Annual Financial Report (7483Y)

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Trans Balk Inv	LSE:TBI	London	Ordinary Share	VGG900341022	ORD NPV

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TIDMTBI

RNS Number : 7483Y

Trans Balkan Investments Ltd

31 December 2010

TRANS BALKAN INVESTMENTS LIMITED

(Formerly Equest Investments Balkans Limited)

FULL YEAR RESULTS

FOR THE YEAR ENDED 31 DECEMBER 2009

Trans Balkan Investments Limited ("TBIL" or "the Company"), a holding company with subsidiaries investing in the Balkan region (all together "the Group"), today announces its final results for the year ended 31 December 2009.

TBIL has prepared its consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS").

Headlines for the financial year ended 31 December 2009

-- Group consolidated revenue of EUR560.9 million for the year ended 31 December 2009 (2008: EUR625.1million)

-- Full year pre-tax loss of EUR72.7 million (2008: loss of EUR61.7 million)

-- 2009 loss per share from continuing operations of EUR3.91 (2008: loss per share EUR3.46)

-- Total net assets at 31 December 2009 of EUR116.8 million (31 December 2008: EUR164.4 million)

-- Net asset value per share of EUR6.39 (31 December 2008: EUR9.24)

-- TechnomarketDomo N.V., TBIL's largest holding, reported consolidated sales of EUR558.4 million (31 December 2008: EUR621.5 million), EBITDA EUR12.0 million (31 December 2008: EUR23.5 million) and pre tax loss EUR3.53 million (31 December 2008: pre tax profit EUR2.82 million).

-- Borovets Investments EAD, TBIL's strategic stake in the Rila Samokov development project, valued at EUR36.52 million (31 December 2008: EUR44.05 million) by independent valuers.

-- Appointment of Ian Schmiegelow as Non-executive Chairman and representatives of major shareholders. SGRF and Kairos Investment Management Ltd (representing 53.81% of TBIL shares in issue), as Non-executive Directors on the Board

-- Renegotiation of TechnomarketDomo N.V.'s debt facilities and TBIL's funding arrangements agreed with the State General Reserve Fund of Oman.

-- Sale of non-core holdings including remaining holding in Uniqa Bulgaria AD, Avto Union AD and various land and properties for a total consideration of EUR44.3 million (Uniqa Bulgaria AD EUR23.1 million, Avto Union AD EUR8 million, Castle Golf and Boyana Park EUR1.4 million, Rodacar AD property EUR9.9 million, Serdika property EUR1.9 million).

-- Termination of Novera's waste management concession for the city of Sofia.

Commenting on the results, Ian Schmiegelow, TBIL's Non-executive Chairman, said:

"Although much was achieved during 2009 by way of internalising management, restructuring debt facilities, cutting costs and selling non core assets, the year proved yet another disappointing period for investors with the broadening economic crisis causing major harm to the Company's operations and the value of its investments. The story for 2010 is sadly no different with little relief from the pressure on liquidity, performance and value despite all the measures taken to ease this situation."

The Company confirms, pursuant to AIM Rule 20, that its report and accounts for the year ended 31 December 2009 has been posted to Shareholders and that copies are available on the Company's website at www.transbalkaninvestmentslimited.com.

For further information please contact:

 
 Trans Balkan Investments   Ian Schmiegelow     Tel: + 44 20 7630 
  Limited                    Natalie Weedon      3350 
 Collins Stewart - Nomad    Stewart Wallace     Tel: +44 20 7523 
  & Joint Broker                                 8322 
 KBC Peel Hunt Limited -    Capel Irwin         Tel: +44 20 7418 
  Joint Broker                                   8900 
 Financial Dynamics - PR    Ed Gascoigne-Pees   Tel: +44 20 7269 
  adviser                    David Cranmer       7132 
                             Nick Henderson

CHAIRMAN'S STATEMENT

The operating climate in the Balkan region for TBIL did not improve during 2009 and so remained extremely challenging. The ongoing economic crisis continued to have a notable impact throughout the year on the Company's operations as well as on the value of its investments in retail, financial services, infrastructure, land and property development. In particular, the performance of its major retail subsidiary, TechnomarketDomo N.V. ("TMD"), a market leader in the Balkan region in electronics and white goods retail, was severely hampered by the weakening consumer markets in Bulgaria and Romania with a resultant fall in both turnover and profitability.

In the twelve months to 31 December 2009, TBIL had consolidated revenue of EUR560.9 million and made a pretax loss of EUR72.7 million (31 December 2008: pre-tax loss EUR61.7 million) and a loss per share including both continuing and discontinuing operations of EUR2.53 (31 December 2008: loss per share EUR7.52). IFRS NAV per share decreased 31% to EUR 6.39 at 31 December 2009 from EUR9.24 at 31 December 2008. Total assets of the Company reduced to EUR366.1 million (31 December 2008: EUR566.6 million), while total debt reduced to EUR132.4 million (31 December 2008: EUR204.6 million). 2010 has witnessed a continuing, if not worsening economic malaise, and this has even further damaged the investment value of TBIL's overall business.

A major issue for TBIL during 2009 and throughout 2010 to date has been the relentless pressure on liquidity, only relieved from time to time by the continuing support of its largest shareholder, The State General Reserve Fund of Oman ("SGRF"), and the ongoing disposal of non core assets. The continuation of TBIL's operations in this environment has only been achieved, as I outline below, through some innovative but costly refinancing arrangements, the forbearance of some creditors and, finally, the resourcefulness and tenacity of TBIL's small operating team.

On 31st December 2009, TBIL announced that, by reference to the restructured TMD debt facilities reported on 16 July 2009, the Company, through a wholly owned subsidiary, had repaid in full, together with all outstanding interest, its EUR12 million bridge facility ("the Bridge Loan") granted by a Bulgarian Bank, ("the Bank"). This repayment was made as a result of the obligation to repay the Bank first out of the net proceeds of any sale of the Serdika and Rodacar properties, both of which sales were effected during the latter part of 2009. In addition, AXIS Retail N.V., the parent of TMD, repaid to Raiffeisen Zentralbank Osterreich AG ("RZB") EUR3 million of the EUR20 million due to be repaid by 31 December 2009. This was enabled by the specific waiver by SGRF of its entitlement to such monies following the repayment of the Bank's Bridge Loan.

On 11 January 2010, it was further announced that RZB had received the balance of EUR17 million (plus accrued interest) due to be repaid to it by 31 December 2009 by calling the Citibank, N.A., Sofia Branch guarantee issued to RZB as part of the restructuring of TMD's debt facilities during the summer of 2009 (the "Citibank Guarantee"). This amount, in turn, was met by SGRF under the terms of its counter indemnity granted in respect to the Citibank Guarantee. The Board of TBIL acknowledged that the aforementioned restructuring, while burdening TBIL with onerous commitments to SGRF by way of a comprehensive security package ("the SGRF Security"), nevertheless provided TBIL with further time to protect and, hopefully, grow the value of its investment in TMD and Borovets. The terms of the restructuring included particular exchange rights in respect to TBIL's holding in TMD that SGRF had in connection with TBIL's indebtedness to SGRF, the exercise of which would be triggered by certain conditions, involving approval of business and integration plans and the completion of a number of senior TMD management appointments, not being satisfied by TBIL by 31 December 2009.

On 9 February 2010, the Board announced that SGRF had notified TBIL that SGRF's exchange rights and rights under the SGRF Security had become exercisable and as such SGRF had reserved its position. TBIL entered into discussions with SGRF on the circumstances giving rise to this notification and continued to work with SGRF on a longer term resolution of these issues. It had become increasingly clear to the Board, as there was no foreseeable relief to the depressed value of TBIL's remaining property assets, that the only feasible option for achieving a timely release from the unsustainable level of its indebtedness was to sell its holding in TMD. To this end, on 3 June 2010, the Board announced that it was in discussion with the minority shareholders of TMD concerning an unsolicited and indicative offer from them to purchase TBIL's equity shareholding of 61.8 % in TMD. Whilst giving suitable consideration to this offer, the Board had also continued to consider other realistic options in order to resolve most advantageously for all of the Company's shareholders the matter of raising sufficient funds both to repay the EUR17 million TBIL owed to SGRF as well as to finance its other commitments and, hopefully, return some value to shareholders. Consequently, the Board announced on 4 August 2010 that it had engaged Entrea Capital of Sofia, Bulgaria and Capital Partners of Bucharest, Romania, acting jointly, to be its independent financial adviser to assist it in respect to the offer, a further offer from one of these minority Shareholders acting alone as well as in reviewing other options including the sale of TBIL's holding in TMD in whole or in part to a third party. Furthermore, the Board confirmed that it had also appointed Ernst & Young to prepare an independent fair valuation of TBIL's holding in TMD. An orderly process for the sale of TMD is now in hand which has been made possible through the terms, admittedly onerous, of the Amendment Agreement between TBIL and SGRF and dated 21 October 2010; this is detailed in note 34 Events after the reporting date to the Financial Statements.

While the proposed sale of TMD is taking place against a back drop of challenging trading conditions, it should be appreciated how, despite this, both the businesses in Romania and Bulgaria have increased their market share whilst, simultaneously, taking steps to reduce costs, close unprofitable stores and otherwise refine operating efficiencies.

At the same time, during 2009, the Company continued an orderly sale of its property assets including Serdika and Rodacar. To date in 2010, two of the former cinema sites in Sofia, Iztok and Europa Palace, have also been sold.

Separately from the economic developments and as previously reported, the Company encountered significant problems at Novera, its waste management investment, during 2009 that culminated in the cancellation of Novera's waste management concessions by the Sofia Municipality. TBIL does not consider this termination as lawful or reasonable and has consequently sought appropriate legal advice in conjunction with the senior and mezzanine lenders to Novera. Following an initial approach by all three parties to the Bulgarian Government the response was to reject any proposal for a negotiated settlement. As a result, the Board is investigating the options available to it in respect to pursuing a complaint against the Bulgarian Government under the terms of the relevant Bilateral Investment Treaty.

On a more positive note, TBIL, together with its fellow shareholders, continues to review the steps which need to be taken to progress the plans for the major Borovets resort development. There have been some preliminary discussions with the representatives of a major resort developer, but, while the weak market conditions persist, it is unlikely that an early decision on any firm course will be taken. In the meantime however, there is much preparatory work involving rezoning, concessions and the like which can be handled advantageously.

During 2009 and since, the Company has continued to implement material cost saving measures arising from the simplification of its holding company structure, involving liquidating and merging BVI and Dutch NV / BV holding companies together with dormant special purpose vehicles, as well as from the streamlining of its administrative processes. Simultaneously, the Board has been focused on the proper maintenance of its existing operations coupled with the further sale of non core assets both of which are essential to ensuring that TBIL and its subsidiaries meet their various financial commitments.

Throughout 2009 and to date in 2010 TBIL's Board has actively managed its business risks in the most challenging of economic environments. After making suitable enquiries and giving proper consideration to factors which could give rise to significant financial exposure, including asset sales, the Board has a reasonable expectation that the Company has adequate resources to both continue its operations for the foreseeable future and meet its obligations as they fall due. However, there cannot be certainty while the extremely difficult market conditions prevail as they may impact adversely on planned disposals in terms of price expectation and timing. Given this position, the Company continues to adopt the going concern basis in the preparation of these financial statements.

Going forward the Board remains particularly concerned about the outlook for the economies of Bulgaria and Romania. However, despite the difficult prevailing circumstances and on the basis of the clear intention to dispose of TBIL's interest in TMD, the continuation of its non core asset sale programme and the rationalisation of any other remaining business interest, the Board is endeavoring to secure the best value overall for shareholders.

Finally, I should like to thank the members of TBIL's small operating team for their effort and resolve in testing times, the shareholders for their patience and understanding and all others, including members of the Board, who have contributed positively to TBIL's progress during an impossibly difficult year.

Ian Schmiegelow

Non-Executive Chairman Trans Balkan Investments Limited

MANAGEMENT REVIEW

While the effects of the global economic crisis were slow to reach the South East European region, the impact was felt heavily in the last quarter of 2009 and has continued into 2010. TBIL's largest holdings are located in Bulgaria where, in 2009, GDP contracted by 4.9% whereas in Romania, the comparable GDP fall was 7.1%. The consequent damage to consumer markets in both countries resulted in a dramatic drop in retail sales for both of TMD's operating subsidiaries, KKE and Domo Retail, which make up the Company's major business activities. Property valuations have been another victim of the spreading economic malaise and the Company's various property holdings have severely suffered both in respect to value and the Company's ability to advance its two main development projects at Sozopolis and Banya. The IMF forecasts Bulgarian GDP growth in 2010 to be nil and the Romanian GDP to decrease by 1.9%. The Board expects that market conditions through to the end of 2010 will remain extremely challenging bringing relentless pressure on the Company's liquidity, trading levels and asset values. In this commercial environment, management intends to continue its focus on disposing of and deleveraging its property holdings as well as on reviewing its options in respect of major liquidity issues.

Financial review

In the financial year to 31 December 2009, the Company had consolidated revenue of EUR560.9 million (31 December 2008: EUR625.1 million) and made a pre tax loss of EUR72.7 million (31 December 2008: pre-tax loss of EUR61.7 million), resulting in a loss per share from continuing operations of EUR3.92 (31 December 2008: loss per share from continuing operations of EUR3.47).

Review of TBIL core holdings

TechnomarketDomo N.V.

61.8% HOLDING AS AT 31 DECEMBER 2009

TechnomarketDomo N.V. Group NV ("TMD") is the Dutch parent company for the Company's investments in the retail electronics and white goods sector in South East Europe which, in the main, comprise 100% of the Bulgarian Technomarket retail and wholesale operations and 100% of the Romanian Domo retail operations.

TMD is the largest player in the sector in South East Europe with a consolidated turnover in 2009 of EUR558.4 million (2008: EUR621.5 million), and an EBITDA of EUR12.0 million (2008: EUR23.5 million).

TMD runs a dual brand strategy with large format stores located in both Bulgaria and Romania under the Technomarket brand and in the main, smaller stores operating under the Domo brand in Romania. At the end of the year, the total TMD network consisted of 218 stores, with TMD's retail market share in Bulgaria amounting to 37%, while its market share in Romania was 27%.

The major strategic objectives for TMD in 2010 were to accelerate the integration of the operations of the Technomarket and Domo businesses to eliminate continually unprofitable stores as well as to reposition the business for fewer but more discerning consumers within TMD and to achieve optimum sales growth.

Post period event

As was described in the announcements made on 11 January 2010 and 09 February 2010, TMD reduced its bank debt exposure to Raiffeisen Zentralbank Osterreich AG ("RZB") from an outstanding principal amount of approximately EUR81 million at the beginning of the year to approximately EUR56 million as at 31 December 2009, it also renegotiated an extended final maturity from three to five years, that is until 31 December 2014.

In view of the economic slowdown, management undertook a detailed cost analysis of TMD's operations and implemented a number of recommendations in the first quarter 2010, including negotiating rental decreases where possible and closing the majority of Domo stores in Bulgaria with the remaining operations rebranded under the Technomarket brand.

Technomarket Serbia and Montenegro (Harwood Limited)

23% HOLDING AS AT 31 DECEMBER 2009

In 2009, the consolidated sales of Harwood amounted to EUR84 million (2008: EUR107 million) and a resultant negative EBITDA of EUR4.5 million (2008: EUR3.2 million). TBIL's investment in Harwood amounted to EUR6.4 million in shareholder loans and EUR0.7 million in equity.

Technomobile

50% HOLDING AS AT 31 DECEMBER 2009

The Company owns 50% of Technomobile Serbia, a chain of stores selling GSM sets, small consumer electronic devices and complementary services. In 2009 sales in Technomobile Serbia amounted to EUR7.0 million (2008: EUR7.9 million), through a chain of 56 shops, resulting in a negative EBITDA of EUR1.6 million (2008: negative EUR1.7 million).

Borovets

33.5% HOLDING AS AT 31 DECEMBER 2009

TBIL holds a 33.5% indirect investment in Rila Samokov 2004 AD, which owns 1,977,131 sq. m. of land for large-scale resort development in the Borovets mountain area. This was purchased in 2007 for EUR 25.9 million in cash.

TBIL's investment is held through its 50% stake in Borovets Invest BV, a holding company, which in turn owns 100% of Borovets Investments EAD, a 67% shareholder in Rila Samokov 2004 AD. TBIL's partner in Borovets Invest BV is the State General Reserve Fund of the Sultanate of Oman ("SGRF"). The other shareholders in Rila Samokov 2004 AD are the Municipality of Samokov (25% shareholding) and Bulgaria's leading construction company Glavbolgarstroy (8% shareholding).

Currently plans divide the project into six sub-projects which can be individually developed, thereby reducing the development risk of this major EUR800 million project. While no substantial construction works have yet been undertaken, the project remains debt free.

Valuations

Regular valuations of TBIL's assets are made and TBIL's 33.5% indirect ownership in Rila Samokov 2004 AD as at 31 December 2009 was valued at EUR36.5 million by CB Richard Ellis, reputable international property valuers.

Review of TBIL Non-Core Holdings

Novera AD (in liquidation)

94% HOLDING AS AT 31 DECEMBER 2009

As previously announced, the remaining Concession Agreements for the provision of waste management and street cleaning services in Sofia held by three wholly owned subsidiaries of Novera AD were terminated by the municipality of Sofia in March 2009. TBIL rejects the basis of the termination of these Concession Agreements and has had discussions with legal representatives of the Bulgarian Government over the Municipal Council of Sofia's conduct in relation to the Concession Agreements. The senior and mezzanine lenders to Novera AD also participated in these discussions.

Novera AD is now in liquidation and the liquidator is handling all the necessary paperwork relating to the company's former employees. The liquidator is also realising any remaining assets to assist in covering the costs of the liquidation.

Avto Union AD

In April 2009 TBIL sold its 80% holding in Avto Union AD, a Bulgarian wholesaler and distributor of automotive products and services, which had an approximate 6.7% share of the new car sales market in Bulgaria in first quarter 2009. It also sold motorcycles, held an Avis car rental franchise and distributed Castrol and BP lubricants. Additionally Avto Union AD owned the Avto Union Centre building, a 28,000 square meter mixed use show room and office building.

The purchaser of Avto Union AD was Eurohold Automotive Group, the automotive subsidiary of Eurohold Bulgaria Inc, a publicly listed company on the Sofia Stock Exchange. While the investment was sold at a loss at it should be noted that, since the sale, sales in the automotive market then dropped by 54% in 2009 and by a further 36% in the first eight months of 2010.

Post Period Event

In March 2010, due to Eurohold's financial difficulties, TBIL renegotiated the repayment plan in respect to the balance of the outstanding purchase price which amounts to EUR2.0 million with the final installment now due in February 2011.

Uniqa AD (Bulgaria)

In June 2009, TBIL sold its remaining 37.71% stake in Uniqa Bulgaria in two tranches in 2009 to Uniqa International, Austria's largest insurance company, under a pre-agreed arrangement. The first tranche was for 21.19% of the shares in Uniqa AD, with the proceeds used for the repayment of a Serdika related debt to Uniqa Real Estate and a second tranche of 16.52% of the shares was for cash.

Post Period Event

In April 2010 TBIL exercised a put option and assigned to Uniqa International subordinated financial instruments, comprising a subordinated bond at a price of EUR1,533,876 million and subordinated debt of EUR1,533,876 million plus accrued interest amounting to EUR586 000 to the date of the assignment.

Pelican Retail Holdings

100% HOLDING AS AT 31 DECEMBER 2009

Pelican Retail is the owner of three sites which were formerly used as cinemas and are located in the city centre and densely populated areas of Sofia and a fourth site which is a land plot in the city of Pernik. All these Pelican Retail properties are included in the asset disposal programme.

In 2009, Pelican Retail sold two of its other assets: the Serdika Forum in which TBIL held a 20% stake, was sold for EUR1.9 million to the hotel operator and real estate developer, Terra Tours, and in November, Rodacar AD, a former car factory in Varna with a built up area of 12,300 square meters, to Baumax, the leader in the Austrian DIY market.

Post Period Event

TBIL has successfully sold two of the former cinemas Iztok and Evropa Palace. On 30 July 2010, the sale of Iztok was completed for the net sale proceeds amounting to EUR1,428,000 in cash which has been received. On 11 November 2010, the Evropa Palace was sold for the consideration of EUR1,500,000 in cash which has been received. The proceeds from the sale of Iztok and Evropa Palace cinemas were utilised to fund the Company's liabilities and continuing operations. Negotiations with a potential buyer for the sale of the remaining cinema, Urvich, are at an advanced stage.

Immofinance EAD

100% HOLDING AS AT 31 DECEMBER 2009

Immofinance EAD is a property development company focusing on first and second homes in Bulgaria. Immofinance is in discussions with the respective banks financing its two remaining development projects, Sozopolis and Banya, as to the future of the projects. The loan facilities are currently in default as a result of breaches of covenants and the loans are secured on the relevant developments but are on a non-recourse basis to TBIL.

The Immofinance EAD portfolio consists of two development projects and the land holdings listed below.

1. Sozopolis is a planned complex of second home properties, a spa centre, and several retail units including two restaurants on the Black Sea coast. The construction started in November 2007 and the first phase of the project, comprising 105 second home apartments, was completed in 2009. However, EUR7 million is still owed to the main construction company and another EUR8 million is required for the completion of the second phase of the project.

Total gross floor area relating to the project is 35,575 square meters, of which 30,265 square meters is for residential apartments.

The marketing of the project coincided with the deterioration of the Bulgarian economy and consequently a major collapse in demand and, as at 31 December 2009, only six units (totalling 2,634 square meters) had been sold.

The project has been financed by a EUR8.2 million equity investment by TBIL and a EUR38 million construction loan from Alpha Bank. The current drawdown on the construction loan is EUR27.3million (of which EUR1.5 million has been repaid) and a EUR5 million VAT facility (of which EUR1.2 million has been repaid). TBIL, with Immofinance EAD being in breach of its covenants, is in discussions with Alpha Bank in respect to the future of this development project.

2. Banya Spa & Wellness Resort, a complex of residential apartments, hotel, spa and sports facilities located in the foothills of Pirin Mountain, was started in September 2006. The gross floor area of the project is 20,277 square meters of which 12,572 square meter is for residential apartments (119 units) and 7,705 square meters for the hotel and spa.

The project was financed by a EUR7.5 million equity investment by TBIL and a EUR10.5 million construction loan from DSK Bank of which, currently, EUR6.9 million has been drawn down. The loan is in default and Immofinance EAD is in discussion with the bank on the available options, including the possible rental of Banya Spa & Wellness Resort to a tour operator, on the basis that the funding of EUR4 million required for the completion of the project is forthcoming. Provided this additional financing can be secured, the project is expected to be finalised within nine months. Immofinance's partner in the project is the Municipality of Razlog which holds a 4% equity interest in the Banya Spa & Wellness project.

3. Boyana Diplomatic Club is a land plot adjacent to the Boyana Diplomatic Club in Sofia which is designed for high end condominium apartments, with a total gross floor area projected at approximately 5 000 square meters.

4. Embassy Apartments is completed development in Sofia, which currently has just five apartments totalling 1,405 square meter that are in the process of sale.

Immofinance EAD Property assets in total have been valued at EUR26.96 million as at 31 December 2009.

Bank Debt

The Group had EUR106.4 million in bank debt at year end secured against assets in which TBIL had majority control. All debt as at 31 December 2009 was non-recourse to TBIL.

The largest subsidiary bank debt is within TechnomarketDomo N.V. and resulted from the use of debt in the acquisition of this holding. This debt facility, with an outstanding principal amount of approximately EUR81 million with RZB was reduced to approximately EUR56.2 million as at 31 December 2009.

TBIL's holding in Novera AD was acquired with EUR20.0 million in mezzanine debt and EUR15.0 million in senior debt provided by InvestkreditBank, both of which facilities were in default as a result of the Sofia Municipality cancelling the waste concessions of Novera AD. The EUR15.0 million senior debt was repaid to InvestkreditBank in 2009 by a new senior lender to Novera AD, Eagle 8.

A table of the principal debt of TBIL and its subsidiaries as at 31 December 2009 is set out below.

 
                                                                     2009 
                                                                    EUR'000 
 
                                    Nominal         Year of        Carrying 
 Subsidiary          Currency    interest rate     maturity         amount 
------------------  ----------  --------------  --------------  -------------- 
 Non-Current 
 TechnomarketDomo 
  N.V.               EUR         Euribor + 4%             2014          26,558 
                                 Euribor + 
 KKE                 EUR          3.5%                    2014           9,005 
                                                                        35,563 
  --------------------------------------------  --------------  -------------- 
 
 Current 
                                 3m Euribor + 
 Immofinance EAD     EUR          5%                      2013          29,838 
 
 TechnomarketDomo 
  N.V.               EUR         Euribor + 4%             2014          19,621 
                                 Euribor + 
 KKE                 EUR          3.5%                    2014           1,001 
 
                                 3m Euribor + 
 Banya Holiday AD    EUR          2.8%                    2013           7,354 
 Overdrafts                                                             12,982 
----------------------------------------------  --------------  -------------- 
                                                                        70,796 
  --------------------------------------------  --------------  --------------

In December 2008, TMD and Axis Retail, together with K & K Electronics EOOD ("KKE") and Domo Retail SA, as guarantors, entered into an agreement with RZB pursuant to which TMD assumed EUR65 million of the loans provided to the TMD group of companies for the purposes of acquiring holdings in the operating subsidiaries (the "Refinancing Loans"). RZB and KKE also executed an agreement for amendments of the original EUR25 million loan facility originally granted in 2006. (The "KKE Loan" together with the Refinancing Loans, the "RZB Loans"). Security for the RZB Loans included a pledge by Axis Retail of all of its shares in TMD to RZB. Axis Retail and Lyra, a minority shareholder in TMD, also gave an undertaking to RZB (the "Undertaking") to facilitate a prepayment of up to EUR40 million of the Refinancing Loans. The TBIL group had no other exposure under the RZB Loans.

In 2009, following discussions between RZB, TMD and Axis Retail, RZB agreed to accept prepayment of EUR40 million as EUR20.0 million in cash and a bank guarantee from Citibank for the remaining EUR20.0 million in exchange for the release of the Undertaking.

The repayment of EUR20 million by TMD was financed by an EUR8 million shareholder loan to TMD and a EUR12 million bridge facility provided by a Corporate Commercial Bank AD to TBIL repayable within 12 months. The bridge loan was drawn down on 15 July 2009 and advanced by TBIL to TMD by a way of a shareholder loan.

The Citibank Guarantee provided that, if TMD was unable to prepay another EUR20 million of the Refinancing Loans by 31 December 2009, RZB would be entitled to draw EUR20 million under the Citibank Guarantee.

As part of these arrangements, SGRF agreed to indemnify Citibank for losses to Citibank under the Citibank Guarantee and provided Citibank with the collateral required by Citibank to secure SGRF's indemnity obligations. TBIL agreed to indemnity SGRF against any expenses or losses in connection with the Citibank Guarantee and TBIL granted a fixed and floating charge in favour of SGRF over all of TBIL's assets and undertakings (the "SGRF Security"). The SGRF Security included a charge over TBIL's shares in Axis Retail, as well as over TBIL's interests (or the proceeds of any sales thereof) in various property holdings including Rodacar AD, Serdika, Axis-S Retail NV and Immofinance EAD.

As from 31 December 2009, SGRF had the right to exchange any unpaid indebtedness or liability of TBIL to SGRF for TBIL's indirect 61.8% interest in TMD unless

(i) certain conditions related to TMD's business integration and further management appointments at TMD were not satisfied by TBIL by 31 December 2009, in which case, SGRF's exchange rights would be exercisable after 31 December 2009 or

(ii) an event of default occurred under any of the agreements with SGRF, in which case, SGRF's exchange rights would become exercisable immediately. For the purposes of such exchange rights, the value of 100% of TMD was fixed at EUR20 million.

On 31st December 2009 TBIL, through a wholly owned subsidiary, repaid in full the EUR12 million bridge facility granted by a Bulgarian bank together with all outstanding interest.

Further in December 2009, Axis Retail, the parent of TMD, repaid to RZB EUR3 million to reduce the amount of the Citibank Guarantee. A balance of EUR17 million (plus accrued interest) due to be repaid to RZB by 31 December 2009 was met by RZB calling the Citibank Guarantee which, in turn, was covered by SGRF under the terms of its related counter indemnity.

Through repayments and the arrangements described above, the exposure to RZB in respect of TMD as at 31st of December 2009, was reduced from an outstanding principal amount of approximately EUR81 million to approximately EUR56 million, with loan covenants waived until 31 December 2010 and final maturity extended from three to five years, that is until 31 December 2014.

In December 2008 TBIL extended a corporate guarantee to InvestkreditBank in lieu of the senior debt in Novera AD as a part of a restructuring and standstill agreement in relation to Novera's debt obligations.

The Company completed the sale of Avto Union AD in April 2009 and this resulted in the transfer of all related debt obligations to the buyer.

TBIL is in active discussions with the lending banks for all remaining subsidiary debt related to assets over which TBIL has majority control.

Non-core asset disposal programme

As more fully described above, in 2009 TBIL sold a number of non-core holdings including its remaining investment in Uniqa AD to Uniqa International for an aggregate consideration of EUR23.1 million, the 80% stake in Avto Union AD for EUR8.0 million, various land plots for an aggregate consideration of EUR1.4 million, the 20% investment in the Serdika project for EUR1.9 million and the Rodacar AD property for EUR9.9 million.

TBIL has continued this process in 2010 with the sale of a number of the remaining property assets. The proceeds from these and other disposals has been used to fund TIBL's continuing operations as well as help to repay the Facility from SGRF used for the repayment of TechnomarketDomo's N.V. facilities.

The difficult current economic conditions in the South East European region continue to have a negative impact on TBIL and its subsidiaries, and the Company is not expecting a recovery in these economies until 2011 at the earliest.

Cost Savings

The Company is expecting to continue to achieve substantial cost savings in its holding company administrative costs both as a result of its non-core asset disposal programme and the reduction in the number of intermediate BVI, NV and BV companies. Simultaneously this will significantly simplify the corporate structure and enable the Company to focus on its remaining core holdings. As a result of the restructuring steps already implemented, the number of intermediary companies has been reduced by five since 31 December 2009, and by the year end the number will have been reduced by a further six intermediate or dormant companies.

The Company has also embarked on a cost savings programme within TechnomarketDomo N.V. in order to maximise operational efficiency.

Hedging

The Company and its subsidiaries maintain their existing cash balances where possible in Euro. However, the debt of the subsidiaries is largely denominated in Euro and these debts have not been hedged to local currencies. The Bulgarian Leva is pegged to the Euro and the Company expects that this peg should be maintained at the current level.

Consolidated financial statements

The consolidated financial statements and related comments in this report provide details on the major account movements since 31 December 2009. The 2008 comparative consolidated financial statements have been restated to account for the errors, which were identified during the current year (reference to paragraph Errors on pages 45-46).

Copies of the annual accounts will be available from Trans Balkan Investments Limited, c/o Hamilton Lunn, 5th Floor, Audley House, 13 Palace Street, London SW1E 5HX, UK or can be downloaded from the company's website www.transbalkaninvestmentslimited.com.

TBIL Management

15 December 2010

DIRECTOR'S REPORT

The Directors of the Company ("the Directors") present their report and consolidated financial statements for the year ended 31 December 2009.

Principal activity and incorporation

The Company is an investment holding company, incorporated on 10 December 2003 under the laws of the British Virgin Islands. The Company changed its name from Equest Investments Bulgaria Limited to Equest Investments Balkans Limited on 20 December 2006 and subsequently to Trans Balkan Investments Limited ("TBIL") on 9 February 2010.

The Company's core focus is to optimise the growth of TechnomarketDomo N.V., the Company's electronics retailer; to maximise the value of Borovets, the mountain resort development, and to sell the remaining, non-core assets.

Results and dividends

The Group's results for the year ended 31 December 2009 are set out in the Consolidated income statement and Consolidated statement of comprehensive income on page 22 and page 23.

A review of the Group's activities is contained within the Chairman's Statement and the Management's Review on pages 3 and 6 respectively.

No dividend has been declared for the year ended 31 December 2009.

Governance

The Directors recognise the value of the Principles of Good Governance and Code of Best Practice as set out in the Combined Code and, although the Company is not obliged by the AIM listing rules to do so, they intend, where appropriate, to comply with the main provisions of the Corporate Governance Code to the relevant extent, taking into account the size of the Company and the nature of its business.

Responsibilities of the Board

The Board of Directors is responsible for the determination of the strategy of the Company and for overall supervision of the objectives that have been set. The Board also has responsibility for the Company's day-to-day operations and in order to fulfil these obligations, the Board has delegated executive authority to the Directors and management of the Company.

At each of the regular Board meetings held, the financial performance of the Company is reviewed. In addition, the members of the Board receive regular reports from the management.

Directors

The current Directors are as stated below. The Directors served throughout the year unless otherwise stated.

Mr. Kieron O'Rourke resigned on 4 February 2009. Messrs. Warith Al-Kharusi, Faisal Al-Riyami, Kalim Aziz and Guido Brera were appointed on 25 February 2009, with George Krumov being re-appointed on the same day. Ian Schmiegelow was appointed Non-executive Chairman of the Company on 31 March 2009 replacing Mr. John Carrington. Mr. George Krumov and Mr. Kari Haataja resigned on 8 September 2009 and 6 November 2009 respectively. Petri Karjalainen retired by rotation at the AGM held on 6 October 2009 and was not re-elected.

The Board of the Company comprises six Non-executive Directors. Of the six Non-executive Directors, two are considered to be independent. Brief biographical details of the members of the Board are set out below:

Ian Schmiegelow (Independent Non-executive Chairman)

Mr. Schmiegelow (67) spent sixteen years with Hambros Bank where he became the Executive Director responsible for its international banking and bond issuance activity, following his studies at Cambridge University and practice in London as a barrister. Thereafter, as a Senior Vice President of First National Bank of Chicago, he directed a review of its international activities and was Chairman of the management committee responsible for the bank's operations in the UK, Europe, Middle East and Africa. Mr Schmiegelow is Chairman and Chief Executive of Hamilton Lunn which he set up, together with his then business partner, in 1988 as a regulated corporate advisory firm. Hamilton Lunn now provides corporate finance, asset management and property investment advisory and management services to its clients. Mr Schmiegelow is also a Governor of Oundle School.

Warith Al-Kharusi(Non-executive Director)

Mr. Al-Kharusi (58), a resident of Oman, joined the State General Reserve Fund of the Sultanate of Oman ("SGRF") in 1985 as the Director General and is now the Chief Executive Officer of the SGRF. He holds a Diploma in Business Administration.

Faisal Al-Riyami(Non-executive Director)

Mr. Al-Riyami (34), a resident of Oman, joined SGRF in June 2007 as the Section Head of Direct Investments of the SGRF. Prior to joining SGRF Mr. Al-Riyami spent nine years working in various corporate roles mainly in banking and later telecoms and I.T.

Kalim Aziz (Non-executive Director)

Mr. Aziz (44) joined Kairos in January 2006 and is the Co-fund Manager of the Kairos Eurasian Fund with Guido Brera, and is the primary analyst at Kairos for stocks in the Eurasian markets. Before joining Kairos, he was Head of Equity research for the EMEA Region at UniCredit Banca Mobiliare in London. Previously Mr. Aziz has specialised in Telecoms research and he held a number of senior research positions at securities houses in London and Karachi. Mr. Aziz holds a Masters in Business Administration from the University of Karachi.

Guido Brera (Non-executive Director)

Mr. Brera (41) is a Co-founder of Kairos. He graduated from Universita La Sapienza, Rome and qualified as a Dottore Commercialista (the equivalent of a chartered accountant) in 1993. In 1994, he joined Fineco SIM, concentrating on relative value trades, calendar spreads, stock index futures arbitrages and the establishment of structured products for institutional clients. In 1996, he joined Cisalpina Gestioni as manager of the Cisalpina Bilanciato and Cisalpina Indice funds. In 1997, he joined Giubergia Warburg as director, Head of Proprietary Trading, leaving to establish Kairos in early 1999. Mr. Brera has been Co-manager of Kairos Fund Limited since its inception in June 1999.

Robin James(Independent Non-executive Director)

Mr. James (65) is based in the Isle of Man and, until he retired in June 2005, was CEO of the banking and financial services group, Singer & Friedlander (Isle of Man) Holdings Limited. Mr James is currently licensed by the Isle of Man Financial Supervision Commission and is a Non-executive Director of a diverse number of companies including listed companies. Mr James spent nine years with Kleinwort Benson Limited in the UK and South Africa. He is also Chairman of the Company's Audit Committee.

Interests of the Directors in contracts with the Company

Any interests the Directors, or companies that they are connected to, had during the year under review in relation to contracts for services with the Company other than as Directors are set out in note 32 "Related party transactions" to the consolidated financial statements.

Directors' service contracts

The following Directors have entered into letters of appointment with the Company, details of which are set out below:

 
 Name               Title           Annual            Appointed       Resigned 
                                    remuneration 
 Ian Schmiegelow    Non-executive   EUR40,000         31 March 2009 
                     Chairman 
 Warith             Non-executive   EUR30,000         25 February 
 Al-Kharusi          Director                          2009 
 Faisal Al-Riyami   Non-executive   EUR30,000         25 February 
                     Director                          2009 
 Kalim Aziz         Non-executive   N.A.*             25 February 
                     Director                          2009 
 Guido Brera        Non-executive   N.A.*             25 February 
                     Director                          2009 
 Robin James        Non-executive   EUR30,000         01 May 2007 
                     Director

* Directors have waived their right to be paid a fee in consideration for acting as a Non-executive Director of the Company.

Share capital

As at the date of this report, the Company has 18,265,890 ordinary shares of no par value in issue. The Company's ordinary shares are traded on the AIM Market operated by the London Stock Exchange plc in pounds sterling. However the Company's reporting currency is the Euro to reflect the underlying assets and liabilities in the Balkan region.

Share warrants

On 25 April 2008, as part of the reorganisation of the Company's management structure, the Company's shareholders approved the grant of warrants to Equest Capital Limited ('ECL') entitling ECL to purchase 564 925 ordinary shares in the Company. The warrants are exercisable, if and to the extent that they are still subsisting, at any time after 1 January 2009 on a condition, inter alia; that the net asset value per ordinary share reported immediately prior to the exercise of the Warrants is not less than the audited net asset value per ordinary share as at 31 December 2007. The warrants cease to be exercisable, inter alia following a change of control of the Company. ECL is owned by Trusts set up by the former Executive Directors of TBIL, Mr. Haataja, Mr. Karjalainen and Mr. Krumov, and ECL in turn has transferred the ownership of the warrants equally to its shareholders.

The Company does not operate any employee share option schemes.

Committees

The Management Committee, which comprised Warith Al-Kharusi (Chairman), Faisal Al-Riyami, Kalim Aziz, Kari Haataja, Petri Karjalainen and George Krumov, had regular monthly or weekly meetings and maintained active participation in the execution of Company strategy and overseeing operational activities, together with the management. This committee was disbanded following changes made to the Board during the course of the year.

The Audit Committee, which comprises Faisal Al-Riyami, Robin James (Chairman) and Ian Schmiegelow, meets at least three times each year. The committee monitors the integrity of the consolidated financial statements of the Company and any formal announcements relating to the Company's financial performance. It also reviews regular reports from management and the external auditors on accounting and internal control matters. Where appropriate, the committee monitors the progress of action taken in relation to such matters.

The Operating Committee which is comprised of Ian Schmiegelow, Natalie Weedon, Zdravka Kostadinova, Elena Fournadjieva, Tero Halmari and Nina Girginova meets on average twice a month to discuss, update, prioritise and assign responsibilities for key operational issues.

The Directors also monitor and plan performance, remuneration and succession of the Board, either through board meetings or, if appropriate, through the use of appropriately constituted committees of the Board.

Auditors

A resolution will be submitted to the forthcoming Annual General Meeting of the Company to re-appoint the current auditors of the Company, for the ensuing year.

Post consolidated statement of financial position events

A summary of the significant transactions entered into by the Company and its subsidiaries subsequent to 31 December 2009 is included in note 34 of the consolidated financial statements.

Relations with shareholders

The Company is committed to maintaining an effective dialogue with its shareholders. Shareholders will have the opportunity at the Annual General Meeting of the Company to ask questions about the Company's activities and performance.

Company website

To provide a portal for investor information and in accordance with the requirements of AIM, the Company maintains a website at: www.transbalkaninvestmentslimited.com.

Annual General Meeting

The Directors are proposing a number of ordinary resolutions at the Annual General Meeting of the Company to be held in early 2011, including a resolution requesting approval of the Company's investment strategy as required under the AIM rules.

On behalf of the Board of Directors

Ian Schmiegelow

Statement of Directors' responsibilities in respect of the Annual Report and the consolidated financial statements

The Directors are responsible for preparing the Annual Report and the consolidated financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare consolidated financial statements for each financial year. Under that law the Directors have elected to prepare the consolidated financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The consolidated financial statements are required by law to give a true and fair view of the state of affairs of the Company and Group and of the profit or loss of the Group for that period.

In preparing those consolidated financial statements, the Directors are required to:

-- select suitable accounting policies and then apply them consistently;

-- make judgements and estimates that are reasonable and prudent;

-- state that the consolidated financial statements comply with International Financial Reporting Standards as adopted by the European Union, subject to any material departures disclosed and explained in the consolidated financial statements;

-- prepare the consolidated financial statements on a going concern basis unless it is inappropriate to presume that the group will continue in business.

The Directors confirm that they have complied with the above requirements in preparing the consolidated financial statements.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the company and the group and to enable them to ensure that the consolidated financial statements comply with the British Virgin Islands laws and regulations. They are also responsible for safeguarding the assets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the British Virgin Islands governing the preparation and dissemination of consolidated financial statements may differ from legislation in other jurisdictions.

On behalf of the Board of Directors

Ian Schmiegelow

Consolidated income statement for the year ended 31 December 2009

 
                                             Notes                 (Restated) 
                                                      Year ended   Year ended 
                                                      31/12/2009   31/12/2008 
                                                         EUR'000      EUR'000 
------------------------------------------  -------  -----------  ----------- 
 Revenue                                       2         560,868      625,140 
 Cost of sales                                         (469,871)    (518,408) 
------------------------------------------  -------  -----------  ----------- 
 Gross profit                                             90,997      106,732 
 
 Other operating income                                      389        1,513 
 Administration, selling and distribution 
  costs                                        3        (89,685)    (117,806) 
 Impairment of assets                          4        (64,577)      (6,228) 
 (Loss) from fair value adjustment 
  of investment property                                 (7,610)      (1,176) 
 (Gain)/ loss on disposal of investment 
  property                                                 3,816      (6,217) 
 Gain/(loss) on sale of investments            6          12,793        3,888 
 Share of post tax losses of associates 
  and joint ventures                         16, 17     (10,028)     (28,288) 
------------------------------------------  -------  -----------  ----------- 
 Operating (loss)                                       (63,905)     (47,582) 
 
 Finance income                                7           2,135        3,185 
 Finance costs                                 7        (10,905)     (17,289) 
 (Loss) before tax                                      (72,675)     (61,686) 
 Taxation                                      8           (863)        (728) 
------------------------------------------  -------  -----------  ----------- 
 (Loss) from continuing operations                      (73,538)     (62,414) 
 Profit/(loss) on discontinued operation, 
  net of tax                                   9          25,308     (72,158) 
------------------------------------------  -------  -----------  ----------- 
 (Loss) for the year                                    (48,230)    (134,572) 
 Attributable to: 
 - Owners of the parent                                 (46,143)    (133,760) 
 -Non-controlling interest                               (2,087)        (812) 
------------------------------------------  -------  -----------  ----------- 
                                                        (48,230)    (134,572) 
------------------------------------------  -------  -----------  ----------- 
 Earnings per share for (loss)/ profit 
  attributable to 
 the equity holders of the parent during 
  the year 
 (basic and diluted)                           10 
 - Continued operations                                   (3.91)       (3.46) 
 - Discontinued operations                                  1.39       (4.05) 
------------------------------------------  -------  -----------  ----------- 
                                                          (2.52)       (7.51) 
------------------------------------------  -------  -----------  -----------

The consolidated financial statements on pages 22 to 29 were approved and authorised for issue by the Board of Directors on 14 December 2010 and were signed on their behalf by:

 
 Ian Schmiegelow          Robin James 
 Non-executive Chairman   Non-executive Director