Report v1.2



Industrial Holding Bulgaria PLC

Interim Consolidated Financial Statements

For the period ended 31 March 2008

|Consolidated Income Statement | | | | |

|In thousands of BGN |Note |31 March 2008 | |31 March 2007 |

| | | | | |

|Revenue |7 |18,457 | |17,826 |

|Other operating revenue |8 |622 | |436 |

| | | | | |

|Movements in work in progress |9 |17,589 | |19,504 |

|Capitalized expenses on own assets creation |10 |6,150 | |248 |

|Cost of materials | |(19,677) | |(19,678) |

|Hired services | |(9,680) | |(5,540) |

|Depreciation and amortization | |(1,258) | |(1,082) |

|Personnel expenses |11 |(8,494) | |(7,885) |

|Cost of assets sold | |(134) | |(207) |

|Other operating expenses | |(535) | |(364) |

|Operating profit | |3,040 | |3,258 |

| | | | | |

|Financial income | |1,697 | |292 |

|Financial costs | |(326) | |(324) |

|Net financial income |12 |1,371 | |(32) |

| | | | | |

|Profit of associates reported under the capital method |13 |203 | |102 |

|Profit before taxation | |4,614 | |3,328 |

| | | | | |

|Tax expenses |14 |(412) | |(321) |

|Profit after taxation | |4,202 | |3,007 |

|Majority owners | |3,012 | |2,114 |

|Minority interest | |1,190 | |893 |

|Net profit for the year | |4,202 | |3,007 |

| | | | | |

|Basic earnings per share (in BGN) |28 |0,069 | |0,101 |

| | | | | |

The Income Statement should be considered together with the notes thereto, which form integral part of the financial statements presented on pages 6 to 36.

|Consolidated Balance Sheet |

| |

|As at 31 March 2008 |

|In thousands of BGN | |Note |31 March 2008 | |2007 |

| | | | | | |

|Assets | | | | | |

|Property, plant and equipment | |18 |126,145 | |119,218 |

|Non-current intangible assets | |19 |1,495 | |1,471 |

|Goodwill | |19 |7,840 | |7,840 |

|Investments in associates reported under the capital method | |20 |11,830 | |11,627 |

|Other investments | |21 |8 | |8 |

|Long-term receivables | |22 |594 | |884 |

|Total non-current assets | | |147,912 | |141,048 |

| | | | | | |

|Inventories | |23 |73,823 | |54,765 |

|Trade and other receivables | |24 |40,640 | |30,942 |

|Non-current assets held for trading | |25 |1,338 | |1,338 |

|Cash and cash equivalents | |26 |88,367 | |86,256 |

|Total current assets | | |204,168 | |173,301 |

|Total assets | | |352,080 | |314,349 |

| | | | | | |

|Equity | | | | | |

|Share capital | |27 |43,756 | |43,756 |

|Premium reserve | | |24,096 | |24,503 |

|Reserves | | |51,250 | |51,269 |

|Retained earnings (net) | | |72,291 | |68,882 |

|Capital and reserves of majority owners | | |191,393 | |188,410 |

|Minority interest | | |29,992 | |29,155 |

|Total equity and reserves | | |221,385 | |217,565 |

| | | | | | |

|Liabilities | | | | | |

|Loans | |29 |12,832 | |7,351 |

|Other long-term payables | |30 |616 | |285 |

|Provisions | |31 |600 | |600 |

|Deferred tax liabilities | |33 |6,038 | |6,046 |

|Total non-current liabilities | | |20,086 | |14,282 |

| | | | | | |

|Loans | |29 |1,872 | |4,934 |

|Trade and other payables | |32 |108,397 | |77,205 |

|Provisions | |31 |340 | |363 |

|Total current liabilities | | |110,609 | |82,502 |

|Total equity and liabilities | | |352,080 | |314,349 |

The Balance Sheet should be considered together with the notes thereto, which form integral part of the financial statements presented on pages 6 to 36.

|Consolidated Cash Flow Statement |

| |

|For the period ended 31 March 2008 |

|In thousands of BGN | |Note |31 March 2008 | |31 March 2007 |

| | | | | | |

|Operating cash flow | | | | | |

|Proceeds from clients | | |41,178 | |23,261 |

|Payments to suppliers | | |(51,839) | |(26,760) |

|Remuneration related payments | | |(7,486) | |(7,405) |

|Taxes paid (refunded) - net | | |(1,457) | |(704) |

|Interests received (paid) | | |718 | |76 |

|Foreign exchange gains (loss) | | |(1,034) | |(13) |

|Other proceeds (payments) | | |829 | |(167) |

|Net operating cash flow | | |(19,091) | |(11,712) |

| | | | | | |

| | | | | | |

|Investment cash flow | | | | | |

|Purchase of non-current assets | | |(1,375) | |(662) |

|Loans granted | | |(978) | |(298) |

|Loans repaid | | |293 | |5,281 |

|Purchase of investments | | | | |(8,754) |

|Proceeds from sale of investments | | | | |13 |

|Proceeds from sale of financial assets held for trading | | | | |433 |

|Net investment cash flow | | |(2,060) | |(3,987) |

| | | | | | |

|Financial cash flow | | | | | |

|Proceeds from issue of capital | | | | |5,018 |

|Proceeds from sale of securities | | | | | |

|Credits and loans received | | |1,948 | |5,233 |

|Credits and loans repaid | | |(3,987) | |(2,964) |

|Dividends paid | | |(189) | |(184) |

|Loan interest, charges and commission fees paid | | |(415) | |(273) |

|Other proceeds (payments) | | |21,090 | |(191) |

|Net financial cash flow | | |18,447 | |6,639 |

|Net increase in cash and cash equivalents | | |(2,704) | |(9,060) |

|Cash and cash equivalents at the beginning of the period | | |53,556 | |12,593 |

|Cash and cash equivalents as at 31 March | | |50,852 | |3,533 |

| |

| |

The Cash Flow Statement should be considered together with the notes thereto, which form integral part of the financial statements presented on pages 6 to 36.

| |Consolidated Statement of Changes in Equity |

| | |

| |For the period ended 31 March 2008 |

| | |

| |In thousands of BGN |

|1 |Status and scope of activity |

| |Industrial Holding Bulgaria PLC (the Company or the Holding) is a public limited company having its seat in Sofia, Bulgaria and |

| |address of management at 47 Vasil Levski Blvd, 1000 Sofia. The consolidated financial statements of the Company for the period ended|

| |31 December 2007 comprise the statements of the Company and its subsidiaries (together referred to as the “Group”), as well as the |

| |interests of the Group in associates. |

| |The operations of the Group include production of and trading in heavy machinery, shipbuilding, ship repairs and transportation, |

| |furniture production, real estate transactions, port services and accompanying activities from / to ships and land transport |

| |vehicles, maintenance and repairs and other services. |

| |Industrial Holding Bulgaria and some of the subsidiaries are listed at Bulgarian Stock Exchange – Sofia. |

| | |

|2 |Basis of preparation |

|(а) |Statement of compliance |

| | |

| |These Financial Statements have been prepared in compliance with the International Financial Reporting Standards (IFRS) prepared by |

| |the International Accounting Standards Board (IASB) and adopted by the Commission of the European Union. |

| | |

| | |

|(b) |Basis of valuation |

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

| |Land, property, plant and equipment, which have been presented at revalued amount less the accumulated depreciation and impairment |

| |losses |

| |Financial assets reported at fair value in the profit and loss |

| |Financial assets available for sale, which have been valued at their fair value |

| | |

|(c) |Functional currency and reporting currency |

| | |

| |These Financial Statements are presented in BGN, which is the functional currency of the Company. The financial data in the Annual |

| |Financial Statements are given in BGN thousand. |

| | |

| |The preparation of financial statements in compliance with IFRS requires that the Company’s Management make decisions and make |

| |estimates and assumptions affecting accounting policies and the amounts of reported assets, liabilities, income and expenses. The |

| |actual results may differ from the estimates made. |

| | |

| |Estimates and related assumptions are reviewed on regular basis. The results of accounting policies review are recognized over the |

| |period of review if they concern only this period or over the period of review and future periods if they concern the current and |

| |future periods. |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

|2 |Basis of preparation, continued |

| | |

|(d) |Used estimates and assumptions |

| |Information about the major spheres, where estimates and decisions have been made in the application of the accounting policies and |

| |which have material effect on the amounts recognized in the financial statements, is given in the following notes: |

| |Note 18 – Property, plant and equipment |

| |Note 19 – Intangible assets |

| |Note 24 – Trade and other receivables |

| |Note 26 – Financial assets held for trading |

| |Note 32 – Provisions |

| |Note 33 – Deferred tax assets and liabilities |

| | |

|3 |Significant accounting policies |

| |With the exception of the change mentioned below, the accounting policy has been consistently applied by the Group’s companies and |

| |is comparable to the one applied over the preceding year. |

| |Where adjustment of disclosure or classification of certain amounts given in the statements has been made, the comparative data have|

| |been reclassified to provide comparability to the current period. Such reclassification is the result of the more detailed |

| |presentation of the balance sheet and income statement items in the notes to the financial statements. |

| | These Interim Financial Statements should be considered in relation to the Annual Consolidated Financial Statements of the Group as|

| |at 31 December 2007. |

| |Change in accounting policy |

| |In 2006 Bulyard Shipbuilding Industry EAD changed its accounting policy with regard to the reporting of indirect production costs. |

| |In the preceding periods the company reported a portion of the indirect production costs as administrative costs and fully |

| |recognized them as current expense for the period of origination. On the basis of a scheme approved by the Management, as of 1 |

| |January 2006 this portion of indirect production costs, reported as administrative costs prior to this date, is taken to the cost of|

| |production and services. The Company’s Management is of the opinion that it is advisable to apply the new policy as it results in |

| |comprising of all expenses related to shipbuilding in compliance with the requirements of IAS 11 Construction Contracts. |

| | |

| |The change in accounting policy has been recognized through adjustment of the 2005 comparative information and the opening balance |

| |of the 2006 retained earnings was increased by BGN 1,065 thousand. |

| |In 2007 no change in the Company’s accounting policies occurred. |

| | |

|(а) |Basis of consolidation |

|(i) |Subsidiaries |

| |Subsidiaries are the enterprises controlled by the Company. Control exists when the Company has the power, directly or indirectly, |

| |to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial |

| |statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date|

| |control ceases. |

| | |

|3 |Significant accounting policies, continued |

|(а) |Basis of consolidation, continued |

| | |

|(ii)|Associates |

| | Associates are enterprises in which the Group has significant influence, but not control, over the financial and operating |

| |policies. The consolidated financial statements include the Group’s share in the total realised gains and losses of associates on |

| |equity accounted basis from the date that significant influence commences until the date that significant influence ceases. When the|

| |Group’s share of the losses exceeds the carrying amount of the investment in the associate, the carrying amount is reduced to nil |

| |and recognition of further losses is discontinued except to the extent that the Group has incurred obligations in respect of the |

| |associate. |

| | |

|(iii|Balances and transactions eliminated on consolidation |

|) | |

| |Intra-group balances and transactions and any unrealised gains arising from intra-group transactions are eliminated in preparing the|

| |consolidated financial statements. Unrealised gains arising from transactions with associates are eliminated to the extent of the |

| |Parent interest in the enterprise. Unrealised gains arising from transactions with associates are eliminated against the investment |

| |in associates. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no |

| |evidence of impairment. |

| | |

|(b) |Foreign currency |

|(i) |Foreign currency transactions |

| |Transactions in foreign currency are recorded in functional currency at the exchange rate effective on the date of the transaction. |

| |At the balance sheet date monetary assets and liabilities denominated in foreign currency have been translated to Bulgarian leva |

| |applying the foreign exchange rate on that date. Non-monetary assets and liabilities denominated in foreign currency, valued at fair|

| |value, are recalculated in Bulgarian leva applying the foreign exchange rate effective on the date of fair value determination. |

| |Foreign currency gains and losses arising as a result of translation are taken to the income statement. |

| | |

|(ii)|Foreign operations |

| |Assets and liabilities of foreign operations, including goodwill and adjustment to the fair value, arising upon acquisition, are |

| |translated to Bulgarian leva applying the foreign exchange rate effective as at balance sheet date. Income from and expenses on |

| |foreign operations are translated into Bulgarian leva applying the foreign exchange rate effective as at transaction date. |

| | |

| |Foreign currency gains and losses as a result of translation are recognized directly in the equity. |

| | |

|(c) |Financial instruments |

| |Non-derivative financial instruments |

| |Non-derivative financial instruments include investments in debt and equity securities, trade and other receivables, cash and cash |

| |equivalents, loans and trade payables. |

| | |

| |Non-derivative instruments are initially recognized at their fair value. Following initial recognition, financial instruments are |

| |valued as described hereinafter. |

| | |

| | |

| | |

| | |

| | |

| | |

|3 |Significant accounting policies, continued |

|(c) |Financial instruments, continued |

| | |

| |Financial instruments are recognized when the Company becomes a party to the instrument contractual terms and conditions. Financial |

| |assets are no longer recognized when the rights agreed on the cash flows from the financial assets become invalid or the Company |

| |transfers the financial asset to third parties without retaining control or significant assets-related risks and benefits. The |

| |purchase and sale of financial assets in the ordinary course of operations are reported as at transaction date, i. e. the date on |

| |which the Company undertakes to purchase or sell the asset. Financial liabilities are no longer recognized when the liabilities of |

| |the Company as per the contract become invalid or exempted or cancelled. |

| | |

|(i) |Investments held till maturity date |

| |Debt instruments, which the Company intends and is able to hold till maturity date, are classified as debt instruments held till |

| |maturity date. Investments held till maturity date are reported at amortized cost based on the effective interest method less |

| |subsequent impairment. |

| | |

|(ii)|Financial assets available for sale |

| |The Group’s investments in equity and debt securities are classified as financial assets available for sale. Subsequent to their |

| |initial recognition they are valued at fair value through revaluation in capital. Any revaluation gains or losses (other than |

| |impairment losses) are directly reported in equity. Upon investment derecognition, the revaluations accumulated in equity are |

| |recognised through gains and losses. |

| | |

|(iii|Financial assets measured at fair value through gains and loss |

|) | |

| |Financial assets are classified as financial assets measured at fair value through gains and loss, if they are held for trading or |

| |if they have been designated as such upon their initial recognition. Financial instruments are classified as financial assets |

| |measured at fair value through profit and loss, if the Group manages such investments and takes decisions for purchase and sale |

| |based on their fair value. Upon their initial recognition the expenses associated with the acquisition are recognised currently |

| |through profit and loss. Financial assets measured at fair value through profit and loss are valued at fair value and the resultant |

| |gains and losses are taken to the income statement. |

| | |

|(iv)|Trade and other receivables |

| |Trade and other receivables are presented at amortised cost less the impairment loss less any unrecoverable amounts. Such |

| |unrecoverable amounts are presented as impairment loss based on the estimated recoverable amounts of trade receivables. |

| | |

|(v) |Cash and cash equivalents |

| |Cash and cash equivalents include cash in hand and at banks. For the purposes of the statement of cash flows, bank overdrafts |

| |payable on demand form integral part of the cash flows managed by the Group and are included as cash and cash equivalents. |

| | |

|(vi)|Loans |

| |Interest-bearing loans are recognised initially at cost, less attributable transaction costs. Subsequent to initial recognition, |

| |interest-bearing loans are stated at amortised cost with any difference between cost and redemption value being recognised in the |

| |income statement over the period of the borrowings on an effective interest basis. |

| | |

| | |

| | |

| | |

|3 |Significant accounting policies, continued |

|(c) |Financial instruments, continued |

| | |

|(vii|Trade and other payables |

|) | |

| |Trade and other payables are reported at amortised cost. |

| | |

|(d) |Property, plant and equipment |

|(i) |Recognition and measurement |

| |Upon initial acquisition |

| |Upon the initial acquisition, items of property, plant and equipment are measured at cost, which comprises the purchase price, |

| |including custom duties and non-refundable sales taxes, and all direct expenses required for bringing the asset to its location and |

| |working condition as required for its use intended by the management. |

| | |

| |The cost of self-constructed items of property, plant and equipment includes expenses on materials, expenses on direct labour and |

| |the relevant pro rata portion of the indirect production expenses; expenses directly related to bringing the asset to its location |

| |and working condition for its intended use; the initial estimate of the expenses on dismantling and removal of the asset and for |

| |restoration of the surface it has been situated on. |

| | |

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

| |separate items of property, plant and equipment. |

| | |

| |Subsequent valuation |

| |The policy adopted by the Group for a subsequent balance sheet valuation of the land, buildings, plant and equipment is the |

| |revaluation model allowed by IAS 16 – the revalued amount is the fair value of the asset as at the date of revaluation less |

| |subsequent depreciation and any subsequent impairment losses. |

| | |

| |Usually, fair values of land, buildings, plant and equipment are determined on the basis of market evidence through valuation |

| |performed by licensed valuers. |

| | |

| |Land, buildings, plant and equipment are usually revalued in every 5 years. This revaluation may be carried out more frequently if |

| |their fair value changes significantly in shorter intervals. |

| | |

| |The Group’s land, buildings, plant and equipment were revalued to fair value on the basis of the valuation made by an independent |

| |licensed valuer as at 31 December 2007. Motor vehicles, other non-current assets and expenses on non-current tangible assets |

| |acquisition are valued in the balance sheet at their cost, less all accrued depreciations and accumulated impairment losses. |

| | |

|(ii)|Reclassification to investment property |

| |An item of property that is constructed with the aim to be used in the future as an investment property is reported as an item of |

| |property, plant and equipment by the time of completion of the construction works. Then, this item is revalued to fair value and is |

| |reclassified as an investment property. Any gain or loss arising out of the revaluation is recognised in the income statement. |

|3 |Significant accounting policies, continued |

|(d) |Property, plant and equipment, continued |

| | |

| |When the intended use of a certain item of property is changed from an asset available for use by the owner to an investment |

| |property, then this asset is revalued to fair value and reclassified as an investment property. Any gain arising out of this |

| |revaluation is recognised directly in equity. Any loss is recognised directly through profits or losses |

| | |

|(iii|Subsequent expenses |

|) | |

| |Expenses incurred to replace a component of an item of property plant and equipment that is accounted for separately, are |

| |capitalised. Other subsequent expenses are capitalised only when it increases the future economic benefits embodied in the item of |

| |property plant and equipment. All other expenses are recognised in the income statement as expenses as incurred. |

| | |

|(iv)|Depreciation |

| |Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of items of property, plant|

| |and equipment, which are accounted for separately. Assets acquired under finance lease terms are depreciated over the shorter of the|

| |two: the lease term or their useful life. Land is not depreciated. |

| |The expected useful lives are as follows: |

| |Buildings 7 – 50 years |

| |Plant and equipment 4 - 20 years |

| |Motor vehicles 2 - 10 years |

| |Fixtures and fittings 5 - 10 years |

| |The method of depreciation, useful lives and the remaining value are reviewed at each balance sheet date. |

| | |

|(e) |Intangible assets |

| | |

|(i) |Goodwill (negative goodwill) |

| |Acquisition of control |

| |Goodwill is the excess of the acquisition cost over the fair value of the identifiable assets and liabilities acquired. Negative |

| |goodwill is the excess of the net fair value of the identifiable assets and liabilities acquired over the acquisition cost. Negative|

| |goodwill is recognised directly in the income statement as it occurs. |

| | |

| |Acquisition of minority interest |

| |Goodwill arises also upon the acquisition of minority interest in a subsidiary and represents the excess of the costs made for the |

| |additional investment over the current value of the net assets acquired as at the date of transaction. |

| | |

| | |

| | |

| | |

| | |

|3 |Significant accounting policies, continued |

|(e) |Intangible assets, continued |

| | |

| |Subsequent valuation |

| |Goodwill is stated at cost less any accumulated impairment losses. Regarding the investments in associates that are reported under |

| |the equity method, the carrying amount of the positive goodwill is incorporated in the carrying amount of the investment in the |

| |associate. |

| | |

|(ii)|Other intangible assets |

| |Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation (see below) and impairment |

| |losses. Expenses on internally generated goodwill and brands are reported in the income statement as incurred. |

| | |

|(iii|Subsequent expenses |

|) | |

| |Subsequent expenses on intangible assets are capitalised only when it increases the future economic benefits embodied in the |

| |specific asset to which it relates. All other expenses are recognized as incurred. |

| | |

|(iv)|Amortisation |

| |Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets. |

| |Intangible assets are amortised from the date they are available for use. The expected useful lives are as follows: |

| |Patents and trademarks 7 years |

| |Software products 5 years |

| | |

|(f) |Leased assets |

| |Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases |

| |(financially committed contracts). Upon the initial acquisition, the leased assets are stated at an amount equal to the lower of |

| |their fair value and the present value of the minimum lease payments. Each one of these value is determined at inception of the |

| |lease. |

| | |

| |The other leases are operating leases and with the exception of the investment properties the assets leased under operating leases |

| |are not recognised in the Company’s balance sheet. Investment properties used under the term of operating leases are recognised in |

| |the Company’s balance sheet at their individual fair value. |

| | |

|(g) |Inventories |

| |Inventories are stated at the lower of the cost and net realisable value. Net realisable value is the estimated selling price in the|

| |ordinary course of business less the estimated costs of completion and selling expenses. |

| | |

| |An impairment loss is recognised always if the carrying amount of a certain inventory (group of inventories) exceeds its (their) |

| |recoverable amount. Impairment losses are recognised in the income statement. |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

|3 |Significant accounting policies, continued |

|(g) |Inventories, continued |

| | |

| |The cost of inventories is based on the weighted average value of materials and work in progress. In the case of finished products, |

| |cost also includes direct labour, social security and depreciation expenses. These expenses are allocated to products based on |

| |normal operating capacity. |

| | |

|(h) |Impairment |

|(i) |Financial assets |

| |A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on|

| |the estimated future cash flows of that asset. |

| | |

| |An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying |

| |amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment |

| |loss in respect of an available-for-sale financial asset is calculated by reference to its current fair value. |

| | |

| |Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are |

| |assessed collectively in groups that share similar credit risk characteristics. |

| | |

| |All impairment losses are recognised in the income statement. Any cumulative losses in respect of available-for-sale financial |

| |assets recognised previously in equity are transferred to the income statement. |

| | |

| |An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was |

| |recognised. For financial assets measured at amortised cost and available-for-sale financial assets that are debt securities, the |

| |reversal is recognised in profit or loss. For available-for-sale financial assets that are equity securities, the reversal is |

| |recognised directly in equity. |

| | |

|(ii)|Non-financial assets |

| |The carrying amounts of the Company’s non-financial assets, other than inventories (see accounting policy i) and deferred tax assets|

| |are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then |

| |the asset’s recoverable amount is estimated. |

| | |

| |For intangible assets that have indefinite lives or are not yet available for use, the recoverable amount is estimated at each |

| |balance sheet date. |

| | |

| |An impairment loss is recognised always if the carrying amount of an asset or its cash-generating unit exceeds its recoverable |

| |amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from |

| |other assets and groups. |

| | |

|3 |Significant accounting policies, continued |

| | |

|(h) |Impairment, continued |

| |Impairment losses are recognized in the income statement. Impairment losses recognized in respect of a cash-generating unit are |

| |allocated first to reduce the carrying amount of any goodwill allocated to the unit (to the extent such is available) and then to |

| |reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. |

| | |

|(i) |Share capital and reserves |

| |The capital of the Company is presented at historical cost at the date of registration. |

| | |

| |Additional and statutory reserves comprise those of the parent company, as well as the share of subsidiaries’ reserves allocated |

| |after the date of acquisition. |

| | |

| |Revaluation reserves are allocated as at the date of revaluation of items of property, plant and equipment. |

| | |

|(j) |Employee’s benefits |

|(i) |Defined contribution plans |

| |The Government of Bulgaria bears the responsibility to ensure pensions under defined contribution plans. The expenses on the |

| |Company’s commitment to make contributions to the defined contribution plans are recognised in the income statement as they incur. |

| | |

|(ii)|Paid annual leave |

| |The Company recognises the non-discounted amount of the estimated expenses related to paid annual leaves, which are to be paid to |

| |the employees for their work in the past reporting period as a liability. |

| | |

|(iii|Other long-term benefits |

|) | |

| |In compliance with the requirements of Article 222, Paragraph 3 of the Labour Code, the Group is obliged to pay two gross monthly |

| |salaries to its employees upon retirement. If an employee has worked for the same employer for 10 or more years as at the date of |

| |retirement, the retirement benefit amounts to six gross monthly salaries. The costs of providing benefits under the existing |

| |salaries level are estimated at each balance sheet date and the respective accruals for provisions are made based thereon. |

| | |

| |The Management estimates the total amount of potential payables to all employees as at balance sheet date based on an actuarial |

| |report. |

| | |

|(к) |Provisions |

| |A provision is recognised in the balance sheet when the Group has a legal or constructive obligation as result of a past event, and |

| |it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions|

| |are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time |

| |value of money and, where appropriate, other specific risks specific to the liability. |

| | |

| | |

|3 |Significant accounting policies, continued |

|(к) |Provisions, continued |

| | |

|(i) |Guarantees |

| |Guarantee provisions are recognised when the respective products and services are realised. The provision is based on the historical|

| |information for guarantees claimed, taking into account the effect of the probability of occurrence of such future expenses as well.|

| | |

|(ii)|Restructuring |

| |Restructuring provisions are recognised when the Company has an approved formal plan for restructuring and the restructuring either |

| |has commenced or has been announced publicly. Future operating costs are not provided for. |

| | |

|(iii|Provisions for terrain restoration |

|) | |

| | According to the published Company’s environmental policy and the applicable law requirements, provisions for terrain restoration |

| |in connection to contaminated land and the costs related thereto are recognised upon the occurrence of the contamination. |

| | |

|(iv)|Onerous contracts |

| |Provision for onerous contracts is recognised where the unavoidable costs of meeting the obligations under the onerous contract |

| |exceed the expected economic benefits for the Company from this contract. Provision is accrued as the present value of the lower of |

| |these two – the estimated costs of exiting the contract or the expected net costs of continuing to fulfil it. Before a separate |

| |provision for an onerous contract can be made, the Company should recognise any impairment that has occurred on assets dedicated to |

| |that contract. |

| | |

|(l) |Revenue |

| | |

|(i) |Goods sold |

| |Revenue from sale of goods is measured at the fair value of the consideration received or receivable net of returns and allowances, |

| |trade discounts and volume rebates. Revenue from sale of goods is recognized in the income statement, when the significant risks and|

| |rewards of ownership are transferred to the buyer; the amount of revenue can be measured reliably, and it is probable that the |

| |economic benefits associated with the transaction will flow to the Company; the costs made and the possible return of the good may |

| |be measured reliably, and when there is no future involvement in the goods management. |

| |The transfer of all significant risks and rewards of ownership depends on the individual terms of the sales contract. |

| |No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due, associated costs or the|

| |possible return of the goods. |

| | |

|(ii)|Services |

| |Revenue from services rendered is recognized in the income statement in proportion to the stage of completion of the transaction at |

| |the reporting date. The state of completion is assessed by reference to the ratio between costs incurred for the work performed so |

| |far and the total expected costs under the contract. |

| | |

|3 |Significant accounting policies, continued |

|(l) |Revenue, continued |

| | |

|(iii|Construction contracts |

|) | |

| |As soon as the outcome of a construction contract can be estimated reliably, contract revenue and expense are recognised in the |

| |income statement in proportion to the stage of completion of the contract. The state of completion is assessed by reference to |

| |surveys of work performed. An expected loss on a contract is recognised immediately in the income statement. |

| | |

|(iv)|Rental income |

| |Income from rent is recognised in the income statement on the basis of the straight-line method for the lease term. Benefits |

| |received are recognised in the income statement as an inseparable part of the total lease revenue. |

| | |

|(m) |Payments under lease contracts |

| | |

| |Payments under operating lease are recognised in the income statement based on the straight-line method over the term of the lease |

| |contract. External benefits received are recognised in the income statement as an inseparable party of the total lease payments. |

| | |

| |Minimum lease payments under financially committed lease contracts are apportioned out between the financial costs and the |

| |settlement of the outstanding liabilities. Financial costs are allocated to each reporting period over the term of the lease |

| |contract so that to achieve a constant periodic interest rate payable on the remaining amount of the liability. Potential lease |

| |payments are accounted for by re-assessing the minimum lease payments over the remaining lease term, when the lease adjustment is |

| |confirmed. |

| | |

|(n) |Financial income and costs |

| | |

| |Financial income comprise interest receivable on funds invested, dividend income, profit from sale of financial assets available for|

| |sale, changes in the fair value of financial assets stated at fair value when the change is reported as profit or loss, and foreign |

| |currency exchange gains. Interest income is recognised when it occurs using the effective interest rate method. Dividend income is |

| |recognised on the date that the Company’s right to receive payment is established, which in the case of quoted/marketable securities|

| |is the date after which the stocks do not longer bear the right to receive final dividend. |

| | |

| |Financial costs comprise interest payable on borrowings, costs incurred as a result of an increased liability with a view to |

| |approaching the date set for provision realisation by one period, foreign currency exchange losses, changes in the fair value of |

| |financial assets stated at fair value when the change is reported as profit or loss, and write down of financial assets. All |

| |expenses on interest payable on loans are recognised as profit or loss using the effective interest rate method. |

|3 |Significant accounting policies, continued |

|(о) |Profit taxes |

| |Profit taxes for the year comprise current and deferred taxes. Profit tax is recognised in the income statement except to the extent|

| |that it relates to items recognised directly in equity. |

| |Current tax is the expected tax payable on the taxable profit for the year, using tax rates enacted at the balance sheet date. |

| | |

| |Deferred tax is recognised using the balance sheet liability method, providing for temporary differences between the current amount |

| |of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax is|

| |based on the expected manner of realisation or settlement applying the tax rates effective as at balance sheet date. The amount of |

| |deferred tax is based on the expected manner of realisation or settlement of carrying amount of assets and liabilities using tax |

| |rates enacted or expected to be enacted as at the balance sheet date. |

| | |

| |A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against |

| |which deferred tax assets can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the |

| |related tax benefit will be realized. |

| | |

| |Additional profit taxes that arise from the distribution of dividends are recognised at the time as the liability to pay the related|

| |dividend. |

| | |

|(p) |Segments |

| |A segment is a distinguishable components of the Company that is engaged either in providing products or services (business segment)|

| |or in providing products and services within a particular economic environment (geographical segment), which is subject to risks and|

| |rewards that are different from those of other segments. The main initial format of the Company for segment reporting is based on |

| |business segments. |

| | |

|(r) |Earnings per share |

| | |

| |The Company provides data about the basic earnings per share or diluted earnings per share for its ordinary shares. The basic |

| |earnings per share are calculated by dividing the profit or loss attributable to the ordinary shareholders to the weighted average |

| |number of common shares of the Company outstanding for the period. The diluted earnings per share are calculated by adjusting the |

| |profit or loss attributable to the ordinary shareholders and the weighted average number of common shares to reflect the effects |

| |from all potential diluted ordinary shares, including convertible bonds and share options provided to workers and employees. |

| | |

|(s) |International Financial Reporting Standards (IFRS) and Interpretations (IFRIC), not yet effective at the balance sheet date |

| |The following International Financial Reporting Standards (IFRS) and Interpretations (IFRIC) not yet effective as at 31 March 2008 |

| |have not been applied by the Company upon the preparation of these Consolidated Financial Statements: |

|3 |Significant accounting policies, continued |

|(s) |International Financial Reporting Standards (IFRS) and Interpretations (IFRIC), not yet effective at the balance sheet date, |

| |continued |

| | |

| |IFRS 8 Operating Segments (effective as of 1 January 2009) |

| |This standard requires disclosure of segments based on the components of the Company, which the Management observes upon operational|

| |decision-making. Operating segments are components of the Company, about which there is available independent financial information |

| |reviewed regularly by a person having management powers in operational decision-making and in determining the manner of resources |

| |allocation and presentation valuation. |

| |The Company does not expect the standard to have material effect on its financial statements. |

| | |

| |Revised IAS 23 Borrowing Costs (effective as of 1 January 2009) |

| |The revised standard excludes the possibility to report all borrowing costs as expenses upon origination and requires that companies|

| |capitalize borrowing costs directly related to the acquisition, creation or production of an eligible asset as part of the asset |

| |cost. The revised IAS 23 will be obligatorily applied by the Company in its financial statements for 2009. |

| | |

| |In compliance with the requirements of this standard, the Company will start applying the revised IAS 23 for qualified assets as to |

| |which borrowing costs are capitalized as of or after the date of effectiveness of the standard. |

| |The Company has not completed the analysis of the results of the revised standard effectiveness. |

| | |

| |IFRIC 11 IFRS 2 Group and Treasury Share Transactions (applicable to annual reporting periods as of 1 March 2007) |

| |The interpretation requires reporting of transactions, under which the Company receives goods or services as consideration for its |

| |own equity instruments, as payments based on shares and settled through the Company’s capital, regardless of the manner of shares |

| |acquisition. It also provides for guidelines on whether payments based on shares where suppliers of goods or services to a company |

| |receive equity instruments of the parent company of the Company should be reported as payments settled by cash or shares. IFRIC 11 |

| |will be obligatorily applied by the Company in its financial statements for 2009, including retrospective application. |

| |IFRIC 11 will have no effect on the Group’s operations as it executes no payments based on shares. |

| | |

| |IFRIC 12 Service Concession Agreements (effective as of 1 January 2008) |

| |The interpretation provides private sector companies with a guide on some disclosures and issues related to valuations |

| |characteristic to the accounting of public and private concession agreements. IFRIC 12 does not concern the Group’s operations as it|

| |has no signed concession agreements. |

| |IFRIC 13 Customer Loyalty Programmes concerns the reporting of companies operating or participating in their customer loyalty |

| |programmes, where some customers may exchange accrued credits for rewards in the form of free-of-charge or discounted goods or |

| |services. IFRIC 13, which will become effective as of 1 July 2008, is not relevant to the operations of the Company. |

| | |

| |IFRIC 14 IAS 19 Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction (effective as of 1 January |

| |2008) |

| |The Company does not expect IFRIC 14 to affect its financial statements. |

| | |

| | |

| | |

|4 |Fair value measurement |

| | |

| |The Group’s accounting policies and disclosures require that fair values are determined for both the financial and non-financial |

| |assets and liabilities. Fair values have been determined for the purposes of assessment and/or disclosure based on the methods |

| |discussed herein below. Where applicable, supplementary information about the assumptions made in measurement of the fair values |

| |has been disclosed in the notes for the specific assets and liabilities. |

| | |

|(i) |Property, plant and equipment |

| |Fair values of property, plant and equipment are recognized in the result of valuation based on market prices, performed by |

| |certified qualified valuers. |

| | |

|(ii)|Investments in equity and debt securities |

| |Fair values of financial assets determined for reporting at fair value through gains and loss and the investments held till |

| |maturity date and financial assets available for sale are measured on the basis of the buyer’s quoted price as at balance sheet |

| |date. The fair values of investments held till maturity date are determined for disclosing purposes only. |

| | |

|(iii|Non-derivative financial liabilities |

|) | |

| |Fair values measured to be disclosed are determined on the basis of the present value of future cash flows related to principals |

| |and interests discounted by the market interest rate as at balance sheet date. The market interest rate applicable to financial |

| |leases is measured on the basis of similar lease contracts. |

| | |

|5. |Financial risk management |

| |The Company is exposed to the following risks resulting from the use of financial instruments: |

| |Credit risk |

| |Liquidity risk |

| |Market risk |

| | |

| |This note gives information on the Group’s exposure to each of the aforementioned risks, the purposes of the Group, policies and |

| |processes related to risk assessment and management and management of the capital of the Group. Additional quantity disclosures |

| |are included in the Notes to the Consolidated Financial Statements. |

| | |

| |The Management is responsible for identification and management of the risks to which the Group is exposed. This policy determines|

| |the limits for assuming risks by types, defined rules on risks control and compliance with established limits. This policy is |

| |subject to regular review to identify possible changes in the risk for the Group. |

| | |

| |Credit risk |

| |The credit risk, to which the Group is exposed, is the risk of possible loss in case a client or a party to financial instrument |

| |agreement fails to perform its contractual obligations. The credit risk is mainly related to receivables from clients and |

| |investments in financial instruments. |

| | |

| | |

| | |

| | |

| | |

|5. |Financial risk management, continued |

| | |

| |Receivables from clients |

| |The exposure to credit risk results from the specific characteristics of individual clients that vary for the different segments. |

| |This exposure may also depend on the risk of non-payment characteristic to the industry or markets where the Group’s companies |

| |operate. As this risk is different for the various segments, it is managed on the basis of their share in the portfolio of IHB |

| |Plc. Thus, the Group’s risk is diversified. The credit policy of the Group provides for investigation of the solvency of each new |

| |client before offering standard terms of delivery and payment. |

| | |

| |The Group reports impairment representing estimated loss in relation to trade and other receivables and investments. The main |

| |impairment components include a component concerning individually significant exposures and a collective component concerning loss|

| |on groups of similar assets as to losses that have been incurred but not identified yet. The collective component is determined on|

| |the basis of historical data on payments related to similar financial assets. |

| | |

| |Investments |

| |The main portion of the investments are investments in businesses and companies where the Holding has control and may determine |

| |their management strategies. As to portfolio investments, the Group aims at investment in liquid securities |

| | |

| |Guarantees |

| |The policy of the Group envisages issuance of financial guarantees only to subsidiaries following preliminary approval by the |

| |management bodies. Information about the guarantees as at 31 December 2007, issued by the Group to secure obligations to third |

| |parties, is given in Note 38. |

| | |

| |Liquidity risk |

| |Liquidity risk originates when the Company is not able to settle its liabilities within the agreed terms. The Company applies a |

| |method ensuring necessary liquid resources to settle its liabilities under usual or extraordinary conditions without suffering |

| |excessive loss or damaging its reputation. |

| | |

| |The companies elaborate financial planning to cover their expenses and current payables for a period of 30 days, including |

| |settlement of financial liabilities; this planning excludes the potential effect of extraordinary circumstances that may not be |

| |foreseen under usual conditions. |

| | |

|5. |Financial risk management, continued |

| | |

| |The Holding’s Management assists the Group’s companies in their efforts to borrow funds from banks for investments and use |

| |revolving working capital loans to secure production. The amounts of these borrowed funds are maintained at certain rates and |

| |allowed following proving economic effectiveness as to each company. Borrowed funds improve liquidity and are necessary for the |

| |production growth. The policy applied by the Management over the last several years is directed at raising fresh market resources |

| |by the Holding in the form of shares, bonds and other similar instruments with the purpose of investing in its subsidiaries in two|

| |directions: granting of loans to its group companies to finance their projects and acquisition of shares in their capitals, |

| |including subscription of shares upon capital increase. |

| | |

| |Market risk |

| |The market risk originates when the income or the value of the investments of the companies are affected by changes in market |

| |prices, exchange rates, interest rates or prices of equity instruments. The purpose of market risk management is the management |

| |and control of market risk within acceptable limits through return rate optimization. |

| | |

| |Currency risk |

| |The Holding’s Management has minimized the payments in foreign currency other than BGN and EUR to minimize the Group’s exposure to|

| |currency risk. Some of the Group’s companies are exposed to limited currency risk upon purchase and/or sale and/or receiving loans|

| |denominated in foreign currencies other than the functional currency; therefore, the Management aims at negotiating most |

| |transactions in BGN and EUR. Bulyard Shipbuilding Industry has signed contracts in USD and payables in JPY under delivery |

| |contracts. Measures for hedging the currency risk have been taken. |

| | |

| | |

| |Interest rate risk |

| |The Group’s companies are exposed to interest rate risk as loans are agreed under the condition of floating interest rates |

| |relevant to current market prices. The interest rate risk management is directed at increasing the number of fixed interest rate |

| |loans. |

| | |

| |Capital management |

| |The policy of the Management is directed at maintenance of strong capital base so as to keep owners’ trust and the market as a |

| |whole and ensure future business development conditions |

| | |

| |The Group’s aims at maintaining a balance between the higher return rate that is possible in case of lower indebtedness levels and|

| |the benefits and security of a strong capital position. |

| | |

| |Over the period no change in the Company’s capital management occurred. |

| | |

| |The Company is the subject of no contractual or regulatory capital requirements. |

| | |

| | |

| | |

|6. |Segments |

| |Segment information is given on the basis of the Group’s business segments. The format is based on the internal management |

| |structure of the Group. |

| | |

| |Intra-segment pricing is based on direct seller-buyer relation. |

| | |

| |The financial results for the individual segment, assets and liabilities include amounts that may be directly related to a |

| |particular segment, as well as amounts that may be allocated on a reasonable basis. Non-allocated assets, liabilities, revenue |

| |and expenses include goodwill, minority interest, loans and related costs and tax assets and liabilities. |

| | |

| |The capital expenses related to a particular segment represent the total expenses, incurred over the period with the purpose of |

| |acquisition of assets expected to be used for more than one period. |

| | |

| |Business segments |

| | |

| |The Group operates in the following key business segments: |

| | |

| |Machine building. Production and sale of metal cutting machines; production, repair and sale of electric machines and metal |

| |casting. |

| | |

| |Shipbuilding and transport services. Production and repair of ships and all kinds of floating facilities and related services, |

| |transport services, port operations and classification and certification. |

| | |

| |Others. Consulting services, furniture production, real estate transactions, etc. |

| | |

| |Geographical segments |

| |All segments are located and operate on the territory of the Republic of Bulgaria. |

| | |

| | |

| | |

|7. |Revenue |

| |In thousands of BGN | |Note |31 March 2008 | |31 March 2007 |

| | | | | | | |

| |Sale of production | | |13,563 | |12,510 |

| |Shipbuilding | |7а |387 | |1,823 |

| |Sale of services | | |2,599 | |1,224 |

| |Ship repair | | |848 | |1,152 |

| |Port operations | | |551 | |385 |

| | | | | | | |

| |Sale of goods and materials | | |509 | |732 |

| | | | |18,457 | |17,826 |

| | |

|7а |The revenue from a stage of the building of ship with construction No 289, ordered by a company within the Group, as at 31 March |

| |2008 has not been reported in these statements. The revenue of BGN 6,020 thousand of Bulyard Shipbuilding Industry AD has been |

| |eliminated, while the recognized revenue is disclosed in Note 10. Capitalized expenses on own assets creation. |

| | |

|8. |Other operating revenue |

| |In thousands of BGN | |Note |31 March 2008 | |31 March 2007 |

| | | | | | | |

| |Gains on sale of non-current assets | |8.а |33 | |42 |

| |Other revenue | | |499 | |394 |

| | | | |622 | |436 |

| | | | | | | |

|8.а |Gains on sale of non-current assets | | | | | |

| |In thousands of BGN | | |31 March 2008 | |31 March 2007 |

| | | | | | | |

| |Revenue from sale of non-current assets | | |33 | |42 |

| |Carrying amount of assets sold | | |- | |- |

| | | | |33 | |42 |

| | | | | | | |

| | | |

|9. |Increase/(Decrease) of work in progress |

| | |

| |In thousands of BGN | | |31 March 2008 | |31 March 2007 |

| | | | | | | |

| |Mashstroy AD | | |350 | |(540) |

| |Leyarmach AD | | |91 | |(23) |

| |ZMM Sliven AD | | |84 | |69 |

| |Augusta Mebel AD | | |- | |(126) |

| |Dockyard Port Bourgas AD | | |21 | |89 |

| |ZMM Nova Zagora AD | | |(123) | |(63) |

| |Elprom ZEM AD | | |782 | |645 |

| |Bulyard Shipbuilding Industry AD | | |16,414 | |19,453 |

| |KLVK | | |(30) | |- |

| | | | |17,589 | |19,504 |

|10. |Capitalized expenses on own assets creation |

| |In thousands of BGN | | |31 March 2008 | |31 March 2007 |

| | | | | | | |

| |Mashstroy AD | | |37 | |55 |

| |Dockyard Port Bourgas AD | | |44 | |65 |

| |Elprom ZEM AD | | |- | |60 |

| |Bulyard Shipbuilding Industry AD | | |49 | |68 |

| |Marciana – ship with construction No 289 | | |6,020 | |- |

| | | | |6,150 | |248 |

| | | | | | | |

| | | | | | | |

|11. |Personnel expenses | | | | | |

| |In thousands of BGN | | |31 March 2008 | |31 March 2007 |

| | | | | | | |

| |Salaries | | |6,939 | |6,275 |

| |Obligatory social security contributions and payments | | |1,555 | |1,610 |

| | | | |8,494 | |7,885 |

| | | | | | | |

| | |

| | | | | | | |

|12. |Net financial income/(costs) |

| |In thousands of BGN | | |31 March 2008 | |31 March |

| | | | | | |2007 |

| | | | | | | |

| |Financial income | | | | | |

| |Interest income | | |702 | |200 |

| |Net exchange gains | | |995 | |55 |

| |Net gains on operations with financial assets | | |- | |3 |

| |Other financial income | | |- | |34 |

| | | | |1,697 | |292 |

| |Financial costs | | | | | |

| |Interest expenses | | |(223) | |(243) |

| |Net exchange loss | | |- | |- |

| |Other financial gains/(loss), net | | |(103) | |(81) |

| | | | |(326) | |(324) |

| | | | |1,371 | |(32) |

|14. |Tax expenses |

| |Reported in the Income Statement |

| | |

| |In thousands of BGN | |Note |31 March 2008 | |31 March 2007 |

| |Tax expenses for the current period | | | | | |

| |Current period | | |412 | |279 |

| | | | |412 | |279 |

| |Deferred tax expenses | | | | | |

| |Origination and reversal effect of temporary differences | | |- | |42 |

| | | | |- | |42 |

| |Total tax expenses based on the Income Statement | | |412 | |321 |

| | | | | | | |

| |Expenses on current profit taxes are calculated at the rate of 10% (2007: 10%) on the tax base. Deferred tax expenses are |

| |calculated by applying the 2008 tax rate of 10% (2007: 10%). |

| | |

| | |

| | | | | | | |

|18. |Property, plant and equipment |

| | | |Land and |Plant and |Other |Costs of | |

| | | |buildings |equipment |non-current |non-current | |

| | | | | |assets |tangible |Total |

| | | | | | |assets | |

| | | | | | |acquisition | |

| | | | | | | | |

| |In thousands of BGN | | | | | | |

| |Book value | | | | | | |

| |Balance as at 1 January 2007 | |33,030 |33,346 |3,279 |833 |70,488 |

| |Additions | |99 |1,623 |1,014 |18,939 |21,675 |

| |Disposals | |(2,586) |(1,405) |(231) |- |(4,222) |

| |Transfers | |3,187 |4,038 |193 |(7,606) |(188) |

| |Assets revaluation | |47,682 |2,898 |36 |- |50,616 |

| |Depreciation elimination against book value | | |(5,056) |(116) |- | |

| | | |(3,815) | | | |(8,987) |

| |Assets depreciation | | (27) |- |- |- |(27) |

| |Transfers to assets held for trading | |(933) |(476) |(137) |- | |

| | | | | | | |(1,546) |

| |Balance as at 31 December 2007 | |76,637 |34,968 |4,038 |12,166 |127,809 |

| | | | | | | | |

| |Balance as at 1 January 2008 | |76,637 |34,968 |4,038 |12,166 |127,809 |

| |Additions | |4 |85 |132 |7,917 |8,138 |

| |Disposals | |(14) |(27) |(6) | |(47) |

| |Transfers | |416 |1,575 |10 |(2001) | |

| |Balance as at 31 March 2008 | |77,043 |36,601 |4,174 |18,082 |135,900 |

| | | | | | | | |

| |Depreciation and impairment losses | | | | | | |

| | | | | | | | |

| |Balance as at 1 January 2007 | |3,122 |9,279 |1,696 |- |14,097 |

| |Depreciation costs for the period | |844 |3,036 |442 |- |4,322 |

| |Depreciation of assets written off | | (23) |(453) |(157) |- |(633) |

| |Depreciation elimination against book value | | | | |- | |

| | | |(3,815) |(5,056) |(116) | |(8,987) |

| |Depreciation of assets transferred for sale | | | | |- | |

| | | |(116) |(71) |(21) | |(208) |

| |Balance as at 31 December 2007 | |12 |6,735 |1,844 |- | 8,591 |

| | | | | | | | |

| |Balance as at 1 January 2008 | |12 |6,735 |1,844 |- |8,591 |

| |Depreciation costs for the period | |264 |818 |115 |- |1,197 |

| |Depreciation of assets written off | |(1) |(27) |(5) | |(33) |

| |Balance as at 31 March 2008 | |275 |7,526 |1,954 | |9,755 |

| |Carrying amount | | | | | | |

| |As at 1 January 2007 | |29,908 |24,067 |1,583 |833 |56,391 |

| |As at 31 December 2007 | |76,625 |28,233 |2,194 |12,166 |119,218 |

| | | | | | | | |

| |As at 1 January 2008 | |76,625 |28,233 |2,194 |12,166 |119,218 |

| |As at 31 March 2008 | |76,768 |29,075 |2,220 |18,082 |126,145 |

| | | | | | | | |

| |Some of the property, plant and equipment of carrying amount of BGN 39,793 thousand are pledged as collateral for the Group’s |

| |bank loans. |

|18. |Property, plant and equipment, continued |

| | |

| |The Group’s Management reviews the fair values of land, buildings, plant and equipment on regular basis. Such reviews have been |

| |made as at 1 January 2003 and 31 December 2007, and the respective assets were revalued based on a valuation made by an |

| |independent licensed valuer. As a result of a valuation made by an independent licensed valuer, land and buildings of BGN 47,682|

| |thousand, plant and equipment of BGN 2,898 thousand and other non-current assets of BGN 36 thousand were revalued as at 31 |

| |December 2007. The effect of this revaluation is taken to the revaluation reserves. |

| | |

|19. |Non-current intangible assets |

| | | | |Patents and |Software |Other |Total |

| | | | |trademarks |products |intangible | |

| |In thousands of BGN | | | | |assets | |

| |Carrying amount | | | | | | |

| | | | | | | | |

| |As at 1 January 2007 | | |88 |351 |238 |677 |

| |As at 31 December 2007 | | |462 |261 |748 |1,471 |

| | | | | | | | |

| |As at 1 January 2008 | | |462 |261 |748 |677 |

| |As at 31 March 2008 | | |433 |264 |798 |1,495 |

| | | | | | | | |

| |The total depreciation accrual for intangible assets for the period ended 31 March 2008 amounts to BGN 56 thousand. As the |

| |non-current intangible assets of the Group are immaterial, there has not been prepared a detailed note for their movement. |

| | |

|(i) |Goodwill |

| |In thousands of BGN | | | |Goodwill |

| | | | | | |

| |Balance as at 1 January 2007 | | | |6,318 |

| |Increase through acquisition of minority interest | | | |1,522 |

| |Balance as at 31 December 2007 | | | |7,840 |

| |Balance as at 31 March 2008 | | | |7,840 |

| | |

| | |

| | |

| | |

|20. |Investments in associates reported under the capital method |

| |The Group owns the following investments in associates: |

| | | | | | |

| | | | |Country |Ownership |

| | | | | |31 March 2008 |2007 |

| |Dounav Tours AD | | |Bulgaria |48.45% |48.45% |

| |VIK-SANDVIK-IHB DESIGN AD | | |Bulgaria |50.00% |50,00% |

| |Instrum Travel | | |Cyprus |50.00% |50.00% |

| |Odessoss PMB AD | | |Bulgaria |30.00% |30.00% |

|20. |Investments in associates reported under the capital method, continued |

| |Movements in investments in associates can be analyzed as follows: |

| | |

| |In thousands of BGN | | |31 March 2008 | |31 December 2007 |

| |Dounav Tours AD | | | | | |

| |As at 1 January | | |5,159 | |6,082 |

| |Share in the net assets increase | | |145 | |2,077 |

| |As at the end of the reporting period | | |8,304 | |8,159 |

| | | | | | | |

| |Instrum Travel | | |31 March 2008 | | 31 December 2007 |

| |Investment | | |1,534 | |1,406 |

| |Share in the net assets increase | | |- | |127 |

| |As at the end of the reporting period | | |1,534 | |1,534 |

| | | | | | | |

| |Odessoss PMB AD | | |31 March 2008 | | 31 December 2007 |

| |As at 1 January | | |1,661 | |1,589 |

| |Share in the net assets increase | | |13 | |72 |

| |As at the end of the reporting period | | |1,674 | |1,661 |

| | | | | | | |

| |VIK-SANDVIK-IHB DESIGN AD | | |31 March 2008 | | 31 December 2007 |

| |As at 1 January | | |273 | |- |

| |Acquired | | |- | |126 |

| |Share in the net assets increase | | |45 | |147 |

| |As at the end of the reporting period | | |318 | |273 |

| | | | | | | |

| |Total investments in associates as at the end of the reporting period | | |11,830 | |11,627 |

| | | | | | | |

| | |

| | |

|21. |Other investments |

| |In thousands of BGN | | | 31 March 2008 | | 31 December 2007 |

| | | | | | | |

| |Meteko AD | | |7 | |7 |

| |Other investments | | |1 | |1 |

| | | | |8 | |8 |

| | |

|22. |Long-term receivables |

| |In thousands of BGN | | |31 March 2008 | | 31 December 2007 |

| | | | | | | |

| |Mak - Gabrovo | | |70 | |70 |

| |Chimremontstroy Engineering AD | | |- | |293 |

| |Other long-term receivables | | |524 | |521 |

| | | | |594 | |884 |

| |Chimremontstroy Engineering AD settled its payable prior to maturity | | | | |

| |date. | | | | |

|23. |Inventories | | | | |

| |In thousands of BGN |Note |31 March 2008 | |31 December 2007 |

| | | | | | |

| |Raw materials, materials and other consumables | |31,614 | |30,167 |

| |Work in progress |23.а |40,161 | |22,649 |

| |Finished products | |1,950 | |1,947 |

| |Goods | |98 | |2 |

| | | |73,823 | |54,765 |

| | |

|23.а |Work in progress |

| |Work in progress comprises: |

| | | |31 March 2008 | |31 December 2007 |

| |In thousands of BGN | | | | |

| |Work in progress in shipbuilding | |29,287 | |14,733 |

| |Work in progress in ship repair | |- | |828 |

| |Work in progress in machine building | |8,131 | |7,039 |

| |Other work in progress | |2,743 | |49 |

| | | |40,161 | |22,649 |

| | | | | | |

|24. |Trade and other receivables |

| |In thousands of BGN | |Note |31 March 2008 | |31 December 2007 |

| | | | | | | |

| |Trade receivables | | |5,369 | |11,210 |

| |Court receivables | | |28 | |28 |

| |Receivables from associates | |34 |1,018 | |326 |

| |Tax receivables | | |3,021 | |2,632 |

| |Other receivables | | |2,090 | |359 |

| |Prepayments and deferred expenses | | |29,114 | |16,387 |

| | | | |40,640 | |30,942 |

| | |

| |The receivables from associates as at 31 March 2008 represent a loan of BGN 690 thousand granted to the associate Dounav Tours |

| |and prepayments to VIK-SANDVIK-IHB DESIGN AD for design services. |

|25. |Non-current assets held for trading |

| | |

| |As at 31 December 2007 non-current tangible assets of total value of BGN 1,338 thousand were classified as assets held for sale. |

| |The classification was made on the basis of decisions of the bodies of two Group’s companies on realization of these assets through|

| |sale, and not through subsequent use. The carrying amount of these assets as at 31 March 2008 is as follows: |

| | |

| |In thousands of BGN |31 March 2008 | |31 December 2007 |

| | | | | |

| |Land and buildings |817 | |817 |

| |Plant and equipment |521 | |521 |

| | |1,338 | |1,338 |

| | |

| | | | | | | |

| | |

| | |

|26. |Cash and cash equivalents |

| |In thousands of BGN | | |31 March 2008 | |31 December 2007 |

| | | | | | | |

| |Cash at banks | | |50,731 | |53,463 |

| |Cash in hand | | |121 | |93 |

| |Cash based on cash flow | | |50,852 | |53,556 |

| | | | | | | |

| |Blocked cash | | |37,515 | |32,700 |

| |Cash and cash equivalents in the balance sheet | | |88,367 | |86,256 |

| | |

| |Blocked cash includes the following amounts: BGN 2,535 thousand for securing of letters of credits for current deliveries opened in|

| |favour of suppliers in relation to carrying out of shipbuilding and ship repair activities; BGN 34,956 – for securing of issued |

| |bank guarantees under client prepayments and BGN 24 thousand – other blocked cash. |

|27. |Share capital and reserves |

| |The share capital is stated at nominal value as per the court registration. The share capital as at 31 March 2008 comprises |

| |43,756,118 ordinary shares (2006: 21,003,235) of BGN 1 nominal value each. In July 2007 Sofia City Court registered increase in |

| |the capital of IHB Plc as a result of the conversion of corporate bonds from BGN 21,003,235 to BGN 26,254,040 through the issuance|

| |of 5,250,805 ordinary registered dematerialized voting shares of BGN 1 nominal value each. In December 2007 the capital was |

| |increased through a new issue of 17,502,078 shares of BGN 1 nominal value and BGN 2.40 issue value each, as a result of which the |

| |capital of the Company was increased from BGN 26,254 thousand to BGN 43,756 thousand and a premium reserve of BGN 24,503 thousand |

| |was set aside. |

| | |

| |The share capital has been subscribed at its nominal value and is fully paid. There are no preference shares or bearer shares. |

| | |

| |Holders of ordinary shares are entitled to dividend as disclosed at the end of each year and one vote per share in the Group’s |

| |meetings. All Group’s shares give equal rights as to assets upon liquidation. |

| |Shareholders holding over 5% of the capital of IHB Plc as at 31 March 2008: |

| | |

| | |

| | |

| | |

|Shareh| |

|older | |

| | |

| |Additional and statutory reserves |

| |Additional and statutory reserves include reserves formed by setting aside 10% of the profit in accordance with the provisions of |

| |the Law on Commerce as well as additional reserves set aside as a result of profit distribution. They also include additional and |

| |statutory reserves of the Parent, as well as the share held in the reserves of subsidiaries after the acquisition date. |

| | |

| |Revaluation reserve |

| |Revaluation reserve is formed in consequence of revaluation of property, plant and equipment and is reduced by the deferred tax |

| |liabilities originating from the revaluation. |

| | |

|28. |Earnings per share |

| | |

|(i) |Basic earnings per share |

| |The calculation of basic earnings per share as at 31 March 2008 is based on the net profit attributable to the majority owners of |

| |ordinary shares, amounting to BGN 3,012 thousand (31 March 2007: profit of BGN 2,114 thousand) and the weighted average number of |

| |ordinary shares available for the period ended 31 March 2008 of 43,756,000 (2007: 21,003,000). Calculation is made as follows: |

| | |

| |Net profit attributable to holders of ordinary shares |

| |In thousands of BGN | | | 31 March 2008 | |31 March 2007 |

| | | | | | | |

| |Net profit for the period | | |4,202 | |3,007 |

| |Net profit attributable to majority owners of ordinary shares | | |3,012 | |2,114 |

| | |

| |Weighted average number of ordinary shares |

| |In thousands of shares | | |31 March 2008 | |31 March 2007 |

| | | | | | | |

| |Ordinary shares issued as at 1 January | | |43,756 | |21,003 |

| |Number of shares as at 31 March | | |43,756 | |21,003 |

| |

| |Weighted average number as at 31 March | | |43,756 | |21,003 |

| | | | | |

| | |

| | |

|29. |Borrowings |

| |This note gives information on the contractual terms and conditions on the Group’s borrowings. |

| | |

| |In thousands of BGN | |. |31 March 2008 | |31 December 2007 |

| |Non-current liabilities | | | | | |

| |Secured bank loans | | |12,729 | |7,250 |

| |Lease payables | | |103 | |101 |

| | | |12,832 | |7,351 |

| | | | | | | |

| |Current liabilities | | | | | |

| |Current portion of secured bank loans | | |1,829 | |4,897 |

| |Lease payables | | |43 | |37 |

| | |1,872 | |4,934 |

|29 |Borrowings, continued |

| | |

| |Terms and conditions and maturity |

| |31 March 2008 |

| |In thousands of BGN | |Total |Up to 1 year |Over 1 year |

| | | | | | |

| |Secured bank loans: | | | | |

| |EUR 205 thousand – 3-month EURIBOR + 2,3% - investment | | |75 |75 |- |

| |EUR 100 thousand – 3-month +2,3% - working capital | | |20 |20 |- |

| |BGN 200 thousand – floating BIR + 2,7% - working capital | | |200 |60 |140 |

| |EUR 430 thousand – 3-month EURIBOR + 2,3% -investment | | |743 |99 |644 |

| |EUR 450 thousand – monthly EURIBOR + 2,3% -investment | | |563 |463 |- |

| |BGN 250 thousand – floating BIR + 3,5% -investment | | |197 |197 |- |

| |EUR 690 thousand – 3-month EURIBOR + 2,4%-investment | | |468 |468 |- |

| |EUR 314 thousand – 3-month EURIBOR + 2,3% -investment | | |486 |- |486 |

| |Overdraft – 3-month EURIBOR + 2,0% - working capital | | |102 |102 |- |

| |BGN 75 thousand – floating BIR + 6,2% - working capital | | |75 |75 |- |

| |BGN 125 thousand – floating BIR + 4,3% - investment | | |63 |- |63 |

| |BGN 108 thousand – floating BIR + 4,98% - investment | | |79 |79 |- |

| |BGN 50 thousand – floating BIR + 5,24% - credit line | | |49 |49 |- |

| |BGN 42 thousand – floating BIR + 4,40% - credit line | | |42 |42 |- |

| |EUR 2,000 thousand – 1-month EURIBOR + 3% | | |2,445 |- |2,445 |

| |EUR 5,000 thousand – 6-month EURIBOR + 1,7% | | |8,583 |- |8,583 |

| |EUR 200 thousand – 1-month EURIBOR + 3% | | |368 |- |368 |

| |Financial leases: | | | | | |

| |BGN 44 thousand – financial lease – 3-month EURIBOR | | |49 |14 |35 |

| |BGN 15 thousand – financial lease – no interest | | |2 |2 |- |

| |EUR 47 thousand – financial lease 6,70% | | |95 |27 |68 |

| | | | |14,704 |1,872 |12,832 |

| | | | | |

| |Bank loans have been secured with pledge of plant, property and equipment with a total carrying amount of BGN 39,793 thousand as at |

| |31 March 2008. Furthermore the business of Dockyard Port Bourgas AD has been pledged. |

| | |

|30. |Other long-term payables |

| |In thousands of BGN | | |31 March 2008 | |31 December 2007 |

| | | | | | | |

| |Financing | | |170 | |170 |

| |Other long-term payables | | |446 | |115 |

| | | | |616 | |285 |

| | |

| |BGN 79 thousand was received under a contract for financing of Project for Development of Technologies for Ship Inspection and |

| |Certification and Internet-Based System for Inspection Management. In 2007 Elprom ZEM AD was financed by the National Investment Fund|

| |at the Small and Medium Size Enterprises Promotion Agency with the sum of BGN 91 thousand. |

| | |

|31. |Provisions |

| | | |Retirement benefits|Guarantees |Lawsuits |Total |

| |In thousands of BGN | | | | | |

| | | | | | | |

| |Balance as at 1 January 2007 | |615 |343 |37 |995 |

| |Provisions charged over the year | |75 |393 |- |468 |

| |Provisions reversed | |(250) |(250) |- | (500) |

| |Balance as at 31 December 2007 | |440 |486 |37 |963 |

| | | | | | | |

| |Balance as at 1 January 2008 | |440 |486 |37 |995 |

| |Provisions charged over the year | |- |- |- |- |

| |Provisions reversed | |- |(23) |- | (23) |

| |Balance as at 31 March 2008 | |440 |463 |37 |940 |

| | | | | | | |

| | |

| | | | | | | |

| | | |Retirement benefits|Guarantees |Lawsuits |Total |

| |In thousands of BGN | | | | | |

| | | | | | | |

| |Including: | | | | | |

| |- non-current | |440 |123 |37 |600 |

| |- current | |- |340 |- |340 |

| | | |440 |463 |37 |940 |

| |Retirement benefits |

| |The Group has estimated the total amount of benefits that would be due upon retirement in compliance with the Labour Code and the |

| |Collective Labour Agreements, if any, by company. The retirement benefits provisions are reported in the Group’s balance sheet as a |

| |non-current liability. |

| | |

| | |

| |Guarantees |

| |Guarantee provision relates mostly to engines sold to Elprom ZEM and guarantee services under shipbuilding contracts of Bulyard |

| |Shipbuilding Industry AD. The computation of the provision is based on estimates made by using historical data for guarantees |

| |associated with similar products and services. Guarantees relating to a period longer than one year as of the balance sheet date are |

| |reported as non-current liabilities. |

| | |

| |Lawsuits provision |

| |The estimated expenses on provisions amounting to BGN 37 thousand are based on detailed information about lawsuits initiated against |

| |the group companies. |

| | |

| | |

| | | | | | | |

|32. |Trade and other payables |

| |In thousands of BGN | | |31 March 2008 | | 31 December 2007 |

| | | | | | | |

| |Trade payables | | |15,038 | |17,800 |

| |Payables to related parties | | |72 | |109 |

| |Payables to the personnel | | |2,821 | |2,447 |

| |Social security contributions | | |825 | |626 |

| |Payables to the budget | | |912 | |1,113 |

| |Prepayments received | | |66,602 | |54,328 |

| |Other | | |22,127 | |782 |

| | | | |108,397 | |77,205 |

| | | | |

|33. |Deferred tax liabilities |

| |Deferred tax payables arise out of: |

| |- revaluation reserve from revaluation of fair value of property, plant and equipment |

| |- retirement benefits provisions |

| |- impairment of trade and other receivables |

| |- adjustments due to changes in accounting policies, etc. |

| | |

|34. |Related parties |

|(i) |Receivables from related parties |

| |In thousands of BGN | |31 March 2008 | |31 December 2007 |

| | | | | | |

| |VIK-SANDVIK-IHB DESIGN AD /prepayment for design services/ | |328 | |326 |

| |Dounav Tours AD – receivables on loan granted | |690 | | |

| |Dounav Tours AD – interest receivables | |- | | |

| | | |1,018 | |326 |

|(ii) |Payables to related parties | |

| |In thousands of BGN | |31 March 2008 | |31 December 2007 |

| | | | | | |

| |VIK-SANDVIK-IHB DESIGN AD /a payable for rendered design services/ | |72 | |109 |

| | | |72 | |109 |

| | |

|35. |Significant subsidiaries |

| | | |Country of registration |Ownership in % |

| | | | |31 March 2008 |31 December 2007 |

| | | | |% |% |

| |Privat Engineering AD | |Bulgaria |100.00 |100.00 |

| |Augusta Mebel AD | |Bulgaria |97.86 |97.86 |

| |Hydropower Bulgaria AD | |Bulgaria |100.00 |77.00 |

| |ZMM Bulgaria Holding AD | |Bulgaria |100.00 |100.00 |

| |ZMM Sliven AD | |Bulgaria |95.58 |95,58 |

| |ZMM Nova Zagora AD | |Bulgaria |93.57 |93.57 |

| |Leyarmach AD | |Bulgaria |100.00 |100.00 |

| |Mashstroy AD | |Bulgaria |80.81 |80.81 |

| |Elprom ZEM AD | |Bulgaria |79.71 |79.71 |

| |Dockyard Port Bourgas AD | |Bulgaria |91.72 |91.72 |

| |KLVK AD | |Bulgaria |100.00 |100.00 |

| |International Industrial Holding Bulgaria AG | |Switzerland |100.00 |100.00 |

| |Maritime Holding AD | |Bulgaria |61.00 |61.00 |

| |Bulgarian Register of Shipping AD | |Bulgaria |61.00 |61.00 |

| |Bulyard AD | |Bulgaria |61.50 |61.50 |

| |Bulyard Shipbuilding Industry AD | |Bulgaria |61.50 |61.50 |

| |Bulkari EAD | |Bulgaria |100.00 |100.00 |

| |Emona Shipping Ltd | |Malta |100.00 |100.00 |

| |Marciana Shipping Ltd | |Malta |100.00 |100.00 |

| |IHB Shipping CO EAD | |Bulgaria |100.00 |100.00 |

| |Emona Ltd | |Marshal Islands |100.00 |100.00 |

| |Karvuna Ltd | |Marshal Islands |100.00 |100.00 |

| |Marciana LTD | |Marshal Islands |100.00 |100.00 |

| | |

|36. |Post balance sheet events |

| |IHB commenced investment in the building of two new ships type Future 56, 56 000 dwt, at Bulyard Shipbuilding Industry AD at the |

| |total value of EUR 60 million. The investment will be financed through the subsidiary KLVK AD. The ships are to be delivered in |

| |May 2010 and 2011. |

| |At the beginning of February 2008 at Leyarmach there were commissioned two new Inductotherm heating units of 5 tons each, working|

| |under Dual-Track regime. The new furnaces ensured production capacity of the company of some 4 000 tons under two-shift working |

| |regime. |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

| | |

-----------------------

Daneta Zheleva | |Toshka Vasileva | |Executive Director | |Chief Accountant | |

Daneta Zheleva | |Toshka Vasileva | |Executive Director | |Chief Accountant | |

| | | | | | | |

Daneta Zheleva | |Toshka Vasileva | |Executive Director | |Chief Accountant | |

>1@8=0 0;>O=>Toshka Vasileva | |Executive Director | |Chief Accountant | |

Daneta Zheleva | |Toshka Vasileva | |Executive Director | |Chief Accountant | |

| | | | | | | |

Daneta Zheleva | |Toshka Vasileva | |Executive Director | |Chief Accountant | |

Гилбърт МакКол | |Добрина Калоянова | |Управител | |Регистриран одитор | |

КПМГ България ООД

ул. “Фритьоф Нансен” 37

гр. София 1142

Daneta Zheleva | |Toshka Vasileva | |Executive Director | |Chief Accountant | |

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download