Bulgaria – investment climate and business opportunities

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

Macroeconomic indicators 1 Macroeconomic indicators Real GDP Growth Inflation (HICP) Bulgarian EU-28 Bulgarian EU-28 0.4% 0.4% 2006 2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013 2014* * February Unemployment FDI Inflow Bulgarian EU-28 € mln. 9,052 6,222 6,728 6.3% 2,437 1,151 1,330 1,070 1,092 2007 2008 2009 2010 2011 2012 2013 2014 2006 2007 2008 2009 2010 2011 2012 2013* * January * Preliminary data Source: Bulgarian National Bank, Eurostat

FDI in Bulgaria comes mostly from EU countries and is concentrated in four main sectors FDI by host country, 1996-2013 (€ mln.) FDI flows by industry, 1996-2013 (€ mln.) (1) Netherlands 6306.2 Real Estate 7936.9 (2) Austria 5750.9 Finance 7479.3 (3) Greece 3585.8 Trade 7059.5 (4) Germany 2834.3 (5) UK 2409.8 Manufacturing 7056.2 (6) Cyprus 2358.7 Energy 3490.6 (7) Russia 1889.8 Construction 2948.3 (8) Italy 1413.6 Telecom 2647.4 (9) USA 1395.6 (10) Hungary 1314.6 Other 3 207.8 Source: Bulgarian National Bank

Government financial indicators are remarkable not only in the region, but on a pan-European scale Average government debt (2007-2012) Greece Italy Belgium Portugal Iceland France Ireland Hungary Germany United Kingdom Malta Austria Cyprus Netherlands Spain Poland Turkey Sweden Slovakia Denmark Latvia Czech Republic Finland Norway Slovenia Romania Croatia Lithuania Bulgaria Luxembourg Estonia -13% -12% -11% -7% -6% -5% -4% -3% -2% -1% 0% 1% 15% Average budget deficit/surplus (2007-2012) Source: Eurostat

Country credit ratings comparison Q4 2013 Bulgaria was the only European country with increased credit rating by Moody’s in 2010 and 2011 Country credit ratings comparison Q4 2013 Country S&P Rating Moody's rating Fitch Rating TE Rating* Czech Republic AA- Stable A1 A+ 79.28 Poland A- A2 67.41 Italy BBB Negative Baa2 BBB+ 62.09 Bulgaria BBB- 54.24 Spain Baa3 52.55 Croatia BB+ 48.85 Macedonia BB   47.5 Romania 47.35 Turkey Ba1 Positive 44.58 Hungary 42.58 Serbia BB- 40 Ukraine B Caa1 28.75 *The TE credit rating is driven by a model created at Trading Economics. Source: Trading Economics Rating

Educated and skilled workforce is among the main advantages of Bulgaria Key facts about education in 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 53 Universities, colleges and higher schools (6 with technical sciences) 80 000 Bulgarian students in foreign countries 24.6 % of population hold university degree 7 % of the workforce has engineering degrees 45.5 % from the population in Bulgaria speak at least one foreign language English language studied by ≈ 85 % of students Business 19 480 Iceland 17.8% Social sciences 8 372 Ireland 14.2% Slovakia 10.2% Engineering 7 178 Bulgaria 8.3% Education 3 677 Greece 5.8% Health 3 166 Austria 4.7% Law 1 553 Germany 3.1% Architecture 833 EU-27 average 2.8% Students in another EU / EEA country, % of all Agriculture 860 Romania 2.2% Other 12 684 Czech Republic 2.1% Source: National Institute of Statistics, Bulgaria

Bulgaria has one of the lowest business costs in Europe . Bulgaria has one of the lowest business costs in Europe Gas prices for industrial users in Europe Electricity prices for industrial users in Europe €/Gigajoule, 2013 €/kWh, 2013 Czech Republic Bulgaria Bulgaria Estonia Poland Germany Austria Turkey Italy Romania EU average Hungary Spain EU average France Czech Rep Germany Slovakia Source: Eurostat

Bulgaria has one of the lowest business costs in Europe 9 Bulgaria has one of the lowest business costs in Europe Average gross annual salaries in industry and services Lowest corporate income tax rate in Europe €, 2011 %, 2014 Bulgaria Bulgaria 10% Romania Romania 16% Latvia Hungary 19% Hungary Czech Rep 19% Slovakia 10 788 Croatia 20% EU average 26 402 Turkey 20% United Kingdom 38 284 Estonia 21% Germany 42 900 Slovakia 23% Netherlands 45 793 EU average 24% Denmark 56 299 Germany 30% Source: Eurostat

The government supports specific industries under the Investment Promotion Act (IPA) Investments must be related to the following sectors: Manufacturing Research & development Education Healthcare High-tech services Warehousing and logistics Minimum investment amounts must exceed €2.5m €1m in regions with high unemployment and €0.5m 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 Labor cost subsidies Individual administrative services

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 €25m + 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)

Attractive FDI sectors Services: Transport and Logistics Information technologies Outsourcing of business processes Health and tourism related to healthy lifestyle Industry: Transport equipment and machine building Electronics and Electrical engineering Chemical industry Food and Agriculture Resources: Mineral water Tourism Balneology Alternative energy

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 (0% in high unemployment areas) 10% personal income tax Lowest cost of labor within EU Favorable office rents and low cost of utilities Access to markets European Union / EFTA Russia Turkey / Middle East Educated and skilled workforce Government incentives

Leading global investors have chosen Bulgaria as an FDI destination IT development Back office operations Chemical and metal Industry Engineering Food

InvestBulgaria Agency InvestBulgaria Agency is a Government investment promotion arm, part of the Ministry of Economy and Energy IBA services: Macroeconomic data on Bulgaria Legal advice Data on operational costs Regional information: industrial zones and infrastructure, data on unemployment, skilled labour force and level of education Recommendation of investment project sites Identification of potential suppliers, contract manufacturers and joint-venture partners Personalized administrative servicing Liaison with central and local governments Liaison with branch chambers and NGOs 14

InvestBulgaria Agency Sofia 1000, 31 Aksakov Str. Phone: (+359 2) 985 5500 Fax: (+359 2) 980 1320 E-mail: iba@investbg.government.bg Web: www.investbg.government.bg