1. Financial Sector in Bulgaria

2. Bulgaria - Currency Board Arrangement  BGN1 = DEM1 = EUR0.5113  Long-term goal for EU membership, the anchor currency being the Euro –The share of the Euro in the external trade is constantly increasing –The EU is by far the leading trade partner of Bulgaria –The CBA helps curb inflation - a step towards meeting the Economic and Monetary Union criteria  No indications that Bulgaria should exit the CBA

3.  Total banking sector assets account for 41% of GDP  Over 80% of the assets in the banking sector are in private hands  Over 80% foreign share of total bank assets  Upon privatization of DSK (the State Savings Bank), the banking sector will be almost completely privately owned Banking Sector Overview (1)

4.  25.3% yoy increase in banking system assets in 2001  High levels of capital adequacy and liquidity (by end-2001) –31% total capital adequacy –13.5% primary liquidity –25.5% secondary liquidity Banking Sector Overview (2)

5. Source: Bulgarian National Bank Commercial Banks Assets, Deposits and Loans (BGN bn, 01/1998-11/2002)

6. Source: Bulgarian National Bank 5.977 Commercial Banks Credits to Non- Government (BGN bn, 01/1998-11/2002)

7. Source: Bulgarian National Bank Commercial Banks Deposits and Credits as % of Total Assets (01/1998-11/2002)

8. Source: Bulgarian National Bank 3.34 Commercial Banks Non-performing Loans as % of Total Loans (01/1998-09/2002)

9. Source: Bulgarian National Bank 9.512 Commercial Banks Total Loans (BGN bn 01/1998-09/2002)

10. Source: Bulgarian National Bank 354 Banking System Financial Result (BGN m, 01/1998-09/2002)

11. Source: Bulgarian National Bank 26.84 Capital Adequacy (%)

12. Source: Bulgarian National Bank 5.91 Loan-Deposit Interest Rate Spread (%, 01/1998-11/2002)

13. Source: Bulgarian National Bank Steady Growth of M2 and Quasi-Money (BGN bn, 01/1998-11/2002)

14.  Bulgarian Stock Exchange – Sofia –20% growth in turnover in 2001 against the previous year –January 27, 2003, the stock exchange index (SOFIX) reached 208.8, an increase of 196% since the June 2001 parliamentary elections  Radical measures for the protection of minority shareholders’ rights  A new Privatization Law which sets a new era in Bulgarian privatization by radically improving the transparency, speed and economic effectiveness of the deals concluded Capital Markets (1)

15.  International Accounting Standards (IAS)  A new Law on Deals in Compensatory Instruments  Major changes have been made to the Securities Law  A list has been approved comprising c. 1,080 companies with state participation in the capital ownership, for the privatisation of which payment through different kinds of vouchers (non-cash instruments) is allowed. The shares of 114 of these companies are to be traded on the stock exchange Capital Markets (2)

16. Source: Bulgarian Stock Exchange +196% - 29% 208.8 Bulgarian Stock Exchange – Sofia (Sofix Index, 23/10/2000-27/01/2003)

17. Brady Bonds

18. Brady Bond Exchanges: Parameters  March 2002: Bulgaria exchanged USD1326m of Brady bonds into a new USD512m Eurobond with a coupon of 8.25% maturing in 2015 and a new EUR836m Eurobond with a coupon of 7.5% maturing in 2013  September 2002: Bulgaria exchanged USD888m of Brady bonds for an increase of USD759m in the 2015 Eurobond

19. Brady Bond Exchanges: Effects on External Public Debt  Decrease in debt face value by USD186m  Release of USD340m of collateral  Lengthening of the average maturity by 4 years  Decrease of debt service payments over next 10 years by around USD1.1bn  NPV saving of USD126m

20. Investment grade countries or countries with split ratings Eurobond spreads Prudent Policies Put Bulgaria’s Spreads in Investment Grade League

21. Bulgarian Institutions on the Internet  Bulgarian state institutions in the field of economics activity: – Bulgarian Chamber of Commerce and Industry: www.bcci.bg www.bcci.bg – BQPC and Bulgarian Industrial Association: www.bia-bg.com www.bia-bg.com – Ministry of Economy: www.mi.government.bg – Ministry of Transport and Telecommunications: www.mtc.government.bg – Privatisation Agency: www.priv.government.bg – Bulgarian Trade Promotion Agency: www.bepc.government.bg – Bulgarian Export Insurance Agency: www.baez-bg.com – Bulgarian Foreign Investment Agency: www.bfia.org