Regulatory Filings • Mar 18, 2024
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Download Source FileSeparate Financial Statements Annual Separate Management Report Corporate Governance Declaration Report on the implementation of the remuneration policy Declaration by the responsible directors Independent Auditor’s Report “Sirma Group Holding” JSC 31 December 2023 Content Separate statement of financial position 1 Separate statement of profit or loss and other comprehensive income for the year ended 31 December 2 Separate statement of changes in equity for the year ended 31 December 3 Separate statement of cash flows for the year ended 31 December 4 Notes to the financial statements 5 1. General information about “Sirma Group Holding” JSC 5 1.1. Distribution of share capital 5 1.2. Management authorities 6 1.3. Organizational structure of Sirma Group 7 2. Statement of compliance with IFRS and application of the going concern principle 9 2.1. Statement of compliance with IFRS adopted by the EU 9 2.2. Application of the going concern principle 9 3. Changes in accounting policies 9 3.1. New Standards adopted as at 1 January 2023 9 3.2. Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Company 9 4. Significant accounting policies 10 4.1. Overall considerations 10 4.2. Presentation of separate financial statements 10 4.3. Investments in subsidiaries 10 4.4. Climate-related matters 10 4.5. Foreign currency translation 11 4.6. Segment reporting 11 4.7. Revenue 11 4.7.1. Revenue recognised over time 12 4.7.2. Revenue recognised at a point of time 12 4.7.3. Revenue from investment property rental 12 4.7.4. Interest and dividend income 12 4.7.5. Revenue from financing 12 4.8. Contract assets and liabilities 12 4.9. Operating expenses 13 4.10. Interest expenses and borrowing costs 13 4.11. Intangible assets 13 4.12. Property, plant and equipment 14 4.13. Leases 14 4.14. Impairment testing of intangible assets and property, plant and equipment 15 4.15. Investment property 16 4.16. Financial instruments 16 4.16.1. Recognition and derecognition 16 4.16.2. Classification and initial measurement of financial assets 16 4.16.3. Subsequent measurement of financial assets 17 4.16.4. Impairment of financial assets 17 4.16.5. Classification and measurement of financial liabilities 18 4.17. Income taxes 18 4.18. Cash and cash equivalents 19 4.19. Equity, reserves and dividend payments 19 4.20. Post-employment benefits and short-term employee benefits 19 4.21. Provisions, contingent liabilities and contingent assets 20 4.22. Significant management judgement in applying accounting policies 20 4.22.1. Internally generated intangible assets and research costs 20 4.22.2. Deferred tax assets 20 4.23. Estimation uncertainty 21 4.23.1. Impairment of non-financial assets 21 4.23.2. Useful lives of depreciable assets 21 4.23.3. Measurement of expected credit losses 21 4.23.4. Defined benefit liability 22 4.23.5. Uncertain tax position and tax-related contingency 22 5. Property, plant and equipment 23 6. Intangible assets 24 7. Investments in subsidiaries 26 8. Investment property 26 9. Deferred tax assets and liabilities 28 10. Trade receivables 28 11. Prepayments and other assets 29 12. Cash and cash equivalents 29 13. Equity 29 13.1. Share capital 29 13.2. Repurchased own shares 29 13.3. Share premium reserve 30 13.4. Other reserves 30 14. Employee remuneration 30 14.1. Employee benefits expense 30 14.2. Pension and other employee obligations 30 15. Borrowings 32 15.1. Borrowings at amortized cost 33 16. Lease liabilities 34 17. Trade and other payables 34 18. Revenues from sales 34 18.1. Revenues recognized over time 34 19. Other income 35 20. Cost of materials 35 21. Hired services expenses 35 22. Other expenses 36 23. Finance costs and finance income 36 24. (Expenses for)/Revenues from income taxes 36 25. Earnings per share and dividends 36 25.1. Earnings per share 36 25.2. Dividends 37 26. Related party transactions 37 26.1. Transactions with subsidiaries 37 26.2. Transactions with other related parties 38 26.3. Transactions with key management personnel 38 27. Related party balances at the end of the period 38 28. Reconciliation of liabilities arising from financing activities 40 29. Contingent assets and contingent liabilities 41 30. Non-cash transactions 42 31. Categories of financial assets and liabilities 42 32. Financial instrument risk 43 32.1. Market risk analysis 43 32.1.1. Foreign currency risk 43 32.1.2. Interest rate risk 44 32.2. Credit risk 44 32.3. Liquidity risk 44 33. Capital management policies and procedures 45 34. Post-reporting date events 46 35. Authorization of the separate financial statements 46 “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 The accompanying notes on pages from 5 to 46 form an integral part of the Interim separate financial statements. 1 Separate statement of financial position Note 31 December 31 December 2023 2022 Assets BGN‘000 BGN‘000 Non-current assets Property, plant and equipment 5 1 057 633 Intangible assets 6 4 225 6 556 Investments in subsidiaries 7 70 830 67 035 Investment property 8 9 638 9 707 Long-term related party receivables 27 295 47 Deferred tax assets 9 831 832 Total non-current assets 86 876 84 810 Current assets Trade receivables 10 158 73 Prepayments and other assets 11 83 36 Related party receivables 27 1 829 905 Cash and cash equivalents 12 1 131 3 671 Total current assets 3 201 4 685 Total assets 90 077 89 495 Equity and liabilities Equity Share capital 13.1 59 361 59 361 Purchased own shares 13.2 (1 781) (85) Share premium reserve 13.3 5 855 5 372 Other reserves 13.4 1 458 1 244 Retained earnings 6 627 7 559 Profit for the year 1 509 2 131 Total equity 73 029 75 582 Liabilities Non-current liabilities Pension obligations 14.2 60 55 Long-term borrowings 15 - 7 457 Long-term lease liabilities 16 192 130 Long-term related party payables 27 16 148 3 768 Total Non-current liabilities 16 400 11 410 Current liabilities Employee obligations 14.2 114 237 Short-term borrowings 15 - 1 432 Short-term lease liabilities 16 53 33 Trade and other payables 17 185 159 Short-term related party payables 27 296 642 Total Current liabilities 648 2 503 Total liabilities 17 064 13 913 Total equity and liabilities 90 077 89 495 Prepared by: ____ /Margarita Boldireva/ Executive Director: _ /Tsvetan Alexiev/ Chief accountant: ____ /Diana Petkova/ The financial report was prepared and approved for issuance by the Board of Directors on 14.03.2024 and signed on 18.03.2024. With auditor’s report from on 18.03.2024. Grant Thornton OOD, Audit firm № 032 Mariy Apostolov, Managing Partner Emilia Marinova, registered auditor responsible for the audit Margarita Petrova Boldireva Digitally signed by Margarita Petrova Boldireva Date: 2024.03.18 13:34:01 +02'00' Diana Ivanova Petkova Digitally signed by Diana Ivanova Petkova Date: 2024.03.18 14:00:12 +02'00' Tsvetan Borisov Alexiev Digitally signed by Tsvetan Borisov Alexiev Date: 2024.03.18 14:34:11 +02'00' EMILIYA GEORGIEVA MARINOVA-LALEVA Digitally signed by EMILIYA GEORGIEVA MARINOVA-LALEVA Date: 2024.03.18 21:10:42 +02'00' MARIY GEORGIEV APOSTOLOV Digitally signed by MARIY GEORGIEV APOSTOLOV Date: 2024.03.18 21:59:49 +02'00' “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 The accompanying notes on pages from 5 to 46 form an integral part of the Interim separate financial statements. 2 Separate statement of profit or loss and other comprehensive income for the year ended 31 December Note 31 December 2023 31 December 2022 BGN‘000 BGN‘000 Revenues from sales 18 2 983 2 514 Dividend income 7 1 509 9 879 Other revenues 19 736 1 311 Cost of materials 20 (138) (84) Hired services expenses 21 (685) (904) Employee benefits expense 14.1 (1 871) (1 689) Depreciation and amortisation of non-financial assets 5,6,8 (617) (3 388) Other expenses 22 (222) (184) Operating profit 1 695 7 455 Finance costs 23 (191) (6 191) Finance income 23 6 7 Profit before tax 1 510 1 271 (Expenses for)/Revenues from income taxes 24 (1) 860 Profit for the period 1 509 2 131 Total comprehensive profit for the period 1 509 2 131 BGN BGN Earnings per share 25.1 0,0261 0,0364 Prepared by: ___ /Margarita Boldireva/ Executive Director: _ /Tsvetan Alexiev/ Chief accountant: _____ /Diana Petkova/ The financial report was prepared and approved for issuance by the Board of Directors on 14.03.2024 and signed on 18.03.2024. With auditor’s report from on 18.03.2024. Grant Thornton OOD, Audit firm № 032 Mariy Apostolov, Managing Partner Emilia Marinova, registered auditor responsible for the audit Margarita Petrova Boldireva Digitally signed by Margarita Petrova Boldireva Date: 2024.03.18 13:35:25 +02'00' Diana Ivanova Petkova Digitally signed by Diana Ivanova Petkova Date: 2024.03.18 14:00:39 +02'00' Tsvetan Borisov Alexiev Digitally signed by Tsvetan Borisov Alexiev Date: 2024.03.18 14:08:09 +02'00' EMILIYA GEORGIEVA MARINOVA-LALEVA Digitally signed by EMILIYA GEORGIEVA MARINOVA-LALEVA Date: 2024.03.18 21:12:41 +02'00' MARIY GEORGIEV APOSTOLOV Digitally signed by MARIY GEORGIEV APOSTOLOV Date: 2024.03.18 22:01:04 +02'00' “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 The accompanying notes on pages from 5 to 46 form an integral part of the Interim separate financial statements. 3 Separate statement of changes in equity for the year ended 31 December All amounts are presented in BGN ‘000 Share capital Purchased own shares Share premium Other reserves Retained earnings Profit for the year Total equity Balance at 1 January 2023 59 361 (85) 5 372 1 244 7 559 2 131 75 582 Dividends - - - - (2 849) - (2 849) Repurchased own shares - (1 696) 483 - - - (1 213) Transactions with owners - (1 696) 483 - (2 849) - (4 062) Profit for the period - - - - - 1 509 1 509 Total comprehensive income for the period - - - - - 1 509 1 509 Transfer of profit to reserves - - - 214 1 917 (2 131) - Balance at 31 December 2023 59 361 (1 781) 5 855 1 458 6 627 1 509 73 029 All amounts are presented in BGN ‘000 Share capital Purchased own shares Share premium Other reserves Retained earnings Profit for the year Total equity Balance at 1 January 2022 59 361 (585) 5 497 1 141 8 028 1 034 74 476 Dividends - - - - (469) (931) (1 400) Sale of repurchased own shares - 500 (125) - - - 375 Transactions with owners - 500 (125) - (469) (931) (1 025) Profit for the year - - - - - 2 131 2 131 Total comprehensive income for the year - - - - - 2 131 2 131 Transfer of profit to reserves - - - 103 - (103) - Balance at 31 December 2022 59 361 (85) 5 372 1 244 7 559 2 131 75 582 Prepared by: ____ /Margarita Boldireva/ Executive Director: _ /Tsvetan Alexiev/ Chief accountant: ____ /Diana Petkova/ The financial report was prepared and approved for issuance by the Board of Directors on 14.03.2024 and signed on 18.03.2024. With auditor’s report from on 18.03.2024. Grant Thornton OOD, Audit firm № 032 Mariy Apostolov, Managing Partner Emilia Marinova, registered auditor responsible for the audit Margarita Petrova Boldireva Digitally signed by Margarita Petrova Boldireva Date: 2024.03.18 13:35:50 +02'00' Diana Ivanova Petkova Digitally signed by Diana Ivanova Petkova Date: 2024.03.18 14:00:57 +02'00' Tsvetan Borisov Alexiev Digitally signed by Tsvetan Borisov Alexiev Date: 2024.03.18 14:09:23 +02'00' EMILIYA GEORGIEVA MARINOVA-LALEVA Digitally signed by EMILIYA GEORGIEVA MARINOVA-LALEVA Date: 2024.03.18 21:14:22 +02'00' MARIY GEORGIEV APOSTOLOV Digitally signed by MARIY GEORGIEV APOSTOLOV Date: 2024.03.18 22:02:19 +02'00' The accompanying notes on pages from 5 to 46 form an integral part of the Interim separate financial statements. 4 Separate statement of cash flows for the year ended 31 December Note 31 December 2023 31 December 2022 BGN‘000 BGN‘000 Operating activities Cash receipts from customers 4 612 4 603 Cash paid to suppliers (2 553) (2 458) Cash paid to employees and social security institutions (1 948) (1 770) Income taxes paid - 17 Other receipts / (payments), net (1 461) (228) Net cash flow from operating activities (1 350) 164 Investing activities Purchase of property, plant and equipment (477) (319) Proceeds from sale of property, plant and equipment 1 999 1 Loans granted (700) (692) Loan repayments received 77 1 639 Cash flows related to the sale of investments 7 - 7 824 Cash flows related to the purchase of investments 7 (3 839) (6 058) Dividends received 7 1 509 9 945 Interest received - 21 Net cash flow from investing activities (1 431) 12 361 Financing activities Proceeds from borrowings 28 - 6 827 Repayments of borrowings 28 (8 876) (14 907) Interest paid 28 (105) (256) Payment of principal element of lease liabilities 16 (70) (38) Interest paid on payment of principal element of lease liabilities 16 (5) (4) Proceeds from deposits received 26 13 622 - Repayments of deposits received 26 (514) (975) Interest payments on deposits received (1) (57) Reinstated dividend 1 - Dividends paid 25.2 (2 595) (1 216) Cash flows related to the purchase of shares 13.1 (1 213) - Net cash flow from financing activities 244 (10 626) Net change in cash and cash equivalents (2 537) 1 899 Cash and cash equivalents, beginning of year 3 671 1 775 Exchange gains/(losses) on cash and cash equivalents (3) (3) Cash and cash equivalents for continuing operations 12 1 131 3 671 Prepared by: ___ /Margarita Boldireva/ Executive Director: _ /Tsvetan Alexiev/ Chief accountant: _____ /Diana Petkova/ The financial report was prepared and approved for issuance by the Board of Directors on 14.03.2024 and signed on 18.03.2024. With auditor’s report from on 18.03.2024. Grant Thornton OOD, Audit firm № 032 Mariy Apostolov, Managing Partner Emilia Marinova, registered auditor responsible for the audit Margarita Petrova Boldireva Digitally signed by Margarita Petrova Boldireva Date: 2024.03.18 13:36:17 +02'00' Diana Ivanova Petkova Digitally signed by Diana Ivanova Petkova Date: 2024.03.18 14:01:15 +02'00' Tsvetan Borisov Alexiev Digitally signed by Tsvetan Borisov Alexiev Date: 2024.03.18 14:09:59 +02'00' EMILIYA GEORGIEVA MARINOVA-LALEVA Digitally signed by EMILIYA GEORGIEVA MARINOVA-LALEVA Date: 2024.03.18 21:18:12 +02'00' MARIY GEORGIEV APOSTOLOV Digitally signed by MARIY GEORGIEV APOSTOLOV Date: 2024.03.18 22:03:27 +02'00' sirma.com Notes to the Separate Financial Statements of "Sirma Group Holding" JSC for 2023 “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 5 Notes to the financial separate statements 1. General information about “Sirma Group Holding” JSC “Sirma Group Holding” JSC is a holding company registered on 25.04.2008 in the Commercial Register under UIC 200101236. Principal place of business and registered office: Bulgaria, Sofia (capital), Sofia municipality, city. Sofia, 1784, Mladost area, bul. Tsarigradsko Shose, No 135. The company’s principal activities include Acquisition, management, evaluation and sale of interest in Bulgaria and foreign entities; acquisition, evaluation and sale of patents, granting of licenses to use patents of the entities in which the company holds interests, financing the entities in which the company holds shares, organizing their accounting and compiling financial statements under the Law of Accounting. The Company may perform independent business activity that in not prohibited by law. The share capital of the company as of 31.12.2023, as well as at the date of preparation of this financial report, is in the amount of BGN 59 360 518, divided into 59 360 518 non-current registered shares with a nominal value of BGN 1. The capital of the Company has changed as follows: Date Amount of capital 30.10.2015 BGN 59 360 518 23.10.2014 BGN 49 837 156 22.10.2010 BGN 73 340 818 15.10.2008 BGN 77 252 478 25.4.2008 BGN 50 000 The company's capital is fully paid. Тhe non-monetary contributions in the company’s capital are presented below: • Software representing 29 (twenty nine) software modules. Amount: 61 555 838 BGN • 81 960 ordinary registered shares of "Sirma Group" JSC registered in the Commercial Register under UIC 040529004. Amount: 11 734 980 BGN • Real Estate - Floor 3 of an office building "IT - Center Office Express" in Sofia, bul. "Tsarigradsko Shosse" N 135 with an area of 796,50 square meters, pursuant to Deed of buying and selling real estate N 126, Volume I, reg. N 4551, case N 116 from 23.04.2003 and 5 floor of an office building "IT - center office Express" in Sofiabul. "Tsarigradsko Shosse" N 135 with area of 281.81 square meters, according to Deed of sale of real estate N 86, Volume 4, Reg. N 10237, Case N 592 of 23.12.2004. Amount: 3 911 660 BGN 1.1. Distribution of share capital As of 31.12.2023 the distribution of the share capital of “Sirma Group Holding” JSC is as follows: 31.12.2023 31.12.2022 Share capital 59 361 59 361 Number of shares (par value of BGN 1) 59 360 518 59 360 518 Total number of registered shareholders 1 039 1 033 Legal entities 39 40 Individuals 1 000 993 Number of shares held by legal entities 7 223 085 5 286 591 % Of participation of entities 12,17% 8,91% Number of shares held by individuals 52 137 433 54 073 927 % Participation of individuals 87,83% 91,09% “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 6 Share capital allocation, including deduction of repurchased own shares is as follows: Shareholders Number of shares at 31.12.2023 Number of shares at 31.12.2022 Nominal VALUE (BGN) Value (BGN) % Sharehol ding % of voting rights Georgi Parvanov Marinov 5 455 748 5 269 748 1 5 455 748 9,19% 9,48% Tsvetan Borisov Alexiev 5 035 153 4 965 753 1 5 035 153 8,48% 8,74% Chavdar Velizarov Dimitrov 4 817 386 4 750 786 1 4 817 386 8,12% 8,37% Veselin Antchev Kirov 4 767 386 4 700 786 1 4 767 386 8,03% 8,28% Ognyan Plamenov Chernokozhev 3 741 620 3 741 620 1 3 741 620 6,30% 6,50% Ivo Petrov Petrov 3 400 000 4 013 920 1 3 400 000 5,73% 5,90% Krasimir Nevelinov Bozhkov 2 534 161 2 534 161 1 2 534 161 4,27% 4,40% Vladimir Ivanov Alexiev 2 177 583 2 177 583 1 2 177 583 3,67% 3,78% Rosen Vasilev Varbanov 2 156 687 2 156 687 1 2 156 687 3,63% 3,75% Emiliana Ilieva Ilieva 1 990 209 1 965 209 1 1 990 209 3,35% 3,46% Deyan Nikolov Nenov 1 814 748 1 790 748 1 1 814 748 3,06% 3,15% Purchesd own shares (1 780 407) (84 846) 1 (1 780 407) 3,00% - Atanas Kostadinov Kiryakov 1 542 787 2 887 524 1 1 542 787 2,60% 2,68% Rosen Ivanov Marinov 1 282 900 1 265 795 1 1 282 900 2,16% 2,23% DF Advance Invest 1 099 116 411 895 1 1 099 116 1,85% 1,91% Yavor Liudmilov Djonev 1 092 746 1 292 746 1 1 092 746 1,84% 1,90% Peter Nikolaev Konyarov 872 803 867 165 1 872 803 1,47% 1,52% Mandjukov Ltd. 860 000 860 000 1 860 000 1,45% 1,49% UPF Doverie JSC 802 126 802 126 1 802 126 1,35% 1,39% UPF DSK Rodina 747 036 747 036 1 747 036 1,26% 1,30% Asen Krumov Nelchinov 650 449 641 349 1 650 449 1,10% 1,13% Others 10 739 467 11 433 035 1 10 739 467 18,09% 18,65% Total 59 360 518 59 360 518 59 360 518 100% 100% Percentage of voting rights represents participation in the capital of the company net of the purchased own shares. Shareholders holding more than 5% of the company's capital are: Shareholders Number of shares at 31.12.2023 % Shareholding % of voting rights Georgi Parvanov Marinov 5 455 748 9,19% 9,48% Tsvetan Borisov Alexiev 5 035 153 8,48% 8,74% Chavdar Velizarov Dimitrov 4 817 386 8,12% 8,37% Veselin Antchev Kirov 4 767 386 8,03% 8,28% Ognyan Plamenov Chernokozhev 3 741 620 6,30% 6,50% Ivo Petrov Petrov 3 400 000 5,73% 5,90% Shareholders Number of shares at 31.12.2022 % Shareholding % of voting rights Georgi Parvanov Marinov 5 269 748 8,88% 8,89% Tsvetan Borisov Alexiev 4 965 753 8,37% 8,38% Chavdar Velizarov Dimitrov 4 750 786 8,00% 8,01% Veselin Antchev Kirov 4 700 786 7,92% 7,93% Ivo Petrov Petrov 4 013 920 6,76% 6,77% Ognyan Plamenov Chernokozhev 3 741 620 6,30% 6,31% 1.2. Management authorities “Sirma Group Holding” JSC has a one-tier management system which comprises of a Board of Directors. “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 7 The Board of Directors as at 31.12.2023 includes the following members: Chavdar Velizarov Dimitrov Tsvetan Borisov Alexiev Atanas Kostadinov Kiryakov Georgi Parvanov Marinov Yordan Stoyanov Nedev Veselin Anchev Kirov Yavor Ludmilov Djonev - independent member Martin Veselinov Paev - independent member Peyo Vasilev Popov - independent member Method of determining the mandate of the Board of Directors: 2 years from the date of entry. The current term of the Board of Directors is until 07.07.2024. The company is represented by the executive director - Tsvetan Borisov Alexiev. The following Committees are established within the Board of Directors: - Investment and Risk Committee; - Remuneration Committee – an internal authority not selected by the GMS; - Information Disclosure Committee; - Audit Committee. The participation of members of the Board of Directors in the capital of the Company is as follows: Shareholders Number of shares at 31.12.2023 Number of shares at 31.12.2022 Nominal value (BGN) Value (BGN) % Shareholding % of voting rights Georgi Parvanov Marinov 5 455 748 5 269 748 1 5 455 748 9,19% 9,48% Tsvetan Borisov Alexiev 5 035 153 4 965 753 1 5 035 153 8,48% 8,74% Chavdar Velizarov Dimitrov 4 817 386 4 750 786 1 4 817 386 8,12% 8,37% Veselin Anchev Kirov 4 767 386 4 700 786 1 4 767 386 8,03% 8,28% Atanas Kostadinov Kiryakov 1 542 787 2 887 524 1 1 542 787 2,60% 2,68% Yavor Ludmilov Djonev 1 092 746 1 292 746 1 1 092 746 1,84% 1,90% Martin Veselinov Paev 126 920 126 720 1 126 920 0,21% 0,22% Yordan Stoyanov Nedev 3 433 3 433 1 3 433 0,01% 0,01% Peyo Vasilev Popov 100 100 1 100 0,0002% 0,0002% Total 22 841 659 23 997 596 22 841 659 38,48% 39,67% During 2023 the member of the BD Georgi Parvanov Marinov acquired 186 000 shares, the member of the BD Tsvetan Borisov Alexiev acquired 69 400 shares, the member of the BD Chavdar Velizarov Dimitrov acquired 66 600 shares, the member of the BD Veselin Anchev Kirov acquired 66 600 shares, the member of the BD Martin Veselinov Paev acquired 200 shares, the member of the BD Yavor Ludmilov Djonev sold 200 000 shares and the member of the BD Atanas Kostadinov Kiryakov sold 1 344 737 shares of the capital of the company. “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 8 1.3. Organizational structure of Sirma Group The structure of the Group includes “Sirma Group Holding” JSC as the parent company and the companies listed below, as follows: Subsidiaries of "Sirma Group Holding" JSC: Company Value of the investment at 31.12.2023 (BGN’000) Percentage of capital at 31.12.2023 Percentage of voting rights at 31.12.2023 Value of the investment at 31.12.2022 (BGN’000) Percentage of capital at 31.12.2022 Percentage of voting rights at 31.12.2022 Sirma Solutions 39 686 100% 100% 39 686 80,11% 100% SAI (Ontotext) 17 865 84,56% 100% 17 865 84,56% 100% Impairment (5 360) - - (5 360) - - Sciant 14 076 100% 100% 10 237 80,00% 80,00% Sirma Group Inc. 3 471 76,30% 76,30% 3 471 76,30% 76,30% Sirma InsurTech 914 55,00% 55,00% 914 55,00% 55,00% Sirma CI 106 80,00% 80,00% 106 80,00% 80,00% Sirma Medical Systems 66 66,00% 66,00% 66 66,00% 66,00% Impairment (44) - - - - - EngView Systems 50 72,90% 72,90% 50 72,90% 72,90% Total 70 830 67 035 “Sirma Group Holding JSC” is a public company under the Public Offering of Securities Act. The number of employees as of 31.12.2023 was 29 people, including 20 employees under labour contracts and 9 under management contracts. “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 9 2. Statement of compliance with IFRS and application of the going concern principle 2.1. Statement of compliance with IFRS adopted by the EU The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and approved by the European Union (IFRS, as adopted by the EU). The term “IFRS, as adopted by the EU” has the meaning of paragraph 1, subparagraph 8 of the Additional provisions of Bulgarian Accountancy Act, which is International Accounting Standards (IAS) adopted in accordance with Regulation (EC) 1606/2002 of the European Parliament and of the Council. The separate financial statements are presented in Bulgarian leva (BGN), which is also the functional currency of the Company. All amounts are presented in thousand Bulgarian leva (BGN‘000) (including comparative information for 2022) unless otherwise stated. Management is responsible for the preparation and fair presentation of the information in these financial statements. These financial statements are separate financial statements. The Company also prepares consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) developed and published by the International Accounting Standards Board (IASB) and approved by EU. Investments in subsidiaries are accounted for and disclosed in accordance with IFRS 10 “Consolidated Financial Statements”. 2.2. Application of the going concern principle The separate financial statements have been prepared in accordance with the going concern principle and taking into account the possible effects from the military conflict between Russia and Ukraine, inflation and others. The management has performed an analysis and assessment of the ability of the company to continue its activities as an operating enterprise based on the available information for the foreseeable future. The assessment was performed on the basis of the actions taken by the management regarding the maintenance of stable supply chains, efficient customer service, regular monitoring of liquidity and negotiation of appropriate financing parameters. The forecasts and budgets made for the future development of the company, taking into account the possible changes in the activity, set out above, indicate that the company should continue its activity normally and that the provided financing is sufficient. As a result of the review, the management expects that the company has sufficient resources to continue its operational activities in the near future and considers that the going concern principle has been used appropriately. 3. Changes in accounting policies 3.1. New Standards adopted as at 1 January 2023 The Company has applied the following new standards, amendments and interpretations to IFRS, developed and published by the International Accounting Standards Board, which are mandatory for application from the annual period beginning on 1 January 2023, but do not have a significant effect on their application on the financial result and the financial condition of the Company: - IFRS 17 “Insurance Contracts” effective from 1 January 2023, adopted by the EU - Amendments to IFRS 17 “Insurance contracts: Initial application of IFRS 17 and IFRS 9 – Comparative information” effective from 1 January 2023, adopted by the EU. - Amendments to IAS 1 “Presentation of Financial Statements” and IFRS Practice Statement 2 “Disclosure of accounting policies”, effective from 1 January 2023, adopted by the EU - Amendments to IAS 8 “Accounting policies, changes in accounting estimates and errors: Definition of accounting estimates”, effective from 1 January 2023, adopted by the EU - Amendments to IAS 12 “Income taxes: Deferred tax related to assets and liabilities arising from a single transaction”, effective from 1 January 2023, adopted by the EU - Amendments to IAS 12 “Income taxes: International Tax Reform – Pillar Two Model Rules”, effective from 1 January 2023, adopted by the EU 3.2. Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Company At the date of authorisation of these 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 Company. They are not expected to have a material impact on the Company’s financial statements. Management anticipates that all relevant pronouncements will be adopted in the Company’s accounting policies for the first period beginning after the effective date of the pronouncement. A list of the changes in the standards is provided below: “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 10 - Amendments to IAS 1 “Presentation of financial statements: Classification of liabilities as current or non- current”, effective from 1 January 2024, not yet adopted by the EU - Amendments to IAS 1 “Presentation of financial statements: Non-current liabilities with covenants”, effective from 1 January 2024, not yet 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 4. Significant accounting policies 4.1. Overall considerations The significant accounting policies that have been used in the preparation of these separate financial statements are summarized below. The 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 more fully described in the accounting policies below. It should be noted that accounting estimates and assumptions are used for the preparation of the separate financial statements. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates. 4.2. Presentation of separate financial statements The separate financial statements are presented in accordance with IAS 1 “Presentation of Financial Statements”. The Company has elected to present the statement of profit or loss and other comprehensive income as a single statement. Two comparative periods are presented for the statement of financial position when the Company applies an accounting policy retrospectively, makes a retrospective restatement of items in its financial statements, or reclassifies items in the financial statements and this has a material impact on the statement of financial position at the beginning of the preceding period. In 2023 two comparative periods are presented. 4.3. Investments in subsidiaries Subsidiaries are firms under the control of the Company. The Company controls an investee when it 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. In the financial statements of the Company investment in subsidiaries is accounted at cost of the investment. The Company recognises a dividend from a subsidiary in profit or loss in its separate financial statements when its right to receive the dividend is established. 4.4. Climate-related matters Risks induced by climate changes may have future adverse effects on implications for certain economic sectors. These risks include physical risks (even if the risk of physical damage is low due to the company activities and geographical locations). As of the end of the previous year, as of 31 December 2023, the Company has not identified any significant risks caused by climate change that could have a negative and significant impact on the separate financial statements of the Company. Management continuously assesses the impact of climate-related issues and takes adequate measures to mitigate or neutralize the impact of identified risks. The Company has successfully implemented and regulated a hybrid working environment (remote and in-person) for its offices. In addition to all the other benefits, telecommuting reduces the carbon footprint of transportation to/from each employee's workplace. The Company is committed to further reducing the carbon footprint of its employees' operations, by updating its business travel policies and minimizing the use of air travel. In addition, measures are taken to optimize fuel consumption for heating and transport, optimization of heating, ventilation, cooling, lighting systems, setting equipment (computers, air conditioners) to turn off automatically, stimulating the holding of meetings, discussions, and trainings remotely, providing teleconferencing equipment to avoid frequent business travel, and more. In relation with maintaining and improving the energy efficiency of the rented premises, the Company has taken measures to increase the awareness of employees regarding the use of energy, as well as the implementation of energy-saving technological solutions. “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 11 In the third quarter of 2023, Sirma Group Holding JSC successfully put into operation its own photovoltaic system without batteries, located in its central building. This measure aims to increase the share of renewable energy used. During the first 3 months (autumn-winter) of operation, it produced 17.34 MWh of electricity. This represents 23.51% of all electricity consumption during these first months of operation. Sirma's photovoltaic system is planned to produce up to 30% of the building's consumption. This is expected to be achieved in 2024 with one full year of PV system operation (and the elimination of seasonal fluctuations). Some of the used computer equipment reaches the end of its productive capacity and is replaced accordingly. The hardware that is still possible to use is donated to one of the many charity campaigns organized by the Group. Equipment that can no longer be used is provided to specialized partner companies that recycle computer equipment. 4.5. Foreign currency translation Foreign currency transactions are translated into the functional currency, using the exchange rates prevailing at the dates of the transactions (spot exchange rate as published by the Bulgarian National Bank). Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary items at year-end exchange rates are recognised in profit or loss. Non-monetary items measured at historical cost are translated using the exchange rates at the date of the transaction (not retranslated). Non-monetary items measured at fair value are translated using the exchange rates at the date when fair value was determined. Bulgarian leva is pegged to the euro at an exchange rate of EUR 1 = BGN 1,95583. 4.6. Segment reporting “Sirma Group Holding” JSC is a parent company that prepares consolidated financial statements and segment information is disclosed only in the consolidated financial statements. 4.7. Revenue The basic revenue generated by the Company is related revenue from sales of services, interest income, revenue from participations, revenue from financing and other revenue. To determine whether to recognise revenue, the Company follows a 5-step process: 1 Identifying the contract with a customer 2 Identifying the performance obligations 3 Determining the transaction price 4 Allocating the transaction price to the performance obligations 5 Recognising revenue when/as performance obligation(s) are satisfied. Revenue is recognised either at a point in time or over time, when (or as) the Company satisfies performance obligations by transferring the promised goods or services to its customers. Аssessment Revenue is measured based on the transaction price determined for each contract. When determining the price of the transaction, the Company takes into account the terms of the contract and its usual commercial practices. The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for the customer's transfer of the promised goods or services, excluding amounts collected on behalf of third parties (e.g. value added tax). The remuneration promised in the contract with the client may include fixed amounts. When (or as) a performance obligation is satisfied, the Company recognizes as revenue the value of the transaction price that is attributed to this performance obligation. The company examines whether there are other promises in the contract that are separate performance obligations for which a part of the transaction price should be allocated. The Company recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as other liabilities in the statement of financial position. Similarly, if the Company satisfies a performance obligation before it receives the consideration, the Company recognises either a contract asset or a receivable in its statement of financial position, depending on whether something other than the passage of time is required before the consideration is due. “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 12 4.7.1. Revenue recognised over time • Rendering of services The services provided by the Company include the following services: subscriptions for IT technical support of software, sale of licenses, administrative and accounting, consulting and other services. Service revenue is recognized when control over the benefits of the services provided is transferred to the service user. Pursuant to concluded long-term contracts, the Company provides financial and accounting, administrative and other services to related parties. The work performed is reported on an ongoing basis every month. The Company transfers control of the services over time and therefore satisfies the performance obligation and recognizes revenue over time. The price of the services can be determined as a remuneration calculated on the basis of the costs incurred by the Company for the performance of the relevant service plus a percentage fixed allowance. The Company measures its progress toward full settlement of the performance obligation, satisfied over time, by confirmation of performance for the service rendered. IT support revenue Pursuant to concluded contracts, the Company provides software technical support services for clients. The work performed is reported on an ongoing basis every month. The Company transfers control of the services over time and therefore satisfies the performance obligation and recognizes revenue over time. The price of the services can be defined as a variable remuneration, calculated on the basis of the costs incurred by the Company for the performance of the relevant service plus a percentage fixed allowance. The Company measures its progress toward full settlement of the performance obligation, satisfied over time, by confirmation of performance for the service rendered. Revenue from the sale of software licenses as a service The Company sells software licenses as a service. Revenue from sales of a software license as a service is recognized at the time control of the services sold is transferred, i.e. when the sale is made. The price of software as a service sold is fixed. The Company measures its progress toward full settlement of the performance obligation satisfied at a specified point in time. 4.7.2. Revenue recognised at a point of time Revenue is recognized when the Company has transferred control of the assets provided to the buyer. Control is considered to be transferred to the buyer when the customer has accepted the assets without objection. 4.7.3. Revenue from investment property rental Rental revenue from operating leases is recognized as revenue on a straight-line basis over the term of the lease, except where the management of the company determines that another systematic basis more accurately reflects the time model, which utilizes the reaped benefit of the leased asset. 4.7.4. Interest and dividend income Interest income is related to loan agreements and deposits granted under the business activity of the holding company. It is reported on an accrual basis using the effective interest method. Dividend income is recognised at the time the right to receive payment is established. 4.7.5. Revenue from financing Initially financing is recognised as deferred income when there is significant certainty as to whether the Company will receive financing and will fulfil any associated requirements. Financing received to cover current expenditure is recognised in the period when the respective expenses were incurred. Financing received to cover capital expenditure for non-current assets is recognised in line with the depreciation charges accrued for the period. 4.8. Contract assets and liabilities The Company recognises contract assets and/ or liabilities when one of the parties in the contract has fulfilled its obligations depending on the relationship between the business of the company and the payment by the client. The Company presents separately any unconditional right to remuneration as a receivable. The receivable is the unconditional right of the company to receive remuneration. A contract liability is presented in the statement of financial position where a customer has paid an amount of consideration prior to the entity performing by transferring the related good or service to the customer. “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 13 The Company recognises contract assets when performance obligations are satisfied, and payment is not due on behalf of the client. A contract asset is the right of a company to receive remuneration in exchange for the goods or services that the company has transferred to a customer. Subsequent the Company measures a contract asset in accordance with IFRS 9 Financial Instruments. 4.9. Operating expenses Operating expenses are recognised in profit or loss upon utilization of the service or as incurred. The Company recognises two types of contract costs related to the execution of contracts for the supply of services/ goods/ with customer: incremental costs of obtaining a contract and costs to fulfil a contract. Where costs are not eligible for deferral under IFRS 15, they are recognised as current expenses at the time they arise, such as they are not expected to be recovered, or the deferral period is up to one year. The following operating expenses are always recognised as current expenses at the time of their occurrence: - General and administrative costs (unless those costs that are chargeable to the customer); - Costs of wasted materials; - Costs that relate to satisfied performance obligation; - Costs for which the company cannot distinguish whether the costs relate to unsatisfied performance obligation or to satisfied performance obligation. Expenditure for warranties is recognised and charged against the associated provision when the related revenue is recognised. 4.10. Interest expenses and borrowing costs Interest expenses are reported on an accrual basis using the effective interest method. Borrowing costs primarily comprise interest on the Company's borrowings. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period of time that is necessary to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed in the period in which they are incurred and reported in 'Finance costs'. To the extent that the Company borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Company shall determine the amount of borrowing costs eligible for capitalization by applying a capitalization rate to the expenditures on that asset. The capitalization rate shall be the weighted average of the borrowing costs applicable to the borrowings of the Company that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. 4.11. Intangible assets Intangible assets include software products and software module rights. They are accounted for using the cost model. The cost comprises its purchase price, including any import duties and non-refundable purchase taxes, and any directly attributable expenditure on preparing the asset for its intended use, whereby capitalized costs are amortized on a straight-line basis over their estimated useful lives, as these assets are considered finite. After initial recognition, an intangible asset is carried at its cost less any accumulated amortization and any accumulated impairment losses. Impairment losses are recognised in the statement of profit or loss/ statement of profit or loss and other comprehensive income for the respective period. Subsequent expenditure on an intangible asset after initial are recognized in the separate statement of profit or loss and other comprehensive income for the period of their occurrence, unless due to them the asset can generate more than the originally projected future economic benefits and when these costs can be reliably estimated and attributed to the asset. If these conditions are met, the subsequent expenditure is added to the carrying amount of the intangible asset. Residual values and useful lives are reviewed by the management at each reporting date. Amortization is calculated using the straight-line method over the estimated useful life of individual assets as follows: • Software 5-20 years • Others 2-20 years Amortization has been included within “Depreciation, amortization of non-financial assets”. Expenditure on research (or the research phase of an internal project) is recognised as an expense in the period in which it is incurred. “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 14 Costs that are directly attributable to the development phase of an intangible asset are capitalized provided they meet the following recognition requirements: • completion of the intangible asset is technically feasible so that it will be available for use or sale; • the Company intends to complete the intangible asset and use or sell it; • the Company has the ability to use or sell the intangible asset; • the intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits; • there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and • the expenditure attributable to the intangible asset during its development can be measured reliably. Development costs not meeting these criteria for capitalization are expensed as incurred. Directly attributable costs to the development phase include employee remuneration and social security expense as well as hired services expenses. Internally generated intangible assets are subject to the same subsequent measurement method as externally acquired intangible assets. However, until completion of the development project, the assets are subject to impairment testing only as described below in note 4.14. The gain or loss arising on the disposal of an intangible asset is determined as the difference between the proceeds and the carrying amount of the asset and is recognised in profit or loss within “Gain/ (Loss) on sale of non-current assets”. The recognition threshold adopted by the Company for the intangible assets amounts to BGN 700. 4.12. Property, plant and equipment 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. After initial recognition, the property, plant and equipment is carried at its cost less any subsequent accumulated depreciation and any subsequent accumulated impairment losses. Impairment losses are recognised in the separate statement of profit or loss and other comprehensive income for the respective period. 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 the its originally assessed standard of performance. All other subsequent expenditure is recognised as incurred. Material residual value estimates and estimates of useful life are updated from the management at each reporting date. Property, plant and equipment acquired under finance lease agreement, are depreciated based on their expected useful life, determined by reference to comparable assets or based on the period of the lease contract, if shorter. Depreciation is calculated using the straight-line method over the estimated useful life of individual assets as follows: • Buildings 50 years • Machines 3-8 years • Vehicles 4 years • Business inventory 7,5 years • IT equipment 2-5 years • Others 7,5 years Depreciation expense is included in the separate statement of profit or loss and other comprehensive income on the line "Depreciation expense for 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 recognised in profit or loss within “Gain/(Loss) on sale of non-current assets”. The recognition threshold adopted by the Company for property, plant and equipment amounts to BGN 700. 4.13. Leases The Company as a lessor As a lessor the Company classifies its leases as either operating or finance leases. “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 15 A lease is classified as a finance lease if it transfers substantially all the risks and rewards of ownership of the underlying asset, and as an operating lease if it does not substantially transfer all the risks and rewards of ownership of the underlying asset. Assets subject to operating lease agreements are presented in the statement of financial position and are depreciated and amortized in accordance with the depreciation and amortization policy of the Company for similar assets and with the requirements of IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible Assets”. The Company earns rental income from operating leases of its investment properties (see note 8). Rental income is recognised on a straight-line basis over the term of the lease. The Company as a lessee For any new contracts the Company considers whether a contract is, or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration'. To apply this definition the Company assesses whether the contract meets three key evaluations which are whether: • the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Company • the Company has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract • the Company has the right to direct the use of the identified asset throughout the period of use The Company assesses whether it has the right to direct ‘how and for what purpose' the asset is used throughout the period of use. Measurement and recognition of leases as a lessee At lease commencement date, the Company recognises a right-of-use asset and a lease liability on the statement of financial position. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Company, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received). The Company depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Company also assesses the right-of-use asset for impairment when such indicators exist. At the commencement date, the Company measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Company’s incremental borrowing rate. Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised. After initial measurement, the liability is reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. When a lease liability is revalued, the corresponding adjustment is recognized in the asset with the right of use or recognized in profit or loss if the carrying amount of the asset with the right of use has already been reduced to zero. 4.14. Impairment testing of intangible assets and property, plant and equipment For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. All assets and cash-generating units are tested for impairment at least annually. All other individual assets or cash- generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount, which is the higher of fair value less costs to sell and value-in-use. To determine the value-in-use, management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Company's latest approved budget, adjusted as necessary “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 16 to exclude the effects of future reorganisations and asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect their respective risk profiles as assessed by management. Impairment losses for cash-generating units reduce the carrying amount of the assets allocated to that cash- generating unit. All assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment charge is reversed if the cash-generating unit’s recoverable amount exceeds its carrying amount. 4.15. Investment property The investment property is initially measured at cost, which comprises the purchase price and any directly attributable expenses, e. g. legal fees, property transfer taxes and other transaction costs. The Company accounts for investment property as buildings that are held for rental income and / or for capital appreciation, using the acquisition cost model. The investment property of the Company includes buildings held to earn rentals and/or for capital appreciation and are accounted for using the cost model. The investment property is initially measured at cost, which comprises the purchase price and any directly attributable expenses, e. g. legal fees, property transfer taxes and other transaction costs. Following the initial recognition, the investment property is measured at cost less any subsequent accumulated depreciation and any subsequent impairment losses. Subsequent expenditure relating to investment property, which is already recognised in the Company’s financial statements, is added to the carrying amount of the investment property when it is probable that this expenditure will enable the existing investment property to generate future economic benefits in excess of its originally assessed value. All other subsequent expenditure is recognised as incurred. The investment property is derecognised upon its sale or permanent withdrawal from use in case that no future economic benefits are expected from its disposal. Gains or losses arising from the disposal of investment properties are determined as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss. Depreciation is calculated using the straight-line method over the estimated useful life of the buildings, which is 50 years. Rental income and operating expenses from investment property are reported in the separate statement of profit or loss and other comprehensive income, respectively in the line "Revenue from sales", "Other expenses" and "Employee benefits expense" respectively and are recognised as described in note 18.2,note 22 and note 14.1. 4.16. Financial instruments 4.16.1. Recognition and derecognition Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. 4.16.2. Classification and initial measurement of financial assets Financial assets are initially measured at fair value, adjusted for transaction costs, except for financial assets at fair value through profit or loss and trade receivables that do not contain a significant financial component. The initial measurement of financial assets at fair value through profit or loss is not adjusted with transaction costs that are reported as current expenses. The initial measurement of trade receivables that do not contain a significant financial component represents the transaction price in accordance with IFRS 15. Depending on the method of subsequent measurement, financial assets are classified into the following categories: “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 17 • Debt instruments at amortised cost; • Financial assets at fair value through profit or loss (FVTPL); • Financial assets at fair value through other comprehensive income (FVOCI) with or without reclassification in profit or loss, depending on whether they are debt or equity instruments. The classification is determined by both: • the entity’s business model for managing the financial asset; • the contractual cash flow characteristics of the financial asset. All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses in the separate statement of profit or loss and other comprehensive income. 4.16.3. Subsequent measurement of financial assets The percentages of expected losses are based on the sales payment profiles and the corresponding historical credit losses that occurred during that period. Historical loss values are adjusted to reflect current and forecast information about the macroeconomic factors that affect customers' ability to settle claims. The company has determined the GDP and unemployment rate of the countries in which it sells its goods and services, as the most important factors and accordingly adjusts historical losses based on the expected changes in these factors. Financial assets at amortised cost Financial assets are measured at amortised cost if the assets meet the following conditions and are not designated as FVTPL: • they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows; • the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. This category includes non-derivative financial assets like loans and receivables with fixed or determinable payments that are not quoted in an active market. After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Company’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments. Trade receivables Trade receivables are amounts due from customers for goods or services sold in the ordinary course of business. Typically, they are due to be settled within a short timeframe and are therefore classified as current. Trade receivables are initially recognised at amortized cost unless they contain significant financial components. The Company holds trade receivables for the purpose of collecting the contractual cash flows and therefore measures them at amortized cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. Financial assets at fair value through profit or loss (FVTPL) Financial assets that are held within a different business model than “hold to collect” or “hold to collect and sell”, and financial assets whose contractual cash flows are not solely payments of principal and interest are accounted for at FVTPL. All derivative financial instruments fall into this category, except for those designated and effective as hedging instruments, for which the hedge accounting requirements apply (see below). This category also contains an equity investment. The Company accounts for the investment at FVTPL and did not make the irrevocable election to account for the investment in subsidiaries at FVOCI. Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists. 4.16.4. Impairment of financial assets IFRS 9’s new impairment requirements use forward-looking information to recognise expected credit losses – the “expected credit loss” (ECL) model. Instruments within the scope of the new requirements included loans and other debt-type financial assets measured at amortised cost, trade receivables, contract assets recognised and measured under IFRS 15 and loan “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 18 commitments and some financial guarantee contracts (for the issuer) that are not measured at fair value through profit or loss. Recognition of credit losses is no longer dependent on the Company first identifying a credit loss event. Instead the Company considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument. In applying this forward-looking approach, a distinction is made between: • financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk (Stage 1) and • financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low (Stage 2) • Stage 3 would cover financial assets that have objective evidence of impairment at the reporting date. “12-month expected credit losses” are recognised for the first category while “lifetime expected credit losses” are recognised for the second category. Expected credit losses are determined as the difference between all contractual cash flows attributable to the Company and the cash flows it is actually expected to receive (“cash shortfall”). This difference is discounted at the original effective interest rate (or credit adjusted effective interest rate). Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument. Trade and other receivables, contract assets and finance lease receivables The Company makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Company uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses. The Company allows 50% for amounts that are 180 to 365 days past due and writes off fully any amounts that are more than 365 days past due. 4.16.5. Classification and measurement of financial liabilities The Company’s financial liabilities include borrowings, finance lease payments, trade and other payables and derivative financial instruments. Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Company designated a financial liability at fair value through profit or loss. Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments). The Company has designated some financial liabilities at FVTPL to reduce significant measurement inconsistencies between investment properties in the United States and related US-dollar bank loans with fixed interest rates. These investment properties are measured using the fair value model, with changes in the fair value recognised in profit or loss. The fair value of loans used to finance these assets correlates significantly with the valuation of the investment properties held by the Company, because both measures are highly reactive to the market interest rate for 30-year government bonds. The loans are managed and evaluated on a fair value basis through a quarterly management review in comparison with the investment property valuations. Therefore, the Company designates such fixed interest rate loans as at FVTPL if they are secured by specific investment property assets that are held by the Company. This accounting policy reduces significantly what would otherwise be an accounting mismatch. 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. 4.17. Income taxes Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive income or directly in equity. “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 19 Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the financial statements. Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of an asset or liability unless the related transaction affects tax or accounting profit. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realization, provided they are enacted or substantively enacted by the end of the reporting period. Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is probable that they will be able to be utilized against future taxable income. For management’s assessment of the probability of future taxable income to utilize against deferred tax assets, see note 4.22.2. Deferred tax assets and liabilities are offset only when the Company has a right and intention to set off current tax assets and liabilities from the same taxation authority. Changes in deferred tax assets or liabilities are recognised as a component of tax income or expense in profit or loss, except where they relate to items that are recognised in other comprehensive income or directly in equity, in which case the related deferred tax is also recognised in other comprehensive income or equity, respectively. 4.18. Cash and cash equivalents Cash and cash equivalents comprise cash on hand, current bank accounts, demand deposits and deposits up to 3 months, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. 4.19. Equity, reserves and dividend payments Share capital represents the nominal value of shares that have been issued. The repurchased own shares of the Company represent the value of the repurchased shares of Sirma Group Holding JSC from the company itself. The company has adopted the value of the repurchased shares to be presented on a separate line in the separate statement of financial position. Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits. Other reserves include the following: • legal reserves, common reserves; • revaluation reserve – comprises gains and losses from the revaluation of non-financial assets; Retained earnings include all current and prior period retained profits and uncovered losses. Dividend payables to shareholders are included in ‘Related party payables’ when the dividends have been approved at the general meeting of shareholders prior to the reporting date. All transactions with owners of the Company are recorded separately within equity. 4.20. Post-employment benefits and short-term employee benefits The Company reports short-term payables relating to unutilized paid leaves, which shall be compensated in case it is expected the leaves to occur within 12 months after the end of the accounting period during which the employees have performed the work related to those leaves. The short-term payables to personnel include wages, salaries and related social security payments. In accordance with Labour Code requirements, in case of retirement, after the employee has gained the legal right of pension due to years of services and age, the Company is obliged to pay him/her compensation at the amount of up to six gross wages. The Company has reported a liability by law for the payment of retirement compensation in accordance with IAS 19 “Employee Benefits”. The amount is based on forecasts made for the next five years, discounted with the long-term income percentage of risk free securities. The Company has not developed and implemented post-employment benefit plans. Net interest expense related to pension obligations is included in “Finance costs” in profit or loss. Service cost on the net defined benefit liability is included in “Employee benefits expense”. “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 20 Short-term employee benefits, including holiday entitlement, are current liabilities included in “Pension and other employee obligations”, measured at the undiscounted amount that the Company expects to pay as a result of the unused entitlement. 4.21. Provisions, contingent liabilities and contingent assets Provisions are recognised when present obligations as a result of a past event will probably lead to an outflow of economic resources from the Company and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events, for example, granted product warranties, legal disputes or onerous contracts. Restructuring provisions are recognised only if a detailed formal plan for the restructuring has been developed and implemented, or management has at least announced the plan’s main features to those affected by it. Provisions are not recognised for future operating losses. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material. Any reimbursement that the Company can be virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision. All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognised. Possible inflows of economic benefits to the Company that do not yet meet the recognition criteria of an asset are considered contingent assets. 4.22. Significant management judgement in applying accounting policies The following are significant management judgements in applying the accounting policies of the Company that have the most significant effect on the financial statements. Critical estimation uncertainties are described in note 4.23. 4.22.1. Internally generated intangible assets and research costs Significant judgement is required in distinguishing research from the development phase. Development costs are recognised as an asset when all the criteria are met, whereas research costs are expensed as incurred. To distinguish any research-type project phase from the development phase, it is the Company’s accounting policy to also require a detailed forecast of sales or cost savings expected to be generated by the intangible asset. The forecast is incorporated into the Company’s overall budget forecast as the capitalization of development costs commences. This ensures that managerial accounting, impairment testing procedures and accounting for internally-generated intangible assets is based on the same data. The Company’s management also monitors whether the recognition requirements for development costs continue to be met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems after the time of recognition. 4.22.2. Deferred tax assets The assessment of the probability of future taxable income in which deferred tax assets can be utilized is based on the Company’s latest approved budget forecast, which is adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. The tax rules in the numerous jurisdictions in which the Company operates are also carefully taken into consideration. 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 recognised 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. “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 21 4.23. Estimation uncertainty When preparing the financial statements management undertakes a number of judgements, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results may differ from the judgements, estimates and assumptions made by management, and will seldom equal the estimated results. In the preparation of the presented Separate financial statements the significant judgments of the management in applying the accounting policies of the Company and the main sources of uncertainty of the accounting estimates do not differ from those disclosed in the annual financial statements of the Company as at 31 December 2022, except for changes in the estimate of income tax liability. Information about significant judgements, estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses are discussed below. 4.23.1. Impairment of non-financial assets An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount, which is the higher of fair value less costs to sell and value-in-use. To determine the value-in-use, management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows (see note 4.14). In the process of measuring expected future cash flows management makes assumptions about future operating results. These assumptions relate to future events and circumstances. The actual results may vary and may cause significant adjustments to the Company’s assets within the next financial year. Towards the end of the reporting period, the Company performed the annual test to determine whether the book value of the investments does not exceed their recoverable value, taking into account factors that affect the economic environment in which the subsidiaries operate. They are related to the unstable economic situation that occurred globally as a result of the effects of the covid-pandemic, a slowdown in economic growth and the subsequent military conflicts on the territory of Ukraine and in the Middle East. When forming its estimates, the management has taken into account the presence of existing and potential risks characterizing the economic situation in the country in 2023 (some of which are already happening). They are also confirmed by data from state institutions or regulatory bodies and are related to the escalation of military conflicts in Ukraine and the Middle East, postponement of the implementation of investment projects and preservation of the negligible investments in the economy from the last 3 years, return to political instability, high inflation and rising interest rates on loans, erosion of consumers' purchasing power and contraction of domestic consumption, recession in some of the major trading partners (Germany) and reduction of Bulgaria's exports to them, delayed implementation of the National Recovery Plan. The results of the tests show that the carrying amount of the Company's non-financial assets and investments does not exceed their recoverable amount and, therefore, no significant impairment losses were recognized during the reporting period. Management's conclusions are also supported by valuations by an independent external appraiser based on a combination of the net asset value method and the estimated cash flow method at a discount factor between 9-12%. In determining the applicable discount factor, an adjustment has been made in relation to market risk, the uncertain business environment and risk factors that are specific to individual enterprises - units generating cash flows. The wide differences in the expected economic development of the country in 2023 (as well as in the near future) are an indicator of the increased risks facing the Bulgarian economy, as well as the high uncertainty regarding the economic development of Bulgaria's economic partners – mainly the EU countries. The Company has no incurred an impairment loss on non-current assets in 2023 (2022 – BGN 2 786 thousand) in order to reduce the carrying amount of non-current assets to its recoverable amount. 4.23.2. Useful lives of depreciable assets Management reviews the useful lives of depreciable assets at each reporting date. At 31 December 2023 management assesses that the useful lives represent the expected utility of the assets to the Company. The carrying amounts are analysed in notes 5,6 and 8. Actual results, however, may vary due to technical obsolescence, particularly relating to software and IT equipment. 4.23.3. Measurement of expected credit losses Credit losses are the difference between all contractual cash flows due to the Company and all cash flows that the Company expects to receive. Expected credit losses are a probability-weighted estimate of credit losses that require the Company’s judgment. Expected credit losses are discounted at the original effective interest rate (or the credit-adjusted effective interest rate for purchased or initially created financial assets with credit impairment). “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 22 4.23.4. Defined benefit liability Management estimates the defined benefit liability annually with the assistance of independent actuaries; however, the actual outcome may vary due to estimation uncertainties. The estimate of its defined benefit liability BGN 60 thousand (2022: BGN 55 thousand) is based on standard rates of inflation, medical cost trends and mortality. It also takes into account the Company’s specific anticipation of future salary increases. Discount factors are determined close to each year-end by reference to high quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability. Estimation uncertainties exist particularly with regard to actuarial assumptions, which may vary and significantly impact the defined benefit obligations and the annual defined benefit expenses. 4.23.5. Uncertain tax position and tax-related contingency The Company's management has assessed whether it is probable that the tax authority will accept uncertain tax treatment. In its activities, the company complied with the tax practice and the probable tax treatment, and therefore the taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and the tax rate, correspond to the used and expected treatment that will be used in declaring income taxes. “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 23 5. Property, plant and equipment Buildings Facilities Vehicles Office equipment Machinery Computer equipment Assets under construction Others Total BGN’000 BGN’000 BGN’000 BGN’000 BGN’000 BGN’000 BGN’000 BGN’000 BGN’000 Gross carrying amount Balance at 1 January 2023 170 - 250 414 211 535 20 97 1 697 Additions - 100 151 20 2 39 373 58 743 In exploitation - - - - - - (149) - (149) Balance at 31 December20 23 170 100 401 434 213 574 244 155 2 291 Depreciation Balance at 1 January 2023 (28) - (91) (185) (206) (521) - (33) (1 064) Depreciation (3) (2) (67) (57) (3) (22) - (16) (170) Balance at 31 December 2023 (31) 98 (158) (242) (209) (543) - (49) (1 234) Carrying amount at 31 December 2023 139 98 243 192 4 31 244 106 1 057 Buildings Vehicles Office equipmen t Machinery Computer equipment Assets under constructio n Others Total BGN’000 BGN’000 BGN’000 BGN’000 BGN’000 BGN’000 BGN’000 BGN’000 Gross carrying amount Balance at 1 January 2022 170 189 375 209 525 - 51 1 519 Additions - 79 39 2 10 20 46 196 Disposals - (18) - - - - - (18) Balance at 31 December 2022 170 250 414 211 535 20 97 1 697 Depreciation Balance at 1 January 2022 (24) (58) (131) (203) (469) - (27) (912) Depreciation (4) (51) (54) (3) (52) - (6) (170) Disposals - 18 - - - - - 18 Balance at 31 December 2022 (28) (91) (185) (206) (521) - (33) (1 064) Carrying amount at 31 December 2022 142 159 229 5 14 20 64 633 All depreciation charges are included within “Depreciation and amortization of non-financial assets” in the separate statement of profit or loss and other comprehensive income. As at 31 December 2023 there were no material contractual commitments related to acquisition of items of property, plant and equipment. The carrying amount of the Company’s property, plant and equipment pledged as security for its liabilities (see note 15) is presented as follows: Buildings Vehicles Office equipment Machinery Computer equipment Others Total BGN’000 BGN’000 BGN’000 BGN’000 BGN’000 BGN’000 BGN’000 Carrying amount at 31 December 2022 142 159 229 5 14 64 613 “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 24 6. Intangible assets The carrying amounts for the reporting periods under review can be analysed as follows: Internally developed assets Software products Rights to software modules Internally developed assets- In process of development Total BGN’000 BGN’000 BGN’000 BGN’000 BGN’000 Gross carrying amount Balance at 1 January 2023 4 269 57 1 623 5 164 11 113 Newly acquired assets, internally developed 458 - - (458) - Commissioned, internally developed - - - 77 77 Disposals (95) - - (4 783) (4 878) Balance at 31 December 2023 4 632 57 1 623 - 6 312 Amortization and impairment Balance at 1 January 2023 (839) (57) (875) (2 786) (4 557) Amortization for the year (226) - (108) - (334) Impairment written off for the year - - - 2 786 2 786 Amortization written off 18 - - - 18 Balance at 31 December 2023 (1 047) (57) (983) - (2 087) Carrying amount at 31 December 2023 3 585 - 640 - 4 225 Internally developed assets Software products Rights to software modules Internally developed assets- In process of development Total BGN’000 BGN’000 BGN’000 BGN’000 BGN’000 Gross carrying amount Balance at 1 January 2022 4 269 57 1 623 5 164 11 113 Balance at 31 December 2022 4 269 57 1 623 5 164 11 113 Amortization and impairment Balance at 1 January 2022 (625) (57) (767) - (1 449) Amortization for the year (214) - (108) - (322) Impairment for the year - - - (2 786) (2 786) Balance at 31 December 2022 (839) (57) (875) (2 786) (4 557) Carrying amount at 31 December 2022 3 430 - 748 2 378 6 556 The Company's internally developed software products and related development costs are the most significant group of intangible assets of the Company. They relate to the following IT developments: - SIRMA CLOUD PLATFORM is a platform for managing cloud environments. - VR Management Platform is a platform for virtual data centers. - Cyber Security Management are cybersecurity platforms designed to provide businesses with a way to integrate security visibility, analytics, and control across all cybersecurity layers and data sources. - Sirma Management Reporting is a business analysis system. SIRMA CLOUD PLATFORM is a platform for managing cloud environments: • Manage virtualization in the data center • Storage virtualization management • Resource performance management • Resource cost management • Management of cloud distributed in different geographical locations. Key functionalities include: FULLY PLATFORM INDEPENDENT ✓ Supports standard and high-end hypervisors, storage, network and monitoring tools. ✓ Cloud build based on KVM, VMWare, LXD. HIGH AVAILABILITY AND BUSINESS CONTINUITY ✓ High availability architecture. ✓ The database is deployed in an HA configuration ✓ Redefined behavior in case of host or virtual machine failure in order to achieve a cost-effective failover solution. “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 25 EDGE AND DISTRIBUTED CLOUD COMPUTING ✓ Dynamically increase cloud resources by adding remote hardware or virtual capacities. ✓ Automatic provisioning of remote resources. ADAPTABLE, EXTENSIBLE AND INTEGRABLE ✓ Modular and extensible architecture. ✓ Configurable plug-ins for integration with third-party data center services. ✓ API for integration with higher-level tools such as billing and self-service portals. CAPACITY AND PERFORMANCE MANAGEMENT ✓ Resource management to track and limit the use of compute, storage and network resources. ✓ Dynamically create clusters as pools of hosts that share datastores and virtual networks for load balancing, high availability, and high-performance computing. ✓ Dynamic creation of virtual data centers as fully isolated virtual infrastructure environments where a group of users, under the control of a VDC administrator, can create and manage compute, storage and network capacity. VIRTUAL INFRASTRUCTURE MANAGEMENT AND ORCHESTRATION ✓ Management of virtual infrastructure to corporate data centers. End-to-end lifecycle management of virtual resources. ✓ Full control, monitoring and reporting of virtual infrastructure resources. ACCOUNTING AND SHOWBACK ✓ Allocation of resource costs to individual units, groups and projects in the organization. ✓ Monitoring and control of costs according to the business plan of the project. ✓ Easy integration with any billing system. Sirma management reporting includes processes, tools and technologies necessary to transform data into information, and information into knowledge and plans that imply quick and effective business actions and support the decision-making process. It is through the developed reporting system that companies receive secure, consistent, comprehensible, easy to process and timely information, which creates prerequisites for an informed decision. Or: - Supports making effective and informed decisions; - Turns huge volumes of data into valuable business conclusions; - Allows access, sharing, processing and analysis of data by the right people, at the right time and in the way they prefer; - Provides a unified version of the truth; - Preserves knowledge in the company; - Saves time and effort of key figures in companies. Sirma management reporting allows organizations to collect data from internal and external sources, prepare it for analysis, create and send requests to this data, and create reports, information boards (dashboards) and data visualization. The Company has not entered into material contractual commitments to acquire intangible assets as of 31 December 2023. All amortization expenses are included within “Depreciation and amortization of non-financial assets” in the separate statement of profit or loss and other comprehensive income. No intangible assets have been pledged as security for liabilities. The analysis of the recoverable values of long-term intangible assets carried out, from the position of the specific economic situation, has not showed the presence of indications of impairment of the same (2022: BGN 2 786 thousand). In confirming its assessment, the management used the expert assessment of an independent licensed an appraiser who prepared an appraisal report on 30.01.2024. The methods used in the appraisal are the income approach and the replacement value method. The assumptions made in making the assessments consist of an assumed analysis period of ten years, a discount rate of 14%, estimates of residual (terminal) value, replacement costs, economic life of the asset, physical, moral, economic wear and tear and others. When preparing the estimates, the unstable macroeconomic environment and the expected changes in it were influenced. “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 26 7. Investments in subsidiaries The Company has the following investments in subsidiaries: Name of the subsidiary Country of incorporation and principal place of business Main activities 2023 2023 share 2022 2022 share BGN‘000 % BGN‘000 % Sirma Solutions EAD Bulgaria Software services 39 686 100% 39 686 80,11% SAI AD Bulgaria Software services 17 865 84,56% 17 865 84,56% Impairment (5 360) (5 360) Sciant EAD Bulgaria Software services 14 076 100% 10 237 80,00% Sirma Group Inc. USA Software services 3 471 76,30% 3 471 76,30% Sirma InsurTech Bulgaria Software services 914 55,00% 914 55,00% Sirma CI AD Bulgaria Software services 106 80,00% 106 80,00% Sirma Medical Systems AD Bulgaria Software services 66 66,00% 66 66,00% Impairment (44) - Engview Systems AD Bulgaria Software services 50 72,90% 50 72,90% 70 830 67 035 The increase in investments in subsidiaries in 2023 is due to the acquisition of an additional stake in the subsidiary "Sciant" EAD. On 03.04.2023 a transaction for the purchase of the remaining shares in the subsidiary of "Sirma Group Holding" JSC - "Sciant" AD, worth BGN 3 839 thousand, was concluded as follows: • Subsidiary whose shares are subject to redemption: "Sciant" AD; • Company that buys the shares: "Sirma Group Holding" JSC; • Size of the minority package object of purchase: 22.20% of the capital of "Sciant" AD distributed in 57 000 shares; • Sellers of shares: 26 individuals and 1 legal entity. As a result of the above transaction, "Sirma Group Holding" JSC now owns 100% of the capital of the company "Sciant" EAD. In accordance with the decision of the General Meeting of Shareholders from 05.05.2023, the capital of "Sirma Solutions" was reduced from 35 370 800 to 28 334 910 BGN on the basis of Art. 200, item 2, in connection with Art. 187d, of the Commercial Law. On 23.10.2023 the reduction is done by cancelling 703 589 shares a total of shares with a nominal value of BGN 10 (ten) each, of which: 15 000 are class A, 62 172 are class B and 626 417 are ordinary, owned by "Sirma Solutions" AD. On 21.12.2023, the Board of Directors of "Sirma Solutions" EAD decided to reduce the capital of the company by reducing the nominal value of the shares from BGN 10 to BGN 5 for each share of the capital. After the reduction, the capital of the company will amount to BGN 14 167 455. The change has been requested to be announced in the Commercial Register, but not yet officially entered at the date of preparation of the financial statement. The subsidiaries are recognised in the financial statements of the Company using the cost method. During 2023 the Company received dividends respectively at the amount of BGN 1 509 thousand (2022: BGN 9 879 thousand). The shares of the subsidiaries are not traded on a stock exchange. The Company has contingent liabilities as a guarantor on loans granted to subsidiaries (see note 30). As disclosed in note 4.23.1, management has analyzed the recoverable amount of investments in subsidiaries based on the net assets of the respective company at the end of the annual period. The specifics of the activity of each company, the plans and forecasts for their development and the potential effects of the existing macroeconomic situation, which could be significantly influenced by the current geopolitical tension, are also taken into account. The investments are in companies developing activity in the field of information and communication technologies, which is one of the industries little affected by the war between Russia and Ukraine. The conflict in the Middle East, however, has an impact on the expected development of one of the subsidiaries, which has contracts to provide services to counterparties in the conflict area. After the analysis, the Company has established that the recoverable value of the investments exceeds their balance sheet value, with the exception of the investment in "Sirma Medical Systems" AD. As a result, an impairment loss of BGN 44 thousand was recognized for the year. As a result, an impairment loss in the amount of BGN 44 thousand was recognized for the year, recognized in the statement of profit or loss and other comprehensive income under the line "Financial expenses". 8. Investment property “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 27 Investment properties are specially detached parts of buildings for self-operation, intended for long-term rent to subsidiaries and third parties. The investment properties have a total built-up area of 5 522 square meters and are part of a business building in Mladost district, Sofia. Changes to the carrying amounts presented in the separate statement of financial position can be summarized as follows: Investment property BGN’000 Gross carrying amount Balance at 1 January 2023 11 210 Newly acquired assets 44 - through subsequent costs 43 Balance at 31 December 2023 11 254 Depreciation Balance at 1 January 2023 (1 503) Depreciation (113) Balance at 31 December 2023 (1 616) Carrying amount at 31 December 2023 9 638 Investment property BGN’000 Gross carrying amount Balance at 1 January 2022 10 994 Newly acquired assets 216 - through subsequent costs 216 Balance at 31 December 2022 11 210 Depreciation Balance at 1 January 2022 (1 393) Depreciation (110) Balance at 31 December 2022 (1 503) Carrying amount at 31 December 2022 9 707 Investment properties valued at BGN 9 638 thousand are pledged as security for borrowings (2022: BGN 9 707 thousand). The fair value of the investment properties, reported according to the acquisition price model, as of the date of the financial statement amounts to BGN 12 793 thousand (2022: BGN 11 036 thousand). The market valuation was carried out in February 2024 by a licensed valuer "Bright Consult" OOD and the valuation method used is the income method. Rental income of BGN 688 thousand (2022: BGN 703 thousand) is shown within “Revenue from sales” in the interim separate statement of profit or loss and other comprehensive income. They include lease payments not dependent on an index or rate. Direct operating expenses of BGN 93 thousand are reported within “Other expenses” (2022: BGN 92 thousand), of which BGN 16 thousand is incurred on vacant properties that did not generate rental income in 2023 (2022: BGN 15 thousand). Future minimum lease rentals are as follows: Minimum lease income Within 1 year 1-2 years 2-3 years 3-4 years 4-5 years After 5 years Total BGN’000 BGN’000 BGN’000 BGN’000 BGN’000 BGN’000 BGN’000 31 December 2023 672 672 672 672 672 1 344 4 704 31 December 2022 735 735 735 735 735 1 470 5 145 “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 28 9. Deferred tax assets and liabilities Deferred taxes arising from temporary differences and unused tax losses can be summarized as follows: Deferred tax liabilities (assets) 1 January 2023 Recognised in profit and loss 31 December 2023 BGN‘000 BGN‘000 BGN‘000 Non-current assets Property, plant and equipment, intangible assets, investment property 107 11 118 Impairment of intangible assets (279) 279 - Impairment of investments (536) (5) (541) Current assets Trade and other receivables (9) 4 (5) Non-current liabilities Pension and other employee obligations (5) (1) (6) Current liabilities Employee obligations (13) 4 (9) Tax loss (97) (291) (388) (832) 1 (831) Deferred tax assets 107 118 Deferred tax liabilities (939) (949) Recognised as: Net deferred tax liabilities/(assets) (832) (831) Deferred taxes for the comparative period 31.12.2022 can be summarized as follows: Deferred tax liabilities (assets) 1 January 2022 Recognised in profit and loss 31 December 2022 BGN‘000 BGN‘000 BGN‘000 Non-current assets Property, plant and equipment, intangible assets, investment property 99 8 107 Impairment of intangible assets - (279) (279) Impairment of investments - (536) (536) Current assets Trade and other receivables (41) 32 (9) Non-current liabilities Pension and other employee obligations (2) (3) (5) Current liabilities Employee obligations (28) 15 (13) Tax loss - (97) (97) 28 (860) (832) Deferred tax assets 99 107 Deferred tax liabilities (71) (939) Recognised as: Net deferred tax liabilities/(assets) 28 (832) During the last two reporting periods, the Company realized tax losses in the total amount of BGN 3 880 thousand, for which a deferred tax asset was recognized. The legally established term for the use of tax losses is as follows: - until the end of 2027 – BGN 964 thousand. - until the end of 2028 – BGN 2 916 thousand All deferred tax assets and liabilities have been recognised in the separate statement of financial position. 10. Trade receivables 31 December 2023 31 December 2022 BGN‘000 BGN‘000 Trade receivables, gross amount before impairment 181 96 Impairment of trade receivables (23) (23) Trade receivables 158 73 The movement in the allowance for credit losses can be reconciled as follows: 2023 2022 BGN‘000 BGN‘000 Balance at 1 January (23) (18) Amounts written off (uncollectible) - 9 Adjustment for expected credit losses - (14) Balance at 31 December (23) (23) “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 29 The net book value of trade receivables is assumed to be a reasonable approximation of their fair value. All trade receivables are short term. The net carrying value of trade and other receivables is considered a reasonable approximation of fair value. All trade receivables of the Company have been reviewed for indicators of impairment. They have applied simplified approach for determining the expected credit losses at the end of the period. An analysis of unimpaired trade receivables that are past due is presented in note 32. 11. Prepayments and other assets 31 December 2023 31 December 2022 BGN‘000 BGN‘000 Other receivables 54 18 Prepayments 29 18 Other assets, non-financial 83 36 12. Cash and cash equivalents Cash and cash equivalents include the following components: 31 December 2023 31 December 2022 BGN‘000 BGN‘000 Cash at bank and in hand: - BGN 406 2 076 - EUR 710 1 580 - USD 15 15 Cash and cash equivalents 1 131 3 671 The amount of cash and cash equivalents inaccessible to the Company as at 31 December 2023 amounts to BGN 0 (2022: BGN 499 thousand). The Company has evaluated the expected credit losses on cash and cash equivalents. The estimated amount is less than 0.1% of the gross amount of cash deposited in financial institutions, which is therefore considered to be immaterial and has not been accounted for in the financial statements of the Company. 13. Equity 13.1. Share capital The share capital of “Sirma Group Holding” JSC consists only of 59 360 518 fully paid ordinary shares with a nominal value of BGN 1. All shares are equally eligible to receive dividends and the repayment of capital and represent one vote at the shareholders meeting of the Company. 2023 2022 Number of shares Number of shares Number of shares issued and fully paid: - beginning of the year 59 360 518 59 360 518 Number of shares issued and fully paid 59 360 518 59 360 518 Total number of shares authorized as at 31 December 59 360 518 59 360 518 A detailed list of shareholders is presented in Note 1. 13.2. Repurchased own shares On 25.01.2023 „Sirma Group Holding“ JSC bought back 1 398 900 of its shares at an average price of BGN 0,71 per share, for a total price of BGN 993 219. The shares represent 2,36% of the company's capital. On 27.06.2023 „Sirma Group Holding“ JSC bought back 50 000 of its shares at an average price of BGN 0,677638 per share, for a total price of BGN 33 881,92. The shares represent 0,0842% of the company's capital. On 28.06.2023 „Sirma Group Holding“ JSC bought back 6 000 of its shares at an average price of BGN 0,65 per share, for a total price of BGN 3 900. The shares represent 0,01% of the company's capital. On 03.08.2023 „Sirma Group Holding“ JSC bought back 30 661 of its shares at an average price of BGN 0,70 per share, for a total price of BGN 21 462,70. The shares represent 0,05% of the company's capital. On 02.10.2023 „Sirma Group Holding“ JSC bought back 210 000 of its shares at an average price of BGN 0,76 per share, for a total price of BGN 159 600. The shares represent 0,35% of the company's capital. As of 31.12.2023 „Sirma Group Holding“ JSC holds 1 780 407 (31.12.2022 - 84 846) repurchased own shares at the total amount of BGN 1 780 407 (3% of share capital). In relation with the buyback of its own shares, the “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 30 Company formed a reserve in the amount of BGN 483 thousand, reported in "Premium reserve" in the separate statement of financial position. 13.3. Share premium reserve The share premium reserve in the amount of BGN 5 855 thousand consists of reserves from initial valuation of contributed fixed assets in the amount of BGN 3 619 thousand and reserves from issue of shares in the amount of BGN 2 236 thousand. 13.4. Other reserves The other reserves consist of legal reserves set aside according to Art. 246 of the Commercial Law over the years as follows: 31 December 2023 31 December 2022 BGN‘000 BGN‘000 Balance at January 1 1 244 1 141 Allocation of reserves 214 103 Balance at 31 December 1 458 1 244 14. Employee remuneration 14.1. Employee benefits expense Expenses recognised for employee benefits include: 2023 2022 BGN‘000 BGN‘000 Salary expenses (1 727) (1 551) Social security expenses (144) (138) - pension - defined contribution plans (4) (32) Employee benefits expense (1 871) (1 689) 14.2. Pension and other employee obligations The liabilities for pension and other employee obligations recognised in the statement of financial position consist of the following amounts: 31 December 2023 31 December 2022 BGN‘000 BGN‘000 Non-current: Compensations in compliance with Labour Code 60 55 Non-current pension and other employee obligations 60 55 Current: Payroll obligations - 114 Social security obligations 30 31 Accrued holiday entitlement 84 92 Current pension and other employee obligations 114 237 The current portion of these liabilities represents the Company's obligations to its current employees that are expected to be settled during 2024. Other short-term employee obligations arise mainly from accrued holiday entitlement at the end of reporting date. As none of the employees has the right for early settlement of pension arrangements, the remaining part of pension obligations for defined benefit plans is considered non-current. In accordance with the requirements upon termination of the employment relationship under Article 222, paragraph 2 and paragraph 3 of the Labour Code, the employee shall have the right to: * sickness benefit in the amount of his gross wage for a period of 2 months, if he has at least five years of service and has not received compensation on the same grounds in the last 5 years. * compensation, after acquiring the right to a pension for length of service and old age, irrespective of the reason for termination - in the amount of his gross salary for a period of 2 months, and if he worked with the same employer during the last 10 years of his work experience - compensation in the amount of his gross salary for a period of 6 months. “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 31 The event that gives rise to the obligation of the employer is the release of the person when he / she has acquired the right to a pension for length of service and old age. This requires an accurate prediction of the time of departure of employees, according to the time of occurrence of this right. The amount of the benefit is directly dependent on the person's length of service and, after a period of 10 years or more, future length of service does not affect the further amount of the obligation. In order to determine the exact amount of the obligation, it is necessary to forecast the amount of compensation at the future time when it will be due to the employee and this compensation must be discounted at the time of the assessment of the obligation. As a result of the current employment contracts in the Company as of 31.12.20223, the payments upon retirement due to illness and due to reaching age and seniority, follow the amounts specified in Article 222, paragraph 2 and paragraph 3 of the Labour Code. The mortality table reflects the probability that individuals will reach the specified retirement age. It is calculated for each person individually based on his / her gender and age at the time of the assessment. A table for mortality and average life expectancy of the population of Bulgaria of the National Statistical Institute for the period 2018-2020 was used. On the basis of the information provided by the company on the number of people who left in the last year, the probability of leaving has been calculated. This probability is set in the projections for the future development of staff in relation to the group of voluntarily left and dismissed in this model as an arithmetic mean of 0.2477. The likelihood of disability reflects the likelihood of a person falling into a state that prevents him from interacting with the environment, which in turn creates social, intellectual, physical or moral difficulties. The probability is calculated on the basis of statistical information received from the NCHI. An effective annual interest rate of 3.0% was used to calculate the discount factor, which corresponds to a discount annual rate of 2.91%. The proposal made is based on the yield data of long-term government securities offered on the Bulgarian Stock Exchange and the forecast for a longer term, based on the recommendations of Article 78 of IAS 19 and Articles 80 and 81 of the IAS, since the discount rate should reflect the estimated time of payment of income. According to the company's development plans, the current model envisages 1.5% annual growth of the average gross salary compared to the previous year. The amount of the expected increase in the basic salary is in line with the levels of remuneration in the company, remuneration in alternative companies on the same market, long-term expectations and projected inflation. Acquisition of pension rights for length of service and age - according to the Social Insurance Code and the underlying plans for increasing the retirement age. If a person cannot qualify for a pension for length of service and old age from the social security services listed in the table, then he / she shall acquire a pension right upon reaching the age of 65 and having at least 15 years of service. From 31.12.2015 the age from the previous sentence is increased from the first day of each following year by 2 months until reaching 67 years. According to the requirements of the Labour Code, the benefit is paid when the employee acquires the right to a pension for length of service and age, and its amount is directly dependent on the amount of his gross salary and his length of service with the employer so far. This necessitates a precise prediction of the moment at which the person will leave the employer, obtaining the right to compensation. For all persons, this moment is calculated individually, on the basis of their age and sex at the time of the assessment and the age required to qualify for a pension, as required by the Social Security Code for the acquisition of a retirement pension by the State Public insurance. When forecasting the moment of retirement of all persons employed under a contract of employment in the structures of the company, it is assumed that they will retire upon reaching the age necessary for acquiring the right to retirement pension and age for persons working under the conditions of the third category of labour. In determining the time of retirement, the requirement of the Social Security Code for the minimum length of service required to qualify for retirement and old age pension was also taken into account. When a worker who has reached the required retirement age does not have the required length of service, the time of retirement is deferred until, he accumulates this length of service. After determining the time of departure of employees who have acquired the right to a pension for length of service and age, the amount of the last salary can be predicted. The value of the gross salary at the time of the appraisal is multiplied by the projected percentage for growth of the salaries per year, for the period from the date of the appraisal to the foreseen moment of leaving the worker. The number of gross salaries due is directly dependent on the time served by the employer at the time of leaving. For employees who at the time of retirement will have ten or more years of service with the employer, compensation in the amount of six gross salaries is calculated, and for all others in the amount of two gross salaries. The amount of the obligation can be divided into two main attributes related to demographic assumptions - gender and reason for payment of the obligation, with the present values of the respective payment obligations as of 31.12.2023: “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 32 Gender Amount upon retirement for reaching length of service and old age in BGN Amount upon retirement due to illness in BGN Total amount Female 36 817,23 553,44 37 370,67 Male 22 560,11 339,12 22 899,23 Total 59 377,34 892,56 60 269,90 The changes in the pension provisions in compliance with the Labour Code are summarized as follows: 31 December 2023 31 December 2022 BGN‘000 BGN‘000 Pension provisions at 1 January 55 22 Increase of pension provisions due to an increased number of employees expected to retire in next 5 years 4 32 Interest expense 1 1 Pension provisions at 31 December 60 55 The total expenses of the Company's defined benefit plans recognized in profit or loss may be presented as follows: 2023 2022 BGN‘000 BGN‘000 Current service expenses 4 32 Interest expenses 1 1 Total expenses recognized in profit or loss 5 33 Current and past service expenses are included in " Employee benefits expense". Net interest expense is included in the separate statement of profit or loss in the line “Finance costs” (see Note 23). 15. Borrowings Borrowings include the following financial liabilities: Current Non-current 31 December 2023 31 December 2022 31 December 2023 31 December 2022 BGN‘000 BGN‘000 BGN‘000 BGN‘000 Financial liabilities measured at amortized cost Bank loans - 1 419 - 7 457 Interest on bank loans - 13 - - Total carrying amounts - 1 432 - 7 457 All loans are denominated in Bulgarian leva (BGN) and are fully repaid in 2023. “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 33 15.1. Borrowings at amortized cost Bank Type of loan Currency Total amount of credit (BGN) Outstanding obligation at 31.12.2023 (BGN) Date of contract Interest rate Number of outstanding installments Amount of monthly installment (BGN) Maturity date Pledges “Unicredit BulBank” AD Investment BGN 2 800 000 - 15.12.2022 The applicable variable interest rate for the relevant interest period +1.5 points, but not less than 1.5% - - 15.12.2025 Pledge of receivables On 12.04.2023 "Sirma Group Holding" JSC made a full early repayment of three of its investment bank loans, including principal amounts of 4 356 154 (four million three hundred and fifty-six thousand one hundred and fifty-four) euros. As a result of the above, the company currently has no credit indebtedness under investment loans. The carrying values of borrowings are considered to be a reasonable approximation of fair value. “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 34 16. Lease liabilities 31 December 2023 31 December 2022 BGN’000 BGN’000 Lease liabilities – non-current portion 192 130 Lease liabilities – current portion 53 33 Lease liabilities 245 163 Future minimum lease payments at 31 December 2023 were as follows: Minimum lease payments due Within 1 year 1-2 2-3 3-4 4-5 Общо years years years years BGN’000 хил. лв. хил. лв. хил. лв. хил. лв. хил. лв. 31 December 2023 Lease payments 60 99 37 34 31 261 Finance charges (7) (5) (3) (1) - (16) Net present values 53 94 34 33 31 245 31 December 2022 Lease payments 36 36 75 13 10 170 Finance charges (3) (2) (2) - - (7) Net present values 33 34 73 13 10 163 Interest expense on leases included in the finance costs for the period ended 31 December 2023 was BGN 5 thousand (2022: BGN 4 thousand). Total cash outflow for leases for the period ended 31 December 2023 was BGN 75 thousand (2022: BGN 42 thousand). 17. Trade and other payables 31 December 2023 31 December 2022 BGN‘000 BGN‘000 Non-current: Trade payables 116 83 Financial liabilities 116 83 Tax payables 69 76 Non-financial liabilities 69 76 Current trade and other payables 185 159 The carrying values of current trade and other payables are considered to be a reasonable approximation of fair value. 18. Revenues from sales 18.1. Revenues recognized over time The Company presents revenues from the sale of goods and services at a point in time and over time in the following product lines and geographical regions: Realized on the territory of the country Administrative and accounting services Technical Support Sale of licenses Other revenues Total 2023 BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 Gross revenues from contracts with clients 2 877 15 - 91 2 983 Timing of revenue recognition Over time 2 877 15 - 91 2 983 2022 Gross revenues from contracts with clients 1 130 36 1 248 100 2 514 Timing of revenue recognition Over time 1 130 36 1 248 100 2 514 Revenues at the amount of BGN 1 928 thousand (2022: BGN 1 642 thousand) are reported by one external client. “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 35 Product lines 2023 2022 BGN‘000 BGN‘000 Administrative and accounting services 2 877 1 130 Technical Support 15 36 Sale of licenses - 1 248 Others 91 100 2 983 2 514 19. Other income 2023 2022 BGN‘000 BGN‘000 Investment property rental income 688 703 Interest income 13 35 Gain on sale of non-current assets 2 1 Income from sale of investments - 410 Other revenues 33 162 736 1 311 Interest income relates to loans granted to related parties. Other revenues in the amount of BGN 33 thousand (2022: BGN 162 thousand) represent reintegrated impairment of receivables, of which BGN 20 thousand were collected during the year, compensations for electricity in the amount of BGN 2 thousand and income from unused vacations in the amount of BGN 11 thousand. 20. Cost of materials 2023 2022 BGN‘000 BGN‘000 Inventory (45) (12) Electricity (34) (20) Heating (11) (9) Hygienic materials (9) (9) Advertising materials (5) (6) Office repair and maintenance materials (4) (4) Office supplies (4) (3) Water (4) (3) Computer components (1) - Others (21) (18) (138) (84) 21. Hired services expenses 2023 2022 BGN‘000 BGN‘000 Consulting services (249) (388) Seminars and training (80) (12) Audit (70) (47) Subscriptions (50) (159) Office maintenance and repair (48) (31) Advertising (45) (132) Internet (27) (44) Security (19) (15) Cleaning (19) (10) Software services (19) - Insurance (18) (15) Commissions and fees (13) (24) Mobile phones (12) (12) Cars maintenance and repair (11) (1) Notary taxes (2) (6) Civil contracts (1) (5) Parking (1) (1) Others (1) (2) (685) (904) The remuneration for independent financial audit for separate and consolidated financial statements financial statement for 2023 amounts to BGN 70 thousand (the amount of the audit fee for each separate and consolidated financial statements for 2022 amounts to BGN 47 thousand without VAT). “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 36 22. Other expenses 2023 2022 BGN‘000 BGN‘000 Local taxes and fees (93) (93) Entertainment expenses (78) (39) Social expenses (17) (12) Impairment of receivables (14) (22) Business trips (4) (4) Donations (1) (1) Others (15) (13) (222) (184) 23. Finance costs and finance income 2023 2022 BGN‘000 BGN‘000 Impairment of investments (44) (5 360) Borrowings at amortized cost (92) (264) Interest expense for deposits (12) (101) Interest expense for finance lease agreements (5) (4) Total interest expenses for financial liabilities not at fair value through profit or loss (153) (5 729) Bank fees and commissions (33) (457) Loss on foreign currency financial liabilities designated at fair value through profit or loss (4) (4) Net interest expense on defined benefit plans (1) (1) Finance costs (191) (6 191) 2023 2022 BGN‘000 BGN‘000 Interest income on financial assets carried at amortized cost and financial instruments carried at fair value through profit or loss 6 7 Total interest income for financial assets 6 7 Finance income 6 8 24. (Expenses for)/Revenues from income taxes The relationship between the expected tax expense based on the applicable tax rate in Bulgaria of 10% (2022: 10%) and the reported tax expense in profit or loss can be reconciled as follows: 2023 2022 BGN‘000 BGN‘000 Profit before tax 1 509 1 271 Tax rate 10% 10% Expected tax expense (151) (127) Tax effect of: Increase of the financial result for tax purposes (68) (886) Decrease of the financial result for tax purposes 217 1 013 Current tax expense (2) - Deferred tax income: Origination and reversal of temporary differences 1 860 (Expenses for)/Revenues from income taxes (1) 860 25. Earnings per share and dividends 25.1. Earnings per share Basic earnings per share has been calculated using the profit attributed to shareholders of the Company as the numerator. The weighted average number of outstanding shares used for basic earnings per share as well as profit attributable to shareholders are as follows: “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 37 2023 2022 Profit attributable to the shareholders (BGN) 1 508 408 2 130 644 Weighted average number of outstanding shares 57 883 926 58 494 062 Basic earnings per share (BGN per share) 0,0261 0,0364 The weighted average number of common shares outstanding for the year is defined as the number of common shares outstanding at the beginning of the year, adjusted by the number of common shares repurchased during the year, multiplied by the time averaging factor. The average time factor is equal to the number of days that the particular shares were in circulation, divided by the total number of days during the year. 25.2. Dividends In 2023 the Company has distributed dividends to its owners in the amount of BGN 2 849 thousand (2022: BGN 1 400 thousand). This amount is a payment of BGN 0,048 per share (2022: BGN 0,024), the dividends paid amount to BGN 2 595 thousand after withholding tax for individuals in the amount of BGN 131 thousand. In 2022, the company paid dividends amount to BGN 1 216 thousand after withholding tax for individuals in the amount of BGN 65 thousand. 26. Related party transactions The Company's related parties include its owners, subsidiaries and associates, key management personnel and others described below. Unless otherwise stated, none of the transactions incorporate special terms and conditions and no guarantees were given or received. 26.1. Transactions with subsidiaries 2023 2022 BGN‘000 BGN‘000 Purchases of goods and services Purchases of services - Software services (19) - - Internet (26) (43) - Consulting services (20) - - Seminars and training (1) - - Subscriptions (27) - - Advertising and marketing - (42) - Software license rental Purchases of goods (3) - - Office supplies (4) (1) - Inventory (1) (1) - Computer components (3) - - Advertising materials (37) (5) Purchases of LTFA (19) - Sale of non-current asset 755 - Sales of goods and services Sales of services - Administrative, accounting services 2 680 1 125 - Rent 542 576 - Consulting services - 34 - Sale of licenses - 1 238 - Technical Support 10 36 Sales of goods: - Consumables 88 64 Dividends received 1 509 9 945 Received deposits 13 622 - Refund of received deposits (514) 975 Received loans - 1 400 Refunded received loans - (2 495) Given loans (700) (398) Refunded given loans 76 1 093 Interest on received deposits (12) (100) Interest on received loans - (7) Interest on given loans 13 30 “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 38 26.2. Transactions with other related parties 2023 2022 BGN‘000 BGN‘000 Sale of services - Administrative, accounting services 111 4 - Rent 8 13 - Technical Support 3 - - Consulting services 2 - Given loans - (295) Interest on given loans 6 6 26.3. Transactions with key management personnel Key management of the Company includes members of the board of directors. Key management personnel remuneration includes the following expenses: 2023 2022 BGN‘000 BGN‘000 Short-term employee benefits: Salaries including bonuses (349) (486) Social security costs (5) (8) Total current renumeration (354) (494) Total remunerations (354) (494) The company has paid dividends to key management personnel as of 31.12.2023 in the amount of BGN 1 177 thousand (2022 - BGN 427 thousand). 27. Related party balances at the end of the period 31 December 2023 31 December 2022 BGN‘000 BGN‘000 Non-current Receivables from: - subsidiaries: - 47 - loans - 47 - other related parties under common control: 295 - - loans 295 - Total non-current receivables from related parties 295 47 Current Receivables from: - subsidiaries: 1 819 529 - trade and other receivables 887 289 - loans (28) (38) - interests 948 284 - dividends 12 1 - impairment of loans - (7) - other related parties under common control 10 304 - trade and other receivables 6 9 - impairment of trade receivables (2) - - loans - 295 - interests 6 - - key management personnel - 72 - other receivables - 92 - impairment of other receivables - (20) Total current receivables from related parties 1 829 905 Total receivables from related parties 2 124 952 Non-current Payables to: - subsidiaries: 16 148 3 768 - trade and other liabilities - 1 242 - deposits 16 148 2 526 Total non-current payables to related parties 16 148 3 768 Current Payables to: - subsidiaries: 46 516 - trade and other liabilities 34 1 - deposits - 514 - interests 12 1 - other related parties under common control 243 119 - dividends 243 119 - key management personnel 7 7 Total current payables to related parties 296 642 Total payables to related parties 16 444 4 410 “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 39 As at 31.12.2023 the Company reports the following given loans: - to two subsidiary in the amount of BGN 648 thousand maturing on 31.12.2024; - to one subsidiary in the amount of BGN 300 thousand maturing on 02.05.2024; - to one related company under common control in the amount of BGN 295 thousand with maturity on 31.12.2025. Interest rates vary between 1,3% and 3%. There are no collaterals for the loans. The non-current liabilities as of 31.12.2023 in the amount of BGN 16 148 thousand are related to deposits received from two subsidiaries with a maturity date of 31.12.2025 and interest in the amount of 0.1%. The Company's current liabilities as of 31.12.2023 in the amount of BGN 296 thousand are related to commercial transactions. A simplified approach for determining the expected credit losses at the end of the period has been applied to all receivables from related parties of the Company. The change in the amount of the adjustment for expected credit losses of receivables from related parties can be presented as follows: 2023 2022 BGN‘000 BGN‘000 Balance as of January 1 (65) (266) Amounts written off (uncollectible) 15 197 Amounts paid 20 12 Impairment loss - (8) Balance as of December 31 (30) (65) “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 40 28. Reconciliation of liabilities arising from financing activities The changes in the Company’s liabilities arising from financing activities can be classified as follows: Long-term borrowings Short-term borrowings Interest on borrowings Lease liabilities Interest on lease agreements Deposits liabilities Interest on deposits Dividends Shares repurchased Total BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 1 January 2023 7 457 1 419 13 163 - 3 040 1 119 (85) 12 127 Cash flows: Repayment (7 457) (1 419) (105) (70) (5) (514) (1) (2 595) (1 213) (13 379) Proceeds - - - - - 13 622 - 1 - 13 623 Non-cash: Accrual of dividends - - - - - - - 2 849 - 2 849 Dividend tax withheld - - - - - - - (130) - (130) Accrual of interest - - 92 - 5 - 12 - - 109 New lease contracts concluded - - - 152 - - - - - 152 Share issue reserve - - - - - - - - (483) (483) 31 December 2023 - - - 245 - 16 148 12 244 (1 781) 14 868 Long-term borrowings Short-term borrowings Interest on borrowings Lease liabilities Interest on lease agreements Deposits liabilities Interest on deposits Dividends Total BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 BGN‘000 1 January 2022 9 038 6 823 9 122 - 10 194 164 - 26 350 Cash flows: Repayment (8 077) (6 830) (256) (38) (4) (975) (57) (1 216) (17 453) Proceeds 5 427 1 400 - - - - - - 6 827 Non-cash: Offsetting 1 095 - (4) - - (6 179) (207) - (5 295) Accrual of dividends - - - - - - - 1 400 1 400 Dividend tax withheld - - - - - - - (65) (65) Accrual of interest - - 264 - 4 - 101 - 369 New lease contracts concluded - - - 79 - - - - 79 Reclassification (26) 26 - - - - - - - 31 December 2022 7 457 1 419 13 163 - 3 040 1 119 12 212 “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 41 29. Contingent assets and contingent liabilities No contingent liabilities have arisen for the Company in relation to subsidiaries and associated enterprises, except for the guarantees on loans of subsidiaries described below: Recipient of loan Bank Type of loan Currency Total amount of credit (in BGN) Outstanding obligation to 31.12.2023 (in BGN) Date of contract Interest rate Maturity date Pledges Sirma Solutions EAD United Bulgarian Bank AD Overdraft BGN 4 025 000 - 12.12.2019 RIR + 1.2%, but no less that 1.3% per year 20.09.2024 Pledge of receivables, pledge of commercial enterprises, pledge of real estate Sirma Solutions EAD United Bulgarian Bank AD Revolving credit line BGN 4 000 000 - 28.10.2020 RIR + 1.4%, but no less that 1.5% per year 20.09.2024 Pledge of receivables Sirma Solutions EAD United Bulgarian Bank AD Overdraft BGN 2 080 000 - 15.12.2022 The applicable variable interest rate for the relevant interest period +1.5 points, but not less than 1.5% 15.12.2025 Pledge of receivables Sciant EAD Unicredit BulBank AD Overdraft BGN 500 000 - 18.05.2020 The applicable variable interest rate for the relevant interest period +2 points, but not less than 2.08% 08.04.2025 Pledge of receivables Sciant EAD Unicredit BulBank AD Overdraft BGN 500 000 - 07.04.2022 The applicable variable interest rate for the relevant interest period +2 points, but not less than 2.08% 07.04.2025 Pledge of receivables EngView Systems AD Unicredit BulBank AD Overdraft BGN 1 000 000 - 15.12.2020 The applicable variable interest rate for the relevant interest period +2 points, but not less than 2.08% 14.12.2025 Pledge of receivables Sirma Medical Systems AD United Bulgarian Bank AD Revolving bank loan BGN 250 000 250 000 15.12.2020 The applicable variable interest rate for the relevant interest period +2 points, but not less than 2.08% 14.12.2025 Pledge on receivables “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 42 Litigations No claims were brought against the Company. Tax liabilities The Company's management does not believe that there are significant risks as a result of the dynamic fiscal and regulatory environment in Bulgaria, which would require adjustments to the financial statements for the year ended 31 December 2023. 30. Non-cash transactions During 2023, the Company carried out the following investment and financial transactions, at which no cash or cash equivalents were used and not reflected in the separate Statement of Cash Flow: • The company has concluded a contract for leasing a car in the amount of BGN 152 thousand. During 2022, the Company carried out the following investment and financial transactions, at which no cash or cash equivalents were used and not reflected in the separate Statement of Cash Flow: • The company has recovered deposits in the amount of BGN 6 179 thousand, which are offset by trade receivables in the amount of BGN 5 084 thousand and a loan in the amount of BGN 1 095 thousand. • The company has offset an interest liability in the amount of BGN 207, which is accrued interest on deposits for 2021 in the amount of BGN 164 thousand and accrued interest on deposits for 2022 in the amount of BGN 43 thousand with receivables from related parties • The company has concluded a contract for leasing a car in the amount of BGN 79 thousand. 31. Categories of financial assets and liabilities The carrying amounts presented in the statement of financial position relate to the following categories of assets and liabilities: Financial assets 31 December 2023 31 December 2022 BGN’000 BGN’000 Trade and other receivables 158 73 Related party receivables 2 124 952 Cash and cash equivalents 1 131 3 671 3 413 4 696 Financial liabilities 31 December 2023 31 December 2022 BGN‘000 BGN‘000 Financial liabilities measured at amortized cost Borrowings: - 8 889 non-current - 7 457 current - 1 432 Lease liabilities: 245 163 non-current 192 130 current 53 33 Trade and other payables 116 83 Related party payables: 16 444 4 410 non-current 16 148 3 768 current 296 642 16 805 13 545 See note 4.16 about information related to the accounting policy for each category financial instruments. Description of the risk management objectives and policies of the Company related to the financial instruments is presented in note 32. “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 43 32. Financial instrument risk Risk management objectives and policies The Company is exposed to various risks in relation to financial instruments. The Company's financial assets and liabilities by category are summarized in note 31. The main types of risks are market risk, credit risk and liquidity risk. The Company's risk management is coordinated at its headquarters, in close co-operation with the board of directors and focuses on actively securing the Company's short to medium-term cash flows by minimizing the exposure to financial markets. Long-term financial investments are managed so that they have a long-term return. The Company does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risks to which the Company is exposed are described below. 32.1. Market risk analysis The Company is exposed to market risk through its use of financial instruments and specifically to currency risk, interest rate risk and certain other price risks, which result from both its operating and investing activities. As the economic consequences of the war unfolded in Ukraine, strong inflationary pressures arose. which was particularly high in 2022, when inflation reached 15.3 percent. Average annual inflation for the period January - December 2023 fell compared to the period January - December 2022 to 9.5 percent. By the second half of 2025, easing pressures from energy prices and other costs, together with the ECB's monetary policy measures, should return inflation to the target level. The expected retention of the level of inflation will continue to affect the maintenance of high levels of purchase prices of the goods and services used by the Company, which could lead to an unexpected contraction of consumer demand and, accordingly, future revenues. 32.1.1. Foreign currency risk Most of the Company’s transactions are carried out in Bulgarian leva (BGN). Exposures to currency exchange rates arise from the Company's overseas sales and purchases, which are primarily denominated in US-Dollars. To mitigate the Company's exposure to foreign currency risk, non-BGN cash flows are monitored. Generally, Company’s risk management procedures distinguish short-term foreign currency cash flows (due within 6 months) from longer-term cash flows. Where the amounts to be paid and received in a specific currency are expected to largely offset one another, no further hedging activity is undertaken, as is usually the case in the Company. The company does not take into account the financial assets and liabilities that are denominated in foreign currency and were recalculated in Bulgarian leva at the end of the reporting period, other than euro as of 31.12.2023. As of 31.12.2022, the financial assets that are denominated in foreign currency are in the amount of BGN 15 thousand. The tables below show the sensitivity of the annual net financial result after taxes and equity to possible changes in the exchange rates of the Bulgarian lev against the following foreign currencies: • USD +/- 2.2% (for 2022: +/- 8.6%) All other parameters are assumed to be constant. These percentages are determined on the basis of the average exchange rates for the last 12 months. The sensitivity analysis is based on the Company's investments in foreign currency financial instruments held at the end of the reporting period. 31 December 2022 Increase in the exchange rate of the Bulgarian lev Decrease in the exchange rate of the Bulgarian lev Net financial result Equity Net financial result Equity BGN‘000 BGN‘000 BGN‘000 US Dollars (+/- 8.6 %) (1) (1) 1 1 “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 44 32.1.2. Interest rate risk The Company's policy is to minimize interest rate cash flow risk exposures on long-term financing. Longer-term borrowings are therefore usually at fixed rates. In 2023, the Company is not exposed to a significant risk of changes in market interest rates, because bank loans with variable interest rates were repaid during the year. All other financial assets and liabilities of the Company have fixed interest rates. In 2022, the Company is exposed to the risk of changes in market interest rates on its bank loans, which have a variable interest rate. All other financial assets and liabilities of the Company have fixed interest rates. The tables presented below show the sensitivity of the annual net financial result after tax and equity to a likely change in interest rates on loans with a floating interest rate based on EURIBOR in the amount of +/- 94.23%. These changes are determined to be probable based on observations of current market conditions. The calculations are based on the change in the average market interest rate and on the financial instruments held by the Company at the end of the reporting period, which are sensitive to interest rate changes. All other parameters are assumed to be constant. 31 december 2022 Net financial result Equity increase in interest rate decrease in interest rate increase in interest rate decrease in interest rate BGN‘000 BGN‘000 BGN‘000 BGN‘000 Loans (ЕURIBOR 94.23%) (75) (75) 75 75 32.2. Credit risk Credit risk is the risk that a counterparty fails to discharge an obligation to the Company. The Company is exposed to this risk for various financial instruments, for example by granting loans and receivables to customers, placing deposits, etc. The Company's maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting date. 31 December 2023 31 December 2022 BGN‘000 BGN‘000 Financial assets Trade and other receivables 158 73 Related parties receivables 2 124 952 Cash and cash equivalents 1 131 3 671 3 413 4 696 The Company 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 Company's policy is to deal only with creditworthy counterparties. The Company's management considers that all the above financial assets that are not impaired or past due for each of the reporting dates under review are of good credit quality. The Company has not provided its financial assets as collateral for transactions other than collateral for received bank loans. The credit risk for cash and cash equivalents is considered negligible, since the counterparties are reputable banks with high quality external credit ratings. The carrying amounts disclosed above are the Company's maximum possible credit risk exposure in relation to these instruments. 32.3. Liquidity risk Liquidity risk is the risk arising from the Company not being able to meet its obligations. The Company manages its liquidity needs by monitoring scheduled debt servicing payments for long-term financial liabilities as well as forecast cash inflows and outflows due in day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on the basis of a rolling 30-day projection. Long-term liquidity needs for a 180-day and a 360-day lookout period are identified monthly. Net cash requirements are compared to available borrowing facilities in order to determine headroom or any shortfalls. This analysis shows that available borrowing facilities are expected to be sufficient over the lookout period. The Company's objective is to maintain cash to meet its liquidity requirements for 30-day periods. Funding for long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long-term financial assets. “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 45 As at 31 December 2023, the Company's non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarized below: Current Non-current 31 December 2023 Within 6 months 6 to 12 months 1 to 5 years BGN‘000 BGN‘000 BGN‘000 Lease liabilities 30 30 201 Trade and other payables 116 - - Related party payables 296 - 16 148 Total 442 30 16 349 This compares to the maturity of the Company's non-derivative financial liabilities in the previous reporting period as follows: Current Non-current 31 December 2022 Within 6 months 6 to 12 months 1 to 5 years BGN‘000 BGN‘000 BGN‘000 Loan liabilities 716 716 7 457 Lease liabilities 18 18 134 Trade and other payables 83 - - Related party payables 642 - 3 768 Total 1 459 734 11 359 The above amounts reflect the contractual undiscounted cash flows, which may differ from the carrying values of the liabilities at the reporting date. Financial assets used for managing liquidity risk The Company considers expected cash flows from financial assets in assessing and managing liquidity risk, in particular its cash resources and trade receivables. The Company's existing cash resources and trade receivables do not significantly exceed the current cash outflow requirements. Cash flows from trade and other receivables are all contractually due within six months. 33. Capital management policies and procedures The Company's capital management objectives are: • to ensure the Company's ability to continue as a going concern; and • to provide an adequate return to the shareholder by pricing products and services commensurately with the level of risk. The Company monitors capital on the basis of the correlation between adjusted capital and net debt. Net debt comprises of total liabilities, incl. total borrowings, trade and other payables less the carrying amount of cash and cash equivalents. Company's goal is to maintain a capital-to-net debt ratio within reasonable limits. The amount of the correlation for the presented accounting periods is summarized as follows: 31 December 2023 31 December 2022 BGN‘000 BGN‘000 Equity 73 029 75 582 Total liabilities/Total borrowings, trade and other payables/ 17 048 13 913 - Cash and cash equivalents (1 131) (3 671) Net debt 15 933 10 242 Adjusted capital to net debt 1:4.59 1:7.38 The ratio-change during 2023 is primarily a result of the increase of liabilities and decrease of equity. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt. “Sirma Group Holding” JSC Separate Financial Statements 31 December 2023 www.sirma.com 46 No changes were made in the objectives, policies or processes for managing capital during the presented periods and in the description of what the Company manages as capital. 34. Post-reporting date events Reduction of the capital of a subsidiary company On 21.12.2023, the Board of Directors of "SAI" AD takes a decision to buy the company's shares from the individual shareholders. As a result of this decision, the sole owner of the company became "Sirma Group Holding" JSC. The decision was entered and announced in the Commercial Register on 12.01.2024. As of that date, “SAI” is a sole proprietorship and its capital is BGN 13 588 241, divided into 13 588 241 ordinary (only) shares with a nominal value of 1 BGN. Buyback of shares By decision of the General Meeting of Shareholders of “Sirma Group Holding” JSC, dated 09.01.2023, on 24.01.2023. “Sirma Group Holding” JSC bought back 1 000 000 of its shares at an average price of BGN 0.74 per share at a total price of BGN 740 000. The shares represent 1.68 % of the company's capital. The purchase was made on the Bulgarian Stock Exchange - Sofia AD. No adjusting or significant non-adjusting events have occurred between the reporting date and the date of authorization. 35. Authorization of the separate financial statements The financial statements for the year ended 31 December 2023 (including comparatives) were authorised for issue by the Board of Directors on 14.03.2024. sirma.com Annual Separate Management Report of "Sirma Group Holding" JSC according to Annex N10 of Ordinance 2 to Article 32, Paragraph 1, ltem 2, Article 35, Paragraph 1, ltem 2, Article 41, Paragraph 1, ltem 2 for 2023 Annual separate management report of “Sirma Group Holding” JSC for 2023 Sirma Group Holding JSC 1 www.sirma.com www.sirma.com Content 1/ STATEMENT BY THE BOARD OF DIRECTORS OF “SIRMA GROUP HOLDING” JSC.................................... 3 2/ ORGANIZATION AND WAY OF PRESENTATION ............................................................................................. 4 4/ STRUCTURE OF SHAREHOLDERS CAPITAL AND MANAGEMENT AUTHORITIES ...................................... 7 4.1. Distribution of share capital .......................................................................................................................... 7 4.2. Management authorities ............................................................................................................................... 9 5/ “SIRMA GROUP HOLDING” JSC IN 2023 ........................................................................................................ 13 MAIN LEGAL INFORMATION IN 2023 ............................................................................................................. 22 6/ INDIVIDUAL FINANCIAL RESULTS ................................................................................................................. 26 6.1. REVENUES .................................................................................................................................................... 26 6.2. EXPENSES .................................................................................................................................................... 27 6.3. FINANCIAL INCOME / COSTS (NET) ............................................................................................................ 27 6.4. ASSETS ......................................................................................................................................................... 27 6.5. EQUITY .......................................................................................................................................................... 28 6.6. LIABILITIES .................................................................................................................................................... 28 6.7. CASH FLOW .................................................................................................................................................. 31 6.8. INDICATORS AND COEFFICIENTS .............................................................................................................. 31 6.9 RELATED PARTY TRANSACTIONS .............................................................................................................. 33 7/ PERSONNEL AND ECOLOGY ......................................................................................................................... 34 7.1 ECOLOGY ....................................................................................................................................................... 34 7.2 PERSONNEL .................................................................................................................................................. 34 8/ RISK FACTORS ................................................................................................................................................ 34 9/ INFORMATION ABOUT EVENTS AND INDICATORS WITH INCREASED NATURE OF THE COMPANY, HAVING A SIGNIFICANT EFFECT ON THEIR ACTIVITY AND THEIR INCOME AND EXPENDITURE; EVALUATION OF THEIR IMPACT ON RESULTS IN THE CURRENT PERIOD. ................................................. 40 10/ INFORMATION ABOUT OUT OF THE BALANCE SHEET TRANSACTIONS - NATURE AND BUSINESS PURPOSE, FINANCIAL IMPACT OF THE TRANSACTION ON ACTIVITY IF THE RISKS AND BENEFITS OF THESE TRANSACTIONS ARE ESSENTIAL FOR THE COMPANY AND THE DISCLOSURE OF THIS INFORMATION IS ESSENTIAL FOR ASSESSING THE FINANCIAL POSITION OF THE COMPANY. .............. 40 11/ ANALYSIS AND FINANCIAL EVALUATION OF THE FINANCIAL RESOURCES MANAGEMENT POLICY WITH THE POSITION OF OPPORTUNITIES FOR THE SERVICE OF THE OBLIGATIONS, THE EVENTUAL THREATS AND MEASURES WHICH THE COMPANY WAS PREVENTED OR PROVIDED TO TAKE FOR THE PURPOSE OF REMOVING THEM. ...................................................................................................................... 41 12/ ASSESSMENT OF THE POSSIBILITIES FOR THE IMPLEMENTATION OF INVESTMENT INTENTIONS WITH THE SIGNIFICANCE OF THE AMOUNT OF EXPENDITURE AND THE EFFECTIVENESS OF THE POSSIBLE CHANGES IN THE STRUCTURE OF FINANCING THAT ACTIVITY. ............................................... 41 13/ INFORMATION ABOUT OCCURRING CHANGES IN THE REPORTING PERIOD IN THE MAIN PRINCIPLES FOR THE MANAGEMENT OF THE COMPANY AND ITS ECONOMIC GROUP. .......................... 41 14/ INFORMATION ABOUT THE MAIN CHARACTERISTICS OF THE FINANCIAL REPORTING PROCESSING INTERNAL CONTROL SYSTEM AND RISK MANAGEMENT SYSTEM IN THE COMPANY. .............................. 42 15/ INFORMATION ON CHANGES IN MANAGEMENT AND SUPERVISORY AUTHORITIES DURING THE PERIOD. ................................................................................................................................................................ 42 Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 2 www.sirma.com www.sirma.com 16/ INFORMATION ABOUT THE USE OF THE FUNDS FROM A NEW ISSUED SHARES AND SECURITIES IN THE REPORTING PERIOD. ................................................................................................................................. 42 17/ DETAILS OF THE DIRECTOR FOR CONNECTIONS WITH THE INVESTOR, INCLUDING A TELEPHONE AND ADDRESS FOR CORRESPONDENCE. ....................................................................................................... 43 18/ CHANGES IN THE PRICE OF THE SHARES OF THE COMPANY ............................................................... 44 19/ EVENTS AFTER THE END OF THE REPORTING PERIOD ........................................................................... 45 Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 3 www.sirma.com www.sirma.com 1/ STATEMENT BY THE BOARD OF DIRECTORS OF “SIRMA GROUP HOLDING” JSC The present annual separate management report of „Sirma Group Holding“ JSC („SGH”,”The Holding”) covers the period, ending on 31 December 2023 and is prepared in accordance with the provisions of Article 39 of the Accountancy Law and Art. 100o, para. 2 and 5 of the Law on the Public Offering of Securities (POSA), including also the established events, occurring after the end of the reporting period. The structure of this report is in accordance with Annex 9, 10 and Appendix 11 to Article 32a (2) of Ordinance No. 2. The board of directors of the holding confirms that: - there were no irregularities in which managers or employees were involved, which may be material to the separate financial statements; - all material transactions are duly accounted for and reflected in the annual separate financial statements as at 31 December 2023; - there is no actual or potential breach of laws and (or) other regulatory provisions that would have a material impact on the separate financial statements or could serve as a basis for reporting contingent losses; - there are no legal or other restrictions on the flow of funds; - there are no known trends, requests, commitments, events or occasional circumstances for which we could reasonably expect to affect the company as a whole This management report contains estimates and information based on our beliefs and assumptions, using currently available information about them. Any statements contained in this report that are not historical facts are predictions. We have based these statements on the future of our current expectations, assumptions and predictions about future conditions and events. As a result, our predictions and information are exposed to uncertainties and risks, many of which are beyond our control. If one or more of these uncertainties or risks materialize or if the underlying management assumptions prove to be incorrect, our actual results may differ materially from those described in the report. We describe these risks and uncertainties in the Risk Section of the report. The words "purpose", "predict", "accept", "believe", "in the future", "we could", "rely", "we are confident", "appreciate", "expect", "we intend", "we can", "can", "prospect", "plan", "project", "predict", "would" and other similar expressions are intended to identify these forward-looking statements. Such estimates are, for example, those made in the Business Results section of our quantitative and qualitative disclosures about market risk in accordance with International Financial Reporting Standards (IFRS), namely IFRS 7 and related statements in our Notes to the financial statements, our prospects for development, and other forecast information that appears in other parts of this report. Unless required by law, we do not commit and we have no obligation to update or revise predictive statements as a result of new information we have received about the conditions that existed at the time of this report, future events, or otherwise unless we are obliged to do so under the law. This report includes IT industry statistics and global economic trends that come from information published by sources including International Data Corporation (IDC), a market information and information technology consultant, telecoms and consumer technology markets; Gartner, the European Central Bank (ECB); and the International Monetary Fund (IMF). This data type is only the forecasts of IDC, the ECB, the IMF and other data sources for the global economy and industry. SIRMA does not guarantee any statistical information provided by sources such as IDC, Gartner, ECB, IMF, or other similar sources cited in this report. In addition, although we believe that information from these sources is generally reliable, this type of data is inaccurate. We warn readers not to create unnecessary dependence on this data. In our Separate Management Report, we analyze our business activities for the reporting financial period as well as the current situation of Sirma Group Holding. Starting from a description of our business, economic environment and strategy, we present our financial system and explain in detail our results and operations as well as our financial position and net assets. We also report on the various aspects of financial sustainability of “Sirma Group Holding” and the expected development of possible risks. The financial information presented in the „Sirma Group Holding“ JSC report includes our separate financial statements, our report to the Board of Directors and some financial aspects derived from our management accountability. The non-financial data presented in the report includes aspects of intellectual, human and social rights and relationships derived from our materiality assessment. Our annual separate financial statements have been prepared in accordance with IFRSs. Internal control over financial reporting ensures the reliability of the information presented in the separate financial statements. Our Board of Directors has confirmed the effectiveness of our internal financial reporting. The reporting period is the financial period ending on 31.12.2023. The report includes the activity of “Sirma Group Holding” JSC. Annual separate management report of “Sirma Group Holding” JSC for 2023 Sirma Group Holding JSC 4 www.sirma.com www.sirma.com 2/ ORGANIZATION AND WAY OF PRESENTATION “Sirma Group Holding” JSC is a holding company which invests in technological businesses, manages them strategically and operationally, provides its subsidiaries with management, administrative, marketing and financial services. Over the years, Sirma has created over 20 companies, investing in them a tremendous financial and human capital. Our strategy is to create businesses, incubate them and develop them. Generating robust growth, cost-effectiveness and consistent business results are among the company's top priorities. 2.1. Group structure Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 5 www.sirma.com www.sirma.com HISTORY AND DEVELOPMENT OF THE COMPANY “Sirma Group Holding” JSC is a holding company is registered on 25.04.2008 with the Registry Agency with UIC 200101236, with Seat and registered office: Bulgaria, Sofia (capital), Sofia municipality, 1784, Mladost area, bul. Tsarigradsko Shosse, No 135. The name of the company changed on 23.03.2009 from "SGH" JSC to "Sirma Group Holding" JSC. The company is not limited by the term of existence. The address for correspondence of Sirma Group Holding JSC is: Sofia city 1784, Mladost area, bul. Tsarigradsko Shosse, No 135. The object of the company is: acquisitions, management, evaluation and sale of participation in bulgarian and foreign companies, acquisition, evaluation and sale of patents, cession of licenses to use patents in companies which the company holds, finance companies in which the company participates, organize accounting and compiling financial statements under the law of accounting. company may perform other business activities which is not prohibited by law. Changes in the subject of activity: On 23.03.2009 “Sirma Group Holding” JSC changed its scope of activity as follows: Acquisition, management, evaluation and sale of participations in Bulgarian and foreign companies, acquisition, evaluation and sale of patents, surrender of licenses for use of patents to companies in which the holding company participates, financing of the companies in which the holding company participates, organization of the accounting and preparation of financial statements as per the Law for Accounting. The company may also carry out its own commercial activity, which is not prohibited by law. On 04.07.2012 the subject of activity is changed to the current one. At the time of its incorporation, the company operated under the following business activities: design, development, marketing, sales, implementation, training and support of software products and complete solutions, including software project management, information and communication technology consultancy; accounting services, as well as any other activity not prohibited by law. From the establishment of the company until the date of this document, “Sirma Group Holding” JSC: • does not have a transfer or pledge to the enterprise; • does not have claims, which have been filed for the opening of insolvency proceedings of the company; • does not have pending tenders from third parties to the Company or from the Company to other companies; CAPITAL The share capital of the company amounts to BGN 59 360 518, divided into 59 360 518 dematerialized shares with nominal value of BGN 1. • On 30.10.2015, after a successful initial public offering, the capital was increased to BGN 59 360 518 by issuing 9 523 362 new shares with nominal value per share BGN 1 and issue value BGN 1,20 Non-monetary contributions - description: 1. Software representing 29 (twenty nine) software modules. Value: BGN 61 555 838 2. 81 960 number of ordinary registered shares of "Sirma Group" JSC, the company registered in the Commercial Register to the Registry Agency with UIC 040529004. Value: BGN 11 734 980 3. Real Estate - Floor 3 of an office building "IT - Center Office Express" in Sofia, bul.”Tsarigradsko Shosse " N 135 with an area 796, 50 square meters, pursuant to Deed of buying and selling real estate N 126, Volume I, reg. N 4551, case N 116 from 23.04.200. and 5 floor of an office building "IT - center office Express" in Sofia bul. " Tsarigradsko Shosse " N 135 with area 281.81 square meters, according to Deed of sale of real estate N 86, Volume 4, Reg. N 10237, Case N 592 of 23.12.2004 Value: BGN 3 911 660 Total Value: BGN 77 202 478 Non-cash contributions are detailed in Article 7, paragraph 3 of the Articles of Association of the Company. Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 6 www.sirma.com www.sirma.com HISTORY OF SHAREHOLDER CAPITAL • Through an initial public offering, according to a resolution of the GMS dated 04.12.2014, an increase of the capital of “Sirma Group Holding” JSC was registered on 30.10.2015, increasing the capital to BGN 59 360 518 BGN. • During the transformation entered in the Commercial Register on 23.10.2014. the Company's capital is reduced to 49 837 156 through the cancellation of 23 503 662 shares. This decrease is a result of the estimated fair value of the shares of “Sirma Group Holding” JSC by three independent valuers. The shareholding structure of the Company does not change as a result of the separation until the shareholding structures in the transforming and newly established companies are mirrored. • On 22.10.2010. as a result of the decision of the regular annual general meeting of the Company's shareholders, a reduction of the capital of “Sirma Group Holding” JSC from 77 252 478 BGN to 73 340 818 BGN was recorded through the cancellation of 3 911 660 shares with a par value of one each. The Company's capital was reduced on the basis of Art. 200, para. 2, in conjunction with Art. 187f, par. 1, item 2n in Bulgarian commercial law. • On 15.10.2008 after the adoption of three triple expert appraisals, the share capital is increased from 50 000 BGN to 77 252 478 BGN through non-cash contributions by issuing new 77 202 478 shares as follows: 1) 29 software modules worth 61 555 838 BGN; 2) Non-monetary contribution representing real estate amounting to 3 911 660 BGN: Office building - offices, floor 3th and floor 5th of an office building, located in Sofia, 135 Tsarigradsko shose Blvd., owned by “Sirma Group” JSC, a company registered in the Commercial Register at the Registry Agency UIC 040529004, with headquarters and address of management in Sofia, Mladost district, 135 Tsarigradsko shose Blvd., accepted as shareholder in “SGH” JSC by decision of the General Meeting of “SGH” JSC from 10.07.2008 3) Non-cash contribution representing shares of 11 734 980 BGN: A total of 81 690 shares of the total amount of 11,734,980 BGN (143.6526 BGN per share) of the capital of "Sirma Group" JSC, registered in the Commercial Register at the Registry Agency UIC, 040529004. Information on the terms of any vesting rights and / or liabilities for statutory but unissued capital “Sirma Group Holding” JSC does not have information about the terms of any acquisition and / or liabilities for statutory but unissued capital. 3/ PORTFOLIO OF “SIRMA GROUP HOLDING” JSC Subsidiaries of "Sirma Group Holding" JSC Company Value of the investment at 31.12.2023 (in BGN’000) Percentage of capital at 31.12.2023 % of voting rights at 31.12.2023 Value of the investment at 31.12.2022 (in BGN’000) Percentage of capital at 31.12.2022 % of voting rights at 31.12.2022 Sirma Solutions EAD 28 335 100% 100% 39 686 80,11% 100% SAI AD 17 865 84,56% 100% 17 865 84,56% 100% Impairment (5 360) (5 360) Sciant EAD 14 076 100% 100% 10 237 80% 80% Sirma Group Inc. 3 471 76,30% 76,30% 3 471 76,30% 76,30% Sirma InsurTech 914 55,00% 55,00% 914 55% 55% Sirma CI AD 106 80,00% 80,00% 106 80% 80% Sirma Medical Systems AD 66 66,00% 66,00% 66 66% 66% Impairment (44) - Engview Systems AD 50 72,90% 72,90% 50 72,90% 72,90% Total 70 830 67 035 INFORMATION ON PARTICIPATION Apart from the above mentioned participations of the Company, there are no other participations which are likely to have a significant effect on the valuation of its own assets and liabilities, financial position or profits or losses. The company has no branches. Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 7 www.sirma.com www.sirma.com 4/ STRUCTURE OF SHAREHOLDERS CAPITAL AND MANAGEMENT AUTHORITIES 4.1. Distribution of share capital As of 31.12.2023 the distribution of the share capital of “Sirma Group Holding” JSC is as follows: 31.12.2023 31.12.2022 Share capital (thousand shares) 59 361 59 361 Number of shares (par value of BGN 1.00) 59 360 518 59 360 518 Total number of registered shareholders 1 039 1 033 Including legal entities 39 40 Individuals 1 000 993 Number of shares held by legal entities 7 223 085 5 286 591 % Of participation of entities 12,17% 8,91% Number of shares held by individuals 52 137 433 54 073 927 % Participation of individuals 87,83% 91,09% Shareholders Number of shares at 31.12.2023 Number of shares at 31.12.2022 Nominal VALUE (BGN) Value (BGN) % Shareho lding % of voting rights Georgi Parvanov Marinov 5 455 748 5 269 748 1 5 455 748 9,19% 9,48% Tsvetan Borisov Alexiev 5 035 153 4 965 753 1 5 035 153 8,48% 8,74% Chavdar Velizarov Dimitrov 4 817 386 4 750 786 1 4 817 386 8,12% 8,37% Veselin Antchev Kirov 4 767 386 4 700 786 1 4 767 386 8,03% 8,28% Ognyan Plamenov Chernokozhev 3 741 620 3 741 620 1 3 741 620 6,30% 6,50% Ivo Petrov Petrov 3 400 000 4 013 920 1 3 400 000 5,73% 5,90% Krasimir Nevelinov Bozhkov 2 534 161 2 534 161 1 2 534 161 4,27% 4,40% Vladimir Ivanov Alexiev 2 177 583 2 177 583 1 2 177 583 3,67% 3,78% Rosen Vasilev Varbanov 2 156 687 2 156 687 1 2 156 687 3,63% 3,75% Emiliana Ilieva Ilieva 1 990 209 1 965 209 1 1 990 209 3,35% 3,46% Deyan Nikolov Nenov 1 814 748 1 790 748 1 1 814 748 3,06% 3,15% Purchesd own shares (1 780 407) (84 846) 1 (1 780 407) 3,00% - Atanas Kostadinov Kiryakov 1 542 787 2 887 524 1 1 542 787 2,60% 2,68% Rosen Ivanov Marinov 1 282 900 1 265 795 1 1 282 900 2,16% 2,23% DF Advance Invest 1 099 116 411 895 1 1 099 116 1,85% 1,91% Yavor Liudmilov Djonev 1 092 746 1 292 746 1 1 092 746 1,84% 1,90% Peter Nikolaev Konyarov 872 803 867 165 1 872 803 1,47% 1,52% Mandjukov Ltd. 860 000 860 000 1 860 000 1,45% 1,49% UPF Doverie JSC 802 126 802 126 1 802 126 1,35% 1,39% UPF DSK Rodina 747 036 747 036 1 747 036 1,26% 1,30% Asen Krumov Nelchinov 650 449 641 349 1 650 449 1,10% 1,13% Others 10 739 467 11 433 035 1 10 739 467 18,09% 18,65% Total 59 360 518 59 360 518 59 360 518 100% 100% Percentage of voting rights represents participation in the capital of the company net of the purchased own shares. Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 8 www.sirma.com www.sirma.com On 25.01.2023 „Sirma Group Holding“ JSC bought back 1 398 900 of its shares at an average price of BGN 0,71 per share, for a total price of BGN 993 219. The shares represent 2,36% of the company's capital. On 27.06.2023 „Sirma Group Holding“ JSC bought back 50 000 of its shares at an average price of BGN 0, 677638 per share, for a total price of BGN 33 881,92. The shares represent 0,0842% of the company's capital. On 28.06.2023 „Sirma Group Holding“ JSC bought back 6 000 of its shares at an average price of BGN 0,65 per share, for a total price of BGN 3 900. The shares represent 0,01% of the company's capital. On 03.08.2023 „Sirma Group Holding“ JSC bought back 30 661 of its shares at an average price of BGN 0,70 per share, for a total price of BGN 21 462,70. The shares represent 0,05% of the company's capital. On 02.10.2023 „Sirma Group Holding“ JSC bought back 210 000 of its shares at an average price of BGN 0,76 per share, for a total price of BGN 159 600. The shares represent 0,35% of the company's capital. As of 31.12.2023 „Sirma Group Holding“ JSC holds 1 780 407 (31.12.2022 - 84 846) repurchased own shares at the total amount of BGN 1 780 407 (3% of share capital). Shareholders holding more than 5% of the company's capital are: Shareholders Number of shares at 31.12.2023 % Shareholding % of voting rights Georgi Parvanov Marinov 5 455 748 9,19% 9,48% Tsvetan Borisov Alexiev 5 035 153 8,48% 8,74% Chavdar Velizarov Dimitrov 4 817 386 8,12% 8,37% Veselin Antchev Kirov 4 767 386 8,03% 8,28% Ognyan Plamenov Chernokozhev 3 741 620 6,30% 6,50% Ivo Petrov Petrov 3 400 000 5,73% 5,90% Shareholders Number of shares at 31.12.2022 % Shareholding % of voting rights Georgi Parvanov Marinov 5 269 748 8,88% 8,89% Tsvetan Borisov Alexiev 4 965 753 8,37% 8,38% Chavdar Velizarov Dimitrov 4 750 786 8,00% 8,01% Veselin Antchev Kirov 4 700 786 7,92% 7,93% Ivo Petrov Petrov 4 013 920 6,76% 6,77% Ognyan Plamenov Chernokozhev 3 741 620 6,30% 6,31% Insofar as it is known to the Company, indicate whether the company is directly or indirectly owned or controlled and by whom and how the nature of that control and the measures introduced are introduced to avoid abusing such control. “Sirma Group Holding” JSC is owned by its shareholders exercising full control over the company. Operational control is delegated to the Board of Directors and, respectively, the Executive Director. The company has implemented a number of internal documents aimed at regulating the work and preventing abuses. Such are the "Instruction on the Obligations and Responsibilities of Insiders with Insider Information", "Code of Conduct for Financial and Accounting Posts", "Rules of Procedure of the Board of Directors", "Good Corporate Governance Program". Description of any arrangements known to the Company, the operation of which may at any subsequent date result in a change in the control of the Company The Company is not aware of any arrangements the effect of which could lead to a change in the control of “Sirma Group Holding” JSC in the future. Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 9 www.sirma.com www.sirma.com 4.2. Management authorities “Sirma Group Holding” JSC has a one-tier management system - Board of Directors. The Board of Directors as of 31.12.2023 includes the following members: Chavdar Velizarov Dimitrov Tsvetan Borisov Alexiev Atanas Kostadinov Kiryakov Georgi Parvanov Marinov Veselin Anchev Kirov Yavor Ludmilov Djonev - independent member Martin Veselinov Paev - independent member Peyo Vasilev Popov - independent member Yordan Stoyanov Nedev - independent member Determination of the mandate of the Board of Directors: 2 years from the date of entry. The current mandate of the Board of Directors: 07.07.2024 The company is represented by the Executive Director of “Sirma Group Holding” JSC Tsvetan Borisov Alexiev. Competencies of the management The competences of the management are in line with those listed in the Commercial Law, the Statute and the POSA. Stock options of the company As of the date of this report, no options are available to the members of the Board of Directors on its shares. Rights of the members of the Board of Directors to acquire shares and bonds of the company The rights of the members of the Board of Directors of the company to acquire shares from the company are regulated in the applicable legal framework. The company has no bonds issued. Participation of the members of the BD of “Sirma Group Holding”JSC in other companies The members of the BD of “Sirma Group Holding” JSC have the following other participations in companies, as per the provisions of Art. 247, Par.2, p.4 of the Commercial Code: Georgi Parvanov Marinov – Chairman of the BD Data for activities external to the issuer: 1. Does not participate as an unlimited liability partner in companies in 2023. 2. Does not own more than 25% of the capital of other companies in 2023. 3. Procurator/manager/member of a managing/supervisory body in 2023: • Executive director and Chairman of the BD of “Engview Systems” JSC; • Member of the BD of “Sirma Business Consulting” JSC; • Executive director and Member of the BD of “Pirina Technologies” JSC; Chavdar Velizarov Dimitrov – Deputy Chairman of the BD Data for activities external to the issuer: 1. Does not participate as an unlimited liability partner in companies in 2023. 2. Does not own more than 25% of the capital of other companies in 2023. 3. Procurator/manager/member of a managing/supervisory body in 2023: • Member of the BD of „Sirma Medical Systems“ JSC; Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 10 www.sirma.com www.sirma.com Tsvetan Borisov Aleksiev – Executive director and member of the BD Data for activities external to the issuer: 1. Does not participate as an unlimited liability partner in companies in the last 5 years.. 2. Does not own more than 25% of the capital of other companies in 2023. 3. Procurator/manager/member of a managing/supervisory body in 2023: • Executive director and Chairman of the BD of “Sirma Solutions” JSC, • Chairman of the BD of „Sirma Business Consulting“ JSC, • Member of the BD of “SAI” AD, • Member of the BD of „Daticum“ JSC, • Member of the BD of “Engview Systems” JSC, • Member of the BD of „Sirma“ Sha., Albania, • Member of the BD of „Sciant“ ЕAD, • Member of the BD of „Sirma Group Inc.“ USA; Atanas Kostadinov Kirjakov - Member of the BD Data for activities external to the issuer: 1. Does not participate as an unlimited liability partner in companies. 2. Does not own more than 25% of the capital of other companies in 2023. 3. Procurator/manager/member of a managing/supervisory body in 2023: • Executive director and Member of the BD of “SAI” AD (“Ontotext” JSC); • Member of the BD of “Sirma Solutions” JSC; • Member of the BD of "Engview Systems" JSC; Yordan Stoyanov Nedev – Member of the BD Data for activities external to the issuer: 1. Does not participate as an unlimited liability partner in companies in 2023. 2. Owns more than 25% of the capital of: • “Susana and Vesko – SV” OOD – 75 %. 3. Procurator/manager/member of a managing/supervisory body in 2023: • Member of the BD of MAC „Bushido“; • Trustee of the foundation „Alexander“. • Member of the BD of „Sirma InsurTech“; • Member of the BD of SC Hanshi Association; Veselin Anchev Kirov – Member of the BD Data for activities external to the issuer: 1. Does not participate as an unlimited liability partner in companies in the last 5 years. 2. Does not own more than 25% of the capital of other companies in 2023. 3. Does not participate in managing other legal entities in 2023. Yavor Ludmilov Djonev – independent Member of the BD Data for activities external to the issuer: 1. Does not participate as an unlimited liability partner in companies in the last 5 years. 2. Owns more than 25% of the capital of other company in 2023: • “Djonev Consulting” ЕOOD – 100%. 3. Representing "Educational Transformation Foundation" Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 11 www.sirma.com www.sirma.com Martin Veselinov Paev – independent Member of the BD Data for activities external to the issuer: 1. Does not participate as an unlimited liability partner in companies in the last 5 years. 2. Owns more than 25% of the capital of the following companies: • “Sortis Invest” ЕOOD – 100%. • “Sortis Group” ЕOOD – 100%. 3. Procurator/manager/member of a managing/supervisory body in 2023: • SORTIS INVEST EOOD – Manager • SORTIS GROUP EOOD – Manager • SORTIS VENTURES EOOD – Manager • SORTIS REAL ESTATE EOOD – Manager • SORTIS.BG EOOD – Manager • SORTIS Hospitality OOD – Manager • BP Bulgaria 2 EOOD – Manager • BP Bulgaria 3 EOOD – Manager Peyo Vasilev Popov – independent Member of the BD Data for activities external to the issuer: 1. Does not participate as an unlimited liability partner in companies in the last 5 years. 2. Does not own more than 25% of the capital of other companies in 2023 3. Does not participate in managing other legal entities. Committees in The Company “Sirma Group Holding” JSC creates the following internal committees, which are assigned to manage the respective activities at the operational level, as well as to propose decisions to the Board of Directors of the company: 1. Investment and Risk Committee, composed of: Yordan Nedev – chairman Tsvetan Alexiev – member Georgi Marinov – member 2. Remuneration Committee, composed of: Georgi Marinov – chairman Martin Paev – member Yordan Nedev – member 3. Information Disclosure Committee, composed of: Tsvetan Alexiev – chairman Stanislav Tanushev – member Chavdar Dimitrov – member Atanas Kiryakov - member 4. Audit Committee, composed of: Angel Petrov Kraychev - chairman Alexander Todorov Kolev - member Veselin Anchev Kirov – member Adopted internal documents In 2015 the company adopts the necessary internal documents related to the company's working and management processes and fulfillment of its obligations as a public company: • Good Corporate Governance Program;; • Operating Rules of the Board of Directors; • Instructions and clarifications on the obligations and responsibilities of internal insiders;; • Special code of conduct for financial and accounting positions. All documents are publicly available on the company's website: https://investors.sirma.com/investors/corporate-governance.html Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 12 www.sirma.com www.sirma.com The participation of members of the Board of Directors in the capital of the Company is as follows: Shareholders Number of shares at 31.12.2023 Number of shares at 31.12.2022 Nominal VALUE (BGN) Value (BGN) % Shareholding % of voting rights Georgi Parvanov Marinov 5 455 748 5 269 748 1 5 455 748 9,19% 9,48% Tsvetan Borisov Alexiev 5 035 153 4 965 753 1 5 035 153 8,48% 8,74% Chavdar Velizarov Dimitrov 4 817 386 4 750 786 1 4 817 386 8,12% 8,37% Veselin Anchev Kirov 4 767 386 4 700 786 1 4 767 386 8,03% 8,28% Atanas Kostadinov Kiryakov 1 542 787 2 887 524 1 1 542 787 2,60% 2,68% Yavor Ludmilov Djonev 1 092 746 1 292 746 1 1 092 746 1,84% 1,90% Martin Veselinov Paev 126 920 126 720 1 126 920 0,21% 0,22% Yordan Stoyanov Nedev 3 433 3 433 1 3 433 0,01% 0,01% Peyo Vasilev Popov 100 100 1 100 0,0002% 0,0002% Total 22 841 659 23 997 596 22 841 659 38,48% 39,67% During 2023 the member of the BD Georgi Parvanov Marinov acquired 186 000 shares, the member of the BD Tsvetan Borisov Alexiev acquired 69 400 shares, the member of the BD Chavdar Velizarov Dimitrov acquired 66 600 shares, the member of the BD Veselin Anchev Kirov acquired 66 600 shares, the member of the BD Martin Veselinov Paev acquired 200 shares, the member of the BD Yavor Ludmilov Djonev sold 200 000 shares and the member of the BD Atanas Kostadinov Kiryakov sold 1 344 737 shares of the capital of the company. Remuneration of the members of the Board of Directors of “Sirma Group Holding” JSC Pursuant to Article 25, paragraph 5 of the Articles of Association of the Company, each member of the Board of Directors has received a permanent gross remuneration under management contracts: Name Company Period: 01.01.2023 - 31.12.2023 (BGN) Tsvetan Borisov Alexiev “Sirma Group Holding” JSC (182 040) Yordan Stoyanov Nedev “Sirma Group Holding” JSC (20 880) Georgi Parvanov Marinov “Sirma Group Holding” JSC (20 880) Atanas Kostadinov Kiryakov “Sirma Group Holding” JSC (20 880) Chavdar Velizarov Dimitrov “Sirma Group Holding” JSC (20 880) Veselin Anchev Kirov “Sirma Group Holding” JSC (20 880) Martin Veselinov Paev “Sirma Group Holding” JSC (20 880) Peyo Vasilev Popov “Sirma Group Holding” JSC (20 880) Yavor Ludmilov Djonev “Sirma Group Holding” JSC (20 880) Total (349 080) INFORMATION ON THE CONTRACTS OF THE MEMBERS OF THE ADMINISTRATIVE, MANAGEMENT OR SUPERVISORY BODIES WITH THE COMPANY PROVIDING BENEFITS FOR THE DISCONTINUATION OF EMPLOYMENT In the contracts of the members of the board of directors, both with the Company itself and with subsidiaries of the Company, where such contracts are available to them, no benefits have been provided upon termination of their contracts. Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 13 www.sirma.com www.sirma.com INFORMATION ON THE COMPANY'S AUDIT COMMITTEE, INCLUDING THE NAME OF THE MEMBERS OF THE COMMITTEE AND A MANDATE SUMMARY ON WHICH THE COMMITTEE FUNCTIONS At the Annual General Meeting of the Shareholders of the Company held on 24.06.2022 was decided to relieve the member of the Audit Committee Emiliyat Ivanov Petrov from his position and elected Veselin Anchev Kirov as a member of the Audit Committee. Тhe mandate of the Audit Committee was continued with 3 (three) years at the current remuneration. The Audit Committee consisting of: Angel Petrov Kraychev - chairman Alexander Todorov Kolev - member Veselin Anchev Kirov – member STATEMENT ON WHETHER THE COMPANY COMPLIES OR DOES NOT TO THE REGIME FOR CORPORATE GOVERNANCE In view of the fact that “Sirma Group Holding” JSC is entered in the register under Art. 30, para. 1, item 3 of FSCA, kept by FSC, the Company has implemented a program prepared in accordance with internationally recognized standards for good corporate governance. In accordance with the provision of Art. 100n, para. 4, item 3 of POSA “Sirma Group Holding” JSC is obliged to comply its financial statements with the requirements within the program for the application of internationally recognized standards for good corporate governance and maintains its accounting policy in accordance with International Accounting Standards. 5/ “SIRMA GROUP HOLDING” JSC IN 2023 Summary Slow economic growth, mainly driven by Asia, a "soft landing" in the US and a little harder for Europe. However, inflation is falling faster than expected, but increased risks to global economic development in 2024/2025 remain. Accordingly, expectations for 2024 have worsened compared to 2023. The ICT market once again proves its resilience to critical situations and continues to grow in 2023 and even accelerate into 2024. The economy of Bulgaria in 2023 and forecast for the future years In spite of the more modest expectations, the Bulgarian economy marked a 2% growth (Economic Forecast Bulgaria, EC, February 15, 2024) in 2023. In 2023, the Bulgarian economy experienced: • limited external demand; • strong decline in exports and hence production; • reduced investments; • higher interest rates in the euro zone; • and continued price pressure. What held back a more significant reduction in economic growth in 2023 was: • expansion of domestic consumption; • supported by a strong labor market; • increased consumer confidence; • decline in inflation and • expansion of credit activity. Annual inflation (National Institute of Statistics) fell from 14.3% in December 2022 to 4.7% in December 2023. The annual inflation for 2023 was 8.6%. This decrease in inflation is expected to continue in the coming years. It can be argued that inflation in Bulgaria is under control, as in 2024 it is expected to be 3.4%, falling to 2.9% in 2025. Development of global economy in 2023 and forecast for the future years Global economic growth turned out to be more sustainable than expected (OECD Economic Outlook, February 2024). At the beginning of 2023, a sharper contraction of the world's economies was forecast as real incomes fell and massive monetary tightening loomed. Inflation fell more quickly than expected, and the various support schemes in a number of countries helped to soften household spending and compensate certain industries. Steady growth has been Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 14 www.sirma.com www.sirma.com maintained throughout the year in the US, where domestic consumption has been strong, led by a liquidation of excess savings from the time of COVID (not happening in other countries) and strong government spending. The results were significantly weaker in many other advanced economies, particularly in Europe, reflecting the relative importance of bank funding (which has become more expensive over the year) and the continued adverse effect of the energy shock. After stronger-than-expected growth in the global economy in early 2023, according to the OECD, economic development has slowed, and this slowdown is expected to continue in 2024. The expected global growth in 2023 has been adjusted to 3.1% and 2.9% for 2024. Despite China's slower recovery in 2023, global economic growth for the year was still led by disproportionate (compared to other economies) growth in Asia. The tight monetary policy and the associated rising interest rates are giving increasingly visible results, which, in addition to falling inflation, are bringing with them a contraction in both business and consumer spending. Accordingly, growth in the US is expected to slow from 2.2% in 2023 to 2.1% in 2024 and 1.7% in 2025. In the Eurozone, where demand has already contracted (2023), economic growth is expected to be 0.6% in 2023 and recover slightly to 1.1% in 2024. Falling energy prices and overcoming supply chain bottlenecks contributed to a faster-than-expected decline in inflation in 2023. In the absence of further supply shocks, a gradual cooling of domestic demand and a further decline in inflation to its target levels by end of 2025. The forecast for global economic development in 2024 and 2025 of the OECD (OECD Economic Outlook, February 2024) remains the same as that of mid-2023. Global economic growth has proven to be relatively sustainable. Moderate global economic growth, estimated at 3.1% in 2023, is expected to continue in the coming years, with a slight decline to 2.9% in 2024 and a recovery to 3% in 2025. Although the OECD forecasts from February 2024 are more optimistic than those at the end of 2022, risks to the world's economic development still remain.Such risks are: • Risk of a greater than expected effect from monetary restrictions: low probability / medium impact; • global recession: average probability / average impact ; • escalation of Russia's war in Ukraine: low probability / high impact; • increasing debt difficulties due to high interest rates and slow growth: average probability / high impact; • potential sustainability of inflation and the related need to maintain high interest rates for a longer period: average probability / high impact ; • stronger-than-expected contraction of the Chinese economy, deepening deflation and contraction of domestic consumption and sales problems in the Chinese property market that generate liquidity and/or risk of debt defaults: low probability / high impact ; • deepening of the geopolitical fragmentation that began in 2022: average probability / high impact ; • escalation of the war between Israel and Hamas to a regional conflict and/or limitation of traffic of fuel and foods through the Middle East: low probability / high impact ; • a possible return of energy and/or food shortages and the resulting rise in prices: high probability / high impact ; • extreme climatic events: high probability / average impact. The European Commission (Winter 2024 Economic Forecast, European Commission, February 15, 2024) again revised downward its forecasts for the development of the European economy (compared to expectations at the end of 2023) in the conditions of a faster than expected contraction of inflation. The EU economy continues to grow, albeit with reduced momentum. The forecast revised EU GDP growth down to 0.5% in 2023 from 0.8% forecast in the autumn and 0.9% in 2024, down from 1.4% forecast in 2023. The EC also cut expectations for euro area growth to 0.5% in 2023 (from 1.1%), 0.8% in 2024 (from 1.6%), and 1.5% in 2025. Inflation is expected to continue to decline over the forecast horizon. The Harmonized Index of Consumer Prices (HICP) is expected to reach 6.5% in 2023 (compared to expectations of 6.5% in the autumn), 3.0% in 2024, and 2.5% in 2025 in the EU. Eurozone inflation is expected to be slightly lower than overall inflation for the Union. The modest growth in Europe in 2023 is mainly due to waning momentum from the COVID recovery. Since the end of 2022, the economic expansion has stopped abruptly, and the economy has stagnated since then. Expectations for the first quarter of 2024 remain modest. The main reasons for this are: • contraction of internal consumption; • poor external demand; • forced monetary contraction (fighting inflation); • and the partial suspension of fiscal stimulus in 2023. Still, it's not all bad in 2023: • inflation fell under control and steadily decreased; • fuel prices fell faster than expected; • real growth of wages; • increased internal consumption; • regardless of logistical constraints surrounding the Red Sea conflict, inflation is expected to continue its decline in 2024 and 2025. Risks related to climate change and extreme weather events will continue to be a threat to the continent again in 2024. The Industry of Sirma Sirma Group companies specialize in the information technology (IT) industry, predominantly focused on Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 15 www.sirma.com www.sirma.com businesses (B2B). Industrial data is usually combined with data on the "communications segment" because this segment is completely dependent on information technology. Accordingly, the industry acquired the name "Information and Communication Technologies" or ICT for short. Out of all the variety of ICT segments, the companies in the group mainly work in the segments "IT services" (system integration, infrastructure as a service, software as a service, software support, consulting) and "Business software" (various software products and services aimed at different business verticals and custom software development). The two main segments ("IT Services" and "Software") in which the Group operates were the fastest and most sustainably growing in the past (Gartner, July 19, 2023). Both segments are seen as the solution to all problems arising from global economic uncertainty and accordingly as "immunized from crises". The mass digitization that is unfolding relies precisely on "Software", for the various technological solutions and "IT services" through which these solutions are implemented. This has led to the growth of both segments even in the turbulent year 2022. Expectations of continued growth of them are in place for 2023 and the following years. Expectations for 2023 are that the two segments will not only maintain their growth - 13.5% for "Software" and 8.8% for "IT Services", but that this growth will be sustainable and will accelerate in the coming years - with growth in 2024 of 14.0% and 11.6% respectively. Geographically, Sirma is focused on the world's leading markets (US, UK, and Europe), which are also the leading geographic centers for demand for ICT products and services. Sirma is a B2B IT provider. Sirma's client portfolio - Digital Business (Consulting and Integration, Chatbots, IT Security and Software Development), Financial Institutions (Consulting, Integration, IT Security, Chatbots, and the products of Sirma Business Consulting AD), Insurance (The platform for insurance broker of Sirma), hospitality (Sciаnt), and healthcare (Sirma Medical Systems) show sustainable development and strong growth in 2023 and the following years. The global ICT market in 2023 and future forecast After a better-than-expected 2022, at the end of the third quarter of 2023, Gartner also revised its forecasts for the development of the ICT market in 2023 (Gartner, October, 2023). 2023 is expected to bring growth of 3.5% (down from the 4.4% forecast mid-year) at current prices and 4.4% in constant currency. The ICT market is expected to reach USD 4.7 billion in 2023. Similar to 2022, 2023 is also expected to be highly divergent. In current prices, while the "Software" segment is expected to record a double-digit growth of 12.9% (down from the forecast of 13.5% in the middle of the year), the "Devices" segment is shrinking by 10%. In 2023, the ICT sector is expected to return to "normalcy" as well as resume its sustained strong growth outlook of 8.0% (down from the mid-year forecast of 8.8%) in 2024 and corresponding growth in all segments. The ICT markets of consumers and corporate customers will experience different dynamics during the two years under review. While inflation erodes the purchasing power of individual consumers, businesses continue to spend for their digitization, process optimization, and pursuit of increased margins. Precisely because of some of the challenges in the world, the leading segment in 2023 is "Software" with a growth of 12.9% on an annual basis in current prices in USD. The "IT services" segment remains in second place with a growth of 7.3%. Both segments are expected to maintain their leading position in 2024 with growth of 13.8% and 10.4%, respectively. The big loser in 2023 is shaping up to be the "Devices" segment, with a drop of as much as 10.0%. The negative impact of inflation on the purchasing power of clients for "Devices" around the world is one of the reasons for postponing much of the planned purchases and refraining from technological renewal, and consequently for the dramatic decline in the segment. In 2024, Gartner expects growth to accelerate (6.8% in current prices or 7.9% in constant prices), with total global ICT spending reaching USD 5 trillion for the first time. The expectations are that the growth of the ICT industry will return to its normal levels, and this time the growth will cover all segments of the sector. Sources of growth The growth expected in 2023 and the following years is global and is anticipated in all regions. While leading by volume, ICT spending growth in North America, the UK and Europe will also outpace the average ICT spending growth of all other countries - for 2023 of 6.1%, 6.4% and 5.9 % growth is forecast respectively. Even countries experiencing increased economic difficulties (Turkey, Greece, Argentina) are expected to increase their ICT spending in the coming years. Forecast growth varies significantly between countries, but no country is expected to shrink its ICT spending. Spending growth in IT will be maintained for all countries in 2024. India is expected to break away from the rest of the countries, in its IT spending, with growth which is approaching 12%. The largest IT market in the US is expected to record strong growth again, exceeding 8% in 2024. European countries and China are oriented towards the world average of 7%. Japan and Latin American countries recorded the most modest growth, around 5%. However, it should be noted that Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 16 www.sirma.com www.sirma.com even this weaker growth of 5% per year would have looked impressive just 10 years ago. The growth of IT spending is related to the IT saturation of the respective economy and the related IT spending per capita. The countries that lead the ranking in terms of IT spending growth are those that have realized that their economic development is tightly related to IT. Things are similar when considering verticals. Again, absolutely every industry is expected to increase its ICT spending. Banking, Financial Services, Telecommunications, Healthcare and various forms of government are expected to lead the growth of ICT spending in 2023 and beyond. These sectors are witnessing near-double-digit growth in 2023 at constant prices, and are expected to remain around and above 10% CAGR 2022-2027 levels. The apparent resilience of the ICT sector to crises does not apply to all its segments. Despite the ubiquitous growth, it is uneven across different technology segments. The expected growth of ICT spending in current prices in 2023 is 4.4% and CAGR 2022-2027 of 6.4%. At the same time, these are only the average values, and there is almost no segment that has a similar growth. "Devices" have a negative growth, which in some cases (laptops and tablets) exceeds 15%. "IT Services" as a whole lead the segments in terms of growth. “Infrastructure as a Service” (IaaS) is outpacing all segments with an impressive growth of 22.5% in 2023 and a CAGR 2022 – 2027 of 23.2%. "Software" (Infrastructure Software, Application Software and Vertical-Specific Software) and "IT Services" (Consulting, System Integration, Management Services) are the segments expected to lead the growth in 2023 and the following years, with double-digit annual growth, which starts from 2023. If individuals' ICT spending is excluded from these figures, the sector's growth is even more impressive. Business spending on ICT grew by 6.7% in 2023 and is expected to grow at a CAGR of 8.0% 2022-2027. This lends credence to the claim that business ICT spending is recession-proof. Again, this growth is not evenly distributed across segments. The "Software" and "IT services" segments are leading again, but their growth is even higher, compensating for the expected decline or weaker growth in the other segments - "Hardware", "Printers", "PCs and tablets", and others (bottom left). This dynamic is expected to increase the sector to USD 6 trillion in 2027. Despite the expected growth in all segments and in 2024, the traditional leaders in terms of growth remain: the "Software" and "IT services" segments. The expected average growth for 2024 is expected to be 7%, with approximately the same CAGR for 2022-2027. Something striking is the huge difference in growth between the fastest growing and the slowest growing (sometimes shrinking) sub-segments: “Infrastructure as a Service” (IaaS) continues to be unable to fit into the graph, due to its impressive growth of 24.5% in 2024, while “Printers” and “Fixed voice” devices are expected to mark a 5% decline. It is also noteworthy that sub-segments that are related to the ownership of devices are massively declining - desktop, laptop, printers. This trend in hardware is even dragging with it some "IT services" such as "Hardware Support". And again, similar to 2023, excluding the consumer segment increases annual growth to 8%. This shows that the driver of growth in 2024 is not consumers, but business organizations and their digitalization. When looking at the components of growth in the leading segment "Software", huge differences can again be observed between the development of the various sub-segments - from -7% to +27%. In this segment, a growth of 10% is considered "a lager". Gartner believes the world is still in the "digital construction" stage, building the digital infrastructure needed to drive sales growth, increase efficiency and, since more recently, increase margins. The leading segments we can expect in the near future to be strengthened by the addition of artificial intelligence (which is currently not yet a major market factor). It is also interesting to note the massive dominance of cloud software relative to non-cloud solutions. Although the latter have their place in the future as well, cloud-based software is experiencing a much greater growth, which reveals the full direction of the market towards cloud-based solutions. Almost all leading sub-segments are already predominantly in the cloud, and this share is only expected to increase in the coming years. The different components of the second most dynamic segment - "IT services" also have very different growth, relative to each other. "Infrastructure as a service" is expected to grow, but its growth is difficult to mark on the graph. All IT services related to access to the cloud and edge software are expected to enjoy hefty growth. IT services in "Design" and "Building" in all their varieties are expected to have significant growth in 2023, as well as in the coming years. These are also the markets where the problem of the shortage of qualified labour is most acute. The lack of talent in enterprises is much more acute than in large IT companies. Accordingly, when enterprises move their operations to the cloud, or implement a new software platform that needs to be managed, the only way forward for them is to hire "Managed services". Hence the dramatic growth of "Managed services for the cloud and edge" - about 13% per year, "Corporate Strategy” - growth of about 12%, "Marketing and customer management" - growth of about 11%, " Risk Management", "Human Resource Management", "Financial Management", "Business Operations", etc. with a growth of about 10%. In 2023, the “slowdown in the development of cloud technologies” was publicly commented on. Although the growth of cloud services falls from 25.8% to 17.8% in 2023, the growth continues to be faster by a factor, than almost all other sub-segments. Spending in the Cloud Services sub- segment has increased by USD 81 million in 2023 compared to 2022. This impressive growth is expected to continue in the coming years. It is characteristic of "Cloud" that there is no single component that is the driver of the growth slowdown in 2023 or its acceleration in 2024 and 2025. For a long time, the "Communication Services" segment was the largest in the ICT sector. From 2024 onwards, this will no longer be the case. "IT services" displaces "TELCO" in the first place, and further, it is expected to maintain its significant growth in the coming years. The "Software" sub-segment market is also expected to eclipse TELCO, but only in 2028. Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 17 www.sirma.com www.sirma.com PARTICIPATION IN MANAGEMENT AND IMPLEMENTATION OF CONTROL ON THE SUBSIDIAR COMPANIES In 2023, as in previous periods, Sirma Group Holding's senior management was actively involved in the management of its subsidiaries. The high expertise and accumulated experience of Sirma Group Holding’s managers helped companies to formulate their development goals and strategies as well as their business and financial plans. As a result, the company achieved outstanding successes over the past period. At the same time, taking part in the management of the Group's companies, they monitored the Group's overall objectives, strategies for its development and financial discipline. MARKETING In operational terms, the annual marketing strategy and budget of the “Sirma Group Holding” JSC for 2023 ensured the planning, development and successful implementation of the following activities: 1. Creating, developing and maintaining a general knowledge of the Sirma brand through a range of activities that help for successful branding and corporate communications - public relations, investor relations, public institutions, company employees, general public. They included internet marketing, online meetings, helping managers and managers with marketing materials for their investment tours, press interviews, TV, radio, participation in specialized and high profile business events. 2. Building a strong employer brand and affirming the company as an attractive place to work, career development and realization of own innovative ideas for creating new software products and solutions, working with the most advanced technologies, entering new market niches. A favorable environment has been created and the innovation process in companies is regularly promoted. Social media is actively used for informal communication with employees, engaging in important causes, informing about upcoming events, company and product news. The team building conducted at the end of the year was traditionally one of the most anticipated events that enabled people from different companies, cities and offices to communicate in an informal environment. 3. Increased presence of the brand in social media and communication management through digital channels. As part of marketing through social channels, a content marketing program has been developed. It aims at: • enhanced performance across the global network through digital tools - a substantial increase in traffic to “Sirma Group Holding” JSC sites and subsidiaries; improved detection in the most popular search engines - SEO & SEM activities; • raising awareness of external and internal audiences about corporate initiatives and key business events; • informing the audience about new products and services created by our companies, the development of existing products and services, company achievements; FINANCIAL ACTIVITY - ASPECTS AND MANAGEMENT OF FINANCIAL RESOURCES OF HOLDING AND GROUP Over the past period the management of the financial activities of “Sirma Group Holding” JSC was carried out in the following: І. Goals As a strategic goal of financial management, “Sirma Group Holding” JSC has accepted the increase in the wealth of the owners, which can only be achieved by maximizing the market value of the company based on the share price. As a tactical objective of the financial management, “Sirma Group Holding” JSC opted the maximization of revenues and profit. As an operational objective of financial management, “Sirma Group Holding” JSC has determined the maintenance of the solvency of the company and the Group companies as an opportunity to service all emerging uncontested payments. II. Execution of functions 1. Executed functions of Sirma Group Holding’s management:: a) Financial planning - plans of “Sirma Group Holding” JSC and of all companies of the Group for a one-year and mid- term period were prepared. b) Co-ordination of the financial activity - “Sirma Group Holding” JSC coordinated the activities of all the companies in the Group for the fulfillment of the general objectives of the financial activity management and for the implementation of unified policies in this activity; с) Control - The financial team of the “Sirma Group Holding” JSC throughout the year carried out regular and periodical control over the financial activity of the companies in the group. Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 18 www.sirma.com www.sirma.com 2. As regards the financial activities of “Sirma Group Holding” JSC and the subsidiaries, the Holding had the following functions: a) financing - related to the provision of financial resources and the structuring of capital needed for the proper functioning of the enterprise. This function is related to the company Balance liability. There are the sources of capital available to the enterprise for the conduct of its business. b) vestment - covers the insured capital in different assets in order to realize the strategic objective of the company. This feature is related to the Balance asset. III. Completed tasks 1. Ensure sufficient financial resources in accordance with the strategy and tasks for the development of “Sirma Group Holding” JSC and the subsidiaries during the respective period. 2. Ensuring the most efficient allocation and utilization of the volume of financial resources formed in the main directions of the Group's activity. 3. Optimization of the monetary turnover - synchronization by size and time of the receipts and payments for the normal service of the undisputed payments. 4. Ensure maximum profit at a given level of risk. 5. Ensure the financial equilibrium of “Sirma Group Holding” JSC and the subsidiaries in the process of their development. In fulfilling the task of financial equilibrium, we have complied with the golden balance rule, which requires long-term assets to be funded by long-term capital sources, and short-term assets from short-term sources of capital. 6. Providing opportunities for quick capital reinvestment when changing the external and internal conditions for carrying out the business activity. - ACCOUNTING SERVICES In 2023 “Sirma Group Holding” JSC performed the accounting services of 20 subsidiaries and associated companies and related companies. In addition to regular accounting services, management is presented with various BI reports built as know-how of the Group. The FAD of “Sirma Group Holding” JSC achieved monthly reporting of results at individual and group level. The department also managed to manage the companies' relationships with the fiscal and social security systems. The timely introduction of taxes, timely information submission and the preparation of information under the Law for Public Offering of Securities to the Financial Supervision Commission and the BSE have been performed in the period. - LEGAL SERVICES The legal department of “Sirma Group Holding” JSC carries out legal services to the companies of the Group, which includes the preparation of corporate documents; assistance with the preparation and implementation of the GMS; preparation of any commercial documents and contracts; settlement of commercial disputes; conducting court cases. - MANAGEMENT OF RISKS The management of the risks of “Sirma Group Holding” JSC is the responsibility of the Board of Directors. In his activities, he is assisted by the Investment and Risk Committee. The holding also supports its subsidiaries for risk management. Risk management is, inherently, the ability to anticipate threats to the company's activities, individual projects and minimize their adverse effects. The process is iterative. It starts with identifying the possible risks, goes through risk analysis and planning their management, then begins a process of monitoring and a regular return to the analysis process. In “Sirma Group Holding” JSC a sophisticated risk management system has been set up. Risk management in SGH includes: ● Risk identification - This is a lengthy process that detects potential threats. In order to identify the expected and predictable risks, different methods are used: questionnaires (interview questionnaires), interviews, brainstorming, document analysis, a list of expected and predictable risks (checklist analysis), based on a previous experience ● Qualitative and quantitative risk analysis - Once the potential risks have been identified, a qualitative and quantitative analysis of each of them is required. The likelihood of occurrence and impact through predefined scales is estimated, for example Probability: very small, small, medium, large or very large; Impact: catastrophic, critical, permissible, insignificant. A risk table is prepared with the data. Risks are grouped into categories, their likelihood of occurrence and their impact, as well as case scenarios that are implemented in case the risk occurs. The resulting list is sorted by impact and probability. A threshold is set, the risks over which it will be managed. The risk table is reviewed and reassessed on a regular basis, as there is a chance that risks may be dropped, new ones added or ratings changed. ● Planning actions to overcome the risk Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 19 www.sirma.com www.sirma.com The next step in risk management is planning. This is the process of documenting the measures that will be applied to managing each of the identified key risks. 3 management strategies are used: a) risk avoidance - a strategy that reduces the likelihood of risk occurring; b) minimizing the risk-taking effect - a strategy that reduces the consequences of the risk; c) Emergency action plans - a strategy where the organization accepts the risk and is ready to deal with it if it comes to fruition; As a result of the risk planning, a Risk Mitigation Monitoring and Management Plan is established. It may be a separate document or a set of information cards for each individual risk to be stored and managed in a database. - Risk monitoring and control - This is the latest activity in risk management. This process has several main tasks: - confirm the occurrence of a risk - ensure that activities to prevent or deal with risks are implemented - Identify what risk has caused the relevant problems - document information to be used in a subsequent risk analysis; IMPACT OF EXCLUSIVE FACTORS The information in this report is not affected by the presence of exceptional factors. SUMMARY INFORMATION RELATING TO THE STATE OF WHICH THE COMPANY DEPENDS ON PATENTS OR LICENSES, INDUSTRIAL, COMMERCIAL OR FINANCIAL CONTRACTS OR FROM NEW PROCESSING PROCESSES “Sirma Group Holding” JSC is not dependent on patents or licenses, industrial, commercial or financial contracts, as well as new production processes. For all employees of the Company, it has the appropriate licenses for operating systems and application software for PCs and servers required for the normal workflow. INFORMATION, CONCERNING SIGNIFICANT FACTORS, INCLUDING NON-ORDINARY OR RARE EVENTS OR NEW DEVELOPMENTS, THAT EXPRESSLY RENDER THE INCOME OF THE COMPANY'S ACTIVITY There are no significant factors, including unusual or rare events or new developments that materially affect the Company's revenue and future investments. SIGNIFICANT CHANGES IN NET SALES OR REVENUES DISCLOSED IN THE ACCOUNTS Significant changes in net sales or earnings reported in the Company's accounts detailed in Section 6 of this Report are observed during the period considered. INFORMATION ON GOVERNANCE, ECONOMIC, FISCAL, MONETARY POLICY OR POLITICAL COURSE OR FACTORS THAT SIGNIFICANTLY HAVE BEEN CONCERNED OR MAY CONTRIBUTE TO SIGNIFICANT, DIRECT, OR CONSEQUENTIAL ACTIVITY OF THE COMPANY During the period under review, there were no factors of government, economic, fiscal, monetary or political factors that had a significant impact on the company's operations. The main factors that may affect the Company's operations and how it manages the risk are described in the Risk Factors of this document. Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 20 www.sirma.com www.sirma.com EVENTS AND BUSINESS NEWS IN 2023 The following events and business news took place in 2023: 18-19.12.2023 Atanas Kiryakov – member of the MB of SGH took part in the discussion organized by the Science and Technology Policy Committee of OECD on public support for business, R&D and innovation. 15.12.2023 Disclosure of sale of 200 000 shares from Sirma Group Holding by member of BD – Yavor Djonev. 28.11.2023 Disclosure of the interim consolidated financial results of Sirma Group Holding JSC for the period ending on 30.09.2023. 14.11.2023 The daughter company Sirma Solutions took part in the event JS Talks 2023. 07.11.2023 Sirma Group Holding JSC взе участие в Investor Finance Forum. 27.10.2023 Disclosure of the interim individual financial results of Sirma Group Holding JSC for the period ending on 30.09.2023. 04.10.2023 The daughter company Sirma Solutions JSC took part in the event Career Show 2023. 02.10.2023 Disclosure of purchase of 66 600 shares from Sirma Group Holding by member of BD – Veselin Kirov. 02.10.2023 Disclosure of purchase of 55 263 shares from Sirma Group Holding by member of BD – Atanas Kiryakov. 02.10.2023 Disclosure of purchase of 66 600 shares from Sirma Group Holding by member of BD – Chavdar Dimitrov. 02.10.2023 Disclosure of purchase of 69 600 shares from Sirma Group Holding by CEO – Tsvetan Alexiev. 02.10.2023 Disclosure of purchase of 75 000 shares from Sirma Group Holding by Chairman of BD – Georgi Marinov. 02.10.2023 Disclosure of a buy-back of 159 600 shares by Sirma Group Holding JSC. 29.09.2023 The daughter company Sirma Business Consulting joined the Bulgarian Business Leaders Forum= 07.09.2023 The second season of the Sirma Venture Lab to support startups in the field of robotics, artificial intelligence and drone technology begins. 30.08.2023 Sirma Group Holding JSC was ranked eighth by size of revenue among the Bulgarian IT companies by the annual ranking of Capital K100. 29.08.2023 Disclosure of the interim consolidated financial results of Sirma Group Holding JSC for the period ending on 30.06.2023. 04.08.2023 Disclosure of a buy-back of 30 661 shares by Sirma Group Holding JSC. 26.07.2023 Disclosure of the interim individual financial results of Sirma Group Holding JSC for the period ending on 30.06.2023. 30.06.2023 Disclosure of purchase of 30 000 shares from Sirma Group Holding by Chairman of BD – Georgi Marinov. Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 21 www.sirma.com www.sirma.com 28.06.2023 Disclosure of a buy-back of 50 000 shares by Sirma Group Holding JSC. 28.06.2023 Publication of Protocol for changes in the voting lists under item 4 of the Minutes from the GMS from 15.06.2023. 16.06.2023 Publication of Terms and conditions for dividend payment for 2022. 15.06.2023 Annual General meeting of shareholders of Sirma Group Holding JSC. 14.06.2023 The champion product of Sirma Medical Systems JSC – Diabetes:M was selected by Google for inclusion in their campaign WeArePlay. 13.06.2023 The first Demo Day of Sirma Venture Lab in support of innovative start-up companies. 06-08.06.2023 A team from Sirma Solutions JSC took part in the fintech event Money 2020 in Amsterdam. 07.06.2023 Sirma Group Holding JSC was awarded by the Technical University, Sofia in connection with the finalization of the education hall in the Education center for digital technologies at the university. 30.05.2023 Disclosure of the interim consolidated financial results of Sirma Group Holding JSC for the period ending on 31.03.2023. 05.05.2023 Publication of the Invitation for convening of a General Meeting of Shareholders of Sirma Group Holding JSC on the 15.06.2023. 02.05.2023 Disclosure of the interim individual financial results of Sirma Group Holding JSC for the period ending on 31.03.2023. 02.05.2023 Disclosure of the audited consolidated financial results of Sirma Group Holding JSC for the period ending on 31.12.2022. 26.04.2023 Disclosure of the registration of a daughter company Sirma AB in Stockholm, Sweden. 12.04.2023 Disclosure of the full repayment of all investment loans by Sirma Group Holding JSC. 04.04.2023 Disclosure of the acquisition of the minority share of the daughter company Sciant JSC by Sirma Group Holding JSC. 30.03.2023 Disclosure of information about the finalization of the sale of the minority stake in Sirma AI. 28.03.2023 The Executive Director of Sirma Solutions JSC was a speaker at the „Fintech and Insurtech Summit” 24.03.2023 Sirma Medical Systems has joined the Bulgarian cluster for digital solutions and innovation in healthcare 14.03.2023 Sirma Solutions took part in the forum Finovate London Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 22 www.sirma.com www.sirma.com 07.03.2023 Disclosure of information about the appointment of a financial controller. 01.03.2023 Disclosure of interim consolidated financial reports by Sirma Group Holding JSC for the period ending on 31.12.2022. 24.02.2023 The executive director of Sirma Solutions – Momchil Zarev and the director for strategic partnerships Mark Belane took part in the forum MWC Barcelona. 21.02.2023 EngView Systems Sofia joins The European Diemaker Association 20.02.2023 Sirma Group Holding started the disbursement of the interim six-month dividend for 2022. 16.02.2023 Publication of the Minutes of the GSM of Sirma Group Holding and notification for dividend payment. 15.02.2023 An extraordinary General Meeting of the Shareholders of Sirma Group Holding JSC was held 03.02.2023 The daughter company of Sirma Group Holding JSC – Sirma Solutions JSC disclosed that it plans to hire 100 new employees in 2023 30.01.2023 Disclosure of information about the purchase of 66 000 shares of Sirma Group Holding by the Chairman of the BD of Sirma Group Holding JSC Georgi Marinov. 26.01.2023 Disclosure of information about the sale of 1 400 000 shares of Sirma Group Holding JSC by the member of the BD of Sirma Group Holding JSC Atanas Kiryakov. 26.01.2023 Disclosure of information of a buy-back of 1 398 900 shares of Sirma Group Holding JSC. 23.01.2023 Disclosure of the interim individual financial reports of Sirma Group Holding for the period ending on 31.12.2023. 13.01.2023 Disclosure of the Invitation and corresponding documents for the GMS of Sirma Group Holding JSC 09.01.2023 Publication of the Minutes of the GSM of Sirma Group Holding and notification for dividend payment. 06.01.2023 Disclosure of the Invitation to a GMS of Sirma Group Holding JSC MAIN LEGAL INFORMATION IN 2023 Transactions with shares for the period 01.01.2023 - 31.12.2023: - Buyback of shares By decision of the General Meeting of Shareholders of “Sirma Group Holding” JSC, dated 09.01.2023, on 25.01.2023 “Sirma Group Holding” JSC bought back 1 398 900 of its shares at an average price of BGN 0.71 per share at a total price of BGN 993 219. The shares represent 2.37% of the company's capital. The purchase was made on the Bulgarian Stock Exchange - Sofia AD. Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 23 www.sirma.com www.sirma.com By decision of the General Meeting of Shareholders of “Sirma Group Holding” JSC, dated 09.01.2023, on 27.06.2023 “Sirma Group Holding” JSC bought back 50 000 of its shares at an average price of BGN 0.677638 per share at a total price of BGN 33 881.92. The shares represent 0.0842% of the company's capital. The purchase was made on the Bulgarian Stock Exchange - Sofia AD. By decision of the General Meeting of Shareholders of “Sirma Group Holding” JSC, dated 09.01.2023, on 28.06.2023 “Sirma Group Holding” JSC bought back 6 000 of its shares at an average price of BGN 0.65 per share at a total price of BGN 3 900. The shares represent 0.01% of the company's capital. The purchase was made on the Bulgarian Stock Exchange - Sofia AD. By decision of the General Meeting of Shareholders of “Sirma Group Holding” JSC, dated 09.01.2023, оn 03.08.2023 „Sirma Group Holding“ JSC bought back 30 661 of its shares at an average price of BGN 0,70 per share, for a total price of BGN 21 462,70. The shares represent 0,05% of the company's capital. The purchase was made on the Bulgarian Stock Exchange - Sofia AD. By decision of the General Meeting of Shareholders of “Sirma Group Holding” JSC, dated 09.01.2023, “Sirma Group Holding” JSC bought back 210 000 of its shares at an average price of BGN 0.76 per share at a total price of BGN 159 600. The shares represent 0.35% of the company's capital. The purchase was made on the Bulgarian Stock Exchange - Sofia AD and entered in the company's Share register book on 02.10.2023. - Sale of shares by a member of the Board of Directors On 25.01.2023 Atanas Kiryakov - a member of the Board of Directors of "Sirma Group Holding" JSC, has sold 1 400 000 shares from the capital of "Sirma Group Holding" JSC, through transactions made on the Bulgarian Stock Exchange - Sofia at an average price of BGN 0.71 per share. On 15.12.2023 Yavor Djonev - a member of the Board of Directors of "Sirma Group Holding" JSC, has sold 200 000 shares from the capital of "Sirma Group Holding" JSC, through transactions made on the Bulgarian Stock Exchange - Sofia at an average price of BGN 0.71 per share. - Purchase of shares by member of the Board On 27.01.2023 Georgi Marinov – Chairman of the Board of Directors of “Sirma Group Holding” JSC, has bought 66 000 shares from the capital of “Sirma Group Holding” JSC, through transactions made on the Bulgarian Stock Exchange - Sofia at an average price of 0.7779 BGN per share. On 29.06.2023 Georgi Marinov – Chairman of the Board of Directors of “Sirma Group Holding” JSC, has bought 30 000 shares from the capital of “Sirma Group Holding” JSC, through transactions made on the Bulgarian Stock Exchange - Sofia at an average price of 0.679 BGN per share. On 30.06.2023 Georgi Marinov – Chairman of the Board of Directors of “Sirma Group Holding” JSC, has bought 15 000 shares from the capital of “Sirma Group Holding” JSC, through transactions made on the Bulgarian Stock Exchange - Sofia at an average price of 0.67 BGN per share. On 02.10.2023 Georgi Marinov – Chairman of the Board of Directors of “Sirma Group Holding” JSC, has bought 75 400 shares from the capital of “Sirma Group Holding” JSC, through transactions made on the Bulgarian Stock Exchange - Sofia at an average price of 0,74202 BGN per share. On 02.10.2023 Tsvetan Alexiev – a member of the Board of Directors of “Sirma Group Holding” JSC, has bought 69 400 shares from the capital of “Sirma Group Holding” JSC, through transactions made on the Bulgarian Stock Exchange - Sofia at an average price of 0,752807 BGN per share. On 02.10.2023 Chavdar Dimitrov – a member of the Board of Directors of “Sirma Group Holding” JSC, has bought 66 600 shares from the capital of “Sirma Group Holding” JSC, through transactions made on the Bulgarian Stock Exchange - Sofia at an average price of 0,76 BGN per share. On 02.10.2023 Veselin Kirov – a member of the Board of Directors of “Sirma Group Holding” JSC, has bought 66 600 shares from the capital of “Sirma Group Holding” JSC, through transactions made on the Bulgarian Stock Exchange - Sofia at an average price of 0,76 BGN per share. On 02.10.2023 Atanas Kiryakov – a member of the Board of Directors of “Sirma Group Holding” JSC, has bought 55 263 shares from the capital of “Sirma Group Holding” JSC, through transactions made on the Bulgarian Stock Exchange - Sofia at an average price of 0,76 BGN per share. - Complete purchase of the company "Sciant AD" by "Sirma Group Holding" JSC On 03.04.2023 a transaction for the purchase of the remaining shares in the subsidiary of "Sirma Group Holding" JSC - "Sciant" AD was concluded as follows: • Subsidiary whose shares are subject to redemption: "Sciant" AD; • Company that buys the shares: "Sirma Group Holding" JSC; Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 24 www.sirma.com www.sirma.com • Size of the minority package object of purchase: 22.20% of the capital of "Sciant" AD distributed in 57 000 shares; • Sellers of shares: 26 individuals and 1 legal entity. As a result of the above transaction, "Sirma Group Holding" JSC now owns 100% of the capital of the company "Sciant" EAD. - Reduction of capital of subsidiary On 23.10.2023, in accordance with the decision of the General Meeting of Shareholders, the capital of "Sirma Solutions" was reduced on the basis of Art. 200, item 2, in connection with Art. 187d, of the Commercial Code by canceling 703 589 shares a total of shares with a nominal value of BGN 10 (ten) each, of which: 15 000 are class A, 62 172 are class B and 626 417 are ordinary, owned by "Sirma Solutions" AD. The shares were acquired by the company through a buy-back from shareholders. The capital of the company decreased from 35 370 800 to 28 334 910 BGN. The company became 100% owned by "Sirma Group Holding" JSC. On 21.12.2023, the Board of Directors of "Sirma Solutions" EAD decided to reduce the capital of the company by reducing the nominal value of the shares from BGN 10 to BGN 5 for each share of the capital. After the reduction, the capital of the company will amount to BGN 14 167 455. The change has been requested to be announced in the Commercial Register, but has not yet been officially entered. Litigation for the period 01.01.2023 - 31.12.2023: There are no lawsuits filed against the company for the period. r legal information for the per Other legal information for the period 01.01.2023 - 31.12.2023: - Dividend payment At the General Meeting of Shareholders of "Sirma Group Holding" JSC, held on 09.01.2023, a decision was made regarding the distribution of a six-month dividend in the amount of BGN 889 thousand from the profit for the period 01.01.2022 – 30.06.2022 in amount of BGN 998 thousand. The dividend will begin to be paid within 60 days of the aforementioned GMS as per the requirements of the Central Depository. - Change of name and Board of Directors of subsidiaries of "Sirma Group Holding" JSC On 10.02.2023 "Ontotext" AD - a subsidiary of "Sirma Group Holding" JSC, changed its name to "SAI" AD and a new Board of Directors of the company was registered in the CR, composed of: Tsvetan Georgiev Trenchev Georgi Parvanov Marinov Yordan Stoyanov Nedev - Full repayment of loans On 12.04.2023 "Sirma Group Holding" JSC made a full early repayment of three of its investment bank loans, including principal amounts of 4 356 154 (four million three hundred and fifty-six thousand one hundred and fifty-four) euros. As a result of the above, the company currently has no credit indebtedness under investment loans. - Dividend payment According to the decision of the General Shareholders' Meeting of Sirma Group Holding JSC dated 15 June 2023, the company proceeds with the distribution of a cash dividend in the gross amount of BGN 0.0339 for 2022. ISIN: BG1100032140 Total amount of the dividend: BGN 1 960 317.90 Right to receive dividend: According to the decision of the General Meeting of Shareholders, all shareholders of “Sirma Group Holding” JSC as at 29 June 2023 have the right to receive a dividend (14 days after holding the meeting, according to Art. 115c, Para. 3 of the POSA), as they are entered in the Book of Shareholders at the Central Depository AD. Shares with a right to dividend: 57 843 833 (deducted 1 516 685 bought back shares). Dividend amount for one share: gross BGN 0.0339 and net for individual shareholders BGN 0.032. Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 25 www.sirma.com www.sirma.com The bank through which the dividend will be paid is Unicredit Bulbank AD: Start date for dividend payment: 24 July 2023. End date for dividend payment: 24 January 2024 (six months after the start date). Taxes: taxes payable for dividends to individual persons will be withheld and remitted by Sirma Group Holding JSC in advance; Bank commissions: Sirma Group Holding JSC will cover all bank fees for the payment of dividends; Payment method: • Shareholders who have open accounts with investment intermediaries will receive their dividend through them, complying with their requirements. • Shareholders who are not served by an investment intermediary and whose shares are stored in personal accounts in "Register A" at the Central Depository AD, will receive their dividends through the branch network of the commercial bank Unicredit Bulbank AD. - Change of name of a subsidiary of "Sirma Group Holding" JSC On 21.07.2023, "EngView Systems Sofia" AD - a subsidiary of "Sirma Group Holding" AD, changed its name to " EngView Systems" AD. Audit compensation in 2023 „Grant Thornton“ OOD, registered under number 032 in the public register of audit companies at the Institute of Certified Public Accountants in Bulgaria, was selected as the auditor of the separate and consolidated annual financial statements of „Sirma Group Holding“ JSC. The renumeration for the independent financial audit in 2023 of the separate annual financial statements amounts to BGN 34 011,88 without VAT and BGN 35 967,71 without VAT for consolidated annual financial statements for 2023. During the year, additional auditing services were provided in the amount of BGN 16 998,69 without VAT, related to the translation and audit of interim consolidated reports. This disclosure is made in compliance with the requirements of Article 30 of Bulgarian Accountancy Act. Information for contracted large transactions in 2023 In 2023, the company signed several large contracts with customer and subcontracts: Purchases: • Deal 1 for BGN 121 thousand • Deal 2 for BGN 87 thousand • Deal 3 for BGN 77 thousand Sales: • Deal 1 for BGN 1 928 thousand • Deal 2 for BGN 613 thousand • Deal 3 for BGN 255 thousand These transactions do not contain the transactions disclosed in the section Transactions with shares for the period 01.01.2023 - 31.12.2023. Information of the used financial instruments in 2023 In 2023 the company has not used any financial instruments. R&D activity of the company in 2022 The strategy for growth and development of “Sirma Group Holding” JSC forsees the concentration of the intellectual property of the Group in the Holding company. This concentration also implies the concentration of the Group's research and development activities at “Sirma Group Holding” JSC. Implementation of this process started in 2018. Possible futue development of the company The forecasts for the development of the Information and Communication Technologies sector in 2023 and the following years are a function of the expected development of the inflation crisis, as well as of the manifestation of other risks accompanying the Company's activity. The conflict in Gaza also has a significant global impact, affecting countries in the region and around the world, causing the disruption of normal economic processes on a global and regional scale, geopolitical division and polarization of the positions of different governments, leading to China's political and economic advantage, a huge scale and consequences humanitarian crisis. All this, inevitably, has an impact on business processes in Israel and in particular in the field of cyber security. Leading companies in this field Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 26 www.sirma.com www.sirma.com report an increase in the number and intensity of cyberattacks against Israeli companies and infrastructure sites, but on the other hand, a significant and intense increase in the need for services in the field of cyber security, in recent months. The presence of professionals in the field and the offering of a complete package of services in this field position Saiforth, a subsidiary of the Sirma Group, as having the potential for development and growth in the near future. Although a direct impact of the war in Ukraine on the ICT sector is not expected, it will strengthen other risks for the global economy – inflation, volatility of exchange rates, difficult supply chains, geopolitical uncertainty. The annual budget has been prepared taking into account the current situation in order to maintain stable financial performance. In 2024, Sirma Group Holding plans to integrate the companies into the holding structure. Through the integration, the holding's management aims for better competitiveness and market positioning, which will lead to access to new business opportunities, providing customers with a wider and more diverse range of services, professional growth and development of the company's employees, optimization of administrative processes , which will lead to better productivity, communication and collaboration between employees The holding is in a continuous process of searching for companies in which to invest in order to improve the profitability of the company's shares. Contracts under Art.240b of the Commerical Code in 2023 During 2023 the company has not been notified for contracted transactions with the members of the Board of Directors or parties related to them, which fall outside the line of activity of the company or the terms of which differ substantially from the current market ones. 6/ INDIVIDUAL FINANCIAL RESULTS 6.1. REVENUES 31.12.2023 31.12.2022 Change 2023 - 2022 (BGN '000) Change 2023/2022 (%) BGN '000 BGN '000 Revenues from sales 2 983 2 514 469 18,66% Dividend income 1 509 9 879 (8 370) (84,73%) Investment property rental income 688 703 (15) (2,13%) Interest income 13 35 (22) (62,86%) Income from sale of investments - 410 (410) (100%) Gain on sale of non-current assets 2 1 1 100% Other revenues 33 162 (129) (79,63%) Total 5 228 13 704 (8 476) (61,85%) In 2023 the revenues of “Sirma Group Holding” JSC decreased by BGN 8 476 thousand or by 61,85% compared to 2022. Revenues in the period include interest and sale of investments, since the business of acquiring businesses and parts of them, as well as the provision of loans and the receipt of deposits is the main activity of the holding company. Revenues by product line includes: 31.12.2023 31.12.2022 Change 2023 - 2022 (BGN '000) Change 2023/2022 (%) BGN '000 BGN '000 Administrative and accounting services 2 877 1 130 1 747 154,60% Technical Support 15 36 (21) (58,33%) Licenses - 1 248 (1 248) (100%) Others 91 100 (9) (9,00%) Total 2 983 2 514 469 18,66% Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 27 www.sirma.com www.sirma.com 6.2. EXPENSES 31.12.2023 31.12.2022 Change BGN '000 BGN '000 (BGN '000,%) Cost of materials (138) (84) (54) Change in % 64,29% Hired services expenses (685) (904) 219 Change in % (24,23%) Employee benefits expense (1 871) (1 689) (182) Change in % 10,78% Depreciation and amortisation and impairment of non- financial assets (617) (3 388) 2 771 Change in % (81,79%) Other expenses (222) (184) (38) Change in % 20,65% Total expenses (3 533) (6 249) 2 716 Change in % (43,46%) In 2023 the expenses of “Sirma Group Holding” JSC decreased by BGN 2 716 thousand or by 43,46% as compared to 2022. A significant decrease was observed in the expenses of depreciation and amortisation and impairment of non-financial assets. 6.3. FINANCIAL INCOME / COSTS (NET) 31.12.2023 31.12.2022 Change 2023 - 2022 (BGN '000) Change 2023/2022 (%) BGN '000 BGN '000 Financial costs (191) (6 192) 6 001 (96,92%) Financial income 6 8 (2) (25,00%) Financial income / costs (net) (185) (6 184) 5 999 (97,01%) In 2023, financial income / costs (net) of "Sirma Group Holding" JSC decreased by BGN 5 999 thousand as compared to 2022. 6.4. ASSETS The total assets of „Sirma Group Holding“ JSC at the end of the of 2023 are with BGN 582 thousand (0,65%) more than their value at the end of 2022. 31.12.2023 31.12.2022 Change 2023 - 2022 (BGN '000) Change 2023/2022 (%) BGN '000 BGN '000 Property, plant and equipment 1 057 633 424 66,98% Intangible assets 4 225 6 556 (2 331) (35,56%) Investments in subsidiaries 70 830 67 035 3 795 5,66% Investment property 9 638 9 707 (69) (0,71%) Long-term related party receivables 295 47 248 527,66% Deferred tax аssets 831 832 1 0,12% Total non-current assets 86 876 84 810 2 066 2,44% 31.12.2023 31.12.2022 Change 2023 - 2022 (BGN '000) Change 2023/2022 (%) BGN '000 BGN '000 Trade receivables 161 73 88 120,55% Prepayments and other assets 83 36 47 130,56% Related party receivables 1 826 905 921 101,77% Cash and cash equivalents 1 131 3 671 (2 540) (69,19%) Total current assets 3 201 4 685 (1 484) (31,68%) Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 28 www.sirma.com www.sirma.com 6.5. EQUITY 31.12.2023 31.12.2022 Change 2023 - 2022 (BGN '000) Change 2023/2022 (%) BGN '000 BGN '000 Share Capital 59 361 59 361 - - Purchased own shares (1 781) (85) (1 696) 1 995,29% Share premium reserve 5 855 5 372 483 8,99% Other reserves 1 458 1 244 214 17,20% Retained earnings 6 627 7 559 (932) (12,33%) Current financial result 1 509 2 131 (622) (29,19%) Total equity 73 029 75 582 (2 553) (3,38%) In 2023, Equity decreased by BGN 2 553 thousand compared to the end of 2022. In compliance with the decisions of the regular shareholders' meeting, Sirma Group Holding JSC has purchased 1 780 407 own shares. The Board of Directors believes in the development of Sirma Group Holding AD and the increase in the market value of the shares in the future, which is why it decided to purchase these shares at a relatively low price. 6.6. LIABILITIES The amount of the liabilities of “Sirma Group Holding” JSC at the end of 2023 is with BGN 3 151 thousand (22,65%) more than their value at the end of 2022. 31.12.2023 31.12.2022 Change 2023 - 2022 (BGN '000) Change 2023/2022 (%) BGN '000 BGN '000 Pension employee obligations 60 55 5 9,09% Long-term borrowings - 7 457 (7 457) (100%) Long-term lease liabilities 192 130 62 47,69% Long-term related party payables 16 148 3 768 12 380 328,56% Total Non-current liabilities 16 400 11 410 4 990 43,73% 31.12.2023 31.12.2022 Change 2023 - 2022 (BGN '000) Change 2023/2022 (%) BGN '000 BGN '000 Employee obligations 114 237 (123) (51,90%) Short-term borrowings - 1 432 (1 432) (100%) Short-term lease liabilities 53 33 20 60,61% Trade and other payables 185 159 26 16,35% Short-term related party payables 296 642 (346) (53,89%) Total Current liabilities 648 2 503 (1 855) (74,11%) Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 29 www.sirma.com www.sirma.com Long-term and short-term bank loans Recipient of credit In Bank Type of loan Currency Total amount of credit Outstanding obligation to 31.12.2023 Date of contract Interest rate Maturity date Pledges (BGN) (BGN) Loans for which the Issuer is a debtor Sirma Group Holding JSC Unicredit BulBank AD Investment BGN 2 800 000 - 15.12.2022 The applicable variable interest rate for the relevant interest period +1.5 points, but not less than 1.5% 15.12.2025 Pledge of receivables Loans for which the Issuer is a guarantor Sirma Solutions EAD United Bulgarian Bank AD Overdraft BGN 4 025 000 - 12.12.2019 RIR + 1.2%, but no less that 1.3% per year 20.09.2024 Pledge of receivables, pledge of commercial enterprises, pledge of real estate Sirma Solutions EAD United Bulgarian Bank AD Revolving credit line BGN 4 000 000 - 28.10.2020 RIR + 1.4%, but no less that 1.5% per year 20.09.2024 Pledge of receivables Sirma Solutions EAD United Bulgarian Bank AD Overdraft BGN 2 080 000 - 15.12.2022 RIR + 1.4%, but no less that 1.5% per year 15.12.2025 Pledge of receivables Sciant EAD Unicredit BulBank AD Overdraft BGN 500 000 - 18.05.2020 The applicable variable interest rate for the relevant interest period +2 points, but not less than 2.08% 08.04.2025 Pledge of receivables Sciant EAD Unicredit BulBank AD Overdraft BGN 500 000 - 07.04.2022 The applicable variable interest rate for the relevant interest period +2 points, but not less than 2.08% 07.04.2025 Pledge of receivables EngView Sistems JSC Unicredit BulBank AD Overdraft BGN 1 000 000 - 15.12.2020 The applicable variable interest rate for the relevant interest period +2 points, but not less than 2.08% 14.12.2025 Pledge of receivables Sirma Medical Systems AD Unicredit BulBank AD Revolving bank loan BGN 250 000 250 000 15.12.2020 The applicable variable interest rate for the relevant interest period +2 points, but not less than 2.08% 14.12.2025 Pledge on receivables On 12.04.2023 "Sirma Group Holding" JSC made a full early repayment of three of its investment bank loans, including principal amounts of 4 356 154 (four million three hundred and fifty-six thousand one hundred and fifty-four) euros. As a result of the above, the company currently has no credit indebtedness under investment loans. The carrying values of borrowings are considered to be a reasonable approximation of fair value. Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 30 www.sirma.com www.sirma.com Other loans and deposits provided by “Sirma Group Holding” JSC and its subsidiaries: Lender Recipient United identification code Relationships Type Currency Liability as of 31.12.2023 (BGN '000) Date of contract/ last annex Interest rate % Term of contract Pledges SAI Sirma Medical Systems 204054855 Subsidiary Loan BGN 1 200 20.12.2022 2.80 31.12.2024 No pledges SAI Sirma Group Holding 200101236 Parent company Deposit BGN 1 300 18.07.2023 0.1 18.07.2025 No pledges Sirma Group Holding Sirma ICS 203940550 Company under common control Loan BGN 48 23.01.2017, 31.01.2021 1.3 31.12.2024 No pledges Sirma Group Holding Pirina Technolgies 175149906 Company under common control Loan BGN 295 10.01.2022 2 31.12.2024 No pledges Sirma Group Holding Sirma InsurTech 205982173 Subsidiary Loan BGN 600 03.10.2022 1.3 31.12.2023 No pledges Sirma Group Holding Sciant 203943638 Subsidiary Loan BGN 300 02.05.2023 3 02.05.2024 No pledges Sirma Solutions Sirma Group Holding 200101236 Parent company Deposit BGN 14 848 29.10.2020 0.1 31.12.2025 No pledges Sirma Solutions Individual S.S. Non related party Loan BGN 150 27.06.2017, 20.09.2017 3 31.12.2023 No pledges Sirma Solutions Individual S.S. Non related party Loan BGN 133 31.05.2022 2 31.12.2023 No pledges Sirma InsurTech HRM Solutions 206096810 Subsidiary Loan BGN 270 14.07.2021 3.2 31.12.2025 No pledges EngView Systems EngView Systems GmbH Subsidiary Loan EUR 94 05.12.2022 3 31.12.2025 No pledges Sciant Sciant Shpk. Company under common control Loan EUR 84 25.7.2023 3 01.09.2025 No pledges Other loans and deposits received from „Sirma Group Holding“ JSC and its subsidiaries: Recipient Lender United identification code Relationships Type Currency Liability as of 31.12.2023 (BGN '000) Date of contract/ last annex Interest rate % Term of contract Pledges Sirma Medical Systems SAI 200356710 Company under common control Loan BGN 1 200 20.12.2022 2.80 31.12.2025 No pledges Sirma Group Holding Sirma Solutions 040529004 Subsidiary Deposit BGN 14 848 29.10.2020 0.1 31.12.2025 No pledges Sciant Sirma Group Holding 200101236 Parent company Loan BGN 300 02.05.2023 3 02.05.2024 No pledges Sirma Group Inc Worklogic Canada Foreign company Non related company Loan USD 85 31.07.2017 0,01 31.12.2024 No pledges Sirma InsurTech Individual Y.M. Related party Loan BGN 77 30.08.2022 2.9 31.12.2024 No pledges Sirma InsurTech Sirma Group Holding 200101236 Parent company Loan BGN 600 03.10.2022 1.3 31.12.2024 No pledges Sirma Group Holding SAI 200356710 Subsidiary Deposit BGN 1 300 18.07.2023 0.1 18.07.2025 No pledges The Issuer has disclosed only the initials of the individuals to whom it has granted loans, in compliance with the provisions of the Personal Data Protection Act and the General Regulation on Data Protection (Regulation (EU) 2016/679, GDPR). Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 31 www.sirma.com www.sirma.com 6.7. CASH FLOW 31.12.2023 31.12.2022 Change (BGN '000) Change % BGN '000 BGN '000 Net cash flow from operating activities (1 350) 164 (1 514) n/a Net cash flow from investing activities (1 431) 12 361 (13 792) n/a Net cash flow from financing activities 244 (10 626) 10 870 n/a Net change in cash and cash equivalents (2 537) 1 899 (4 436) n/a Cash and cash equivalents at the beginning of the year (3) (3) - - Exchange gains/(losses) on cash and cash equivalents 3 671 1 775 1 896 106,82% Cash and cash equivalents at the end of the year 1 131 3 671 (2 540) (69,19%) The Company has no liquidity problems and operates with the available resources. 6.8. INDICATORS AND COEFFICIENTS Over the past financial period, the company has realized the following financial results: (The indices and the coefficients have been calculated according to the instructions of BSE) 31.12.2023 31.12.2022 Change Indicators BGN '000 (Abs.) (%) Revenue from operating activities 5 228 13 704 (8 476) (61,85%) Cost of sales (3 311) (6 065) 2 754 (45,41%) Gross profit / loss 1 917 7 639 (5 722) (74,91%) Other operating costs ( 222) ( 184) ( 38) 20,65% Operating profit / loss 1 695 7 455 (5 760) (77,26%) Financial income 6 7 ( 2) (25,00%) Financial costs ( 191) (6 191) 6 000 (96,91%) Profit / loss before tax expense 1 510 1 271 239 18,80% (Expenses for)/Revenues from income taxes (1) 860 ( 861) n/a Net profit / loss 1 509 2 131 ( 622) (29,19%) Dividend (2 849) (1 400) (1 449) 103,50% Cash and cash equivalents 1 131 3 671 (2 540) (69,19%) Short-term assets 3 201 4 685 (1 484) (31,68%) Total amount of assets 90 077 89 495 582 0,65% Average arithmetic total asset value for 5 quarters 91 133 93 847 (2 714) (2,89%) Current liabilities 648 2 503 (1 855) (74,11%) Debt 245 9 052 (8 807) (97,29%) Liabilities (borrowed funds) 17 048 13 913 3 135 22,53% Equity 73 029 75 582 (2 553) (3,38%) Equity averaged for 5 quarters 74 067 74 245 ( 179) (0,24%) Turnover capital 2 553 2 182 371 17,00% Number of shares at the end of the period (in thousands) 59 361 59 361 - - Interest expenses (109) (369) 260 (70,46%) Weighted average share price of last trading session 0,715 0,7375 (0,0225) (3,05%) Last share price of last trading session 0,725 0,75 (0,025) (3,33%) Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 32 www.sirma.com www.sirma.com Indicators Change 31.12.2023 31.12.2022 (Abs.) (%) EBITDA 2 236 2 242 ( 6) (0,27%) DEPRECIATION (617) ( 602) ( 5) 2,49% EBIT 1 619 1 640 (21) (1,28%) FIN/INVEST NET (185) (6 184) 5 999 (97,01%) EBT 1 510 1 271 239 18,80% ROA 0,0168 0,0238 (0,00706) (29,65%) ROA(BSE) 0,0166 0,0227 (0,00615) (27,08%) Debt/EBITDA Ratio 0,1096 4,0375 (3,92790) (97,29%) Quick Ratio 4,9398 1,8718 3,0681 163,91% ROE (BSE) 0,0204 0,0287 (0,0083) (29,02%) ROE 0,0204 0,0287 (0,0083) (29,02%) EBITDA 0,2334 0,1841 0,0494 26,82% Profitability ratios Gross profit margin 0,3667 0,5574 (0,1907) (34,22%) Operating profit margin 0,3242 0,5440 (0,2198) (40,40%) Net profit margin 0,2886 0,1555 0,1331 85,62% Coefficients for assets and liquidity Assets turnover ratio 0,0574 0,1461 (0,0887) (60,70%) Assets turnover ratio (BSE) 0,0574 0,1460 (0,0887) (60,72%) Operating cycle 2,0478 6,2805 (4,2327) (67,39%) Current ratio 4,9398 1,8718 3,0681 163,91% Quick ratio 4,9398 1,8718 3,0681 163,91% Cash ratio 1,7454 1,4666 0,2787 19,00% Odds per share P/S ratio 8,1184 3,1946 4,9238 154,13% P/E ratio 28,1267 20,5438 7,5829 36,91% P/B ratio 0,5812 0,5792 0,0020 0,34% Revenue per share 0,0881 0,2309 (0,1428) (61,85%) Earnings per share 0,0254 0,0359 (0,0105) (29,19%) Book value of equity per share 1,2477 1,2507 (0,0030) (0,24%) Development Ratios Revenue growth (0,6185) 1,9592 (2,5777) n/a Gross profit growth (0,7491) 3,9062 (4,6553) n/a Assets growth 0,0065 (0,1602) 0,1667 n/a Leverage Ratios Debt/total assets 0,0027 0,0965 (0,0938) (97,21%) Debt/capital 0,0033 0,1087 (0,1054) (96,97%) Debt/equity 0,0033 0,1219 (0,1186) (97,29%) Total assets/equity 1,2304 1,2640 (0,0336) (2,66%) Market value of the company 43 037 44 521 (1 484) (3,33%) Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 33 www.sirma.com www.sirma.com 6.9 RELATED PARTY TRANSACTIONS The Company's related parties include its owners, subsidiaries and associates, key management personnel and others described below. Unless otherwise stated, none of the transactions incorporate special terms and conditions and no guarantees were given or received. Transactions with subsidiaries 2023 2022 BGN‘000 BGN‘000 Purchases of goods and services Purchases of services - Software services (19) - - Internet (26) (43) - Consulting services (20) - - Seminars and training (1) - - Subscriptions (27) - - Advertising and marketing - (42) - Software license rental Purchases of goods (3) - - Office supplies (4) (1) - Inventory (1) (1) - Computer components (3) - - Advertising materials (37) (5) Purchases of LTFA (19) - Sale of non-current asset 755 - Sales of goods and services Sales of services - Administrative, accounting services 2 680 1 125 - Rent 542 576 - Consulting services - 34 - Sale of licenses - 1 238 - Technical Support 10 36 Sales of goods: - Consumables 88 64 Dividends received 1 509 9 945 - Received deposits 13 622 - - Refund of received deposits (514) 975 - Received loans - 1 400 - Refunded received loans - (2 495) - Given loans (700) (398) - Refunded given loans 76 1 093 - Interest on received deposits (12) (100) - Interest on received loans - (7) - Interest on given loans 13 30 Transactions with other related parties 2023 2022 BGN‘000 BGN‘000 Sale of services - Administrative, accounting services 111 4 - Rent 8 13 - Technical Support 3 - - Consulting services 2 - - Given loans - (295) - Interest on given loans 6 6 Transactions with key management personnel Key management of the Company includes members of the board of directors. Key management personnel remuneration includes the following expenses: 2023 2022 BGN‘000 BGN‘000 Short-term employee benefits: Salaries including bonuses (349) (486) Social security costs (5) (8) Total remunerations (354) (494) The company has paid dividends to key management personnel as of 31.12.2023 in the amount of BGN 1 177 thousand (2022 - BGN 427 thousand). Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 34 www.sirma.com www.sirma.com 7/ PERSONNEL AND ECOLOGY 7.1 ECOLOGY Sirma Group Holding maintains and observes its commitments in compliance with the national legislation in the field of environmental protection. The company applies measures for separate collection of waste, minimization, recovery and recycling of municipal waste. In 2017, the use of plastic cups stopped, and they were replaced with porcelain and glass cups. 7.2 PERSONNEL The Company believes that its employees play a key role in the development of its business and the overall corporate goals and therefore pays special attention to the development of a common human resources management strategy and policies. Sirma Group Holding's policies in this regard are aimed at stimulating the responsibility and motivation of the staff to fulfill the assigned tasks and objectives. The company and the companies in the group apply certain selection criteria and consider that they have an ambitious team of professionals capable of pursuing the strategic and operational objectives. Sirma Group Holding invests in various training programs for its employees and provides its employees with opportunities for professional development. The structure of the personnel of Sirma Group Holding has the following dynamics: 31.12.2023 31.12.2022 Relative share in 2023 % Number of Employees 29 29 100% Higher education 27 27 93,10% Secondary education 2 2 6,90% Employees 31 - 40 years 7 7 24,14% Employees 41 - 50 years 16 16 55,17% Employees 51 - 60 5 5 17,24% Employees over 60 1 1 3,45% Women 14 13 48,28% Men 15 16 51,72% DESCRIPTION OF ALL AGREEMENTS FOR THE PARTICIPATION OF THE EMPLOYEES IN THE CAPITAL OF THE COMPANY. There are no arrangements for the participation of employees in the capital of the Company. 8/ RISK FACTORS 8.1 System Risks The general risks stem from possible changes in the overall economic system and, in particular, a change in the conditions of the financial markets. They can not be diversified, as all economic entities in the country are exposed to them. Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 35 www.sirma.com www.sirma.com 8.1.1. Economic Growth The interaction between economic growth and external indebtedness of the country has a direct impact on the formation and change of market conditions and the investment climate. Official statistics show real GDP and GDP growth per capita in recent years, which are in line with the government's development agenda. According to published information from NSI, after the introduction of the currency board system in 1997, Bulgaria achieved macroeconomic stability and good indicators for economic development. Delayed economic growth, not only in Bulgaria but also in other countries where the Company realizes its output, means reduced activity on the part of economic operators, where there is also a reduced level of investment in general and in particular in software solutions. In this respect, lower economic growth adversely affects the Company's activity and would prevent the future plans from being realized according to predefined parameters. 8.1.2. Political Risk The political risk is the likelihood of a change in government, or a sudden change in its policy, the emergence of internal political turmoil and unfavorable changes in European and / or national legislation, resulting in a negative change in the environment in which local businesses operate, and investors to suffer losses. The political risks for Bulgaria at international level are related to the commitments made to implement serious structural reforms in the country as an equal member of the EU, increasing the social stability of the inefficient spending on the one hand, as well as the severe destabilization of the countries The Middle East, the increasing threats of terrorist attacks in Europe, refugee waves, and the volatility of key countries in the immediate vicinity of Bulgaria. Bulgaria, as well as the other EU member states in the region, continues to be seriously affected by the common European problem of the intensive Middle East refugee flow. Other factors that also affect this risk are possible legislative changes, particularly those that concern the economic and investment climate in the country. 8.1.3. Credit Risk Credit risk is the risk that a counterparty fails to discharge an obligation to the Company. The Company is exposed to this risk for various financial instruments, for example by granting loans and receivables to customers, placing deposits, etc. The Company's maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting date, as summarized below: 2023 2022 BGN‘000 BGN‘000 Financial assets Trade and other receivables 158 73 Related parties receivables 2 124 952 Cash and cash equivalents 1 131 3 671 3 413 4 696 The Company 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 Company's policy is to deal only with creditworthy counterparties. The Company's management considers that all the above financial assets that are not impaired or past due for each of the reporting dates under review are of good credit quality. The Company has not provided its financial assets as collateral for transactions other than collateral for received bank loans. The credit risk for cash and cash equivalents is considered negligible, since the counterparties are reputable banks with high quality external credit ratings. The carrying amounts disclosed above are the Company's maximum possible credit risk exposure in relation to these instruments. 8.1.4. Currency Risk Most of the Company’s transactions are carried out in Bulgarian leva (BGN). Exposures to currency exchange rates arise from the Company's overseas sales and purchases, which are primarily denominated in US-Dollars. To mitigate the Company's exposure to foreign currency risk, non-BGN cash flows are monitored. Generally, Company’s risk management procedures distinguish short-term foreign currency cash flows (due within 6 months) from longer-term cash flows. Where the amounts to be paid and received in a specific currency are expected to largely offset one another, no further hedging activity is undertaken. The company does not take into account the financial assets and liabilities that are denominated in foreign currency and were recalculated in Bulgarian leva at the end of the reporting period, other than euro as of 31.12.2023. As of 31.12.2022 foreign currency denominated financial assets and liabilities are: Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 36 www.sirma.com www.sirma.com Short-term exposure BGN‘000 31 December 2022 Financial assets 15 Total exposure 15 The tables below show the sensitivity of the annual net financial result after taxes and equity to possible changes in the exchange rates of the Bulgarian lev against the following foreign currencies: • USD +/- 2.2% (for 2023: +/- 8.6%) All other parameters are assumed to be constant. These percentages are determined on the basis of the average exchange rates for the last 12 months. The sensitivity analysis is based on the Company's investments in foreign currency financial instruments held at the end of the reporting period. 31 December 2022 Increase in the exchange rate of the Bulgarian lev Decrease in the exchange rate of the Bulgarian lev Net financial result Equity Net financial result Equity BGN‘000 BGN‘000 BGN‘000 BGN‘000 US Dollars (+/- 8.6 %) (1) (1) 1 1 8.1.5. Interest Rate Risk The Company's policy is to minimize interest rate cash flow risk exposures on long-term financing. In 2023, the Company is exposed to the risk of changes in market interest rates on its bank loans, which have a variable interest rate. All other financial assets and liabilities of the Company have fixed interest rates. In 2022, the Company is exposed to the risk of changes in market interest rates on its bank loans, which have a variable interest rate. All other financial assets and liabilities of the Company have fixed interest rates. The tables presented below show the sensitivity of the annual net financial result after tax and equity to a likely change in interest rates on loans with a floating interest rate based on EURIBOR in the amount of +/- 94.23%. These changes are determined to be probable based on observations of current market conditions. The calculations are based on the change in the average market interest rate and on the financial instruments held by the Company at the end of the reporting period, which are sensitive to interest rate changes. All other parameters are assumed to be constant. 31 december 2022 Net financial result Equity increase in interest rate BGN‘000 decrease in interest rate BGN‘000 increase in interest rate BGN‘000 decrease in interest rate BGN‘000 Loans (ЕURIBOR 94.23%) (75) (75) 75 75 8.1.6. Liquidity risk Liquidity risk is the risk arising from the Company not being able to meet its obligations. The Company manages its liquidity needs by monitoring scheduled debt servicing payments for long-term financial liabilities as well as forecast cash inflows and outflows due in day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on the basis of a rolling 30-day projection. Long-term liquidity needs for a 180-day and a 360-day lookout period are identified monthly. Net cash requirements are compared to available borrowing facilities in order to determine headroom or any shortfalls. This analysis shows that available borrowing facilities are expected to be sufficient over the lookout period. The Company's objective is to maintain cash to meet its liquidity requirements for 30-day periods. Funding for long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long-term financial assets. As at 31 December 2023, the Company's non-derivative financial liabilities have contractual maturities (including interest payments where applicable) as summarized below: Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 37 www.sirma.com www.sirma.com Current Non-current 31 December 2023 Within 6 months 6 to 12 months 1 to 5 years BGN‘000 BGN‘000 BGN‘000 Lease liabilities 30 30 201 Trade and other payables 116 - - Related party payables 296 - 16 148 Total 442 30 16 349 This compares to the maturity of the Company's non-derivative financial liabilities in the previous reporting period as follows: Current Non-current 31 December 2022 Within 6 months 6 to 12 months 1 to 5 years BGN‘000 BGN‘000 BGN‘000 Loan liabilities 716 716 7 457 Lease liabilities 18 18 134 Trade and other payables 83 - - Related party payables 642 - 3 768 Total 1 459 734 11 359 8.1.7. Inflation Risk Inflationary risk is a general price increase whereby money is depreciated and there is a likelihood of loss from households and firms. During the reporting year, our country went through a process of accelerated increase in price levels, but at the moment this process has been overcame and does not represent a serious risk for the Company in the short term. 8.1.8. Risk from unfavorable changes in tax and other legislation The taxes paid by Bulgarian legal persons include withholding tax, local taxes and fees, corporate income tax, value added tax, excise duties, export and import duties and property taxes. The tax system in Bulgaria is still developing. This may result in contradictory tax practices, both at state and local level. Investors should also take into account that the value of the investment in shares may be adversely affected by changes in the current tax legislation, including its interpretation and application. In addition, tax legislation is not the only one that can undergo changes, and thease changes adversely to affect the Company's business. Although the bulk of Bulgarian legislation is already harmonized with EU law, the application of the law is subject to criticism by the European partners in Bulgaria. Judicial and administrative practice remains problematic: the Bulgarian courts are not able to effectively resolve disputes over property rights, breaches of legal and contractual obligations, etc., resulting in a systemic regulatory risk being relatively high. Unfavorable changes to tax and other laws would lead to a worsening of the general conditions in which the Company operates, from wherever its future results may deteriorate. In particular, the increase in the corporate income tax and other taxes would reduce the ultimate disposable profit for new investments and / or the distribution of dividends to its shareholders. 8.1.9. Force Majeure Risks Force majeure events such as natural disasters, sabotage, war and terrorist acts, and others may lead to unpredictable changes in investor and interest in the market for all shares, as well as, in particular, the shares of Sirma Group Holding, Some force majeure events do not provide for the possibility of insurance. Force majeure events could seriously affect the Company's performance by reducing its ability to conduct normal business activities and cause an increase in some cost items. 8.2. Non-system Risks Non-system risks are associated with the overall investment risk specific to the firm and the industry itself. Non-system risks can be divided into two types: sectoral risk related to the uncertainty in the development of the sector as a whole and general business risk - arising from the specifics of the particular company. 8.2.1. Industry Risks The activity of the Company and of the companies within Sirma Group are exposed to various risks, including: 1) risks typical of the Information and Communication Technology (ICT) industry and 2) risks specific to the Company itself. Revenue and profit of Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 38 www.sirma.com www.sirma.com the Company may be adversely affected by a number of factors: the financial market situation and the information and communication technology market; the ability of the Company to ensure effective management, assessment of the different risks and economic feasibility of individual transactions, the economic climate in the country and others. 8.2.2. Specific Company Risk The company risk is related to the nature of the Company's business, as for every firm it is important that the return on the invested funds and resources is consistent with the risk associated with the investment. The main company risk for “Sirma Group Holding” JSC is related to the possibility of reduction of the solvent demand for the products and services offered by the Group, as well as changes in the terms of sale of those products and services. The company risk may have an impact on the growth of service and software solutions development contracts. Uncertainty can be measured by the variability of revenue earned over time. This means that the more volatile the revenues of a company, the greater the uncertainty of the company to realize a positive financial result, ie. the risk for the investors, respectively the creditors, will be higher. 8.2.3. Operation Risk Operational risks are related to the management of the company and can be expressed in the following: • Making erroneous decisions for the ongoing management of the investment and liquidity of the company by the management staff; • the inability of the management team to start the implementation of planned projects or lack of suitable personnel for this; • key employees leaving and impossibility to recruit new ones; • the risk of excessive spending on management and administration, leading to a reduction in the overall profitability of the company. Various mechanisms will be used to optimize and manage this risk, including the following: • sound investment policy; • optimizing the structure, quality and return on assets of the Company; • protection against unfavorable and undesirable external factors and attacks, etc. 8.2.4. Intelectual Property Protection The protection of the intellectual property of the Group is crucial to its success. It uses a variety of tools to identify and control potential risks and to protect its intellectual property. These measures include application for patents, trademarks, and other brands and copyrights to prevent infringement of copyright and trademarks. Despite these efforts, the Group may not be able to prevent third parties from using or selling without permission what it regards as its own technology. All these measures provide only limited protection and its rights could be challenged or otherwise affected. Any intellectual property may be vulnerable to disclosure or misuse by employees, partners or third parties. Third countries can independently develop technologies that are substantially equivalent to or better than the technology of the Company. In addition, a third party may reengineer or otherwise obtain and use technology and information that the Group considers to be its own. In this regard, the Company may not be able to protect its proprietary rights against unauthorized copying or third party use, which could have an adverse effect on the competitive and financial situation and lead to a decline in sales. In addition, the laws and courts of some countries may not offer effective protection of intellectual property rights. 8.2.5. Risk of concluding insider deals at prices differing from the market ones The company is part of an economic group. The risk of engaging in transactions with Group entities, whose conditions differ from market at the date of the transaction is eliminated to the extent that the Company seeks to maintain a transparent policy regarding its relations and the treatment of related companies. As far as there are transactions in the economic group, they are concluded under standard market conditions at the moment of transaction and do not favor any of the parties. 8.2.6. Risk of asset depreciation The impairment risk of assets is related to the possibility of reducing the carrying amount of the Company's assets. Possible impairment of tangible and / or intangible fixed assets would result in the need to account for an impairment loss. This, in turn, may worsen the Company's future financial performance as well as lead to a final negative financial result for an annual period. This in turn leads to the risk of not being able to distribute dividends to existing shareholders at this future moment, as well as a possible decrease in the market price of a shares of the Company due to the deteriorated financial indicators. 8.3. Risk factors, characteristic of share traded on the Stock Exchange The risk of investing in securities is linked to the uncertainty and the inability to accurately predict future effects and the impact on the expected return on the investment made. The main risk and uncertainty for the shareholders of “Sirma Group Holding” JSC is the probability that the investments in the company's shares will not retain its value, nor generate the expected return on them, due to a decrease in the price of the shares or a lack of other income (dividends) from them. “Sirma Group Holding” JSC informs potential investors that investing in shares is associated with certain risks. Investors should carefully read and understand the risks associated with investing in shares of the current issue before making an investment decision. Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 39 www.sirma.com www.sirma.com “Sirma Group Holding” JSC seeks to maintain a low risk profile by maintaining low levels of financial and operational leverage, a high level of operational efficiency, the introduction of strict rules and procedures in the management of the activity and strict control over their compliance, diversification of the client base and suppliers. The above makes the company resistant to external negative shocks, but nevertheless has significant risks for its business that could negatively affect the company's results. 8.3.1. Price Risk The changes in the price of the shares of “Sirma Group Holding” JSC can be created both from the fundamental state of the Company - current and expected results from the activity and financial results as well as from the economic and market conditions in Bulgaria and from the market and economic conditions in the world economy. Shareholders should keep in mind that events that may cause sudden fluctuations in market prices of shares that have previously occurred on the Bulgarian capital market and in international financial markets may occur and that such fluctuations are likely to affect unfavorable price movements of the shares of “Sirma Group Holding” JSC. The market value of the shares will be determined on the basis of supply and demand, and the share price may increase or decrease. These "price fluctuations" can cause a security to cost at a certain point much less than the value at which it is purchased. This price dynamic is particularly typical for the ordinary stock market, whose stock prices may be subject to sharp fluctuations as a result of publicly disclosed information about the Company's financial performance, changes in legislation and other material events. A significant number of sales of the shares of “Sirma Group Holding” JSC for a certain period of time may have an adverse effect on the maintenance of their achieved price level. Such an event would result from a significant excess of the sellers of those shares over buyers in that period. At this point in time, the Issuer or a third party does not commit to maintaining a particular price level and a significant number of sales may lead to a decrease in that level. The Company does not guarantee to investors that the price of its shares will remain stable and / or increase its value in the future. At the moment of preparation of this document, “Sirma Group Holding” JSC or, to the best of its knowledge, other persons, do not intend to purchase shares of the Company in order to preserve and / or increase the market price of the Company's shares after the increase of capital. 8.3.2. Liquidity Risk Liquidity risk is directly related to the liquidity of the securities market itself and expresses the potential for short-term purchase or sale of the securities on the secondary market. The liquidity of the issue depends on the number of investors who will be interested in investing in the issue. The liquidity risk of the shares will also depend on the development of the equity market in terms of the volume and variety of instruments offered, the issuer's financial position, the ability of the local capital market to attract new investors, Investors should keep in mind that the BSE is significantly smaller and less liquid than the securities markets in most developed market economies. Thus, for the shareholders of “Sirma Group Holding” JSC there is no guarantee that the listing of the shares of the Company on the BSE will guarantee their active trading and sufficient liquidity. 8.3.3. Inflation Risk The manifestation of the inflationary risk for the shareholders of “Sirma Group Holding” JSC would arise in cases when the income from the shares (increase in the price and / or received dividends) were lower than the inflation for the investment period. The inflation processes leads to a decrease in the real yield that investors receive. Although in the long run equity yields usually outweigh the inflationary processes in Bulgaria and other countries with a developed market economy, there is no guarantee for the investors in the shares of “Sirma Group Holding” JSC that their investment in shares of the Company will represent a real protection against inflation. 8.3.4. Dillution Risk Pursuant to the Articles of Association of the Company no limitations on the maximum amount of future issues of shares are envisaged. For this reason, shareholder participation may be reduced as a result of a public offering if they do not exercise their rights and do not subscribe a proportionate share of the new shares. In the event that, as a result of a future public offering, the number of issued shares of the Company increases at a faster rate than the amount of the assets of the Company, it is possible to decrease the value of the assets per share of the Company. 8.3.5. Currency Risk This current issue is denominated in BGN. Currency risk of the investment exists for investors whose funds are denominated in US dollars or currencies other than Lev and Euro, due to the constant exchange rate movements. Investors who take a currency risk in the purchase of the current issue would increase or reduce the effective return on their investment as a consequence of strengthening or weakening the BGN and EUR exchange rate against the currency in which the investor's funds are denominated. Stability and high confidence in the credibility of the Currency Board in the country, as well as the relatively stable positions of the euro on international currency markets, reduce the existence of the currency risk to minimum levels. 8.3.6. Lack of an annual dividend payment guaranty The financial results of the company depend on many factors, including the skills and professionalism of the management team, the development of the market in which the company operates, the economic development of the country and the region, etc. There is a risk for investors due to the lack of a guarantee for annual dividends payment. Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 40 www.sirma.com www.sirma.com 8.3.7. Risk of change in the tax treatment of investments in shares The risk of changing in the taxation of investments in securities is linked to the change in the current taxation regime for such instruments. The latter may be considered favorable, as capital gains are tax-exempt. Changes in capital gains tax, as well as other potential changes in the taxation of securities’ investments, may have a negative impact on the final realized net result by an investor. 8.3.8. Risk factors included in the Registration document The specific risks associated with the core activity of “Sirma Group Holding” JSC, as well as the general risks that may have an impact on its activities, are detailed on pages of the Registration document, Section “Risk Factors”. 9/ INFORMATION ABOUT EVENTS AND INDICATORS WITH INCREASED NATURE OF THE COMPANY, HAVING A SIGNIFICANT EFFECT ON THEIR ACTIVITY AND THEIR INCOME AND EXPENDITURE; EVALUATION OF THEIR IMPACT ON RESULTS IN THE CURRENT PERIOD. There are no events and indicators with an unusual nature for the company that have a significant impact on its operations and its realized revenues and expenses; assessing their impact on results during the current period. 10/ INFORMATION ABOUT OUT OF THE BALANCE SHEET TRANSACTIONS - NATURE AND BUSINESS PURPOSE, FINANCIAL IMPACT OF THE TRANSACTION ON ACTIVITY IF THE RISKS AND BENEFITS OF THESE TRANSACTIONS ARE ESSENTIAL FOR THE COMPANY AND THE DISCLOSURE OF THIS INFORMATION IS ESSENTIAL FOR ASSESSING THE FINANCIAL POSITION OF THE COMPANY. There are no deals out of the balance sheet of the Company. Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 41 www.sirma.com www.sirma.com 11/ ANALYSIS AND FINANCIAL EVALUATION OF THE FINANCIAL RESOURCES MANAGEMENT POLICY WITH THE POSITION OF OPPORTUNITIES FOR THE SERVICE OF THE OBLIGATIONS, THE EVENTUAL THREATS AND MEASURES WHICH THE COMPANY WAS PREVENTED OR PROVIDED TO TAKE FOR THE PURPOSE OF REMOVING THEM. The management of financial resources is subject to the requirement of maximizing efficiency while respecting payment deadlines agreed with both suppliers and customers. This means a predominant use of own funds, resulting in lower financial costs and interest costs. On the other hand, there is a significant reserve of undrawn loans that can serve both current and investment costs, which maintain high liquidity of payments. The entity's ability to service obligations is expressed in terms of liquidity ratios in the description of the liquidity risk in this report. As evidenced by the values of the liquidity indicators, Sirma Group Holding JSC has no problems in meeting its obligations, both in the medium and long term. The company has regular proceeds from sale, while also using bank overdrafts, which allows it to service its obligations by successfully managing its financial resources and to properly and timely service its obligations. 12/ ASSESSMENT OF THE POSSIBILITIES FOR THE IMPLEMENTATION OF INVESTMENT INTENTIONS WITH THE SIGNIFICANCE OF THE AMOUNT OF EXPENDITURE AND THE EFFECTIVENESS OF THE POSSIBLE CHANGES IN THE STRUCTURE OF FINANCING THAT ACTIVITY. The management estimates that it is possible to realize the investment intentions declared with the prospectus for initial public offering. 13/ INFORMATION ABOUT OCCURRING CHANGES IN THE REPORTING PERIOD IN THE MAIN PRINCIPLES FOR THE MANAGEMENT OF THE COMPANY AND ITS ECONOMIC GROUP. There were no changes during the reporting period in the company's main management principles and its economic group. Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 42 www.sirma.com www.sirma.com 14/ INFORMATION ABOUT THE MAIN CHARACTERISTICS OF THE FINANCIAL REPORTING PROCESSING INTERNAL CONTROL SYSTEM AND RISK MANAGEMENT SYSTEM IN THE COMPANY. Under Bulgarian law, the management should prepare an interim report on the operations and a financial statement for each quarter to give a true and fair view of the Company's financial position as of the end of the year, financial performance and cash flows in accordance with the applicable accounting framework. Management's responsibility also includes the implementation of an internal control system to prevent, detect and correct mistakes and false statements as a result of the accounting system's actions. In this respect, the management observes the following basic principles in its activities: - adherence to a particular management and accounting policy disclosed in the financial statements; - carrying out all operations in compliance with the laws and regulations; coverage of all events and operations in a timely manner, with the exact amount of the amounts in the appropriate accounting articles. - accounts and the relevant reporting period so as to allow the financial statements to be prepared in accordance with the specific accounting framework; - observance of the precautionary principle in the valuation of assets, liabilities, income and expenses; - detection and termination of frauds and errors; - completeness and regularity of accounting information; - preparation of reliable financial information; - adherence to international financial reporting standards and adherence to the going concern principle. The annual separate financial statements have been prepared in accordance with the going concern principle, taking into account the possible effects of the risks accompanying the company's activity. During the reporting period, there have been no changes in the basic principles of management of Sirma Group Holding JSC. 15/ INFORMATION ON CHANGES IN MANAGEMENT AND SUPERVISORY AUTHORITIES DURING THE PERIOD. No changes during the period considered. 16/ INFORMATION ABOUT THE USE OF THE FUNDS FROM A NEW ISSUED SHARES AND SECURITIES IN THE REPORTING PERIOD. No funds from a new issued shares and securities were used during the reporting period. Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 43 www.sirma.com www.sirma.com 17/ DETAILS OF THE DIRECTOR FOR CONNECTIONS WITH THE INVESTOR, INCLUDING A TELEPHONE AND ADDRESS FOR CORRESPONDENCE. Stanislav Tanushev Bul. 135 Tsarigradsko shose, fl. 3 Sofia 1784 [email protected] Contact phone: +359 2 976 8310 Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 44 www.sirma.com www.sirma.com 18/ CHANGES IN THE PRICE OF THE SHARES OF THE COMPANY Annual separate management report of “Sirma Group Holding” JSC for 2023 “Sirma Group Holding” JSC 45 www.sirma.com www.sirma.com 19/ EVENTS AFTER THE END OF THE REPORTING PERIOD Reduction of the capital of a subsidiary company On 21.12.2023, the Board of Directors of "SAI" AD takes a decision to buy the company's shares from the individual shareholders. As a result of this decision, the sole owner of the company became "Sirma Group Holding" JSC. The decision was entered and announced in the Commercial Register on 12.01.2024. As of that date, “SAI” is a sole proprietorship and its capital is BGN 13 588 241, divided into 13 588 241 ordinary (only) shares with a nominal value of 1 BGN. Buyback of shares By decision of the General Meeting of Shareholders of “Sirma Group Holding” JSC, dated 09.01.2023, on 24.01.2023. “Sirma Group Holding” JSC bought back 1 000 000 of its shares at an average price of BGN 0.74 per share at a total price of BGN 740 000. The shares represent 1.68 % of the company's capital. The purchase was made on the Bulgarian Stock Exchange - Sofia AD. No adjusting or significant non-adjusting events have occurred between the reporting date and the date of authorization. Sofia CEO: 14.03.2024 Tsvetan Alexiev Tsvetan Borisov Alexiev Digitally signed by Tsvetan Borisov Alexiev Date: 2024.03.18 14:15:38 +02'00' “SIRMA GROUP HOLDING” JSC DECLARATION OF „SIRMA GROUP HOLDING“ JSC FOR CORPORATE GOVERNANCE IN 2023 AS PER ART.100n, PAR. 8 IN RELATION TO PAR. 7, PТ. 1 FROM POSA “SIRMA GROUP HOLDING” JSC ii „Sirma Group Holding“ JSC (the Company) is a public holding company, recorded in the Registration Agency. „Sirma Group Holding“ JSC considers that the effective application of the principles of internationally recognized standards for good corporate governance is highly important for the future development of the Company. The Board of directors of the company believes that it is imperative to strive to establish and validate a modern management style that will contribute to the better performance of the company, respectively to provide favorable conditions for achieving sustainable growth and achievement of the long-term objectives, as well as establishing a transparent and fair relationship with all stakeholders. “Sirma Group Holding” JSC considers good corporate governance as a set of relationships between company’s management body, its shareholders and all stakeholders - employees, trading partners, corporate creditors, potential future investors and society as a whole. “SIRMA GROUP HOLDING” JSC iii I. Information as per art. 100n, par. 8, item 1 from the Public Offering of Securities Act “Sirma Group Holding” JSC adheres to the National Corporate Governance Code, adopted by the National Corporate Governance Commission and approved as a Corporate Governance Code under Art. 100n, par. 7, item 1 in relation to par. 8, item 1 of the Public Offering of Securities Act (POSA) by Resolution No. 461-CCC dd.: 30.06.2016 of the Deputy Chair of the Financial Supervision Commission in charge of the Investment Activity Supervision Division. II. Information under Art. 100n, par. 8 of POSA. Applying the principles of transparency, independence and accountability of the Company's Management Board (Board of Directors) in accordance with established vision, objectives, strategies of the company and interests of the shareholders. 1. The Board of Directors of the Company consists of 9 (nine) members who are elected by the General Meeting of Shareholders for a given term of office. 2. The Board of Directors shall carry out its activities in accordance with the Company's Articles of Association and the Rules for Operation of the Board of Directors. 3. The Board of Directors shall decide on: o Closure or transfer of businesses or significant parts thereof; o A significant change of the company's activity by unanimity of the Board of Directors; o Essential organizational changes; o Long-term cooperation essential for the company or the termination of such cooperation; o Establishment and closure of branches, representations and offices; o Adoption of the annual business program of the company; And all other decisions that are not within the express competence of the General Meeting of Shareholders. 4. The members of the Board of Directors shall be guided in their activities by the generally accepted principles of integrity and managerial and professional competence. 5. The members of the Board of Directors shall apply in their activity the principle of avoidance “SIRMA GROUP HOLDING” JSC iv and prevention of real or potential conflict of interests. The members of the Board of Directors shall inform the General Meeting of Shareholders whether directly or on behalf of third parties they have a substantial interest in transactions or issues that have a direct impact on the Company. In 2023, no ethical issues arose between the members of the management, including the need to comply with certain written procedures. 6. Main criteria and principles of the diversity policy for selection and evaluation of the Company’s management members and management bodies (information under Art. 100n, para 8, item 6 of POSA): • The members of the Board of Directors may be only legally capable physical or corporate persons, without any imposed restrictions on age, gender, nationality, education; • Good reputation, professional experience and managerial skills; 7. Corporate governance follows rules for the organization and conduct of each general meeting, which are agreed in the form of an organization scenario. The GMS Invitation shall be drafted with maximum detail and in accordance with the regulatory requirements, indicating all of the proposed decisions, in order for each shareholder to have the opportunity to acquaint himself with them in advance, from the moment of its publication. Written procedures for the conduct of the GMS have not been drafted, because the legal framework has explicitly regulated the basic principles and all other specific points are stipulated in the Invitation. 8. Any significant periodic and incidental information shall be disclosed immediately. The company has compiled its activity with the current local legal framework as well as with the European regulations, having direct application in the local legislation. Notwithstanding the above, the corporate management will develop rules as part of the Quality Management and Information Security Policy to assess the materiality of any information or the need for its disclosure. 9. The annual and interim reports are prepared with the involvement and under the strict control of the corporate management, without official formalization in the form of internal rules. However, such rules will be developed and implemented as part of the Quality Management and Information Security Policy. “SIRMA GROUP HOLDING” JSC v III. System for internal control and risk management (information as per art. 100n, par. 8, item 3 from POSA) In “Sirma Group Holding” JSC an internal control system is in place, to ensure the effective functioning of the reporting and disclosure systems. The internal control system is also being developed and functioning in order to identify the risks associated with the Company's activity and to support their effective management. The Company also has elected and Audit Committee, in accordance with the requirements of the Public Offering of Securities Act. “Sirma Group Holding” JSC has adopted and applies rules and procedures, regulating the effective functioning of the reporting and disclosure systems of the company. The rules describe in detail the different types of information created and disclosed by the company, the internal flow of documents, the different levels of access to different information types, for the persons responsible and the terms for handling and managing the information flows. The established risk management system ensures the effective implementation of internal control in the creation and management of all corporate documents, including financial statements and other regulated information, which the Company is required to disclose in accordance with legal regulations. 1. Control environment. The Control environment in „Sirma Group Holding“ JSC is formed on the basis of: 1.1. Communicating and enforcing integrity and ethical values. “Sirma Group Holding” JSC has approved a Code of Ethics, which sets a framework for personal integrity and professional ethics in the Company. The Code of Ethics is communicated with all employees who agree to abide by the established ethical norms and professional ethics. It is implemented in the job descriptions of all employees, including the Financial and Accounting Department and is a model for their behavior. 1.2. Commitment and competence “Sirma Group Holding” JSC has developed a Procedure for selection and appointment of employees under labor contracts. There are requirements for the education, work experience and professional experience of employees at all levels 1.3. Participation of persons in charge of general management The Executive Director of “Sirma Group Holding” JSC has introduced adequate procedures and rules for the implementation of internal control. He is responsible for the implementation of financial management and control in the Company managed by him, in compliance with the principles of legal “SIRMA GROUP HOLDING” JSC vi compliance, sound financial management and transparency. The Executive Director delegates his powers to other officials of the Company, defining their specific rights and obligations and requires periodic reporting on the implementation of delegated powers. Management bodies that have certain responsibilities and powers regarding the financial reporting process and respectively other related processes are: the Board of Directors, the Audit Committee, the Chief Financial Officer, the Financial Controller, the Chief Accountant. The Board of Directors accepts and confirms: the Accounting policy and the changes in it for each reporting period, the developed accounting estimates as of the date of each reporting period, incl. the applied methodology; financial statements, and other public documents containing financial information. The Audit Committee independently monitors the implementation of the financial reporting processes, the applied accounting policies and the efficiency of the internal control system of the company, incl. risk management, as well as the implementation and results of the external audit. The CFO is responsible for the overall organization, operation and ongoing control of accounting and financial reporting. He directly manages the whole process, makes all key decisions related to financial statements and other public documents with financial information. The CFO also approves at the first level the Accounting policy, the main reporting methodologies and evaluates the acceptance of the work of used independent experts (appraisers, actuaries, consultants, etc.) involved in the financial reporting process. He monitors on an ongoing basis, together with the Chief accountant, the effects and risks on the financial statements of the identified business risks for the company. The Chief accountant organizes and manages the accounting activity of the company - controls and methodologically, directs the current accounting, manages the preparation of financial and management reports; is responsible for the development and implementation of accounting methodologies and techniques; is responsible for the process of accounting closing and preparation of all accounting estimates, proposes and develops accounting policies and changes in them, monitors current changes in IFRS. He is the direct contact with the internal and external experts used for the purposes of financial reporting. 1.4. Philosophy and operational style of leadership The management of “Sirma Group Holding” JSC prepares the financial statements, adhering to the principle of providing a true and fair view of the condition of the Company and its accounting results. “SIRMA GROUP HOLDING” JSC vii The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and are in accordance with local law. Management confirms that it has consistently applied an adequate accounting policy and that the principle of prudence in the assessment of assets, liabilities, income and expenses has been observed in the preparation of the financial statements as of December 31. Management also confirms that it has adhered to the applicable accounting standards, and the financial statements have been prepared on the going concern basis. Management is responsible for the proper keeping of accounting records, for the proper management of assets and for taking the necessary measures to avoid and detect possible abuses and other irregularities. 1.5. Human resource management policies and practices. In “Sirma Group Holding” JSC a Procedure has been developed for selection and appointment of employees, as well as a Procedure for evaluation of employees; 1.6. Competence of the staff. The requirements for the competence of the employees are laid down in the job descriptions. The desire and the need for additional qualification are reflected in the annual individual plans of the employees. They are prepared on the basis of the annual evaluation of the company's employees. Following the completion of the annual evaluations, the results in terms of areas for improving skills and competences are discussed with the directors of departments and a training program is prepared. The management provides the opportunity to develop the necessary knowledge and skills by including them in appropriate training programs. 2. Process for risk evaluation in “Sirma Group Holding” JSC. Risk management is a mandatory element of the overall management process of “Sirma Group Holding” JSC. It is known that every organization is dynamic and involves a constant transition - in time, money, participants, therefore there is always a certain risk that needs to be managed. The purpose of risk management in the Company is: To maximize the probability of a positive impact on its activities, and to reduce to a minimum the probability of a negative impact. The management of “Sirma Group Holding” JSC perceives risk management as a key activity contributing to the achievement of the Company's objectives. For this purpose, all decisions / actions “SIRMA GROUP HOLDING” JSC viii taken to manage the identified risks and to ensure a periodic review of the process, in view of its timeliness, are documented. The operating environment in which the Management of “Sirma Group Holding” JSC operates is the framework in which risk management should be applied. It consists of external and internal factors for the Company that affect its activities. The main types of risks and their detailed description related to the company's activities and the policy for their management are regulated in item 8 – “Risk factors” of the Report on the company's activities for 2023, to which this declaration is attached. The Risk management policy is applied in an integrated manner and in accordance with all other policies and principles regulated in the internal acts of “Sirma Group Holding” JSC. 3. Information system “Sirma Group Holding” JSC has implemented and uses a set of different software products forming an Information System related to financial reporting and communication. Elements of the overall information system are: • Financial and accounting software ERP system - serves to reflect all income and expenditure operations on bank accounts and their distribution by items; • Payroll software - serves to automate the formation of remuneration of employees in the Company and automate the mandatory deductions and installments on individual accounts; In general, the Information System covers methods and documentation that: • identify and reflect all valid transactions and operations; • describe contracts and transactions in a timely manner in sufficient detail to enable them to be properly classified for financial reporting purposes; • determine the value of transactions and operations in a way that allows their appropriate monetary value to be reflected in the financial statements; • determine the time period during which the transactions and operations have occurred in order to allow their recording in the appropriate accounting period; • present deals and transactions and related disclosures in the financial statements as appropriate. “SIRMA GROUP HOLDING” JSC ix The quality of the information generated by the systems affects the ability of the Management to make appropriate decisions in the management and control of the activities of the enterprise and in the preparation of reliable financial statements. Communication, which includes providing an understanding of individual roles and responsibilities related to internal control over financial reporting, is done electronically or through the actions of Management. 4. Control activities, policies and procedures. The control activities, which are related to the audit, may be categorized as follows: 4.1. Reviews of the implementation and results of the activity • reviews and analysis of the real results compared to budgets, forecasts and results from previous periods; • linking different groups of data - operational or financial - together with analyzes of relationships and exploratory and corrective measures; • comparison of internal data with external sources of information; • review of the results of the work by functions or by activities. 4.2. Information processing The two common categories of the control activities in information systems are application program controls and general IT controls, which are policies and procedures related to multiple application programs and support the effective functioning of application program controls by helping to ensure the continued proper functioning of information systems. Examples of application controls include: • checking the mathematical accuracy of the records; • maintenance and review of accounts and turnover sheets; • Automated controls, such as input checks and numbering sequence checks and non-automatic tracking of exception reports. “SIRMA GROUP HOLDING” JSC x Examples of common IT controls include: • controls over the change of programs; • controls that restrict access to programs or data; • controls over the implementation of new editions of bundled software applications; • Controls over system software that restrict access or ongoing monitoring of the use of system support features that could alter financial data or records without leaving a trace. 4.3. Physical controls These activities include: • the physical security of the assets, including appropriate security measures, such as secure facilities and conditions for access to assets and documents; • approval of access to computer programs and data files; • periodic counting and comparison with the amounts recorded in the control documents (for example, comparison of the results of the cash counting and the results of the inventories with the accounting documents). The extent to which physical controls aimed at preventing theft of assets relate to the reliability of the financial statements and therefore to the audit, depends on circumstances, such as cases where the assets are highly susceptible to misuse. 4.4. Distribution of the responsibilities Assigning responsibilities for approving transactions and operations, recording them and maintaining responsibility for the assets of various employees. The distribution of duties is intended to reduce the possibility of allowing an employee to be in a position to both commit and conceal errors or fraud in the normal course of his duties. 5. Ongoing monitoring of controls The control in “Sirma Group Holding” JSC is a continuous process carried out by the Management, the Administration and the personnel in the Company. The ongoing control process aims to achieve reasonable confidence in the achievement of the objectives, divided into the following categories: “SIRMA GROUP HOLDING” JSC xi • implementation and optimization of operations; • reliability of financial and accounting information; • compliance with the laws and by-laws. Management's ongoing monitoring of controls includes an assessment of whether they are operating as intended and whether they are being modified in an appropriate manner to reflect changes in conditions. Ongoing monitoring of controls includes: • Management review - which addresses the main objectives of the organization, including those related to performance, cost-effectiveness and resource conservation. • Assessment by internal auditors of compliance with the Company's policy - which includes the preparation of reliable financial statements - interim results and published statements of results. • Supervision over the observance of the ethical norms or the policy for business practice in the Company - which covers the compliance with the laws and by-laws, regulating the activity of the organization. Ongoing monitoring is carried out to ensure that controls continue to operate effectively over time. The assessment of the current monitoring of the controls in “Sirma Group Holding” JSC is assigned on a rotating basis to external Audit companies, which will confirm the proper functioning of the internal controls or give their recommendations for their improvement. Inventory of required documents 1. Code of Ethics; 2. Job descriptions for the following posts: • regular accountants, cashiers, accountants and employees of “Reporting” department; • senior accountants; • deputy Chief Accountants; • Controller • Chief Accountant; • Financial director. “SIRMA GROUP HOLDING” JSC xii 3. Rules of the Board of Directors and the Audit Committee. Both documents must have a section for reviewing the financial statements, accounting policies, significant accounting estimates. Ongoing monitoring at two levels - by the Board of Directors / Management Board and respectively from Audit Committee. 4. Organizational structure of the company with written functions, responsibilities and powers of the individual units in terms of financial reporting; 5. Rules and criteria for selection of qualified persons from the financial and accounting departments and the "Reporting" department - with a focus on educational qualifications, previous professional experience, past achievements and evidence of integrity and ethical behavior. 6. The policy for training of the staff of the financial and accounting departments and the “Reporting” department; 7. Policy for attestations, promotions and bonuses of the financial accounting staff and other persons engaged in the financial reporting process; IV. Information on the availability of takeover/merger proposals in 2022 (information under Article 10 (1) (c), (d), (f), (h) and (i) of Directive 2004/25/EC of the European Parliament and of the Council from 21 April 2004 on takeover bids pursuant to the provisions of Article 100n (8) (4) of the POSA) 1. As at 31.12.2023, no proposals for takeover and/or merger with another company have been made to the Company. 2. Information under Art. 10 of Directive 2004/25 / EC of the European Parliament and of the Council from 21 April 2004 • Participation of the Company in the capital of other commercial companies are described in item 3, “Portfolio of “Sirma Group Holding” JSC” in the Company’s Activity Report for 2022, to which this declaration is an Annex. • "Sirma Group Holding" JSC does not have shares that give special control rights. • There are no restrictions on voting rights, such as restrictions on the voting rights of holders of a certain capital percentage or number of votes, deadlines for the exercise of voting rights in relation to the shares issued by “Sirma Group Holding” JSC. • The rules for the election of members of the Board of Directors of “Sirma Group Holding” JSC are regulated in the Company's Articles of Association. “SIRMA GROUP HOLDING” JSC xiii • The powers of the members of the Board of Directors are specified in Art. 41 of the Articles of Association of the company. The rights to issue or buy back shares are within the competence of the General Meeting of Shareholders. V. Composition and function of the administrative and management bodies and their committees (Information under Article 100n, paragraph 8, item 5 of POSA) BOARD OF DIRECTORS 1. Functions and duties 1.1. The Board of Directors of “SIRMA GROUP HOLDING” JSC manages the Company independently and responsibly in accordance with the established Vision, goals and strategies of the Company and the interests of the shareholders. The members of the Board of Directors provide a guarantee for their management to the amount of their three-month gross remuneration, as determined by the General Meeting of Shareholders. 1.2. The Board of Directors of “SIRMA GROUP HOLDING” JSC establishes and controls the strategic directions for development of the Company. 1.3. The Board of Directors of “SIRMA GROUP HOLDING” JSC establishes the Company's risk management policy and controls the establishment and functioning of the internal control and risk management systems. 1.4. The Board of Directors of “SIRMA GROUP HOLDING” JSC shall ensure the observance of the legal, regulatory and contractual obligations of the Company in accordance with the adopted Articles of Association and Rules of Procedure of the Board of Directors. 1.5. The Board of Directors is responsible for the establishment and reliable operation of the financial and information system of the Company. 1.6. The Board of Directors gives guidance, approves and controls the implementation of the business plan of the Company, transactions of substantial nature, as well as other activities established in the Company's statutes. 1.7. The Board of Directors approves the disclosure policy in accordance with legal requirements and statutes. The information disclosure system ensures that addresses of information (shareholders, stakeholders, investment community) are not discriminated and does not allow abuse of insider information and market manipulation of financial instruments. 1.8. During their term of office, the members of the Board of Directors are guided in their activity “SIRMA GROUP HOLDING” JSC xiv by the generally accepted principles of integrity, managerial and professional competence. The Board of Directors adheres to the Code of Ethics of the Company's employees. 1.9. The Board of Directors of “SIRMA GROUP HOLDING” JSC reports its actions to the General Meeting of Shareholders by preparing an annual report on its activities and submitting it for acceptance by the General Meeting of Shareholders. 2. Election and dismissal of members of the Board of Directors 2.1. The General Meeting of Shareholders elects and releases the members of the Board of Directors of “SIRMA GROUP HOLDING” JSC, in accordance with the law and the statutes of the Company, observing the principles of continuity and sustainability of the Board of Directors' work. All members meet the legal requirements for taking their position. 2.2. The management contracts with the members of the Board of Directors determine their duties and tasks, the criteria for the amount of their remuneration, their loyalty obligations to the Company and the grounds for the waiver. The management contract with a member of the Board of Directors or the Executive Director respectively are in compliance with the Articles of Association of the Company and the Board of Directors' Policy for Determining the Remuneration of the Members of the Board of Directors as approved by the General Meeting of the Shareholders on 04.12.2014, amended by subsequent decisions of the General Meeting of Shareholders of the Company. 3. Structure and competence 3.1. The number of members and the structure of the Board of Directors is defined in the Articles of Association of the Company. The Company is managed and represented by a Board of Directors, which consists of nine individuals, meeting the requirements of Article 234 of the Commercial Act and Article 116 a, paragraph 2 of the Public Offering of Securities Act. 3.2. The composition of the Board of Directors elected by the General Meeting is structured in such a way as to ensure the professionalism, impartiality and independence of the decisions and actions of its members in relation to the management of the Company. 3.3. The Board of Directors shall ensure a proper division of tasks and duties among its members. The main function of the independent directors is to control the actions of the executive management and to participate effectively in the Company's work in accordance with the interests and rights of the shareholders. The main functions of the members of the Board of Directors, as well as these of the independent members, are laid down in the Articles of Association of the Company. There are three independent members of the Board of Directors of “SIRMA GROUP HOLDING” JSC. “SIRMA GROUP HOLDING” JSC xv 3.4. The competencies, rights and obligations of the members of the Board of Directors follow the requirements of law, statutes and standards of good professional and managerial practice. 3.5. The members of the Board of Directors of “SIRMA GROUP HOLDING” JSC have the appropriate knowledge and experience, which are required by their position. After their election, the new members of the Board of Directors are acquainted with the main legal and financial issues related to the Company's activities. The Company encourages the improvement of the qualification of the members of the Board of Directors. 3.6. The members of the Board of Directors have the necessary time to perform their tasks and duties. The Statute of the Company does not specify the number of companies in which the members of the Board of Directors may be in managerial positions, as the activity of the members of the Board of Directors cannot be limited. 3.7. The election of the members of the Board of Directors of the Company takes place through a transparent procedure which provides, among other things, timely and sufficient information on the personal and professional qualities of the members. The number of successive mandates of the members of the Board of Directors ensures the effective operation of the Company and compliance with the legal requirements. According to the Articles of Association of the Company, the members of the Board of Directors may be re-elected without any restrictions. “SIRMA GROUP HOLDING” JSC xvi 4. Remuneration 4.1. The Board of Directors of “SIRMA GROUP HOLDING” JSC prepared a remuneration policy for the members of the Board of Directors adopted by the General Meeting of Shareholders on 04.12.2014, as amended by a decision of the GMS of 09.01.2023. The remuneration policy has been developed in accordance with Ordinance No 48 from 20 March 2013 of the Financial Supervision Commission and the Public Offering of Securities Act. The amount and structure of remuneration shall be determined by the General Meeting of the Company. 4.2. In accordance with legal requirements and good corporate governance practice, the size and structure of the remuneration take into account: 4.2.1. The duties and the contribution of each member of the Board of Directors to the Company's activities and results. The members of the Board of Directors receive a permanent remuneration in the form of an amount determined by the General Meeting of Shareholders paid under the terms and within the periods as determined in the management contracts concluded between them and the Company. 4.2.2. The ability to select and retain qualified and loyal members of the Board of Directors of “SIRMA GROUP HOLDING” JSC. These requirements are applied through the remuneration policy of the members of the Board of Directors adopted by the General Meeting of Shareholders on 04.12.2014. 4.2.3. The need to reconcile the interests of the members of the Board of Directors and the long-term interests of the Company. The remunerations of the members of the Board of Directors are based on the results of the Company's operations and are in line with the Company's business strategy, objectives, values and long-term interests. 4.3. The executive member of the Board of Directors receives a permanent remuneration in the form of an amount determined by the General Meeting of Shareholders, paid under the terms and within the periods as set in the management contract concluded between him and the Company. 4.3.1. The remunerations and benefits of the members of the Board of Directors and the Executive Director of the Company shall be determined by the General Meeting of Shareholders. 4.3.2. As of 31.12.2023, the executive members of the BD have not been granted shares or other financial instruments. “SIRMA GROUP HOLDING” JSC xvii 4.4. The members of the Board of Directors receive a permanent remuneration in the form of an amount determined by the General Meeting of Shareholders paid under the terms and within the periods as set in the management contracts concluded between them and the Company. 4.5. The disclosure of information about the remuneration of the members of the Board of Directors is in accordance with the legal requirements and the Company's statutes: 4.5.1. Information about the remuneration of the members of the Board of Directors is presented in the annual financial statements and is published on the website www.sirma.com. 5. Committees 5.1. The work of the Board of Directors is assisted by committees. The Board of Directors determines the necessity of their establishment in accordance with the specifics of the Company. The committees are set up on the basis of a written structure, range of tasks, way of functioning and reporting procedures. As of now the Board of Directors has the following committees elected: - Investment and risk committee – responsible for defining and executing the investment policy of Sirma Group Holding; - Remuneration committee – responsible for defining and executing the remuneration policy for the executive staff and key personnel at Sirma Group Holding; - Information disclosure committee - responsible for the organization and control of information disclosure by Sirma Group Holding. 5.2. In accordance with the requirements of the current legislation and on the basis of the criteria set by it, the Board of Directors proposes to the General Meeting of Shareholders of the Company to elect an Audit Committee with a composition meeting the legal requirements and the specific needs of the Company. The audit committee of “SIRMA GROUP HOLDING” JSC was changed with the decision of GMS, held on 24.06.2022. The members of the Audit Committee meet the requirements set forth in Article 40f (3) and (4) of the Independent Financial Audit Act. “SIRMA GROUP HOLDING” JSC xviii GENERAL MEETING OF SHAREHOLDERS 5.3. All shareholders are entitled to participate in the General Meeting of Shareholders and to express their opinion: 5.3.1. Shareholders entitled to vote have the opportunity to exercise their voting rights at the General Meeting of the Company in person or through representatives, as well as by correspondence or by electronic means. 5.3.2. The corporate management applies effective control by creating the necessary organization for the voting of the authorized persons in accordance with the instructions of the shareholders and in the ways set forth in the legislation. 5.3.3. The corporate management shall establish rules for the organization and holding of the regular and extraordinary General Meetings of the Company's shareholders, which ensures equal treatment of all shareholders and the right of each shareholder to express their opinion on the items on the agenda of the General Meeting. 5.3.4. The corporate management organizes the procedures and the terms of the General Meeting of Shareholders in a way which does not make the voting unnecessarily difficult or expensive. 5.3.5. The corporate management takes action to encourage the participation of shareholders in the General Meeting of Shareholders, by providing the possibility of voting in advance and remote access by technical means (including the Internet) where this is possible and necessary. 5.4. All members of the corporate management shall endeavor to attend the General Meetings of the Shareholders of the Company. 5.5. Materials for the General Meeting of Shareholders: 5.5.1. All texts in the written materials, connected to the Agenda of the General Meeting of Shareholders must be clear, accurate and to the point in order not to mislead the shareholders. All proposals related to major corporate events shall be presented as separate items on the Agenda of the General Meeting, including the proposal for distribution of dividends. 5.5.2. Corporate management assists shareholders, entitled under the current legislation, to include additional items on the agenda of the General Meeting of Shareholders. “SIRMA GROUP HOLDING” JSC xix “Sirma Group Holding” JSC publishes the Corporate Governance Code and the present Corporate Governance Declaration on the Company's website www.sirma.com for disclosure of information pursuant to Art. 100n, para. 7 and 8 of POSA. In this respect, the requirement of Article 100n, Paragraphs 7 and 8 of POSA and Article 40, Paragraphs 1 and 2 of the Accountancy Act shall be deemed to be met. This Declaration of Corporate Governance is an integral part of the 2022 Annual Financial Statements of “Sirma Group Holding” JSC. Tsvetan Alexiev CEO of “Sirma Group Holding” JSC Tsvetan Borisov Alexiev Digitally signed by Tsvetan Borisov Alexiev Date: 2024.03.18 14:14:42 +02'00' REPORT OF THE REMUNERATION COMMITTEE ON THE IMPLEMENTATION OF THE REMUNERATION POLICY OF THE MEMBERS OF THE BOARD OF DIRECTORS OF „SIRMA GROUP HOLDING“ JSC FOR 2023 1. INTRODUCTION 1.1. The legal basis of the Report During the period 1 January 2023 – 31 December 2023 (hereafter referred to as the "Reporting Period"), “Sirma Group Holding” JSC (hereinafter referred to as "the Company") has applied the remuneration policy of the members of the Board of Directors approved by resolution of the General Meeting of Shareholders of the Company held on 04.12.2014, as amended by decision of the General Meeting of Shareholders held on 09.01.2023. The policy is published on the Internet at the following address: https://investors.sirma.com/investors/corporate-governance.html (Hereinafter referred to as the "Policy"). This report has been prepared by the Remuneration Committee in compliance with the requirement of Art. 12, para. 1 of Ordinance No. 48 of March 20, 2013, on the Fees Requirements, issued by the Financial Supervision Commission (hereinafter "Ordinance No. 48"). The report forms an independent document to the annual financial statement of the Company for the year 2023. The report is presented to the shareholders of the Company and may be discussed with the members of the Board of Directors at the regular annual meeting of the General Meeting of Shareholders of the Company. The composition of the Remuneration Committee is as follows: - Georgi Parvanov Marinov - Chairman - Martin Veselinov Paev - member - Jordan Stoyanov Nedev - member 1.2. Subject and Scope of the Report According to Art. 12, para. 2 of Ordinance No. 48, the Report contains a review of the way the Policy is applied during the Reporting Period; The Report includes all the requisites, which are mandatory according to Art. 13 of Ordinance No. 48. 2. INFORMATION ON THE APPLICATION OF POLICY IN THE REPORTING PERIOD 2.1. Information on the decision-making process in defining the Policy According to Art. 116c, para. 1 of the Public Offering of Securities Act, the Company's Articles of Association and the Policy, the determination of the remuneration of the members of the Board of Directors, their right to receive part of their profits and their right to acquire shares or debt instruments of the Company shall be the power of the General Meeting. In exercising this power, the General Assembly is: • determined the remuneration of the members of the Board of Directors with the decision under item 7 of the agenda of the annual general meeting held on 14 June 2016 and item 10 of the agenda of the annual general meeting held on 23 June 2021, as follows: • The General Meeting of Shareholders approves a maximum permissible total amount of the remuneration of the members of the Board of Directors as follows: - The maximum amount of permanent salaries - up to BGN 384 000 per year. - The maximum amount of the short-term variable remuneration - up to 6% (six percent) of the net consolidated profit, but not more than 40% (forty percent) of the unconsolidated profit before tax and provisions. - The total number of shares from the capital of the Company, which may be granted as remuneration to the members of the Board, are detailed in the Policy for remuneration. 2.2. Information on the relative weighting of the variable and permanent remuneration of members of the Board of Directors In accordance with Article 7 and 8 of policy, "Sirma Group Holding" JSC can be paid to the members of the Board of Directors as permanent (fixed) and variable remuneration in the form of premiums, bonuses, benefits related to retirement and other material incentives that are given on the basis of performance evaluation criteria. Variable remuneration is short-term and long-term. Short-term remuneration is paid in cash and long-term - in the form of shares in the company's capital. The amount of short-term variable remuneration is up to 6% (six percent) of the net consolidated profit, but not more than 40% (forty percent) of the value of individual accounting profit before tax and provisions for short- term variable remuneration. The amount of the annual long-term variable remuneration paid in the form of shares shall be no more of 1% of the total number of shares in the company's capital. Variable remuneration payments are made in accordance with objective and measurable performance criteria and non-financial indicators that are designed to promote long-term business stability and are relevant to the long-term business of the company. About the Reporting Period: • Only permanent fixed remuneration was paid to each of the members of the Board of Directors, representing 100% (one hundred percent) of the remuneration charged by the Company for its activity as such during the Reporting Period; and • no authority of the Company has taken any decisions on payment of additional fees, bonuses, incentives, non-monetary benefits or payments and benefits of any kind to the members of the Board as such during the period. 2.3. Information on the performance criteria on the basis of which variable remuneration is provided; an explanation of how these criteria contribute to the long-term interests of the Company; an explanation of the methods used to assess whether the criteria are met and the relationship between remuneration and the results achieved and the periods of postponement of the payment of variable remuneration For the Reporting Period, no variable remuneration has been charged or paid to any member of the Board of Directors. Accordingly, no methods have been applied to assess the fulfilment of the criteria and the relationship between the results achieved and such remuneration. No payment of any part of the remuneration of the members of the Board of Directors was postponed for the Reporting Period. These remunerations have been paid, in their capacity as permanent remuneration, in their entirety and within the deadlines provided for in the individual contracts between the respective member of the Board of Directors and the Company. 2.4. Information on the main payments and justification of the annual bonus scheme and/or any other non-monetary additional remuneration For the Reporting Period, the total value of the Company's accrued and paid basic remuneration amounts to: • Georgi Parvanov Marinov as Chairman of the Board of Directors - BGN 20 880 (twenty thousand eight hundred and eighty); • Chavdar Velizarov Dimitrov as Deputy Chairman of the Board of Directors - BGN 20 880 (twenty thousand eight hundred and eighty); • Tsvetan Borisov Alexiev as an Executive Director - BGN 182 040 (one hundred and eighty two thousand and forty); • Atanas Kostadinov Kiriakov as a member of the Board of Directors - BGN 20 880 (twenty thousand eight hundred and eighty); • Yordan Stoyanov Nedev as a member of the Board of Directors - BGN 20 880 (twenty thousand eight hundred and eighty); • Veselin Anchev Kirov as a member of the Board of Directors - BGN 20 880 (twenty thousand eight hundred and eighty); • Martin Veselinov Paev as a member of the Board of Directors - BGN 20 880 (twenty thousand eight hundred and eighty); • Peyo Vasilev Popov as a member of the Board of Directors - BGN 20 880 (twenty thousand eight hundred and eighty); • Yavor Ludmilov Djonev as a member of the Board of Directors - BGN 20 880 (twenty thousand eight hundred and eighty). For each charging or payment of remuneration to the members of the Board of Directors, the Company has withheld and contributed to the relevant budgets within the statutory period any and all public liabilities (including but not limited to: tax, state social security contributions, supplementary compulsory insurance and health insurance ) in the way these obligations are established by law. For the Reporting Period: • none other material incentives have been accrued or owed by the Company to any member of the Board of Directors; • No annual scheme for the payment of bonuses and/or other non-monetary additional remuneration to the members of the Board of Directors has not been adopted and implemented in the Company. 2.5. Description of the main characteristics of the supplementary voluntary pension scheme and information on the paid and/or due contributions by the Company to the members of the Board of Directors No supplementary voluntary pension assurance scheme for the members of the Board of Directors has been adopted and implemented for the Reporting Period and no contributions have been paid or due by the Company under such scheme. 2.6. Information on the severance policy for termination of contracts The rules governing benefits for members of the Board of Directors in the termination of their contracts are contained in Section VI of the Policy. The company brings individual contracts to each member of the BD in full compliance with these rules. No termination of the assignment contracts with members of the Company's Board of Directors has occurred for the Reporting Period. Early termination benefits have not been accrued or paid. 2.7. Information on the period during which shares cannot be transferred and share options cannot be exercised at variable share-based remunerations and policy information on the retention of a certain number of shares until the end of the BD members' term of office No variable remuneration based on shares or share options has been paid for the Reporting Period. Accordingly, the Company does not have terms and conditions for restrictions on the transfer of such shares or options to shares or for the maintenance of a certain number of shares until the end of the term of the members of the Board of Directors. 2.8. Information on the BD members contracts On 24.06.2022, the General Meeting of Shareholders (GM) of "Sirma Group Holding" JSC decided that the members of the Board of Directors should be in the following composition, and the decision was entered in the Commercial Register on 07.07.2022: • Georgi Parvanov Marinov (throughout the Reporting Period) • Tsvetan Borisov Alexiev; (throughout the Reporting Period) • Chavdar Velizarov Dimitrov; (throughout the Reporting Period) • Atanas Kostadinov Kiriakov (throughout the Reporting Period) • Yordan Stoyanov Nedev (throughout the Reporting Period) • Veselin Anchev Kirov (throughout the Reporting Period) • Martin Veselinov Paev (throughout the Reporting Period) • Peyo Vasilev Popov (throughout the Reporting Period) • Yavor Ludmilov Djonev (throughout the Reporting Period) The term of the BD members' contracts during the Reporting Period and the notice period for the early termination of these contracts by the Company are as follows: The term of the contract The term of notice for early termination by the Company until the expiration of the 2-year term mandate (i.e. 07.07.2024) none Pursuant to Article 16 of the Policy, in the event of early termination of a Management Agreement with the Executive Director, the total amount of benefits due to the person in respect of the early termination and the payments related to the notice period may not exceed the sum of the annual paid permanent salary for two years. Benefits are not due if the termination of the contract is due to unsatisfactory results and/or guilty behaviour of the Executive Director. In case of early termination of a Management Agreement with the Executive Director, due to a breach of the clause prohibiting the conduct of competitive activity, the person owes damages to the company in an amount not higher than the paid annual fixed remuneration of the person for two years. Information on the remuneration of any person who has been a member of the Board of Directors of the Company for a certain period of the respective financial year. 2.8.1 Remuneration by the Company The full amount of the basic remuneration accrued and/or paid under management contracts by the Company for the Reporting Period of the persons who were members of the Board of Directors is indicated in paragraph 4.2 of the Report for the activity of the Company for 2023. 2.8.2 Other payments by the Company for services rendered by members of the Board of Directors outside their normal roles For the reporting period, the Company has charged and paid to members of the Board of Directors for services beyond the usual roles of these members as follows: • Yordan Stoyanov Nedev as Financial Director - BGN 114 362 (one hundred and fourteen thousand three hundred and sixty two); For each charging or payment of remuneration to the members of the Board of Directors, the Company has withheld and contributed to the relevant budgets within the statutory period any and all public liabilities (including but not limited to: tax, state social security contributions, supplementary compulsory insurance and health insurance ) in the way these obligations are established by law. 2.8.3 Remuneration and other payments to members of the Board of Directors from other persons belonging to the Group of the Company For the Reporting Period of the members of the Board of Directors, the remuneration of other persons belonging to the Company's Group is charged and paid as follows: • Gеorgi Parvanov Marinov as: - Executive Director of “Engview Systems Sofia” JSC BGN 126 600 (one hundred and twenty six thousand and six hundred); - Member of the Board of Directors of “Sirma Business Consulting” JSC BGN 6 000 (six thousand); - Member of the Board of Directors of “SAI” JSC BGN 1 060 (one thousand and sixty); • Yordan Stoyanov Nedev as: - Member of the Board of Directors of “SAI” JSC BGN 1 060 (one thousand and sixty); • Chavdar Velizarov Dimitrov as: - Senior Programmer under labor contract with “Engview Systems Sofia” JSC - BGN 101 258.34 (one hundred and one thousand two hundred and fifty eight 0.34); - Member of Board of Directors of “Sirma Medical Systems” JSC- BGN 1 200 (one thousand and two hundred); • Tsvetan Borisov Alexiev as: - Project Manager under labor contract with “Sirma Solutions” JSC - BGN 215 641.60 (two hundred ad fifteen thousand six hundred and forty one 0.60); - Executive Director under a control and management contract at “Sirma Solutions” JSC BGN 181 792 - (one hundred and eighty one thousand seven hundred and ninety two); - Member of the Board of Directors of “Sciant” JSC - BGN 4 000 (four thousand); - Member of the Board of Directors of “Sirma Business Consulting” JSC - BGN 12 000 (twelve thousand); - Member of the Board of Directors of “EngView Systems Sofia” JSC - BGN 600 (six hundred); • Atanas Kostadin Kiriakov as: - Member of the Board of Directors of “EngView Systems Sofia” JSC - BGN 600 (six hundred); - Executive Director under a control and management contract of “Sirma AI” JSC - BGN 46 630 (forty six thousand six hundred and thirty) - Member of the Board of Directors of “Sirma Solutions” JSC - BGN 6 000 (six thousand); • Veselin Anchev Kirov as: - Project Manager under labor contract with “EngView Systems Sofia” JSC - BGN 128 249.31 (оne hundred and twenty eight thousand two hundred and forty nine 0.31) With each accrual or payment of the relevant remuneration, the companies have deducted and contributed to the relevant budgets any and all public liabilities (including, but not limited to: tax, state social security contributions, supplementary compulsory insurance and health insurance) these obligations are established by law. 2.8.4 Paid and/or accrued indemnities in case of termination of BD member's duties For the Reporting Period, none of the members of the BD has been charged or compensated for the termination of his functions as such. 2.8.5 Overall assessment of all non-cash benefits equated to remuneration granted to members of the Board of Directors For the Reporting Period, no member of the Board of Directors has been charged, paid or provided in any form whatsoever any non-monetary benefit equated to remuneration. 2.8.6 Information on all loans, payments of social and household expenses and guarantees from the Company or its subsidiaries or other companies that are subject to consolidation in its annual financial statements, including data on the remaining outstanding amount and interests For the Reporting Period, payments were made for principal and interest on a loan granted by Sirma Solutions AD to a member of the Board of Directors in the amount of BGN 34 104. As of the date of preparation of the report, the balance of principal for repayment was in the amount of BGN 5 555. Payments for social and household expenses of the members of the Board of Directors of the Company for the reporting period do not differ from social and household expenses to which all employees of the Company or another company that is subject to consolidation in the annual financial statement of the Company are entitled. 2.8.7 Shares and / or share options and / or other incentive schemes for members of the BD based on shares For the Reporting Period, none of the members of the Board of Directors has been accrued, paid or given in any form of remuneration or payment on the basis of shares or share options and there have been no incentive schemes in the Company for the members of the Board of Directors . 2.8.8 Determining short-term variable remuneration of the members of the Board of Directors The amount of the short-term variable remuneration is up to 6% (six per cent) of the net consolidated profit, but not more than 40% (forty per cent) of the value of the individual accounting profit before taxes and provisions for the short-term variable remuneration. The criteria for payment of the short-term variable remuneration are: • Achieving 8% growth of the consolidated revenues of the group; • Achieving equal or higher consolidated profit of the company, before taxes and provisions, compared to the previous year; • Implementation of technological innovation and product development; • Profit and development of the company; • Imposing high standards of corporate governance; • Integration of corporate social responsibility in the daily management practice of the company; • Stable and sustainable development of the company in economic, social and environmental aspects; • Adequacy of the administrative, organizational and reporting structures of the company and ensuring the maximum efficiency of the company's activities; • Compliance with applicable rules and procedures; • Encouraging cooperation with stakeholders; • Compliance with obligations - work in the interest of the company and loyalty; observing the due care of a good trader. 2.8.9 Information on exercising the possibility to demand a refund of variable remuneration Paid variable remuneration shall be subject to return if is established that the following circumstances are present: 1. the achieved results do not contribute to the achievement of the business goals of the company and 2. the achieved results do not contribute to the achievement of the long-term interest of the Company and 3. the achieved results are not sustainable and do not contribute to the sustainable development of the public company. 2.9. Information on all deviations from the procedure for the implementation of the remuneration policy in connection with extraordinary circumstances under Art. 11, para. 13, including an explanation of the nature of the exceptional circumstances and an indication of the specific components not implemented For the Reporting Period in the Company there are no deviations from the procedure for the implementation of the remuneration policy in connection with extraordinary circumstances. 2.10. Information on the annual change in the remuneration, the results of the company and the average amount of remuneration based on full-time employees of the company who are not directors, during the previous five financial years 2018 2019 2020 2021 2022 2023 Average gross monthly remuneration of the employees of “Sirma Group Holding” JSC, BGN 3 541,20 3 574,03 3 817,91 4 432,98 5 100 5 311 Annual change in remuneration,% 0,70% 0,93% 6,82% 16,11% 15,05% 4,14% Net individual profit of “Sirma Group Holding” JSC, in thousands BGN 2 557 1 898 995 1 034 2 131 1 509 Remuneration Committee: Georgi Parvanov Marinov - chairman Yordan Stoyanov Nedev - member Martin Veselinov Paev - member YORDAN STOYANOV NEDEV Digitally signed by YORDAN STOYANOV NEDEV Date: 2024.03.18 15:47:18 +02'00' Georgi Parvanov Marinov Digitally signed by Georgi Parvanov Marinov Date: 2024.03.18 16:16:58 +02'00' MARTIN VESELINOV PAEV Digitally signed by MARTIN VESELINOV PAEV Date: 2024.03.18 18:39:19 +02'00' DECLARATION under Art. 100o, para 4, item 3 of POSA The undersigned: 1. Tsvetan Borisov Alexiev in his capacity as CEO of “Sirma Group Holding“ JSC, UIC 200101236 2. Diana Ivanova Petkova in her capacity as Chief Accountant of “Sirma Group Holding“ JSC, UIC 200101236 WE DECLARE that to the best of our knowledge: a) The annual separate financial statements as at 31.12.2023 are prepared in accordance with the applicable accounting standards and reflect honestly and fairly the information about the assets and liabilities, the financial position and the profit / loss of “Sirma Group Holding” JSC. b) The annual separate management report of “Sirma Group Holding” JSC as at 31.12.2023 contains a reliable overview of the development and results of the company's operations. Date: 18.03.2024 Declarers: CEO Chief Accountant Diana Ivanova Petkova Digitally signed by Diana Ivanova Petkova Date: 2024.03.18 14:02:25 +02'00' Tsvetan Borisov Alexiev Digitally signed by Tsvetan Borisov Alexiev Date: 2024.03.18 14:17:57 +02'00' 1 Grant Thornton OOD A 26, Cherni Vrah Blvd, 1421 Sofia A 111, Knyaz Boris I Blvd., 9000 Varna T (+3592) 987 28 79, (+35952) 69 55 44 F (+3592) 980 48 24, (+35952) 69 55 33 E [email protected] W www.grantthornton.bg INDEPENDENT AUDITOR’S REPORT To the shareholders of Sirma Group Holding JSC 135 Tsarigradsko shosse blvd., Sofia Report on the Audit of the Separate Financial Statements Opinion We have audited the financial statements of Sirma Group Holding JSC (the Company), which comprise the separate statement of financial position as at 31 December 2023 and the separate statement of profit or loss and other comprehensive income, the separate statement of changes in equity and the separate statement of cash flows for the year then ended, and notes to the separate financial statements, comprising material accounting policy information and other explanatory information. In our opinion, the accompanying separate financial statements give a true and fair view of the financial position of the Company as at 31 December 2023 and of its financial performance and its 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 Opinion 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 Financial Statements” section of our report. We are independent of the Company in accordance with the International Code of Ethics for Professional Accountants (including International Independent Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), together with the ethical requirements of Bulgarian Independent Financial Audit Act, and we have fulfilled our other 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 opinion. Emphasis of Matter We draw attention to note 4.23 "Estimation uncertainty", where information is disclosed about the risks characterizing the business environment in which the Company operates. When performing the annual asset impairment test and determining their recoverable value, the Company's management refers to forecasts and assumptions that largely depend on external factors and are beyond the Company's control. They are the result and combination of negative effects of the deteriorating macroeconomic situation, geopolitical risks, including the military conflicts on the territory of the Middle East and Ukraine and the specifics of the IT sector. These circumstances lead to significant complications in forecasting the plans, implementation of activities and achievement of expected indicators and parameters used in determining the recoverable value of the Company's assets. This, in turn, could lead to a change in their net carrying amount as of 31 December 2023, which in the separate financial statements is estimated after making a number of judgments and assumptions by the management, taking into account the most reliable information available at the date of the approximate assumptions. 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 financial statements of the current period. These matters were addressed in the context of our audit of the separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 2 Impairment testing of investments in subsidiaries, accounted for using the cost model Note 7 to the separate financial statements Key audit matter How this matter was addressed during the audit As of 31 December 2023, the investments in subsidiaries of Sirma Group Holding AD amount to BGN 70 830 thousand and represent 79% of the Company's assets. Investments in subsidiaries are measured at cost and are subject to regular annual impairment testing. In determining the recoverable amount of investments, the Company's management makes a number of significant assumptions and assumptions that may be based on uncertain future events. Management performs detailed analyses of the activities of its subsidiaries and the financial results achieved by them to determine whether there are indications of impairment of the value of investments. In addition, it uses reports of independent licensed valuers to determine the fair value of part of the investments. Management is required to apply a significant level of judgment in the formation of accounting estimates regarding assumptions and external influencing factors such as potential economic consequences of macroeconomic changes during the period that may have an effect on the operations of subsidiaries. The current macroeconomic environment is characterized by lower economic growth, measures to control inflation since the beginning of the year, the deterioration of the business climate, and high geopolitical risks and uncertainty regarding future developments in regions of military conflicts. These circumstances lead to significant complications in forecasting plans, execution of activities, achievement of expected indicators and parameters used in determining the recoverable amount of investments, including investments in companies that have plans to provide services related to cyber security in the area in the Middle East. Due to the importance of investments in subsidiaries, as well as the fact that management's judgment is based on significant assumptions and future events, we have identified this issue as a key audit issue for the audit. Notes 4.23 and 7 to the separate financial statements present the disclosures regarding the judgments and assumptions of the Company's management regarding investments in subsidiaries as of 31 December 2023. During our audit, our audit procedures included, but were not limited to: - gaining an understanding of the process applied by the Company's management with respect to identifying impairment indicators related to investments in subsidiaries as well as the necessity to prepare impairment tests; - review and analysis of the financial statements, other available, relevant financial information, including budgets, business plans and estimates of subsidiaries; - assessment and analysis of the estimates and assumptions used by the management in terms of their relevance and adequacy; - assessment of the assumptions used by management in terms of the impairment indicators including those based on the financial indicators of the subsidiaries; - review of the professional competence and qualification of the external appraisers; - assessment and analysis of the independence of external experts, including through a declaration of independence; - analysis and evaluation of the applied valuation methods, including assumptions and other key indicators and their comparison with our available information on the real estate market and other external information; - enquiries made to the Company's experts regarding valuation processes, including the extent to which the negative impact on a number of sectors of the economy from the military conflicts in the Middle East and Ukraine as well as observable external data used by the Company has made it difficult for management to make judgements; - assessment of the completeness and adequacy of the disclosures in the separate financial statements, including disclosures of key assumptions and judgements about investments in subsidiaries. Information Other than the Separate Financial Statements and Auditor’s Report Thereon Management is responsible for the other information. The other information comprises the annual management report, including the corporate governance statement and the report on compliance with the remuneration policy, prepared in accordance with Bulgarian Accountancy Act and other applicable legislation requirements, but does not include the separate financial statements and our auditor’s report thereon. Our opinion on the separate financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the separate financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the separate financial statements or whether our knowledge obtained in the audit may indicate that there is a material misstatement or otherwise the other information appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 3 Responsibilities of Management and Those Charged with Governance for the Separate Financial Statements Management is responsible for the preparation and fair presentation of the separate 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 financial statements that are free from material misstatement, whether due to fraud or error. In preparing the separate financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. Auditor’s Responsibilities for the Audit of the Separate financial statements Our objectives are to obtain reasonable assurance about whether the separate 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 separate 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 separate 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 Company’s internal control; − evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management; − conclude on the appropriateness of management’s use of the 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 Company’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 separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern; − evaluate the overall presentation, structure and content of the separate financial statements, including the disclosures, and whether the separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements 4 In addition to our responsibilities for reporting under ISAs, described above in section “Information Other than the Separate financial statements and Auditor’s Report Thereon”, regarding annual management report, including the corporate governance statement, 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, Article 100н, paragraph (10) in relation to Article 100n, paragraph (8), subparagraphs (3) and (4) of Bulgarian Public Offering of Securities Act, as well as Article 100n, paragraph 14 in relation to Article 116c, paragraph (1) of Bulgarian Public Offering of Securities Act. Statement Pursuant to Article 37, Paragraph (6) of Bulgarian Accountancy Act Based on the procedures performed, we describe the outcome of our work: (a) the information in the separate management report is consistent with the separate financial statements for the same reporting period; (b) the separate 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 Company and the environment in which it operates, we have found no cases of material misrepresentation in the separate management report; (d) the separate 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; (a) the report on compliance with the remuneration policy has been prepared in accordance with the requirements of the ordinance pursuant to Article 116c, paragraph 1 of Bulgarian Public Offering of Securities Act and the information in it is consistent with the separate financial statements for the same reporting period. Statement Pursuant to Article 100n, Paragraph (10) of Bulgarian Public Offering of Securities Act Based on the procedures performed and our knowledge of the Company and the environment in which it operates, in our opinion, there is no material misstatement in the description of the main characteristics of the internal control system and of the risk management system of the Company in connection with the financial reporting process and also in the information pursuant to Article 10, paragraph 1, items “c”, “d”, “f”, “h” and “i” of Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids, which are included in the corporate governance statement, being a component of the annual separate management report. Additional reporting concerning the audit of separate financial statements in connection with Article 100n, paragraph (4), subparagraph (3) of Bulgarian Public Offering of Securities Act − Statement on Article 100n, paragraph 4, subparagraph (3), item "b" of Public Offering of Securities Act Related party transactions are disclosed in note 28 to the separate financial statements. Based on the performed audit procedures on related party transactions as part of our audit of separate financial statements as a whole, no facts, circumstances or other information have come to our attention that caused us to conclude that the related party transactions are not disclosed in the accompanying separate financial statements for the year ended on 31 December 2023, in all material respects, in accordance with the requirements of IAS 24 „Related Party Disclosures“. The results of our audit procedures on related party transactions were taken into consideration for the purposes of issuing an auditor’s opinion on the separate financial statements as a whole, not for issuing a separate opinion only on related party transactions. − Statement on Article 100n, paragraph (4), subparagraph 3, item "c" of Public Offering of Securities Act Our responsibilities for audit of the separate financial statements as a whole, described in our report in section „Responsibilities of the Auditor for the Audit of Separate financial statements“, include assessment whether the separate financial statements present fairly the significant transactions and events. Based on the performed audit procedures on the significant transactions, which are fundamental to the separate financial statements for the year ended on 31 December 2023, no facts, circumstances or other information have come to our attention that caused us to conclude that there are instances of unfair presentation and disclosure in accordance with the requirements of IFRS, as adopted by the European Union. The results of our audit procedures on the significant transactions and events of the Company, which are material to the separate financial statements, were taken into consideration for the purposes of issuing an auditor’s opinion on the separate financial statements as a whole, not for issuing a separate opinion only on the significant transactions. 5 Reporting on compliance with the electronic format of the separate financial statements included in the annual separate financial statements for the activity under Art. 100n, paragraph 4 of POSA with the requirements of the EEEF Regulation In addition to our responsibilities and reporting under ISA, described above in the section " Auditor’s Responsibilities for the Audit of the Separate financial statements", we have followed the procedures in accordance with the Guidelines on the Audit Opinion in Implementing the Single European Electronic Format ( EEEF) on the financial statements of companies whose securities are admitted to trading on a regulated market in the European Union (EU) of the Institute of Certified Public Accountants (ICPA) in Bulgaria". These procedures concern verification of the form and part of this electronic format corresponds to the audited separate financial statements and an opinion on the compliance of the electronic format of the separate financial statements of Sirma Group Holding AD for the year ending 31 December 2023, attached to the electronic file "8945007AD80FTJTEGH37-20231231-EN-SEP.xhtml“.’, with the requirements of Commission Delegated Regulation (EU) 2019/815 of 17 December 2018 supplementing Directive 2004/109 / EC of the European Parliament and of the Council through regulatory technical standards to define the uniform electronic format for reporting ("EEEF Regulation"). Based on these requirements, the electronic format of the separate financial report included in the annual separate report on the activities under Art. 100n, paragraph 4 of POSA, must be submitted in XHTML format. The management of the Company is responsible for the application of the requirements of the EEEF Regulation when preparing the electronic format of the separate financial statements in XHTML. Our opinion is only regarding the electronic format of the separate financial statements attached to the electronic file "8945007AD80FTJTEGH37-20231231-EN-SEP.xhtml" and does not cover other information included in the annual separate financial statements for the activities of Art. 100n, paragraph 4 of the POSA. Based on the performed procedures, our opinion is that the electronic format of the separate financial statement of the Company for the year ending 31 December 2023, contained in the attached electronic file "8945007AD80FTJTEGH37-20231231-EN-SEP.xhtml” has been prepared in all essential respects in accordance with the requirements of the EEEF Regulation. Reporting Pursuant to Article 59 of Bulgarian Independent Financial Audit Act in relation to Article 10 of Regulation (ЕС) № 537/2014 In accordance with the requirements of Bulgarian Independent Financial Audit Act and in relation with Article 10 of Regulation (ЕС) № 537/2014, we report additionally the information as follows: - Grant Thornton OOD was appointed as statutory auditor of the separate financial statements of Sirma Group Holding JSC for the year ended on 31 December 2023 by the general meeting of shareholders, held on 15 June 2023, for a period of one year. - The audit of the separate financial statements of the Company for the year ended on 31 December 2023 has been made for the fifth 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 Company in conducting the audit. - For the period for which we were engaged as statutory auditors, we have not provided any other services to the Company and its controlled undertakings in addition to the statutory audit Grant Thornton Ltd. Audit firm № 032 Mariy Apostolov Emilia Marinova Managing partner Registered auditor, responsible for the audit 18 March 2024 Bulgaria, Sofia, 26, Cherni Vrah Blvd. EMILIYA GEORGIEVA MARINOVA-LALEVA Digitally signed by EMILIYA GEORGIEVA MARINOVA-LALEVA Date: 2024.03.18 22:11:30 +02'00' MARIY GEORGIEV APOSTOLOV Digitally signed by MARIY GEORGIEV APOSTOLOV Date: 2024.03.18 22:13:23 +02'00'
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