Annual Financial Report for financial year 2009 (January 1 st December 31 st 2009)

Transcription

1 S.A. Reg. No /06/Β/88/14 TZIMA LOCATION KOROPI ATTICA Annual Financial Report for financial year 2009 (January 1 st December 31 st 2009) According to article 4 of L. 3556/2007 and the relevant Decisions issued by the Board of Directors of the Hellenic Capital Market Commission It is confirmed that the present Annual Financial Report that concerns the financial year 2009 (January 1 st 2009 December 31 st 2009), is that approved by the Board of Directors of FLEXOPACK PLASTICS S.A. on the 29 th of March 2010 and is posted on the internet on the website The Annual Financial Report will remain available to investors on the internet for a period of at least five (5) years from its preparation date and initial release. 1

2 CONTENTS CHAPTER 1 : Statements by Representatives of the Board of Directors... 4 CHAPTER 2 : Annual Report by the Board of Directors... 5 CHAPTER 3 : Audit Report by Independent Certified Auditor-Accountant CHAPTER 4 : Financial Statements Balance Sheet Income Statement Consolidated statement of changes in equity Statement of changes in Parent Company s equity Cash Flow Statement General Information on the company and group Basis for the preparation of the financial statements Important accounting judgments, estimations and assumptions New accounting standards interpretations and amendments of existing standards Basic accounting principles Consolidation Group Structure and consolidation method Currency of operation and presentation Conversion of currency Tangible Fixed Assets Goodwill Intangible Fixed Assets Impairment of Assets (apart from Goodwill) Customers Receivables and Other Receivables Inventories Investments and Other Financial Assets: Cash & cash equivalents Share Capital Loans Income Tax (Current and Deferred) Employee Benefits State Grants Provisions for Contingent Claims - Obligations Recognition of Income Leases Dividend Distribution Earnings per Share Segment Reporting Risk Management Notes on the Financial Statements Tangible Fixed Assets Goodwill

3 6.3 Intangible Fixed Assets Investments in Subsidiaries Investments in Associate Companies Other Long Term Receivables Inventories Trade Receivables Other Receivables Cash & cash equivalents Equity Deferred tax asset and liability Provision from staff retirement indemnities Government grants Long Term and Short Term Loans Other Provisions Suppliers and other liabilities Liabilities arising due to income tax Turnover Analysis of Expenses per category Employee Benefits Other Operating Income and Expenses Financial Income and Expenses Other Financial Results Income Tax Contingent Receivables - Liabilities Information regarding contingent liabilities Tax un-audited fiscal years Information regarding contingent receivables Current Charges Written against Tangible Assets Operating Leases Company transactions with affiliated parties Earnings per share Dividends Events after the balance sheet date CHAPTER 5: Information of article 10 l.3401/ CHPATER 6: Data and Information for CHAPTER 7 : Online availability of financial information

4 CHAPTER 1 : Statements by Representatives of the Board of Directors (according to article 4 par. 2 of l. 3556/2007, as is in effect) 1. Georgios Ginosatis of Spyridonos, resident of Koropi Attica, 6 Karaiskaki Str., Chairman of the Board of Directors and Chief Executive Officer 2. Stamatios Ginosatis of Spyridonos, resident of Koropi Attica, 204 Vas. Konstantinou Str., Vice-Chairman of the Board of Directors and Deputy Chief Executive Officer. 3. Asimina Ginosati of Dimitrios, resident of Koropi Attica, 204 Vas. Konstantinou Str., Member of the Board of Directors. ************************** We the following signatories, under our capacity as mentioned above, according to the stipulations by law (article 4 par. 2 l. 3556/2007) and specifically as appointed by the Board of Directors of the Societe Anonyme Company with the name FLEXOPACK SOCIETE ANONYME COMMERCIAL AND INDUSTRIAL PLASTICS COMPANY, (hereinafter the Company or FLEXOPACK ), hereby state that to our knowledge: (a) The Annual financial statements of the Company for financial year 2009 ( ), individual and consolidated, which were prepared in accordance with the current accounting standards in effect, accurately present the assets and liabilities, the net position and results for the period of the Company, as well as of the companies included in the consolidation and considered aggregately as a whole, and (b) The Annual Report prepared by the Company s Board of Directors accurately presents the development, performance and position of the Company, as well as of the companies included in the consolidation and considered aggregately as a whole, including the main risks and uncertainties such face. Koropi, March 29 th 2010 Georgios Gkinosatis Stamatios Gkinosatis Asimina Gkinosati 4

5 CHAPTER 2 : Annual Report by the Board of Directors for the financial year 2009 (01/01/ /12/2009) The Annual Report by the Board of Directors (hereinafter the Report ) was prepared and is in line both with the relevant provisions of c.l. 2190/1920 (article 136 in combination with article 107 par. 3, as the Company prepares consolidated financial statements) and with those of law 3556/2007 (Government Gazette 91 Α / ) and the relevant, as stated by law, executive decisions issued by the Hellenic Capital Market Commission and specifically Decisions No. 1/434/2007 and 7/448/ by the Board of Directors of the Capital Market Commission. The Report includes the total required information under an objective and adequate manner and with the principle of providing substantial and not typical information as regards to the issues tackled in such. Given the fact that the Company prepares consolidated and non-consolidated financial statements, the present Report is exclusive, however its basic and primary reference is to the Company s consolidated financial data and those of its affiliated companies. References to non-consolidated financial data in the following analysis, are made in specific points deemed reasonable or necessary by the Company s Board of Directors, for the better understanding of the Report s contents. The affiliated companies included in the consolidated financial statements are the following: a) Fescopack Sp. Z.o.o. with headquarters in Poland, held by 75% by the Parent Company b) INOVA PLASTICS S.A., owned by 50% c) VLACHOU BROS S.A., owned by 44% Finally, it is noted that the present Report is included in total together with the 2009 financial statements and the other required by law information and statements in the Annual Financial Report for the financial year The sub-sections of the Report and the content of such are as follows: 1. REVIEW OF THE COMPANY S AND S MAIN EVENTS DURING 2009 The basic events that took place in 2009 for the Company and Group are briefly the following: 1.1 During 2009, the Group implemented investments for production purposes of EUR 2.16 million, whereas the Company implemented investments of EUR million. With the new investments, the Group has the ability to improve its production process, increase production capacity and also produce new products. 1.2 During 2009, the Company s exports reached EUR million, posting a decrease of 7.67% as compared to Exports represented 67.95% of total turnover of the Company. Specifically: The Company exported products in 40 countries approximately during 2009 such as in the following ones: USA, Australia, England, Germany, France, Belgium, Austria, Switzerland, Italy, Spain, Holland, Sweden, Ireland, Ukraine, Russia, Poland, Yugoslavia, Turkey, Israel, Korea, etc. It s noted that Group s sales target a large number of clients in both domestic and international markets. Producers and manufacturers of meat, cheese, sea food, frozen food, refreshments are typical clients of the Group. The Group has formed strong relations with the clients based on professionalism and mutual credibility and continues to strengthen those relations. 1.3 It must be also noted that in the context of the Group s efforts to boost export activities and promote its products to international markets, the Company participated in 2009 in the following exhibitions: a) FOTEG 2009, Constantinople Turkey b) INDAGRA 2009, Bucharest Romania c) Mesomania 2009, Sofia Bulgaria With its participation in the following exhibitions, the Company targets to expand its presence in international markets, utilizing its long term experience as well as the upgraded spectrum of products. 5

6 1.4 During 2009, the Company placed special emphasis on the operations of the Research & Development Department. The above department is fully equipped and organized, and has a very well educated and trained personnel. The department is equipped with the most modern machinery for analysis and evaluation of plastic films and possesses all necessary means and infrastructure in order to fully respond to the ever rising market standards and the need for the production of thinner, more transparent, low cost and highly developed film products. The operation of the above department and the Company s policy with regard to the department s organization and efficiency is to strengthen the Company s competitiveness by a) developing new products, b) taking advantage of all new technological practices available in the market and c) upgrading the existing products. 1.5 On June 26, 2009, the Annual Shareholders Meeting convened in the Company s headquarters (Koropi of Attica, Tzima location, Ifaistou Agricultural Street). Shareholders representing 9,043,944 common registered shares and equal voting rights or a percentage of 77.17% out of total 11,720,024 shares were present in the Meeting which approved the following: On the first issue, the Meeting approved unanimously the Annual Financial Statements (parent and consolidated) for the year 2008 (01/01/ /12/2008) in the format that were compiled according to the law. On the second issue, the Meeting unanimously approved the Board of Directors Management Report, which is fully included in the minutes of the Board of Directors of 24 th March 2009, as well as the Certified Auditor s (Mr. Theodoros N. Papailiou) report as of 26 March On the third issue, the Meeting approved the distribution of earnings of the financial year 2008 and especially the distribution of EUR dividend per share of the Company from the earnings of From the above dividend, according to Law 3697/2008 (FEK A, 194/2008) a 10% tax is withheld and therefore the total paid dividend was set at EUR per share. Entitled to the above dividend are the shareholders registered as of 21 July 2009, Tuesday. Ex dividend date was set on 17 July 2009, Friday. The payment of the dividend for the year 2008 commenced on 24th July 2009, Friday, via the National Bank of Greece. On the fourth issue, the Meeting released the Board of Directors and the Company s auditors from any responsibility for compensation with regard to the operations, activities and management of the closing year 2008 (01/01/ /12/2008). On the 5 th issue it unanimously elected the auditors of financial year 2009 for the audit of the annual, first half (corporate and consolidated) Financial Statements of the Company. Specifically it elected the following members of the auditing firm SOL S.A., which is registered in the Certified Auditors Registrar: a) Certified Auditor-Accountant Mr. Theodoros Papailiou under Reg. No. S.O.E.L was elected as ordinary auditor and b) Mr. Panagiotis Trimbonias under Reg. No. S.O.E.L was elected as deputy auditor. The fees of the auditors were set at the same levels with the pevious year. On the 6 th issue, the Meeting elected a new six member (6-member) Board of Directors, with a five-year term, that may be extended until the ordinary General Meeting that will decide on the annual financial statements of the final year, and whose term cannot exceed six years, namely with a term until June 30 th Specifically, the following individuals were elected as members of the new Board of Directors, which following their election were formed to a body as follows: a) Georgios Ginosatis of Spyridonos b) Stamatios Ginosatis of Spyridonos c) Asimina, wife of Stamatios, Ginosati d) Nikolaos Regos of Eleftherios e) Eleni-Flora Zaverdinou of Paraskevas f) Nikolaos Vlachos of Matthaios 6

7 At the same time, the Meeting appointed according to law 3016/2002 Mr. Nikolaos Regkos and Ms. Eleni- Flora Zaverdinou as independent members of the Board of Directors. On the 7 th issue it unanimously approved the remuneration of the Board of Directors members paid during 2008 and it pre-approved the BoD remuneration (executive and non-executive members) for 2009 and until the next Annual Ordinary General Meeting. On the 8 th issue, it provided authorization, according to article 23 par. 1 of c.l. 290/1920 to members of the BoD and to the company s Managers, to realize, on behalf of third parties, actions within one of the company s objectives and to participate in Board of Director Meetings or the Management of Group companies that have the same or similar objectives. On the 9 th issue, the Meeting unanimously appointed according to the provisions of article 37 of Law 3693/2008 the Audit Committee consisting of the 3 non executive members of the Company s Board of Directors, Mr. Nikolaos Regos, Ms. Eleni Flora Zaverdinou and Mr. Nikolaos Vlachos. The new Board of Directors of the Company convened into body immediately after its election, according to the law provisions, the Company s articles of association and the corporate governance principles. The BoD elected Mr. Georgios Gkinosatis as President and Managing Director, Mr. Stamatios Gkinosatis as Vice President, and it assigned other members or non members with authorities and duties. The above BoD decisions with regard to the election of the members and the assignment of authorities were published in Government Gazette (issue of SA and Limited Liab. Comp.) with issue number 8245/ Evolution, performance and position of the Company Basic Financial and non-financial performance ratios The present paragraph includes a brief presentation of the evolution, performance, activities and position of the total companies included in the consolidation. Moreover, we also present several ratios that the Board of Directors consider as useful for the full understanding of the above issues. Α. The basic fundamentals of the income statement for 2009 are presented below in thousand euro. 31/12/ /12/2008 Change % Turnover 36,532 45, % Earnings before interest, taxes, depreciation and amortization 6,628 6, % Earnings before taxes 4,168 3, % Earnings after taxes 3,229 3, % Earnings after taxes and minority interest 3,208 3, % COMPANY 31/12/ /12/2008 Change % Turnover 36,346 42, % Earnings before interest, taxes, depreciation and amortization 6,478 6, % Earnings before taxes 4,022 3, % Earnings after taxes 3,107 3, % 7

8 Β. Below we present a brief analysis of the Group s basic consolidated fundamentals for 2009, compared to The negative financial developments that prevailed during 2009, due to the international financial crisis, affective with a negative manner the Parent Company s turnover (-14.01% year on year). The above turnover contraction was mainly due to the following factors: a) The reduction of demand in the domestic and international market where the Company activates, b) The conservative sales policy followed by the Company due to the increased financial risk and c) The reduction of selling prices due to the drop in the prices of raw materials. On parent company basis, earnings before interest, taxes, depreciation and amortization (EBITDA) posted a marginal increase of 0.72% mainly due to the efficient pricing strategy applied by the Company and the targeted penetration in selected markets. The reduction of consolidated sales by 19.28% year on year is due to the drop of parent company s sales by 14.01% and to the change of consolidation method for the company INOVA AEBE (Note 3.1.1). On a comparable basis (without including INOVA s consolidation effect) the reduction of consolidated sales would have been 14.25%. Furthermore on consolidated basis (without including the above effect) the consolidated Earnings before interest, taxes, depreciation and amortization (EBITDA) would have increased by 2.13% year on year. The increase of consolidated and parent earnings before taxes is also due to the reduction of financing cost of both the Group and the Company following the drop of interest rates and the reduction of the Company s short term loans. Specifically, net financial income-expenses of the Company amounted to EUR 171 thousand on 31/12/2009 from EUR 582 thousand on 31/12/2008. Finally, it is noted that changes in the items of the Group s financial position as of 31/12/2009 compared to 31/12/2008 are due to changes in the parent Company s accounts. The major change related to the drop of the Company s long term and short term bank debt by EUR million due to strong cash flows deriving from the Company s operating activities. Capital Management The primary objective of the Group s capital management is the smooth operating of business activities, the achievement of the development plans and the maintenance of a high credit rating. For the purpose of capital management, the Group monitors the following ratios: 1. Net debt to earnings before interest, tax, depreciation & amortization (EBITDA). 2. Net debt to Equity. Net debt is defined by the Group as the total interest bearing loan liabilities minus its total cash & cash equivalents. For the periods ended on December 31 st 2009 and 2008 respectively the ratios are as follows: Amounts in thousand euro 8

9 Group Company 31/12/ /12/ /12/ /12/2008 Long Term Loans 2,396 3,196 2,396 3,196 Shrot Term Loans 3,323 6,312 3,312 6,312 Total Bank Loans 5,719 9,508 5,708 9,508 Less: Cash and Cash Equivalents 4,261 4,610 4,254 4,442 Net Bank Debt 1,458 4,898 1,454 5,066 EBITDA 6,628 6,863 6,478 6,432 Net Bank Debt / EBITDA Shareholders' Funds 36,682 34,098 36,367 33,916 Net Bank Debt / Shareholders' Funds Total Liabilities 20,774 26,172 20,644 26,085 Total Liabilities / Shareholders' Funds Significant transactions with affiliated parties The present paragraph includes the significant transactions between the Company and its affiliates, (affiliated parties) as such are defined by International Accounting Standard 24 and specifically: A) Transactions between the Company and any affiliate that took place during 2009 and which substantially affected the financial position or performance of the Company during the year. B) Possible changes of transactions between the Company and any affiliate that are described in the previous annual report, which could have substantial consequences for the financial position or performance of the Company during We note that the following reference to the aforementioned transactions includes all the following information: (a) The amount of the transactions during 2009, (b) The outstanding balance of the transactions at the end of the period (31/12/2009), (c) The nature of the relation between the affiliate and the issuer, as well as (d) Any information on the transaction, which is necessary for the understanding of the Company s financial position, given however that such transactions are substantial and have not taken place according to the normal market terms. Amounts in thousand euro FESCOPACK Sp. VLACHOU Total zo.o ΙΝΟVA S.A. BROS SA 31/12/2009 Sale of Goods and Services Sale of Fixed Assets Purchase of Goods and Services Receivables Liabilities Benefits to Management and Company's Executives Transactions and fees of executives and management members 827 Receivables - Executives and management members 0 Liabilities to executives and management members 31 Notes: 1. There are no other legal entities affiliated to the Company, according to the definition of International Accounting Standard 24, apart from the aforementioned. From the above 3 legal entities only the foreign 9

10 company Fescopack Sp. zoo falls under the scope of the relation (parent to subsidiary) defined by article 23 e par. 5 c.l. 2190/ No loans have been provided to members of the Board of Directors or to other senior executives of the Company (and their families). 3. There were no changes in the transactions between the Company and its affiliated parties that could have significant effects on the financial position and performance of the Company for The transactions described above have taken place according to the normal market terms and do not include any specific or distinct feature that would require the further analysis of such also per affiliate. 5. The transactions of the company and the outstanding balances with its subsidiary, have been written-off from the group s consolidated financial data. 4. Basic risks and uncertainties Macroeconomic environment Given its exporting activities, the Group operates within an intense competitive global environment. The Group s general activities create several financial risks, including exchange rate risk, interest rate risk, credit and liquidity risk. The Group s overall risk management program focuses on the volatility of financial markets and aims at minimizing the potential adverse effects of such volatility on the financial performance of the Group. The financial items and the financial liabilities of the Group consist of cash and cash equivalents, customer receivables, other receivables, bank loans and liabilities to suppliers and related liabilities. Ι. The usual Financial risks to which the Group is exposed, are as follows: Α. Exchange rate risk The Group operates on a global level and realizes transactions in foreign currency, mainly a) in U.S. dollars (U.S.D.) due to Flexopack s exports and b) in Polish zlotys (PLN) due to the subsidiary company FESCOPACK Sp.z.o.o which operates in Poland. The Group s exposure to foreign exchange risk mainly emerges from existing or expected cash flows in foreign currency (exports-imports). The Group s priced sales as at 31/12/2009 in foreign currency represent 8.84% of total sales, from which 3.15% concerned sales in U.S.D., 4.15% sales in PLN and the remaining 1.54% sales in other foreign currencies. The largest part of the foreign exchange risk that emanates from exports in foreign currency (U.S.D.) was hedged with the use of natural hedging instruments, namely by the maintenance of liabilities towards foreign suppliers in the same currency. Forwards in foreign currency, foreign exchange futures, as well as loans in foreign currency, can also be used according to the needs. The following table presents the effect on earnings before taxes and equity, from a potential change in the EUR/USD and EUR/PLN exchange rates on 31/12/09 by 5%, in relation to the average exchange rate during 2009, with all the other variables constant. Amounts in thousand euro 10

11 Sensitivity Analysis for Foreign Exchange Changes Foreign currency Increase / decrease of foreign currency against Effect on earnings before taxes Effect on equity Amounts for 2009 USD 5.00% % PLN 5.00% % Amounts for 2008 USD 7.00% % -4-3 PLN 7.00% % The Group closely monitors the above exchange rates and updates the relevant analysis frequently. Nevertheless, given the fact that pricings in foreign currency represent a single digit number as a percentage, this specific risk is currently considered as controlled. Β. Credit risk The Group is not exposed to significant credit risk. Trade receivables stem from a wide client base. The Group s turnover mainly consists of transactions with reliable and creditworthy firms and companies in general, with which it sustains a long-term collaboration. As regards to sales with new customers, the Company ensures that such sales take place towards customers with a positive and rated credit history. On this basis and in conjunction with the existing experience and continuous monitoring of the credit ability of each customer-counterparty the Group trades with, credit risk is estimated at relatively low levels. Specifically, the Group has established and applies credit control procedures that aim at minimizing bad debt. The Credit Control Division defines credit limits per customer and specific sales and payment terms are applied. When possible security is requested. The Group continuously and systematically monitors the performance and financial position of its customers, in order to be pro-active and to evaluate the need to take specific measures per customer, also according to the market characteristics and difficulties where each customer operates in. It is noted that credit risk, even though present, particularly with customers that operate in countries whose economies have significantly been affected by the economic crisis, is currently considered limited and controlled. C. Liquidity risk In General, the monitoring of liquidity risk is focused on monitoring and managing cash inflows and outflows on a constant basis, in order for the Group to be able to meet its cash liabilities. Liquidity risk is maintained at low levels by holding adequate cash balances, while there are also adequate unused credit lines with financial institutions, in order to face any possible shortage in cash. There is no such need as of today therefore the above risk is expected to affect the Group s operations in any manner. The following table summarizes the maturities of financial liabilities as at December 31 st 2009, according to the payments emanating from the relevant loan contracts, at non-discounted prices. 11

12 Financial Liabilities Amounts in thousand euro 2009 up to 6 months 6 to 12 months 1 to 5 years > 5 years Total Bank Debt 2, , ,719 Suppliers and related liabilities 8, ,579 Taxes payable Total 11, , , up to 6 months 6 to 12 months 1 to 5 years > 5 years Total Bank Debt 5, , ,508 Suppliers and related liabilities 9, ,507 Taxes payable Total 15,775 1,539 3, ,510 D. Cash flow risk due to changes in interest rates The Group s operating income and cash flows are not significantly affected by changes in interest rates, given that net bank debt is at low levels compared to the Group s equity. Specifically, the current relationship for the group as at 31/12/2009 corresponds to 3.97%. The Group s bank debt is linked to floating interest rates in euro. The limited level of loans places the above risk under control. The following table presents the changes to the Group s earnings before taxes (through effects of balances at the end of the period of loans with floating interest rates on earnings) from potential interest rate changes in relation to the weighted average interest rate for 2009, with all the remaining variables constant: Amounts in thousand euro Sensitivity Analysis - Group's Loans against Interest Rate Movements Interest and Expenses of Loans Effect on THE Interest Rate Volatility Effect on EBT Shareholders' Funds Amounts 2009 EURO 1% % Amounts 2008 EURO 1% % ΙΙ. Other risks to which the Group is exposed: Α. Risk arising from competition of foreign and domestic firms There is risk from competition of foreign firms, however the sector in which the Company operates is characterized by entry barriers for new entrants due to the particular technological know-how required and the significant investments in infrastructure that are required. With the contribution of the Research & Development Department, the Group manages to differentiate its products from the existing competition and present innovative solutions. Towards the same direction of product differentiation, the Company utilizes the high quality and recognition of its products, whereas it develops long term relations with both suppliers and customers. 12

13 Taking the above factors into account, this risk is considered to be at low levels. Β. Risk of reduced demand due to consumption slowdown The Group is active in an intensive and competitive global environment. Its specialized know-how in conjunction with the research, development and creation of new products and strong infrastructure, help the Group to remain competitive and to expand its penetration in new markets. The products of the Group are used mainly in food packaging which, since food is of first need, are affected the least from consumption slowdown, however they may be affected subsequently by external factors that may prevail in the markets in which the Group is active. External factors that may harm demand for the Group s products is the probability of illnesses in meat, the change in food and nutrition patterns, climate changes, a slowdown of the global economy etc. During the current period and given the anticipated slow pace in sales as appeared by the end of closing year due to unfavorable economic and market conditions, and also given the broader business uncertainty, the above risk is evaluated s significant for the time being. The Group s activity is directly linked to the food sector, which is traditionally affected to a lesser extent from an economic crisis, however there are signs about a persistent weak demand which results to a slow pace for the Company s ales. For this reason, the particular risk is considered as significant during the current year (as it was the case in the previous year) as it may affect the Group s overall financial performance until there are signs about a reversal of the current negative economic conditions. C. Risk from the price increase of raw materials The Group due to lack of domestic production of raw materials, is mainly exposed in price volatility of raw materials that it acquires internationally. This volatility may result from abrupt changes in oil prices or other related reasons. In order to face the above risk, the Group adapts the inventory and commercial policy accordingly and therefore part of the above risk is controlled and transferred. In case of inability to transfer the raw material cost to the product s final price, the above risk is considered significant and may negatively affect the Group s financial results. 5. Proposed dividend distribution The Board of Directors of FLEXOPACK, taking into account the results for fiscal year 2009, the company s financial status, its investment plan as well as the conditions of the broader financial environment, will propose to the Annual Ordinary General Shareholders Meeting the distribution of a total dividend amounting to 656,321.34, which corresponds to a dividend of per share, the same as last year. 6. Analytic information, according to article 4 par. 7 l. 3556/2007, as currently in effect According to article 4 par. 7 l. 3556/2007 the Company is obliged to disclose analytic information in the present Report, as regards to a number of issues. Therefore, we disclose the following: 1) The Company s share capital currently amounts to 5,860,012 Euro, is paid up in full and is divided into 11,720,024 common registered shares with a nominal value of 0.50 Euro each. All Company shares are listed and traded on the Athens Exchange, in the Middle and Small Capitalization Category. 2) There are no limitations as regards to transfers of Company shares, either from the company s Articles of Association, or from specific agreements, or from other regulatory provisions etc, except for limitations imposed by existing Bond Loan agreements issued by the Company, according to which the Ginosati family aggregately must own a percentage of at least 33.4% of the Company s paid up share capital. 3) The Company s main participations, are as follows: - FESCOPACK Sp.z.o.o foreign (Polish) Company: participation of 75% of shares and voting rights - INOVA PLASTICS SA: participation of 50% of shares and voting rights - VLAHOU BROS SA: participation of 44% of shares and voting rights Moreover and regarding the direct or indirect significant participations in the share capital and voting rights of the Company, according to the definition of provisions of article 9 to 11 of l. 3556/2007, and according to information known to the Company, such participations are as follows: 13

14 1. Gkinosatis Stamatios 31.74% 2. Gkinosatis Georgios 19.31% 3. Gkinosatis Nikolaos 16.29% 4. COMPETROL ESTABLISHMENT 6.70% SA 5. COMMERZBANK AG LONDON 5.38% SA 4) There are no shares, which provide special control rights. 5) To the Company s knowledge, no restrictions on voting rights emanate from the Company shares. 6) To the Company s knowledge, there are no agreements between shareholders that imply limitation on the transfer of shares or limitations on the exercise of voting rights. 7) As regards to the appointment and replacement of the Company s BoD members and the amendment of the Company s Articles of Association, there are no rules that differ than those stipulated in C.L. 2190/1920, as such is in effect today. 8) The Board of Directors or specific members of the Board of Directors have no special authority for the issuance of new shares or the purchase of treasury shares, as no relevant decision has been made according to article 16 or according to article 13 of C.L. 2190/ ) There is no significant agreement contracted by the Company, which becomes in effect, is amended or terminated in case of change in the Company s control following a tender offer, with the exception of the Bond Loans contracted by the Company and the National Bank of Greece SA dated 6/9/2006 and 26/3/2007, according to which Bondholders have the right to denounce the loan if the Issuer s shareholding structure is altered as regards to the controlling majority and specifically if the Ginosatis family in total ceases to own a percentage at least equal to 33.4% of the Issuer s paid up share capital. The aforementioned term is common practice and is included in all common Bond Loans (in fact the controlling majority is usually defined as over 50%), which are not secured. 10) There is no agreement between the Company and the BoD members or employees, which provides for indemnity in case of resignation or termination of employment without reason or termination of employment term or termination emanating from any public tender offer. Explanatory report regarding the information of article 4 par. 8 l. 3556/2007 The numbering in the present explanatory report (which is prepared according to article 4 par. 8 l. 3556/2007) follows the respective relevant numbering of information of article 4 par. 7 l. 3556/2007, as such information is presented above: 1. The structure and form of the Company s share capital is presented in detail in article 5 of the company s Articles of Association. The company s shares were listed on the Athens Exchange on April 2 nd No such limitation is imposed either by law, either by the company s Articles of Association, or by any other agreement, apart from the common Bond Loan Agreements, reference to which is made also in point Data regarding the number of shares and voting rights owned by individuals with significant participations, have been derived by the shareholders registry kept by the company and by disclosures notified according to law to the company. 4. There are no other categories of shareholders, namely there are only common registered shares with voting rights. 5. No such limitations have been notified to the company. 6. Likewise no such agreements have been notified to the company. 7. On the specific issues, the company s Articles of Association do not deviate from the provisions of c.l. 2190/1920. It is explicitly mentioned that the Company s Articles of Association are fully conformed to the provisions of l. 3604/ There is no such special authority. 9. In the lack of such agreements, apart from those mentioned, no clarification is deemed necessary. 10. Likewise, in the lack of such agreements no clarification is deemed necessary. 7. Information on labor and environmental issues A. The Group employed at 31/12/ people and the Company 195 people. The Group maintains excellent relationship with its employees and no work problems arise since one of the top priorities for the 14

15 Group is to maintain and promote a peaceful work environment and to continuously improve and upgrade working conditions, in order to achieve the maximum utilization of human resources on production level. The Group takes care of all necessary measures and adopts practices in order to fully comply with current labor and insurance regulation. The Company recognizes the need for continuous improvement of its environmental targets based on the principle of sustainable development and compliance with current regulation and international standards, aiming to a balanced economic development in harmony with nature. Following a viable growth route it develops its activities in such a way to secure the protection of environment and the health and safety of its employees, the local community and the public. The Company s policy to secure environmental protection is based on the following basic principles: It takes measures to protect the environment in line with environmental legislation and the approved, in relation to its operation license, environmental terms. It applies an Environmental Management System on the overall activities of its production process. It adopts specific rules for environmental controls on its internal production operation. It improves its overall environmental behavior particularly on issues of prevention of environmental pollution and management of emergencies. It establishes, to the extent and degree possible, the definition of ecological sensitivity and environmental vision, which inspires the highest level throughout the entire pyramid of the Company s employees. Finally, it must be noted that the production process has been planned in a way that renders the use of available sources effective and minimizes the negative effect on the environment. 8. Other information 8.1 It is noted that on 13/2/2009 the Prefecture Local Government of East Attica proceeded with the deletion from the Societe Anonyme Registrar of the company SPOROS SOCIETE ANONYME COMMERCIAL AND INDUSTRIAL PLASTICS COMPANY under liquidation, in which FLEXOPACK SA participated by 40.21%. 8.2 None of the Group s companies has branches, apart from the parent Company whose new building, which is located across from the old industrial plan, is considered as a branch. During 2009 there was no transfer of domicile for any of the Group s companies, nor was any decision made regarding the opening or operation of any branch. 8.3 The Company has a special Research and Development Department, which promotes activities for the development of new products and the improvement of existing products. The other affiliated companies have the ability to refer to the aforementioned Department for research issues of interest in the context of promoting the development of their products with the use of special advice and the evaluation of relevant studies that are prepared for such a purpose. 8.4 None of the companies participating in the consolidation, own shares or interests of par. 5 article 103 of c.l.2190/ There are no important events that took place prior to the closing of year 2009 and until the compilation date of the this Report except from the following: 1. With regard to the loan agreement signed between the Polish subsidiary company Fescopack Sp.Z.o.o. and EFG Eurobank Ergasias (branch in Poland) for an amount of PLN 1,000,000 (EUR 250,000 approximately), the Company guaranteed the above amount as maximum level to the bank for the repayment of the subsidiary s liability based on the above agreement. The relevant agreement for the granting of guarantee provides for the reduction of the maximum amount as guarantee by the installments that will be paid on behalf of the subsidiary company. The agreement does not contain any other particular or unusual terms. 8.6 As regards to the Company s and Group s outlook, a relevant analysis is presented below in the present Report. 9. Group s Outlook for 2010 With the continuous and sustainable development of the Company and Group as the main objective, the basic axis of strategic development for 2010, are as follows: 15

16 - Further penetration in foreign markets, through partnerships and also through the commercial network the company has already developed and continues to expand. The development and expansion of this network forms one of the top priorities for the Group. - Improvement and development of the range of produced products, with an emphasis on product diversification as compared to the competition. - Maintenance of high quality of produced products. - Development of new products and modern production methods. - Strengthening of the production operations of the Polish subsidiary with an emphasis on the particular as well as neighboring markets. - Continuous development of the existing organizational structure aiming at the further increase of efficiency, the further reduction of costs and finally the continuous and increased spread of information at all the company s and Group s levels. - Focus on the main activities and specifically on those developed and promoted by the Company, and at the same time improvement and restructuring of the Company s participations and its portfolio in general. Given its export orientation, the financial results of the Group for the year 2010 depend on the global economic and market conditions, which are currently uncertain thus making difficult to predict the point of reversal. In view of the above, the Group s management has its own reservations with regard to any kind of prediction for the financial results of At this stage, no prediction can be made for the end of the economic crisis and the beginning of a recovery in the broader global economic environment and specifically in the Group s markets. Thus any kind of forecast at this point in time is considered as fragile. Koropi, March 29 th 2010 THE BOARD OF DIRECTORS THE CHAIRMAN OF THE BOARD Georgios Gkinosatis 16

17 CHAPTER 3 : Audit Report by Independent Certified Auditor-Accountant Towards the Shareholders of the Societe Anonyme Flexopack Societe Anonyme Commercial and Industrial Plastics Company Report on the Parent and Consolidated Financial Statements. We have audited the attached individual and consolidated financial statements of Flexopack Societe Anonyme Commercial & Industrial Plastics Company, (the Company ), which consist of the individual and consolidated Balance Sheet as at December 31st 2009, the individual and consolidated income statements, statements of changes in equity and cash flow statements for the period ended on the aforementioned date as well as the summary of significant accounting policies and other explanatory notes. Management s Responsibility for the Financial Statements. The Management of the Company is responsible for the preparation and fair presentation of the Financial Statements according to the International Financial Reporting Standards, as such have been adopted by the European Union. This responsibility includes the planning, implementation and maintenance of an internal audit system as regards to the preparation and fair presentation of the financial statements, free from substantial inaccuracies due to fraud or error. Auditor s Responsibility Our responsibility is limited to the formation and expression of opinion on the Financial Statements, based on the conducted audit. Our audit was conducted based on the Greek Auditing Standards, which are in line with the International Auditing Standards. These Standards demand our compliance with the ethics rules and the planning and implementation of the audit in a way that reassures with reasonable certainty that the Financial Statements are free from substantial inaccuracies or omissions as regards to the amounts included in the Financial Statements. The procedures are selected according to the auditor s judgment and include the estimation of risk from substantial inaccuracies of the financial statements due to fraud or error. For the estimation of this risk, the auditor takes into account the internal audit system as regards to the preparation and fair presentation of the Financial Statements, and aims at planning auditing procedures that correspond to the circumstances and not for the expression of an opinion on the effectiveness of the Company s internal audit system. The audit also includes the evaluation of the followed accounting principles, the Management s estimations and generally, the overall presentation of the Financial Statements. We believe that the audit data collected are adequate and appropriate for the formation of our opinion. Opinion In our opinion, the attached individual and consolidated Financial Statements, accurately present from any aspect the financial status of the Company and its subsidiary as at December 31st 2009, as well as their financial performance and Cash Flows for the period ended on the aforementioned date, according to the International Financial Reporting Standards, as such have been adopted by the European Union. Report on other legal and regulative issues We verified the agreement and reconciliation of the contents of the Board of Directors Management Report with the attached individual and consolidated Financial Statements, as stipulated by articles 43a, 37 and 107 of C.L. 2190/20. Athens, March 29 th 2010 The Certified Auditor Accountant Theodoros N. Papailiou 17

18 SOEL Reg. No SOL S.A. Sworn Auditors SA Member of Crowe Horwath International 3 Fok. Negri Street, Athens SOEL No

19 CHAPTER 4 : Financial Statements 2009 Annual Financial Statements (January 1 st December 31 st 2009) Balance Sheet According to the International Financial Reporting Standards THE THE COMPANY ASSETS Note 31/12/ /12/ /12/ /12/2008 Non-current assets Tangible Assets ,733 35,696 34,187 35,267 Goodwill Intangible Assets Investments in Subsidiary Companies Investments in associate companies 6.5 1,980 1,940 1,837 1,837 Other Long-term Receivables ,009 38,740 37,748 38,638 Total non-current assets Inventories 6.7 6,742 6,685 6,503 6,545 Trade Receivables 6.8 6,821 8,220 6,888 8,410 Other Receivables 6.9 1,623 2,014 1,617 1,967 Cash and cash equivalents ,261 4,610 4,254 4,442 19,447 21,529 19,263 21,363 Total Assets 57,455 60,269 57,011 60,001 EQUITY & LIABILITIES Share capital ,860 5,860 5,860 5,860 Share premium ,823 9,823 9,823 9,823 Reserve Capital ,369 9,044 10,394 9,078 Profit/(loss) carried forward ,480 9,244 10,290 9,155 Total equity attributed to the parent's shareholders 36,531 33,970 36,367 33,916 Minority interest Total Equity 36,682 34,098 36,367 33,916 LIABILITIES Long-term liabilities Deferred tax liabilities ,020 1,722 1,996 1,712 Liabilities for staff retirement indemnities Future income from government grants ,233 3,401 3,233 3,401 Long-term bank liabilities ,396 3,196 2,396 3,196 Other provisions ,210 8,858 8,185 8,848 Short-term liabilities Suppliers and related liabilities ,579 10,507 8,488 10,435 Current tax liabilities Short-term bank liabilities ,323 6,312 3,312 6,312 12,564 17,314 12,459 17,237 Total Liabilities 20,774 26,172 20,644 26,085 Total Equity & Liabilities 57,455 60,269 57,011 60,001 The attached notes constitute an inseparable part of these financial statements. 19

20 Income Statement Continuing Operations Note 31/12/2009 THE 31/12/2008 THE COMPANY 31/12/ /12/2008 Turnover ,532 45,256 36,346 42,267 Cost of Sales 6.20 (28,825) (36,673) (29,035) (34,399) Gross Profit 7,707 8,583 7,312 7,868 Other operating income Administrative expenses 6.20 (1,518) (1,718) (1,340) (1,443) Research & Development Expenses 6.20 (246) (326) (246) (304) Distribution expenses 6.20 (2,230) (2,773) (2,120) (2,473) Other operating expenses 6.22 (92) (36) (68) (18) Operating Results 4,292 4,420 4,193 4,301 Financial income Financial expenses 6.23 (313) (707) (307) (585) Other Financial Results (41) 42 (14) Proportion of associate companies' Result Earnings before taxes 4,168 3,722 4,022 3,719 Income tax 6.25 (939) (563) (914) (554) Earnings after taxes 3,229 3,159 3,107 3,165 Allocated to : Shareholders of the parent 3,208 3,174 3,107 3,165 Minority interest 20 (15) 0 0 3,229 3,159 3,107 3,165 Earnings per share that correspond to the parent's shareholders for the period (basic in Euro) The attached notes constitute an inseparable part of these financial statements. Continuing Operations 31/12/ /12/ /12/ /12/2008 Earnings after Taxes 3,229 3,159 3,107 3,165 Other Income Foreign Exchange Differences from Consolidation of a Foreign Subsidiary 12 (71) 0 0 Other Income after Taxes 12 (71) 0 0 Total Income after Taxes 3,240 3,088 3,107 3,165 Allocated to : Shareholders of the parent 3,217 3,121 3,107 3,165 Minority interest 23 (33) 0 0 3,240 3,088 3,107 3,165 The attached notes constitute an inseparable part of these financial statements. THE THE COMPANY Due to the fact that the Company does not exercise control on INOVA S.A. from 20/6/2008, the latter company ceased to be consolidated with the full consolidation method on 30/6/2008 and since then is incorporated in the consolidated financial statements with the equity method. As a result, the consolidated financial results of the previous year include the results of the former subsidiary for the period based on the full consolidation method and of the period based on the equity method. Current year s results are consolidated based on the equity method (Note 3.1.1). 20

21 Consolidated statement of changes in equity THE Attributable to Parent Company's Shareholders Share Capital Share Premium Reserves Foreign Exchange Profit Carried Differences Forward Total Minority Interests Total Sharehold ers' Funds Balance as at January 1st ,860 9,823 8, ,085 31,506 1,445 32,951 Change in Equity Total Income after Taxes (53) 3,174 3,121 (33) 3,088 Distributed Dividends (656) (656) (1) (658) Transfer to reserves (792) Change in Consolidation Method for INOVA AEBE 0 0 (434) (1,374) (1,374) Share Capital Increase of Subsidiary (Minority Stake) Balance of Equity as at December 31st ,860 9,823 9,087 (44) 9,244 33, ,098 Balance as at January 1st ,860 9,823 9,087 (44) 9,244 33, ,098 Change in Equity Total Income after Taxes ,208 3, ,240 Distributed Dividends (656) (656) 0 (656) Transfer to reserves (139) Transfer of Depreciation from Grants L. 3299/ ,177 0 (1,177) Balance of Equity as at December 31st ,860 9,823 10,404 (35) 10,480 36, ,682 The attached notes constitute an inseparable part of these financial statements. 21

22 Statement of changes in Parent Company s equity THE COMPANY Share Capital Share Premium Reserves Profit Carried Forward Total Balance as at January 1st ,860 9,823 8,295 7,430 31,408 Change in Equity Total Income after Taxes ,165 3,165 Distributed Dividends (656) (656) Transfer to reserves (783) 0 Balance of Equity as at December 31st ,860 9,823 9,078 9,156 33,916 Balance as at January 1st ,860 9,823 9,078 9,155 33,916 Change in Equity Total Income after Taxes ,107 3,107 Distributed Dividends (656) (656) Transfer to reserves (139) 0 Transfer of Depreciation from Grants L. 3299/ ,177 (1,177) 0 Balance of Equity as at December 31st ,860 9,823 10,394 10,290 36,367 The attached notes constitute an inseparable part of these financial statements. Cash Flow Statement 22

23 THE THE COMPANY 31/12/ /12/ /12/ /12/2008 Cash flows from operating activities Earnings before taxes 4,168 3,722 4,022 3,719 Adjustments to Earnings for: Depreciation of tangible assets 2,764 2,850 2,713 2,562 Amortization of intangible assets Impairment Provisions 22 (29) 22 (28) Foreign exchange differences (23) 149 (23) 115 Profit / (Losses) from Sale of Tangible Fixed Assets (35) (3) (35) (3) Interest income (98) (12) (94) (12) Interest expenses Income from dividends 0 (1) 0 (5) Amortization of grants (564) (541) (565) (536) Share of results in affiliated companies (40) (36) 0 0 Total adjustments of Profits for Cash Flows 2,476 3,249 2,462 2,812 6,644 6,971 6,484 6,531 Working capital changes Increase/ (decrease) of inventories (55) (112) 42 (371) Increase/ (decrease) of receivables 1,831 (312) 1, Increase/ (decrease) of liabilities (1,827) (621) (1,834) (617) (52) (1,045) 115 (509) Cash flows from operating activities 6,592 5,926 6,598 6,022 minus: Interest paid minus: Income tax paid (498) (653) (490) (641) Net cash flows from operating activities 6,094 5,273 6,109 5,381 Cash flows from investment activities Acquisition of subsidiaries, associates, joint ventures and other investments Purchases of tangible fixed assets (1,916) (3,040) (1,796) (2,883) Purchases of intangible assets (330) (186) (330) (186) Sales of tangible fixed assets Interest received Dividends received Increase in subsidiary's capital (270) Net cash flows from investment activities (2,086) (3,214) (1,923) (3,076) Cash flows from financing activities Dividends payable (662) (664) (662) (662) Received loans 11 2, ,831 Payment of loans (3,801) (979) (3,800) (800) Interest paid (313) (707) (307) (585) Payments of leases 0 (31) 0 0 Inflows from government grants 396 1, ,424 Proportion of minority in subsidiary's share capital increase Cash & cash equivalents from cancellation of subsidiary consolidation (Note (61) 0 0 Net Cash flows from financing activities (4,369) 1,562 (4,373) 1,208 Net (decrease)/ increase in cash and cash equivalents (360) 3,621 (187) 3,513 Cash and cash equivalents at the beginning of the period 4,610 1,059 4, Effect from foreign exchange differences 11 (71) 0 0 Cash and cash equivalents at the end of the period 4,260 4,609 4,254 4,442 The attached notes constitute an inseparable part of these financial statements. 1. General Information on the company and group The Company operates in the sector of constructing plastic packaging items mainly for the food industry but also for other advanced special applications. The Company FLEXOPACK SOCIETE ANONYME COMMERCIAL AND INDUSTRIAL PLASTICS COMPANY specifically is active in the production of flexible plastic packaging materials that broadly appeal to many sectors, the main of which are the food packaging sector. The Company has developed advanced know-how in the production of multiple layer packing films, holding the leading position in the Greek market as the competition comes from a limited number of companies that are active abroad. 23

24 The Company was initially established as a General Partnership in 1979 in Koropi Attica. In 1998 it is converted from a General Partnership to a Societe Anonyme, its current form, under the corporate name FLEXOPACK SOCIETE ANONYME COMMERCIAL AND INDUSTRIAL PLASTICS COMPANY, according to L. 1297/1972 and C.L. 2190/1920 (Gov. Gazette11/ , S.A. and L.T.D. issue). The company s base (constitutive and administrative) is located at the Municipality of Koropi Attica, at the position Tzima (Postal Code , tel.: ) and is registered in the Societe Anonyme Registrar with registration number 18563/06/Β/88/14. Its duration has been set to 50 years, namely until The company s building facilities are located at the Tzima position in Koropi Attica, in two self-owned plots with a total area of 19,695 sq. m. The total useful area of the building facilities amounts to 15,000 sq. m. From September 19th 1995 the Company operates and is a holder of the ISO 9001 quality assurance certificate with No for research, development, production, distribution and technical support of its products. The aforementioned certificate has been granted to the Company from the company Bureau Veritas Quality International. Furthermore, in April 2003 the Company was certified with the new hygiene standard, the British Retail Consortium (BRC). This standard with pan European recognition introduces very high hygiene, products security and quality demands. The Company s shares are listed and traded on the Athens Exchange from April Basis for the preparation of the financial statements The consolidated and individual financial statements of FLEXOPACK PLASTICS SA as at December 31st, 2009 covering the period from January 1st up to December 31st, 2009 have been prepared in accordance with the International Financial Reporting Standards (IFRS), including the International Accounting Standards (IAS) and interpretations issued by the Interpretation committee of the International Financial Reporting Standards, as such have been adopted by the European Union. Also, the financial statements have been compiled based on the historic cost principle as this is amended by the readjustment of specific asset and liability items into current values, the going concern principle. The consolidated financial statements of the Company include the financial statements of the parent company FLEXOPACK PLASTICS S.A. as well as the subsidiary company FESCOPACK Sp.zo.o which is controlled by FLEXOPACK S.A. (the Group). The financial statements are expressed in thousand euros. It is noted that any differences in summations of the attached financial statements and analysis are due to rounding. The accounting principles, based on which the attached financial statements have been prepared and which the Group applies systematically, are in line with those applied in the previous financial period. 2.1 Important accounting judgments, estimations and assumptions The preparation of financial statements according to IFRS requires the management to make decisions, perform estimations and use assumptions that affect the amounts presented in the financial statements, the assets, liabilities, as well as the disclosure of contingent assets and liabilities during the preparation date of the financial statements and the published income and expenses amounts for the period. The actual results may differ due from such estimations. Estimations and judgments by the Management are continuously evaluated and are based on empirical data and other factors, such as expectations for future events considered probable under current conditions. Specific amounts which are included or affect the financial statements, and the relevant disclosures, must be estimated. During the estimations, assumptions must be created as regards to the values or conditions that cannon be known with certainty during the preparation period of the financial statements. An important accounting estimation is considered as one that is important for the image of the company s financial status and results and demands the most difficult, subjective or complicated judgments by the management, often as a result of the need to create estimations regarding the effect of assumptions which are uncertain. The Group evaluates such estimations on a constant basis, based on the results of the past 24

25 and based on experience, meetings with specialists, trends and other methods that are considered appropriate under the specific circumstances. The important accounting judgments and assumptions which refer to factors that could affect the accounts of the financial statements are the following: Income taxes of tax un-audited fiscal years The provision for the income tax according to IAS 12 is based on an estimation of taxes that will be paid to the tax authorities and includes the current income tax for each financial year and a provision for additional taxes that will likely arise from future tax audits. The final settlement of income taxes may differ from the relevant amounts recorded in the financial statements. The management creates a provision for additional taxes that may arise from future tax audits, based on estimations and historical data from previous years. If the final tax audit result differs from the booked amounts, then the difference will affect income tax and the provision for deferred taxes during the period the tax differences were defined. Estimated impairment of goodwill The Group annually reviews the impairment of goodwill on annual and interim basis, when events or conditions make such an impairment possible. The recoverable amounts of cash flow generating units are based on estimations of the value in use. Additional information is presented in paragraph 3.4. Fair values and useful life of tangible fixed assets The management makes certain estimations regarding the useful life of depreciating fixed assets. For more information se paragraph 3.3. Provisions Doubtful accounts are presented with the amounts likely to be recovered. When it is known that a specific account is subject to a larger risk than the normal credit risk, then the account is analyzed and is registered if conditions indicate that the receivable is non-collectable. 2.2 New accounting standards interpretations and amendments of existing standards The International Accounting Standards Board as well as the Interpretation Committee (IFRIC), have already issued a series of new accounting standards and interpretations, while they have also revised previous standards, which are mandatory for accounting periods beginning on or after 1 January The Company s assessment regarding the effect from the new standards and interpretations is presented below. Standards and Interpretations effective from the financial year 2009 Amendment of I.A.S. 1 Presentation of Financial Statements, with effect, for annual accounting periods beginning on or after 01/01/2009. The revised standard requires the presentation of the restatement of the balance sheet at the beginning of the comparative period in cases of reclassification of comparative information and it introduces the comprehensive income statement which can be one statement or two separate statements that will include all changes in equity not arising from transactions with owners. Also, the standard was amended in May 2008 to clarify that some and not all financial assets and liabilities classified as held for trading purposes, are examples of current assets and short-term liabilities. This standard was applied from and apart from the difference in presentation, it did not have a substantial effect on the Group and Company. Replacement of I.A.S. 23 Borrowing Cost, with effect, for annual accounting periods beginning on or after 01/01/2009. The amended standard requires the capitalization of the borrowing cost related directly to the construction or acquisition of assets that meet specific conditions. The option for direct expensing of the total borrowing cost was repealed. In May 2008 I.A.S. 23 was also amended, to clarify that interest is calculated with the effective interest rate method according to those stipulated by I.A.S. 39. This standard did not have any material impact, because the Group and the Company had not completed their investment plans. Amended I.A.S. 32 Financial Instruments: Presentation, with effect for annual periods beginning on or after

26 The amendments require, the recognition in equity, of puttable financial instruments that oblige the issuer to proportionately pay the net assets of the instrument during settlement, when specific conditions are met. The amendments do not apply to the Group and Company. I.F.R.S. 8 Operating Segments, with effect for annual accounting periods beginning on or after 01/01/2009. I.F.R.S. 8 replaces I.A.S. 14 Segment Reporting. The significant changes of the standard refer to the distinction basis of operating segments and the ability to calculate items on a difference basis, now according to internal references towards the decision maker, in order to allocate sources and estimate the performance. This amendment had no impact on the number of segments presented in the financial statements. Amended I.F.R.S. 1 First Implementation of I.F.R.S., with effect for annual periods beginning on or after According to this amendment, during the first implementation of I.F.R.S., in the individual financial statements of the parent company, it is permitted to use the implied cost for investments in subsidiaries, associates and joint ventures. This amendment does not apply to the Company. Amended I.F.R.S. 2 Share Based Payments, with effect from The amendments deal with issues of vesting conditions and cancellation conditions of options. Specifically it defines that vesting conditions are service conditions and performance conditions and thus are taken into account for the definition of fair value during the concession date. It also defines that all cancellations of options, either arising from the entity or from third parties, must have the same accounting treatment. The amendments do not apply to the Group and Company. Amended I.A.S. 28 Investments in Associate Companies, with effect for annual periods beginning on or after According to the amendments an investment in an associate is a whole asset for purposes of impairment revisions. Therefore, possible impairment losses are not allocated to goodwill and other assets of the investment and any reversal of impairment losses concern the total investment. Also when an investment in an associate is accounted for according to I.A.S. 39, then all of the disclosures of I.A.S. 28 are not required. Amended I.A.S. 36 Impairment of Assets, with effect for annual periods beginning on or after The amendments define that when the fair value minus the sale cost are calculated according to discounted cash flow techniques, then disclosures equivalent with those for the definition of value in use are provided. Those amendments had no application in the Group and the Company. Amendments of I.A.S. 38 Intangible Assets, with effect for annual periods beginning on or after According to the amendments, prepayments are recognized as an asset when such take place in advance for the acquisition of the right to purchase goods or receive services. Also the wording was amended as regards to amortization of intangible assets, which essentially allows the free use of other, apart from the straight line method, methods on intangible assets. The amendments had no application for the Group and Company. Amendments to I.A.S. 19 Employee Benefits, with effect for annual periods beginning on or after According to the amendments, an amendment to a plan that results in the change of promised benefits being affected by future wage increase, is considered as a cut-back, while an amendment to a plan that changes benefits attributed to past service, is considered as negative service cost if such leads to a reduction of the present value of the commitment for the defined benefit. The amendments had no application for the Group and Company. Amended I.A.S. 39 Financial Instruments: Recognition and Calculation, with effect for annual periods beginning on or after The amendments refer to issues of reclassification of derivatives from the category of calculated at fair value through the results, in case of the end or beginning of hedging, to amendment of the definition of 26

27 items calculated at fair value through the results and to amendments regarding the definition of the effective interest rate in case that a debt instrument ceases to be a hedging item. The amendments had no application for the Group and Company. Amended I.A.S. 16 Tangible Fixed Assets, with effect for annual periods beginning on or after According to the amendments, entities that acquire tangible fixed assets with the purpose to lease and then sell such, present the price from the sale as income and transfer such items from tangible assets to inventories when rendered as intended for sale. A respective amendment was applied to I.A.S. 7 Cash Flow Statement according to which cash flows from the purchase lease and sale of such assets are recognized in flows from operating activities. The amendments had no application for the Group and Company. Amended I.A.S. 29 Presentation of Financial Assets in Hyper-inflationary Economies, with effect for annual periods beginning on or after The amendments were made to emphasize the fact that a number of assets and liabilities are calculated at fair value and not at cost. The amendments do not apply to the Group and Company. Amended I.A.S. 31 Participations in Joint Ventures, with effect for annual periods beginning on or after The amendments define that when an interest in a joint venture is accounted for according to I.A.S. 39, then all the disclosures or I.A.S. 31 are not required. The amendments do not apply to the Group and Company. Amended I.A.S. 20 Accounting for Government Grants and Disclosure of Government Assistance, with effect for annual periods beginning on or after According to the amendments, loans granted by the government with an interest rate less than the market rate, are accounted for according to I.A.S. 20 and not I.A.S. 39. The amendments do not apply to the Group and Company. Amended I.A.S. 40 Investment Property, with effect for annual periods beginning on or after According to the amendments, property that is at the construction state and intended for investment property when completed, fall under the implementation scope of I.A.S. 40 and therefore can be calculated at fair value. The amendments had no application for the Group and Company. Amended I.A.S. 41 Agriculture, with effect for annual periods beginning on or after According to the amendments, the prohibition of the use of the biological transformation as a parameter for the calculation of fair value of biological assets is repealed and the use of the market interest rate is required when the discounted future cash flow method is used to define fair value. The amendments do not apply to the Group and Company. IFRIC 13 Customer Loyalty Programs, with effect for annual accounting periods beginning on or after 01/07/2008. The interpretation describes the accounting treatment of the award credits, that an entity provides to its customers, in the context of a sale of goods, services or use of its assets from such, and which (award credit), will be cashed in the future, if conditions are met, with the free or discounted receipt of goods or services. The interpretation does not apply to the Group and Company. IFRIC 15 Agreements for the Construction of Real Estate, with effect for annual periods beginning on or after The Interpretation provides guidance on whether to apply I.A.S. 18 or I.A.S. 11 in cases of construction of real estate. The Interpretation does not apply to the Group and Company. IFRIC 16 Hedges of a Net Investment in a Foreign Operation, with effect for annual periods beginning on or after The interpretation defines, that in such cases, an accounting hedging can be applied only for foreign exchange differences that arise between the operating currency of the foreign unit and the operating currency of the parent company. The interpretation currently does not apply to the Group and Company. 27

28 IFRS 7 «Improvements to the Disclosures of Financial Instruments» with effect for the accounting periods starting at or after Improvements regarding the disclosure of financial instruments refer to the inclusion and presentation of fair values along three levels (Level 1: use of public prices, Level 2: use of data deriving from market prices, and Level 3: use of prices not deriving from market prices) and some additional disclosures with regard to liquidity risk. The above amendments are not expected to affect the financial statements given the fact that refer to disclosures of financial instruments that are not broadly utilized by the Company and the Group. Interpretation 9 and IAS 39 Amendments for Embedded Derivatives with effect for accounting periods ending at or after Based on these amendments, in case of reclassification of financial instruments outside the category measured at fair value through results, a new estimate must be made for derivatives embedded in a major contract. The above amendments do not apply to the Group and the Company since such instruments are not utilized. 3. Basic accounting principles The accounting principles based on which the attached financial statements have been prepared, and which are consistently applied by the Group, are presented as follows. 3.1 Consolidation Subsidiaries All the companies that are managed or controlled, directly or indirectly, by another company (parent) either through the holding of majority voting rights in the undertaking or, in the case where there is no majority shareholding, through agreement of the Company with the other shareholders in the undertaking. That is to say that subsidiaries are companies in which control is exercised by the parent. Subsidiaries are consolidated completely (full consolidation) with the purchase method from the date that control over them is acquired and cease to be consolidated from the date that this control no longer exists. The acquisition cost of a subsidiary is the fair value of the assets given as consideration, the shares issued and the liabilities undertaken on the date of the acquisition plus any costs directly associated with the transaction. The acquisition cost over and above the fair value of the individual assets acquired is booked as goodwill. If the total cost of the acquisition is lower than the fair value of the individual assets acquired, the difference is immediately booked to the results. Inter-company transactions, balances and unrealized profits from transactions between Group companies are written-off. Unrealized losses are also eliminated except if the transaction provides indication of impairment of the transferred asset. The participation in subsidiaries are valued based on the acquisition cost in the Company s financial statements after any impairment. The accounting principles of the subsidiary company have been amended wherever it was deemed necessary in order to ensure the consistency with the accounting principles applied by the Group. The compilation date of financial statements of subsidiary company is the same with the one of the parent Company. Minority rights represent the percentage of profit or losses and of shareholders funds not owned by the Group. Minority rights are recorded separately in the consolidated income statement as well as in the shareholders funds of the consolidated balance sheet. Associates Associates are companies on which the Group can exert significant influence but which the Group does not control. The assumptions used by the group imply that a holding of between 20% and 50% of a company s voting rights suggests significant influence on the company. Investments in associates are initially recognized at cost less any impairment in the Company s financial statements, and are subsequently valued using the equity method in the consolidated financial statements. The Group s share in the profits or losses of associated companies after the acquisition is recognized in the income statement, while the share of changes in reserves after the acquisition is recognized in the reserves. When the Group s share in the losses of an associate is equal or larger than its participation in the associate, including any other doubtful debts, the Group does not recognize any further losses, except if it has covered liabilities or made payments on behalf of the associate or those that emerge from ownership. 28

29 Unrealized profits from transactions between the Group and its associates are eliminated according to the percentage of the Group s holding in the associates. The accounting principles of the associates have been amended so as to be uniform to the ones adopted by the Group Group Structure and consolidation method The Group s companies with the respective addresses, and percentages by which the Group participates in their share capital, as well as the respective consolidation method in the consolidated financial statements, are presented below. NAME Domicile Participation % Type of Participation Relationship that dictated the consolidation Full Consolidation Method FLEXOPACK PLASTICS S.A. Koropi - Attica Parent FESCOPACK Sp. zo.o Malbork Poland 75,00 Direct The participation percentage Equity Consolidation Method VLAHOU BROS SA PRODUCTION OF PACKAGING - TRADE - REPRESENTATIONS Koropi - Attica 44,00 Direct ΙΝΟVA SA PLASTICS AND IRON Thiva 50,00 Direct On July 20 th 2007 the Company acquired 75% of the Polish company FESCOPACK Sp. zo.o. and thus from that date the aforementioned subsidiary is consolidated for the first time. Due to the fact that the Company does not exercise control on INOVA S.A. from 20/6/2008, the latter company ceased to be consolidated with the full consolidation method on 30/6/2008 and since then is incorporated in the consolidated financial statements with the equity method. As a result, the consolidated financial results of the previous year include the results of the former subsidiary for the period based on the full consolidation method and of the period based on the equity method. Current year s results are consolidated based on the equity method (Note 3.1.1). The following table presents accounts of the Income Statement of INOVA S.A. for the period included in the consolidated Income Statement of the Group for the year with the full consolidation method. Turnover Gross Profit 392 Earnings before interest, taxes, depreciation and amortization 373 Operating Results 95 Earnings before taxes -13 Earnings after taxes

30 3.2 Currency of operation and presentation Conversion of currency Euro is the Group s reporting and operating currency. Foreign exchange transactions are converted into euro based on the exchange rates in effect at the transaction dates. At the date when the financial statements are compiled, receivables and liabilities in foreign currency are converted in order to reflect the foreign exchange rates at the balance sheet date. Profit and losses deriving from the transactions in foreign currencies as well as from the valuation of foreign currency units at the end of the year are included in the Income Statement, with the exclusion of transactions that do not fulfill the conditions of cash flow hedging depicted in the shareholders funds. The operating currency of the foreign subsidiary is the currency of the country which the company activates in. For the foreign subsidiaries which do not activate in the euro area, all balance sheet accounts of these subsidiaries are converted into euro during the compilation of the financial statements by year end based on the current foreign exchange rate (at balance sheet date), whereas income and expenses are recorded based on the average exchange rate of the year. The cumulative difference that derives from the above conversion is recorded in the shareholders funds, in the account foreign exchange differences due to consolidation of foreign subsidiaries, until the sale or exclusion of the subsidiary and then is transferred to the income statement (profit and loss account). 3.3 Tangible Fixed Assets Fixed assets are reported in the financial statements at acquisition cost less cumulated depreciations and any impairment suffered by the assets. The acquisition cost includes all the directly attributable expenses for the acquisition of the assets. Subsequent expenditure is added to the carrying value of the assets or is booked as a separate asset only if it is probable that future economic benefits will flow to the Group and their cost can be accurately measured. The cost of repairs and maintenance is booked in the results when such are realized. The tangibles under construction include assets in the stage of completion and are recorded at cost. These assets are not depreciated until the asset is completed and is available for operation by the company. Land plots are not depreciated. Depreciation of fixed assets (other than land which is not depreciated) is calculated using the straight line method over their useful lives, as follows: Buildings: Up to 50 years Mechanical equipment: 5-21 years Vehicles: 5-8 years Other equipment: 3-7 years Upon sale of the fixed assets, any difference between the proceeds and the book value are booked as profit or loss to the results. 3.4 Goodwill Goodwill is the difference between acquisition cost and the fair value of the assets and liabilities of a subsidiary / affiliated company during the acquisition date. The company during the purchase date recognizes the goodwill that derived from the acquisition recording it as an asset item at cost. This cost equals with the amount by which the consolidation cost exceeds the company s share in the asset and liability accounts of the assumed purchased company. Following the initial recognition, goodwill is valued at cost less the cumulative losses due to impairment. Goodwill is not depreciated however it is reviewed for any impairment, or even more frequently if there are events that provide signs for any losses. For the easiest treatment of impairment test, the goodwill amount is distributed in cash flow generation units. The cash flow unit is the smallest estimated amount of assets that generate independent cash flows. Impairment losses related to goodwill cannot be reversed in future periods. The Group makes an annual test for possible goodwill impairment at December, 31 st of each year. The impairment of goodwill is set by the calculation of recoverable amount from cash flow items linked to goodwill. The valuation of the corresponding unit is based on the method of discounted cash flows. Whenever it is deemed necessary, the valuation can be based on market multiples, in order to confirm the 30

31 results of the discounted cash flows methodology. By applying this method, the company s valuation is based on a series of factors such as real operating results, future growth plans, economic elements and market conditions. In the case where the fair value of equity for a company at acquisition date is larger than the price paid for its acquisition then a negative goodwill is recorded directly as income in the income statement. If part of a unit that generates cash flows and which has recorded goodwill, is sold, then the goodwill that corresponds to the sold part is included in the accounting value of this part in order to determine the profit or loss. The goodwill that corresponds to the particular part is determined based on the value in which that part was sold and the part of the cash flow generating unit that remains in the company. 3.5 Intangible Fixed Assets Intangible assets comprise know-how rights, patents, cost for the development of new products and software licenses. a) Know-how rights concern the purchase of a patent right and of all the applications of the patent of the patent right group based on the multiple layer heat-shrinkable packing film, with all the rights and obligations stemming thereof. The initial recognition of the intangible asset has been done at cost (contractual consideration for purchase) which is reduced on an annual basis through amortization. The useful life of the intangible asset has been estimated by the Management to be 20 years. It is noted that this right may become the object of a trade in the future. b) Cost for the development of patents related to various products such as multiple-layer packing film, exports made in various countries and amortized based on their useful life as this is estimated by management at 20 years. The initial recognition is made at acquisition cost which is reduced annually through depreciations. c) The directly recorded development cost, includes the cost of the raw materials that were utilized. The cost of the internally created product development is recognized as an intangible asset. Until the completion of the development phase, assets are tested for any impairment. Depreciation begins with the completion of the asset and is performed with the straight line method. The economic life of the above intangible assets is estimated at years by the Management. Expenses related to research activities are recognized as expense during the period. The expenses made during the development of a new product are recognized as intangible assets if the following are met: the technical viability of the under development product for internal use or sale may be proven. the intangible asset will create potential future benefits from the internal use or sale. there are adequate and available technical, economic and other resources for the completion of its development and the value of intangible asset may be reliably estimated. d) Software: Software licenses are valued at acquisition cost less depreciation. Depreciation is effected using the straight line method throughout the useful life of these assets which ranges from 1 to 3.5 years. 3.6 Impairment of Assets (apart from Goodwill) Non Financial Fixed Assets The Group examines at each balance sheet date whether there are impairment needs for the non financial fixed assets. Apart from the goodwill and the intangible assets with no determined economic life which are tested for impairment at least every year, the accounting values of the other long term assets are tested for impairment when events or changing conditions imply that their accounting value might not be recoverable. The loss from impairment of a fixed asset is recorded in the income statement when the net value of the fixed asset is higher than its recoverable value. The recoverable value is the highest between the fair value less the cost of sale and the utilization value of a certain asset. Fair value less the cost of sale is the amount that can b received from the sale of a fixed asset in the context of a bilateral agreement where both parties have full knowledge and proceed on their own will, after the deduction of any cost for the immediate sale of the asset. Utilization value is the present value of the estimated future cash flows expected to be generated as result of the asset s constant use and sale at the end of its economic life. For the purposes of determining the impairment, the fixed assets are classified at the lowest possible level for which separate cash flows can be determined. 31

32 Financial Assets At each balance sheet date, the Group reviews the financial assets and decides whether there is need for impairment of a certain financial asset or a group of financial assets. Financial assets subject to impairment (provided that there are relevant indications) are those assets value at net cost (long term receivables) and at acquisition cost (participation in subsidiaries and affiliated companies in the Company s balance sheet). The recoverable value of participation in subsidiaries and affiliated companies is determined with the same manner as it is the case for the non financial assets. The recoverable value of the other financial assets is determined in order to perform the necessary impairment tests based on the present value of estimated future cash flows, discounted with either the initial real interest rate of each asset or group of assets, or with the current rate of return of a similar financial asset. Any losses that may result are recognized in the income statement (profit and loss account). 3.7 Customers Receivables and Other Receivables Short term receivables accounts appear in their nominal value following provisions for any non receivable balances, whereas long term receivables (balances beyond the year) are valued based on the net cot with the real interest rate method. Provision for doubtful receivables is recorded when the Company is not likely to receive the aggregate amount due. The balance of the particular provision for doubtful receivables is adjusted accordingly in the balance sheet closing date of each year in order to reflect any possible relevant risks. Every deletion of customer balances is debited against the existing provision for doubtful receivables. The Group s policy is not to delete any customer receivable until all possible legal measures have been taken in order to receive the payment. The provision amount is recorded as expense in other operating expenses in income statement. 3.8 Inventories Inventories include raw materials, packaging materials and finished products, spare parts and other finished or semi finished products. The cost of inventories includes all the expenses that were realized in order to render the inventory at its current position and condition. The cost of inventories does not include financial expenses. At the balance sheet date, inventories are valued at the lower of acquisition cost and net realizable value. Net realizable value is the estimated sales price during the normal course of business of the company less any relevant sales expenses. The cost of inventories is defined by the Weighted Average method. 3.9 Investments and Other Financial Assets: Financial assets according to the provisions of IAS 39 are classified according to their nature and features in one of the following four categories: Financial assets at fair value through results, Receivables and loans Investments held to maturity Investments available for sale These financial assets are initially recognized at acquisition cost which represents the fair value (in certain cases, in addition to the direct acquisition / transaction expenses). The classification of the above financial assets is implemented after the initial recognition and wherever is feasible, it is reviewed and adjusted on interim basis. (i) Financial assets at fair value through results: It is about the Company s trade portfolio and includes investments that were made in order to be liquidated in the near future. Profit or losses from the valuation of particular items are recorded in the income statement. The Group did not hold such type of investments at the balance sheet date. 32

33 (ii) Receivables and loans: Receivables and loans created from the Group s activity, are valued at the net cost with the real interest method. Profit and losses are recorded in the income statement when the relevant items are deleted or becoming impaired. (iii) Investment held to maturity: The financial assets with determined flows and predetermined maturity are classified as held to maturity when the Group intends to hold these investments up to maturity. Investments held for indefinite or undetermined period cannot be classified in this category. Investments held to maturity, after the initial recording, are valued at net cost based on the method of real interest. Profit and losses are recorded in the income statement when the relevant items are deleted or becoming impaired. The Group did not hold such type of investments at the balance sheet date. (iv) Investments available for sale: Financial assets that cannot be classified in any of the above categories are characterized and classified as assets available for sale. Following the initial recording, investments available for sale are valued at fair value and the relevant profit and losses are directly recorded in a separate net worth item. Cumulative profit and losses are recorded in the income statement when the relevant items are sold, deleted or becoming impaired. The fair value of the above investments traded in an organized market derives from the market value of the investment at the balance sheet date. With regard to investments that do not trade in active market, the fair value is calculated with relevant valuation techniques. These techniques are based on recent bilateral transactions of similar investments with reference to the market value of another investment with similar characteristics with the ones of the investment which is to be valued, discounted cash flow analysis and investment valuation models. As of the balance sheet date, the Group did not hold any such type of investments Cash & cash equivalents Cash and cash equivalents include cash, sight deposits and time deposits. The cash and related items imply insignificant risk with regard to changes in their values Share Capital The share capital depicts the nominal value of the common shares issued and outstanding. The price paid above nominal value per share is recorded in the account Share Premium in Shareholders Funds. Direct expenses paid for the issuance of new shares or rights are recorded in the net worth as a deduction from the amounts of the issue Loans Loans are initially registered at their fair value, less any possible direct costs for the realization of the transaction. Following, they are valued at net book cost based on the real interest rate. The borrowing cost is recognized in the results of the period when such is realized. Loan liabilities are classified as short-term except for the cases where the Group has the right to postpone the payment of the liability for at least 12 months after the balance sheet date Income Tax (Current and Deferred) The period charge for income tax comprises current tax and deferred tax, i.e. the tax charges or tax credits that are associated with economic benefits accruing in the period but have been or will be assessed by the tax authorities in different periods. Current income tax is calculated based on the tax balance sheets of each company included in the financial statements according to the tax law which is in effect in Greece or other tax regimes which foreign subsidiaries operate in. The expense for the current income tax includes the income tax deriving from the profit of each consolidated company, as it is revised in its tax statements, as well as provisions for 33

34 additional taxes and incremental amounts for non tax audited years. It is based on the legally effective tax rates as of the balance sheet date. Deferred income tax is determined according to the liability method which results from the temporary differences between the book value and the tax base of assets and liabilities. Deferred tax assets and liabilities are valued based on the tax rates that are expected to be in effect during the period in which the asset or liability will be settled, taking into consideration the tax rates (and tax laws) that have been put into effect or are essentially in effect up until the Balance Sheet date. Deferred tax assets are recognized to the extent that there will be a future tax profit to be set against the temporary difference that creates the deferred tax asset Employee Benefits Short Term Benefits Short-term employee benefits (except post-employment benefits) monetary and in kind are recognized as an expense when they accrue. Any unpaid amount is booked as a liability, while in the case where the amount paid exceeds the amount of services rendered, the company recognizes the excess amount as an asset (prepaid expense) only to the extent that the prepayment will lead to a reduction of future payments or to reimbursement. Post-employment Benefits According to Law 2112/20, the Company pays to employees compensation as a lump sum due to retirement or dismissal. The level of the paid indemnity depends on the years of service, the level of remuneration and whether it is due to retirement or dismissal. In Greece, the compensation payable in the case of retirement equals with 40% of the compensation that would be payable in case of an unjustified dismissal. According to the Greek practice, employee compensation plans are not usually financed. Those plans are defined benefit plans according to IAS 19. The above liability recorded in the balance sheet for defined benefit plans is the present value of the commitment for the defined benefit less the changes deriving from the non recognized actuarial profit and loss and the service cost. The commitment for the defined benefit is calculated by an independent actuarial officer with the use of the projected unit credit method. The liability is defined by taking into consideration several parameters such as age, service years, salary and specific obligations for paid benefits. The provisions corresponding to the current financial year are recorded in the Income Statement. Apart from the above, the Company and the Group do not have legal or implied liabilities of long term nature against the employees State Grants The Group recognizes the government grants that cumulatively satisfy the following criteria: (a) There is reasonable certainty that the company has complied or will comply with the conditions of the grant and (b) it is probable that the amount of the grant will be received. They are booked at fair value and are systematically recognized as revenue according to the principle of matching the grants with the corresponding costs that they are subsidizing. Grants that relate to assets are included in long-term liabilities as deferred income and are recognized systematically and rationally as revenue over the useful life of the fixed asset. Depreciation of grants appear in Other Operating Income in the Income Statement Provisions for Contingent Claims - Obligations Provisions are recognized when the Group has present obligations (legal or constructive) as a result of past events, their settlement through an outflow of resources is probable and the exact amount of the obligation can be reliably estimated. Provisions are reviewed during the date when each balance sheet is compiled so that they may reflect the present value of the outflow that it expected to be required for the settlement of the obligation. Contingent claims are not recognized in the financial statements but are disclosed provided that the inflow of economic benefits is probable. 34

35 3.17 Recognition of Income Income comprises the fair value of goods and services sold, net of Value Added Tax, discounts and returns. Inter-company income within the Group is eliminated completely. The recognition of income is done as follows: Sales of goods are recognized when the Group transfers goods to customers, the goods are accepted by them and the collection of the resulting claim is reasonably assured. Income from rendering of services are recognized according to the completion stage of the services rendered as of the balance sheet date against to the total services to be provided, and the Company has ensured the receipt of the amounts payable. Interest income is recognized on a time proportion basis using the effective yield. Income from dividends are recognized upon approval from the appropriate bodies of the companies that distribute them Leases Operating Leases: These are leases where the lessor maintains all benefits and risks implied from the possession of the asset. The payments for operating leases are recorded as expense in the financial results during the leasing period. Financial Leases: These are leases that imply all material risks and benefits for the Group arising from the leasing of the asset, are capitalized during the start of the leasing at the fair value of the leased asset or in case the asset s value is lower, at the present value of the minimum leases. The Company and the Group had not financial leases as of 31 December Dividend Distribution The distribution of dividends to the shareholders of the parent company is recognized as a liability in the financial statements at the date on which the distribution is authorized by the General Shareholders Meeting Earnings per Share Basic earnings per share are calculated by dividing the year s net profit corresponding to the common shareholders with the weighted average number of shares outstanding during the same year. There are no bonds convertible into shares or other securities that may be converted into shares and which would dilute the profit of the year which the attached financial statements refer to. 4. Segment Reporting A business segment is defined as a group of assets and activities that provide goods and services, which are subject to different risks and returns than other business segments. A geographical segment is defined as a geographical region in which goods and services are provided and which is subject to different risks and returns than other regions. The Group is mainly active in the production of flexible plastic packing materials (films). In the current financial year, the Group considered the conditions for the application of IFRS 8 Operating Sectors, with effect in the financial periods starting at or after 1/1/2009 and concluded that no such conditions apply. Specifically, the conditions (b) and (c) of paragraph 5 of the Standard do not apply. These conditions provide for the operating sector as a constituent of the company, the financial results of which are regularly examined by the Chief Corporate Decision Maker (in this case, the parent Company s BoD plays this role), in order to decide about the distribution of resources and estimate the efficiency of this sector, which is reported separately. Therefore, the Group s activities account for one and united sector. The secondary information per business segment refers to the geographical breakdown of the Group s revenues and assets. 35

36 Secondary presentation-geographic Segments 31/12/2009 GREECE EUROPE OTHER COUNTRIES Intra-group Write-offs TOTAL Income from External Customers Assets (658) Purchases of fixed assets (44) /12/2008 GREECE EUROPE OTHER COUNTRIES Intra-group Write-offs TOTAL Income from External Customers Assets (768) Purchases of fixed assets (242) Risk Management As an established exporter, the Group activates in an intense competitive global environment. The Group s activities create financial risks, including those of exchange and interest rates, credit risk and liquidity risk. The risk management of the Group focuses on the volatility of financial markets and aims to limit their potential negative repercussions on the financial position of the Group. Group s financial items and financial liabilities consist mainly of cash and cash equivalents, customer receivables and other receivables, bank debt, suppliers and related liabilities. The normal Financial risks to which the Group is exposed to are: Α. Exchange rate risk The Group operates on a global level and realizes transactions in foreign currency, mainly a) in U.S. dollars (U.S.D.) due to Flexopack s exports and b) in Polish zlotys (PLN) due to the subsidiary company FESCOPACK Sp.z.o.o which operates in Poland. The Group s exposure to foreign exchange risk mainly emerges from existing or expected cash flows in foreign currency (exports-imports). The Group s priced sales as at 31/12/2009 in foreign currency represent 8.84% of total sales, from which 3.15% concerned sales in U.S.D., 4.15% sales in PLN and the remaining 1.54% sales in other foreign currencies. The largest part of the foreign exchange risk that emanates from exports in foreign currency (U.S.D.) was hedged with the use of natural hedging instruments, namely by the maintenance of liabilities towards foreign suppliers in the same currency. Depending on the needs, it is also possible to utilize time deposits in foreign currency, future contracts in foreign currency and loans in foreign currency. The following table presents the effect on earnings before taxes and equity, from a potential change in the EUR/USD and EUR/PLN exchange rates on 31/12/09 by 5%, in relation to the average exchange rate during 2009, with all the other variables constant. 36

37 Sensitivity Analysis for Foreign Exchange Changes Foreign currency Increase / decrease of foreign currency against Effect on earnings before taxes Effect on equity Amounts for 2009 USD 5.00% % PLN 5.00% % Amounts for 2008 USD 7.00% % -4-3 PLN 7.00% % The Group closely monitors the above exchange rates and updates the relevant analysis frequently. Nevertheless, given the fact that pricings in foreign currency represent a single digit number as a percentage, this specific risk is currently considered as controlled. Β. Credit Risk The Group is not exposed to significant credit risk. Trade receivables stem from a wide client base. The Group s turnover mainly consists of transactions with reliable and creditworthy firms and companies in general, with which it sustains a long-term collaboration. As regards to sales with new customers, the Company ensures that such sales take place towards customers with a positive and rated credit history. On this basis and in conjunction with the existing experience and continuous monitoring of the credit ability of each customer-counterparty the Group trades with, credit risk is estimated at relatively low levels. It is noted that the Group has established and applies credit control procedures that aim at minimizing bad debt. The Credit Control Division defines credit limits per customer and specific sales and payment terms are applied. When possible security is requested. The Group continuously and systematically monitors the performance and financial position of its customers, in order to be pro-active and to evaluate the need to take specific measures per customer, also according to the market characteristics and difficulties where each customer operates in. It is noted that credit risk, even though present, particularly with customers that operate in countries whose economies have significantly been affected by the economic crisis, is currently considered limited and controlled, based on the historic information possessed by the Group and on the precautionary measures already taken. C. Liquidity Risk In General, the monitoring of liquidity risk is focused on monitoring and managing cash inflows and outflows on a constant basis, in order for the Group to be able to meet its cash liabilities. Liquidity risk is maintained at low levels by holding adequate cash balances, while there are also adequate unused credit lines with financial institutions, in order to face any possible shortage in cash. Such a case however is not applicable as of today. Therefore the above risk is considered low and cannot affect in any manner the Group s operating activities. The following table summarizes the maturities of financial liabilities as at December 31 st 2009, according to the payments emanating from the relevant loan contracts, at non-discounted prices. 37

38 Financial Liabilities 2009 up to 6 months 6 to 12 months 1 to 5 years > 5 years Total Bank Debt 2, , ,719 Suppliers and related liabilities 8, ,579 Taxes payable Total 11, , , up to 6 months 6 to 12 months 1 to 5 years > 5 years Total Bank Debt 5, , ,508 Suppliers and related liabilities 9, ,507 Taxes payable Total 15,775 1,539 3, ,510 D. Cash flow risk due to changes in interest rates The Group s operating income and cash flows are not significantly affected by changes in interest rates, given that net bank debt is at low levels compared to the Group s equity. Specifically, the current relationship for the group as at 31/12/2009 corresponds to 3.97%. Group s loans are based on floating rate and are denominated in EUR, however their low level implies a limited and controlled risk. The following table presents the changes to the Group s earnings before taxes (through effects of balances at the end of the period of loans with floating interest rates on earnings) from potential interest rate changes, with all the remaining variables constant: Sensitivity Analysis - Group's Loans against Interest Rate Movements Interest and Expenses of Loans Effect on THE Interest Rate Volatility Effect on EBT Shareholders' Funds Amounts 2009 EURO 1% % Amounts 2008 EURO 1% % Capital Management The primary objective of the Group s capital management is the smooth operating of business activities, the achievement of the development plans and the maintenance of a high credit rating. For the purpose of capital management, the Group monitors the following ratios: 1. Net debt to earnings before interest, tax, depreciation & amortization (EBITDA). 2. Net debt to Equity. Net debt is defined by the Group as the total interest bearing loan liabilities minus its total cash & cash equivalents. For the periods ended on December 31 st 2009 and 2008 respectively the ratios are as follows: 38

39 Group Company 31/12/ /12/ /12/ /12/2008 Long Term Loans 2,396 3,196 2,396 3,196 Shrot Term Loans 3,323 6,312 3,312 6,312 Total Bank Loans 5,719 9,508 5,708 9,508 Less: Cash and Cash Equivalents 4,261 4,610 4,254 4,442 Net Bank Debt 1,458 4,898 1,454 5,066 EBITDA 6,628 6,863 6,478 6,432 Net Bank Debt / EBITDA Shareholders' Funds 36,682 34,098 36,367 33,916 Net Bank Debt / Shareholders' Funds Total Liabilities 20,774 26,172 20,644 26,085 Total Liabilities / Shareholders' Funds Finally, the provisions of Societe Anonyme legislation (C.L. 2190/1920 as effective today), sets constraints related to equity as follows: The acquisition of treasury shares, with the exclusion of the cases mentioned in paragraphs 3 and 4 of article 16 of c.l. 2190/1920, cannot exceed (in relation to nominal value of acquired shares) the 10% of paid in capital and cannot reduce equity to an amount less than equity increased by the reserves the distribution of which is not allowed by the Law or the Articles of Association. In case the total equity of the company reduces below ½ of share capital the management must call a General Shareholders Meeting within a six months period from the end of the year, and the meeting will decide the end of the company or the adoption of other measures. When equity falls below 1/10 of share capital and the General Shareholders Meeting does not take the necessary measures in accordance with article 47 of c.l. 2190/1920, the company may be settled following a court order or with the application of anyone having lawful rights. Annually, at least the 1/20 of net earnings is deducted for the creation of the Statutory reserve, which is exclusively used for balancing, prior to any dividend distribution, any debit balance of profit carried forward exists. The formation of this reserve is not mandatory when it reaches the 1/3 of share capital. The payment of annual dividend to shareholders in cash, and amounting at least to 35% of net earnings, following the deduction of statutory reserves and net results from the valuation of assets and liabilities at fair value, is mandatory. This is not applied if the General Shareholders Meeting, with a majority at least of 65% of share capital decides the opposite. In this case the non-distributed dividend equal to 35% of net earnings is recorded in a special Reserve account for capitalization within a four years period with the issue of new shares that are freely delivered to shareholders. Finally, with the majority of at least the 70% of paid in share capital, the General Shareholders Meeting may decide on the non-application of aforementioned provisions. The company fully complies with the aforementioned provisions that are forced by law regarding equity. 39

40 6. Notes on the Financial Statements 6.1 Tangible Fixed Assets The Group s and company s tangible fixed assets are analyzed as follows. Tangible fixed assets Vehicles, furniture and Other equipment Assets under constructi on Plots Buildings Mechanical equipment Total Acquisition Cost as at January 1st ,732 10,478 35,262 2,138 3,830 56,440 minus: Accumulated Depreciations 0 (1,653) (11,928) (1,467) 0 (15,048) Book value as at January 1st ,732 8,825 23, ,830 41,391 Additions ,441 2,003 Foreign Exchange Differences (0) (24) (2) (3) (4) (33) Assets of Non Cons. Subsidiary (182) (2,160) (4,403) (250) (46) (7,041) Transfers , (2,942) 0 Sales - Reductions (1) 0 (1) Depreciations of the current period 0 (229) (2,467) (154) 0 (2,850) Depreciation of Non Cons. Subsidiary , ,226 Depreciations of sold, written-off goods Acquisition Cost as at December 31st ,554 8,470 34,026 2,038 2,279 51,368 minus: Accumulated Depreciations 0 (1,519) (12,741) (1,411) 0 (15,672) Book value as at December 31st ,554 6,951 21, ,279 35,696 Additions ,330 1,830 Foreign Exchange Differences Transfers (535) 0 Sales - Reductions 0 0 (240) 0 0 (240) Depreciations of the current period 0 (206) (2,418) (140) 0 (2,764) Depreciations of sold, written-off goods Acquisition Cost as at December 31st ,554 9,158 34,055 2,120 3,074 52,961 minus: Accumulated Depreciations 0 (1,726) (14,950) (1,551) 0 (18,227) Foreign Exchange Differences 0 (0) (0) (0) 0 (1) Book value as at December 31st ,554 7,433 19, ,074 34,734 The group s total tangible fixed assets were valued as at the transition date to IFRS (01/01/2004) at their acquisition costs minus the accumulated depreciations and the impairment losses according to IAS 16. There are no charges on the assets of the parent company and the subsidiary FESCOPACK Sp. Z.o.o. The company s tangible fixed assets are analyzed as follows. 40

41 Tangible fixed assets THE COMPANY Vehicles, furniture and Other equipment Assets under constructi on Plots Buildings Mechanical equipment Total Acquisition Cost as at January 1st ,548 8,141 30,986 1,854 3,752 49,281 minus: Accumulated Depreciations 0 (1,324) (10,472) (1,256) 0 (13,052) Book value as at January 1st ,548 6,817 20, ,752 36,229 Additions ,186 1,843 Transfers ,646 0 (2,662) 0 Sales - Reductions 0 0 (320) (1) 0 (321) Depreciations of the current period 0 (184) (2,244) (134) 0 (2,562) Depreciations of sold, written-off goods Acquisition Cost as at December 31st ,548 8,312 33,694 1,974 2,275 50,803 minus: Accumulated Depreciations 0 (1,508) (12,640) (1,389) 0 (15,536) Book value as at December 31st ,548 6,805 21, ,275 35,267 Additions ,216 1,707 Transfers (535) 0 Sales - Reductions 0 0 (341) 0 0 (341) Depreciations of the current period 0 (198) (2,382) (133) 0 (2,713) Depreciations of sold, written-off goods Acquisition Cost as at December 31st ,548 8,998 33,612 2,055 2,956 52,169 minus: Accumulated Depreciations 0 (1,706) (14,755) (1,522) 0 (17,982) Book value as at December 31st ,548 7,292 18, ,956 34, Goodwill Gross book value at January 1st Cumulative impairment loss 0 Net book value at January 1st Addition form acquisition 0 Gross book value at December 31st Cumulative impairment loss 0 Net book value at December 31st Addition from acquisition 0 Gross book value at December 31st Cumulative impairment loss 0 Net book value at December 31st The amount of recognized goodwill for 2007 refers to the acquisition of 75% of the Polish company FESCOPACK Sp. z.o.o. Impairment Review of Goodwill Impairment Review of Goodwill For purposes of reviewing goodwill for possible impairment in 2009, the aforementioned subsidiary constitutes an individual cash flow generating unit. As regards to goodwill recognized from the acquisition of 41

42 FESCOPACK Sp. z.o.o., the recoverable amount of such was calculated based on the value in use, discounting its future cash flows. The definition of the subsidiary s future cash flows took place by well-founded estimations of management for the level of the subsidiary s future profitability and by evaluating current market conditions. The basic assumptions regarding the estimation of the subsidiary s value, are as follows: Discount rate 10.00% Average growth of turnover in the next five years 14.00% Growth rate after five-years 2.00% According to the impairment review on 31/12/2009 no impairment losses emerged for the above goodwill. 6.3 Intangible Fixed Assets The Group s and Company s intangible assets are analyzed as follows: Intangible Assets Software THE Other Intang. Assets Total Software THE COMPANY Other Intang. Assets Acquisition cost as at January 1st , minus: Accumulated Amortization (451) (81) (533) (329) (38) (367) Book value as at January 1st Total Additions Fixed Assets of Non Cons. Subsidiary (134) (214) (349) Depreciation for the Year (80) (55) (135) (71) (33) (104) Depreciation of Non Cons. Subsidiary Acquisition Cost as at December 31st , ,157 less: Cumulative Depreciation (400) (72) (472) (400) (71) (471) Book value as at December 31st Additions Depreciation for the Year (75) (63) (137) (74) (63) (137) Acquisition Cost as at December 31st , ,487 less: Cumulative Depreciation (475) (135) (609) (474) (134) (608) Book value as at December 31st Other intangible assets include know how rights, patent development costs regarding the registration of patents of different packaging film applications of multiple layers, as well as the development cost of new products. 6.4 Investments in Subsidiaries In the parent financial statements, investments in subsidiaries are valued at acquisition cost. The movement of investments is analyzed as follows. COMPANY 31/12/ /12/2008 Opening Balance 739 1,668 Share Capital Increases Change in Consolidation Method of INOVA SA 0 (1,199) Closing Balance

43 6.5 Investments in Associate Companies The Group s and Company s investments in associate companies are as follows: COMPANY 31/12/ /12/ /12/ /12/2008 Opening balance 1, , Proportion in profit/loss (after taxes) Change in consolidation method of INOVA SA 0 1, ,199 Closing balance 1,980 1,940 1,837 1,837 Brief financial information on associate companies: Country of Establishment Assets Liabilities Income Net Profit (Loss) Participation Acquisition percentage Year 2009 INOVA SA GREECE ,00% 2001 VLACHOS BROS S.A. GREECE (22) 44,00% INOVA SA GREECE (29) 50,00% VLACHOS BROS S.A. GREECE ,00% 6.6 Other Long Term Receivables The Group s and Company s other long-term receivables are analyzed as follows: COMPANY Other Long Term Receivables 31/12/ /12/ /12/ /12/2008 Given Guarantees Total other Long-term Receivables These receivables refer to collateral for rents and other and will be received after the end of the coming fiscal year. 6.7 Inventories The Group s and Company s inventories are analyzed as follows: 43

44 COMPANY Inventories 31/12/ /12/ /12/ /12/2008 Raw Materials 4,284 4,171 4,170 4,115 Consumables Spare parts & packaging items Products & other inventory 1,664 1,683 1,593 1,599 Total 6,742 6,685 6,503 6,545 Less: Provisions for impairment of inventories Total 6,742 6,685 6,503 6, Trade Receivables The Group s and Company s customers and other trade receivables are analyzed as follows: Trade receivables COMPANY 31/12/ /12/ /12/ /12/2008 Customers (open account) 5,715 6,892 5,782 7,081 Checks Receivable 1,429 1,652 1,429 1,652 Less: Impairment Provisions (323) (323) (323) (323) Total Net Receivables 6,821 8,220 6,888 8,410 Charges to the results Impairment provisions (3) (30) 0 (30) Total (3) (30) 0 (30) At December 31 st, the maturity of receivables is as follows: Trade receivables COMPANY 31/12/ /12/ /12/ /12/2008 Till 3 months 6,078 7,371 6,166 7,566 Between 3 and 6 months Between 6 months and 1 year Greater than a year Total 6,821 8,220 6,888 8,410 Non Overdue and Non Impaired 6,150 7,385 6,238 7,580 Overdue and Impaired Total 6,821 8,220 6,888 8, Other Receivables The Group s and Company s other receivables are analyzed as follows: 44

45 COMPANY Other receivables 31/12/ /12/ /12/ /12/2008 Receivables from the Greek State for taxes Orders of current assets Purchases of inventory under receipt Discounts on purchases under settlement Deferred charges Income receivable Prepayments and loans to employees Sundry Debtors Total 1,623 2,014 1,617 1, Cash & cash equivalents Cash and cash equivalents refer to the Group s and Company s cash in hand and to short-term bank deposits and term deposits held at call with banks. The Group s and Company s cash and cash equivalents are as follows: COMPANY Cash and cash equivalents 31/12/ /12/ /12/ /12/2008 Cash in hand Short-term bank deposits 4,256 4,608 4,249 4,441 Total 4,261 4,610 4,254 4, Equity i) Share Capital and Share Premium The Company s share capital consists of 11,720,024 common fully paid-up shares, with a par value of 0.50 each. The total share capital amounts to million. Share Capital Share Premium Treasury Shares Total 5,860 9, ,683 During the presented period (and the respective comparative period) there was no change in the Company s share capital. The Company s share premium emerged from the issuance of shares through cash at a value larger than their par value. The amount of the share premium amounts to 9,823 thousand. ii) Reserves 45

46 The Group s and Company s other reserves are analyzed as follows: Reserves COMPANY 31/12/ /12/ /12/ /12/2008 Ordinary Reserve 1, , Special Taxed Reserves 7,393 6,216 7,393 6,216 Extraordinary Reserves Tax Free Reserves L.1828/ Tax Free Reserves L.3220/ Reserves from Tax Free Income Reserves from Special Taxed Income Other Reserves Foreign Exchange Differences Reserve (35) (44) 0 0 Total 10,369 9,044 10,394 9,078 The movement of reserves for the Group and the Company is presented below: Reserves Ordinary Reserve Special Taxed Reserves Extraordinary Reserves Other Reserves Foreign Exchange Consolidation Differences Balance as at January 1st , , ,738 Formation of reserves from net earnings of the period Interruption in Consolidation of INOVA SA (23) (88) (2) (322) 0 (434) Foreign Exchange Differences from Conversion (53) (53) Balance as at December 31st , ,818 (44) 9,044 Formation of reserves from net earnings of the period Transfer of Subsidies' Depreciation L.3299/04 to Profit Carried Forward 0 1, ,177 Other Transfers 0 0 (10) Foreign Exchange Differences Reserve Υπόλοιπο στις 31 Δεκεμβρίου ,127 7, ,827 (35) 10,369 Total Reserves COMPANY Ordinary Reserve Special Taxed Reserves Extraordinary Reserves Other Reserves Total Balance as at January 1st , ,818 8,295 Formation of reserves from net earnings of the period Transfers to profit carried forward Other Transfers Balance as at December 31st , ,818 9,078 Formation of reserves from net earnings of the period Transfer of Subsidies' Depreciation L.3299/04 to Profit Carried Forward 0 1, ,177 Balance as at December 31st ,127 7, ,818 10, Ordinary reserve: According to Greek corporate law, companies are obliged to create 5% of the period s earnings as an ordinary reserve until such reaches one third of the paid up share capital. During the Company s life the ordinary reserve cannot be distributed. 2. Special taxed reserves: Special taxed reserves of the parent Company have been created to cover the own participation in the context of the Company s investment plans in accordance with the provisions of various development laws. 46

47 The group s management does not intend to distribute the above reserves and thus it has not recognized a deferred tax liability. 3. Extraordinary reserves: Parent Company s extraordinary reserve corresponds to the article 8 of Law 2579/1998. This reserve is taxed and may be capitalized or distributed without any additional tax burden. 4. Other reserves: Other reserves include tax free reserves and special law reserves, and are analyzed as follows: Tax free reserves L. 1828/89 and tax free reserves L. 3220/2004 The above reserves have been created according to the provisions of tax law and may be immediately capitalized without paying income tax. Reserves from tax free or taxed according to special law income: They refer to income from interest, which has not been taxed or a part of which has been directly withheld as tax. According to the Greek tax law, these reserves are exempt from any income tax, under the condition that they will not be distributed to the Company s shareholders. The Group does not intend to distribute the above reserves, and therefore there is no need to calculate any deferred tax liability related to income tax that would otherwise be payable if those reserves were distributed. 5. Reserve due to foreign exchange differences: The above reserve derives from the recording of foreign exchange differences following the conversion of a foreign subsidiary s financial statements. iii) Profits carried forward Profit Carried Forward COMPANY 31/12/ /12/ /12/ /12/2008 Balance as at January 1st 9,244 7,085 9,155 7,429 Net Results for the period 3,208 3,174 3,107 3,165 Distributed Dividends (656) (656) (656) (656) Formation of reserves from net earnings 0 (792) 0 (783) Transfer of Subsidies' Depreciation L.3299/04 to Reserves (1,177) 0 (1,177) 0 Interruption in Consolidation of INOVA SA Transfers to reserves (139) 0 (139) 0 Balance as at December 31st 10,480 9,244 10,290 9,155 The distributed dividend for the profit of the financial year 1/1/ /12/2009 amounts to EUR 656, corresponding to EUR per share, unchanged to the dividend distributed in the previous year, is included in the shareholders funds of 31 st December 2009 and it has not been recognized as a liability in the balance sheet Deferred tax asset and liability The calculation of deferred tax assets and liabilities is conducted based on each of the Group s company and at the extent where receivables and liabilities arise, such are offset between each other (at the level of each individual company). The deferred tax assets and liabilities are offset when there is an applicable legal right to offset current tax receivables against current tax liabilities and when the deferred income taxes refer to the same tax authority. The deferred tax receivables and liabilities of the Group derive from the following items: 47

48 Deferred Tax Liabilities / Receivables Balance Sheet Deferred Tax Income Statement 31/12/ /12/ /12/ /12/2008 Deferred Tax Receivables Provision for Retirement Compensation (10) State Grants (35) (69) Other Provisions 0 15 (15) (50) (72) Deferred Tax Liabilities Intangible Assets (51) (36) (14) (14) Tangible Assets (2,128) (1,894) (234) 46 Customer Receivables (41) (41) 0 15 (2,220) (1,972) (248) 48 Net Deferred Tax Liabilities (2,020) (1,722) Net Debit of Deferred Tax in Results (298) (24) The deferred tax receivables and liabilities of the Company derive from the following items: Deferred Tax Liabilities / Receivables Deferred Tax Balance Sheet Income Statement COMPANY COMPANY 31/12/ /12/ /12/ /12/2008 Deferred Tax Receivables Provision for Retirement Compensation (10) State Grants (35) (69) (35) (79) Deferred Tax Liabilities Intangible Assets (51) (36) (14) (14) Tangible Assets (2,103) (1,869) (235) 46 Customer Receivables (41) (41) 0 15 (2,195) (1,946) (249) 48 Net Deferred Tax Liabilities (1,996) (1,712) Net Debit of Deferred Tax in Results (284) (31) 6.13 Provision from staff retirement indemnities The Group and Company recognize the liability for staff retirement indemnities as the present value of the legal commitment for the payment of staff retirement lump sum. The relevant liability was calculated based on an actuarial study. 48

49 The relevant liability for the Group and the Company is analyzed as follows: COMPANY 31/12/ /12/ /12/ /12/2008 Balance sheet liabilities for: Retirement benefits Total Charges to the results Retirement benefits Total The main actuarial assumptions used, are as follows: 31/12/ /12/2008 Discount rate 5.2% 4.5% Future wage increases 3.5% 3.5% Inflation 2.5% 2.5% Percentage of departures 0.5% 1.0% 6.14 Government grants The Group receives grants that relate to fixed assets and are provided from governmental entities in order to purchase fixed assets for long-term exploitation. The Group registers the effect from the acceptance of government grants for fixed assets according to IAS 20, as deferred income in the category of long-term liabilities. The transfer of grants in the results of each period is conducted according to the fixed depreciation method along the granted assets economic life. The movement of grants for the Company and the Group are as follows: Government / State Grants COMPANY 31/12/ /12/ /12/ /12/2008 Opening balance 3,401 2,542 3,401 2,513 Additions 396 1, ,424 Depreciations of income in the current peri (565) (541) (565) (536) Interruption in Consolidation of INOVA SA 0 (24) 0 0 Total 3,233 3,401 3,233 3, Long Term and Short Term Loans Long-term and short-term loans of the Company have been granted by domestic banks and are denominated in EUR. The amounts of the long term loans payable within a year from the balance sheet date are recorded as short-term liabilities, whereas the amounts payable at a later stage, are recorded as long term loans. 49

50 Group s loans are based on floating rates. The Company s bond loans are non convertible, are divided in non registered bonds of natural form, provided their bond holders with an interest right, have duration of 7 years and have been issued to finance investments for the purchase of machinery equipment. The Company has the right to proceed with a premature loan repayment without penalty or other cost incurred. The bond loans terms include the obligation on behalf of the Company to maintain certain ratios at desired levels such as (a) the ratio of total liabilities against total shareholder s funds and (b) the ratio of earnings before interest, taxes, depreciation and amortization against debit interest. There are no collaterals for the Company s loans. Long-term and short-term liabilities from the Group s and Company s loans are analyzed as follows: COMPANY 31/12/ /12/ /12/ /12/2008 Long-term bank liabilities Bond loans 3,196 3,996 3,196 3,996 3,196 3,996 3,196 3,996 Less: Long-term bank debt payable in next period ,396 3,196 2,396 3,196 Short-term Debt Bank debt 2,523 5,512 2,512 5,512 Short term part of bond loans ,323 6,312 3,312 6,312 Total Debt 5,719 9,508 5,708 9,508 Maturities of long-term bank debt Within 1 year Maturity from 2 to 5 years 2,396 3,098 2,396 3,098 Maturity over 5 years Total 3,196 3,996 3,196 3,996 Weighted average interest rate charged on the results 3.60% 6.18% 3.60% 6.18% 6.16 Other Provisions The Group s and Company s other provisions are analyzed as follows: 50

51 COMPANY Other Provisions January 1st Used provisions for the period (58) (58) December 31st Additional provisions for the period December 31st Analysis of additional provisions for the period Provision for other taxes Other provisions 0 0 Total Suppliers and other liabilities The Group s and Company s balances for the suppliers and other related liabilities accounts are analyzed as follows: COMPANY Suppliers and related Liabilities 31/12/ /12/ /12/ /12/2008 Suppliers 7,294 8,604 7,256 8,589 Checks payable Customer prepayments Dividends payable Sundry creditors Payable employee remuneration Accrued expenses Purchases under settlement Social Security Funds Other taxes, other than income tax Total 8,579 10,507 8,488 10, Liabilities arising due to income tax COMPANY 31/12/ /12/ /12/ /12/2008 Liabilities from Income Tax Total The payment of the income tax takes place through eight (8) equal annual installments. The first installment is paid within May of the following financial year Turnover 51

52 The Group s and Company s turnover is analyzed as follows: COMPANY 31/12/ /12/ /12/ /12/2008 Income from sale of merchandise 1,655 2,059 1,542 1,203 Income from sale of products 33,946 41,934 33,839 39,820 Income from sale of other inventories Income from service rendering 830 1, ,065 36,532 45,256 36,346 42, Analysis of Expenses per category The analysis of the Group s expenses per category is as follows: 31/12/2009 1/1/-31/12/2008 Expenses per category Cost of Goods Sold Distribut ion Expense s R&D Expense s Administrative Expense s Total Cost of Goods Sold Distribut ion Expense s R&D Expenses Administrative Expense s Retirement benefits Remuneration & other staff benefits 5, ,922 5, ,367 Third party remuneration & expenses Third party benefits (energy, insurance, maintenance etc.) 2, ,901 2, ,103 Taxes-Dues Other sundry expenses , , ,135 Depreciations of fixed assets 2, ,764 2, ,850 Depreciations of intangible assets Provisions Total Cost of inventories recognized as an expense 17, ,756 25, ,169 Total 28,825 2, ,518 32,820 36,739 2, ,719 41,556 Minus self-production of fixed assets Total 28,825 2, ,518 32,820 36,673 2, ,719 41,490 The analysis of the Company s expenses per category is as follows: 52

53 COMPANY 31/12/2009 1/1/-31/12/2008 Expenses per category Cost of Goods Sold Distribut ion Expense s R&D Expense s Administrative Expense s Total Cost of Goods Sold Distribut ion Expense s R&D Expenses Administrative Expense s Retirement benefits Remuneration & other staff benefits 5, ,736 5, ,658 Third party remuneration & expenses Third party benefits (energy, insurance, maintenance etc.) 2, ,748 2, ,841 Taxes-Dues Other sundry expenses , , ,030 Depreciations of fixed assets 2, ,713 2, ,562 Depreciations of intangible assets Provisions Cost of inventories recognized as an expense 18,168 18,168 23,749 23,749 Total 29,035 2, ,340 32,741 34,399 2, ,443 38,619 Minus self-production of fixed assets Total 29,035 2, ,340 32,741 34,399 2, ,443 38,619 Total 6.21 Employee Benefits The Group s and Company s employee benefits are analyzed as follows: Employee Benefits 31/12/2009 COMPANY 31/12/ /12/ /12/2008 Wages and daily wages and benefits 5,468 5,839 5,319 5,276 Social security expenses 1,330 1,413 1,315 1,309 Remuneration for termination of service Other staff benefits Total 6,922 7,367 6,736 6,658 Employed staff as at 31/12/09: Group 216 individuals, Company 195 individuals. Employed staff as at 31/12/08: Group 205 individuals, Company 193 individuals Other Operating Income and Expenses The Group s and Company s other operating income and expenses are analyzed as follows: 53

54 COMPANY Other income 31/12/ /12/ /12/ /12/2008 Amortization of received grants Income from indemnities Profit from sale of fixed assets Income brought forward Other income Total Other expenses Provisions for doubtful customers Expenses brought forward Other expenses Total Financial Income and Expenses The Company s and Group s financial income and expenses are analyzed as follows: 31/12/ /12/2008 COMPANY 31/12/ /12/2008 Financial income Bank interest Income from participations Financial expenses Interest and expenses of bank loans Other bank expenses Other Financial Results The Group s and Company s financial results are analyzed as follows: COMPANY Other Financial Results 31/12/ /12/ /12/ /12/2008 Foreign exchange differences from valuation of receivables and liabilities in foreign currency (debit) (205) (236) (124) (171) Foreign exchange differences from valuation of receivables and liabilities in foreign currency (credit) (41) 42 (14) 54

55 6.25 Income Tax The nominal tax rate for the Company in Greece is 25% for the financial year According to the current tax laws, the tax rate for activities in Greece is 25% for the years , whereas from the year 2010, this rate will gradually decrease by 1% until it settles at 20% by The nominal income tax has been based on the consolidated profit times the nominal tax rate. The effective tax rate is different from the nominal one. The effective tax rate is affected by a series of factors, such as the non-expensing of some items and the Company s option to create tax free reserves. The income tax of the Group and the Company is analyzed as follows: Income Tax COMPANY 31/12/ /12/ /12/ /12/2008 Income Tax Deferred tax Other income taxes of previous years (Provisions) Total income tax The analysis and agreement between the nominal and effective tax rate is as follows: 31/12/ /12/ /12/ /12/2008 Earnings before taxes according to IFRS 4,168 3,722 4,022 3,719 Tax Rate 25% 25% 25% 25% Income tax based on tax rate 1, , Tax that corresponds to: Other tax free income (100) (92) (100) (92) Subsidiary's loss for which no tax was recognised Proportion of Results by associate companies (11) Other Non Deductible Expenses Adjustment of deferred tax due to change of tax rate 0 (326) 0 (326) Other adjustments of deferred tax (54) 0 (54) 0 Subsidiary's results taxed on a different tax rate (6) Other taxes and differences of previous years Tax expense to the income statement Weighted Tax Rate 22.53% 15.13% 22.72% 14.90% The lower weighted average tax rate in the previous financial year is due to the reduction of the Company s deferred tax liability that derived from the adoption of the new lower tax rates which will gradually apply starting from 2010, according to the new tax law. 55

56 6.26 Contingent Receivables - Liabilities Information regarding contingent liabilities There are no litigious claims or differences under dispute before the Courts that could have a significant impact on the company s and Group s financial status or operation. The contingent liabilities of the company and group in the context of their ordinary activity, are as follows. The provided bank letters of guarantee are analyzed as follows. COMPANY 31/12/ /12/ /12/ /12/2008 Bank letters of guarantee, for collection of prepayments on grants of tangible assets Tax un-audited fiscal years The tax un-audited fiscal years for the parent company are the years 2008 and The cumulatively created provisions against the possibility of additional taxes being imposed during the tax audit, amount to 118 thousand euro and refer to the parent company. The tax-unaudited years for the Group s companies are: FESCOPACK Sp. z.o.o : INOVA AEBE PLASTICS AND IRON : VLAXOS BROS S.A. : Information regarding contingent receivables There are no contingent receivables that are of significance to report in the company s financial statements Current Charges Written against Tangible Assets No charges are written on the parent Company s and subsidiary s FESCOPACK Sp. Z.o.o. tangible assets Operating Leases Such concern long-term leases of the group s vehicles. Future payments of the group that concern Operating leases, are analyzed as follows: 56

57 COMPANY Leases from operating leasing payable: 31/12/ /12/ /12/ /12/2008 Up to 1 year From 1 to 5 years Total Charges to the results Leases from operating leasing Total Company transactions with affiliated parties The company s transactions with affiliated parties, according to IAS 24, are as follows: 31/12/ /12/ /12/2009 COMPANY 31/12/2008 Sales of goods and services To subsidiaries 0 0 1,824 1,397 To associates 1,334 1,539 1,334 1,539 Purchases of goods and services From subsidiaries From associates Income from dividends From subsidiaries From associates Sales of fixed assets To subsidiaries To associates Receivables From subsidiaries From associates Liabilities To subsidiaries To associates Benefits towards the company's management and executives Transactions and remuneration of senior executives and BoD members Receivables from senior executives and BoD members Liabilities towards senior executives and BoD members

58 The aforementioned transactions took place according to the commercial terms of the market. The transactions that concern the subsidiary company have been written-off the group s consolidated balance sheet, while the transactions that concern the associate companies are included in the relevant accounts of the consolidated Balance sheet and income statement. No loans have been granted to members of the BoD or other senior executives of the Group (and their families) Earnings per share Earnings per share are analyzed as follows: COMPANY 31/12/ /12/ /12/ /12/2008 Earnings after taxes corresponding to shareholders of the parent 3,208 3,174 3,107 3,165 Weighted number of outstanding shares 11, , , , Basic earnings per share (Euro per share) Dividends During the current year 1/1/ /12/2009, the Group paid dividends totaling 662 thous. euros. The proposed dividend from the earnings of the period 1/1/ /12/2009, amounts to 656, euro, which corresponds to euro per share, an amount the same as the dividend distributed in the previous year Events after the balance sheet date There are no other significant events after the balance sheet date, which concern the Group or the Company, and whose disclosure is required by the International Accounting Standards (IAS). Koropi, 29/3/2010 THE CHAIRMAN OF THE BOARD THE VICE-CHAIRMAN OF THE BOARD THE CHIEF FINANCIAL OFFICER GEORGIOS S. GΚINOSATIS STAMATIOS S. GΚINOSATIS ANASTASIOS A. LYMBEROPOULOS ID No/ΑΕ ID No /S ID No /Χ Reg. No.3544/99 58

59 CHAPTER 5: Information of article 10 l.3401/2005 The following Announcements/Disclosures have been send to the Athens Exchange Daily Bulletin and are posted on the Athens Exchange website as well as on the company website DATE SUBJECT 09/01/2009 Announcement of Change of a Company's Director 26/02/2009 Transactions made by Entities regulated by art. 13, par. 1, L.3340/ /02/2009 Transactions made by Entities regulated by art. 13, par. 1, L.3340/ /02/2009 Transactions made by Entities regulated by art. 13, par. 1, L.3340/ /03/2009 Financial Statement and 2008 Annual Financial Statements according to IAS 27/03/2009 Comments on 2008 Results 25/05/2009 Financial Statement and Interim Financial Statements according to IAS for 1st Quarter of /05/2009 Comments on 1Q 2009 Results 29/05/2009 Invitation to the Annual General Meeting 26/06/2009 Decisions by the Annual General Meeting of 26/6/ /06/2009 Payment of 2008 Dividend 26/06/2009 Disclosure of Composition of New Board of Directors 27/08/2009 Financial Statement and Interim Financial Statements according to IAS for 1st Half of /08/2009 Comments on 1H 2009 Results 17/09/2009 Disclosure of Regulated Information 25/11/2009 Financial Statement and Interim Financial Statements according to IAS for 9 Month /11/2009 Comments on 9M 2009 Results 59

60 CHPATER 6: Data and Information for