 Capacity increase 1 713 876 Improving production efficiency and quality 170 87 Infrastructure improvements 45 23 Other divisions 391 200 Group-level projects in the area of software improvements 1 145 586 Total Investment Program 2024 16 837 8 609 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 Group. 15.Information about the main characteristics of the applied by the issuer internal controls risk management systems in the process of preparation of the financial statements The group 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 is to assess whether the ICRM system is still suitable for the group 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 group. Evaluation is also proportionate to the characteristics of the group and the impact of the risks identified. Board of Directors reports to the audit committee on the basic characteristics of the ICRM system and also on key issues, including main incidents established and the respectively approved or applied corrective measures. 62 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 Petrov - member of the Board of Directors 3.Evelina Slavcheva - member of the Board of Directors 4.Petar Bozadjiev - member of the Board of Directors 5.Kyle Anderson - member of the Board of Directors 6.Viktor Spiriev - Executive member of the Board of Directors As of December 31, 2023, Monbat AD was represented by Viktor Stanimirov Spiriev - Executive Director and Petar Petrov – Procurator, separately. 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 remunerations; b) contingent or deferred remunerations occurred during the year, even if the remuneration is due later; 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 and the procurators have received the following remuneration: Table № 22 № 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 63 In 2023, the members of the Board of Directors and procurators of MONBAT AD received remuneration as management personnel from subsidiaries of MONBAT AD as follows: Table № 23 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 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 Group does not have any information about agreements which may lead to future change of ownership of shares by current shareholders of the parent company. 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 is 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 64 22.Non-financial disclosure of information The Paris Agreement adopted under the United Nations Framework Convention on Climate Change was approved by the European Union on 5 October 2016. Article 2(1)(c) of the Paris Agreement sets out the goal of stronger action in response to the amendment of climate by aligning capital flows with the goal of achieving low greenhouse gas emissions and climate-resilient development, among other means. In this regard, on 12 December 2019, the European Council adopted conclusions on climate change. In view of this, Regulation (EU) 2020/852 (the Taxonomy Regulation) represents a key step towards achieving the objective of a climate-neutral Union by 2050. Sustainability and the transition to a safe, climate-neutral and climate-resilient circular economy with efficient use of resources are crucial to ensure the long-term competitiveness of the economy of the European Union countries. To promote sustainable investment The Taxonomy Regulation (Regulation (EU) 2020/852) establishes a classification system across the European Union to identify economic activities that are considered sustainable. According to Article 8 of this regulation, companies are required to publish sustainability indicators from January 1, 2022. Additionally, a Delegated Regulation published by the European Commission on July 6, 2021, determines the content, calculation methodology and presentation of these indicators (Delegated Regulation ( EU) 2021/2178 of the Commission of 6 July 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by determining the content and presentation of the information to be disclosed by the undertakings covered by Article 19a or 29a of Directive 2013/34/EU, regarding ecologically sustainable economic activities, and by determining the methodology for fulfilling this disclosure obligation). The requirement to provide sustainability indicators under Article 8 of the Taxonomy Regulation applies to companies that are required to publish non-financial statements in accordance with Article 19a or Article 29a of the Accounting Directive 2013/34/EU. This requirement also applies to enterprises of public interest within the meaning of Directive 2013/34/EU, provided that their average number of employees in the financial year exceeds 500 regardless of the size of the book value of the assets and the net value of sales. The Monbat AD Group falls within the scope of Article 8 of the Taxonomy Regulation and prepares a non-financial statement in accordance with the Accounting Directive 2013/34/EU and the Accounting Act transposing Directive 2014/95/EU. At the time of preparation of the Activity Report, the Corporate Sustainability Reporting Directive - 2022/2464 has not yet been transposed into the national legislation of the Republic of Bulgaria. Monbat AD presents a Consolidated non-financial statement prepared in accordance with the requirements of Art. 51, in conjunction with Art. 41 and Art. 48 of the Law on Accounting, as an integral part of this report. The non-financial statement includes a description of the Group's environmental, social, employee, anti-corruption and human rights policies. Additionally, on the basis of Art. 8 of the Taxonomy Regulation Monbat AD provides as an integral part of the Non-Financial Declaration and the Information in accordance with item 1.2 of Annex I of Delegated Regulation (EU) 2021/2178 - "Definition of the information disclosed together with the CPR of the non-financial enterprises". 65 XII. CHANGES IN THE PRICE OF THE COMPANY’S SHARES FOR THE PERIOD The management of the Group 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. ii CONSOLIDATED 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 and its subsidiaries comply 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. MONBAT AD is a part of group of enterprises within the meaning of §1, item 2 from the Additional provisions of the Accountancy Act and is a parent company, holding over 50% of the votes at the general assembly of several subsidiaries. As of 31.12.2023 the economic Group of Monbat AD includes the companies as a part of the economic Group indicated in the annual consolidated activity report. The companies of the economic Group of Monbat AD are non-public and they are not obliged to present CG Declaration. They follow the approved practices and policy of the Group. 2.Information regarding the corporate governance practices, which are applied by MONBAT AD in addition to the National Corporate Governance Code "Monbat" AD and companies of the economic Group do not apply other corporate governance practice, 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 2 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. 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. 3 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. 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. 4 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. 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. 5 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; • 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 December 31, 2023, shareholders holding 5% or more of the capital and voting rights in the General Meeting of Shareholders are indicated by specific names: Тable № 22 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 17 and must be registered by the mandate commission on the list of attending shareholders prior to the beginning of the General Meeting. 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. iii CONSOLIDATED NON-FINANCIAL STATEMENT AND DISCLOSURES UNDER ARTICLE 8 OF THE TAXONOMY REGULATIONOF MONBAT GROUP FOR 2023 1 CONSOLIDATED NON-FINANCIAL STATEMENT OF MONBAT GROUP FOR 2023 I.Scope and subjects of the statement The information contained in the non-financial statement includes the period from 01.01.2023 to 31.12.2023. As of 31.12.2023, the economic group of Monbat AD is comprised of the following entities: Table №1 No. 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, development and implementation activities, foreign and domestic trade. 97.80% of voting shares 2 SC MONBAT RECYCLING S.R.L 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 products. 100% of the capital 3 MONBAT RECYCLING EAD 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 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 products. 100% of the capital 5 SC MONBAT ROMANIA S.R.L. Commercial company: trading, service and marketing of accumulator batteries, accumulator, lead, polyethylene and polypropylene scrap. 100% of the capital 6 MONBAT NEW POWER AD Commercial 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 A Holding Company, owner of the subsidiaries 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 S.R.L. Holding Company which holds the equity interest in Piombifera Italiana 100% of the capital 2 No. Company’s name Principal activity Capital share or percentage of votes at the General Assembly as of 31.12.2023. 12 Piombifera Italiana SPA Recycling of battery and lead scrap, trading of batteries, trade of battery, lead, polyethylene and polypropylene scrap and materials in Italy, and export and import to and from Italy of scrap and materials derived from battery scrap 100% of the capital 13 YU Monbat DOO Commercial company with the following objects: trading, service and marketing of accumulator batteries, accumulator, lead, polyethylene and polypropylene scrap. 100% of the capital 14 MONBAT SPED EOOD Transport services, foreign and domestic transport, freight forwarding services, transportation of goods, export and import of special goods and items, opening of a warehouse network in the country, commercial agency and brokerage 100% of the capital 15 ARTMONBAT AD Manufacturing, trade, development of research in the field of nanostructured materials; sales of nanostructured additives in various industries 51% of the capital 16 Monbat Immobilien GmbH Commercial company: 100% of the capital 17 STC S.R.L. Manufacturing, installation, research & 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 Ltd Sale of batteries and other battery-related materials 51% of the capital 19 Monbat NBP EAD Development – bi-polar rechargeable batteries 100% of the capital 20 Société Nouvelle des Accumulateurs (SNA) A holding company holding a majority stake and controlling the other companies of the Nour Group. Also – manufacturing, service and realization of batteries, engineering and development activities, external and internal trade and construction of trade networks, specialized shops and representative offices. 60% of the capital 21 Société NOUR Distribution (SND) Sales of batteries in the Tunisian market through the establishment of sales networks, specialized shops and representative offices. 59.85% of the capital 22 Société Technique et Ingénierie de Précision (TIP) Providing engineering and maintenance services to Nour Group companies 55% of the capital 23 Société NOUR des Batteries Industrielles (NBI) Providing services the Nour Group companies 44.31% of the capital 24 Société NOUR Recycling (SNR) Recycling of battery and lead scrap, lead alloys, polyethylene and polypropylene materials, trading of batteries, battery, lead polyethylene and polypropylene scrap and materials within Tunisia 30.50% of the capital 3 The Group's core business is divided into four segments: •Lead-acid battery manufacturing segment, which produces a broad product range of starter and stationary batteries, as well as cyclic batteries. •Industrial Materials Recycling segment, which produces lead, lead alloys, sodium sulfate and regranulated polypropylene for the segment's lead-acid battery manufacturing needs and for sale to external customers, as well as manufacturing industrial materials recycling equipment; •A segment of the Nour industrial group for the production and recycling of lead-acid batteries. •Segment "Others", which includes the Group's logistics and foreign trade companies and companies with ancillary activities. II.GROUNDS FOR CREATING A NON-FINANCIAL STATEMENT The disclosure of non-financial data is mandated for corporations or conglomerates that satisfy the following conditions as of 31 December 2023: large entities of public interest that surpass the benchmark for the mean count of employees during the fiscal year, set at 500, as of 31 December of the reporting period. In accordance with existing legislation, the Monbat Group is obligated to submit a non-financial information report on a consolidated basis. This non-financial information report is a crucial component of the Annual Consolidated Financial Statements of Monbat AD for the year 2023. III.ENVIRONMENTAL ISSUES The executive team of the Monbat AD Group, a dynamic conglomerate encompassing two of Bulgaria's leading rechargeable battery manufacturers, a prominent rechargeable battery manufacturer in Tunisia, two German battery production companies, four European recycling firms located in Bulgaria, Romania, Serbia, and Italy, and a recycling entity in Tunisia, carries a significant responsibility that extends to their environmental stewardship. Monbat AD Group's management views the prevention or mitigation of pollution as a paramount concern, aiming to achieve the highest possible standards of human health and environmental protection. This perspective is a critical determinant in their pursuit of sustainable and long-term growth. The Group has a well-established tradition of providing transparent and precise environmental information related to its products, services, and operations to its customers, suppliers, and the wider public. The management of Monbat AD strives to reduce the environmental impact of the Group's companies by: •efficient use of natural resources; •minimize waste generation and increase recycling rates; •preventing pollution through reducing and minimizing harmful emissions; •use of best available techniques and good management practices in production expansion; •own monitoring of environmental components. 4 Self-regulatory system – the development and execution of the internal oversight mechanism at the group level is aimed at ensuring perpetual adherence to the stipulations of environmental, health, and safety regulations. This serves as the foundation of the Comprehensive Management System. The self-regulatory system facilitates an evaluation of the efficacy and productivity of the management system, as well as the overall operations of the Monbat Group. 1. Essential information related to the environmental pollution control and environmental pollution prevention measures: Environmental pollution control and environmental pollution prevention measures are completed on a group level by compliance with the applicable obligations according to the laws in the European Union and in the countries, where Group companies operate. Table №2 Company’s name information related to the environmental pollution control and environmental pollution prevention measures Laws in force “MONBAT” AD The Monbat AD development strategy includes participation in long-term environmental protection projects of benefit to the public. The company has been granted integrated permit No. 2-NZ/2019, which has been subsequently revised by Decision No. 2-H3-I0-A1/2022. This permit encompasses distinct requirements and benchmarks pertaining to environmental components. This permit is shared between two entities – Monbat AD and Monbat Recycling EAD, given their co-location on the identical manufacturing premises. Treatment facilities have been built and utilized for the treatment of gas atmospheric emissions. The wastewater from the production is treated in a local treatment plant before being discharged to the City Wastewater Treatment Plant (WWTP) of the town of Montana. All treatment facilities to the process lines are regularly maintained, with control parameters monitored to ensure optimum operation. In 2023, there were no instances of non-compliance concerning environmental emissions as stipulated by the integrated permit. All prescribed emission limit values were duly adhered to. The corporation has disclosed the subsequent emissions for the year 2023, in accordance with the European Pollutant Release and Transfer Register – EPRTR under Regulation 166/2006: Air: lead –125 kg/year; dust – 246 kg/year. Water: lead – 0,13 kg/year; zinc – 0,13 kg/year; total organic carbon – 32,33 kg/year All storage requirements for all chemical substances and mixtures classified in one or more hazard categories according to Regulation (EC) No 1272/2008 on classification, labeling and packaging of substances and mixtures – REACH have been met. Safety data sheets are available for stored raw materials, auxiliary materials, fuels and products. Waste management activities are carried out in accordance with the requirements of the regulatory framework. Contracts are in place with Legislation of the Republic of Bulgaria and European legislation on environmental protection 5 the waste transporting and treating companies, and said companies have all permits necessary for these activities. As of 2021, reporting on waste management activities is carried out through the National Waste Information System (NWIS), maintained by the Executive Environmental Agency (EEA). The Company has instituted a Management System for End-of-Life Lead Acid Batteries. Monbat AD has formalized agreements for the provision of NUBA with authorized distributors and companies possessing the necessary permits. The collection points for NUBA, as well as the retail outlets selling new rechargeable batteries, are strategically positioned across the nation. The Company furnishes its suppliers and distributors with specialized containers for NUBA collection. These containers are strategically placed by the suppliers at the designated NUBA collection points, as well as in retail outlets or storage facilities where Monbat AD rechargeable batteries are available for purchase. Used rechargeable batteries constitute one of the most prevalent forms of hazardous waste, and the company plays a pivotal role in environmental preservation through their collection and recycling. The lead and polypropylene recovered through the recycling process are repurposed into the production of new rechargeable batteries, thereby ensuring effective waste recovery. The company operates under its proprietary Programme for the Management of End-of-Life Lead-Acid Rechargeable Batteries, with an operational timeline spanning from 2023 to 2027, sanctioned by the Minister of Environment and Water. Monbat AD has established and maintained an Environmental Management System – EMS. Since September 2018, the company holds a Certificate No. 0100560, which proves compliance of EMS with the requirements of the BDS EN ISO 14001:2015 standard. The standard addresses the delicate balance between maintaining production efficiency on the one hand and reducing negative environmental impact on the other, engaging all parts of the organization to achieve both goals. Monbat AD continuously invests in environmental protection. The amount spent in 2023 in this area is BGN 229,749.45 for: -Establishment of a pipeline pathway – LWWTP-collection basins; -Construction of a ventilation system for a lead strip casting workshop. A project has been initiated, with the titled "Establishment of a Water Farm for Groundwater Treatment via Preliminary Filtration and Subsequent Reverse Osmosis". As of the conclusion of 2023, this project remains incomplete. Monbat PLC DOO Environmental protection for the area it operates in is a priority for MONBAT PLC DOO. The corporation has been granted the integrated permit number 140-501-202-2022-05/2022. This permit encompasses precise stipulations and benchmarks pertaining to each environmental element. Facilities dedicated to the processing of waste gases released into the surrounding atmosphere are in place. Industrial wastewater Legislation of the Republic of Serbia on environmental protection 6 undergoes treatment at a designated local wastewater treatment facility before being released into the municipal sewage system. All treatment facilities to the process lines are regularly maintained, with control parameters monitored to ensure optimum operation. In 2023, there were no instances of non-compliance concerning environmental emissions as stipulated by the complex permit. All prescribed emission limit values were duly adhered to. The corporation has disclosed the subsequent emissions for the year 2023, in accordance with the European Pollutant Release and Transfer Register – EPRTR under Regulation 166/2006: Air: lead – 42,51 kg/year; dust – 381,72 kg/year; sulfur oxides – 8778,09 kg/year; nitrogen oxides – 9461,18 kg/year; carbon monoxide – 533,08 kg/year All storage requirements for all chemical substances and mixtures classified in one or more hazard categories according to Regulation (EC) No 1272/2008 on classification, labeling and packaging of substances and mixtures – REACH have been met. Safety data sheets are available for stored raw materials, auxiliary materials, fuels and products. Waste management activities are carried out in accordance with the requirements of the regulatory framework. Contracts are in place with the waste transporting and treating companies, and said companies have all permits necessary for these activities. Monbat PLC DOO continuously invests in environmental protection. The amount spent in 2023 in this area is BGN 147,470 for: - compression processing; - purchase of plastic containers for storage of rechargeable batteries, big bags, etc. Start AD Environmental protection for the area it operates in is a priority for Start AD. The company has been granted the integrated permit No. 144-H2/2023, encompassing precise stipulations and benchmarks for environmental elements. Facilities for the remediation of waste gases released into the surrounding atmosphere are in place. Industrial wastewater undergoes processing at a local wastewater treatment facility prior to its release into the municipal sewage system of the town of Dobrich. All treatment facilities to the process lines are regularly maintained, with control parameters monitored to ensure optimum operation. In 2023, there were no instances of non-compliance concerning environmental emissions as stipulated by the integrated permit. All prescribed emission limit values were duly adhered to. The corporation has disclosed the subsequent emissions for the year 2023, in accordance with the European Pollutant Release and Transfer Register – EPRTR under Regulation 166/2006: Air: lead – 59.04 kg/year; dust – 116.5 kg/year Legislation of the Republic of Bulgaria and European legislation on environmental protection 7 Water: total phosphorus – 1.7 kg/year; zinc – 0.23 kg/year; total organic carbon – 65.34 kg/year; lead – 0.28 kg/year; chromium – 0.5 kg/year; copper – 0.09 kg/year; nickel – 0.05 kg/year; arsenic – 0.04 kg/year; nitrogen – 0.9 kg/year All storage requirements for all chemical substances and mixtures classified in one or more hazard categories according to Regulation (EC) No 1272/2008 on classification, labeling and packaging of substances and mixtures – REACH have been met. Safety data sheets are available for stored raw materials, auxiliary materials, fuels and products. Waste management activities are carried out in accordance with the requirements of the regulatory framework. Contracts are in place with the waste transporting and treating companies, and said companies have all permits necessary for these activities. As of 2021, reporting on waste management activities is carried out through the National Waste Information System (NWIS), maintained by the Executive Environmental Agency (EEA). Start AD has established and maintained an Environmental Management System – EMS. Since September 2018, the company holds a Certificate No. 01001008, which proves compliance of EMS with the requirements of the BDS EN ISO 14001:2015 standard. The standard addresses the delicate balance between maintaining production efficiency on the one hand and reducing negative environmental impact on the other, engaging all parts of the organization to achieve both goals. SC Monbat Recycling S.R.L. Protecting the environment in the area in which it operates is a priority for SC Monbat Recycling S.R.L. The Corporation has been granted integrated permit J23/56/13.01.2011, last updated on 28.07.2023, bearing the Unique Registration Code – URC: 21538860. This permit encompasses distinct stipulations and benchmarks for each environmental component. Facilities for waste gas treatment have been established to manage the emissions released into the surrounding air. The wastewater generated from production undergoes treatment at a local facility and is subsequently incorporated into a recycling process. All treatment facilities to the process lines are regularly maintained, with control parameters monitored to ensure optimum operation. In 2023, no non-compliances were found from emissions to the environment as required by the integrated permit. All emission limit values are met. All storage requirements for all chemical substances and mixtures classified in one or more hazard categories according to Regulation (EC) No 1272/2008 on classification, labeling and packaging of substances and mixtures – REACH have been met. Safety data sheets are available for stored raw materials, auxiliary materials, fuels and products. Waste management activities are carried out in accordance with the requirements of the regulatory framework. Contracts are in place with The legislation of Romania and European legislation on environmental protection 8 the waste transporting and treating companies, and said companies have all permits necessary for these activities. Monbat Recycling EAD The company has been granted integrated permit No. 2-NZ/2019, which has been subsequently revised by Decision No. 2-NZ-I0-A1/2022. This permit encompasses distinct requirements and benchmarks pertaining to environmental components. This permit is shared between two entities – Monbat AD and Monbat Recycling EAD, given their co-location on the identical manufacturing premises. Facilities for the remediation of waste gases released into the surrounding atmosphere are in place. All treatment facilities to the process lines are regularly maintained, with control parameters monitored to ensure optimum operation. Due to the location of Monbat AD and Monbat Resources EAD on one site, wastewater management is carried out by Monbat AD. In 2023, there were no instances of non-compliance concerning environmental emissions as stipulated by the integrated permit. All prescribed emission limit values were duly adhered to. The corporation has disclosed the subsequent emissions for the year 2023, in accordance with the European Pollutant Release and Transfer Register – EPRTR under Regulation 166/2006: Air: dust – 99.6 kg/year; carbon oxide – 23 kg/year; nitrogen oxides – 484 kg/year; total organic carbon – 17.63 kg/year All storage requirements for all chemical substances and mixtures classified in one or more hazard categories according to Regulation (EC) No 1272/2008 on classification, labeling and packaging of substances and mixtures – REACH have been met. Safety data sheets are available for stored raw materials, auxiliary materials, fuels and products. Waste management activities are carried out in accordance with the requirements of the regulatory framework. Contracts are in place with the waste transporting and treating companies, and said companies have all permits necessary for these activities. As of 2021, reporting on waste management activities is carried out through the National Waste Information System (NWIS), maintained by the Executive Environmental Agency (EEA). The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy Legislation of the Republic of Bulgaria and European legislation on environmental protection SC Monbat Romania S.R.L. The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy The legislation of Romania and European legislation on environmental protection MONBAT NEW POWER AD The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy. Legislation of the Republic of Bulgaria and European legislation on environmental protection 9 Energy Batteries Nigeria Limited The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy Legislation of Nigeria on environmental protection Monbat Holding GmbH The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy Legislation of the Republic of Germany and European legislation on environmental protection EAS Batteries GmbH In its work on pollution control and prevention, the company uses a subcontractor, the REMONDIS Group, which has a network of companies in Germany and provides a wide range of services and comprehensive concepts in the areas of waste recycling, processing and the production of environmentally friendly recycled raw materials. REMONDIS provides EAS Batteries with water supply and wastewater treatment services. This concept has been adopted by the management of EAS Batteries in order to be able to ensure compliance with the requirements of current legislation, and for the sake of sustainability. Legislation of the Republic of Germany and European legislation on environmental protection Monbat New Power GmbH The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy Legislation of the Republic of Germany and European legislation on environmental protection Monbat Italy Srl. The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy Legislation of the Republic of Italy and European legislation on environmental protection Piombifera Italiana SPA Environmental protection for the area it operates in is a priority for Piombifera Italiana SPA. The Corporation has been granted integrated permit 6679/25.09.2015. This permit encompasses distinct stipulations and benchmarks for each environmental component. Facilities for waste gas treatment have been established to manage the emissions released into the surrounding air. The wastewater generated from production undergoes treatment at a local facility and is subsequently incorporated into a recycling process. All treatment facilities to the process lines are regularly maintained, with control parameters monitored to ensure optimum operation. The requirements of the current integrated permit regarding the frequency of emission monitoring are complied with. All storage requirements for all chemical substances and mixtures classified in one or more hazard categories according to Regulation (EC) No 1272/2008 on classification, labeling and packaging of substances and mixtures – REACH have been met. Safety data sheets are available for stored raw materials, auxiliary materials, fuels and products. Legislation of the Republic of Italy and European legislation on environmental protection 10 Waste management activities are carried out in accordance with the requirements of the regulatory framework. Contracts are in place with the waste transporting and treating companies, and said companies have all permits necessary for these activities. Piombifera Italiana SPA has established and maintained an Environmental Management System – EMS. The company holds a Certificate No. EMS-2534/S, which proves compliance of EMS with the requirements of the ISO 14001:2015 standard. The standard addresses the delicate balance between maintaining production efficiency on the one hand and reducing negative environmental impact on the other, engaging all parts of the organization to achieve both goals. Yu Monbat DOO The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy Legislation of the Republic of Serbia on environmental protection Monbat Sped EOOD The company provides transport services – foreign and domestic transport, freight forwarding services, transportation of goods, export and import of special goods and items, opening a warehouse network in the country, commercial agency and brokerage, as well as any other activity not prohibited by law. Monbat Sped EOOD has Registration Document No. 12-RD-1895-10/07.06.2023 for waste collection and transportation activities issued by the Regional Environmental Protection Agency – Sofia. As of 2021, reporting on waste management activities is carried out through the National Waste Information System (NWIS), maintained by the Executive Environmental Agency (EEA). Legislation of the Republic of Bulgaria and European legislation on environmental protection Monbat Immobilien GmbH The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy The legislation of Austria and European legislation on environmental protection STC S.R.L. Environmental protection is a commitment that STC S.R.L. makes to institutions and the population to ensure its operations are environmentally-friendly. Legislation of the Republic of Italy and European legislation on environmental protection Monbat South Africa Proprietary Ltd The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy Legislation of the Republic of South Africa on environmental protection ARTMONBAT AD Production, marketing, research development in the field of nanostructured materials; sales of nanostructured additives in various industries The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy Legislation of the Republic of Bulgaria and European legislation on environmental protection 11 Monbat NBP EAD The Company is not engaged in manufacturing activities. Environmental pollution control activities and prevention measures are subject to a group-wide corporate policy Legislation of the Republic of Bulgaria and European legislation on environmental protection Societe Nouvelle des Accumulateurs Nour Environmental protection is a commitment that Société Nouvelle des Accumulateurs makes to institutions and the population to ensure its operations are environmentally-friendly. The legislation of Tunisia and European legislation on environmental protection Societe NOUR Distribution Environmental protection is a commitment that the Company makes to institutions and the population to ensure its operations are environmentally-friendly. The legislation of Tunisia and European legislation on environmental protection Societe Technique et Ingenierie de Precision Environmental protection is a commitment that the Company makes to institutions and the population to ensure its operations are environmentally-friendly. The legislation of Tunisia and European legislation on environmental protection Societe NOUR des Bateries Insustrielles Environmental protection is a commitment that the Company makes to institutions and the population to ensure its operations are environmentally-friendly. The legislation of Tunisia and European legislation on environmental protection Societe NOUR Recycling Environmental protection is a commitment that the Company makes to institutions and the population to ensure its operations are environmentally-friendly. The legislation of Tunisia and European legislation on environmental protection Group companies that do not carry out production activities are subject to the Group-wide corporate policy on pollution control and prevention measures. The Monbat Group's business model is oriented towards minimizing waste from operations, recycling all possible waste from production and building a system to prevent environmental pollution in the long term. 2. The environmental impact of energy use (energy performance and energy performance improvements): The Monbat Group's policy to minimize the adverse impact on the environment and to achieve sustainable energy efficiency is reflected in the activities of the production companies of the structure. The Monbat Group's corporate policy strongly corresponds to the global efforts to minimize the negative impact on the environment and meets the main characteristics of the idea of sustainability of energy efficiency, reducing the carbon intensity of industry. 12 Most Group companies are implementing projects and measures to improve energy efficiency. Table №3 Company’s name The environmental impact of energy use (energy performance and energy performance improvements) “MONBAT” AD Production is also dependent on the price of electricity and natural gas, which are currently regulated by the state. The upward trends in electricity prices (excluding the effect of government subsidy) and natural gas have an increasing impact on the cost of production, as their relative weight in the cost of production increases – up to 8.2% of the cost of final output is determined by the cost of electricity, and up to 2% by the cost of natural gas. The corporate management of Monbat AD is directly involved in the implementation of energy savings at the company's premises. Most of the buildings have been renovated and refurbished. The investment program is focused on replacing and purchasing new and energy efficient production lines.In 2023, the efficiency standards for the use of energy resources, according to the integrated permit have been met.The annual efficiency standards for the use of electricity, heat and natural gas in the production of a product unit are met. Monbat PLC DOO The use of energy for the operation of the plant is to be carried out in accordance with the integrated permit. No adverse impact on the environment and human health due to the use of energy.Compared to 2022, the volumes of electric power and natural gas have been reduced in 2023.The company has implemented strategies to enhance energy efficiency, including the installation of a vertical heat exchanger, which has amplified the capacity for water evaporation by 3.2 - 3.5 m3/hour. In the year 2023, a comprehensive redesign of the compressor was undertaken, leading to complete system stability. This modification resulted in a significant decrease in the consumption of natural gas, with reductions estimated at around 80-85%. Start AD The use of energy for the operation of the plant is to be carried out in accordance with the complex permit. No adverse impact on the environment and human health due to the use of energy.In 2023, the efficiency standards for the use of energy resources, according to the integrated permit have been met.The corporation has initiated steps to augment energy efficiency through the execution of a project dedicated to the establishment of a photovoltaic system, entailing an expenditure of BGN 1,240,847.12. SC Monbat Recycling SRL The use of energy for the operation of the plant is to be carried out in accordance with the integrated permit. No adverse impact on the environment and human health due to the use of energy.The company has taken measures to improve energy efficiency by carrying out the following activities:- building of a vapor recompression system (crystallizer).The investment for the above improvement is EUR 655,900.The improvements made will reduce gas consumption by 80% at the Engitec plant, and will also result in a 50% reduction in gas consumption as a total for the entire plant. 13 Monbat Recycling EAD The use of energy for the operation of the plant is to be carried out in accordance with the integrated permit. No adverse impact on the environment and human health due to the use of energy.In 2023, the efficiency standards for the use of energy resources, according to the integrated permit have been met.Compared to 2022, the quantities of electricity, heat and natural gas used per unit of product are maintained in 2023. SC Monbat Romania SRL The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy. MONBAT NEW POWER AD The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy. Energy Batteries Nigeria Limited The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy. Monbat Holding GmbH The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy. EAS Batteries GmbH In its operations, the company primarily uses natural gas, the consumption of which is measured on a weekly and monthly basis. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy. Monbat New Power GmbH The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy. Monbat Italy Srl. The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy. Piombifera Italiana SPA The use of energy for the operation of the plant is to be carried out in accordance with the integrated permit. No adverse impact on the environment and human health due to the use of energy. Yu Monbat DOO The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy. Monbat Sped EOOD The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy. Monbat Immobilien GmbH The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy. STC S.R.L. There is no adverse impact on the environment and human health due to the use of energy. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy. Monbat South Africa Proprietary Ltd The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy. 14 ARTMONBAT AD The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy. Monbat NBP EAD The Company is not engaged in manufacturing activities. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy. Societe Nouvelle des Accumulateurs Nour There is no adverse impact on the environment and human health due to the use of energy. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy. Societe NOUR Distribution There is no adverse impact on the environment and human health due to the use of energy. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy. Societe Technique et Ingenierie de Precision There is no adverse impact on the environment and human health due to the use of energy. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy. Societe NOUR des Bateries Insustrielles There is no adverse impact on the environment and human health due to the use of energy. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy. Societe NOUR Recycling There is no adverse impact on the environment and human health due to the use of energy. Measures to minimize the environmental impact of energy use in the business are subject to the Group's corporate policy. The Group's non-manufacturing companies are subject to a Group-wide corporate policy on minimizing the environmental impact of energy use in operations. 3. Direct and indirect atmospheric emissions (greenhouse gas emissions in metric tonnes of carbon dioxide equivalent (CO2) and greenhouse gas emission intensity): Monbat Group companies do not have direct or indirect air emissions. They do not participate in a greenhouse gas emissions trading scheme, as they are not a large carbon dioxide emitter. 4. The use and conservation of natural resources – water and soil, and associated biodiversity conservation The companies of the MONBAT group are not within protected areas within the meaning of the Protected Areas Act and NATURA 2000, and other special laws under the national laws of the countries in which they operate. The following activities are carried out in the group to protect natural resources – water, soil, and biodiversity: Table №4 Company’s name The use and conservation of natural resources – water and soil, and associated biodiversity conservation “MONBAT” AD The Company holds water use permits: The water utilized for both production and residential purposes is sourced from the municipal water supply network of the town of Montana, as per the contract No. 00828/16.09.2014 with VIK OOD, Montana. 15 Water for production and cooling purposes from the canal Izvorska Bara (Parta) – Water Use Permit for a surface water body from the Basin Directorate for Water Management Danube Region – city of Pleven, No. 11130047/11.01.2010, extended with a Permit No. 2929/02.04.2020, with permitted water volume equal to 390,000 m3/year. Permit for groundwater extraction from pipe well-Monbat-Montana for Industrial and Cooling Applications, Issued by the Basin Directorate of the Danube Region Water Management Directorate, Pleven, Reference No. 11530515/02.10.2017, extended through Decision 3955 dated 26.09.2023. The permit allows for an annual water extraction volume of 252,288 m3/year. The effluent resulting from the manufacturing process undergoes treatment at a local facility prior to its release into the City Wastewater Treatment Plant (CWWTP) situated in the town of Montana. Regular maintenance is performed on the plant and monitoring of control parameters is conducted to guarantee its peak performance. In 2023, there were no instances of emission discharge in wastewater and ground water, under the requirements of the integrated permit. All prescribed emission limit values were duly complied with. The corporation has disclosed the subsequent waste water emissions for the year 2023, in accordance with the European Pollutant Release and Transfer Register – EPRTR: Lead – 0.13 kg/year; zinc – 0.13 kg/year; total organic carbon – 32.33 kg/year Compared to 2022, a 1.04% reduction in water used per unit of product (m3/t) was achieved in 2023. As part of the measures to improve energy efficiency, chillers/industrial air-conditioners were installed in the company using circulating water to cool the process equipment. This is how up to 80,000 m3 water per year is saved. Monbat PLC DOO Periodic monitoring of the state of natural resources is carried out to prevent water and soil pollution as part of the obligations under the integrated permit. The Corporation has been granted a Water Activities Permit, bearing the number 104-325-2216/2022-04, effective from 25 August 2023. The wastewater generated from our production processes is processed at a local wastewater treatment facility before being released into the municipal sewage system. Regular maintenance of this facility is mandatory, and monitoring parameters must be consistently observed to guarantee its optimal functioning. In the year 2023, there were no instances of non-compliance concerning discharges into wastewater, soil, and groundwater as stipulated by the comprehensive permit. The Corporation has adhered to all prescribed emission limit values. Start AD, Sofia The Company holds the following water use permits: -Water utilized for manufacturing and cooling processes from proprietary water source - Authorization for groundwater extraction via newly established facilities granted by the Basin Directorate for Water Management Danube Region - r. Pleven, No. 11530483/24.02.2016, subsequently extended and modified by Decision No. 3455/21.12.2021, with an approved water volume of 78,840 m3/year. Wastewater from the production is treated in a local treatment plant before being discharged into the city sewerage system, Dobrich. The plant is regularly maintained and control parameters are monitored to ensure optimal operation. 16 In 2023, there were no instances of non-compliance detected in relation to discharges into wastewater, soil, and groundwater as stipulated by the comprehensive permit. All prescribed emission limit values were duly adhered to. The corporation has documented the subsequent emissions to wastewater for the year 2023, in accordance with the European Pollutant Release and Transfer Register – EPTR: total phosphorus – 1.7 kg/year; zinc – 0.23 kg/year; total organic carbon – 65.34 kg/year; lead – 0,28 kg/year; chromium – 0,5 kg/year; copper – 0,09 kg/year; nickel – 0,05 kg/year; arsenic – 0,04 kg/year; nitrogen – 0,9 kg/year Compared to 2022, a 1.17% reduction in water used per unit of product (m3/t) was achieved in 2023. SC Monbat Recycling S.R.L. Periodic monitoring of the state of natural resources is carried out to prevent water and soil pollution as part of the obligations under the complex permit. The Company has a Water Use Permit No. 769 – IF/09.11.2020. Wastewater from production is treated in a local treatment plant. It is regularly maintained, with control parameters monitored to ensure optimal performance. A water recirculation system is in place. Monbat Recycling EAD Due to the location of Monbat AD and Monbat Resources EAD on one site, wastewater, soil and ground water management is carried out by Monbat AD. Compared to 2022, the amount of water used per unit of production is maintained in 2023. SC Monbat Romania SRL The Company is not engaged in manufacturing activities. Consequently, it does not exert a detrimental influence on water resources, soil quality, or biodiversity. MONBAT NEW POWER AD The Company is not engaged in manufacturing activities. In this sense, it does not have adverse impact on water, soil, and biodiversity. Energy Batteries Nigeria Limited The Company is not engaged in manufacturing activities. In this sense, it does not have adverse impact on water, soil, and biodiversity. Monbat Holding GmbH The Company is not engaged in manufacturing activities. In this sense, it does not have adverse impact on water, soil, and biodiversity. EAS Batteries GmbH The REMONDIS Group is responsible for wastewater disposal and treatment. There is no negative impact on water, soil, and biodiversity. Monbat New Power GmbH The Company is not engaged in manufacturing activities. Consequently, it does not exert a detrimental influence on water resources, soil quality, or biodiversity. Monbat Italy Srl. The Company is not engaged in manufacturing activities. Consequently, it does not exert a detrimental influence on water resources, soil quality, or biodiversity. Piombifera Italiana SPA Periodic monitoring of the state of natural resources is carried out to prevent water and soil pollution as part of the obligations under the complex permit. Wastewater from production is treated in a local treatment plant. It is regularly maintained, with control parameters monitored to ensure optimal performance. Water recirculation system has been put in place. 17 Yu Monbat DOO The Company is not engaged in manufacturing activities. Consequently, it does not exert a detrimental influence on water resources, soil quality, or biodiversity. Monbat Sped EOOD The Company is not engaged in manufacturing activities. Consequently, it does not exert a detrimental influence on water resources, soil quality, or biodiversity. Monbat Immobilien GmbH The Company is not engaged in manufacturing activities. Consequently, it does not exert a detrimental influence on water resources, soil quality, or biodiversity. STC S.R.L. Periodic monitoring of the state of natural resources is carried out to prevent water and soil pollution. No negative impact on water, soil and biodiversity. Monbat South Africa Proprietary Ltd The Company is not engaged in manufacturing activities. Consequently, it does not exert a detrimental influence on water resources, soil quality, or biodiversity. ARTMONBAT AD The Company is not engaged in manufacturing activities. Consequently, it does not exert a detrimental influence on water resources, soil quality, or biodiversity. Monbat NBP EAD The Company is not engaged in manufacturing activities. Consequently, it does not exert a detrimental influence on water resources, soil quality, or biodiversity. Societe Nouvelle des Accumulateurs Nour Periodic monitoring of the state of natural resources is carried out to prevent water and soil pollution. No negative impact on water, soil and biodiversity. Societe NOUR Distribution The Company is not engaged in manufacturing activities. Consequently, it does not exert a detrimental influence on water resources, soil quality, or biodiversity. Societe Technique et Ingenierie de Precision The Company is not engaged in manufacturing activities. Consequently, it does not exert a detrimental influence on water resources, soil quality, or biodiversity. Societe NOUR des Bateries Insustrielles The Company is not engaged in manufacturing activities. Consequently, it does not exert a detrimental influence on water resources, soil quality, or biodiversity. Societe NOUR Recycling Periodic monitoring of the state of natural resources is carried out to prevent water and soil pollution. No negative impact on water, soil and biodiversity. 5. Impacts over natural ecosystems, which result in a flow of materials beneficial for the ecosystem in the future Monbat and its subsidiaries do not have a direct impact over natural ecosystems. 6. Waste management Waste is managed in compliance with the national laws in force and the EU laws, as well as the waste management laws in countries in which Group companies operate. The Monbat Group conducts sustainable policy in the area of waste management, guided by the hierarchy, designated in the Waste Management Act: 18 •Prevention of waste formation; •Preparation for reuse; •Recycling or any other type of utilization, for example to generate energy; •Decontamination. During the production cycles, the Monbat Group introduces recycling and processing to ensure a sustainable integrated business model. Over the years, the Recycling division, which comprises 4 group companies, has become an innovative manufacturer of lead, lead alloys, and regranulated polypropylene. Table №5 Company’s name Waste management “MONBAT” AD With a Decision IND-NUBA-01-02/28.11.2022 of the Minister of the Environment and Water, the permit of Monbat AD for individual fulfilment of obligations for batteries and accumulators not fit for use was extended. The collection of end-of-life batteries and accumulators and their recycling is one of the main activities of Monbat AD. Lead and lead alloys from the recycling of old batteries are the main raw material for the production of new rechargeable batteries. Waste polypropylene is regranulated and used for the production of battery boxes and lids /Rp-kits/. Production, hazardous, construction, household and packaging waste is generated in the premises of Monbat AD. Hazardous lead waste from battery production is recycled by the recycling subsidiaries that produce lead and lead alloys as a product. The volumes of waste generated are the minimum for the existing technology and this estimate is based on the long experience that Monbat AD has in the production and recycling of batteries. The set norms for the quantities of waste generated are complied with, in accordance with the conditions of the issued Integrated Permit.All waste generated is recovered through recycling. Production waste is recycled at Monbat Recycling EAD. Packaging waste is handed over to authorized recycling companies, and Monbat AD participates in a collective form of recovery of this waste. Only solid municipal waste shall be disposed of at the Municipal Landfill for solid municipal waste – town of Montana.As of 2021, reporting on waste management activities is carried out through the National Waste Information System (NWIS), maintained by the Executive Environmental Agency (EEA). Monbat PLC DOO Waste management activities shall be carried out in accordance with the requirements of the complex permit. The Company has a Waste Collection and Transportation Permit No. 19-00-00219/2020-06 dated 13 March 2020.The company has signed contracts with licensed companies for further waste treatment. Start AD With a decision No. IND-NUBA-02-02/18.06.2021, the Ministry of Environment and Water extended the validity of Start AD's permit for the individual fulfilment of obligations for batteries and accumulators not fit for use. The collected unusable 19 batteries and accumulators are handed over to Monbat Recycling EAD for recycling. The management activities of the remaining waste streams are carried out in accordance with the requirements of the integrated permit. Compared to 2022, a 1.01% reduction in the amount of waste generated was achieved in 2023. All waste generated is recovered through recycling. Production waste is recycled at Monbat Recycling EAD. Packaging waste is handed over to authorized recycling companies, and Start AD participates in a collective form of recovery of this waste. Only solid municipal waste shall be disposed of at the Municipal Landfill for solid municipal waste – town of Dobrich. As of 2021, reporting on waste management activities is carried out through the National Waste Information System (NWIS), maintained by the Executive Environmental Agency (EEA). SC Monbat Recycling S.R.L. Waste management activities shall be carried out in accordance with the requirements of the integrated permit. The company has signed contracts with licensed companies for further waste treatment. Monbat Recycling EAD Waste management activities shall be carried out in accordance with the requirements of the complex permit. The company has signed contracts with licensed companies for further waste treatment. As of 2021, reporting on waste management activities is carried out through the National Waste Information System (NWIS), maintained by the Executive Environmental Agency (EEA). SC Monbat Romania SRL The Company is not engaged in manufacturing activities. It is subject to the Group's waste management corporate policy. Responsibilities for the collection and management of batteries waste are carried out by transferring them to a collection organization in accordance with Romanian legislation. The company has to take back some of the waste batteries due to imported batteries placed on the Romanian market. MONBAT NEW POWER AD The Company is not engaged in manufacturing activities. It is subject to the Group's waste management corporate policy. Energy Batteries Nigeria Limited The Company is not engaged in manufacturing activities. It is subject to the Group's waste management corporate policy. Monbat Holding GmbH The Company is not engaged in manufacturing activities. It is subject to the Group's waste management corporate policy. EAS Batteries GmbH Waste management is carried out by the REMONDIS Group. It is subject to the Group's waste management corporate policy. Monbat New Power GmbH The Company is not engaged in manufacturing activities. It is subject to the Group's waste management corporate policy. Monbat Italy Srl. The Company is not engaged in manufacturing activities. It is subject to the Group's waste management corporate policy. 20 Piombifera Italiana SPA Waste management activities shall be carried out in accordance with the requirements of the integrated permit. The company has signed contracts with licensed companies for further waste treatment. Yu Monbat DOO The Company is not engaged in manufacturing activities. It is subject to the Group's waste management corporate policy. Monbat Sped EOOD The Company has Registration Document No. 12-RD-1895-10/07.06.2023 for waste collection and transportation activities issued by the Regional Environmental Protection Agency – Sofia. As of 2021, reporting on waste management activities is carried out through the National Waste Information System (NWIS), maintained by the Executive Environmental Agency (EEA). Monbat Immobilien GmbH The Company is not engaged in manufacturing activities. It is subject to the Group's waste management corporate policy. STC S.R.L. Waste management activities are carried out in accordance with regulatory requirements and are subject to corporate policy. Monbat South Africa Proprietary Ltd The Company is not engaged in manufacturing activities. It is subject to the Group's waste management corporate policy. ARTMONBAT AD The Company is not engaged in manufacturing activities. It is subject to the Group's waste management corporate policy. Monbat NBP EAD The Company is not engaged in manufacturing activities. It is subject to the Group's waste management corporate policy. Societe Nouvelle des Accumulateurs Nour Waste management activities are carried out in accordance with regulatory requirements and are subject to corporate policy. Societe NOUR Distribution The Company is not engaged in manufacturing activities. It is subject to the Group's waste management corporate policy. Societe Technique et Ingenierie de Precision The Company is not engaged in manufacturing activities. It is subject to the Group's waste management corporate policy. Societe NOUR des Bateries Insustrielles The Company is not engaged in manufacturing activities. It is subject to the Group's waste management corporate policy. Societe NOUR Recycling Waste management activities are carried out in accordance with regulatory requirements and are subject to corporate policy. Group companies that are not engaged in manufacturing activities are subject to the Group's Corporate Waste Management Policy. 21 7. Environmental impact of transportation The Group's transportation impact is minimal. An evaluation of emission levels from both routine traffic and Monbat AD's transportation system has been conducted. This evaluation was carried out in accordance with Tier 2 of the European Emission Inventory Guide EMEP/EEA CORINAIR'2013. The evaluation revealed that Monbat AD's contribution to traffic on the E79 road section does not surpass 4.5% for certain pollutants, signifying a minimal additional burden. Emissions are directly discharged into the surrounding air from vehicle exhausts, post the application of suitable catalytic converters in line with the pertinent EURO standard. The cumulative quantity of greenhouse gases, denoted in kg CO2-eq., amounts to 134.3 t from routine traffic and a mere 2.9 t from the factory's transportation. The transport schedule (number of heavy trucks per day) for deliveries and removal of finished materials from Monbat AD is on average approximately 15 trucks per working day. 8. Development of environmentally friendly products, services and technologies The nature of the Group's business prevents the development of pure products, services, and technologies to some extent. However, the Group's Corporate Policy and the efforts of the corporate management are focused on the application of new technologies in sustainable management, recycling and reduction of negative environmental impact based on the best available techniques. ІV. SOCIAL AND EMPLOYEE ISSUES: As of 31.12.2023, the Monbat Group employs 1 272 employees. All Group companies comply with the applicable national labor laws, which reflects the norms of the conventions and recommendations of the International Labor Organisation, ratified by the various countries. 22 1. Number of employees of different genders and by area of employment in the group Table №6 Company’s name Number of staff men women MONBAT AD 419 360 59 Monbat PLC DOO 79 64 15 Start AD 199 172 27 Monbat Recycling EAD 96 75 21 SC Monbat Recycling S.R.L. 73 62 11 SC Monbat Romania SRL 5 3 2 Energy Batteries Nigeria Limited 1 1 - Monbat Holding GmbH 2 2 - EAS Batteries GmbH 33 24 9 Monbat New Power GmbH 1 1 - Piombifera Italiana SPA 18 15 3 Monbat Sped EOOD 38 32 6 STC Srl 41 31 10 Monbat South Africa Proprietary Ltd 1 1 - ARTMONBAT AD 3 2 1 Yu Monbat DOO 11 9 2 Societe Nouvelle des Accumulateurs Nour 197 183 14 Societe NOUR Distribution 41 37 4 Societe Technique et Ingenierie de Precision 6 6 0 Societe NOUR des Bateries Industrielles 8 6 2 Total 1 272 1 086 186 2. Employment – consulting and involving employees in decisions about the Group's terms and conditions of employment In accordance with the regulatory requirements, the companies of the Monbat Group – Monbat AD, Monbat Riskseeking EAD and Start AD, have established Working Conditions Committees, and in Monbat Sped EOOD – a Working Conditions Group, which meet regularly on matters of employment and working conditions. 3. Relations of Group companies with trade unions There are no trade unions established in the Group companies. 4. Human capital management Professional actions and efforts, qualifications, motivation and reputation of the members of the corporate management and senior executives of Monbat AD and the companies of the economic group are essential for achieving the strategic and investment objectives of the company. The departure or dismissal of any member of the corporate management or key management personnel could, in the short term, adversely affect the seamless conduct 23 of the Company's business. The established management system and the consistently applied corporate policy for providing incentives to motivate employees within the structure ensure to a large extent the long-term participation of the members of the corporate management and key management personnel in the Company's activities. As a typical industrial structure, Monbat AD keeps its focus on the people involved in production, with adequate administrative support. Remuneration and benefits The structure of remuneration varies within the organizational hierarchy and depends on both the specific position and the employee's personal contribution to value creation in the company. Certain remuneration levels are predefined for all positions. Individual remuneration is structured within this framework, depending on personal experience, skills, knowledge, and performance. By making its employees part of the company's economic success, the Group offers wages that are typically above average. Professional development The Monbat Group has introduced a corporate competency model that defines a framework and structures performance management processes through a system for introducing, measuring and developing competencies that lead to improved organizational performance and achievement of organizational goals. Through the established Monbat Academy, the Group offers a comprehensive development and training program and develops the potential for professional growth and personal improvement of all its employees. Technology specializations, a mentoring programme that supports the sharing of practical knowledge, and personal development plans based on appraisal results, which aim to narrow the gap between what is expected for a particular position and the employee's actual performance, are an attractive addition to the programme. Sometimes even the smallest project connects colleagues and inspires them to take a step forward. Monbat actively supports all opportunities for the development and improvement of its employees, both professionally and personally. Global activity Monbat offers exciting opportunities in the communities where the companies are located, including “New Home” – a relocation assistance programme. For select positions, the economic group assists approved candidates with relocation special packages, depending on the specific position. 24 Work-life balance Monbat promotes work-life balance, creates attractive places to work, offers flexible working hours, thus it attracts and retains valuable, motivated and loyal employees with a high degree of in-house experience and expertise. Balanced employees are a prerequisite for improving productivity and reducing conflicts between colleagues and management. Healthcare Being healthy and active is a core value in the economic group, regardless of job title, location, or age. This is why Monbat takes health prevention and promotion very seriously. Monbat provides a relaxing annual leave for its employees and their families. 5. Occupational Health and Safety Occupational health and safety and risk management activities are organized on a group level in accordance with the regulatory requirements and with the Internal Occupational Health and Safety Rules of each of the manufacturing companies. The following apply to Bulgarian companies: Labor Code, Occupational Health and Safety Act, Ordinance No. 7 on the minimum occupational health and safety requirements at workplaces and in use of work equipment, Internal Work Rules, etc. In accordance with the requirements of Ordinance No. 5/99 on the procedure, manner and periodicity of conducting risk assessments, Group companies have prepared Health and safety risk analysis and assessments for each work position (job). Programmes with measures to improve and maintain occupational health and safety conditions and to reduce risks to the health and safety of workers have been established. Risk assessments are reviewed and programmes of measures are updated on a regular basis. Each Group company conducts training to improve the organization's occupational safety culture. Trainings shall be planned, conducted and documented in accordance with company procedures. The management of occupational health and safety activities is important for businesses. Therefore occupational health and safety management must be uncompromising with violators of occupational health and safety, ensuring the health and lives of workers. 25 Table №7 Company’s name Occupational Health and Safety “MONBAT” AD In accordance with the requirements of the Occupational Health and Safety Act and its regulations and the Disaster Relief Act, Monbat AD has developed an emergency plan for rescue and emergency assistance work in the event of disasters, accidents and catastrophes which have occurred during production activities. The purpose of the developed plan is to provide the necessary materials, equipment and means for effective action to prevent the consequences of disasters and accidents; the preparation of the site personnel for action; the method of notification and readiness of personnel; the management of personnel activities; the procedure for putting the plan into action and informing the competent authorities; ways, means and procedure for informing, if possible, the endangered population in the vicinity of the site; the procedure for carrying out the relevant rescue and urgent emergency-recovery works on the territory of the site; the procedure for the restoration of the activity on the site; the provision of the necessary measures for the recreation of the environment.In order to ensure an adequate response of workers in a crisis situation, Monbat, in cooperation with the Regional Office of Fire Safety (ROFS) conducts on an annual basis an emergency drill on the company's premises.The company has successfully passed the ISO 45001 certification process, which is an internationally recognized standard for Occupational Health and Safety Management Systems. The Company demonstrates commitment to occupational health and safety and a drive to minimize risks to the health of employees and the people it targets with its activities.Personal protective equipment shall be provided on a regular basis in accordance with the specific work and risk assessment carried out for the activity concerned. The purchase of personal protective equipment, work clothes, work shoes and other protective equipment shall be made according to an approved list of the type of work clothes and personal protective equipment according to the workplace and their wear periods. A list by job title of workers entitled to PPE, work clothing and footwear has been approved. Monbat PLC DOO The norms of the valid national legislation apply Start AD The Company has practices related to the provision of work clothing and personal protective equipment, according to the specifics of the positions; food; nutritional supplements; and hygiene products.Regarding the provision of healthy working conditions, measurements of work environment factors, risk assessment of workplaces, regular medical examinations and tests are carried out.The company has successfully passed the ISO 45001 certification process, which is an internationally recognized standard for Occupational Health and Safety Management Systems. In accordance with corporate policies and practices, programmes of activities have been established to ensure and maintain safe and healthy working conditions and to reduce risks to employee health and safety. SC Monbat Recycling S.R.L. The Company has practices related to the provision of work clothing and personal protective equipment, according to the specifics of the positions; food; nutritional supplements; and hygiene products.Regarding the provision of healthy working conditions, measurements of work environment factors, risk assessment of workplaces, regular medical examinations and tests are carried out. In accordance with corporate policies and practices, programmes of activities have been established to ensure and maintain safe and healthy working conditions and to reduce risks to employee health and safety. The norms of the valid national legislation apply Monbat Recycling EAD The Company has an Occupational Health and Safety Policy. The creation and continuous improvement of working conditions are one of the top priorities of Monbat Recycling EAD's management, as optimal safety and health are a fundamental aspect of our responsibilities. Monbat Recycling EAD is committed to continuously improving conditions to ensure healthy and safe working conditions by: 26 •Plant management according to the European principles for the implementation of waste recycling activities. •Achieve compliance with the requirements of current legislation relating to health hazards and other requirements that the establishment has adopted and documented. •Providing the necessary resources for technical renewal and application of safe production technologies and creating occupational health and safety prerequisites to prevent injury and illness to personnel. •Reduction or elimination of occupational hazards associated with production activities, as well as a corresponding reduction in the negative social, technical and economic consequences of their manifestation. •Ensuring effective organization and management of the enterprise and occupational health and safety. •Ensuring high level of discipline and personal accountability for compliance with occupational health and safety requirements by company personnel. •Achieving and maintaining the necessary quality of qualification, training, motivation and information exchange with staff working under the management of the enterprise, to enable them to understand their individual health and safety responsibilities. •Integration of health and safety activities in all units of the company and efficient and effective exchange of information and consultation on occupational health and safety with suppliers, customers, controlling state and municipal authorities, and all other stakeholders. •Continuous improvement of the Occupational Health and Safety Management System and occupational health and safety performance. •Annual review and update of the policy for adequacy and setting company objectives. •Dissemination of the Occupational Health and Safety Policy to all company personnel and all other stakeholders. The company has successfully passed the ISO 45001 certification process, which is an internationally recognized standard for Occupational Health and Safety Management Systems. SC Monbat Romania SRL The norms of the valid national legislation apply. MONBAT NEW POWER AD The norms of the valid national legislation apply. Energy Batteries Nigeria Limited The norms of the valid national legislation apply. Monbat Holding GmbH The norms of the valid national legislation apply. EAS Batteries GmbH The norms of the valid national legislation apply. Monbat New power GmbH The norms of the valid national legislation apply. Monbat Italy Srl. The norms of the valid national legislation apply. Piombifera Italiana SPA The norms of the valid national legislation apply. U Monbat Serbia The norms of the valid national legislation apply. Monbat Sped EOOD The norms of the valid national legislation apply. STC Srl. The norms of the valid national legislation apply. Monbat Immobilien GmbH The norms of the valid national legislation apply. STC S.R.L. The norms of the valid national legislation apply. Monbat South Africa Proprietary Ltd The norms of the valid national legislation apply. ARTMONBAT AD The norms of the valid national legislation apply. Societe Nouvelle des Accumulateurs Nour The norms of the valid national legislation apply. Monbat NBP EAD The norms of the valid national legislation apply. Societe NOUR Distribution The norms of the valid national legislation apply. Societe Technique et Ingenierie de Precision The norms of the valid national legislation apply. Societe NOUR des Bateries Insustrielles The norms of the valid national legislation apply. Societe NOUR Recycling The norms of the valid national legislation apply. Battery Pro South Africa LTD The norms of the valid national legislation apply. Leventa OOD The norms of the valid national legislation apply. 27 6. Customer relations – satisfaction, accessibility, products with impact on consumer health and safety The corporate management of the Monbat Group works to improve customer service, ensuring that Group companies are constantly talking to their customers. Some of the Group companies have established customer satisfaction reporting systems. Monbat Recycling EAD has developed a procedure for reporting customer satisfaction in accordance with the requirements of ISO 9001:2015. All products handed over to the customer have a Safety Data Sheet developed according to the requirements of the CLP (Classification, Labeling and Packaging) Regulation (EC) 1272/2008. The Group's website provides information on all of the Company's products and their applications. The companies' individual websites also contain comprehensive information on each company's product portfolio. Contact with clients is made through the contact forms on the websites of the companies and also through the contact form on the global website of Monbat AD www.monbatgroup.com. 7. Responsible trade The Monbat Group continuously strives to improve its operations in all possible aspects: developing innovative products and technologies, increasing market share, managing risk more effectively, improving customer satisfaction. The quality management system established on group level provides a reliable framework that can monitor and improve performance in the companies' areas of operation. Consumer awareness of accurate and clear pricing terms for the products offered is a priority for corporate management. V. HUMAN RIGHTS ISSUES In its corporate value system, the Monbat Group puts the protection of human rights at the forefront and does not tolerate any form of behavior that violates the dignity and rights of the individual, nor discrimination. •The Monbat Group does not tolerate any form of discrimination against its employees, and requirements for employees and their duties, as set out in the employment agreements and job descriptions, are based solely on the requirements of the labor law, individual employment contracts. •In its recruitment policy, the corporate management of the Group companies is guided by the principle of equal treatment of all candidates regardless of their race, nationality, ethnicity, gender, origin, religion, education, beliefs, political affiliation, personal and social status, or property status. 28 •All employees of Group companies shall comply with their hierarchical subordination within the established internal group or corporate structure and shall not abuse their position by exerting any form of pressure or harassment on subordinate employees. •Group companies, as employers, and all Group employees who, by the nature of their duties, have access to personal data, shall comply with the requirements of the Personal Data Protection Act and shall prevent the unauthorized dissemination of personal data. 1. Cases of severe human rights impacts related to decisions and actions of the Group In 2023, there are no severe human rights impacts associated with the decisions and actions of the Group companies. 2. Commitment of the Group for protection of human rights As an enterprise of public interest, Monbat AD and its management, and all Group companies, are aware of the responsibility to society for respect for human rights in all aspects of their activities. 3. Availability of human rights compliance checks There were no human rights inspections of Monbat Group companies in 2023. 4. Human rights matters in supply chain contracting No human rights issues are discussed in the procurement negotiation process, although Group companies closely monitor the reputation of their contractors. 5. Processes and measures to prevent human trafficking, all forms of exploitation, forced and child labor The corporate management of the Group companies condemns all forms of human exploitation and forced child labor. Child labor exploitation is not permitted within the Monbat structure and Group companies. Notwithstanding the possibilities for minors to work provided for in certain legislation, due to the nature of the work, Group companies do not employ minors. VІ. ANTI-CORRUPTION AND ANTI-BRIBERY MATTERS The Monbat Group complies with the rules of pure donation or sponsorship on a case-by-case basis under conditions of full transparency. Suppliers and business partners are informed about the commercial policy of each of the Monbat Group companies. The Group's corporate policy excludes the Group companies from involvement with any political party. 29 1. Risk assessment criteria for corruption risk assessments The existence of clearly defined procedures for identifying corrupt practices is a key requirement for effectively countering the problem, and for creating the prerequisites for a well-functioning state-owned company. Although there is no corruption risk assessment system in place at Group level, it should be considered that all processes and procedures are conducted in a manner that excludes any form of corruption within Group companies. 2. Internal control procedures and resources for corruption and bribery prevention All Group Companies transactions are evaluated individually in advance and those of significant value are approved by the management of each Group Company. 3. Whistleblowing mechanisms for reporting misconduct, corruption, etc. Having clearly defined procedures for identifying corrupt practices is a key requirement for effectively countering the problem, as well as for creating the prerequisites for a well-functioning Group. In 2023, there were no reports of corrupt practices or wrongdoing in the companies. A group level Whistleblowing Policy has been developed in line with the Whistleblowers Protection Act adopted in early 2023. The law has become effective in May 2023 and an the development of an internal communication channel is pending, which will be in line with the newly introduced legal framework. The Group will take advantage of the Whistleblower Protection Act for the whistleblowers or persons publicly disclosing information about violations to establish a common internal whistleblowing channel for all Group companies. 30 DISCLOSURE OF INFORMATION ON KEY PERFORMANCE INDICATORS (KPIs) UNDER ARTICLE 8 OF THE TAXONOMY REGULATION (REGULATION (EC) 2020/852) AS OF 31 DECEMBER 2022 ON A CONSOLIDATED BASIS І. BASIS FOR THE INFORMATION The Paris Agreement adopted under the United Nations Framework Convention on Climate Change (the "Paris Agreement") was approved by the European Union on 5 October 2016. Article 2(1)(c) of the Paris Agreement sets out the objective of taking more decisive action to respond to climate change by aligning capital flows with the goal of achieving low greenhouse gas emissions and climate-resilient development, among other means. In this context, on 12 December 2019, the European Council adopted conclusions on climate change. With this in mind, Regulation (EU) 2020/852 (the Taxonomy Regulation) represents a key step towards achieving the goal of a climate-neutral Union by 2050. Sustainability and the transition to a safe, climate-neutral and resource-efficient circular economy are crucial to ensure the long-term competitiveness of the European Union's economies. To promote sustainable investment , the Taxonomy Regulation (Regulation (EU) 2020/852) establishes a classification system across the European Union to identify economic activities that are considered sustainable. Under Article 8 of this Regulation, companies are required to publish sustainability indicators as of 1 January 2022. Additionally, a Delegated Regulation published by the European Commission on 6 July 2021 sets out the content, calculation methodology and presentation of these indicators(Commission Delegated Regulation (EU) 2021/2178 of 6 July 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by laying down the content and presentation of the information to be disclosed by undertakings covered by Article 19a or 29a of Directive 2013/34/EU in relation to environmentally sustainable economic activities and by laying down the methodology for meeting this disclosure obligation). The requirement to provide sustainability indicators under Article 8 of the Taxonomy Regulation applies to companies that are required to publish non-financial accounts in accordance with Article 19a or Article 29a of the Accounting Directive 2013/34/EU. This requirement also applies to public-interest entities within the meaning of Directive 2013/34/EU, provided that their average number of employees during the financial year exceeds 500, irrespective of the size of the book value of assets and the net sales value. The MONBAT Group falls within the scope of Article 8 of the Taxonomy Regulation and prepares a non-financial statement in accordance with the Accounting Directive 2013/34/EU and the Accounting Act, transposing Directive 2014/95/EU. At the time of drafting this document, the Corporate Sustainability Reporting Directive – 2022/2464 has not yet been transposed into Bulgarian national legislation. The information in this document has been prepared in accordance with article 1.2 of Annex I of Delegated Regulation (EU) 2021/2178 – “Determination of information to be disclosed with the KPI of non-financial undertakings”. 31 ІІ. DEFINITIONS, EXPLANATIONS AND STATEMENTS BY THE MANAGEMENT 1.DEFINITIONS •“Taxonomy eligible economic activity” means any economic activity included in the regularly updated list of activities covered by the delegated acts of the Taxonomy Regulation (Regulation (EU) 2020/852). In accordance with Article 1(5) of Delegated Regulation (EU) 2021/2178, an activity is taxonomy-eligible regardless of whether it meets some or all of the technical verification criteria set out in Delegated Regulation (EU) 2021/2139. Concurrently, the fact that an economic activity is taxonomy-eligible in no way guarantees its sustainability and compliance with the requirements of Article 3 of the Taxonomy Regulation (Regulation (EU) 2020/852). In principle, if an economic operator generates revenue or invests in capital expenditure (CE) or operating expenditure (OE) corresponding to an economic activity, described in Delegated Regulation (EU) 2021/2139, the same economic activity may be considered eligible for taxonomy eligibility disclosure. Conversely, if an activity is not already included in the Delegated Act, it should not be considered eligible. •An economic activity is considered taxonomy-compliant economic activity if: -it contributes significantly to one or more of the six environmental objectives -does not significantly harm any of the six environmental objectives; -is carried out in accordance with minimum safeguards ensuring compliance with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the principles and rights set out in the eight core conventions referred to in the International Labor Organization Declaration on Fundamental Principles and Rights at Work, and the International Bill of Human Rights; and -meets the technical verification criteria – set out in the Climate Delegated Act and its Annexes (Delegated Regulation (EU) 2021/2139). •“transitional economic activity” means any economic activity for which there is no technologically and economically feasible low-carbon alternative, qualifying as contributing significantly to climate change mitigation if it supports the transition to a climate-neutral economy consistent with measures to limit the temperature increase to 1,5°C above pre-industrial levels, including by phasing out greenhouse gas emissions, in particular emissions from solid fuels, and when this activity: -has greenhouse gas emission levels that are consistent with sector or industry best practice; -does not hinder the development or deployment of low-carbon alternatives; and -does not lead to carbon intensive assets being tied up, in consideration of their economic life cycle. Transitional economic activities can play a key role in mitigating climate change by substantially reducing their current high environmental footprint, including by helping to phase out reliance on fossil fuels. 32 •“ancillary economic activity” means any economic activity, which directly contributes to other activities contributing substantially to one or more such objectives, provided that such economic activity: -does not result in the tying up of assets that undermine long-term environmental objectives given the economic life cycle of those assets; and -has a significant positive impact on the environment, based on lifecycle considerations. Ancillary economic activities alone do not contribute significantly to climate change mitigation. They play a key role in decarbonizing the economy by directly contributing to other activities with low carbon environmental performance. •The environmental targets under Article 9 of the Taxonomy Regulation (Regulation (EU) 2020/852) are as follows: -climate change mitigation; -adapting to climate change; -sustainable use and conservation of aquatic and marine resources; -transition to a circular economy; -pollution prevention and control; -protection and recovery of biodiversity and ecosystems. •“climate change mitigation” – keeping the global average temperature rise well below 2°C and continuing efforts to limit it to 1.5°C above pre-industrial levels, as set out in the Paris Agreement. Under the Taxonomy Regulation (Regulation (EU) 2020/852), an economic activity that pursues the environmental objective of mitigating climate change should make a significant contribution to stabilizing greenhouse gas emissions either by preventing or reducing emissions, or by increasing removals of greenhouse gases. Economic activity should be consistent with the long-term temperature targets set out in the Paris Agreement. This environmental objective should be interpreted in accordance with applicable EU law, including Directive 2009/31/EC of the European Parliament and of the Council of Europe. •“climate change adaptation” – the process of adapting to actual or expected climate change and its consequences; An economic activity that pursues the environmental objective of adapting to climate change , should contribute significantly to reducing or preventing the adverse impacts of current or projected climate trends, or the risks of such adverse impacts, on the activity itself or on people, nature or assets. This environmental objective should be interpreted in accordance with applicable EU law and the Sendai Framework for Disaster Risk Reduction 2015-2030. •“Sustainable use and conservation of aquatic and marine resources” should be interpreted in accordance with relevant EU legislation. This includes Regulation (EU) No 1380/2013 enacted by the European Parliament and Council, along with Directives 2000/60/EC, 2006/7/EC, 2006/118/EC, 2008/56/EC, and 2008/105/EC, also enacted by the European Parliament and Council. Council Directives 91/271/EEC, 91/676/EEC, and 98/83/EC, as well as Commission Decision (EU) 2017/848, are also pertinent. Furthermore, the Commission's communications are of relevance, specifically "Addressing Water Scarcity 33 and Droughts in the European Union" dated July 18, 2007, "A Strategy for Safeguarding Europe's Water Resources" dated November 14, 2012, and "The European Union's Strategic Approach to Pharmaceutical Products in the Environment" dated March 11, 2019. •"shift towards a circular economy" should be understood in line with the relevant Union legislation in the fields of circular economy, waste, and chemicals. This includes Regulations (EC) No 1013/2006, (EC) No 1907/2006, and (EU) 2019/1021 enacted by the European Parliament and the Council, as well as Directives 94/62/EC, 2000/53/EC, 2006/66/EC, 2008/98/EC, 2010/75/EU, 2011/65/EU, 2012/19/EU, (EU) 2019/883, and (EU) 2019/904 issued by the European Parliament and the Council. Additionally, Council Directive 1999/31/EC, Commission Regulation (EU) No 1357/2014, Commission Decisions 2000/532/EC and 2014/955/EU, and the Commission Communications of 2 December 2015, namely "Closing the loop – An EU action plan for the circular economy" and "A European strategy for plastics in the circular economy", should also be considered. •"pollution prevention and control" should be construed in line with the relevant Union legislation, encompassing Directives 2000/60/EC, 2004/35/EC, 2004/107/EC, 2006/118/EC, 2008/50/EC, 2008/105/EC, 2010/75/EU, (EU) 2016/802 and (EU) 2016/2284/ as enacted by the European Parliament and the Council. •“safeguarding and rejuvenation of biodiversity and ecosystems” should be construed in compliance with the relevant Union legislation, encompassing Regulations (EU) No 995/2010, (EU) No 511/2014 and (EU) No 1143/2014 issued by the European Parliament and the Council, Directive 2009/147/EC enacted by the European Parliament and the Council, Council Regulation (EC) No 338/97, Council Directives 91/676/EEC and 92/43/EEC. This interpretation should also align with the Commission Communications dated 21 May 2003 titled "Implementing the Forest Law Enforcement, Governance and Trade (FLEGT)", 3 May 2011 titled "Our life insurance, our natural capital: an EU biodiversity strategy to 2020", 6 May 2013 titled "Green Infrastructure (GI) – Enhancing Europe's Natural Capital", 26 February 2016 titled "EU Action Plan against Wildlife Trafficking" and 23 July 2019 titled "Stepping up EU Action to Protect and Restore the World's Forests". 2. EXECUTIVE REASONING AND STATEMENTS The information presented in this document may contain statements that reflect the current views of members of the Company's management with respect to the achievement of future non-financial performance, the execution of the Company's business strategy, plans and objectives. The projections herein pertain to both the MONBAT Group and the industry within which it functions. Declarations incorporating terms such as "expects", "intends", "plans", "anticipates", "assumes", "will", "aims", "seeks", "may", "could", "continues", and analogous expressions concerning the future performance of the MONBAT Group are recognized as forward-looking statements under the purview of Bulgarian and European law, or otherwise. 34 When projections are presented, they pertain to the anticipated performance and outcomes of the MONBAT Group, which are subject to risks and uncertainties. Various elements and incidents may transpire that could lead to a significant deviation in the actual results of the MONBAT Group from those suggested in the forward-looking statements. These elements encompass, but are not limited to, the factors outlined in the RISKS section of the Annual Consolidated Financial Statements. These factors should be evaluated collectively and in correlation with all financial and economic data presented in the Annual Report. ІІІ. MAIN ACTIVITIES OF THE MONBAT GROUP COMPANIES The Group's core business is divided into four segments: •Lead-acid battery manufacturing segment, which produces a broad product range of starter and stationary batteries, as well as cyclic batteries. •Industrial Materials Recycling segment, which produces lead, lead alloys, sodium sulfate and regranulated polypropylene for the segment's lead-acid battery manufacturing needs and for sale to external customers, as well as manufacturing industrial materials recycling equipment; •A segment of the Nour industrial group for the production and recycling of lead-acid batteries. •Segment "Others", which includes the Group's logistics and foreign trade companies and companies with ancillary activities. No. Company’s name Principal activity Capital share or percentage of votes at the General Assembly as of 31.12.2023. 1 Start AD Production, service and marketing of accumulator batteries, engineering, development and implementation activities, foreign and domestic trade. 97.80% of voting shares 2 SC Monbat Recycling S.R.L 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 products. 100% of the capital 3 Monbat Recycling EAD 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 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 products. 100% of the capital 5 SC Monbat Romania S.R.L. Commercial company: trading, service and marketing of accumulator batteries, accumulator, lead, polyethylene and polypropylene scrap. 100% of the capital 6 MONBAT NEW POWER AD Commercial 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 A Holding Company, owner of the subsidiaries Eas Batteries GmbH and Monbat New Power GmbH 100% of the capital 9 Eas Batteries GmbH Production, trade and development of R&D in the field of Li-ion Batteries 100% of the capital 10 Monbat New Power GmbH Production, trade and development of R&D in the field of Li-ion Batteries 100% of the capital 35 No. Company’s name Principal activity Capital share or percentage of votes at the General Assembly as of 31.12.2023. 11 Monbat Italy S.R.L. Holding Company which holds the equity interest in Piombifera Italiana 100% of the capital 12 Piombifera Italiana SPA Recycling of battery and lead scrap, trading of batteries, trade of battery, lead, polyethylene and polypropylene scrap and materials in Italy, and export and import to and from Italy of scrap and materials derived from battery scrap 100% of the capital 13 YU Monbat DOO Commercial company with the following objects: trading, service and marketing of accumulator batteries, accumulator, lead, polyethylene and polypropylene scrap. 100% of the capital 14 MONBAT SPED EOOD Transport services, foreign and domestic transport, freight forwarding services, transportation of goods, export and import of special goods and items, opening of a warehouse network in the country, commercial agency and brokerage 100% of the capital 15 ARTMonbat AD Manufacturing, trade, development of research in the field of nanostructured materials; sales of nanostructured additives in various industries 51% of the capital 16 Monbat Immobilien GmbH Commercial company: 100% of the capital 17 STC S.R.L. Manufacturing, installation, research & 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 Pty. Ltd. Sale of batteries and other battery-related materials 51% of the capital 19 Monbat NBP EAD Research and development in the area of bi-polar rechargeable batteries 100% of the capital 20 Société Nouvelle des Accumulateurs (SNA) A holding company holding a majority stake and controlling the other companies of the Nour Group. Also – manufacturing, service and realization of batteries, engineering and development activities, external and internal trade and construction of trade networks, specialized shops and representative offices. 60% of the capital 21 Société NOUR Distribution (SND) Sales of batteries in the Tunisian market through the establishment of sales networks, specialized shops and representative offices. 59.85% of the capital 22 Société Technique et Ingénierie de Précision (TIP) Providing engineering and maintenance services to Nour Group companies 55% of the capital 23 Société NOUR des Batteries Industrielles (NBI) Providing services the the Nour Group companies 44.31% of the capital 24 Société NOUR Recycling (SNR) Recycling of battery and lead scrap, lead alloys, polyethylene and polypropylene materials, trading of batteries, battery, lead polyethylene and polypropylene scrap and materials within Tunisia 30.50% of the capital ІV. ACCOUNTING POLICY The Group formulates and implements accounting policies that are in complete compliance with the relevant IFRS as adopted within the EU. The existing accounting policies encompass disclosures pertaining to IAS 16, IAS 38, IAS 40, and IFRS 16, in accordance with the stipulations of Delegated Regulation (EU) 2021/2178 and the significance it attributes to them. A more comprehensive disclosure of the Group's significant accounting policies can be found in the notes accompanying the Annual Consolidated Financial Statements as of 31 December 2023. 36 V. ASSESSMENT OF COMPLIANCE WITH THE TAXONOMY REGULATION (REGULATION (EC) 2020/852) Pursuant to the Taxonomy Regulation (Regulation (EU) 2020/852) and its corresponding delegated acts, the MONBAT Group's taxonomically compliant revenue, capital outlay, and operational costs for the year 2023 are incorporated within the non-financial statement. This disclosure of eligibility pertains to all present environmental objectives as contemplated in the European Taxonomy, grounded on Article 27(2)(a) and (b) of the Taxonomy Regulation (Regulation (EU) 2020/852). The Paris Agreement adopted under the United Nations Framework Convention on Climate Change (the "Paris Agreement") was approved by the EU on 5 October 2016. Article 2(1)(c) of the Paris Agreement sets out the objective of taking more decisive action to respond to climate change by aligning capital flows with the goal of achieving low greenhouse gas emissions and climate-resilient development, among other means. In this context, on 12 December 2019, the European Council adopted conclusions on climate change. With this in mind, this Regulation represents a key step towards achieving the goal of a climate-neutral Union by 2050. The progression towards sustainability and the shift to a secure, climate-neutral, and resource-efficient circular economy are vital to guarantee the enduring competitiveness of the EU economy. The concept of sustainability has always been integral to the architecture of the European Union, and this is mirrored in the Treaty on European Union and the Treaty on the Functioning of the European Union (TFEU), both of which encapsulate its social and environmental facets. Under the Taxonomy Regulation (Regulation (EU) 2020/852), an economic activity that pursues the environmental objective of mitigating climate change should make a significant contribution to stabilizing greenhouse gas emissions either by preventing or reducing emissions, or by increasing removals of greenhouse gases. Economic activity should be consistent with the long-term temperature targets set out in the Paris Agreement. This environmental objective should be interpreted in accordance with applicable EU law, including Directive 2009/31/EC of the European Parliament and of the Council of Europe. An economic activity that pursues the environmental objective of adapting to climate change , should contribute significantly to reducing or preventing the adverse impacts of current or projected climate trends, or the risks of such adverse impacts, on the activity itself or on people, nature or assets. This environmental objective should be interpreted in accordance with applicable EU law and the Sendai Framework for Disaster Risk Reduction 2015-2030. An economic activity qualifies as contributing significantly to the sustainable use and protection of water and marine resources where the same activity contributes significantly to the achievement of good status of water bodies, including surface and groundwater bodies, or to the prevention of deterioration of water bodies already in good status, either contribute significantly to the achievement of good environmental status of marine waters or to the prevention of deterioration of marine waters already in good environmental status. 37 An economic activity aimed at achieving the environmental goal of transitioning to a circular economy should substantially contribute to the prevention of waste, as well as its reuse and recycling. An economic activity is deemed to significantly contribute to pollution prevention and control if it substantially aids in safeguarding the environment from pollution. This is achieved by preventing, or when prevention is unfeasible, minimizing the discharge of pollutants, excluding greenhouse gases, into the air, water, or land. An economic operation will be deemed as significantly contributing to the safeguarding and rejuvenation of biodiversity and ecosystems if said operation substantially aids in the preservation, conservation, and restoration of biodiversity, or in attaining a favourable condition of ecosystems, or in the protection of those ecosystems that already possess a favourable status. Total energy consumption accounts for approximately 75% of the Union's direct greenhouse gas emissions. The energy sector, therefore, plays a crucial role in further reducing greenhouse gas emissions. Delegated Regulation (EU) 2021/2139 of 4 June 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council by laying down technical criteria for the verification for the purpose of determining the conditions under which an economic activity qualifies as contributing significantly to climate change mitigation or adaptation and for the purpose of determining whether that economic activity does not cause significant harm in relation to the achievement of any of the other environmental objectives has established the technical criteria for the verification of a wide range of activities, related to the energy supply chain – from the production of electricity and heating power from various sources, through the transfer and distribution networks, to the accumulation, and the use of thermal pumps and the production of biogas and biofuel. The manufacturing sector, encompassing battery fabrication and primary plastics production, is responsible for approximately 21% of the EU's direct greenhouse gas emissions. This sector ranks as the third largest contributor to these emissions within the Union, thereby holding significant potential for climate change mitigation. Concurrently, the manufacturing industry can serve as a pivotal sector in curtailing and diminishing greenhouse gas emissions across other economic sectors. This is achieved by manufacturing the necessary products and technological equipment that enable other sectors to transition to, or maintain, a low carbon footprint. Activities of generation for which there exist no other technologically and economically viable low-carbon alternatives, but which aid in the transition towards a climate-neutral economy, are classified as transitional economic activities pursuant to Article 10(2) of Regulation (EU) 2020/852. The manufacturing of rechargeable batteries is also encompassed within this category of activity. To encourage the diminution of greenhouse gas emissions, the benchmarks for the technical verification criteria for these activities are established to be attainable solely by the top-performing companies in each industry, predominantly based on greenhouse gas emissions per unit of product manufactured. The proportion of greenhouse gas emissions attributed to waste management and recycling within the European Union is comparatively minor. Nevertheless, this sector possesses considerable potential to aid in the reduction of greenhouse gas emissions in other sectors. This can be achieved notably through the provision of secondary raw materials as a 38 substitute for primary raw materials, the replacement of fossil fuel-based products, fertilisers, and energy, and the transportation and permanent storage of sequestered carbon dioxide. The technical verification criteria for waste activities duly acknowledge these activities as significantly contributing to the mitigation of climate change, contingent upon the application of certain best practices within this sector. These criteria ensure that the selected waste treatment options align with the superior levels of the waste management hierarchy. The transportation industry, inclusive of international maritime activities, is responsible for approximately 26% of the total greenhouse gas emissions within the European Union. As delineated in the Action Plan for Financing Sustainable Growth, the transportation sector necessitates roughly 30% of the additional yearly investment required for sustainable progression within the Union. This includes initiatives such as enhancing electrification or expediting the transition to cleaner modes of transportation by promoting a shift in modalities and improving traffic management. The decarbonization of the transportation fleet and infrastructure can thus serve a pivotal role in climate change mitigation. The technical screening criteria for the transportation sector are designed to curtail its primary emission sources, while considering the necessity to transition towards passenger and freight transportation modes with lower emissions and to construct infrastructure that facilitates clean mobility. Structures across all sectors within the Union contribute to 4% of energy usage and 36% of carbon emissions. Consequently, they hold significant potential in the efforts to mitigate climate change. As suggested by the European Commission, the development of an asset or facility that is integral to an operation, for which specific verification criteria should be set to ascertain the circumstances under which the economic activity is deemed to significantly aid in climate change mitigation, can serve as a crucial facilitator for that economic activity. It is thus fitting to incorporate the construction of such assets or facilities as a component of the activity to which they are connected, particularly in the sectors of energy, water supply, sanitation, waste management and recycling, and transportation. Research and development (R&D), along with innovation, possess the capacity to bolster other sectors in fulfilling their climate change mitigation goals. The technical parameters for R&D&I endeavors are thus centered on the potential of solutions, processes, technologies, and other products to curtail greenhouse gas emissions. Studies aimed at bolstering activities under Article 10(1)(i) of Regulation (EU) 2020/852 can also significantly contribute to aiding these economic activities and their target operations to drastically reduce their greenhouse gas emissions or to augment their technological and economic viability, ultimately promoting their growth. Research can also significantly contribute to further decarbonizing transitional activities under Article 10(2) of Regulation (EU) 2020/852 by assisting in ensuring that these activities are executed with significantly lower greenhouse gas emissions than the thresholds delineated in the technical verification criteria for the substantial contribution to climate change mitigation for these activities. Although they may be in line with EU environmental objectives, the activities of MONBAT Group companies that are not yet covered by the European Taxonomy, respectively the Delegated Acts, and as such are ineligible under the Taxonomy, and are currently considered ineligible under the Delegated Acts. 39 In order to establish Key Performance Indicators (KPIs) in alignment with the objectives set forth by the Taxonomy Regulation, pertaining to its six environmental goals, an examination of MONBAT Group's range of products has identified revenue generated from the subsequent eligible activities. These activities fall under the purview of the EU Taxonomy Regulation, specifically Delegated Regulation (EU) 2021/2139 (which has been amended and supplemented by Delegated Regulation (EU) 2022/1214 and Delegated Regulation (EU) 2023/2485), and Delegated Regulation (EU) 2023/2486. -Activity CCM 3.4./ CCA 3.4. – Production of rechargeable batteries; -Activity CCM 3.17./CCA 3.17. – Production of polymers (plastics) in primary form In identifying them, we have been guided by point 3 of the clarifications provided in articles 2, 8 and 11 of the Commission Notice (2022/C 385/01) on the interpretation of certain legal provisions of the Delegated Act on disclosure under Article 8 of the EU Taxonomy Regulation, in relation to the reporting of eligible economic activities and assets. According to the technical verification criteria, the activity of PRODUCTION OF RECHARGEABLE BATTERIES is classified as an ancillary activity in accordance with Article 10(1)(i) of the Taxonomy Regulation (Regulation (EU) 2020/852). In the course of the assessment, we identified that the economic activity of producing rechargeable batteries fully meets the technical criterion of recycling end-of-life rechargeable batteries as part of the value chain and of producing (rechargeable) batteries, battery (rechargeable) packs and accumulators (and their respective components), i.e., including from secondary raw materials, resulting in a significant reduction of greenhouse gas emissions in transport and in stationary and off-grid energy storage, and other industrial applications. Thus, the value of the MONBAT Group's operating income related to the production of rechargeable batteries amounting to BGN 314,289 thousand (note 28 of the annual consolidated financial statements, part of the line Revenue from the sale of products) was classified as income from eligible and taxonomy compliant activities. Next, in assessing whether this identified activity meets the ‘do no significant harm’ principle (DNSH) in relation to the other five environmental objectives under Article 9 of the Taxonomy Regulation (Regulation (EU) 2020/852), it was established that the activity does not cause significant harm, as the principle of legality in the company's operations has been respected, and all the requirements of environmental legislation in the sector have been applied, a piece of evidence of which is the Annual Environmental Reports 2023 of the companies holding Integrated Permits under Chapter Seven of the Environmental Protection Act, thus ensuring that the technical verification criteria are met. According to the technical verification criteria, the activity PRODUCTION OF POLYMERS (PLASTIC) IN PRIMARY FORM is classified as a transitional activity in accordance with Article 10(2) of the Taxonomy Regulation (Regulation (EU) 2020/852). Upon evaluation, we discerned that the business operation of manufacturing primary form polymers wholly satisfies the technical verification criterion. This is due to the fact that the production of primary form plastic is entirely achieved through the mechanical recycling of plastic waste - specifically, the mechanical recycling of waste polypropylene derived from end-of-life batteries. Consequently, the revenue generated from the MONBAT Group's 40 operations associated with the production of primary form polymers, which totals to BGN 525 thousand (refer to note 28 in the consolidated financial statements, included in the line item 'Income from sales of products'), has been categorized as income derived from eligible and taxonomy-compliant activities. Next, in assessing whether this identified activity meets the ‘do no significant harm’ principle (DNSH) in relation to the other five environmental objectives under Article 9 of the Taxonomy Regulation (Regulation (EU) 2020/852), it was established that the activity does not cause significant harm, as the principle of legality in the company's operations has been respected, and all the requirements of environmental legislation in the sector have been applied, a piece of evidence of which is the Annual Environmental Reports 2023 of the companies holding Integrated Permits under Chapter Seven of the Environmental Protection Act, thus ensuring that the technical verification criteria are met. The leadership of the MONBAT Group acknowledges that the Taxonomy and the Climate Delegated Act, inclusive of its appendices, necessitate non-financial entities engaged in economic activities that do not meet the eligibility criteria under the Taxonomy Regulation and its Delegated Acts to disclose the capital expenditure (CR) and operating expenditure (OE) components. These components are associated with the procurement of production from economic activities compatible with the taxonomy and individual initiatives aimed at transforming the targeted activities into low-carbon or contributing to a decrease in greenhouse gases (as per item 1.1.2.2, letter c) and item 1.1.3.2, letter c) of the Disclosure Regulation (Delegated Regulation (EU) 2021/2178)). In order to ascertain taxonomy eligibility and subsequently evaluate adherence to the six environmental objectives of the key performance indicators (KPI) related to capital expenditure (CR) and operational costs (OC), a number of ancillary activities, as depicted by the taxonomy, were recognized. These activities are inherently connected to the primary business operations and have the potential to influence the Group's performance. The activities identified include: -Activity CCM 3.6./CCA 3.6. – Production of additional low-carbon process products; -Activity CCM 4.1./CCA 4.1. - Power generation via solar photovoltaic technology -Activity CCM 4.25./CCA 4.25. - Generation of heating/cooling energy through the utilization of waste heat -Activity CCM 7.1./CCA 7.1./CE 3.1. – Construction of new buildings -Activity CCM 7.2./CCA 7.2./CE 3.2. – Refurbishment (renovation) of existing buildings -Activity CE 2.3. – Collection and transportation of non-hazardous and hazardous waste. 41 As regards the allocation of capital expenditure (CR) and operational costs (OC) on ecologically sustainable activities (taxonomy compliant), the conformity of the eligible accompanying activities, as referred to above, which are intrinsically linked to the main activity and meet the requirements of article 1.1.2.2 and 1.1.3.2 of Annex I to Delegated Regulation (EU) 2021/2178. For each activity eligible under the taxonomy, a detailed analysis was conducted to evaluate its individual adherence to the technical screening criteria, its substantial contribution to mitigating climate change, and its compliance with the National Ambient Air Quality Standards (NAAQS) principle. In determining whether each identified activity aligns with the principle of No Significant Harm (NSH) in relation to the other five environmental objectives outlined in Article 9 of the Taxonomy Regulation (Regulation (EU) 2020/852), it was concluded that the activities do not inflict significant harm. This is because the principle of legality in the company's operations has been upheld and all legislative requirements in the production and environmental sectors have been fulfilled, thereby ensuring that the technical verification criteria are satisfied. To prevent the duplication of taxonomy-qualified economic activities already accounted for under the mitigation objective, as per point 2(c) of Annex I to Delegated Regulation (EU) 2021/2178, the MONBAT Group is prohibited from including taxonomy-qualified economic activities under the objective of climate change adaptation. In relation to the taxonomy-qualified operation of producing other low-carbon technology goods, a primary focus of the subsidiary STC S.R.L. – Italy, all revenue generated from this operation is excluded for consolidation purposes (since it is entirely consumed within the MONBAT Group). In other words, there are no earnings from this taxonomy-qualified operation reflected in the Group's consolidated statement, while the capabilities established in the recycling plants have an impact on CE at the Group level. In 2023, the company manufactured process products (compressors) that are technologically designed to decrease gas usage at recycling facilities and significantly cut down Greenhouse Gas (GHG) emissions in other economic sectors. CE from this operation, amounting to BGN 1,725 thousand, are reported as eligible but not taxonomy compliant activities. This is because the Group has not computed the life cycle GHG emission reductions of the manufactured process products for the reporting year, and therefore, it cannot be definitively stated that they fulfill the technical verification criteria. The establishment of a photovoltaic power plant, valued at BGN 348 thousand (as detailed under the Newly acquired assets section in note 10 of the annual consolidated accounts), and the BGN 196 thousand investment in the installation of compressors for the generation of heating/cooling energy via waste heat at the MONBAT Group's recycling facilities, have been recognized as aligning with the CE taxonomy. Furthermore, the CE pertaining to the installation of additional capacities at the MONBAT Group's recycling facilities, amounting to an additional BGN 13,787 thousand (also detailed under the Newly acquired assets section in note 10 of the annual consolidated financial statements), are deemed eligible and in compliance with the CE taxonomy for the battery business. Subsequently, CE valued at BGN 569 thousand have been identified as being in compliance with the taxonomy and the DNSH principles, pertaining to the transportation of collected NUBA, designated exclusively for recycling at the MONBAT Group's recycling facilities. 42 In the absence of more detailed information to assess their compliance with the technical verification criteria, it has been assessed that the CRs amounting to BGN 1,081 thousand are attributed to taxonomy-eligible activities that are not environmentally sustainable (compliant) with the taxonomy, as no robust and irrefutable evidence was found that they meet the technical verification criteria for these activities in terms of making a significant contribution to climate change mitigation and, in particular, capital expenditure related to the construction of new buildings and refurbishment (renewal) of buildings. The EU taxonomy definition of OE differs significantly from the classic definitions of operating expenses applied in financial statements. According to the taxonomy, operating expenses consist only of direct non-capitalized expenses related to (a) research and development; (b) building refurbishment measures; (c) short-term rentals; (d) maintenance and repairs; and (e) any other direct costs associated with the day-to-day servicing of property, plant and equipment assets necessary to ensure the continued and efficient operation of those assets. The MONBAT Group ensures that the OE under consideration comply with the definition of the EU Taxonomy by defining the relevant cost items from the bottom up. The Company refrains from reconciling OE to the individual statement of profit or loss and other comprehensive income as it is considered that this would result in a mismatch between the operating expenses included and the legislator's intent. The MONBAT Group will employ method 1.1.3.2(a) as outlined in Annex I of the Delegated Regulation (EU) 2021/2178 to ascertain the OC KPIs. The reporting will encompass operating expenses associated with assets and processes pertinent to business operations that qualify for the taxonomy. This will be in accordance with the principle of disaggregation that mirrors the original, adhering to the technical verification criteria and the Do No Significant Harm (DNSH) criteria for the six environmental objectives. To prevent the duplication of reporting for economic activities eligible for taxonomy, which have already been accounted for under the mitigation target as per point 2(c) of Annex I to Delegated Regulation (EU) 2021/2178, the MONBAT Group does not deem economic activities as eligible for taxonomy against the remaining environmental objectives. The only exception to this is Activity CE 2.3 – Collection and transport of non-hazardous and hazardous waste. In the non-financial disclosure, a crucial component of the activity report, the MONBAT Group affirms that all fundamental social safeguards in the domains of human rights respect, anti-corruption measures, obligations towards secure and healthy work environments, employees' right to associate, and adherence to the collective agreement have been duly observed. Given these circumstances, it can be inferred that the principle of upholding minimum guarantees has been satisfied. Further details regarding the adherence to these fundamental social safeguards can be found in paragraphs 3 through 8 of Section IV of the Non-Financial Statement, as stipulated in Article 48 of the Accounting Act. The findings from the analysis of the principal performance metrics indicate that the revenue of the MONBAT Group, which is both eligible for and in alignment with the taxonomy—specifically, revenue derived from environmentally sustainable activities—constitutes 82.08% of the Group's total revenue. This is as stipulated under point 1.1.1 of Annex I to Delegated Regulation (EU) 2021/2178. This proportion is notably high, a testament to the Group's proactive strategies over the preceding years. Owing to these 43 strategies, the recycling facilities within the MONBAT Group have been capable of supplying over 90% of the raw materials necessary for the Group's product manufacturing. The analysis of the firm's principal performance metrics, or key performance indicators (KPIs), in relation to capital expenditure (CE) demonstrates the MONBAT Group's dedication to the procurement of assets that promote environmental sustainability. The parent company's capital expenditure is wholly allocated to assets and procedures directly associated with the taxonomy-eligible activity of battery production. The share of taxonomy-compliant capital expenditure constitutes 61.12% of the group's overall capital expenditure, a result of the parent company's investment in sophisticated, intelligent solutions aimed at fostering a low-carbon economy. A considerable portion (11.51%) of eligible activities are currently not classified as environmentally sustainable due to the present inability to separate them as required for evaluation against the technical verification criteria. However, in forthcoming periods, these activities are anticipated to be incorporated into the Group's efforts towards the six environmental goals outlined by the Taxonomy Regulation. The aggregate sum of the operational expenses amounts to BGN 274,939 thousand. Of this total, 40.10% qualifies under the taxonomy, as it adheres to the stipulations outlined in point 1.1.3.2(a) and (c) of Annex I of Delegated Regulation (EU) 2021/2178. Among these qualifying costs, 40.00% have been recognized as environmentally sustainable, satisfying both the technical verification criteria and the Do No Significant Harm (DNSH) principles. VІ. CONTEXTUAL INFORMATION The Delegated Regulation (EU) 2021/2178 defines the key performance indicators (KPIs) for turnover, capital expenditure (CE) and operating expenditure (OE) as set out in Sections 1.1.1, 1.1.2 and 1.1.3 respectively of Annex I to that Regulation. The MONBAT Group should disclose the portion of its net turnover (determined in accordance with 1.1.1 of Annex I to Delegated Regulation (EU) 2021/2178) that corresponds to its taxonomy-eligible economic activities. The net turnover (denominator) of the MONBAT Group in determining the turnover KPIs can be reconciled to note 28 to the annual consolidated financial statements. The share of the taxonomy-compliant economic activities in the Group's total turnover is calculated by dividing the share of net turnover derived from services related to the taxonomy-compliant economic activities (numerator), i.e., rechargeable battery manufacturing and polymer production in primary form, by net turnover (denominator). The information on eligible CE prepared in accordance with Section 1.1.2 of Annex I to Delegated Regulation (EU) 2021/2178 shall cover CE that relate to assets or processes corresponding to taxonomy-eligible activities. The total capital expenditure, which serves as the denominator in the Key Performance Indicator for Capital Expenditure, encompasses both tangible and intangible fixed assets procured in the year 2023. This includes the cumulative capitalised costs associated with these assets, as well as right-of-use assets. All such CE are calculated prior to accounting for depreciation, amortization, and any supplementary valuations, which include those resulting from revaluations and impairments, and do not consider changes in fair value. 44 The Group's capital expenditures can be reconciled with the aggregate of the items for newly procured assets as detailed in the subsequent notes to the annual consolidated financial statements, specifically Note 10 concerning Property, Plant and Equipment, Note 11 pertaining to Assets with Right of Use, and Note 8 relating to Intangible Assets. The total operational expenditures (the denominator in the KPI for OC) include direct non-capitalised expenses. These, for the specified reporting period, pertain to the costs of maintenance and repair, the expenses incurred in procuring products from taxonomy-compliant economic activities, and any other direct costs linked to the routine upkeep of property, plant, and equipment. These costs may be borne by the Group companies themselves or outsourced to ensure the sustained and efficient functioning of these assets. This category of costs is intimately connected to maintenance and repair expenses, which, as per the delegated regulation, do not encompass the general overheads necessary for the operation of the property, plant, and equipment, such as electricity, reagents, oils, etc. Furthermore, OC do not include project management expenses related to Research and Development and similar activities. The expenses incorporated in the denominator Key Performance Indicator (KPI) of Operational Efficiency (OE) constitute a segment of the total disclosed cost of materials as detailed in note 29.1 (primarily from the Main Materials and Spare Parts and Supplies lines) within the consolidated financial statements. This also includes a fraction of the outsourcing costs, as documented in note 30 (under the Other Expenses line) of the same statement, in addition to a portion of the personnel costs, as outlined in note 22.1. Pursuant to Article 10(2) of Delegated Regulation (EU) 2021/2178, in order to ensure reliability and consistency in the reporting of the three KPIs, the Group has eliminated the double counting of the same amounts when attributing them to turnover, CE and OE, through the detailed analytical accounting (including by type of activity) established for the purpose of preparing its financial statements and for the purpose of preparing the quarterly and annual reports filed with the regulator. VII. METHODOLOGY FOR CALCULATION OF KEY PERFORMANCE INDICATORS FOR DELIRABLES UNDER ARTICLE 8 OF THE TAXONOMY The methodology used by the company to calculate the key performance indicators (KPI) for turnover, capital expenditure (CE) and operating expenditure (OE) is in accordance with Sections 1.1.1, 1.1.2 and 1.1.3 of Annex I to Delegated Regulation (EU) 2021/2178. VІІI. KPI ON TURNOVER Annex Table 1 IX. KPI ON CAPITAL EXPENSES Annex Table 2 Х. KPI ON OPERATING COSTS Annex Table 3 45 Table 1 KPI ON TURNOVER Financial year 2023 Criteria for significant contribution Criteria for DNSH (do no significant harm) (8) Economic activities (1) Code (2) Turnover (3) Share of turnover (4) Climate change mitigation (5) Adapting to climate change (6) Water (7) Pollution (8) Circular economy (9) Biodiversity (10) Climate change mitigation (11) Adapting to climate change (12) Water (13) Pollution (14) Circular economy (15) Biodiversity (16) Minimum guarantees (17) Share of taxonomy-compliant (A.1.) or taxonomy-eligible (A.2.) turnover, year 2022 (18) Category “ancillary activity” (19) Category “transitional activity” (20) in BGN thousand % Yes; No; ineligible Yes; No; ineligible Yes; No; ineligible Yes; No; ineligible Yes; No; ineligible Yes; No; ineligible Yes/No Yes/No Yes/No Yes/No Yes/No Yes/No Yes/No % A. TAXONOMY-ELIGIBLE ACTIVITIES A.1. Environmentally sustainable activities (compliant with the taxonomy) Production of rechargeable batteries CCM 3.4/CCA 3.4 314 289 81.94% Yes Yes Ineligible Ineligible Ineligible Ineligible Yes Yes Yes Yes Yes Yes Yes С Production of polymers (plastic) in primary form CCM 3.17/CCA 3.17 525 0.14% Yes Yes Ineligible Ineligible Ineligible Ineligible Yes Yes Yes Yes Yes Yes Yes П Turnover from environmentally sustainable activities (consistent with the taxonomy) (A.1) 314 814 82.08% 82.08% 0.00% 0.00% 0.00% 0.00% 0.00% Yes Yes Yes Yes Yes Yes Yes 81.08% Out of which – ancillary 314 289 81.94% 81.94% 0.00% 0.00% 0.00% 0.00% 0.00% Yes Yes Yes Yes Yes Yes Yes Of which – transitional 525 0.14% 0.14% 0.00% 0.00% 0.00% 0.00% 0.00% Yes Yes Yes Yes Yes Yes Yes A.2 Taxonomy-eligible activities, but not environmentally sustainable (not compliant with the taxonomy) Turnover from taxonomy-eligible activities, but not environmentally sustainable (activities not compliant with the taxonomy) (A.2) - 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 1.78% А. Turnover from taxonomy eligible activities (A.1+A.2) 314 814 82.08% 82.08% 0.00% 0.00% 0.00% 0.00% 0.00% 82.86% B. TAXONOMY-INELIGIBLE ACTIVITIES Turnover from taxonomy-ineligible activities 68 733 17.92% 17.14% TOTAL 383 547 100% 100% 46 TABLE 2. KPI ON CAPITAL EXPENDITURE Financial year 2023 Criteria for significant contribution Criteria for DNSH (do no significant harm) (8) Economic activities (1) Code (2) CR (3) Share of turnover (4) Climate change mitigation (5) Adapting to climate change (6) Water (7) Pollution (8) Circular economy (9) Biodiversity (10) Climate change mitigation (11) Adapting to climate change (12) Water (13) Pollution (14) Circular economy (15) Biodiversity (16) Minimum guarantees (17) Share of taxonomy-compliant (A.1.) or taxonomy-eligible (A.2.) turnover, year 2022 (18) Category “ancillary activity” (19) Category “transitional activity” (20) BGN thousand % Yes; No; ineligible Yes; No; ineligible Yes; No; ineligible Yes; No; ineligible Yes; No; ineligible Yes; No; ineligible Yes/No Yes/No Yes/No Yes/No Yes/No Yes/No Yes/No % A. TAXONOMY-ELIGIBLE ACTIVITIES A.1. Environmentally sustainable activities (compliant with the taxonomy) Production of rechargeable batteries CCM 3.4/CCA 3.4 13 766 56.46% Yes Yes Ineligible Ineligible Ineligible Ineligible Yes Yes Yes Yes Yes Yes Yes С Production of polymers (plastic) in primary form CCM 3.17/CCA 3.17 21 0.09% Yes Yes Ineligible Ineligible Ineligible Ineligible Yes Yes Yes Yes Yes Yes Yes П Power generation via solar photovoltaic technology CCM 4.1. /CCA 4.1. 348 1.43% Yes Yes Ineligible Ineligible Ineligible Ineligible Yes Yes Yes Yes Yes Yes Yes Generation of heating/cooling energy through the utilization of waste heat CCM 4.25. /CCA 4.25 196 0.80% Yes Yes Ineligible Ineligible Ineligible Ineligible Yes Yes Yes Yes Yes Yes Yes Collection and transportation of non-hazardous and hazardous waste CE 2.3. 570 2.34% Ineligible Ineligible Ineligible Ineligible Yes Ineligible Yes Yes Yes Yes Yes Yes Yes Turnover from environmentally sustainable activities (consistent with the taxonomy) (A.1) 14 901 61.12% 58.78% 0.00% 0.00% 0.00% 2.34% 0.00% Yes Yes Yes Yes Yes Yes Yes 18.62% Out of which – ancillary 13 766 56.47% 56.47% 0.00% 0.00% 0.00% 0.00% 0.00% Yes Yes Yes Yes Yes Yes Yes Of which – transitional 21 0.09% 0.09% 0.00% 0.00% 0.00% 0.00% 0.00% Yes Yes Yes Yes Yes Yes Yes A.2 Taxonomy-eligible activities, but not environmentally sustainable (not compliant with the taxonomy) Production of additional low-emission process products CCM 3.6/CCA 3.6 1 725 7.07% Eligible Eligible Ineligible Ineligible Ineligible Ineligible Construction of new buildings CCM 7.1. /CCA 7.1./CE 3.1. 792 3.25% Eligible Eligible Ineligible Ineligible Eligible Ineligible Repair (renovation) of existing buildings CCM 7.2. /CCA 7.2./CE 3.2. 289 1.19% Eligible Eligible Ineligible Ineligible Eligible Ineligible CE from taxonomy-eligible activities, but are not environmentally sustainable (activities not compliant with the taxonomy) (A.2) 2 806 11.51% 11.51% 0.00% 0.00% 0.00% 0.00% 0.00% 19.85% А. CR of taxonomy eligible activities (A.1+A.2) 17 707 72.63% 70.29% 0.00% 0.00% 0.00% 2.34% 0.00% 38.47% B. TAXONOMY-INELIGIBLE ACTIVITIES CE from taxonomy-ineligible activities 6 672 27.37% 61.53% TOTAL 24 379 100% 100% 47 TABLE 3. KPI ON OPERATIONAL COSTS Financial year 2023 Criteria for significant contribution Criteria for DNSH (do no significant harm) (8) Economic activities (1) Code (2) RA (3) Share of turnover (4) Climate change mitigation (5) Adapting to climate change (6) Water (7) Pollution (8) Circular economy (9) Biodiversity (10) Climate change mitigation (11) Adapting to climate change (12) Water (13) Pollution (14) Circular economy (15) Biodiversity (16) Minimum guarantees (17) Share of taxonomy-compliant (A.1.) or taxonomy-eligible (A.2.) turnover, year N-1 (18) Category “ancillary activity” (19) Category “transitional activity” (20) BGN thousand % Yes; No; ineligible Yes; No; ineligible Yes; No; ineligible Yes; No; ineligible Yes; No; ineligible Yes; No; ineligible Yes/No Yes/No Yes/No Yes/No Yes/No Yes/No Yes/No % A. TAXONOMY-ELIGIBLE ACTIVITIES A.1. Environmentally sustainable activities (compliant with the taxonomy) Production of rechargeable batteries CCM 3.4/CCA 3.4 6 048 2.21% Yes Yes Ineligible Ineligible Ineligible Ineligible Yes Yes Yes Yes Yes Yes Yes С Power generation via solar photovoltaic technology CCM 4.1. /CCA 4.1. 12 0.00% Yes Yes Ineligible Ineligible Ineligible Ineligible Yes Yes Yes Yes Yes Yes Yes Collection and transportation of non-hazardous and hazardous waste CE 2.3. 103 903 37.79% Ineligible Ineligible Ineligible Ineligible Yes Ineligible Yes Yes Yes Yes Yes Yes Yes OC from environmentally sustainable activities (compliant with the taxonomy) (A.1) 109 963 40.00% 2.21% 0.00% 0.00% 0.00% 37.79% 0.00% Yes Yes Yes Yes Yes Yes Yes 14.26% Out of which – ancillary 6 048 2.20% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Yes Yes Yes Yes Yes Yes Yes Of which – transitional 0 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Yes Yes Yes Yes Yes Yes Yes A.2 Taxonomy-eligible activities, but not environmentally sustainable (not compliant with the taxonomy) ELIGIBLE; INELIGIBLE ELIGIBLE; INELIGIBLE ELIGIBLE; INELIGIBLE ELIGIBLE; INELIGIBLE ELIGIBLE; INELIGIBLE ELIGIBLE; INELIGIBLE Repair (renovation) of existing buildings CCM 7.2. /CCA 7.2./CE 3.2. 283 0.10% Eligible Eligible Ineligible Ineligible Eligible Ineligible OE from taxonomy-eligible activities, but are not environmentally sustainable (activities not compliant with the taxonomy) (A.2) 283 0.10% 0.10% 0.00% 0.00% 0.00% 0.00% 0.00% 1.74% А. OC of taxonomy eligible activities (A.1+A.2) 110 246 40.10% 2.31% 0.00% 0.00% 0.00% 37.79% 0.00% 16.00% B. TAXONOMY-INELIGIBLE ACTIVITIES OC for taxonomy-ineligible activities 164 693 59.90% 84.00% TOTAL 274 939 100.00% 100% iv DECLARATION under Art. 100n, para. 4, item 4 of the LAW ON PUBLIC OFFERING OF SECURITIES The undersigned, 1. Viktor Spiriev – Executive member of the Board of Directors of MONBAT AD 2. Petya Belnikolova – Preparer of the consolidated financial statements of MONBAT AD DECLARE that, to the best of our knowledge: 1.The 2023 annual consolidated 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 and the companies from the economic group. 2.The 2023 consolidated 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 and its subsidiaries face. 1 Grant Thornton OOD A 26, Cherni Vrah Blvd, 1421 SofiaA 111, Knyaz Boris I Blvd., 9000 VarnaT (+3592) 987 28 79, (+35952) 69 55 44F (+3592) 980 48 24, (+35952) 69 55 33E office@bg.gt.com W www.grantthornton.bg INDEPENDENT AUDITOR’S REPORT To the shareholders of MONBAT AD 32А, Cherni Vrah Blvd., Sofia Report on the Audit of the Consolidated Financial Statements Qualified Opinion We have audited the consolidated financial statements of Monbat AD and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at 31 December 2023 and the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the consolidated 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 consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2023 and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU and Bulgarian legislation. Basis for Qualified Opinion As disclosed in note 41 “Risks related to financial instruments” to the consolidated financial statements, the Group has overdue trade receivables from Ukrainian counterparties with a carrying amount of BGN 7,987 thousand as of 31 December 2023, of which BGN 5,469 thousand is overdue more than two years and BGN 2,518 thousand is overdue more than one year. No payments have been received as of the date of this report. We have not been able to obtain sufficient appropriate audit evidence regarding the recoverability of these trade receivables. We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements” section of our report. We are independent of the Group 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 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. Emphasis of Matter 1. We draw attention to note 39 “Contingent assets and contingent liabilities” of the consolidated financial statements, which describes tax liabilities of BGN 3,233 thousand of the subsidiary Monbat Recycling EAD in connection with a tax inspection act issued in 2022, for which the Group has not accrued provisions in the consolidated financial statements. The Group's expectations are that the appealed tax inspection act will be cancelled. Through its lawyers, Monbat Recycling EAD appealed the tax inspection act in the Administrative Court Sofia - city. The next court session is scheduled on May 8, 2024. Our opinion is not modified in respect of this matter. 2 2. As disclosed in note 13 "Income tax" of the consolidated financial statement, the subsidiary Piombifera Italiana Spa, Italy, has received an invitation from the Italian revenue agency to pay tax liabilities for corporate tax in the amount of BGN 6,922 thousand. (EUR 3,539 thousand), related to old tax liabilities of Piombifera Bresciana Srl, which merged into Piombifera Italiana Spa. Through its lawyers, Piombifera Italiana Spa disputed the invitation, but in September 2023 a court decision was issued, by which the court demanded payment of the above amount. In October 2023, Piombifera Italiana Spa disputed the amount of the tax liabilities at a second court instance. According to the Italian legislation, the maximum liability should be up to the amount of the equity capital of the transformed company Piombifera Bresciana Srl into Piombifera Italiana Spa, namely BGN 4,058 thousand (EUR 2,075 thousand). The expectation of the Group and its tax and legal associates is that the court will confirm the existence of the joint and several liability of Piombifera Italiana Spa in relation to the established tax liabilities of Piombifera Bresciana Srl, limiting the liability and the corresponding liability of Piombifera Italiana Spa, to the maximum amount of 4,058 thousand. In this regard, in 2023 the Group has recognized an adjustment in respect of prior periods BGN 4,058 thousand. Our opinion is not modified in respect of this matter. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters are considered as part of our audit of the consolidated financial statements as a whole and the formation of our opinion on it, and we do not provide a separate opinion on these issues. In addition to the matters described in the Basis for a Qualified Opinion section, we have identified the matter described below as key audit matter to be communicated in our report. Assessment of the recoverability of loans and receivables from Prista Oil Holding EAD Group’s disclosures regarding the assessment of the recoverability of loans and receivables from Prista Oil Holding EAD are presented in notes 37 and 38 to the consolidated financial statements. Key audit matter How this matter was addressed during the audit The Group's operations include significant transactions and balances with Prista Oil Holding EAD, as described in notes 37 “Related party transactions” and 38 “Related party balances at year- end”. As at 31 December 2023 the carrying amount of receivables and loans granted to Prista Oil Holding EAD is BGN 38 917 thousand (or 8% of the total assets of the Group). IFRS 9 requires the Group to determine at each reporting date the expected credit losses of its financial assets, based on a change, if any, in the credit risk of the financial instrument. As disclosed in note 39 “Related party balances at year-end”, the Group has determined that no impairment on loans and receivables from Prista Oil Holding AED is required, based on the assessment of the recoverability as at 31 December 2023. This assessment is related to a complex analysis and numerous judgments by the Group's management, regarding the expected time and amount of repayments by the related party 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 outside the core business.) Management's analysis and judgments focus on a 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 an assessment of the capacity for distribution of dividends of "Monbat" Group, based on its projected cash flows for the same five-year period. In this area, our audit procedures included, among others: •analysis of the Group'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 the Group's operations; •receipt of confirmation letters on related party transactions and balances and, as well as 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 Group, 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, 3 Due to the significant outstanding amount of loans and receivables from Prista Oil Holding AD, as well as the annual assessment of their recoverability, including complex analysis and multiple assumptions by Group's management, we have identified this area as a key audit matter. 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 key assumptions such as revenues, expenses, profitability before interest, taxes and depreciation against historical data and industry data. We also performed a test on the relevance of the recoverability of the loans and receivables of "Prista Oil" Group, using an estimate of Group's equity value using market comparables and the net asset value methods, as well as a sensitivity analysis of "Prista Oil" Group's ability to repay amounts due in the context of assumptions regarding adverse effects on its operating activities. We also considered the availability of additional non-operational sources of repayment (e.g. possible sales of businesses or assets outside the main activity), which are included as other considerations in the recoverability analysis by management; - assessment of the dividend distribution capacity of "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 industry data. We also took into account the history of the dividends distributed and the dividend distribution policy of "Monbat" Group. •procedures for assessment the adequacy of Group's disclosures in the attached consolidated financial statements regarding related parties, including the assessment of the recoverability of loans and receivables from them. Information Other than the Consolidated Financial Statements and Auditor’s Report Thereon Management is responsible for the other information. The other information comprises the annual consolidated management report, including the consolidated corporate governance statement and the consolidated non-financial declaration, prepared in accordance with Bulgarian Accountancy Act and other applicable legal requirements, but does not include the consolidated financial statements and our auditor’s report thereon. Our opinion on the consolidated 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 consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated 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 have not been able to obtain sufficient and appropriate audit evidence on the matter identified in this section. Accordingly, we are not in a position to conclude whether the other information does not contain material misstatement in relation to this matter. Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements 4 Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU and Bulgarian legislation, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group’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 Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group’s financial reporting process. Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and Bulgarian Independent Financial Audit Act will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of our audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: −identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override 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 Group’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 going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated 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 auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern; −evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. −obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. 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 consolidated 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 5 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 Consolidated Financial Statements and Auditor’s Report Thereon”, regarding the annual consolidated management report, including the consolidated corporate governance statement and the consolidated non-financial declaration, 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 Public Offering of Securities Act (Article 100m, paragraph (10) in relation to Article 100n, paragraph (8), subparagraphs (3) and (4) of Bulgarian Public Offering of Securities Act) applicable in Bulgaria. 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 consolidated management report is consistent with the consolidated financial statements for the same reporting period, on which we have issued qualified opinion in the section “Report on the Audit of the Consolidated Financial Statements” above; (b)the consolidated management report is prepared in accordance with the applicable legal requirements; (c)as a result of the acquired knowledge and understanding of the activities of the Group and the environment in which it operates, we have found no cases of material misrepresentation in the consolidated management report, except for the possible effect of the matter described in section “Information Other than the Consolidated Financial Statements and Auditor’s Report Thereon” of the “Report on the Audit of the Consolidated Financial Statements”; (d)the consolidated corporate governance statement for the financial year contains the required information in accordance with the applicable legal requirements, including Article 100n, paragraph (8) of Bulgarian Public Offering of Securities Act; (e)the consolidated non-financial declaration is prepared and made available in accordance with the requirements of Bulgarian Accountancy Act. Statement Pursuant to Article 100m, Paragraph (10) of Bulgarian Public Offering of Securities Act Based on the procedures performed and our knowledge of the Group 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 Group 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 consolidated corporate governance statement, being a component of the annual consolidated management report. Reporting on compliance of the electronic format of the consolidated financial statements included in the annual consolidated financial report on the activity under Art. 100n, paragraph 5 of Bulgarian Public Offering of Securities Act with the requirements of ESEF Regulation We have undertaken a reasonable assurance engagement on the compliance of the electronic format of the consolidated financial statements of Monbat AD for the year ended on 31 December 2023 included in the digital file „213800ZH4VUOQOUVYX93-20231231-BG-CON.zip“, with the requirements of Commission Delegated Regulation (EU) 2019/815 of 17 December 2018 supplementing Directive 2004/109/EC of the European Parliament and of the Council with regard to regulatory technical standards on the specification of a single electronic reporting format (“ESEF Regulation”). Our opinion is only regarding the electronic format of the consolidated financial statements and does not include the other information contained in the annual consolidated financial report on the activity under art. 100n, para. 5 of Bulgarian Public Offering of Securities Act. 6 Description of Subject Matter Information and Applicable Criteria Management has prepared the electronic format of Group’s consolidated financial statements for the year ended 31 December 2023 in accordance with ESEF Regulation in order to comply with Bulgarian Public Offering of Securities Act. The rules for preparation of the consolidated financial statements in this electronic format are described in the ESEF Regulation and in our opinion, they are applicable criteria for providing reasonable assurance. Responsibilities of Management and Those Charged with Governance Group’s management is responsible for the application of the requirements of ESEF Regulation in preparing the electronic XHTML format of the consolidated financial statements. These responsibilities include the selection and application of suitable iXBRL tags in accordance with the taxonomy of ESEF Regulation, as well as the application of such internal controls, which are necessary for the preparation of the electronic format of Group’s annual consolidated financial statements, that are free from material misstatements in accordance with ESEF Regulation. Those charged with governance are responsible for overseeing the process for preparation of Group’s annual consolidated financial statements and application of ESEF Regulation. Auditor’s Responsibilities Our responsibility is to obtain reasonable assurance about whether the electronic format of the consolidated financial statements complies with ESEF Regulation. We applied the “Guidance on issuing an opinion on the application of ESEF Regulation by issuers whose securities are admitted to trading on a regulated market in the European Union” of Institute of Certified Public Accountants (ICPA)” in Bulgaria and conducted our reasonable assurance engagement in accordance with International Standard on Assurance Engagements 3000 (Revised) “Assurance Engagements Other than Audits or Reviews of Historical Financial Information (ISAE 3000 (Revised))”. The standard requires that we comply with ethical requirements, design and perform audit procedures to obtain reasonable assurance whether the electronic format of Group’s consolidated financial statements have been prepared in accordance with the applicable criteria described above. The nature, timing and extent of our procedures depend on our professional judgement, including the risk of material misstatements whether due to fraud or error, in applying the requirements of ESEF Regulation. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAE 3000 (Revised) will always detect a material misstatement when it exists. Quality Management Requirements We apply the requirements of International Standard on Quality Management (ISQM) 1, which requires the firm to design, implement and operate a system of quality control, including documented policies or procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements for registered auditors in Bulgaria. We have complied with the independence and other ethical requirements of the International Code of Ethics for Professional Accountants (including International Independent Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code) and adopted by BICPA, together with the ethical requirements of Bulgarian Independent Financial Audit Act. Summary of the Work Performed The purpose of the designed and performed procedures was to obtain reasonable assurance whether the electronic format of the consolidated financial statements has been prepared in all material aspects in compliance with the requirements of ESEF Regulation. In performing procedures for assessing compliance with the requirements of ESEF Regulation on electronic (XHTML) format of Group’s consolidated financial statements, we used professional judgement and applied professional skepticism. We also: −obtained an understanding of the internal control and processes, related to the application of ESEF Regulation in preparing Groups’ consolidated financial statements in XHTML format with iXBRL tags; −checked that the enclosed XHTML format is valid; −reconciling the data in the electronic format of the consolidated financial statements with the audited consolidated financial statements; 7 −evaluated the completeness of Group’s tagging of the consolidated financial statements using the XBRL markup language; −evaluated the appropriateness of the use of iXBRL elements selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identified; and −evaluated the use of anchoring in relation to the extension elements in accordance with ESEF Regulation. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion on compliance of the electronic format of the consolidated financial statements with ESEF Regulation Based on the performed procedures, our opinion is that the electronic format of the consolidated financial statements of the Group for the year ended 31 December 2023, contained in the attached electronic file „213800ZH4VUOQOUVYX93-20231231-BG-CON.zip“, 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 consolidated 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 consolidated financial statements of the Group for the year ended on 31 December 2023 has been made for fourth consecutive year. −In support of our audit opinion, we have provided a description of the most significant assessed risks of material misstatement, a summary of the auditor’s response and where relevant, key observations arising with respect to those risks in the section „Key audit matters“ of this report. −We confirm that our audit opinion is consistent with the additional report to the audit committee, 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 Group in conducting the audit. −For the period for which we were engaged as statutory auditors, we have not provided any other services to Monbat AD and its controlled undertakings in addition to the statutory audit.