Bulgaria – Investment and Business Opportunities

1. Bulgaria – Investment and Business Opportunities July 2011

2. Bulgaria offers the best of both worlds – a key strategic location, bridging Europe and Asia, low corporate tax and political and economic stability and the lowest business operational costs in the EU • Bulgaria has a strategic geographic location. Its position on the European continent allows investors to reach the entire market of the European Union and the markets of central and eastern Europe, which represent a total population of 853 million. • With its parliamentary republican political system, the political situation in Bulgaria is stable and the legislature, the executive and the judiciary are independent of the parliament. As of Jan1, 2007, Bulgaria is a part of the European Union and has harmonized its legal system in line with the EU requirements. In April 2004, the country became member of NATO. • Foreign investment in Bulgaria has never been so dynamic and so massive. During recent years, a significant number of international companies have opened offices in Bulgaria - Solvay, Umocore, Italcemente Group, Liebherr, Kraft, Nestle, American Standard, Philip Morris, Metro, Lindner, Praktiker and SAP to name but a few. As a result of a liberal financial policy and continuous economic growth, Bulgaria has become very attractive to foreign investments. In addition, local companies are also increasing their share of business in Bulgaria and abroad.

3. 0 Macroeconomic indicators show consistent growth in the years leading up to the global financial crisis Real GDP Growth Inflation EU-27 EU-27 EU-27 0.2% 2004 2005 2006 2007 2008 2009 2010 2011 2004 2005 2006 2007 2008 2009 2010 2011 * Q1 2011 * April 2011 FDI Inflow Unemployment EU-27 € mln. 9.3% 6.9% 6.3% 2004 2005 2006 2007 2008 2009 2010 2011 2004 2005 2006 2007 2008 2009 2010 * April 2011 Page 3 Source: Bulgarian National Bank, Eurostat

4. Despite the global ecnomic downturn , Bulgaria’s investment climate is good and the countries economic performance indicators are positive. • Macroeconomic and financial stability: • Real GDP growth rate - -5.0% (2009) • Inflation Rate, annual change - 0.6% (2009) • Unemployment Rate - 9.1% (2009) • No currency risk, local currency is pegged to Euro • Budget surplus for the previous 5 years (-3.9% for 2009) • Investment grade credit rating by major rating agencies • Local and International Agreements to safeguard FDIs • Government and EU funding for many industries

5. % Visible signs exist that the Bulgarian economy is emerging rapidly from the crisis Exports (€ mln.) Real GDP growth (% annual basis) +44% 4,500 +6% 4.8% 4,000 0.0% -0.4% +66% 3,500 -3.3% 3,000 -4.6% -6.0% -6.7% 0 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Source: National Institute of Statistics, Bulgaria

6. Role of Bulgaria as FDI location has grown significantly for the last 10 years Inward FDI per country (€ mln.) 10,000 9,000 8,000 7,000 6,000 5,000 Romania 4,000 Croatia 3,000 Bulgaria 2,000 Czech Republic Hungary 1,000 0 Slovakia 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

7. 6 FDI in Bulgaria comes mostly from EU countries and is concentrated in four main sectors FDI by host country, 1996-2010 (€ mln.) FDI flows by industry, 1996-2010 (€ mln.) (1) Netherlands 5,740 Real Estate 8,419 (2) Austria 5,183 Finance 7,422 (3) Greece 3,763 Manufacturing 6,552 (4) UK 2,948 Trade 6,425 (5) Germany 2,646 (6) Cyprus 2,229 Construction 2,608 (7) Hungary 1,362 Energy 2,492 (8) USA 1,337 Telecom 1,955 (9) Russia 1,229 Other 2,376 (10) Italy 1,221 Page 7 Source: Bulgarian National Bank

8. Why invest in Bulgaria? • Political and business stability • EU and NATO member • Currency board • Low budget deficit and government debt • Low cost of doing business • 10% corporate tax rate • Lowest cost of labor within EU • Access to markets • European Union / EFTA • Russia • Turkey / Middle East • Educated and skilled workforce • Government incentives

9. Bulgaria enjoys one of the most stable political and economic environments in Southeastern Europe ”the culture of impunity that once plagued Bulgaria has largely gone“ May 27, 2010 • Bulgaria is a member of some of the most prestigious political organizations • European Union member since 2007 • NATO member since 2004 • WTO member since 1996 • Strong commitment to political reform and transparency has earned praise from leading media and experts worldwide • Stable currency • Bulgarian Lev has been pegged to the Euro since the adoption of the currency in 2002 • Currency board backed by IMF “The Bulgarian economy looks to be stabilizing after weathering the recent financial crisis better than most of its neighbors” “the government has earned accolades from Western economists” July 20, 2010

10. Government financial indicators are remarkable not only in the region, but on a pan-European scale % Bulgarian government debt is 3rd lowest in Europe Budget surplus / deficit has consistently outperformed regional and European averages Government debt, % of GDP Estonia 7% Bulgaria 15% Romania 24% Czech Republic 35% UK 68% Bulgaria Germany 73% Hungary 78% Euro Area Euro area 79% CEE average Greece 115% 2005 2006 2007 2008 2009 Source: Eurostat

11. Bulgaria has one of the lowest business costs in Europe(1) Taxes and Labor Costs , Lowest corporate income tax rate in Central / Eastern Europe Most competitive cost of labor in Central / Eastern Europe Average wage, € / month Oct 2010 332 Bulgaria Bulgaria (*) 10% 431 Romania Romania 16% 445 Serbia Hungary 19% 713 Hungary Slovakia 19% 772 Slovakia Croatia 20% 806 Poland 1,022 Czech Republic Czech Rep 20% 1,044 Croatia Turkey 20% 1,488 Slovenia * 0% tax rate for manufacturing companies in regions with low employment Page 11 Source: Eurostat; CEIC

12. 629 Bulgaria has one of the lowest business costs in Europe(2) Energy costs and Prime Location Office Rent Bulgarian cost of electricity for industrial users is 67% of the European average Office rents in Bulgaria are among the lowest in Europe €/kWh, 2009 € / sq. m / year, Q1 2010 Sofia Estonia Zagreb Bulgaria Bucharest Romania Budapest EU average Prague Germany Warsaw Czech Rep Istanbul Hungary Athens Slovakia Moscow Page 12 Source: Eurostat, CB Richard Ellis

13. Bulgaria is only 3 hours flight from all major destinations in Europe, Russia and the Mediterranean region Russia and CIS EU and EFTA Turkey and Middle East Strategic geographic location Major transport corridors passing through Bulgaria

14. n The role of the European Union as a trade partner for Bulgaria has been growing consistently Share of EU-27 exports has grown by 50 percentage points since 1995 ... in absolute terms EU-27 exports have grown approximately 5 times 10,000 9,000 8,000 EU-27 € mln 7,000 6,000 5,000 Balkans 4,000 Asia 3,000 2,000 Other 29% 1,000 17% 16% 14% 0 1995 2000 2005 2009 Page 14

15. 0 An educated and skilled workforce is among the main advantages of Bulgaria Almost 60,000 students graduate every year from over 50 universities Bulgaria has one of the highest proportions of students abroad from all European countries Iceland 17.8% Business 19,480 Ireland 14.2% Social sciences 8,372 Slovakia 10.2% Engineering 7,178 Bulgaria Education 3,677 Greece Health 3,166 Austria Law 1,553 Germany Architecture EU-27 average Agriculture Romania Students in another EU / EEA country, % of all Other 12,684 Czech Republic Page 15 Source: National Institute of Statistics, Bulgaria

16. The government supports specific industries under the Investment Promotion Act (IPA) Derelli Company Ltd can help you make the most of this • Investments must be related to the following sectors: • Manufacturing • Research & development • Education • Healthcare • High-tech services • Warehousing and logistics • Minimum investment amounts must exceed €10m • €3.5 in regions with high unemployment and €2m for investment projects in high-tech services • Benefits for certified investors include: • Shortened administrative procedures • Preferential acquisition of state or municipal land • Financial support for professional training / education • Infrastructure subsidies • Individual administrative services Page 16

17. Biggest investors are supported through a priority investment scheme • Priority projects can be related to all sectors of the economy, which do not contradict regulation 800/2008 of the European Commission • Subsidies not allowed in mining, primary agriculture production, and shipbuilding • Priority projects should exceed €50m and create at least 200 new working places for a 3-year period • €25 + 100 working places for certain manufacturing projects • €10m + 50 working places for high-tech services and R&D • Priority projects receive all benefits for certified investors, as well as the following: • Lowest possible costs for the acquisition of government and municipal land + waived taxes for land status changes • Working group for project support is assigned by the Council of Ministers • Financial grant scheme for up to 10% of the investment project cost (50% for R&D) Page 17

18. Attractive FDI sectors • Services: • Information technology • Public Sector • Transport and tourism • Industry: • Electronic and electrical equipment • Machine building • Metal processing • Chemical Industry • Resources: • Mining • Oil • Alternative energy Source: Deloitte Consulting; United Nations (UNCTAD)

19. Leading global investors have chosen Bulgaria as an FDI destination

20. Derelli Company Ltd Our Consultancy Services: • Macroeconomic data on Bulgaria and the Bulgarian Security Industry – all aspects from manufacturing and sales to guarding and identification of key business opportunities • Legal and Tax Advice – everything you need to know about setting up a business here –we’ll advise you on and undertake on your behalf • Business Intelligence and Statistical Data • Recommendation and evaluation of investment projects • Identification of potential suppliers, contract manufacturers and joint-venture partners • Personalized admin,tax,legal servicing and practical assistance from local and international experts • Liaison with central and local governments • Liaison with branch chambers and NGOs, liaison with the Government investment promotion Agency, part of the Ministry of Economy, Energy and Tourism

21. DERELLI Company Ltd. Sofia 1202, 21Rodopi Str. Phone: (+359 2) 479 56 56 Fax: (+359 2) 479 79 01 E-mail: office@derelli.eu www.derelli.eu