TBIH Financial Services Group NV

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Strictly Private Confidential

March 2004 Presentation to ADVENT
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Consumer Leasing in Bulgaria?

• UNDERDEVELOPED MARKET
• Consumer leasing was started only in 1998
  volumes are still small and there are only few
  players
• Key success factors presence in the retail
  network, funding, products
• Successful underwriting is crucial
• SUBSTANTIAL GROWTH PROSPECTS
• Consumer leasing is becoming a vehicle for people
  to acquire consumer goods
• Sizable market (8 million people) - financing
  needs of individuals are considerable and not
  covered by the banks
• In the Bulgarian market banks can serve only a
  small part of potential consumer finance clients
• PROFITABILITY
• Net margins will likely remain high

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BULGARIAN CONSUMER LEASING MARKET

• Main players
• Independent with national presence TBI Credit,
  Euroline and Jet Credit
• Regional small and not able to grow, expensive
• Banks now active in consumer lending limited
  to prime credit risk clients
• Market Share

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FUTURE MARKET TRENDS

• Demand and business volume will increase
• The product range of leased goods will broaden
• Retailers/distributors will continue to
  outsource the leasing service
• Companies will move into consumer finance and
  other products
• Risk management will improve - launch of credit
  bureau, more track record, etc.
• Interest rates will decrease
• Banks will play an increasing role, especially
  in the prime market

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About TBI Credit EAD

• Established in 1998 as Telervis Bulgaria AD and
  acquired by TBIF in November 2002
• The leading provider of consumer leasing in
  Bulgaria
• about 45 market share
• presence in over 700 merchants in over 71 cities
  in the country
• Client base of over 150,000 with 110,000 active
  contracts
• Powerful IT system
• Proven track record, working business model and
  sustainable profitability
• Well developed risk management procedures

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TBI Credit EAD Performance Highlights

• Performance highlights Year 2003
• Number of active contracts over
  110,000
• Total portfolio outstanding-Dec03 Euro
  17.8 million
• Total turnover for 2003 Euro 27
  million
• Number of contracts for 2003 82,155
• Number of contracts for December03 14,044
• Average value of leasing contract Euro 390
• Average contract duration around 12 months
• Number of retail partners 700

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TBI Credit EAD PRODUCT FOCUS

• Consumer leasing
• The following pie chart represents the volumes of
  5 main groups of products
• Financing of distributors and retailers
• Assist our retail partners to increase their own
  sales and the leasing through TBI Credit

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TBI Credit EAD PRODUCT FOCUS (2)

• Consumer finance
• First stage Consumer funding to pre-selected low
  credit risk clients
• TBI Credit good clients with track record
• Doverie pension fund members (around 1 million)
• Clients with life insurance policies as
  collateral
• Employees of the TBIH corporate clients
• Second stage Extend the product to other
  clients
• Revolving credit for consumers
• Store cards
• Overdraft facilities as part of framework
  agreements with employers
• Credit cards

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TBI Credit EAD Product Distribution

• Retail network
• Contracts with over 700 POS in 71 cities
• Cross-selling with other TBIH companies
• Over 150 offices throughout Bulgaria
• Client database of TBIH sister companies
• Repeat sales to the best TBI Credit clients
• Joint loyalty programs with key partners
• E-channels

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Modus Operandi

• Rigorous selection process and underwriting
• Leasing application
• Data verification, including personal visits and
  employment verification
• Limited number of leasing contracts per client
• Tracking
• Strict monitoring of payments and active
  collections measures
• High efficiency over 450 contracts per day
  signed
• Risk insurance
• Close co-operation with retailers and
  distributors
• Powerful IT system
• Development of an expert risk management system

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IT SYSTEM

• The introduction of a new, Oracle-based software
  ORA TBI was commenced at the end of 2003. The
  system
• is based on an Oracle 9 database, giving greater
  possibilities at operational level and with
  regard to the processing and storage of an
  enlarged volume of data by means of fewer
  resources
• allows work from remote terminals with a greater
  level of data protection and minimum amount of
  traffic
• operational flexibility during data processing
• can be used for reporting purposes in connection
  with all financial products offered by TBI
  Credit
• quick and relatively easy to adapt to the dynamic
  changes in the companys activities

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RISK MAMAGEMENT EXPERT SYSTEM

• The expert system will be based on the credit
  history contained in the companys database,
  reflecting the cumulative knowledge gained from
  the companys experience on the market.
• The expert system will allow for
• evaluation and analysis of the achieved results,
  in regard to the delayed payments and reflecting
  the different products, regions, representatives,
  etc.
• prevention of default as a result from the
  findings from above
• optimising the costs of monitoring, prevention
  and control
• Additionally the system will provide the company
  with a major competitive advantage on the POS
  credits and consumer finance market, allowing for
  immediate reply to the client
• Final implementation expected mid 2004

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STRUCTURE AND FUNCTIONS OF THE SALES AND
MARKETING DEPARTMENT

• More than 700 retail partners in 71 cities in
  Bulgaria
• Close cooperation with all TBIH companies
  throughout Bulgaria
• The major marketing functions performed include
• establishing and maintaining clients relationship
  with both retailers and individuals
• approaching potential retail partners and
  presenting to them the financial product offered
  
• negotiating and drawing-up the contracts with
  retailers
• provide trainings to retailers
  representativesconcerning terms of financing
  flow of operations and documentation flow,
• operational support provision if needed when
  sales to end client performed
• follow up procedures and monitoring of retailers
  performance, in term of
• number of contracts generated
• quality of contracts generated
• implementation of systems for retailers
  evaluation and ranking
• development of incentive schemes for retailers
  with satisfactory performance
• developing new products
• collecting information about the competition on
  the leasing and consumer finance markets and
  initiating response activities

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RISK MANAGEMENT

• General eligibility requirements
• General exposure limit
• max BGN 3,000 per clients for consumer finance
• max BGN 10,000 per client for POS credits
• General terms
• between 3 and 18 monthsfor consumer finance
• between 3 and 24 months- for POS credits
• General requirements
• max installment due- ¼ of net monthly income
• clients with positive track record preferred
• TBIH Group employees preferred
• individuals with Bulstrad insurance preferred
• Doverie Pension Fund members preferred

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RISK MANAGEMENT

• Financing individuals analysis criteria
• Capacity of Payment
• Net income, Family Income
• Job, company, employment details
• Age, Marital Status, family members supported
• Properties owned (house, car, land, others)
• Debts (loans, rentals payable, etc.)
• Second contact person details
• Financed amount
• Total exposure to a client
• Asset details (if applicable, e.g. for leasing
  contract)
• Down payment
• Asset value
• Re marketing potential
• Difficulties in re possession

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COLLATERALS REPOSSESSION OF THE LEASED ASSETS

• COLLATERALS USED
• Promissory notes
• Direct debit as payment instrument-applied for
  the consumer finance product
• Additional guarantees required for higher risk
  files, regarding clients solvency or type/value
  of leased assets.
• REPOSSESION OF THE LEASED ASSETS
• Leasing contracts empower the Lessor with
  execution title, according to Bulgarian Laws
• Leased assets repossessing procedure can be
  initiated after 60 days of delays, according to
  leasing contract
• Legal procedure can start at the same time with
  enforcing promissory notes with execution rights.
  Thus, there are two parallel ways of recovering
  bad debts. After remaining amount is recovered,
  leasing company will return any surplus in forced
  execution

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OPERATIONS DEPARTMENT

• RESPONSIBILITIES
• Negotiations with client and questionnaires
  preparation are held at the representatives
  shops throughout the country
• After receiving an approval from the Head office
  the authorized representative is checking the
  client status based on the questionnaire
• The contract signed together with the down
  payment collected from the client are to be sent
  to the Head office
• Leasing contracts data input into the database
• Payments to suppliers are ordered
• Registration and insurance of the leasing
  contracts collected
• Follow-up of the lease payments
• Draw all the necessary reports for management
  purposes regarding clients in delay, default
  clients, etc.

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ACCOUNTING DEPARTMENT

• RESPONSIBILITIES
• CONTROL functions
• Control and coordination of payment and
  collection activity
• Coordinate the budgetary process of the company
• Periodically produces variance report
  highlighting any departure from the budget
• Coordinate the bank loans applications
• Organize and coordinate internal audit activity
• Assure the accuracy of the software records

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TBI Credit EAD Turnover per month
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TBI Credit EAD - Number of contracts per month
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TBI Credit EAD Outstanding Investment in Leases
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Financial Highlights 2002-2003
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TBI CREDIT EAD FINANCIAL HIGHLIGHTS 2002/2003
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TBI CREDIT EAD FINANCIAL HIGHLIGHTS 2002/2003
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SWOT ANALYSIS

• STRENGHTS
• Member of a Group specialized in providing
  financial services
• Leader in consumer leasing
• Efficient organisation of work, well developed IT
  and strong monitoring flexibility and user
  friendly
• Strong distribution network, brand awareness and
  good reputation among distributors
• Substantial client base
• Good relationship with financial institutions

• WEAKNESS
• No affiliation to a bank or producer, makes it
  difficult to compete on price

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SWOT ANALYSIS (2)

• OPORTUNITIES
• Expected growth of the consumer leasing market
• Development of consumer finance and other new
  products
• Increase in client base due to synergies with
  Doverie and Bulstrad
• Increase in sales due to diversification of
  product range

• THREATS
• Banks are likely to get more aggressive in
  consumer lending
• Foreign players entering the market

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TBI Credit EAD - Strategy

• Increase sales and overall profitability by
• expanding activities to more commercial outlets
• achieving full geographical coverage
• introducing new products ahead of competition
• increasing client base though synergies with
  Doverie and Bulstrad
• Maintain the tight control procedures and reduce
  default rate
• Ensure sufficient funding to support expansion
• Become a main player in consumer finance
• Develop revolving credit facilities for
  consumers

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TBI Credit EAD Financial Projections

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TBI Credit EAD Financial Projections

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TBI Credit EAD Financial Projections