HELLENIC SEAWAYS MARITIME S.A.

Transcription

1 HELLENIC SEAWAYS MARITIME S.A. Annual Consolidated and Financial Statements for the fiscal year 2008 ( ) In accordance with the International Financial Reporting Standards (IFRS)

2 HELLENIC SEAWAYS MARITIME S.A Table of Contents Page Annual Financial Statements in accordance with the International Financial Reporting Standards (IFRS) for the fiscal year BALANCE SHEET...5 INCOME STATEMENT...6 STATEMENT OF CHANGES IN CAPITAL RESERVES...7 CASH FLOW STATEMENT...8 Notes to the annual financial statements for the fiscal year General information regarding the and the Basis of preparation of financial statements General basis New accounting standards, adjustments and interpretations Standards and Interpretations mandatory for the fiscal year Standards and Interpretations mandatory after the 31 st December Adjustments in standards that comprise a part of the IASB s program for annual improvements Basic Accounting Policies Use of Management s judgments and estimations Basis of Consolidation Subsidiaries Intercompany transactions Conversion of amounts in foreign currency Intangible assets Tangible assets Impairment of assets Inventories Financial instruments Trade receivables / other receivables Financial assets held for trading Cash and cash equivalents Borrowings Suppliers and other payables Retirement benefit provisions Other provisions / Possible payables and receivables Income tax (current and deferred) Operating leases Recognition of income Recognition of expenses Reallocation of funds Intangible and tangible assets Investments in subsidiaries Inventories Trade receivables Other receivables and other assets Financial assets held for trading Cash and cash equivalents Share capital and share-premium account Other reserves Retained earnings Long-tem loans

3 HELLENIC SEAWAYS MARITIME S.A 15. Retirement benefit provisions Trade and other payables Short-term bank liabilities Accrued expenses and next years deferred income Turnover (sales) Cost of sales Other operating income Administrative expenses Distribution expenses Other operating expenses Financial income Financial expenses Profits (losses) coming from vessels sales Income taxes Profits per share after taxes Dividends Provisions, contingent liabilities and contingent assets Contingent liabilities Contingent assets Transactions between related parties Receivables Payables of related parties Purchases sales to related parties Board of Directors and basic executive directors fees Financial risk management Credit risk Liquidity risk Market risk Capital management Events after the balance sheet date

4 HELLENIC SEAWAYS MARITIME S.A Annual Financial Statements in accordance with the International Financial Reporting Standards (IFRS) for the fiscal year 2008 It is assured that the accompanying Financial Statements are those that are approved by the Board of Directors of Hellenic Seaways Maritime S.A. on March 18 th, Yannis I. Vardinogiannis The Chairman of the Board of Directors of 4

5 BALANCE SHEET ASSETS Notes Fixed assets Intangible assets Tangible assets Invetments in subsidiary companies Non-current receivables Total fixed assets Current assets Inventories Trade receivables Other receivables and other current assets Financial assets held for trading Cash and cash equivalents Total current assets TOTAL ASSETS CAPITAL RESERVES AND LIABILITIES Capital reserves Share capital Share premium Other reserves Retained earnings Total shareholders' equity Minority interests in subsidiaries Total capital reserves Long-term debt Long-term loans Retirement benefit provisions Other provisions Total long-term debt Current liabilities Accounts payables and other payables Short-term bank obligations Deferred income and accrued expenses Total current liabilities Total liabilities TOTAL CAPITAL RESERVES AND LIABILITIES Due to rounding there may be minor differences in some amounts 5

6 INCOME STATEMENT Notes Revenue Cost of sales 20 ( ) ( ) ( ) ( ) Gross profit Other operating income Administrative expenses 22 (8.368) (8.165) (7.903) (7.750) Distribution expenses 23 (18.050) (15.871) (15.792) (14.589) Other operating expenses 24 (1.662) (4.246) (1.834) (4.202) Earnings before interests and taxes Financial income Financial expenses 26 (10.559) (7.294) (10.497) (7.836) Profit from sale of tangible assets Profit before taxes Taxes 28 (62) (322) (31) (297) Profit after taxes Attributable as follows: Parent 's Shareholders Minority interests in subsidiaries Total Earning after taxes per share Basic earnings after taxes per share (in euro) 29 0,1381 0,2239 0,0817 0,2515 Proposed dividend payable per share (in euro) 30 0,03 0,08 SUMMARY OF INCOME STATEMENT Earnings before interest, taxes, depreciation and amortization (EBITDA) Earnings before interest and taxes (ΕΒΙΤ) Earnings before taxes Earnings after taxes Due to rounding there may be minor differences in some amounts 6

7 HELLENIC SEAWAYS MARITIME S.A STATEMENT OF CHANGES IN CAPITAL RESERVES Fair value Retained Total capital Share capital Share premium Other reserves reserves earnings reserves Balance at Earnings (losses) from the valuation of available financial assets held for trading Transfer of loss coming from the hedging of cash flows directly at the income statement Profit from the period Balance at Approval of dividend for the fiscal year 2007 (6.209) (6.209) Transfer from other reserves to retained earnings (833) Transfer from the retained earnings to other reserves due to the formation of regular reserve 850 (850) 0 Transfer from the revaluation reserves to the profits (losses) due to sale of financial instruments (4.484) (4.484) Earnings (losses) from the valuation of available financial assets held for trading (3) (3) Profit from the period Balance at (8) Balance at (2.552) Earnings (losses) from the valuation of available financial assets held for trading Transfer of loss coming from the hedging of cash flows directly at the income statement Profit from the period Balance at Approval of dividend for the fiscal year 2007 (6.209) (6.209) Transfer from other reserves to retained earnings (833) 833 Transfer from the retained earnings to other reserves due to the formation of regular reserve 850 (850) 0 Transfer from the revaluation reserves to the profits (losses) due to sale of financial instruments (4.484) (4.484) Earnings (losses) from the valuation of available financial assets held for trading (3) (3) Profit from the period Balance at (8) Due to rounding there may be minor differences in some amounts 7

8 CASH FLOW STATEMENT Cash flow from operating activities Profit (loss) before taxes Plus / (Less) adjustments for: Depreciation and amortization Provisions Interests and other financial expenses Foreign exchange differences (11) (28) (9) (24) Net (profit) / loss from investing acivities (Interest income/dividends) (794) (722) (2.537) (8.229) (Profit) / losses from sale of fixed assets (14) (3.145) (14) (3.145) (Profit) / losses from sale of investements (5.140) 0 (5.140) 0 Net profit / (loss) before changes in working capital accounts Changes in working capital accounts (Increase) / Decrease: in Inventory 720 (720) 631 (397) (Increase) / Decrease: in Trade receivables (6.460) (355) (3.021) 90 (Increase) / Decrease: in Other receivables (6.448) (5.004) Increase / (Decrease): in Accounts payable and other payables (4.870) (5.698) (269) Increase / (Decrease): in Deferred income and accrued expenses (505) (1.268) (313) (1.436) Net profit / (loss) after changes in working capital accounts Interest received (10.494) (7.571) (10.482) (7.554) Taxes paid (226) (43) (200) (25) Net cash flow from operating activities (a) Cash flow from investing activities Acquisition of subsidiaries (22.000) Purchase of tangible assets and other intangible assets (5.060) (68.252) (310) (56.123) Acquisition of investments 0 (13) 0 (13) Proceeds from sale of assets Proceeds from sale of investments Increase / (Decrease): Payables to subsidiaries (3.360) Increase / (Decrease): in Non-current receivables Interests received Dividends received Net cash flow from investing activities (b) (57.268) (49.592) Cash flow from financing activities Proceeds from borrowings Payments from borrowings (22.016) ( ) (22.016) ( ) Dividends paid (6.179) (74) (6.179) (74) Net cash flow from financing activities (c) (19.195) (19.195) Net increase / (decrease) in cash and cash equivalents (a)+(b)+(c) (7.242) 834 (9.629) Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period Due to rounding there may be minor differences in some amounts 8

9 Notes to the annual financial statements for the fiscal year 2008 (01/01/ /12/2008) 1. General information regarding the and the The parent HELLENIC SEAWAYS (the ) is a maritime societe anonyme (SA) company, with the trademark HELLENIC SEAWAYS, and for its international deals bears the name HELLENIC SEAWAYS MARITIME S.A. The prior corporate name was HELLAS FLYING DOLPHINS S.A. and even before that it was named as MINOAN FLYING DOLPHINS S.A. The initial came from the rename and the change of goal and subject of activity of CERRES GREEK MARITIME BUSINESS S.A. (FEK 1118/ issue S.A. and L.L.C.). The headquarters of the are situated in Piraeus (6 Astiggos str., Square Karaiskaki, ). s share capital is divided into registered shares, which are held nowadays by more than natural and legal entities. of Companies (the ), apart from the parent, comprises the following subsidiary companies, which are fully controlled (participation percentage 100%) by the parent : Name Parent 's Percentage of Participation Registered Office Hellenic Seaways Cargo Shipping Co 100% Greece Hellenic Seaways Management S.A. 100% Liberia Trailer Shipping Ltd * 100% Cyprus Sea Hawk Marine S.A.* 100% Marshall Islands *Inactive companies. The operates in the sector of passenger shipping by providing services of maritime transportation to passengers and goods both in Greece and abroad. The parent HELLENIC SEAWAYS S.A. operates mainly in the Greek coastal market with a fleet of owned passenger and Pax Ro vessels, under Greek flag, while the subsidiary company HELLENIC SEAWAYS CARGO Shipping Co. operates in the route Greece - Italy with a fleet of owned Ro Ro vessels, under Greek flag too. The foreign companies TRAILER SHIPPING COMPANY LTD and SEA HAWK MARINE S.A. were established for the management of vessels under a foreign flag and after the sale of those vessels the companies remain inactive. The foreign HELLENIC SEAWAYS MANAGEMENT S.A., which is established in Greece, pursuant of Common Law 89/1967, is dealing with the management of vessels that belong to the and operate abroad. All the above mentioned subsidiaries are included in the consolidated financial statements of the with the method of full consolidation. The number of the employed personnel on December, 31 st 2008 reaches the 635 employees for the (from whom the 498 employees are employed as crew in its vessels) and the 767 employees for the (vessels crew 612 employees). 9

10 The is consolidated as a related company, following the method of net equity in the consolidated financial statements of the Cypriot company SEA STAR CAPITAL PLC (it owns a percentage of 34,70% of HELLENIC SEAWAYS S.A. share capital) and the Greek company MINOAN LINES S.A. (it owns a percentage of 33,35% of HELLENIC SEAWAYS S.A. share capital). 2. Basis of preparation of financial statements 2.1 General basis The annual company and consolidated financial statements as of 31 st December 2008 ( Financial Statements ) have been prepared in accordance with the International Accounting Standards / International Financial Reporting Standards ( IAS / IFRS ), as they have been published by the International Accounting Standard Board ( IASB ) and the International Financial Reporting Interpretations Committee and are adopted by the European Union. The financial statements have been prepared based on the going concern principle and on the historical cost concept as it is modified by the adjustment of specific items in the Assets and Liabilities and Equity s accounts at their fair value. Additionally, it is noted that the applied the IFRS 1 First implementation of IFRS during the preparation of the financial statements for the fiscal year 2007, which were the first that were prepared according to the IFRS, on the date of transition to IFRS 1, the 1 st January New accounting standards, adjustments and interpretations International Accounting Standards Board (IASB) as well Interpretation Committee of IFRS (IFRIC) have issued a range of new IFRS, adjustments and interpretations, which are mandatory for accounting periods starting from the current fiscal year or subsequently. The view of the and the about the effect of the application of those new standards, adjustments and interpretations is set out below: Standards and Interpretations mandatory for the fiscal year 2008 IAS 39 (Adjustment) Financial instruments: Recognition and Measurement and IFRS 7 (Adjustment) Financial Instruments: Disclosures Reclassification of Financial Instruments (COMMISSION REGULATION (EC) No. 1004/2008 of 15 October 2008 L ) It is applied since the 1/7/2008. This adjustment allows to an entity to reclassify non-derivative financial assets (excluding those that were classified by the company at fair value through profit or loss category during their initial recognition) to a different category than the fair value through profit or loss category in specific circumstances. The adjustment also allows to an entity to transfer from the available for trading category to the loans and receivables category a financial asset that could have met the definition loans and receivables (if it had not been designated as available for trading), since the entity has the intention and the ability to hold the financial asset for the foreseeable future. The above mentioned adjustment has no impact on the s and the s financial statements. IFRIC 11 - IFRS 2: and Treasury Share Transactions (COMMISSION REGULATION (EC) No. 611/2007 of June 2007, L ) It is applied to the annual accounting periods commencing on 1/3/2007 or subsequently. This interpretation provides guidelines for the accounting treatment of cases where the employees of a subsidiary company receive equity instruments of the parent equity. Additionally, it clarifies whether certain transactions should be accounted for as equity-settled or as cash-settled. This interpretation has no impact on the s and the s financial statements. IFRIC 14 Limits on Defined Benefit Assets, Minimum Finding Requirements and their Interaction 10

11 (COMMISSION REGULATION (EC) No. 1263/2008 of 16 December 2008, L ) It is applied to the annual accounting periods commencing on 1/1/2008 or subsequently. This interpretation deals with employees benefits after their retirement from the company and with other long-term programs of specified benefits towards the employees. The interpretation clarifies: a) When economic benefits in the form of refund or reductions in future contributions to the programs should be considered as available, b) How the existence of contractual minimum funding requirement have an impact on the measurement of the asset representing the funding surplus in terms of reductions of future contributions and c) Under what circumstances the existence of contractual minimum funding requirements give a rise to a liability. Because the and the do not have such employees benefit programs, this interpretation has no impact on the s and the s financial statements Standards and Interpretations mandatory after the 31 st December 2008 IAS 1 (Revised 2007) Presentation of Financial Statements Applies to annual accounting periods commencing on 1/1/2009 or subsequently. (COMMISSION REGULATION (EC) No. 1274/2008 of 17 December 2008, L ) IAS 1 has been revised in order to upgrade the utility of the information that are presented in the financial statements. The most important changes are: a) The statement of changes in capital reserves must include only the transactions with equity owners, b) The introduction of Statement of Comprehensive Income that combines all the profit and loss data, which are registered in the income statement in the other income category, and c) Changes in titles of some of the financial statements or retrospective application of new accounting standards and methods should be presented from the beginning of the most recent period. The Regulation is accompanied by an appendix of equivalent adjustments of limited extend in several IAS, IFRS, IFRIC and SIC that apply for periods commencing on or subsequently. The and the will implement the above mentioned adjustments and will proceed with the necessary changes in the presentation of the financial statements for the fiscal year IAS 23 Borrowing Costs (Revised 2007) (COMMISSION REGULATION (EC) No. 1260/2008 of 10 December 2008, L ) Applies to annual accounting periods commencing on 1/1/2009 or subsequently. This standard replaces the previous edition of IAS 23. The main difference from the previous version is the removal of the option of immediately recognizing as an expense borrowing costs that relate to assets that take a substantial period of time to get ready for use or sale. Furthermore, some adjustments took place in IFRS 1, IAS 1, IAS 7, IAS 11, IAS 16, IAS 38 and IFRIC 1 that apply commencing on 1/1/2009 or subsequently. The and the will implement the IAS 23 commencing on 1/1/2009. IAS 32 (Adjustment) Financial Instruments: Presentation and IAS 1 (Adjustment) Presentation of Financial Statements - Financial Instruments available by the holder (COMMISSION REGULATION (EC) No. 53/2009 of 21 January 2009, L ) Applies to annual accounting periods commencing on 1/1/2009 or subsequently. The adjustment of IAS 32 demands some financial instruments available by the holder and liabilities that arise from their liquidation, to be classified as Owners Equity if certain criteria are met. The adjustment of IAS 1 demands the announcement of specific information relevant to those financial instruments that are classified as Owners Equity. In addition, some adjustments took place in IFRS 7, IAS 39 and IFRIC 2 that apply commencing on 1/1/2009 or subsequently. Because the and the do not hold such financial instruments, the adjustments have no impact on the s and the s financial statements. 11

12 IFRS 1 (Adjustment) First-time adoption of IFRS and IAS 27 (Adjustment) Consolidated and Separate Financial Statements (COMMISSION REGULATION (EC) No. 69/2009 of 23 January 2009, L ) Applies to annual accounting periods commencing on 1/1/2009 or subsequently. The adjustment of IFRS 1 allows to the entities that apply first-time the IFRS to use as deducible cost either the fair value or the accounting value based on the previous applied accounting policies for the estimation of the initial cost of the investments in subsidiary companies, in jointly controlled financial entities and in related companies. Moreover, the adjustment abrogates the definition of the cost methodology arising from the IAS 27 and replaces it by demanding the dividends to be presented as income in the individual financial statements of the investor. Furthermore, limited adjustments took place in IAS 18, IAS 21 and IAS 36, which are applied as well commencing on 1/1/2009 or subsequently. Because the and its subsidiaries have already performed the transition to IFRS, this adjustment will have no impact on the financial statements for the fiscal year IFRS 2 (Adjustment) Share-based Payments Vesting Conditions and Cancellations (COMMISSION REGULATION (EC) No. 1261/2008 of 16 December 2008, L ) Applies to annual accounting periods commencing on 1/1/2009 or subsequently. The adjustment clarifies the definition of the vesting conditions, through the introduction of the expression notvesting conditions for conditions that do not form service conditions or performance conditions. In addition, it is illuminated that all cancellations either coming from the same entity or from incumbent parts, should have the same accounting treatment. The and the do not expect that this adjustment will have an impact on the financial statements for the fiscal year IFRS 8 Operating Segments (COMMISSION REGULATION (EC) No. 1358/2007 of 21 November 2007, L ) Applies to annual accounting periods commencing on 1/1/2009 or subsequently. This standard replaces the IAS 14, according to which the operating segments are recognized and presented based on an analysis of risk performance. According to IFRS 8 the segments comprise parts of a financial entity that are examined constantly by the Managing Director / Board of Directors of the financial entity and are presented at the financial statements based on this internal categorization. Given that the is not registered at the Stock Exchange, the IFRS 8 is not applied. IFRIC 13 Customer Loyalty Programs (COMMISSION REGULATION (EC) No. 1262/2008 of 16 December 2008, L ) Applies to annual accounting periods commencing on 1/7/2008 or subsequently. The interpretation clarifies the operation that should be adopted by the companies, which grant loyalty award credits such as bonus credits or travel miles to customers that purchase products or services. The (or the ) will apply the specific interpretation commencing on the 1/1/ Adjustments in standards that comprise a part of the IASB s program for annual improvements Part I The following adjustments describe the most important changes in IFRS as a consequence of the results arising from IASB s program of annual improvements that was published in May The following adjustments, since it is not mentioned differently, are valid for the annual accounting periods commencing on 1/1/2009 or subsequently. (COMMISSION REGULATION (EC) No. 70/2009 on 23 January 2009, L ) 12

13 IAS 1 (Adjustment) Presentation of financial statements The adjustment clarifies that some of the financial assets and liabilities that are registered as held primarily for the purpose of being traded according to IAS 39 Financial Instruments: Recognition and Measurement form examples of current assets and current liabilities respectively. Both the and the will apply this adjustment commencing on the 1/1/2009, however it is expected to has no impact on the financial statements. IAS 16 (Adjustment) Property, plant and equipment (and consequent adjustment in IAS 7 Statement of cash flows ) This adjustment requires that the financial entities with common activities, including the leasing and subsequently the sale of financial assets, to present the result arising from assets sale in the income and to transfer its net book value in the inventories when the asset is considered to be available for sale. The consequent adjustment of IAS 7 states that the cash flows, which arise from the purchase, leasing and sale of the above mentioned financial asset, are registered at the cash flow from operating activities. As leasing and subsequently sale of financial assets are not included in the common activities of the and the, this adjustment will have no impact in these activities. IAS 19 (Adjustment) Employee benefits The adjustments of this standard are the following: a) An adjustment in the program that ends up in a modification in the degree at which the commitment for benefits are influenced by future salary increases is considered to be a cut measure, while an adjustment that modifies the benefits coming from the work experience causes a negative cost in work experience if it ends up in a reduction of net present value of liabilities of specified benefits. b) The definition of return on assets of the program has been modified in order to state that the administrative expenses of the program are deducted from the calculation of return on assets of the program only in the extend to which these expenses are excluded from the valuation of the liability on specified benefits. c) The separation between short-term and long-term employees benefits will be based on the fact of whether the benefits will be settled down in between the period of 12 months of employment or later. d) IAS 37 Provisions, Contingent Liabilities and Contingent Assets requires that the possible liabilities should be notified and not recognized. IAS 19 has been modified in order to be consistent. The and the will apply this adjustment commencing on the 1/1/2009, however it is expected to have no impact on the financial statements. IAS 20 (Adjustment) Government grants and disclosure of government assistance The adjustment requires that the benefit arising from a stock with an interest rate lower than this of the market to be estimated as the difference between the book value based on IAS 39 Financial instruments: Recognition and measurement and the income arising from the above mentioned benefit through the accounting treatment of IAS 20. Due to the fact that the and the have not received any government loan, this adjustment will have no impact on the s and the s activities. IAS 23 Borrowing costs (as it is revised in 2007) (Adjustment) According to this adjustment: (a) It is clarified that the interest expense should be calculated under the method of the effective annual rate, as it is mentioned in IAS 39 Financial instruments: Recognition and measurement, (b) The possibility of the borrowing cost to include depreciation of share discount from loan receive or share premium from loan payment and the depreciation of eventual cost which is connected to the settlement of loans. The and the will apply this adjustment commencing on 1/1/2009, however it is expected to have no impact on the financial statements. 13

14 IAS 27 (Adjustment) Consolidated and separate financial statements The adjustment defines that in the cases an investment in an affiliated company, which has an accounting treatment based on the IAS 39 Financial instruments: Recognition and measurement, has been registered as an owned asset held for sale according to IFRS 5 Non-current assets held for sale and discontinued operations, the IAS 39 will continue to be applied. As the and the implement the principle of registering the investments in affiliates at cost in the special financial statements, the adjustment will have no impact on the financial statements. IAS 28 (Adjustment) Investments in associates (and following adjustments in IAS 32 Financial instruments: Presentation and in IFRS 7 Financial instruments: Disclosures ) According to this adjustment, an investment in an associate is met as a unique element for impairment control purposes and the impairment loss is not allocated in specific elements of the assets that are included in the investment balance. The reversal of loss impairment is registered as an adjustment in the accounting balance of the investment in the extent of the increase of the amount retrieved by the investment in the associate. The and the will apply this adjustment commencing on the 1 st January IAS 28 (Adjustment) Investments in associates (and following adjustments in IAS 32 Financial instruments: Presentation and in IFRS 7 Financial instruments: Disclosures ) This adjustment defines that in the cases where an investment in an associate is journalized according to IAS 39 Financial instruments: Recognition and measurement additionally to the prerequisite adjustments of IAS 32 Financial instruments: Presentation and IFRS 7 Financial instruments: Disclosures specific prerequisite disclosures of IAS 28 shall be met and not all of them. As the follow the principle to incorporate in the consolidated financial statements the investments in associates using the equity method, the adjustment will have no impact in the s financial statements. IAS 29 (Adjustment) Financial reporting in hyperinflationary economies The instruction given in this standard has been adjusted in order to picture the fact that some assets and liabilities are valuated in fair value instead of historical cost. As no subsidiary or associated company operates in hyperinflationary economies, this adjustment will have no impact on the s operations. IAS 31 (Adjustment) Interests in joint ventures (and consequent adjustments in IAS 32 Financial instruments: Presentation and in IFRS 7 Financial instruments: Disclosures ) This adjustment defines that in the cases where an investment in a joint venture is journalized according to IAS 39 Financial instruments:recognition and measurement additionally to the requested adjustments IAS 32 Financial instruments: Presentation and IFRS 7 Financial instruments: Disclosures specific prerequisite disclosures of IAS 31 Interests in joint ventures shall be met and not all of them As the does not have any participations in joint ventures, this adjustment will have no impact on its operations. IAS 36 (Adjustment) Impairment of assets This adjustment requires in the cases where the fair value reduced by the cost of sales is calculated based on the discounted cash flow method, disclosures shall be made equivalent to those used for the calculation of the value in use. The and the will implement this adjustment and will provide the necessary disclosure whenever it is implemented for the impairment controls commencing on the 1 st January IAS 38 (Adjustment) Intangible assets This adjustment clarifies that a payment can be recognized as prepayment only if the entity has the right to access the goods or has received the services. This adjustment practically means that when the (or the ) has the right to access the goods or has received the services, the payment must be registered in the expenses category. 14

15 The and the group will implement this adjustment commencing on the 1 st January IAS 38 (Adjustment) Intangible assets This adjustment deletes the enouncement which defines that there will be rarely, if any indicia for the use of a method that ends up to a lower factor of amortization from this that is used in the straight line method. The adjustment will have no impact for the time being on the and the as all the intangible assets are amortized by the straight line method. IAS 39 (Adjustment) Financial instruments: Recognition and measurement The adjustments in this standard are as follows: a) It is likely removals to happen from and towards the fair value category through the income balance when a derivative begins or ceases to fulfill the assumptions as a means of hedging for the cash flows or for a net investment. b) The definition of the financial asset or liability at fair value through the income balance, mainly referring to instruments that are acquired as available for commercial exploitation, has been adjusted. It is clarified that a financial asset or liability that comprises part of a financial instruments portfolio, which have common exploitation with well-documented indication of a real recent plan of short-term collection of profits, is included in this kind of portfolio since its initial recognition. c) The in force direction regarding the determination and the documentation of hedging clarifies that a means of hedging must involve a part that does not belong to the referred financial entity and mentions a segment as an example of a financial entity. This means that in order to implement the accounting hedging in segment level, the liabilities for the accounting hedging must be fulfilled at the same time by the segment which applies it. The adjustment removes this liability, in order IAS 39 to keep step with IFRS 8 Operating segments, which demands the disclosure for the segments to be based on information that are presented at the Managing Director / Board of Directors of the financial entity. d) When the accounting value of a debt instrument is evaluated over again during the cessation of fair value hedge accounting, the adjustment clarifies that a revised effective interest rate must be used (calculated at the date of the cessation of the fair value hedge accounting). The and the will implement the IAS 39 (Adjustment) commencing on the 1 st January It is not expected to have any impact on the financial statements. IAS 40 (Adjustment) Investment property (and consequent adjustments at IAS 16 Property, plant and equipment ) The adjustment clarifies that property that is being constructed or developed for future use as an investment property is classified at the implementation of IAS 40. Consequently, wherever the fair value method is implemented those properties are valuated at fair value. But if an entity is unable to determine the fair value of an investment property under construction with credibility, the property is valuated at cost until such time as fair value can be determined or construction is complete. As the and the do not acquire such investments in properties, the adjustment will not affect their operations IAS 38 (Adjustment) Intangible assets The adjustment demands the use of a prepaid market interest rate where the calculation of the fair value is based on the prepaid cash flows and the cessation of the prohibition to take under consideration the biological transformations at the calculation of the fair value. As the and the are not involved in an agricultural activity, the adjustment will have no impact on their operations. 15

16 IFRS 5 (Adjustment) Non-current assets held for sale and discounted operations (and consequent adjustments at IFRS 1 First time adoption of International Financial Reporting Standards ) Applies to annual accounting periods commencing on 1/7/2009 or subsequently. The adjustment clarifies that all of a subsidiary s assets and liabilities are classified as held for sale even when the entity will retain a non-controlled interest in the subsidiary after sale and the relevant disclosures must be made for the subsidiary since the definition of a terminated operation is kept. The consequent adjustment of IFRS 1 clarifies that these adjustments will be implemented in the future commencing from the date of transition to IFRS. The will implement this adjustment in the future at all its subsidiaries held for sale commencing on the 1 st January Part ΙΙ The adjustments that are included in Part II of the regulation report changes in terminology or changes of publishing character and do not lead in accounting changes for presentation and recognition reasons and as a result the applied adjustments will have no impact on the financial statements of the (). The above mentioned adjustments were applied in the following standards: IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors IAS 10 Events after the Reporting Period IAS 20 Accounting for Government Grants and Disclosure of Government Assistance (and consequent adjustments in IAS 41 Agriculture ) IAS 29 Financial Reporting and Hyperinflationary Economies IAS 34 Interim Financial Reporting IAS 40 Investment Property IAS 41 Agriculture (and consequent adjustments in IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations, IAS 2 Inventories, IAS 36 Impairments of Assets ). 3. Basic Accounting Policies The basic accounting policies which are adopted for the preparation of the financial statements for the fiscal year 2008, are applied with consistency for the preparation of the financial statements for the fiscal year 2007 and are as follows : 3.1 Use of Management s judgments and estimations The preparation of financial statements, in accordance with the IFRS, demands that the Management goes through judgements and estimations that affect the assets and liabilities, the amounts of income and expenses as well as the disclosures of possible fund requirements and liabilities. Those judgements and estimations are based on the complete information that the Management commands for the and the markets in which it operates, as well as its experience in relation to relevant transactions or facts that are considered to be rational under the present circumstances. Subsequent possible changes in the present circumstances are taken into consideration in order to reconsider, if it is necessary, the above mentioned judgements and estimations. The real results might differ from those estimations. The accounting estimations regarding the assets useful life and the vessels residual value of the and the are considered to be very important, given that they influence seriously the financial statements (see accounting policy 3.5). Furthermore, the collection of receivables, the evaluation of some amounts as doubtful accounts, the formation of provisions regarding the collection of receivables or other possible liabilities demand judgements and estimations that are significant too given that they can affect seriously the financial statements.. 16

17 3.2 Basis of Consolidation Subsidiaries The s consolidated financial statements include the parent s financial statements as well as the financial statements of all its subsidiaries. Those are controlled, directly or indirectly, by the parent, through the acquisition of the shares majority (see note 1) and the control of their board of directors. The subsidiaries are consolidated completely with the method of full consolidation, from the date this kind of control is exercised and stop to be consolidated when this kind of control cease to exist. Whenever it was necessary, the subsidiaries accounting principles are adjusted, in order to be consistent with those that are adopted by the parent. In the parent s financial statements, subsidiaries are valuated at their acquisition cost less the possible losses from impairments Intercompany transactions Intercompany (transactions between the companies of the ) transactions, intercompany balances as well as the profits that are not realized yet from intercompany transactions of assets are eliminated during the preparation of the consolidated financial statements. The losses, which are not realized, are eliminated too, unless the transaction relates to an asset which provides evidence of impairment. 3.3 Conversion of amounts in foreign currency The amounts that are included in the financial statements are valuated in the currency of the initial financial environment, in which the operates (operating currency), which is Euro. The transactions in foreign currencies are calculated in Euros, with the use of the exchange rates which were valid on the date of each transaction. On the day of the financial statements preparation, the currency amounts from assets and liabilities that are expressed in foreign currencies, are valuated according to the exchange rate on that specific date. Profits and losses coming from the exchange rates differences, are recorded in the financial income or expense of the income statement according to their nature (debit or credit exchange rate differences respectively). 3.4 Intangible assets The intangible assets comprise: (a) the licenses of the programs used and (b) the s trademark s cost. The licenses and the trademark are valuated at their acquisition cost, less the respective amortizations. The amortizations are calculated on a straight line basis, during all their useful life, which is defined to be three (3) years for the licenses and ten (10) years for the trademark. 3.5 Tangible assets The tangible assets are stated in the financial statements at acquisition cost, plus interest of construction period, less accumulated depreciation and any impairment loss on their value, plus the future additions improvements. The acquisition cost of the tangible assets on the 1 st January 2005 (date of transition to IFRS) are determined as follows: a) The vessels were valuated on deemed cost, according to IFRS 1. As deemed cost in considered the fair value on the date of transition, which is determined by an independent valuator and b) The rest of the tangible assets were valuated on historical cost on the date of their acquisition. Depreciation of tangible assets is calculated on a straight line basis and charge the income statement during the tangible assets estimated useful life. 17

18 s Management made estimations for the useful lives and the residual value of its assets as follows: a) Estimated useful lives of assets Category of Tangible Assets Years Conventional vessels (Ro-Pax) 35 Highspeed vessels (catamaran) (passengers or Ro-Pax) 25 Flying dolphins (passengers) 35 Ro-Ro type vessels 35 Buildings of third parties 9 Machinery 6,67 Vehicles 6,67 Trailers 5 Motors 6,67 Furniture and fixtures 5 Hardware equipment 3,33 b) Residual value The residual value of the vessels is estimated at 20% of their acquisition cost. These estimations, are reevaluated in short periods and are readapted if it is necessary, but they are not expected to change for the next twelve (12) months. Once the sale of a tangible asset is completed, the difference between the selling price and the net book value less any expenses related to the sale, is recognized as gain or loss in the income statements during the same fiscal year that the sale is realized. 3.6 Impairment of assets The assets book value (tangible and intangible assets) are checked for impairment purposes when facts or changes in the circumstances indicate that their book value (non-depreciated cost) might not be recoverable. The impairment loss recognized at the amount where the book value of the asset is greater than its recoverable value and is recorded in the income statement. The recoverable value is defined as the greater value between the net selling value and the value of the asset when used by the entity. The net selling value is the amount that can be received by the selling of an asset in the line of a transaction, during which the members have full knowledge and accede under their own will, after the removal of every additional direct asset s distribution cost, while the value of the asset when used by the entity is equal to the net present value of the estimated future cash flows that are expected to occur from the continuous use of an asset and from the revenue that is expected to come about from its sale at the end of its useful life. 3.7 Inventories Inventories consist of tradable goods and fuel oils lubricants for the vessels. The acquisition cost comprise all the expenditures realized in order to have the inventories in the present position and circumstances. On the date of the preparation of the balance sheet, the inventories are valuated at their lowest price, between the acquisition cost and the net liquidation value. The net liquidation value of fuel oils and lubricants for the vessels is their replacement cost. 3.8 Financial instruments Financial instruments is every contract that creates a financial asset to a company and a financial liability to another. The and the have non-derivative financial instruments only, which comprise customer liabilities and other liabilities, financial instruments held for trading, cash and cash equivalents (financial assets) as well as loans, 18

19 suppliers and other liabilities (financial liabilities). The non-derivative financial instruments are recorded initially in the financial statements at their fair value (which is equal to the transaction cost), adapted to the direct transaction costs, when the and the become parties in a transaction based on the non-derivative financial instruments. A financial asset ceases to be recorded in the financial statements, when the conventional rights of the s companies on the asset s cash flows expire or when the asset is transferred to a third party without maintaining the control or all the important benefits or the risks that are connected to it. Purchases and sales of financial assets, which take place during the ordinary operation of the s companies, are recorded in the financial statements on the date of their engagement in the purchase or the sale of that asset.. A financial liability ceases to be recorded in the financial statements when the s and the s conventional liabilities that derive from this specific financial liability expire or are cancelled Trade receivables / other receivables Trade receivables and other receivables are evaluated at their fair value (face value that coincide with the fair value), less possible provisions regarding non-collectible balances. For this purpose, in every balance sheet, all the delayed or doubtful payments are estimated in order to specify the necessity of a provision for doubtful accounts. Every noncollectible balance, which is considered to be definitive, is deleted through a respective reduction in the provisions for doubtful accounts Financial assets held for trading The financial assets held for trading comprise registered participating titles in the Athens Stock Exchange. After the initial registration, the held for trading financial assets are valued at their fair value, which is the financial price at the date of the preparation of the balance sheet. The respective profits or losses are recognised as a reverse at the fair value of the owners equity, until they are disposed or it is detected that there is permanent impairment of their value, so the accumulative profit or loss that was previously recognised at the owner s equity, is transferred to the income statement Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits in banks and short-term bank deposits of three (3) months duration starting from the date of the preparation of the balance sheet Borrowings Borrowings are comprised by bank bond loans. All the loans initially are recognised at their cost, which is equal to the fair value of the consideration that is received, less the cost of raising a bank loan or the cost of raising a bond loan. After the initial recognition, the loans are valuated at their non-depreciated cost under the method of effective interest rate Suppliers and other payables Suppliers and other payables comprise commercial and other payables. These are recorded on their face value, which are considered to coincide with their fair value, except if the influence of the diachronic value of money is important. 3.9 Retirement benefit provisions The retirement benefit provisions (apart from the crew employees of the vessels), are calculated on their present value of their future benefit that are considered to be accrued at the end of the fiscal year according to the recognition of the right for the benefit to the employees during the expected labor lives. The above mentioned liabilities are calculated on an annual basis based on the financial and actuarial assumptions, which are set by an independent valuator and are specified by the use of actuarial method of valuation of the projected credit units. The relevant provisions are registered 19

20 as other expenses of the operating expenses and the distribution expenses categories and consist of the benefits present value which is considered to be accrued during the fiscal year, the interests on the benefits liabilities, any possible cost of previous longevity and the respective profits or losses which are recognized during the year. The longevity costs are recognized on a constant basis on the average period until the benefits of the program cemented. Non-recognized actuarial profits or losses, in case they exceed the 10% of the estimated benefits provision during the fiscal year, are recognized equally at the average recessive period of employment of the active employees and are included in the net cost due to the retirement of the year. In reference with the crew of the vessels, based on present legislation, they do not accumulate rights on the compensation in case they are fired or retired and consequently the financial statements do not include a relevant provision Other provisions / Possible payables and receivables Provisions are realized when the and the have presented legal or deemed obligations, as a result of actions that took place in the past, their realization is possible through the outflow of resources and the estimation of the liabilities relevant amounts can be done with soundness. Provisions are pre-examined in any date that a balance sheet is prepared and are adjusted, preparative to reflect the present value of the expenditure that is expected to be demanded for the settlement of this commitment. Contingent liabilities are not recorded in the financial statements, but are announced, except if the possibility of resources outflows is small. Contingent assets are not recorded in the financial statements, but are announced if the inflow of financial benefits is possible Income tax (current and deferred) According to the valid tax legislation regarding the taxation of the vessels (article 2 of Common Law 27/1975), shipowners under a Greek flag are released from the income tax related to the profits arising from the exploitation of their vessels. In conformity with the same law, vessels are liable only to a special tax, based on the registered tons of their capacity. This tax is considered to be an income tax. Profits arising from the non-maritime operations are taxed according to general income taxation clauses, where according to the valid clauses the tax rate reached the percentage of 25% for the fiscal year The expenditure for the current income tax has to do with the current income tax of the vessels according to Common Law 27/1975 and the income tax for the non-maritime operations, which is calculated according to the method that is provided by the clauses of article 2 of the Common Law 27/1975. The and the do not cater for provisions for possible additional taxes and increments for fiscal years that are not examined by the tax authorities and recognize as an income tax expenditure the possible differences arising from a tax audit during the year where the audit will be completed. The deferred income tax is a tax which will be paid or will be returned in the future regarding income or expenses that were realized during a fiscal year, but are considered to be taxable income or deducted expenses of future fiscal years. Due to the above mentioned tax regime, which is valid for the local companies of the, deferred taxes are not recognized to the parent and the Operating leases The leases where the lessor transfers his right of use of an asset for a pre-agreed period of time, without transferring its risks and its benefits arising form its ownership, are classified as operating leases. The payments that are realized by the lessor regarding the operating leases, are recorded as expenses in the income statement during the duration of the lease. The parent and the act as lessors for operating leases. 20

21 3.13 Recognition of income Income consists of the value of sale of goods and services, net, reduced by the VAT, collections for third parties, discounts and returns. The recognition of the income is realized as follows: Income coming from sale of transportation services: The provided services basically concern the transportation of passengers and merchandises by the sea and the income is the related fares coming from tickets or chartered vessels. The income arising from the tickets is recorded at the date of the trip for which are issued, while the income arising from chartered vessels is recorded based on the accrual accounting principle. The income coming from the provided services that will be offered in the future fiscal year, is recorded in a liability account (future year s income) and is transferred at the income of the period during which the services are offered. Income coming from on board sale of goods and services: The income arising from the sale of goods is recorded when the goods are delivered, while the income arising from on board sale of services (based on contracts with third parties, at which the exploitation of bars/restaurants and shops of the ships are granted) is recorded based on the accrued principle according to the relevant contracts. Income coming from credit interests (Financial income): The income arising from interests is recorded on an accrual basis using the effective interest method. Dividend income coming from shares held for sale (Financial income): The income arising from dividends is recorded in the income statement at the date at which their distribution is approved Recognition of expenses Repairs and maintenance expenses (Cost of goods sold) : Operating costs are recorded in the income statement on an accrual basis. Based on this principle, the repair and maintenance expenses and the expenses of periodical inspections at the vessels engines are recognized as follows: a) Repair and maintenance expenses that are conducted on the annual dry docking of the vessels are recorded in the fiscal year during which they operate after the end of their dry docking, allocated in periods (trimester, semester, nine months period) of that fiscal year based on the realized miles of vessels sailing in relation to the budgeted ones. b) The expenses of periodical inspections at the vessels engines that are conducted in regular periods of time (from 3 years to 6 years according to the specifications given by the engine manufacturers in combination with the hours of their operation) are recorded in the appropriate fiscal years based on the realized hours of operation in every fiscal year. Expenses coming from debit interests (Financial expenses): Interest expenses are recorded based on an accrual basis according to the effective interest method and comprise interests coming from short-term and long-term loans. Expenses coming from debit interests when the loan concerns directly the acquisition or the construction of an asset and until its construction is completed, are recorded at this asset s acquisition cost. 21

22 3.15 Reallocation of funds a) In the Income Statement of financial statements for the fiscal year 2007 the fund Taxes did not include the tax of Common Law 27/1975, which were included in the cost of sales. In order to be able to proceed with a comparison with the Income Statement of the fiscal year 2008, the tax of Common Law 27/1975 of the fiscal year 2007 ( 58 thousand for the and 40 thousand for the ) was deducted from the fund Cost of Sales and was added to the fund Taxes, resulting in the equal change in the Earnings before interest, taxes, depreciation and amortization (EBITDA), in the Earnings before interest and taxes (EBIT) and in the Profit before taxes of the Income Statements of fiscal year b) In the Cash Flow Statement of the financial statements of fiscal year 2007 the cash flows arising from Foreign exchange differences, Net profit / loss from investing activities, Profit / loss arising from sale of assets and Taxes paid were added in special lines in the cash flows from operating activities, the cash flows of Interests received and Dividends received were added in special lines in the cash flows from investing activities, while the cash flows arising from Purchase of fixed assets and Purchase of intangible assets were compressed into line Purchase of fixed and intangible assets in the cash flows from investing activities, in order to be comparable with the Cash Flow Statement of fiscal year 2008 and to be fully presented the cash flows of the and the. As a result, changes came about in the respective net cash flows arising from operating and investing activities in Cash Flow Statement of the fiscal year

23 4. Intangible and tangible assets The assets analysis and movement, for the fiscal years , is presented in the table that follows: Vessels Machinery Vehicles Furniture & other fixtures Intangible assets Total Acquisition cost Additions for the year Disposals for the year (10.803) 0 0 (1.156) 0 (11.959) Acquisition cost Additions for the year Disposals for the year 0 0 (74) (47) 0 (121) Acquisition cost Accumulated depreciations Depreciation for the year Disposals for the year (3.710) 0 0 (1.142) 0 (4.852) Accumulated depreciations Depreciation for the year Disposals for the year 0 0 (74) (47) 0 (121) Accumulated depreciations Net book value Net book value Vessels Machinery Vehicles Furniture & other fixtures Intangible assets Total Acquisition cost Additions for the year Disposals for the year (25.003) 0 0 (1.154) 0 (26.157) Acquisition cost Additions for the year Disposals for the year 0 0 (74) (47) 0 (121) Acquisition cost Accumulated depreciations Depreciation for the year Disposals for the year (4.510) 0 0 (1.141) 0 (5.650) Accumulated depreciations Depreciation for the year Disposals for the year 0 0 (74) (47) 0 (121) Accumulated depreciations Net book value Net book value

24 The vessels of the parent have been mortgaged as security of the long-term borrowings for the amount of 1.737,6 mio. 5. Investments in subsidiaries The participation of the parent to subsidiaries and the respective percentages of participation are presented in note 1. The value of those participations to the subsidiaries that are included in the consolidated financial statements of the are presented in the table that follows: Hellenic Seaways Cargo N.E Hellenic Seaways Management S.A. 0 0 Trailer Shipping Ltd 1 9 Sea Hawk Marine S.A. 0 0 Total The value of participation to subsidiaries in the financial statements of the parent on the reaches the thousand Euros, reduced compared to respective value on the by 8 thousand Euros by the amount of losses of the fiscal year 2008 of the subsidiary company TRAILER SHIPPING COMPANY LTD. 6. Inventories The s and the parent s inventories concern mainly the current vessels inventories of fuel oil and lubricants. The s and the s inventories analysis is as follows: Goods Fuel oils and lubricants Total

25 7. Trade receivables Trade receivables for both the and the have to do with trade receivables from maritime agents, tourist agencies, and road hauliers from the issuance of tickets and bills of lading. The above mentioned receivables of the and the are analysed as follows: Customers' balance Receivable cheques Less: Provisions for impairement of doubtful receivables (6.082) (3.431) (5.760) (3.191) Total The fair values of the above mentioned receivables almost coincide with their corresponding book values. Similarly, the maximum exposure to credit risk, without taking under consideration the received guarantees, does not differ from the book values of the receivables. The provisions regarding the impairments for the bad debt accounts for the and the for the fiscal years are presented in the table that follows: Balance at Provisions Reversal of provisions due to the collection of bad debt accounts (22) (7) Balance at Provisions Reversal of provisions due to the collection of bad debt accounts (54) (54) Balance at The provisions are considered to be adequate to cover the possibility of not collecting the receivables. In order to secure the trade receivables the following actions were taken: Letters of guarantee Guaranteed cheques Total

26 8. Other receivables and other assets The s and the s other receivables and other assets, for the fiscal years , are analyzed as follows: Other receivables Prepaid expenses Accrued income Less: Bad debt receivables provisions (7.694) (7.739) (7.694) (7.739) Total The amount of prepaid expenses on the of the comprise the repair and maintenance expenses equal to thousand, which will be charged to income statement during the fiscal year 2009 and expenses of periodical inspections equal to thousand, which will be charged to income statement during the next fiscal years 2009, 2010, 2011, 2012 and 2013 by the amounts of thousand, thousand, thousand, thousand and 196 thousand respectively (see accounting policy 3.14). The amount of prepaid expenses on the of the comprises the repair and maintenance expenses equal to thousand, which will be charged to income statement during the fiscal year 2009 and expenses of periodical inspections equal to thousand, which will be charged to income statement during the next fiscal years 2009, 2010, 2011, 2012 and 2013 by the amounts of thousand, thousand, thousand, thousand and 196 thousand respectively (see accounting policy 3.14). The fair values of the above mentioned receivables coincide approximately with their respective book values. Similarly, the maximum exposure to credit risk of the other receivables does not differ from the book values of those receivables. The provisions of impairment of bad debt receivables for the other receivables of the and the, for the fiscal years , are shown in the table that follows: Balance at Provisions Reversal of provisions 0 0 Balance at Provisions Reversal of provisions (84) (84) Balance at The provisions are considered to be adequate to cover the possibility of not collecting the receivables. 26

27 9. Financial assets held for trading The s and parent s financial assets held for trading, for the fiscal years , are analyzed as follows: Listed securities in ASE Valuation The fair value reserve fund of the financial assets held for trading represents the s and the s net position (see note 12). During the fiscal year 2008, all the Minoan Lines securities that the owned on the were sold and a profit arose in the financial statements equal to thousand, which is comprised by 656 thousand that were registered as profit from the sale and by thousand that were transferred in the income statement of the fiscal year from the profit arising from the valuation of securities in previous fiscal years and which was included in the fair value reserves of capital reserves on the (see notes and 25). On the the owns securities of the company NEL MARITIME S.A Cash and cash equivalents The analysis of cash and cash equivalents for the and the, for the fiscal years , is presented as follows: Cash in hand Bank deposits Total Share capital and share-premium account The parent s share capital comes to thousand divided by common nominal shares of 2,50 face value each. All the parent s shares provide equal rights regarding the distribution of dividends and share represents one vote in the general meeting of the shareholders of the parent. The share-premium account was formed from the increase of the parent s share capital with issuance price of the shares higher than their nominal price. After the capitalization of the share-premium account, which took place before the fiscal year 2005, remained the amount of thousand. 27

28 12. Other reserves The s and the parent s other reserves, for the fiscal years , are analyzed as follows: Legal reserves Tax free reserves of special tax clauses Fair value reserves (8) (8) Total Legal reserve: Concerns the obligatory detection, before the distribution, of 5% annually of the parent s net profits, according to the clauses of Common Law 2190/1920, until it reaches the one third of their initial capital. Its increase during the fiscal year 2008 concerns the retention of the amount of 850 thousand from the profits of the fiscal year 2007 before the distribution of dividend. Reserve of special tax clauses: Concerns the untaxed reserves, which were formed by the profits from the fiscal year 1999 and which were transferred to the retained earnings. Fair value reserve: Comes from the valuation of the financial assets held for trading. After the sale of Minoan Lines S.A. securities during the fiscal year 2008, the amount of thousand, which was included in the fair value reserve on the and concerned the profit that arose from the valuation of those shares in previous fiscal years was transferred in the income statement of the fiscal year The negative amount of 8 thousand that remained in the above mentioned reserve on the concerns the loss that arose from the valuation of securities of NEL MARITIME S.A. that the owned on the Retained earnings The s and the s retained earnings, for the fiscal years , are analyzed in the table as follows: Balance of retained earnings from previous years (2.552) Balance of retained earnings Total The parent s retained earnings include the amount of thousand, which comes from the difference of the vessel s value adjustment of the subsidiary company TRAILER SHIPPING COMPANY LTD and which is not distributed until this vessel (Ro-Ro HELLENIC VOYAGER ) is sold to a company outside of the. From the balance of the retained earnings, the proposed dividend, by the Board of Directors in the Annual General Meeting of the shareholders, of 0,03 per share will be distributed (total amount of dividend thousand). 28

29 14. Long-tem loans The long-term loans of the, for the fiscal years , is as follows: Bond loans Less: Short-term part of bond loans (13.152) (13.152) (13.152) (13.152) Total The issued two bond loans in the fiscal year 2007 with which it financed its investment program and refinanced its previous bank loans. The first loan (its bondholders are represented by the National Bank of Greece) is equal to thousand, has a ten year duration and incurred by a floating interest (Euribor) plus a margin. The second loan (its bondholders are represented by the ABN AMRO bank) is equal to thousand, has a ten year duration as well and incurred by a floating interest rate (Euribor) plus a margin. The above mentioned weighted margins on the 31/12/2008 reach the 1,15 % for the first loan and the 1,05 % for the second one. The s schedule of capital and interests payments for the above long-term loans, is as follows: Payments within the first year Payments from 2 to 5 years Payments beyond 5 years The is not exposed to a significant liquidity risk since it is expected to cover the above mentioned payments from its operational cash flows. In addition, it is not exposed to a significant exchange rate risk (its loans are issued in Euros) and to a significant interest rate risk although its issued loans have a floating interest rate, because the ratio of earnings before interest, taxes, depreciation and amortization (EBITDA) over net debit interests is high enough (see note 33.4). For the security of the above mentioned loans, mortgages are signed on some parent s vessels of a total amount of 1.737,6 mio. 15. Retirement benefit provisions The s retirement benefit provisions, for the fiscal years , are analyzed as follows : Balance at the beginning of the period Additional provision for the fiscal year Balance at the end of the period The provisions that concern the fiscal year are included in the other expenses of administrative expenses and distribution expenses. 29

30 The s and the s above mentioned liabilities (see note 3.9) were specified based on a actuarial report conducted by an independent company of actuaries. The basic actuarial assumptions that were used is as follows: Rediscount interest rate : 5,8 % on the Average annual inflation : 2 % Average annual increase of salaries : 4 % Expected average of the recessive working life on the : 14,43 years The s and the s other provisions refer to provisions for crewmembers receivables, which are included in the salaries and other crew expenses from the cost of sales (see note 20). The s and the s Management estimates that the above mentioned provision regarding the crewmembers receivables is enough to cover the liabilities that will come about (see note 31.1(g)). 16. Trade and other payables The s and the s trade and the other payables for the fiscal years , are analyzed as follows: Suppliers' balance Cheques payables Customers' prepayments Taxes liabilities Social security contributions Dividends payable Other creditors Total The fair values of the above mentioned liabilities coincide with their equivalent book values. Liabilities towards the suppliers are on average repayable in between two-month period counting from the date of the balance sheet. 17. Short-term bank liabilities The s and the s short-term bank liabilities (including the short-term part of the long-term loans), for the fiscal years , are analyzed in the table that follows: Short-term part of bond loans Short-term bank loans Total

31 18. Accrued expenses and next years deferred income The s and the s accrued expenses and the next years deferred income for the fiscal years , are analyzed as follows: Next years' deferred income Accrued expenses Total Turnover (sales) The s turnover for the fiscal years , is presented in the following table: Income coming from fares Income coming from sales of goods on board Other income Total Cost of sales The s and the s cost of sales for the fiscal years , is presented in the table that follows: Salaries and crew expenses Fuel oil and lubricants Repair, maintenance, spare parts and technicians' salaries Port expenses Insurance cost Other expenses Depreciation Total

32 21. Other operating income The s and the s other operating income for the fiscal years , is analyzed as follows: Commissions of third-party rights upon tickets' sales Income coming from state subsidies Income coming from forfeiture penalty clauses from the constructions of vessels Other income Total Administrative expenses The s and the s administrative expenses for the fiscal years , are presented in the table that follows: Salaries and other employees' expenses Third-party services and expenses Other expenses Depreciation Total Distribution expenses The s and the s distribution expenses for the fiscal years , are analyzed as follows: Salaries and other employees' expenses Third-party services and expenses Sales commissions Advertising expenses Other expenses Provisions of impairement of doubtful customers' accounts Depreciation Total

33 24. Other operating expenses The s and the s other operating expenses for the fiscal years , are analyzed as follows: Provisions of impairment of doubtful accounts Other expenses Total Financial income The s and the s financial income for the fiscal years , is analyzed as follows: Income from subsidiary companies Income from stocks' held for trading dividends Income from the sale of stocks held for trading Credit interest Credit foreign exchange differences Total Financial expenses The s and the s financial expenses for the fiscal years , is analyzed as follows: Debit interest Other financial expenses Debit foreign exchange differences Impairement of participations and securities Total The other financial expenses include bank commissions, expenses for the issuance of letters of guarantee and the settlement of sales through credit cards as well as loan expenses that mainly concern the annual amortization of the expenses arising from the issuance of loans (or expenses from the issuance of bond loans), which are calculated based on the straight line depreciation method over the duration of the above mentioned loans. 33

34 27. Profits (losses) coming from fixed assets sales The profits coming from fixed assets sales in the fiscal year 2007 concern the sales on the old vessels Express Apollon, Saronikos, Express Aphrodite, Express Athina, Aias and Flying Dolphin VIII, while the profits in the fiscal year 2008 concern the sale of passenger vehicles used by the. 28. Income taxes The parent and its subsidiaries do not underlie income taxation for the profits coming from the operation of their vessels. They only underlie taxation for the capability of the registered tons of the vessels according to Common Law 27/1975 and income taxation for the non-maritime activities (see note 3.11). The income tax that appears in the s and the s income statement for the fiscal years 2007 and 2008 is analyzed as follows: Income tax coming from non-maritime activities Tax of Common Law 27/ Differences from tax audit Total All the s companies have been audited from the tax authorities until the fiscal year The audit tax differences that were recorded in the fiscal year 2007 concern the differences that arose from the tax audit of the fiscal years The fiscal years are not tax audited for all the companies of the. 29. Profits per share after taxes The profits per share after taxes are calculated through the division of the profits after taxes that correspond to the shareholders of the parent by weighted average number of shares in circulation during the fiscal year and are analyzed for the fiscal years as follows: Profits after taxes that correspond to the parent 's shareholders Weighted average number of shares Basic profits per share after taxes 0,1381 0,2239 0,0817 0,

35 30. Dividends According to the clauses of the law regarding the incorporated companies (Common Law 2190/1920), companies are obligated to distribute dividend every year, which corresponds to at least the 35% of the profits after taxes, after the deduction of the legal reserves. The s Annual General Meeting on the 23 rd July 2008 decided upon the distribution of dividend for the fiscal year 2007 of total amount equal to thousand ( 0,08 per share), which was paid during the fiscal year For the fiscal year 2008, the dividend per share that the Board of Directors proposes to the Annual General Meeting of the is equal to 0,03 per share, forming a total amount of thousand. 31. Provisions, contingent liabilities and contingent assets 31.1 Contingent liabilities There are no pending or upon arbitration cases at the Courts against the and the or other liabilities that might have significant consequences on their financial position apart from those that are mentioned below: (a) In the past, ex-ship-owners, who were also shareholders of the, have proceeded with lawsuits against the. These lawsuits concerned receivables coming from given guarantee for the s share price to ex-ship-owners regarding the increase of s share capital following the sale of their ships to the in the last quarter of Five (5) from those lawsuits regarding a total amount of 9,00 mio. and $ 9,5 mio. were rejected definitively at the decision of the High Court and the Court of Appeal in Piraeus. The Courts accepted the invalidity of the above mentioned guarantee of the share price. Three (3) similar cases arising from companies of Con. Agapitos interests stand over the competent Courts for the total amount of 69,9 mio., for which the estimates that they will come in its favour, given that the main request of these lawsuits as well the main and the arising issues are judged for the s views from the above mentioned decisions of the High Court and the Court of Appeal in Piraeus. (b) The Rabbit S.A. (Consta Agapitos interests) has exercised lawsuit against the demanding the amount of 5,9 mio. from alleged non-disposal of s shares to them following the s increase of share capital in The case is related directly with the lawsuit of the same company against the Second Vice President and member of the s Board of Directors for interception of the earlier mentioned shares, who were relieved pursuant to an irreversible decree of the High Court. Given the fact that the real cases of charges and lawsuits are the same (coincidence of historical and legal basis) and the decree on the cases judged that the real cases, which are mentioned are totally untrue, the rejection of the lawsuits is certain. (c) The company European Thalassic Agencies Ltd (ETA) has exercised three (3) lawsuits against the concerning receivables of 0,46 mio. In connection with the ownership of the software of bookings (MINOWIDE) used by the between , while the opposite lawsuit of the against the ETA is still a pending case. The has not recognized any respective provisions, as it believes that the decision from the competent Courts will be in its favour. (d) The Maritime Labour Exchange Office has imposed to the fines of 1,56 mio. for not having crew in the vessels during the winter season of The has exercised refugees against all these decisions. One of those imposed fines of 0,28 mio. has been called off according to the first-degree court decision, two (2) other cases of imposing fines of a total amount of 0,07 mio. have been called off according to the decision of Council of State, while twelve (12) other similar cases of imposing fines of a total amount of 1,21 mio. are still pending to the Council of State under favourable for the proposal. The believes 35

36 that the decisions to be issued will be in its favour from the Council of State regarding the above mentioned cases and the amount of 0,46 mio. which has already been paid will be returned to the (the paid amounts are included in the above mentioned total amount of fines). (e) According to the 210/111/2002 decision of the Hellenic Competition Commission, a fine of 1,8 mio. was imposed to the regarding the non-notification and the realization of acquisitions in the coastal sector in The exercised refugees against this decision at the Board of the Court of Appeal, which reduced the fine to 0,9 mio., an amount which was paid by the (plus interests 0,15 mio.). Against the in question decision, retractions have been exercised at the Council of State by the and the Greek Public Sector, which are still pending. The has not formulated a respective provision, as it believes that there will not be any further surcharge resulting from the Council of State s decision. (f) The Port Fund of Korinthos has certified dues against the companies of the concerning receivables of a total amount of 0,79 mio. arising from port dues for the transit of vehicles from Korinthos Port, against those certified dues the has exercised refugees at the Administrative Court of First Instance of Korinthos and their execution have been recessed under the temporary command of the same Court. The has not formulated a respective provision, as it believes that the qualified courts final decisions will be at its favour. (g) There are pending lawsuits against the companies of the regarding crew members claims of 1,17 mio. Based on a fixed policy, the formulates a provision on the basis of estimations of its Legal Advisors, who handle the in question cases for the amount of the final expense per case, given that a number of legal decisions taken in the past in equivalent cases adjudged amounts that are much more lower than the ones demanded. For this reason the has charged a provision in its balance sheet for the amount of 0,16 mio. concerning the above mentioned receivables, which it believes that is sufficient for the coverage of the expense that is expected to arise from the lawsuits. Furthermore, bank guarantee letters are valid on the in order to provide assurance for the liabilities of the that arise from its ordinary activities (they have been issued for the Ports Funds, Piraeus Port Authority, Merchant Seamen s Fund, e.c.t), which reach the thousand Contingent assets The contingent assets of the and the are as follows: (a) The has exercised four (4) lawsuits against maritime companies of Con. Agapitos interests and himself personally for a total amount of 2,6 mio. plus interests that concern not paid in loans which were granted to them in 1999, five (5) lawsuits against the same companies for a total amount of 0,6 mio. that concern paid in debt from the to the Merchant Seamen s Fund regarding the transferred vessels to the in 1999, which are still pending at the courts. In addition, the has exercised retraction at the High Court, against the decisions of the Court of Appeals of Piraeus and disapproved two (2) lawsuits against the maritime companies of I. Lefakis interests and himself personally for a total amount of 1,5 mio. plus interests that concern not paid in loans which were granted to them in (b) The has exercised lawsuit against the Greek Government regarding the payment of a due amount of 6,6 mio. arising from imposed discounts through a ministerial decision for the transportation of specific categories of passengers during the year 2003, for which the ministerial decision foresees the compensation of the. The hearing of this lawsuit is still pending. 36

37 32. Transactions between related parties 32.1 Receivables Payables of related parties The balance (receivables / payables) with the related parties, at the dates of balance sheet, are as follows: Receivables Receivables from subsidiaries Receivables from other related parties Total Payables Payables to other related parties Purchases sales to related parties The purchases and the sales to related parties, for the fiscal years , are as follows: Purchases Purchases of goods and services from the related parties Sales Sales of goods and services to subsidiaries Sales of assets to subsidiaries Sales of goods and services to other related parties Total The transactions with the companies Minoan Lines Maritime S.A. and ANEK Lines Maritime S.A. are included in the transactions with the other related parties for the fiscal year 2008, which arose from the leasing of the Pax-Ro vessel Ariadne to them during the periods and respectively. During the fiscal year the parent collected as a dividend the amount of thousand from the subsidiary company HELLENIC SEAWAYS CARGO Shipping Co and the amount of 76 thousand from the company Minoan Lines Maritime S.A. (other related party). 37

38 32.3. Board of Directors and basic executive directors fees The s and the s Board of Directors and the basic executive directors gross compensations and fees for the fiscal years are as follows : Board of Directors' compensations and fees Basic directors' compensations Total Financial risk management The and the are exposed to financial risks, such as credit risk, liquidity risk and market risk (deviations of interest rates, exchange rates and fuel oil prices). Because of this reason the Management of the and the seek for the minimization of those risks through a program of financial risk management. At the same time, the Management apply capital risk management policies in order to ensure the smooth operation of the and the in the future and to assure the satisfactory dividend yield at the shareholders. This note presents information regarding the exposure of the and the in each of the above mentioned risks, as well as the goals, the policies and the procedures which are applied by the Management regarding their quantification and their management Credit risk Credit risk is the risk of loss which the and the face in the case at which a customer or a third-party in a transaction of a financial instrument does not fulfill its conventional liabilities and is connected basically to the customers receivables. The and the apply procedures regarding the credit risk, which include the definition of credit limit per customer and specific clauses of credit policy for each category of customer. In addition, bank guarantee letters have been received from specific customers as an assurance as well as cheques in guarantee (see note 7 ). The and the do not face significant credit risk given the fact that there is a high diversification between the customers receivables and the other receivables Liquidity risk The liquidity risk consists of the probability that the and the being unable to fulfill their financial liabilities when these are to be paid. This risk is limited given the fact that the and the dispose enough cash equivalents and have at their disposal sufficient bank credit limits that are not used yet (the use of the disposed bank credit limits is zero on the ). The and the monitor their liquidity through the compilation of short-term and mediumterm cash programs from which the cash s needs emerge early enough. The notifications of the contractual expirations of over the year of the s and the s financial liabilities are presented in note

39 33.3 Market risk This kind of risk appears from the deviations of the exchange rates, interest rates and fuel oil prices, which affect the income statement and the s and the s cash flows. In reference with the exchange risk, it has no impact on the and the regarding their debt liabilities given the fact that their total amount is denominated in Euros. Moreover, the purchases and sales transactions are performed mainly inside the Euro zone, so they are not exposed to the exchange rate risk. Concerning the interest rate risk, the and the have contracted long-term loans and bond debts of floating interest rate based on Euribor and as a result they underlie the risk of increasing interests rates. The sensitivity of the balance of the income statement and the s cash flows in a deviation (increase or decrease) of 1 % of the average exchange rate during the fiscal year will result in their change by the amount of thousand. This amount, in the case of an increase of the exchange rates by 1 % does not change significantly the ratio of interest cover (see note 33.4) and as a result the s exposure to the exchange rate risk is limited. In regard of the risk arising from the deviations of the fuel oil prices, the and the are affected significantly, considering the important participation of the fuel oil cost in the operation cost. This risk is hedged, partially, through the escalation in ticket prices. In order to handle this risk, the and the enter, periodically and based on the market s conditions, into derivative contracts in order to hedge it Capital management s and s goal for the capital management is the assurance of the ability to continue their operation in order to ensure satisfactory yields for the shareholders and benefits for the other parties that are related to their operations. Having as a purpose the maintenance or the adaption of their capital structure, the and the are able to adapt the amount of payable dividends, to pay back capital at their shareholders, to issue new shares or to sale assets. The s Management control and monitor the capital adequacy based on the leverage ratio, which is calculated by dividing the total of liabilities to the owners equity. The Management s aim is to keep this ratio in the long-run below 60 % ( 0,6 ) for the, a level which is very satisfactory for a of capital intensity. This ratio is formed as follows for the and the on the dates of balance sheet: Total liabilities Total owners' equity Capital leverage ratio 0,44 0,46 0,44 0,46 At the same time, Management monitors the ratio of Earnings before interests, taxes, depreciation and amortization (EBITDA) over Net interest paid (interests charges minus interest income) in order to assure the smooth service of the s loan liabilities. Management s goal is to keep this ratio in the long-run above three (3) for the, a level which is very satisfactory for a of capital intensity. 39

40 This ratio (Interest cover ratio) is formed as follows for the and the during the last two fiscal years: Earnings before interest, taxes, depreciation and amortization (EBITDA) Interest charges Less: Interest income Net Debit interest Interest Cover 3,41 5,47 2,39 4,44 40

41 34. Events after the balance sheet date There are no posterior events from the date of the balance sheet ( ) for both the and the that are obligatory to be mentioned according to the IFRS. Piraeus, 18 March 2009 The Chairman of Board of Directors The Β Vice President of Board of Directors Ioannis Ι. Vardinogiannis ID Card No Π Constantinos Ε. Klironomos ID Card No Κ The Chief Financial Officer The Accounting Manager Nicholas G. Armaos ID Card No Σ Androula Ν. Portidou ID Card No Σ