We have audited the accompanying balance sheet of Center for the Study of Democracy (hereafter "CSD") as of 31 December 1994 and the related statements of income and expenditure and changes in financial position for the year then ended. These financial statements are the responsibility of CSD management; our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit based upon International Standards on Auditing which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining on a test basis evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.

As explained in note 2 and consistent with other entities in Bulgaria, International Accounting Standard No 29 _Financial Reporting in Hyper-inflationary Economies" has not been applied despite the hyper-inflationary environment in Bulgaria.

In our opinion subject to the matter discussed in the third paragraph of this report the accompanying financial statements present fairly in all material respects, the financial position of CSD at 31 December 1994 and the result of its operations and its changes in financial position stated in Bulgarian Leva for the year then ended in conformity with International Accounting Standards and the CSD accounting policy and statutes.

Price Waterhouse

Sofia, Bulgaria , 5 May 1995