Dear clients,

In connection with Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories, as well as all relevant and related to this Regulation European and national regulations, including but not limited to implementing / delegated regulations ("EMIR"), it is necessary to supplement the contractual relations between UniCredit Bulbank AD and its clients, with whom the Bank has signed master agreements for financial transactions.

In this regard, below you can find short answers to some of the most frequently asked questions related to the provisions of EMIR.

What is EMIR?

EMIR is a Regulation of the European Union (and being such it is applied directly by the competent authorities of the entities affected by its provisions in the member states without need for its transposition into the national legislation by express enactment), whose aim is to regulate the market for derivative financial instruments in order to make it more transparent and simultaneously mitigating system risks, which are characteristic of this market.

What are the main requirements of EMIR?

1. Obligatory clearing via a central counterparty of some groups of OTC derivatives;

2. Reporting of all concluded and active transactions having as a subject a derivative financial instrument to a trade repository;

3. Introduction of the so called “Technical Standards for Risk Mitigation”, connected with OTC derivatives, which are not subject to obligatory clearing. Such technical standards are: timely confirmation of concluded OTC derivatives transactions; portfolio reconciliation; dispute resolution, etc.

Who will be affected by the provisions of EMIR?

All entities established in a member state, which are trading in the OTC derivatives market, except for such that are explicitly listed in the Regulation (for instance, central banks and natural persons performing no commercial activity), will be affected by the provisions of EMIR.

Entities whose country of establishment is outside the European Union will be affected by the provisions of EMIR as long as they are dealing in the OTC derivatives market with an entity established in a member state.

What kind of transactions are subject to the provisions of EMIR?

The term “derivative” is defined in EMIR by reference to Directive 2004/39/ЕC on markets in financial instruments (MiFID). Derivatives are: options, futures, swaps, forward rate agreements and any other derivative contracts relating to securities, currencies, interest rates, income, goods, assets, rights, obligations, indices and measures; derivative instruments for the transfer of credit risk, financial contracts for differences. The implementation of EMIR regarding FX instruments is not fully clarified. FX instruments are not explicitly excluded from the scope of EMIR. That notwithstanding, it is accepted that the provisions of EMIR will not find application in the conclusion and execution of FX spot transactions. The opinion of the European Commission or ESMA on the matters regarding treatment of FX forward transactions in the context of EMIR is being expected.

Why is it necessary to amend the contracts and the agreements, concluded by UniCredit Bulbank AD with its counterparties and having as their subject transactions with OTC derivative financial instruments?

The provisions of EMIR enforce that the parties to transactions with OTC derivatives shall agree on rules and procedures with regard to the introduction and implementation of some of the Technical Standards for Risk Mitigation (in particular, portfolio reconciliation, as well as identification of disputes and dispute resolution), prior to concluding transactions. For this reasons, in order the parties to contracts/ agreements having as their subject transactions with derivative financial instruments to be able to conclude OTC derivatives transactions after 15.09.2013, their signed contract/agreement should be reconciled with the provision of EMIR. In case the parties conclude a contract for a derivative financial instrument, which does not comply with the requirements of EMIR, they will be subject to administrative sanctions.

To access the full text of Regulation (EU) No. 648/2012, click here (http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:052:0011:0024:BG:PDF).

For more information regarding the requirements of the Regulation, you can address your servicing banker or Corporate Sales and Derivatives Unit: +359 (2) 9320 122; +359 (2) 9320 123; +359 (2) 9320 124; +359 (2) 9320 125.

Respectfully,

UniCredit Bulbank AD