cetis d.d

ANNUAL REPORT 2007

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TABLE OF CONTENT

I. INTRODUCTORY PART ....................................................................................... 3

FINANCIAL HIGHLIGHTS OF THE CETIS GROUP AND THE CETIS COMPANY IN 2007 ........... 3

IMPORTANT EVENTS OF THE CETIS GROUP IN 2007 ......................................................................... 4

LETTER FROM GENERAL MANAGER ........................................................................................................... 5

SUPERVISORY BOARD REPORT .................................................................................................................. 7

STATEMENT ON THE RESPECT OF THE MANAGEMENT CODE OF PUBLICLY TRADED

COMPANIES ........................................................................................................................................................ 9

GENERAL INFORMATION ON THE COMPANY ....................................................................................... 11

BUSINESS ORIENTATION ............................................................................................................................ 14 Mission ............................................................................................................................................................. 14 Vision ................................................................................................................................................................ 14 Values ............................................................................................................................................................... 14 Strategic orientations ..................................................................................................................................... 14 Business goals ................................................................................................................................................. 14

CHARACTERISTICS OF GRAPHIC BRANCH ........................................................................................... 15

II. BUSINESS REPORT.......................................................................................... 17

SALES BY CETIS, d.d. .................................................................................................................................... 17 Sales in 2007 by product groups ................................................................................................................. 18 Sales of commercial printed matter ............................................................................................................. 18 Sales of security printed matter ................................................................................................................... 19

COMPANIES OF THE GROUP ....................................................................................................................... 20

ASSET MANAGEMENT .................................................................................................................................... 22 Financial operations ....................................................................................................................................... 22 Investments .................................................................................................................................................... 23 Shares and shareholders ............................................................................................................................... 24

PURCHASING AND LOGISTICS .................................................................................................................. 27

PRODUCTION ................................................................................................................................................... 29

RESEARCH AND DEVELOPMENT ................................................................................................................ 30 Strategic development ................................................................................................................................... 30 Development and research in graphic technology .................................................................................... 32 Cetis New Technologies................................................................................................................................. 33

ASSET MANAGEMENT .................................................................................................................................... 34

EMPLOYEES ...................................................................................................................................................... 34

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III. RESPONSIBILITY TO SOCIAL AND NATURAL ENVIRONMENT .............. 40

RESPONSIBILITY TO NATURAL ENVIRONMENT ................................................................................. 40

RESPONSIBILITY TO USERS OF PRODUCTS AND SERVICES ......................................................... 45

RESPONSIBILITY TO SOCIAL ENVIRONMENT ..................................................................................... 45

IV. FINANCIAL REPORT OF CETIS, D.D. ............................................................ 46

V. FINANCIAL REPORT OF THE CETIS GROUP ................................................. 89

VI. CONTACTS ...................................................................................................... 132

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I. INTRODUCTORY PART

FINANCIAL HIGHLIGHTS OF THE CETIS GROUP AND THE CETIS COMPANY IN 2007

Operations in EUR thousand

CETIS GROUP CETIS d.d.

2006 2007 2006 2007

Net sales revenues 32,007 39,520 26,990 28,411 Sales – domestic market 18,789 24,208 18,790 21,625

Sales – foreign markets 13,218 15,312 8,200 6,786 Gross profit 8,46 11,396 6,313 8,423

Net profit or loss for the

financial year

999 173 951 957

Investments 2,781 4,976 2.512 4,788

Gross value added per employee

27.7 28.4 25.9 27.2

Number of employees 441 499 419 436

Scope of investments CETIS GROUP CETIS d.d.

2006 2007 2006 2007 In EUR thousand 2,782 4,976 2,512 4,788

Chain index 178.90 190.60

Structure of assets CETIS GROUP Cetis d.d.

Asset/year in EUR thousand

2006 2007 2006 2007

Fixed assets 39,008 46,303 37,990 40,894 Current assets 13,372 15,446 11,916 11,817

Total assets 52,380 61,749 49,906 52,711

Structure of liabilities CETIS GROUP Cetis d.d.

Liability/year in EUR

thousand

2006 2007 2006 2007

Capital 30,564 30,396 30,401 30,989

Long-term liabilities 11,062 13,731 9,787 9,768 Short-term liabilities 10,754 17,622 9,718 11,954

Total liabilities 52,380 61,749 49,906 52,711

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Sales in the companies of the Group Net sales revenues in EUR thousand 2006 2007

Cetis-ZG d.o.o. 4,897 6,892 Cetis-dooel Skopje 240 /

Amba Co., d.o.o. / 5,261 Total 5,137 12,183

IMPORTANT EVENTS OF THE CETIS GROUP IN 2007

- With January 1, 2007 a new information system of the Cetis Company became operational.

- The Cetis Company became the majority owner of the Amba Company, Ljubljana. - The Cetis Company concluded a contract with Sudan for the manufacture of biometric

passports, visas, software for intelligent data capturing and document issuing, and for

consultancy services in total value of EUR 10 million. - For the second time the Cetis Company was ranked among the top 50 manufacturers of

passports worldwide. - Cetis was chosen in a public tender for the personalization of smart health insurance cards.

- Based on the selection of a renowned Croatian newspaper, the Cetis Zg Company was listed

among the Gazelle 2007 and in its branch it was ranked first among the fastest growing enterprises.

- The beginning of active operations of the lottery enterprise Nacional in Albania. - At the end of the year, Cetis adopted new strategic orientations.

After balance sheet date (31 December 2007)

- In January the registered office of Amba Co. officially moved to Celje, Čopova 24. - In the Amba Co. Company the general manager changed in March.

- In the Nacional Sh.a. Company the general manager changed in March.

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LETTER FROM GENERAL MANAGER

Dear shareholders, business partners and employees! Yet another successful business year is behind us. Constant adaptation to changes and the

ability to listen to the needs of our clients marked the year of 2007. In past years Cetis made some

determined steps and developed into a technologically advanced and service-oriented company. Modern information society dictates the production of advanced and smart products where only

graphic mind-set is insufficient. Again and again every year the decision to combine information and graphic technologies proves correct.

In 2007, the sales increased by 5.3% compared to the previous year. The highest growth of sales was achieved in the markets outside the European Union, namely by 17.2%. At the level of costs, the

absolute and relative value, material costs and labour costs are the most outstanding. In the structure of sales, material costs represent 33.5% and labour costs 30.7%. Both types of costs are considerably

higher when compared to the previous year due to the beginning of two major projects whose realisation will only result in 2008.

Despite substantially higher costs the operating loss is lower than a year before, namely by 15%, and the result before taxation is positive mainly thanks to the financial part of operations and is almost 37

percent higher than in 2006.

Last year Cetis signed a contract on the production of biometric passports, visas, software and the

provision of consultancy services with a value of EUR 10 million that significantly contributed to the business goal achievement. The realization of the project already started in 2007 whereas its majority

will be implemented in 2008 and partly in 2009. An exceptional achievement was also the award of a contract on the issue of smart cards in the health care system.

Cetis was chosen in a public tender for the »Development and supply of health insurance cards and

the supply of applets, the establishment and implementation of card personalization« as a bidder that

completely met the tender conditions and criteria. The project that includes electric and graphic personalization of professional and health insurance cards and the establishment of an agency for

issuing digital certificates will be completed in 2008.

This was a year of growth. A significant part of the Cetis activities focused on further expansion on

the domestic and foreign markets.

The Company is a co-founder of a new lottery enterprise Nacional in Albania that started its operations at the end of 2007.

Cetis also became the majority owner of a smaller Slovene company Amba Co., d.o.o. This new partnership between two supplementing activities has contributed to a more comprehensive offer on

the market of flexible packaging.

We also became the owner of the Slovene company, KIG-KGA d.o.o., producing registration plates.

This was a year of changes. The Implementation of the strategic business plan designed by the

Company continued in 2007. In the process of forming a new strategy we redefined our vision and mission and enriched our values. Cetis is based on four strong pillars, four primary product groups:

documents, packaging, games of chance and corporate communication systems.

The pillar strategies have been prepared down to the smallest detail. In the field of documents we will

focus on the development of strategic partners and together with the development of integrated solutions we will search for potential public-private partnerships with public institutions. A

comprehensive offer to support democratic processes in small countries will be provided and in particular we will concentrate on the development of smart card technology.

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With packaging the strategy envisages production modernisation and the integration of consumer views in the development cycle of products and services as well as the specialization in ecologically

friendly and special packaging.

Games of chance as the third pillar in our offer will aim at developing a global business model of the

organization of games of chance and new offers (services) combining games of chance and other pillars for the acceleration of sales and advertising.

Also the systems of corporate communications will have their own path striving for systematic development of solutions in direct marketing, the concentration of the development of new services

related to the pillar in the parent company, the transfer of tested models into print centres being newly established and the standardization of repeatable documents.

The common denominator of all product groups is mainly globalization.

In January 2007, Cetis set up a new information system. Due to the competition on the global market the Company had to rationalise its business processes and achieve high cost-effectiveness. It has

been more than a year since the Company was reorganized and the new information system started to function and it can be claimed that the introduction was more than successful. In the second half of

2006, the system was being introduced and on 1 January 2007 we shifted to the use of the new

information system with great success.

There is a year of challenges ahead of us. In the year ahead the already started projects will be completed and at the same time we will be faced with new challenges. On the domestic market there

will be a tender for a new driving licence, a vignette and a new identity card. This already demands a lot of efforts and what I have in mind is mainly extreme complexity of products and services required

by such tenders.

Also the global market is ahead. We want to gain two major projects outside Slovenia and we believe

we will succeed. Our goals for future have been set ambitiously but they are realistic and manageable.

In plans for 2008 we envisaged sales growth of more than 29% and slower growth of costs. A positive

result is planned amounting to EUR 1.8 million.

We are consistent in following our vision, which is ensuring secure information management and in doing so we stress the five values of Cetis: favour of challenges, professionalism, team work,

multidisciplinarity and innovation. With all the values listed and the mission we persistently implement

our vision to become a global integrator of information.

April, 2008 Simona Potočnik, MA

General Manager

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SUPERVISORY BOARD REPORT

1. Operations of the Supervisory Board in 2007

In 2007, the Supervisory Board controlled the operations of the Cetis, Graphic and Documentation Services Company within the scope of authorities and competences set out in law, the by-laws and

the Articles of Association of the Company.

The Supervisory Board performed its supervisory role and in the financial year of 2007 it convened

four sessions where it dealt with the following relevant topics:

• the 2006 business report, • the 2007 business plan,

• the report of the Management on the acquisition of Amba Co., d.o.o.,

• examination of the audited annual report and the consolidated annual report of the Cetis Company for the financial year of 2006 and the adoption of the Report of the supervisory Board on checking the

Annual Report and the Consolidated Annual Report of the Cetis company for the financial year of 2006,

• the report on operations in the first quarter of 2007, • the report on operations in the first two quarters of 2007,

• the report on operations in the first eight months of 2007,

• the report on operations in the ten months of 2007, • a proposal of the 2008 plan.

During the year the Supervisory Board constantly monitored the results of operations and a lot of

attention was placed on the Company’s business development, relevant business events, the

implementation of general strategic orientations and the measures to reduce and manage costs.

In the year of 2007 the composition of the Supervisory Board was the following:

Ljubo Peče, Chairman of the SB, shareholder representative,

Goranka Volf, Deputy Chairman of the SB, shareholder representative,

Franc Ješovnik, shareholder representative,

Dušan Mikuš, MA, shareholder representative,

Bernard Gregl, employee representative, Marko Melik, employee representative.

2. The view of the Supervisory board on the report of the independent auditor

The Supervisory Board reviewed and discussed the Independent Auditor’s Report. The Supervisory Board adopted the report without comments.

3. Review of the Company’s 2007 annual report

The Supervisory Board reviewed the revised Annual Report and the Consolidated Annual Report of Cetis, Graphic and Documentation Services, d.d. for the financial year of 2007 at its 54th regular

meeting on 30 June, 2008. The Supervisory Board had no remarks to either of the reports and concluded that the reports were in compliance with legal regulations, that they presented a true and

fair balance of assets and liabilities, financial position and the Company’s operating profit or loss, and

that the reports sufficiently explained all significant events that had had influence on the operations of the Company and the Group.

In accordance with the statement above, the Supervisory Board adopted and confirmed the Annual

Report and the Consolidated Annual Report of Cetis, Graphic and Documentation Services, d.d., for

2007.

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4. Opinion of the Supervisory Board regarding the Balance Sheet Profit

The company Cetis, Graphic and Documentation Services, d.d. concluded the 2007 financial year with

a net profit of EUR 872,904.55. The Supervisory Board agrees with the proposal of the Management Board not to allocate the 2007 balance sheet profit.

5. Opinion of the Supervisory Board regarding the work of the Management

The Supervisory Board believes that the Company’s Management worked well in 2007. The

Supervisory Board confirms the Management’s business reports and proposes to the shareholders a discharge for the Management and the Supervisory Board for the 2007 business year.

Celje, 30 June 2008

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STATEMENT ON THE RESPECT OF THE MANAGEMENT CODE FOR PUBLICLY TRADED COMPANIES

On the basis of the provisions in the Rules of the Ljubljana Stock Exchange and the legislation in force

the Cetis Company expresses its Statement of compliance of conduct with the Management Code for

Publicly Traded Companies (Official Journal of RS No 118/2005 of 17 December 2005 as subsequently amended with effect from 1 January 2007) for the period from 1 January 2007 to the adoption of this

annual report.

The Code is available to the public in Slovene and English language on the web site of the Ljubljana Stock Exchange www.ljse.si.

The Company functioned in compliance with the provisions of the Code that was in force before the amendments were adopted, and in 2007 it also followed the recommendations of the Management

Code for Publicly Traded Companies with the amendments applicable from 5 February, 2007 with the exceptions listed below. Some recommendations of the Code are not applicable to the Company and

cannot be breached and are therefore not explicitly exposed. The obligations of the Company and its

bodies respectively will be performed if there is such a case.

In the continuation certain explanations are provided concerning the provisions of the Code in force and explanations to binding provisions the Company does not yet observe:

1.2.6. and 1.2.7.

The Company treats all the shareholders equally and does not specifically encourage them to exercise their rights.

2.3.8.

The total remuneration, compensation and other benefits of the Management Board members are

disclosed to the public in accordance with legal provisions.

3.1.5. The Supervisory Board operates without the rules of procedure but in accordance with the regulation.

3.4.6. and 3.4.7. The insurance of indemnity liability with regard to the performance of the tasks of the members of

Supervisory Board has not been established.

3.6. - 3.9. According to the size of the Company and its organization, the Supervisory Board did not form any

special commissions.

4.3.

The Articles of Association does not define the types of operation that require from the management to obtain the consent of the Supervisory Board.

7.1.4. So far an auditor has not been present at the company shareholders’ Assembly.

7.1.5.

The Company has an internationally renowned auditor who has been performing the annual report audit for more than five years.

8.1.1. According to the regulation the Company has not published half-yearly reports so far.

http://www.ljse.si/

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8.2. The Company's shareholders are mainly Slovene legal and natural persons and this is the reasons why

publications are in Slovene. Only annual reports are published in English.

8.6. The Company does not prepare a financial calendar for the forthcoming financial year because

currently it is not possible to precisely determine the deadlines of individual publications. The

Company promptly informs the shareholders of all relevant events.

8.11. The Company determines risk factors in the annual report.

8.15.5.

The Company has not adopted a special bylaw with a provision that would specify the rules on

limitation of trading in the Company shares because the Company does not consider it necessary. In this field the legislation in force is applied.

8.17.1. and 8.17.2.

The Company has not published its Articles of Association on the website but it is available in the legal office at the Company’s registered office. In 2008, the Company will post on its website the name and

contact information of a person in charge of investor relations.

The Company will respect the recommendations of the Code with the derogations described above

also in future. If it appears that the Company cannot respect any of the Code provisions, the Management and the Supervisory Board will prepare a justified explanation. From the completion of

the accounting period to the publication of this statement no changes or other derogations occurred.

Since 4 June 2008 this notification is also available on the official website of the Company

www.cetis.si.

The Management Board and the Supervisory Board of the Company

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GENERAL INFORMATION ON THE COMPANY

Company profile

Company name: Cetis, Graphic and Documentation Services, d.d.

Registered Office: Čopova 24, 3001 Celje, Slovenia, Europe Company registration number: 5042208

Tax number: 24635812 VAT Number: SI24635812

Share capital: EUR 10,015,022.53

Entered in the Companies Register of the Regional Court of Celje; registration number:

063/10147600.

Transaction accounts:

Nova LB d.d. 02234-0011655374 Banka Celje d.d 06000-0026390798

Abanka Vipa d.d. 05100-8000027831 Probanka d.d. 25100-9704894196

Bank Austria Creditanstalt d.d. 29000-0003262161

Telephone: 03 4278 500

Fax: 03 4278 817 E-mail address: [email protected]

Company's website: www.cetis.si

Companies of the Group

Cetis-ZG d.o.o., Poduzeče za trgovino i usluge, Industrijska ulica 11, 10431 Sveta Nedelja, Croatia

e-mail address: [email protected] web site: www.cetis.hr

t: +385 1 333 5000

f: +386 1 333 5001

Cetis Print d.o.o. Breza 8, 11030 Beograd, Serbia

e-mail address: cetisprint@cetisprint

web site: www.cetisprint.co.yu

t/f: +381 11 2511 913

Cetis-Tirana Sh.p.k., Twin Towers, Tower 1, Blvd. Deshmoret e Kombit, Kati IV, Tirana, Albania

e-mail address: [email protected]

t: +355 4 280 424 f: +355 4 280 425

http://www.cetis.si/

mailto:[email protected]

http://www.cetis.hr/

mailto:cetisprint@cetisprint

http://www.cetisprint.co.yu/


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Amba Co., proizvodnja in trgovina d.o.o., Ljubljana

Leskoškova 11, 1000 Ljubljana, Slovenia

e-mail address: [email protected] web site: www.amba-tc.si

t: +386 1 587 4300

f: +386 1 586 4305

Affiliated companies

- Societe Nationale Des Loteries Sportives, Gabon

Immeuble BICP bord de mer, 1474 Avenue Georges POMPIDOU, BP 13490, Libreville, Gabon

- Nacional Sh.a, Albania

Rruga Kavajes, Porta Kry Esore, Misto Mame, Tirana

- KIG KGA, proizvodnja, trgovina, inženiring d.o.o.

Zagorica 18, 1292 Ig, Slovenia

- Druckman, Budapest

Jaszu. 33-35, 1135 Budapest, Hungary


http://www.amba-tc.si/

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MANAGEMENT

Management Board: Simona Potočnik, MA, General Manager

Supervisory Board: Ljubo Peče, Chairman of the SB, shareholder representative

Goranka Volf, Deputy Chairman of the SB, shareholder representative

Franc Ješovnik, shareholder representative Mag. Dušan Mikuš, shareholder representative

Bernard Gregl, employee representative

Marko Melik, employee representative

Organization

Macro level of organization – functions of the Company:

Legend: KT – commercial printed matter VT – security printed matter CENT – Cetis New technologies PI&UČV – Corporate integrations and human resources management

Products - documents

- cards - forms

- labels - flexible packaging

- lottery and prize games

- direct mail printed matter

- promotional printed matter

Services - consultancy and project management

- prepress and printing

- printed matter protection - variable data printing

CETIS MANAGEMENT

SALES CPM SALES SPMPURCHASING

AND LOGISTICSPRAPHIC R&D CENT CI&HRM

FINANCE AND ECONOMICS

PRODUCTION

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BUSINESS ORIENTATION

In 2007, the Company designed the continuation of a business plan that it will be implementing by 2012. In the process of defining a new strategy, the Company redefined its vision and mission. Also

the values had to be adjusted to new strategic orientations.

Mission

Cetis provides safe data management. With printed and e-media we offer comprehensive solutions in corporate communications and security printed matter. Our purpose is to provide services

that enable our clients to achieve optimal operations and maximum performance on the market and

that grant us stable economic growth. This is why we have been striving to combine graphic services and information technology and manage them both.

Vision

We wish to be the best partner to companies and countries worldwide in the fields of identification,

security and corporate communications and a leading partner and consultant when dealing with the rationalization and management of costs in packaging, corporate communication systems, documents

and games of chance. Our vision is to become a global integrator of information.

Values

Innovation

Multidisciplinarity Team work

Openness to challenges

Professionalism

Strategic orientation

In Cetis we are aware of the importance of a modern model of strategic management aiming at

increasing competitive advantage. Most of attention is placed on a policy of products and services that

is in accordance with the wishes of our clients. Our business strategy is to achieve the leading position in the field of high quality and printing of promotional and business printed matter for huge business

systems in Slovenia and in foreign markets. We also wish to be the leading one in the field of printing heat shrink packages made of various materials, printed matter for direct mail and variable printing.

We will produce products of high profitability such as security printed matter and introduce protection

to other products such as bank, credit and commercial cards and documents. At the same time services of high added value will be offered.

Business goals

- On the basis of knowledge and its recognition, Cetis is a marketing oriented company providing

services and products of high value added. - It controls the market of customers and suppliers.

- In provides customers with services and products such as packaging, corporate communication

systems, documents and games of chance.

- It takes over entire projects.

- Cetis is a creator and generator of demand.

- It organizes a network of independent suppliers (outsourcing) and co-operators and establishes

(acquires) daughter companies. - It only deals with the highest level of specialized production.

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- Cetis will move its production to local markets of cheaper labour force.

- Cetis takes care of a gradual but fast and determined shift of a company from a producer to a

system integrator.

CHARACTERISTICS OF THE GRAPHIC BRANCH

Competitiveness of the European Graphic Industry1 The European printing industry is facing both structural challenges and increasing competition

challenges. New providers from Eastern and Central Europe and China forced European printers to redefine their market positions by integrating more services in their product portfolio and building a

closer relationship with their clients.

Data base management, on-demand printing2, personalization of products and services are only some

additional services that enable additional positioning of graphic companies on the market. In addition to the use of information technology, constant development of flexible and multi-purpose products will

grant the graphic industry a more reliable market position. Despite new technologies and media,

printed documents will still be an important link in information activities but will need to take into account the economy of scale and globalization. However, the operations of printing companies have

to be adapted in order to be able to face new conditions in competition.

Facts and figures of the European printing industry: 130,000 printing companies employ over 820,000 people and have a turnover of almost EUR

100 billion.

Seven countries (Great Britain, Germany, France, Italy, Belgium, the Netherlands and Spain) account for more than 80% of the overall Union turnover.

These are mainly small companies, 85% of them employ less than 20 persons. Some new EU member states (Poland, Czech Republic) disclose very rapid growth and acquire

new market positions.

Opportunities:

Several differentiation strategies are possible according to size or activities of companies: proximity or niche-markets for small and medium-sized companies, international development and

integration of big companies “Service orientation” is a growing trend, allowing printers and their partners to satisfy the

expectations from customers

Ensuring successful integration of classical printing industry in the global communication system

Threats: Growing presence of third country suppliers in the EU market

intense price war and a lack of qualitative differentiation

The printing industry is relatively disconnected from research and development, which can jeopardize structural innovation

Deployment of new technologies coming from the major suppliers could accelerate the transformation of the printing business.

In principle, the graphic industry is focused on products delivered on orders on the basis of yearly and multi-yearly orders in the case of printing security printed matter, identification documents, and

specialized products in the field of packaging. Smaller providers mainly satisfy local needs and only

1 Summary of the report by Ernst & Young: Competitiveness of the European Graphic Industry 2 On-demand printing

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exceptionally they operate cross-border whereas bigger or highly specialized providers enter demanding foreign markets. The same applies to Slovenia that with the entry to the European Union

on the one hand opened possibilities of export and on the other hand Slovenia opened the door to

competitive graphic producers with high value added. Being a successful player does not mean one needs to follow the changes and novelties but to co-create them.

We have been living in information era and therefore timely and precise information is the most

important factor impacting the change and at the same time ensuring constant development.

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II. BUSINESS REPORT

SALES BY THE CETIS GROUP

In 2007, net sales revenues amounted to EUR 39.5 million. Compared to 2006 when net sales

revenues equalled EUR 32.1 million, revenues increased by 23.5%.

On the domestic market the revenues totalled EUR 24.2 million and on foreign markets revenues amounted to EUR 15.3 million. Compared to 2006, sales on the domestic market grew by 28.8%

whereas on foreign markets the share of sales increased by 15.8%.

Čisti prihodki od prodaje = Net sales revenue Prodaja domači trg = Sales domestic market Prodaja tuji trg = Sales foreign market

SALES BY CETIS, d.d.

In 2007, net sales revenues totalled EUR 28.4 million, which was EUR 1.5 million more than a year before. Most of the revenue was generated by selling products and services on the domestic market,

namely a bit more than EUR 22 million. Compared to 2006, the sales on the domestic market increased by 15% and exceeded the plan by 12%. On foreign markets the sales reached

approximately EUR 7 million. In total sales this represents 24%. The majority of the revenue abroad

was generated on the following markets: Croatia, Germany, Poland, Sudan, Austria and elsewhere.

Every year the Company assesses its customers on the basis of the following criteria: repeatability of

orders, turnover value, high standards, solvency and potential common path of development. According to these criteria customers are classified into the key customers, A customers, B and C

customers. Whereas the key customers are of extreme importance to Cetis, the customers in class C

only represent one transaction of low value. In 2007, the Company had 64 key and A customers that together created sales equalling 69% of total sales.

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

Čisti prihodki od prodaje Prodaja domači trg Prodaja tuji trg

2006

2007

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Sales in EUR thousand 2006 2007

Net sales revenues

Sales on the domestic

market

Sales on foreign

markets

26,990

18,790

8,200

28,411

21,625

6,786

Sales in 2007 by product groups

In 2007, documents represented the biggest share of sales in the overall structure, namely 17.4%.

This group of products was followed by forms with 16.6%, cards with 13.2%, self-adhesive labels with 11.5% and printed matters for direct mail with 8.6%. They are closely followed by flexible packaging

with approximately 3% less. Services and photo bags account for about 4% of sales whereas lottery

tickets and services represent less than 3% of the sales.

In comparison with 2006, the biggest growth was noticed in the group of documents, which totalled 69.8% whereas 51-percent growth was reported in the group of cards. The sales of flexible packaging

and the sales of basic material rose by approximately 43%. The sales of photo bags increased by 18.7% and of merchandise by 14.8%. The sales of printed matter for direct mail, non-adhesive labels

and forms as well as promotional printed matter and self-adhesive labels dropped.

Sales by product groups

In EUR thousand 2006 2007

Documents 2,917 4,952

Flexible packaging 1,682 2,401

Photo bags 959 1,138

Cards 2,496 3,763

Direct mail printed matter 2,711 2,436

Non-self-adhesive labels 1,888 1,540

Forms 6,479 4,709

Basic material used in production 1,087 1,564

Promotional printed matter 203 142

Self-adhesive labels 3,806 3,273

Lottery tickets 788 723

Services 982 980

Goods for resale 568 652

Basic material and other 424 138

Total 26,990 28,411

Sales of commercial printed matter

The sales of commercial printed matter represent 60% of Cetis' sales. The Company sells its products

and services in 15 European countries and Slovenia represents the biggest sales share. The sales of commercial printed matter can be divided into six product groups: forms, mailers, self-adhesive labels,

flexible packaging, non-self-adhesive labels and photo bags. As for the value, the biggest one in

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commercial printed matter is achieved by the sales of forms. Sales plans on the domestic market were exceeded by 16%.

In Slovenia in 2007, mainly the sales of integrated forms with cards and self-adhesive labels went up. A trend of growth was recorded also in the field of mailing where the Company succeeded in

achieving the goals set. Sales activities were aiming at the offer of promotional commercial mailings wrapped up in printed foil. With self-adhesive and non-self-adhesive labels the Company started new

projects in the field of drinks. It is important that with its knowledge and capacities Cetis is close to

European producers. In 2007, the Company experienced the most substantial growth in flexible packaging. For a client, the Company carried out a shift from paper labels to polypropylene wrapping

labels based on a project approach.

Strategic marketing development of commercial printed matter sales focuses mainly on promotional direct mail. With new solutions Cetis has been trying to enter Eastern European countries.

In the field of self-adhesive labels the Company is closely cooperating with strategic suppliers in

developing self-adhesive materials for no-label look labels. Its own development supplements the offer with booklets. (Note: A booklet is a self-adhesive label with an integrated leaflet.)

Sales of security printed matter

The sales of security printed matter in 2007 rose by 46.6% compared to the previous year and in the

Cetis Company it represented a 40-percent share of sales (in 2006, this share amounted to 30%). Cetis exports security printed matter to 12 countries in Europe and Africa. The biggest share of

security printed matter sales can be allocated to Slovenia.

The sales of security printed matter consist of three major product groups: identity documents, cards

and lottery games.

With identity documents the Company exceeded its sales plan by 33%, namely by producing and

personalizing Slovene biometric travel documents, identity cards, by producing visas, driving licences, certificates of registration and extracts from registers. The Company successfully continued issuing

Slovene biometric passports; the project was started by upgrading the issuing system and implementing additional data in the memory chips – finger prints. The Company signed an important

contract to produce biometric travel documents for an African country and this considerably contributed to the achievement of business goals.

This year the Company successfully completed two projects in the field of elections – in Slovenia and Kosovo.

Growth trend was also recorded with the production of cards, mainly with EMV chip personalization of

bank cards. In 2007, the Company completed the personalization of bank cards for the biggest

Slovene bank. The issue of European digital tachograph cards continued effectively. This is the project Cetis is very proud of since it established the Company as a system integrator between the European

and Slovene systems of data verification and the issue of tachograph cards. Cetis was also chosen in a public tender for issuing new health insurance cards. The Company will implement the project

together with the biggest European system integrator of smart cards.

With the product group of games of chance the Company satisfies the needs of customers for

instant/quick lottery tickets, tombola tickets, lottery sheets and commercial games of chance. With an affiliated company, SNLS, in Gabon in Central Africa, Cetis continued the organization of games of

chance and the first financial year was completed by winning a concession for ten years.

Strategic marketing development of security printed matter sales is globally oriented and in particular

directed to foreign markets in Africa and Asia. This orientation is dominant with identification documents.

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The Cetisecurity brand name was presented at bigger European and global congresses of security printed matter, of which the congress on the French Riviera in Nice was the most important. The

Company successfully presented itself at an international fair of smart cards »Cartes 2007« in Paris.

Special attention is placed on the expansion of marketing games of chance and in this segment the

Company operates on a broader European market.

COMPANIES OF THE GROUP

The Cetis Group provides comprehensive solutions in the fields of printed media in combination with other media. It offers a programme of diversified printed matter, such as security, variable and

commercial printed matter. These are accompanied by a range of services such as personalization, documentation and other services.

The Cetis Group comprises of the parent company Cetis, Graphic and Documentation Services, d.d. with its registered office in Celje and subsidiaries that are 100% owned by the parent company. These

companies are Cetis-ZG d.o.o., poduzeče za trgovinu i usluge, and Amba Co., d.o.o., Ljubljana.

The operations of the Company and the Group financial statements also take into consideration the financial statements of these companies. The company in Tirana is also 100% owned by Cetis but it

does not have its own financial statements. It only acts as a trade intermediary.

Cetis-ZG d.o.o., poduzeče za trgovinu i usluge,

Industrijska 11, 10431 Sv. Nedelja, Croatia

Tel: +385 1 333 5000

Fax: +385 1 333 5001


web site: www.cetis.hr

Cetis Tirana Sh.p.k.

Twin Towers, Tower 1,

Blvd. Deshmoret e Kombit, Kati IV, Tirana, Albania

Tel: +355 4 280 424

Fax: +355 4 280 425



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Amba Co., proizvodnja in trgovina d.o.o., Ljubljana

Leskoškova 11, 1000 Ljubljana, Slovenia

Tel: +386 (0)1 587 43 00

Fax: +386 (0)1 587 43 05


web site: www.amba-tc.si

Cetis Print d.o.o., Beograd

Breza 8, 11030 Belgrade, Serbia

Tel/Fax: +381 11 2511 913

e-mail address: cetisprint@cetisprint

web site: www.cetisprint.co.yu

Sales by the companies in the Group

Net sales revenues in EUR thousand 2006 2007

Cetis - ZG, d.o.o. 4,897 6,892

Cetis – dooel Skopje 240

Amba Co., d.o.o. Ljubljana 5,261

Total 5,137 12,153

Note: In 2006, the parent company disinvested the assets in Macedonia and in 2007 it became the majority owner of Amba.

Cetis-ZG, d.o.o.

The year of 2007 was the most successful for Cetis Zg since it was established in 1991. The investment and acquisition of Bipost in 2005 have proven to be sound business decisions already

bearing fruit for the third year. In 2007, the growth of income increased by 41% in comparison with

the previous year. The revenues reached EUR 6.9 million in 2007. Profit after taxation amounted to EUR 216,519 and depreciation equalled EUR 426,166. Whereas the sales in trade decrease, hybrid

mail sales rapidly increase.

Systematic market analyses, satisfying permanent customers that have turned into real partners and

the motivation of the employees together with the business idea have become the base of a leading hybrid mail centre in Croatia and sound foundations of the company that some years ago still fought

for its existence.


http://www.amba-tc.si/www.amba-tc.si

mailto:cetisprint@cetisprint

http://www.cetisprint.co.yu/

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At the beginning of the year, the Company started with the implementation of a contract concluded with Optima Telekom that is a distributor of fixed telephony in Croatia. The year of 2007 was also

marked by a deal with Zagrebačka Banka. Despite increased scope of work the number of employees

reduced from 24 to 22. Revenue per employee exceeded EUR 300,000 annually, which is extraordinary and comparable European ratio.

Cetis Print d.o.o.

In September 2007, Cetis Print, d.o.o. Beograd was registered in Serbia. The majority owner is Cetis-ZG. The company Cetis Print, d.o.o. is in a phase of establishing. Subscribed capital has not been paid

up fully. Therefore, in 2007 this company is not included in the consolidated balance sheet. The

revenue of the company in 2007 totalled EUR 26,486.

The core business of the company is printing and enveloping and the services of printing invoices and mailings. Cetis d.d. markets its products such as forms, bank cards and labels in Serbia through Cetis

Print. The vision of Cetis Print is to become one of the leading mailing centres in Serbia in a relatively

short period of time.

Amba Co. d.o.o.

Amby Co. D.o.o. was established in 1992 and joined Cetis in 2007. The purpose of acquisition was to

provide a more comprehensive offer on the market of flexible packaging. The basic and only activity of the company is the manufacture of complex flexible packaging and the provision of advisory

services in this field. The company currently employs 40 people and covers the markets in Western

and Central Europe. Approximately 55% of products are exported to Austria, Germany, Italy, Czech Republic, Hungary, Croatia, Serbia, Montenegro and Bosnia and Herzegovina. In January 2008, the

registered office of the company moved from Ljubljana to Celje, Čopova 24. In 2008, the company plans to disinvest business unnecessary assets. In 2009 the company will move to Celje to the existing

location of Cetis. The R&D activities in 2007 mainly focused on the preparation and coordination of the development strategy to be in compliance with the orientations of the parent company and on the

expansion of the product portfolio to food and non-food industry.

ASSET MANAGEMENT

Financial management

Also in 2007 the Company mostly achieved and even exceeded its objectives financially. The financial situation of the company was assessed by breaking down and analyzing the past, current and planned

cash flows. The company took into consideration the following general principles and financial

management rules:

- Coherence of the size, the structure and the trends in assets, as well as liabilities; - Sustainability of operation with the provision of rational financing, the limitation of financial

risks and optimal solvency with appropriate financing economics;

- Achievement of favourable business results with operation-derived net cash flow; - The possibility of increasing financial strength through property and assets.

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To the greatest extent possible the Company maintained the abovementioned principles despite negative operating result. The Company financed the current operations mainly with its own facilities

and resources. These were acquired by adjusting the investment policy and selling the no longer

necessary financial investments.

The emphasis of the financial analysis was given to the financial and the capital structure, as well as to the assessment and maintenance of creditworthiness of the Company. By determining the assets

unnecessary for operations and by dynamic cash flow planning, the Company secured the resources

and guarantees for strategically important and other investments.

As regards financing, the 2007 business year was a very dynamic one for the Company and it dictated a quick adjustment to the newly created conditions on financial markets. In the financial field, certain

decisions were taken regarding financing of investments in the given circumstances. These decisions contributed to the overall business result. Thus the two basic financial goals - ensuring solvency of the

Company and financing economics with controlled financial risks – were considered.

Due to the nature of operations in 2007, the capital and debt ratio changed to 60.9 : 39.1, which is

less favourable than in 2006 despite positive operating results. However, this ratio is a consequence of more aggressive financing, in which the company maintained term-based balancing of assets and

resources.

At the end of 2007, fixed assets were financed in entirety with capital and external long-term

resources. In the financing structure, which is still relatively balanced, financial measures for appropriate financial correction had to be implemented that resulted in adequate financial correction.

These measures and their effectiveness are based mainly on successful operations. In 2007, the Company was not as successful in the management of operating receivables as it was in 2006 since

the share of recovered receivables was lower and the balance of receivables higher than in the

previous year. Furthermore, the Company was less efficient in stock management as they increased in both structure and absolute value. However, the fact remains that the result of financing, regardless

additional borrowing in 2007, remained positive and had a favourable effect on the operations of the Company.

The Company is aware that, due to the lower level of self-financing, regular operations of the Company has to reach positive results in order not to put long-term loan repayment at risk (the

company is currently regularly repaying its long-term debts). The financial risks and exposure are described in the accounting report herein.

Investments

Scope of investments in 2006-2007 in EUR thousand 2006 2007

Intangible fixed assets 1,390 237

Land

Buildings 44 204

Equipment 1,078 4,347

Total 2,512 4,788

Compared to values in 2006, investments in tangible fixed assets in 2007 increased substantially.

Technological modernisation and the expansion of certain capacities remain the key conditions for the

existence, growth and improved competitiveness in all areas of the Company’s activities. In 2007, the most substantial investments were the purchase of two printing machines, a robot and the

arrangement of air conditioning in the production areas whereas a relatively limited volume of funds was invested in intangible fixed assets.

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In this and the following years, the Company will increase its investments into the market, and in

advanced technology and knowledge. The key purpose is to ensure higher productivity, responsiveness, specialisation and reliability of business processes and, consequently, lower costs.

Cash flow – investments in 2006-2007 (non-consolidated) Inflows (offset) in EUR thousand 2006 2007

Tangible fixed assets 268 312

Financial investments 1,052 541

Total 1,320 853

Outflows (offset) in EUR thousand 2006 2007

Intangible fixed assets 1,390 237

Tangible fixed assets 833 4,551

Financial investments 926 1,802

Total 3,149 6,590

Gross value added 2006-2007 Year 2006 2007

Gross value added in EUR thousand

10,838 12,052

Chain index 100 111.20

The gross added value was significantly higher in 2007 compared to 2006. In 2007 and in future, the

Company has planned to lower costs and intensify investments in marketing on the domestic market

and international markets, where the Company will act through subsidiaries and affiliated companies abroad. One of such companies was registered in Albania at the end of 2007 and started its

operations in Albania marketing games of chance.

The Company expects these investments will improve its efficiency and returns with a secured long-term liquidity. According to the needs and the objectives of the strategy, the Company will also invest

in tangible and other fixed assets and continue disinvestment of unnecessary investments.

Shares and shareholders

The share capital of Cetis, d.d. is divided into 200,000 registered ordinary shares, bearing the CETG

mark and are dealt in on the Ljubljana Stock Exchange. All shares are freely-transferable. In 2007, the Company introduced no change in the share capital. The Company publishes all required information

on the SEO-net portal of the Ljubljana Stock Exchange.

The number of shareholders did not change significantly in 2007. At the end of 2007, there were 1,039 shareholders. Compared to the end of 2006 the number of shareholders decreased by 45. Two

new names appeared among the ten largest shareholders in 2007: Triglav naložbe and Raiffeisen

Zentralbank. On 31 December 2007, the structure of share ownership was the following:

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Shareholder Number of shares Percentage of the share capital - %

Cetis-Graf d.d. 78,493 39.25

Infond ID d.d. 27,358 13.68

Kovinoplastika d.d. 18,649 9.32

Kapitalska družba d.d. 15,609 7.80

Slovenska odškodninska družba 14,948 7.47

VS Probanka Glob. nal. sklad 12,049 6.02

Triglav naložbe d.d. 12,043 6.02

NFD Holding d.d. 3,500 1.75

Merkur 530 0.27

Raiffeisen Zentralbank a.g. 459 0.23

Other legal and natural persons 16,362 8.19

Total 200,000 100.00

The ten largest shareholders own 91.81% of the total shares, issued in dematerialised form at the

Central Securities Clearing Corporation in Ljubljana. As at 31 December, 2007, the Company maintained 201 of its own shares for the purposes stated in the second indent of Article 240 of the

Companies Act (ZGD-1). The company acquired no own shares in 2007.

At the end of 2007, the share market value amounted to EUR 93.15, which – based on the total

number of issued registered shares - represented 60.1% of the book value, which at the end of 2007 amounted to EUR 154.94. 2007 is the second subsequent year, in which the book value of the share

marked CETG increased, while its market value decreased.

Movements of market and book value of CETG shares in years 2006 and 2007 Year Market value of a share

in EUR

(31 December)

Book value of a share

in EUR

(31 December)

Ratio between the two

2006 100.15 152.00 65.9

2007 93.15 154.94 60.1

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Movement of CETG share price in 2007 in EUR

The uniform price of a CETG share on a regulated market of the Ljubljana Stock Exchange did not

experience any strong fluctuations in 2007. In first months of the year the price dropped to approximately EUR 80 whereas in the middle of the year it even exceeded EUR 120 and in last months

of 2007 it dropped again to EUR 90. In comparison with the SBI20 index, it can be concluded that the movement of the CETG share market price in 2007 retrograded, as the SBI20 index rose and this can

also be observed in the graph.

Number of shares owned by the Management Board and the Supervisory Board

General Manager, Mrs Simona Potočnik, is the owner of 100 shares of the Cetis Company that represents 0.05% of all the shares issued. The Supervisory Board members are not owners of the

Cetis d.d. shares.

Net profit per share in 2006 and 2007 in EUR Year 2006 2007

Net profit per share 4,76 4,79

Note: The calculation is made on the basis of the weighted average of the number of shares.

Dividend policy The management of the Company has established that in 2007 a positive but not planned result that would allow for payment of minimal dividends, which was promised in the last annual report, was

reached. However, the management estimates that the Company needs the profit made for further

operations and will therefore not propose the distribution of the profit for appropriation.

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The management plans to continue pursuing the long-term development and investment objectives

and seeking new opportunities to maximize the Company assets and profits, and achieving the expectations and interests of the shareholders. If the Company achieves the profit planned for 2008,

the management of the Company shall, taking into consideration all other relevant factors, propose allocation of the appropriate part of 2007 net profit to dividends.

PURCHASING AND LOGISTICS

Strategic purchasing of Cetis

By strengthening partnerships with suppliers we are building our long-term stability in supply and reducing risks pertaining to purchasing. Constant development of purchasing together with the

suppliers promotes innovation and partnership and on the basis of long-term business relations we are able to achieve the goals set. The global objectives of purchasing are to provide material of adequate

quality at the right price and timely according to the needs of the customer and the production process. We aim at the introduction of modern logistic concepts and mutual operations with suppliers.

Global objectives of purchasing are:

- Introduction of the systems of supply following the win-win concept where the client and the supplier cooperate in order to improve conditions on both sides;

- Introduction of modern logistic concepts of work (internal, external);

- Establishment of an advanced system of evaluation of suppliers; - Adoption of adequate documentation support for the key functions of purchasing and logistics

– general reduction of purchasing costs; - Definition of strategic suppliers and general reduction of the number of suppliers.

Increasingly faster and more dynamic changes in marketing and development require from Cetis and its purchasing strong globalization of purchasing sources and intensive development of suppliers

respectively.

Report on the dynamics of raw material prices in 2007

Last year was marked by strong trends of increasing the price of basic papers. The Company was

relatively successful in resisting these market trends. The task of searching for the possibility of purchasing cost has been continuous also in 2008. Purchasing material costs could be reduced by

approximately EUR 73,151 by adequate purchase of self-copy and self-adhesive paper, redirected

purchase of OCR paper and partly cardboard (this is not possible with the cardboard used in pharmaceutical industry where the supplier is authorised), paper used for photo bags, thermal paper

and palettes. The purchasing service is aware of the fact that its basic task is to provide material of adequate quality at the right price and timely.

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Orders and receiving

year 2005 2006 2007

Total number of orders 5,371 5,006 5,003

Total number of receipts 5,864 5,833 19,043 Purchasing value in EUR 10,070,000 10,491,000 11,599,800

Conclusions: Total number of orders remained the same throughout the years whereas the number of receipts last year more than tripled due to the new information system. Through this system not

only materials are received but also services are purchased (repairs of tools, order of printing blocks and other printing elements, print, plastification, additional treatment and binding of printed matter

and other prepress-personalization services with contractors) that were not covered in purchasing in

previous years. Thus the value of purchasing rose by 9%. The quantity of purchased material has been dropping and this is why also their structure changes, which causes the increase in total value.

In the programme of documents the Company purchases more materials of higher value.

Relations with suppliers

The construction of a comprehensive system of purchase management is based on a transfer of the

requirements of the Cetis’ customers to suppliers. The suppliers regularly inform the Company of the novelties in their production programmes and market trends. With their knowledge and experience

they thus contribute to the introduction of new products and technologies.

Assessment of suppliers

The assessment of suppliers is an important and constant process and implies planned collection of information to select new suppliers and control the existing ones. It ensures continuous quality of a

supplier in a long run if it is interested in eliminating errors. The assessment of suppliers produces a

list of approved and potential suppliers. This assessment is carried out once a year following the criteria: price, payment conditions, claims, warnings, the ISO 9001 system, dealing with claims,

delivery period, payment period, service-development trends, the ISO 14001 system, cooperation – ecology. Based on these criteria, the suppliers are classified into three groups: A – a reliable supplier,

B – an acceptable supplier, C – a conditional supplier.

Year/share of suppliers in individual groups in % A B C 2005 31 57 4

2006 31 83 6

2007 23 76 1

Conclusions: Last year the Company intensified the criteria and this is why the number of suppliers in group A reduced. Although the cooperation is good, the expectations are getting higher every year

and the suppliers are expected to follow these requirements.

Satisfaction of suppliers

Partnerships are built by taking into consideration the requirements of the customer and the remarks

of the supplier. To build good business cooperation and to eliminate errors that are disturbing to our suppliers a short questionnaire was prepared. With the analysis of these questionnaires we obtained

information on their satisfaction when working with us. Thus we can identify spots where work process can be improved and we can see what else suppliers can be offered to meet our requirements

with satisfaction.

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Report on expected movement of prices of raw materials for 2008

Information on the development of prices of basic raw materials that were obtained from the main

suppliers announces increasing prices of almost all basic materials. The reasons for these movements are higher prices of energy, cellulose and transport. Because of rather not optimistic forecasts, the

purchasing service will make a lot of efforts to ensure the optimal quality and quantity of materials at the right prices and timely.

Storage-transport service

The main task – automation of warehousing is continued in 2008 because a year is a too short period

for the introduction of such a complex process in particular because at the same time the new

information system was being introduced. The Company expects the automation to enable advanced warehousing functions such as the use of bar code, monitoring of purchase and stocks by individual

materials (with the definition of the date – for example the date of maturity), monitoring individual materials according to deliveries, setting notifications when minimal stocks have been reached, the

prevention of dispatching when stocks are inexistent, control over all storage places at the same time, the overview of stocks. It will be easier to follow the history of stock movement.

Transport costs in 2007

Costs for the affiliated company 15,247.08 EUR

Costs of transport of material 66,171.83 EUR Costs of transport services in Slovenia 160,765.08 EUR

Costs of transport services related to export 200,334.99 EUR Total transport costs 442,518.98 EUR+VAT

Six contractors conducted transport services amounting to EUR 315,689 and the transport services by other six contractors totalled EUR 164,593. The most frequent transports (80%) were to Germany.

The costs of postal services in 2007 equalled EUR 22,000.

PRODUCTION

The beginning of 2007 was characterized by a shift to a new information system and its use. Most companies introduce the entire system in two or three phases or in years. But Cetis mastered the

basic central system and central production planning which is extremely important to production as well as automated data capture on most machines in only half a year.

Essential organizational changes reflected in the paint division the purpose of which was central management of paints (recipes, mixing, stocks, work with suppliers etc.) and the process

management division where central production planning was added strong programme support.

The Company only neared the 2007 goals but did not achieve them entirely. In particular in the field of costs the gap between the achieved result and the planned one was the most significant. The

Company did not manage to reduce the costs due to the sales. Labour costs are the most outstanding

because due to two major projects the Company had to employ additional labour force but the beginning of the implementation and/or the completion of works postponed to 2008. The use of more

material was the consequence of the use above the norm as well as changed product structure with the materials of higher value and the initiation of works on bigger projects that have not yet resulted

in sales.

30

In line with the sales plans the Company modernized the division of card production in the first half of the year. The production area was expanded, the equipment modernized and the available capacity

increased while the staff remained unchanged.

With flexible packaging the Company continued with the development of print preparation and

increased the production capacity. This as a result increased realization by approximately 39% and with such growth the most considerable challenge was to train suitable personnel in a relatively short

period of time.

In the second half of the year the “Sudan passport” project was successfully started. This is the

biggest and most demanding project in 2007/2008. For this purpose the Company increased its capacities of offset print. In the process of passport manufacture the first robotized manufacturing cell

was introduced that entirely replaced manual work and at the same time increased the capacity and ensured a stable and controlled process of joining polycarbonate with paper.

At the end of the year the Company outsourced its maintenance in order to be able to focus on the core activities more. The entire service of maintenance that covers the preventive and curative

activities and engineering was entrusted to Tero d.o.o. Thus maintenance was transferred to an external provider with whom a long-term contract had been concluded and the staff had been

transferred and the rental of premises and working facilities was organized and stocks were sold. The

expected effects are mainly due to the availability of working facilities, optimal management of the stocks of spare parts and changed ratio between preventive and curative activities.

Plans for 2008:

Major projects: - Successful completion of the »Sudan passport« project

- Transition of all Slovene banks to EMV cards - Removal of the Amba Company to a location in Celje

In accordance with the strategy of process organization in the Company, lean production was

introduced into four pillars with the objectives: - Ensuring smooth and undisturbed production and constant productivity improvement

- Identifying possibilities of improvements and defining activities for improvements - Promoting culture of continuous improvement among the employees in the production.

RESEARCH AND DEVELOPMENT

Strategic development

To Cetis the year of 2007 means a beginning of accelerated entry to new markets, which was the

result of a strategic orientation of the Company and the cognition that the Company’s growth is only possible by breaking through to foreign markets.

Main activities were directed in the following projects:

1. SNLS Gabon, a company organizing games of chance in Gabon, has been in operation for the second year and to Cetis’ Programme of organizing games of chance this was a pioneering

project. Due to the distance, cultural differences and lack of experience in this field this was a

particularly demanding challenge that has not brought results yet. In 2007, special attention was paid to strengthen the management of the SNLS Company and the sales network in

Gabon. These activities had a positive impact on the company’s operations but were

31

insufficient to achieve the results expected. To achieve them Cetis has been looking for a strategic partner with additional material and personnel investment in the company.

2. The establishment of a company for the organization of games of chance »Nacional« in Tirana, Albania, where Cetis is an important shareholder means an expansion of this kind of

programme to the Balkans. The Nacional Company started its operations at the end of 2007. In the implementation of this project, the Company used the experience gained so far and it

needs to be emphasized that results are much better and already in 2008 a positive result can

be anticipated. The company had a well developed sales network in the entire territory of Albania. Planned revenues of the Nacional Company for 2008 amount to EUR 5 million. For

2008/09 the expansion of concession is planned so that in addition to Bingo also other games of chance will be added.

3. Last year Cetis Tirana, Cetis’ marketing company in Albania, operated in line with the

expectations. In 2008, the company will employ more people and the scope of sales will

increase in the Republic of Albania. The sales planned for 2008 will total EUR 300,000. The goal of Cetis is to train Cetis Tirana professionally to be able to market more demanding

projects that Cetis can offer and to represent Slovene companies in Albania.

4. In 2007, the Company started to implement projects of travel documents for Sudan. In

addition to the manufacture of passports and visas within this project Cetis provides the local partner with professional assistance in setting up their own production to manufacture travel

documents as well as in expanding the operations to other fields since Sudan is an opportunity and there is also interest to establish the Cetis programme.

In 2008, the Company will direct its efforts to the following strategic areas:

1. Looking for connections with the companies and institutions that have modern technology and knowledge relevant to our operations planned within the four pillars;

2. Looking for opportunities and partners to open new companies for the organization of games of chance and other programmes, in particular in the Balkans;

3. Expanding the sales network through local partners to tackle the most demanding projects

(documents, personalization) in the African-Asian area.

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Development and research in graphic technology

Cetis’ development activities are focused on new products and services and the improvement of quality and functionality of the existing ones. Development needs are mainly directed by the

requirements of customers, legislation and environmental regulations and the rapid changes of business environment that are reflected in more active competition.

In 2007, research and development of graphic technology (hereinafter: R&D GT) adhered to the orientations of the four basic fields of the operations of the Company:

In the field of games of chance the R&D GT division intensified development activities to improve the

technology of scratch-off coating with printed matter for games of chance. R&D GT generated more new games, prepared sample tickets and technical-promotional leaflets for each individual game. The

project of developing a finishing machine to control and package printed matter used for games of

chance that the division is carrying out on the basis of their own concept with a business partner from abroad is one of the foundations for efficient production process and entry to foreign markets.

In the preparation of the project documentation for the Sudan project, the entire R&D GT team

cooperated whereas the project implementation and control (passports, visas, residential permits,

consulting in setting up the production) is run by a member of the R&D GT division.

R&D GT supplemented the card group with cards manufactured with new materials with better applicable characteristics and lower costs of input materials.

The development activities in the field of packaging concentrated on after-sales activities, mainly consultancy and solving problems related to the implementation of new types of wrapping labels.

Within corporate communication systems in 2007 Cetis developed new forms of printed matter for

direct mail, envelopes on the basis of non-paper materials etc.

With the introduction of the new information system in 2007 graphic R&D was still active in the

standardization of a business process.

According to the reorganization of development activities and a lack of professional staff in the field of development, the R&D GT division was in particular active in applicative development and support to

sales activities.

Plans for future

Continuation of intensive development of games of chance simultaneously with the development of the printing procedure and upgrading games of chance,

Following the development of smart packaging and materials,

Continuation of the development of protective elements on documents, cooperation in the preparation of bids and participation in major projects,

In the field of corporate communication systems, R&R GT will be developing new products for direct mail,

According to the newly adopted strategy of the Cetis Company, R&D GT will define

development activities for the period 2008-2012.

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Cetis New Technologies

The CeNT Research and Development Division (hereinafter: CeNT R&R) is responsible for the research and development of innovative solutions in information technology that are closely connected with the

core activity of Cetis, which is the graphic activity.

In 2007, CeNT R&D completed the following important projects:

- SiZID.BIO whose contracting authority was the Ministry of Foreign Affairs; CeNT R&D developed a

system for capturing ten finger prints and their control; it prepared the instalment version and handed

it over to the client.

- SiZID.DP whose contracting authority was the Ministry of Interior; to satisfy the needs for issuing

residential permits CeNT R&D developed a special module to capture photographs from a scanner and

implemented a solution than is now applied in administrative units. While developing it, a link was

necessary with the new Aliens Register where the data are sent.

- A system for issuing visas and residential permits for the client from Sudan. A national information

system was developed for issuing visas and residential permits. The system functions independently at

individual embassies and after establishing a connection the data are synchronized to the central

server. Modules that were developed: data capture, photograph capture with a camera, photograph

capture with an optical reader, document capture, capture of ten finger prints and the capture of a

signature from the signature plate.

In the field of card systems CeNT R&D successfully completed the NLB-XLS project with the mass re-

issue of cards. In the same period everything necessary to start issuing EMV cards for most Slovene

banks was prepared.

Exceptional achievement in 2007 was the deal for issuing smart cards in the health care system. Cetis

was selected in a public tender »Development and supply of health insurance cards and the supply of

applets, the establishment and implementation of card personalization« as a bidder satisfying all the

tender conditions and criteria. The project that combines electric and graphic personalization of

professional cards (PC) and health insurance cards (HIC) and the establishment of an agency for

issuing digital certificates will be completed in 2008.

There were several projects implemented by Cent R&D in document digitalization. The capture and

processing of forms for bigger Slovene companies should be mentioned. The Group also developed

and installed the software for document management in several bigger companies.

In 2007, CeNT R&D tested a possibility of outsourcing certain IT solutions and thus came to solution –

the CeTacho application that enables data transfer, storage, search and archiving from tachograph

cards and devices.

34

QUALITY MANAGEMENT

Quality and constant improvements are the fundamental aims in all fields of Cetis operations. These aims are a part of all key processes in the company.

In management systems Cetis relies on the following standards:

ISO 9001:2000 Quality Management System.

ISO 14001 Environmental Management System.

OHSAS 18001 Occupational safety and health

Standard of Visa/Mastercard for ensuring physical and logical safety

CQM – (Card Quality Management) Mastercard standard ensuring the quality of bank cards

ISO 27001 – Information Security system

Quality assurance of biometric travel documents according to ISO/IEC/JTC1/SC17/WG3/TF4 – ICAO 9303 standard

The common denominator of all management systems is constant improvement of processes. The

driving force of improvement is the commitment of Cetis to standards. According to the changing working environment, the Company endeavours to adapt its key processes. They are modernized with

the aim of achieving better performance and efficiency in various processes.

The management systems are constantly verified with internal assessments and assessments

conducted by authorized institutions, the assessments of suppliers and customers.

This year Cetis is focused on the establishment of an integrated management system that will be carried out with the assistance of the PAS 99 standard. Thus all the standards representing the base

of activities will be integrated.

EMPLOYEES

Characteristics of 2007 The year of 2007 was marked by the reorganization that followed the introduction of the new

information system. At the beginning of the year all employees received new employment contracts in compliance with the Employment Relationship Act. During the year most activities were focused on

the selection of new employees for the sales, card production and the production of security printed

matter. The Human Resources Management Department (hereinafter: HRM) started to work on the renewal of the HRM information system in order to set up comprehensive indicators of human

resources management and their automatic monitoring. The Company started to invest in education more systematically so that gradually the measurement of investment effects will be in place – ROI in

education. According to 2006, the educational index was 94.28.

Plans for 2008

Definition and implementation of human resources processes and setting up the intranet

system

Integrated monitoring of absenteeism in the Company

Preparation of monthly reports,

Interviews with workers who are on sickness leave for longer than 30 days,

Strengthened cooperation with the heads and external experts to reduce sickness leave.

Internal communication on health issues.

35

Implementation of internal educational courses for the employees in order to transfer

knowledge Labour legislation

Changes of rules

Implementation of a project of harmonizing the system of working time records and the

calculation of salaries (optimization)

Number of employees in the Cetis Group Year CETIS

GROUP

Cetis, d.d.,

Celje

Cetis-ZG,

d.o.o.

AMBA Co.,

d.o.o.,

Ljubljana

Cetis-SK,

dooel, Skopje

Cetis-Print,

dooel, Skopje

2005 552 430 22 20 80

2006 441 419 22

2007 499 436 22 41

Number of employees per organizational unit in Cetis, d.d.

OU

2006 2007

IND 06/07

No of

employees %

No of

employees. %

Management 2 0.48 9 2.06 450.00

Sales KT 0 0.00 25 5.73

Sales VT 0 0.00 16 3.67

Purchasing and logistics 0 0.00 41 9.40

CENT 0 0.00 21 4.82

PI&UČV 21 5.01 11 2.52 52.38

Finance and economics 13 3.10 11 2.52 84.62

Marketing 93 22.20 0 0.00 0.00

R&R graphic technologies 12 2.86 7 1.61 58.33

Production 278 66.35 295 67.66 106.12

Total 419 100.00 436 100.00 104.06

Conclusions: As for new employments, the year of 2007 was extremely dynamic. Due to huge

demand for new identity documents the Company had to strengthen the teams in the “Cards”

production unit. In the PTV production unit 14 new workers were employed due to increased scope of work related to Sudan passports. At the end of last year the scope reduced and thus the fluctuation

rate was relatively high, namely 13.66. There were 86 newly employed whereas 69 left the Company. This can be observed in the table below.

1. Plan for 2007 404

2. As at 31 Dec. 2006 419

3. Arrivals by 31 Dec. 2007 86

4. Departures by 31 Dec. 2007 69

5. Situation 31 Dec. 2007 436

6. Fluctuation rate 13,66

7. Increased by 31 Dec. 2007 17

8. Deviation from the

plan: 31 Dec. 2007 +32

36

Educational structure of the employees in Cetis, d.d. EDUCATIONAL LEVEL 2006 2007

Number % Number %

II. Primary school 96 23 97 22.2

III. Qualified workers 7 1.7 8 1.8

IV. Qualified workers 138 33 137 31.4

V. Secondary school 106 24.6 119 27.3

VI. Vocational college 29 6.9 27 6.2

VII. University degree 39 9.3 42 9.6

VIII. Master’s degree 4 1 6 1.4

Total 419 100 436 100

Conclusions: The majority of the employees in Cetis have either vocational or secondary education since production workers are the most numerous. However, the educational structure has been

improving and in 2007 there were more employees with levels V, VI, VII and VIII of education than in

2006.

Educational structure of the employees in the Cetis Group – average EDUCATIONAL LEVEL 2006 2007

II. Primary school 100 103

III. Qualified workers 7 7

IV. Qualified workers 140 149

V. Secondary school 125 143

VI. Vocational college 28 30

VII. University

degree 42 52

VIII. Master’s degree 5 6

Conclusions: The majority of the employees in the Cetis Group have either vocational or secondary education. However, the educational structure has been improving and in 2007 there were more

employees with levels V, VI, VII and VIII of education than in 2006.

37

Labour costs and salaries € / % 2006 2007

Average gross salary in Cetis

in EUR 1,053.47 1,134.37

Average annual gross salary in Slovenia in EUR

1,212.41 1,285.57

Deviation from the Slovene average in %

-13 -12

Average annual gross salary

in the branch in Slovenia in EUR

1,061.00 1,053.39

Deviation from the Slovene average in the branch in %

-0.72 6.9

Labour costs in the structure

of revenue in % 29.18 30.72

Conclusions: The average monthly salary in Slovenia in 2007 equalled EUR 834.50 and was 7.9% higher than in 2006. The average gross salary amounted to EUR 1,258.57, which was by a bit more

than 6% higher than the average a year before. Compared to 2006, gross salary in the Company increased by 7.6%, which is also 6.9% higher than the average in the branch (gross salary also

includes the employees with individual contracts).

Education and training costs in EUR

EDUCATION 2006 2007 IND 06/07

Seminars 209,397.29 180,416.15 86.16

Computer science 3,489.45 27,335.58 783.38

Foreign languages 7,136.12 3,466.73 48.58

Trade fairs 37,539.56 46,719.00 124.45

Part-time study 23,721.75 10,444.72 44.03

Scholarships 26,556.86 21,839.21 82.24

TOTAL 307,841.03 290,221.39 94.28

Conclusions: Due to the purpose of target investments in education, the funds were distributed to

computer science and fairs. The funds allocated to part-tie studies were halved. In 2007, there was

less foreign language learning since these courses were more frequent in previous years. The stress was also on internal transfer of knowledge and workshops organized within the Company (working

procedures, legislation, various novelties…).

Statistical data for past five years

Year

Datum 2003 2004 2005 2006 2007

Number of employees 441 451 430 419 436

Share of women 37.00% 37.00% 37.21% 36.30% 40.60%

Share of men 63.00% 63.00% 62.80% 63.70% 59.40%

Average age of female

employees 40.7 years 41.4 years 41.89 years 42.18 years 40.75 years

Average age of male employees 40.5 years 40.98 years 41.65 years 41.71 years 40.82 years

Average term of employment

of female employees 21.7 years 21.01 years 22.78 years 22.98 years 20.58 years

38

Average term of employment of male employees 20.7 years 22.27 years 21.56 years 21.48 years 20.13 years

Share of permanently

employed 96.10% 94.70% 95.80% 95.50% 84.60%

Share of temporarily employed 3.90% 5.30% 4.20% 4.50% 15.40%

Fluctuation rate 8.51% 2.80% 7.09% 7.51% 13.66%

Share of women in

management 29.41% 30.00% 27.27% 30.00% 44.73%

Arrivals 11 23 11 23 86

Departures 41 13 32 34 69

Conclusions: In 2007, there were many new employees and at the end of the year there were 436 employees, the average age decreased since quite a number of young people got employment in the

production. The number of temporarily employed workers rose because there were more jobs of temporary character. Thus fluctuation was higher. The share of female employees in the management

structure already amounted to 44.73%, which shows that women in Cetis can enjoy equal

opportunities of promotion and career.

Overview of sickness leave in %

Months

Sickness

benefits

chargeable to the company -

%

Reimbursed sickness

benefits - % Total - %

January 3.61 3.03 6.64

February 4.26 3.16 7.42

March 4.01 3.01 7.02

April 4.16 2.67 6.83

May 3.48 2.36 5.84

June 2.45 2.08 4.53

July 3.03 2.16 5.19

August 2.07 2.30 4.37

September 2.71 2.37 5.08

October 4.27 2.15 6.42

November 4.30 2.06 6.36

December 4.49 2.41 6.90

Average 3.57 2.48 6.05

Conclusions: In 2007, the percentages of sickness leave on the average decreased by 0.13 percentage point (from 6.18% to 6.05%). Partly sickness leave up to 30 days reduced – from 3.99%

to 3.57% whereas the absence due to longer period of sickness leave slightly went up – from 2.20%

to 2.48%. The Company regularly monitors sickness leave and has special interviews with those who are on sickness leave for longer periods. For a certain number of employees a proposal was made to

Pension and Disability Insurance Institute of the Republic of Slovenia to establish the possibility of retirement on the basis of disability.

39

Safety and health at work In 2007, all regular health and safety at work activities were carried out in compliance with the

Occupational Health and Safety Act (Official Journal of the RS, No 56/99), in particular: - theoretical training of employees regarding safety at work and fire safety (80 participating

employees), - practical training of employees regarding safety at work and fire safety (40 participating

employees),

- preventive medical examinations for employees - 200 employees, - selection, purchase and implementation of working equipment and technologies complying with

EC norms and fulfilling all requirements of the local legislation of the RS (declaration of conformity, noise levels, mechanical dangers, environmental protection, etc.),

- periodic inspections and tests of process equipment (acquisition of operating licenses

for 60 machines), - inspections and testing of fire fighting equipment (fire extinguishers, hydrants).

In order to permanently and in a long-run improve the health status of employees and their safety at

work the following is important:

- Regular monitoring of health status of the employees, timely diagnosis of occupational diseases,

preventive medical examinations and gradual introduction of target health examinations for certain groups of posts.

- Consultancy and cooperation of experts in safety at work (external provider with a permit to work) whenever selecting, purchasing and introducing new working equipment and new technological

procedures in the company.

Number of accidents at work

Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

On the

way to

work 8 9 4 10 14 4 7 7 8 3

At work 21 22 22 25 22 15 14 13 10 13

Total 29 31 26 35 36 19 21 20 18 16

on the way to work

at work

total

0

10

20

30

40

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Number of accidents at work

on the way to work

at work

total

on the way to work

40

III. RESPONSIBILITY TO SOCIAL AND NATURAL ENVIRONMENT

RESPONSIBILITY TO NATURAL ENVIRONMENT

A responsible attitude towards the natural environment is one of the conditions for healthy working

environment. Our company is aware of this and therefore we observe strict environmental guidelines

defined in the environmental policy. Cetis is not a heavy polluter of the environment. Nevertheless, we have been working actively on minimising the effects of our activities on the natural environment –

from raising environmental awareness and education of our employees, to considering the environmental aspect when acquiring new technologies.

Implementation of environmental goals and programmes in 2007

- The largest environmental project so far – construction of a modern warehouse for hazardous substances and waste with optimal storage conditions – is fully utilized. With

this investment a risk of environmental accidents such as spillage of dangerous chemicals

and a fire has been significantly reduced. - Rearrangement of smaller warehouses for dangerous substances is ongoing and will

probably be completed in 2008. - In 2007, the Company did not succeed in achieving the set environmental goals

concerning the reduction of hazardous substance quantity since it increased by 17.7% but

was nevertheless considerably lower (by 27.6%) in comparison with the quantity in 2005. - In 2007, the quantity of municipal waste also slightly increased.

- The Company successfully completed the examination of the system management and satisfied the requirements for the ISO 14001:2004 certificate.

Plans for 2008

- Final arrangement and modernisation of a warehouse for hazardous substances and the

abolishment of all types of transfer of flammable and dangerous substances in the

Company,

- Acquisition of the environmental permit for the plants that cause emissions into water, - Reduction of the quantity of municipal waste by 10%,

- Reduction of the quantity of hazardous waste by 5%.

Long-term goals The intention to reduce the quantity of waste by 30% compared to 2003 remains a long-term goal of

Cetis (currently the Company has achieved a 20-percent reduction of total waste). The other such goal is to raise the environmental awareness of the employees.

Environmental investments in recent years Environmental investments in recent years Investments in EUR

Introduction of CTP technology 400,000

Introduction of flexo CTP technology 117,892

Construction of a warehouse for hazardous

waste

330,000

Total 847,892

41

Quantity of municipal waste Year 2002 2003 2004 2005 2006 2007

Municipal waste in tonnes 132 67 72 75.9 67.2 68.2

Conclusions: Compared to 2006, the Company did not manage to reduce the quantity of municipal

waste since it remained on the level of the previous year.

Quantities of hazardous waste

2003 2004 2005 2006 2007 Change in % 2006/2007

Cloth 17605 16662 15875 10301 10980 +6.6%

Packaging

of

dangerous substances

11854 11022 10296 400 90 -77.5%

Dyes 6316 6922 6105 6863 8989 +31.0%

Adhesives 1591 1946 830 1540 2000 +29.9%

Toners 244 628 495 345 284 -17.7%

Solvents 3237 1950 2564 1012 943 -6.8%

Fixers 3745 2230 780 1028 1898 +84.6%

Developers 4433 4810 3764 3.546 4272 +20.5%

Total 49025 46170 40709 25,035 29,456 +17.7%

Conclusions: Our efforts to reduce the quantities of hazardous waste have not been effective.

Compared to 2006, the quantities increased by approximately 18% whereas compared to 2005, the quantities are still lower by 28%. The most outstanding is the increase in the quantity of waste dyes

that went up by 31% or by more than 2 tonnes. The reasons for this situation are a new flexo printing machine, expanded production of flexible packaging and cleaning of unsaleable stocks.

Quantities of hazardous waste by individual years are illustrated in the following figure:

42

Krpe = Cloth Embalaža nevarnih snovi = Packaging of dangerous substances Barve = Dyes Lepila = Adhesives Tonerji = Toners Topila = Solvents Fiksirji = Fixers Razvijalci = Developers

Packaging

Cetis generates waste packaging not considered municipal waste and an insignificant share of

waste packaging from direct import. In Slovenia in 2007, the Company generated 117 tonnes of waste paper packaging and 8 tonnes of plastic packaging waste, 500 kilos of sheet metal

and 107 tonnes of wooden packaging including reusable wood palettes. In comparison with previous years the data for 2007 are more precise due to the introduction of a new

information system.

The Company’s waste does not burden the environment as it is remitted for treatment to the

Slopak Company in accordance with the legislation.

Emissions to air

The advanced technological equipment and the Company’s dedication to the use of non hazardous process materials result in minimum air emissions. Heating is based on natural gas, which is considered to be an environmentally friendly form of heating.

10.980

90

8.989

2.000

284948

1.898

4.272

0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

18.000

20.000

Krpe Embalaža nevarnih

snovi

Barve Lepila Tonerji Topila Fiksirji Razvijalci

2003 20042005 20062007

Year 2003 2004 2005 2006 2007

Natural gas consumption in ccm 310,597 284,389 308,049 238,323 181,306

43

Conclusions: Compared to 2006, the consumption of natural gas in 2007 reduced by almost 24%.

Electricity

Year 2003 2004 2005 2006 2007

Consumption of

electricity in kwh 7,156,070 7,481,885 7,603,110

7,492,920

7,286,970

Poraba električne energije v kWh = Consumption of electricity in kwh

Conclusions: Indirect impact on environment is the consumption of electricity that compared to 2006 reduced by 3%.

310.597

284.389308.049

238.323

181.306

0

50.000

100.000

150.000

200.000

250.000

300.000

350.000

2003 2004 2005 2006 2007

Natural gas consumption in ccm

7.156.070

7.481.885

7.603.110

7.492.920

7.286.970

6.900.000

7.000.000

7.100.000

7.200.000

7.300.000

7.400.000

7.500.000

7.600.000

7.700.000

2003 2004 2005 2006 2007

Poraba električne energije v kWh

44

Emissions to water By investing in the BAT technology, the Company has reduced the concentration of silver in waste water. Also the measurements of competent institutions show that the Company’s wastewater is within the legally prescribed limits for emissions into the public sewerage system.

Year 2003 2004 2005 2006 2007

Consumption of

water in m3

33.192 21.024 18.331 13.090 12.666

Consumption of water in m3

Conclusions: Water consumption in the Company is lower than in 2006 and is additionally decreased

by 3%, and if this is compared to 2003, water consumption has reduced by 61%. When the obsolete technology was replaced by modern CTP, the effects of the BAT technology in the prepress

department were, in accordance with the expectations, obvious also in lower water consumption (use

of water has been excluded from the offset plate developing procedure).

Preventive and corrective measures In 2007, the Company did not introduce any significant preventive or corrective measures. In most cases the reason was inconsistent separation of waste and inaccessibility of fire extinguishers. The

preventive and corrective measures in Cetis are issued by the person authorised to deal with

environmental issues. In most cases preventive measures are usually provided orally or via e-mail.

Environmental communication

Pursuant to the Rules on Environmental Management, the company keeps internal and external

records on environmental communication. Periodically, our employees and business partners are informed of the environmental activities as well as of the implementation of major projects or

investments in the annual report.

The established channels of communication such as notice boards, electronic mail and meetings are

used to regularly inform the employees of our environmental activities. The employees are expected

33.192

21.024

18.331

13.090 12.666

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

2003 2004 2005 2006 2007

Consumption of water in m3

45

to provide concrete proposals for improvements because working on individual programmes they are the ones having most information. The employees are also constantly trained in the field of

environmental protection and safety at work with the purpose of improving our organisational culture

in terms of higher environmental awareness. Each individual at Cetis is obliged to implement our environment protection policy and to act in accordance with its provisions.

RESPONSIBILITY TO PRODUCT AND SERVICE USERS

A lot of the Company's attention is placed on the development of socially responsible, safe and ecologically-friendly products and services. The Company conducts its business in adherence to the

European Directive on the reduction of hazardous substances (RoHS) with the early integration of partners from the supply chain and with regular assessment of the before mentioned requirements.

Users are provided with safe, repeatable, reliable and durable products and services throughout the

life span.

RESPONSIBILITY TO SOCIAL ENVIRONMENT

Cetis is involved in the local and wider community with a variety of programmes and initiatives. The Company also supports the activities of other organisations with funds for sponsorships and

donations.

For several years the Company has been a sponsor of the Pivovarna Laško Handball Club, the Kladivar

Athletics Club and other sport associations and clubs. As a donor it supports sports and humanitarian societies, individuals in need and local cultural societies. Among other things in 2007, the Company

supported the Europa Donna association in purchasing a new ultra-sound for the University Hospital in Maribor.

Since graphics is among the Company’s activities, we also sponsor printed material. In 2007, we

sponsored the National and University Library with our products as well as the SNG Celje Theatre and others.

46

IV. FINANCIAL REPORT OF CETIS, d.d.

47

INCOME STATEMENTS (IFRS)

in EUR thousand

notes

Achieved

in 2007

Achieved

in 2006

REVENUE 2 28,411 26,990

Cost of goods and materials sold 3 -1,345 -1,517

Production costs 3 -18,643 -19,160

Costs of goods sold and production costs -19,988 -20,677

GROSS PROFIT 8,423 6,313

Other operating income 4 950 1.002

Distribution expenses 3 -3,552 -4,596

Administrative expenses 3 -6,095 -2,951

Other operating expenses 3 -151 -295

Total -8,848 -6,840

OPERATING PROFIT OR LOSS EXCLUDING

COSTS OF FINANCING -425 -527

Financial income 5 2,397 1,902

Financial expenses 5 -802 -521

NET FINANCIAL INCOME 1,595 1,381

PROFIT OR LOSS BEFORE TAXATION 1,170 854

Tax 6 -213 97

PROFIT OR LOSS FOR THE PERIOD 957 951

Net earnings (loss) per share (in EUR) 22 4.79 4.76

48

BALANCE SHEET AS AT 31 DECEMBER 2007

in EUR thousand

Notes

31 Dec.

2007

31 Dec.

2006

ASSETS

Property, plant and machinery 8 20,024 18,921

Intangible assets 9 1,375 1,458

Investments in subsidiaries 10 3,616 1,696

Investments in associates 11 72 72

Investments available for sale 12 13,016 13,960

Loans 13 1,550 1,303

Long-term operating receivables 14 878 0

Deferred tax assets 15 363 580

Total non-current assets 40,894 37,990

Inventories 16 3,308 3,436

Short-term investments at fair value through P&L 17 2,156 1,839

Short-term loans 18 418 36

Operating and other receivables 19 5,434 5,875

Cash and cash equivalents 20 501 730

Total current assets 11,817 11,916

TOTAL ASSETS 52,711 49,906

CAPITAL AND LIABILITIES

Issued capital 10,015 10,015

Capital reserves 17,859 17,859

Reserves (legal and statutory) 1,901 1,710

Retained earnings 899 153

Own shares -26 -26

Fair value reserve 341 690

Total capital 21 30,989 30,401

Borrowings 23 8,445 7,940 Long-term operating liabilities based on advanced

payments 24 3 0

Provisions 25 1,188 1,602

'- long-term employee benefits 1,050 1,170

'- other provisions 138 432

Deferred tax liabilities 15 132 245

Total long-term liabilities 9,768 9,787

Loans raised 23 3,960 3,745

Operating and other liabilities 26 7,994 5,973

Total short-term liabilities 11,954 9,718

Total liabilities 21,722 19,505

TOTAL EQUITY AND LIABILITIES 52,711 49,906

49

CASH FLOW STATEMENT (IFRS)

in EUR

thousand

Achieved

in 2007

Achieved

in 2006

CASH FLOWS FROM OPERATING ACTIVITIES

Profit for the period 957 951

Adjustments for: 3,249 2,616

Depreciation of property, plant and equipment 3,254 3,302

Depreciation of intangible assets 320 185

(Reversal of) impairment loss -147 64

Negative translation differences 4 10

Investment income -541 -1,052

Financial expenses 798 511

Gain on disposal of property, plant and equipment -53 -26

Revenue from a decrease in long-term provisions -386 -378

OPERATING PROFIT BEFORE CHANGES IN

NET OPERATING ASSETS AND PROVISIONS 4,206 3,567

Change in operating and other receivables -1,099 -1,339

Change in inventories 291 -276

Change in operating and other liabilities 1,648 382

Change in provisions and employee earnings -27 88

CASH GENERATED FROM OPERATIONS 813 -1,145

Interest paid -533 -11

NET CASH FROM OPERATING ACTIVITIES 4,486 2,411

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of property, plant and equipment 312 268

Proceeds from sale of investments 541 1,052

Interest received 69 81

Dividends received 254 308

Acquisition of property, plant and equipment -4,551 -833

Acquisition of other investments -1,802 -926

Acquisition of intangible assets -237 -1,390

NET CASH FROM INVESTING ACTIVITIES -5,414 -1,440

CASH FLOWS FROM FINANCING ACTIVITIES

Changes in equity -20 1

Borrowings 6,787 4,546

Repayment of borrowings -6,067 -4,921

Dividends paid -1 -1

NET CASH FROM FINANCING ACTIVITIES 699 -375

Net increase in cash and cash equivalent -229 596

Cash and cash equivalents at beginning of period 730 134

CASH AND CASH EQUIVALENTS AT END OF PERIOD 501 730

50

STATEMENT OG CHANGES IN EQUITY (ISRF)

in EUR

thousand

Issued capital

Capital reserves

Legal and

statutory reserves

Own shares

Profit retained

Reserve

for fair value

Total capital

Balance 1 Jan. 2006 10,015 17,859 1,710 -26 -799 129 28,888

Profit 2006 951 951

Dividends for own shares 1 1

Allocation of statutory

reserves

Increase in fair value 561 561

Balance 31 Dec. 2006 10,015 17,859 1,710 -26 153 690 30,401

Profit 2007 957 957

Allocation of statutory

reserves 191 -191

Payment of bonuses -20 -20

Decrease in fair value -349 -349

Balance 31 Dec. 2007 10,015 17,859 1,901 -26 899 341 30,989

The Management of Cetis, d.d. approves the financial statements and notes thereto for the financial year ended on 31 December 2007.

51

Statement of the Management responsibility

The Management Board is responsible for the preparation of the financial statements so that they give a true and fair picture of the financial position of the Company and the results of its operations for the

year ended 31 December 2007.

The Management Board approves that the appropriate accounting policies have been applied

consistently and the accounting estimates have been prepared under the principle of conservatism and due care. The Management Board approves that the financial statements have been prepared in

compliance with the International Financial Reporting Standards (IFRS). The financial statements have

been prepared on the basis of the assumptions concerning further operations of the Company.

The Management Board recognizes its responsibility for adequate and orderly accounting, the adoption of measures for safeguarding the Company’s assets and prevention and uncovering frauds

and other irregularities.

March 2008

Simona Potočnik, MA General Manager

52

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS

1. Presentation of the Company

Registered office and legal form, country

Cetis, Graphic and Documentation Services, d.d. is a company with its registered office at Čopova 24,

Celje, Slovenia. The Company was entered in the Companies Register with the District Court Celje on

13 February 1996 under the entry No 95/00923 and on 25 November 2003 under the entry No 1/01476/00.

The share capital of the Company amounts to EUR 30,989 thousand 8.93 and is divided into 200,000 ordinary, no-par value registered shares issued as dematerialised securities and kept with the Central

Securities Clearing Corporation (KDD) in Ljubljana. The Cetis shares (designated as CETG) are traded on the free market of the Ljubljana Stock Exchange.

Nature of operations and relevant activities

The Company’s core business is the provision of comprehensive solutions in the field of communications through printed and other types of media. The corporate Vision of the Company is to

be a leading company on the Slovene market and to increase its share on the markets outside

Slovenia with adequate developmental, investment and marketing activities and the employment of the best qualified staff. The Company offers a programme of diversified printed matter, such as

security, variable and commercial printed matter, graphic design including accessory services, like personalisation of documents, the implementation and personalisation of micro chips or magnetic

tapes, archiving, identity management and consultancy, project management and other services.

Fact sheet of the parent company Cetis is a parent company and prepares also consolidated financial statements of the Group. The Group comprises of the Cetis parent company, subsidiaries and associated companies.

2. Basis of the preparation of financial statements

a) Statement of compliance The 2007 financial statements have been prepared in accordance with the International Financial

Reporting Standards (IFRS) published by the International Accounting Standards Board (IASB) and

the interpretations by the IFRS Interpretations Committee (IFRSIC), as adopted by the European Union.

The financial statements were approved by the Management Board on 7 March 2008.

b) Basis for measurement The 2007 financial statements have been prepared on the cost basis or the hypothetical cost basis except for the following items that are measured at fair value:

- financial instruments at fair value through profit or loss

- available-for-sale financial assets.

The methods applied to measure fair value are described in the continuation.

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c) Functional and presentation currency The financial statements are presented in Euro (EUR) and are rounded off to the nearest thousand.

d) Use of estimates and judgements

The preparation of financial statements in compliance with the International Financial Reporting

Standards (IFRS) requires the Management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and

expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions need to be reviewed on an ongoing basis. Revisions to

accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

Information about significant areas of estimation uncertainty and critical judgements in applying

accounting policies that have the most significant effect on the amount recognised in the financial

statements are described in the following notes:

Point 14 – utilisation of tax losses

Points 24 and 25 – provisions and contingencies

Point 27 – valuation of financial instruments.

3. Relevant accounting principles applied

The accounting policies stated below were consistently applied by the Company to all the periods

presented in the financial statements.

a) Foreign currency

Transactions expressed in foreign currency are translated into a suitable functional currency of the

company using the exchange rate at the date of transaction.

Assets and liabilities expressed in foreign currency are translated into the functional currency at the date of the transaction and at the end of the accounting period, using the reference exchange rate

(ECB) of the Bank of Slovenia in EUR. Monetary assets and liabilities stated in foreign currency at the balance sheet date are translated into

functional currency at the applicable exchange rate. The foreign exchange gains or losses are the

differences between the amortised cost in the functional currency at the beginning of the period, adjusted by the amount of effective interest and the payments effected during the accounting period,

as well as the amortised cost expressed in a foreign currency and translated at the middle exchange rate at the end of the period. Non-monetary items and liabilities stated in foreign currency and

measured at fair value are converted into the functional currency at the exchange rate effective at the

date on which the fair value was set. Foreign exchange gains and losses are recognised in the Income Statement.

54

b) Financial instruments

Non-derivative financial instruments Non-derivative financial instruments include investments in equity and debt securities, trade and other receivables, cash and cash equivalents, borrowings and loans, and trade and other liabilities.

Initially, non-derivative instruments are recognised at fair value increased by costs that are directly

related to the transaction. Subsequent to initial recognition, non-derivative financial instruments are measured as explained below.

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are

repayable on demand and form an integral part of the Group’s cash management are included as a

component of cash and cash equivalents in the Cash Flow Statement.

Accounting of financial income and expenses is discussed in Point k) – Financial income and expenses.

Available-for-sale financial assets Investments of the Company in equity securities are classified as available-for-sale financial assets. Subsequent to initial recognition, these investments are measured at fair value and the changes in fair

value with the exception of losses due to impairment are recognised directly in equity. When an

investment is derecognised, the cumulative gain or loss in equity is transferred to profit or loss.

Investments at fair value through profit or loss An instrument is classified as at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit or

loss if the Group manages such investments and makes purchase and sale decisions based on their

fair value. Upon initial recognition, attributable transactions costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and a

change in fair value is recognised in profit or loss.

Other Other non-derivative financial instruments are measured at amortised cost using the effective interest

method, less any impairment losses.

Share capital

Ordinary shares

Ordinary shares represent an integral part of share capital.

Repurchase of own shares When shares recognised as equity are repurchased, the amount of the consideration paid, including

directly attributable costs and excluding potential tax effects, is recognised as a change in equity. Repurchased shares are classified as own shares and are presented as a deduction from total equity.

When selling own shares the amount received is recognized as the increase in equity whereas the loss in transaction is presented as a deduction from total equity.

c) Property, plant and equipment

Items of property, plant and equipment are initially carried at historical cost reduced by straight-line

method depreciation and the loss due to impairment. As at the day of transition to IFRS the items of property, plant and equipment were carried at their purchase price on 1 January 2005.

Historical cost includes the costs that can be directly attributed to the purchase. The cost of an

55

item of property, plant or equipment that is a result of own production contains material costs, direct labour costs and other costs that can be directly attributable to bringing the asset to a working

condition for its intended use, in particular the cost of transport and mounting and the costs of

decomposition and removal off the location where it was used. Purchased software that is integral to the functionality of the related equipment is capitalised as a part of that equipment. The costs of

borrowing related to the purchase and production of the related assets are disclosed in profit and loss when incurred.

Parts of an item of property, plant and equipment with different useful lives are accounted for as separate items of tangible fixed assets.

Profit or loss from the disposal of property, plant and equipment is determined as the difference

between the income generated from the disposal of asset and the book value and is disclosed in profit

or loss among »other operating income«.

Subsequent costs in connection with property, plant and equipment

The cost of replacing a part of an item of property, plant and equipment is recognised in the book

value of the asset if it is probable that future economic benefits embodied within the part will flow to the Group and its historical cost can be reliably measured. All other costs, such as day-to-day

servicing, are recognised in profit or loss as incurred.

Depreciation

Depreciation of assets is calculated individually following the straight-line method. Depreciation

charges on these assets are made individually. Land is not depreciated.

The cost of replacing a part of an item of property, plant and equipment is calculated individually

following the straight-line method. All other costs, such as day-to-day servicing, are recognised in profit or loss as incurred.

Depreciation rates are based on estimated useful life of assets and amount to:

In years, min In years,

max

Buildings 7 40

Equipment – graphic activities 3 20

Laboratory equipment 3 10

Vehicles 5 8

Telephone sets, telegraphic switchboard 3 5

Furniture 5 6

Typewriters, computer equipment 3 8

Computer equipment for fire-safety 3 3

Measuring and control devices 4 6

Useful life is determined and examined in accordance with the Rules on Accounting and Finance.

The item Buildings includes parts, such as hydraulic bridge-over plate, with a 14.2% depreciation rate or useful life of 7 years.

Depreciation methods, useful life and the residual value are examined at the reporting date in

accordance with the Rules on Accounting and Finance.

56

d) Intangible assets

Research and development Expenditure on research activities aiming to achieve new scientific and professional knowledge and

understanding is recognised in profit or loss when incurred.

The development activities involve a plan or design for the production of new or essentially improved

products and processes. An expense for development is recognised if it can be reliably measured, if the product or process is technically and operationally feasible, if there is a potential for future

economic benefits, if the Company has adequate resources for the completion of development, and if it intends to use or sell such assets. The recognised expenditure comprises the cost of materials,

direct labour costs, and other costs which can be directly attributable to qualifying the asset for its intended use. The remaining expenditure is recognised in profit or loss when incurred.

Capitalised development expenditure is carried at historical cost less depreciation value adjustment and accumulated impairment losses.

Other intangible assets Other intangible assets acquired by the Company with finite useful lives are disclosed at historic cost reduced by straight-line method depreciation and the loss due to impairment.

Subsequent costs Subsequent expenditure related to intangible fixed assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is

recognised in profit or loss when incurred.

Depreciation

Depreciation of assets is calculated individually following the straight-line method. Depreciation charges on these assets are made individually. The assets acquired in the current year are subject to

depreciation when then may be put into use. The estimated useful lives for the current and comparative periods are as follows:

Depreciation rates are based on the estimated useful life of the assets:

In years min In years max

Intangible assets 3 10

e) Subsidiaries and associates Investments of the Company in subsidiaries and associates are evaluated according to the method of historical cost.

The participation in profit is recognised when the Company has obtained the right to pay it out.

f) Inventories

Inventories are evaluated according to the original value or net realisable value, whichever is lower. The value of inventories is based on the First-In-First-Out method (FIFO) of inventory valuation and

includes purchasing price, costs of production and translation and other costs generated with the

storage of inventories to the current location and their current price. With finished products and unfinished products, production costs also contain an adequate share of indirect production costs.

Net realisable price is the estimated sales price to be achieved in ordinary operations and reduced by

the estimated cost of completion and the estimated sale costs.

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g) Impairment of assets

Financial assets

On the date of reporting the Company assesses the value of financial assets in order to judge whether

there are any objective signs of the asset impairment. A financial asset is considered to be impaired if

objective evidence indicates that one or more events have had a negative effect on the estimated

future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the

difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale

financial asset is calculated at its current fair value.

Important financial assets are tested for impairment individually. The remaining financial assets are

assessed collectively in groups that have similar characteristics relating to the exposure to risks.

All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available-

for-sale financial asset recognised previously directly in equity shall be transferred to profit or loss.

An impairment loss is reversed if the reversal can be impartially related to a transaction occurring

after the impairment loss was recognized. For financial assets carried at amortised cost and available-for-sale financial assets, which are debt instruments, the reversal of impairment loss is recognised in

profit or loss. For available-for-sale financial assets that are equity securities, the reversal can not be done directly in equity.

Non-financial assets At each reporting date, the Company assesses the residual book value of non-financial assets

excluding inventories and deferred tax liabilities in order to judge whether there are any objective signs of the asset impairment. If such an indication exists then the asset’s recoverable amount is

estimated. For intangible assets that have indefinite useful lives or that are not yet available for use, recoverable amount is estimated at each reporting date.

The recoverable amount of an asset or cash-generating unit is its value or fair value, whichever is greater, reduced by sales costs. When determining the value of asset in use, the estimated future

cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. To check

impairment, assets are put into groups that generate cash inflows from permanent use and these

assets are interdependent (»cash-generating units«).

Asset impairment or cash-generating unit impairment is recognized when its book value exceeds its

recoverable amount. Impairment is recognized in profit and loss. Loss that is recognized with a cash-

generating unit due to impairment is distributed to assets in a unit (groups of units) proportionate to

book values of individual assets in a unit.

In respect of other assets, impairment losses recognised in prior periods are assessed at each

reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An

impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no

impairment loss had been recognised.

h) Employee benefits Other long-term employee benefits

Net liability of the Company generated with regard to long-term benefits of the employees is the sum

58

of future benefits that the employees gained in return for their work carried out in the current and

previous periods. Thus calculated sum is discounted in order to determine the current value which is

then reduced by fair value of all related assets. Discount rate at the reporting date is the AA-rated

bond yield of which the due date is approximately the same as with the due date of the Company’s

liabilities. The calculation is based on planned relevance of the units. Potential actuarial profit or loss is

recognized in profit and loss in the period of its occurrence.

Short-term employee benefits Obligations for short-term employee benefits are measured on an undiscounted basis and are

expensed as the related service is provided.

The liability is disclosed as an amount for which a payment in a form of a premium is expected that is due in twelve months after the period of work performance is completed or according to the

programme of profit division if the company is currently or indirectly obliged to make such payments due to the employee’s performance of work in the past and this liability can be reliably measured.

i) Provisions

Provisions are recognised if, as a result of a past event, the Company has a present legal or

constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the

expected future cash flows at a pre-tax rate that reflects current market assessments of the time

value of money and the risks specific to the liability.

Warranties for products and services Provisions for warranties for products and services are recognised when the underlying products or services are sold. The provision is based on historical warranty data and a judgement of all potential

outcomes against their associated probabilities.

j) Revenues Revenues from products sold

Revenue from the sale of products is measured at the fair value of the consideration received or

receivable reduced by net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer,

recovery of the consideration is probable, the associated costs and possible return of goods can be

estimated reliably, and there is no continuing management involvement with the goods.

Transfer of risks and benefits varies depending on the individual terms of the contract of sale. For sales of goods, transfer usually occurs when the product is received at the customer’s warehouse;

however, for some international shipments transfer occurs upon loading the goods onto the relevant

carrier.

Revenue from services supplied Revenue from services rendered is recognised in profit and loss in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by verifying

the work performed.

Rental income Rental income is recognised in income on a straight-line basis over the term of the lease.

59

k) Financial income and expenses

Financial income is mainly accounted for by interest income on funds invested (including available-for-

sale financial assets), dividend income, gains on disposal of available-for-sale financial assets, changes in the fair value of financial assets at fair value through profit or loss, foreign currency gains, and

gains on hedging instruments that are recognised in profit or loss. Interest income is recognised as it accrues, using the effective interest method. Dividend income is recognised on the date that the

shareholder’s right to receive payment is established, which in the case of quoted securities is the ex-

dividend date.

Financial expenses comprise interest expense on borrowings, dividends on preference shares classified

as liabilities, foreign currency losses, changes in the fair value of financial assets at fair value through profit or loss, impairment losses recognised on financial assets, and losses on hedging instruments

that are recognised in profit or loss. All borrowing costs are recognised in profit or loss using the effective interest method.

Profit or loss from exchange differences are disclosed in a net amount.

l) Income tax expense

Income tax expense comprises current and deferred tax. Income tax expense is carried in profit or

loss except to the extent that it relates to items recognised directly in equity, in which case it is

recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous

financial years.

Deferred tax is recognised using the balance sheet liabilities method, taking into account the temporary differences between the book value of assets and liabilities for financial reporting purposes

and the amounts used for taxation purposes. All temporary differences are taken into consideration. Deferred tax is disclosed in the amount expected to be paid when temporary differences are no longer

existent. This is done based on the acts in force on the reporting date.

The Company offsets deferred receivables and tax liabilities if it is legally entitled to offset recognized

assessed receivables and tax liabilities if they refer to corporate income tax that belongs to the same

tax authority in relation to the same taxable unit; or different taxable units that intend to settle the

assessed tax liabilities and tax receivables with the difference and either simultaneously return

receivables and settle the liabilities.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be

available against which a deferred tax asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Additional income tax that arises from the distribution of dividends is recognised at the same time as

the liability to pay the related dividend.

m) Net earnings per share

The Company presents basic earnings per share (EPS) data for its ordinary shares. The basic earnings per share are calculated by dividing the profit or loss attributable to ordinary shareholders of the

Company by the weighted average number of ordinary shares in the period. Adjusted earnings per

60

share equal net earnings per share since the Company does not have preferential shares or deferred or convertible shares.

Segment reporting Segment is a distinguishable component of an enterprise that is engaged in providing products or

services (business segment) or products and services within a particular economic environment

(geographical segment) and that is subject to risks and returns that are different from those of

components operating in other segments.

The Company’s segment reporting is based on business segments.

Transfer prices between segments are set on an arm’s length basis.

Segment profit or losses, segment assets, and segment liabilities include amounts of such items that

are directly attributable to a segment and amounts of such items that can be allocated to a segment

on a reasonable basis. Unallocated assets include investments whereas unallocated liabilities include

capital.

New standards and interpretations not yet effective A number of new standards, amendments to standards and interpretations are not yet effective for

the year ended 31 December 2007, and have not been applied in preparing these financial statements:

• IFRS 8 – Operating Segments introduces the “management approach” to segment reporting. IFRS 8,

which becomes mandatory for the Company’s 2009 financial statements, will require the disclosure of segment information based on the internal reports regularly reviewed by the Company’s Chief

Operating Decision Maker in order to assess each segment’s performance and to allocate resources to them. Currently the Company presents segment information in respect of its business segment (see

Note No. 1).

• Revised IAS 23 – Borrowing Costs removes the option to expense borrowing costs and requires that

an entity capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. The revised IAS 23 will become mandatory for

the Company’s 2009 financial statements and will constitute a change in accounting policy. In accordance with the transitional provisions the Company will apply the revised IAS 23 to qualifying

assets for which capitalisation of borrowing costs commences on or after the effective date.

• IFRIC 11 IFRS 2 – Group and Treasury Share Transactions requires a share-based payment

arrangement in which an entity receives goods or services as consideration for its own equity instruments to be accounted for as an equity-settled share-based payment transaction, regardless of

how the equity instruments are obtained. IFRIC 11 will become mandatory for the Company’s 2008 financial statements, with retrospective application required. It is not expected to have any impact on

the financial statements.

• IFRIC 12 – Service Concession Arrangements provides guidance on certain recognition and

measurement issues that arise in accounting for public-to-private service concession arrangements. IFRIC 12, which becomes mandatory for the Company’s 2008 financial statements, is not expected to

have any effect on the financial statements.

• IFRIC 13 – Customer Loyalty Programmes addresses the accounting by entities that operate, or

otherwise participate in, customer loyalty programmes for their customers. It relates to customer loyalty programmes under which the customer can redeem credits for awards such as free or

discounted goods or services. It is not expected that IFRIC 13, which becomes mandatory for the

Company’s 2009 financial statements, will have an impact on the financial statements.

• IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction clarifies when refunds or reductions in future contributions in relation to defined benefit

61

assets should be regarded as available and provides guidance on the impact of minimum funding requirements (MFR) on such assets. It also addresses when a MFR might give rise to a liability. IFRIC

14, which becomes mandatory for the Company’s 2008 financial statements, is not expected to have

any impact on the financial statements.

4. Determination of fair value A number of the company’s accounting policies and disclosures require the determination of fair value,

for both financial and non-financial assets and liabilities. Fair values have been determined for

measurement and/or disclosure purposes based on the methods describe below. Where applicable,

further information about the assumptions made in determining fair values is disclosed in the notes

specific to that asset or liability.

a) Property, plant and equipment The fair value of property equals the estimated value at which the property could be exchanged on

the appraisal date and following adequate marketing between knowledgeable, willing parties in an

arm’s length transaction. The fair value of items of plant, equipment and inventory is based on the market price of similar items.

b) Intangible assets

The fair value of an intangible asset is determined as the present value of estimated future cash flows

expected to arise from the use and eventual sale of the asset.

c) Inventories

The fair value of inventory is determined on the basis of its estimated selling price in the ordinary

course of business less the estimated costs of completion and sale, and a reasonable profit margin

based on the effort required to complete and sell the inventory.

d) Investments in equity and debt securities

The fair value of financial assets at fair value through profit and loss, held-to-maturity investments

and available-for-sale financial assets is determined at bid price at the reporting date. The fair value of

held-to-maturity investments is determined only for reporting purposes.

e) Trade and other receivables

The fair value of trade and other receivables is estimated as the present value of future cash flows,

discounted at the market rate of interest at the reporting date.

f) Non-derivative financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of

future principal and interest cash flows, discounted at the market rate of interest at the reporting

date. In financial lease contracts, the market interest rate is determined through a comparison with

similar lease contracts.

5. Financial risk management

The Company is exposed to the following risks arising from financial instruments:

Credit risk

Liquidity risk

Market risk.

This section deals with the Company and its exposure to the above risks, its objectives, policies and

procedures for risk measurement and management, and its equity management. Other quantitative

62

disclosures are indicated below.

Management is entirely responsible to set up the Company’s risk management framework.

The risk management policies are designed to identify and analyse risks that can pose a threat to the

Company, on the basis of which adequate constraints and controls are determined, as well as risks are

monitored and constraints considered. The risk management policies and systems are subject to a

regular review and updated information on market conditions and activities of the Company is

regularly communicated. The Company endeavours through training and risk management standards

and procedures to develop a disciplined and constructive environment in which all the employees are

aware of their role and obligations.

Credit risk

Credit risk is the risk of suffering financial loss should any of the Company’s clients or parties to the

financial instrument contract fail to meet their contractual obligations. Credit risk mainly occurs due to

Company’s trade receivables and investment securities.

Trade and other receivables

The Company’s exposure to credit risk mainly depends on individual clients’ characteristics. The

demographics of the Company’s client base as well as payment risk in terms of industry or country in

which a client operates does not have such impact on credit risk. Approximately 3.5 % of Company’s

revenues may be attributed to sales with one client alone. In geographical terms, there is no credit

risk concentration.

The Company shapes its credit policy according to which a creditworthiness analysis of each new

client is made before the Company offers them its standard payment and delivery conditions. The

Company review includes any exterior estimates, if available and in certain cases also bank’s references.

Purchase limits – to be determined in the form of the highest open amount – are set for each client

separately; such limits are verified every three months. Any transactions with a client not meeting the

standard creditworthiness are carried out solely through advance payments.

The ownership is retained in the goods until those goods have been paid up in full. In the event of a

non-payment for the goods the Company’s claim is therefore secured. As for operating and other

receivables, the Company requires no surety.

The Company makes allowance for the value of impairment, representing the amount of estimated

losses arising from operating and other receivables as well as investments. The main elements of this

allowance are a special portion of the loss related to individual key risks, and the total loss, formed for

groups of similar assets due to incurred losses not yet defined. An allowance for total amount of loss

is determined by taking into account historical data referring to payment statistics of similar financial

resources.

Allowances for trade receivables are made on the basis of a collectability analysis of each receivable.

Allowance is based on receivables which remain unpaid 90 days after the maturity. The average trade

receivables allowance accounts for 0.5 % of net sales revenue or 0.3 percentage points less than in

2006. Total receivables are divided into:

- Past due of EUR 1,733 thousand

- Not yet due of EUR 4,950 thousand

Investments

The Company reduces its credit risk exposure through investments in liquid securities of contractual

63

parties with adequate credit rating.

Guarantees

In accordance with its policy, the Company provides financial guarantees or sureties solely to

subsidiaries fully owned by the controlling company. As of 31 December 2007, the Company records

guarantees granted under off-balance sheet items.

Liquidity risk

Liquidity risk is the risk arising from the Company’s inability to meet its financial obligations when they

fall due. The Company manages to ensure the highest possible liquidity by always having sufficient

liquid assets available to settle its obligations within the set time limits, both under normal and

stressful circumstances, without incurring unacceptable losses or risking harm to the Company’s

reputation.

Evaluation of products and services is based on activities aimed at monitoring the Company’s cash

flow needs and optimising return on investments. The Company also claims it has sufficient cash

(sight deposits) to cover operating expense for a period of 60 days, including servicing financial

liabilities; the latter excludes any potential consequences of unpredictable extraordinary

circumstances, such as natural disasters for example.

The Company has the following credits lines: for approved overdrafts with domestic banks totalling

EUR 1,025 thousand; interest rate ranges up to maximum EURIBOR plus 1%. As of 31 December

2007, the overdraft amounted to EUR 73 thousand.

Market risk

Market risk is the risk that changes in market prices, such as exchange rates, interest rates and equity

instruments may impact the Company’s revenues or the value of financial instruments. The objective

of market risk management is to manage and control the market risk exposure within reasonable

limits while optimising the profit.

The Company trades in financial instruments and assumes financial obligations, both with the aim of

managing market risks. All these transactions are carried out in compliance with the Company’s

policies. In order to reduce the fluctuations in earnings to the lowest possible level the Company

makes sustained efforts to use accounting treatment for risk protection purposes.

Currency risk

The Company is not exposed to currency risk. The Company concludes the majority of purchasing

deals in its functional currency. The volume of business not concluded in the Company’s functional

currency, i.e. USD, GBP and CHF is negligible. As far as sales and borrowing are concerned,

transactions are carried out in Euros.

Interest rate risk

The Company is exposed to interest rate risks since a variable interest rate applies to the most of its

financial liabilities. The Company has so far had no specific protection against changes to interest

rates.

Capital management

The Board has made a decision to keep a large capital volume so as to maintain confidence of

shareholders, creditors and market and the Company’s sustainable development. The Supervisory

Board monitors the return on equity defined by the Company as net earnings divided by average

equity less net profit for financial year.

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The Company endeavours to maintain balance between higher returns to be ensured through higher

loans, and benefits and security of a strong capital position. The Company’s goal for 2007 was to

achieve a 5.46 percent return on the capital employed. The actual return achieved was 3.17 percent

(3.12 percent in 2006).

During the reporting year, no changes related to capital management occurred at the Company.

The parent company or its subsidiaries were not subject to capital requirements to be determined by

external bodies.

65

INCOME STATEMENT DISCLOSURES

1. Segment reporting

Business segments in EUR thousand

Security printed

matter

Commercial printed

matter Other Total

2007 2006 2007 2006 2007 2006 2007 2006

Net sales revenue 9,261 6,319 16,443 18,331 2,707 2,340 28,411 26,990

Net profit or loss -139 -123 -243 -358 -41 -46 -423 -527

Assets by business segments 11,035 11,683 19,590 33,896 3,226 4,327 33,851 47,270

Unallocated assets 18,860

Total assets 11,035 11,683 19,590 33,896 3,226 4,327 52,711 47,270

Total liabilities 7,081 4,566 12,571 13,248 2,070 1,691 21,722 17,911

Investments 1,561 263 2,771 762 456 97 4,788 4,048

Depreciation 1,165 816 2,068 2,368 341 3,023 3,574 3,184

Sales revenue indicated under Other comprises revenue from sale of materials, merchandise and fixed

assets.

The Company primarily does business in Europe (95.9%), which is why it does not report by

geographical segments.

2. Revenues

in EUR thousand

Sales revenue by type 2007 2006

Sale of products in domestic market 19,374 14,922

Sale of services in domestic market 667 2,568

Rental revenues in domestic market 88 62

Sale of products in foreign market 5,502 7,295

Sale of services in foreign market 458 477

Sale of materials and merchandise in domestic market 1,496 1,238

Sale of materials and merchandise in foreign market 826 428

Total 28,411 26,990

3. Expenses

in EUR thousand

Cost by primary type, change in value of inventories 2007 2006

Cost of goods and materials sold 1,345 1,517

Cost of materials used and services 15,914 15,252

Labour cost 8,729 7,878

Depreciation and amortisation expense 3,574 3,487

Other (operating) expense 465 577

Change in inventories of finished products, work-in-

progress and semi-manufactures -241 -192

Total (operating) expenses 29,786 28,519

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Labour cost

in EUR

thousand

2007 2006

Gross wages and salaries 5,991 5,385

Pension insurance cost 792 700

Cost of other social insurance 459 398

Other labour cost 1,487 1,395

Total labour cost 8,729 7,878

The wages and salaries costs are accounted for in compliance with collective agreements, internal

rules and regulations governing wages and other emoluments, the Decree on the amount of costs

recognised as deductible expense, and individual employment agreements. Other labour cost comprises the cost of meal allowances, commuting allowances, holiday bonuses, retirement bonus,

and payroll tax.

In 2007, the Company also allocated EUR 237 thousand for additional pension insurance, together

with the employees who allocated 1,615% of their gross wages to the same purpose. In 2006, the Company paid EUR 218 thousand for this purpose under the same terms.

In 2007, tax on wages and salaries accounted for EUR 199 thousand which is less than in 2006 when

it accounted for EUR 216 thousand.

4. Other operating income

in EUR thousand

Item 2007 2006

Gain in disposal of fixed assets 100 25

Reversal of impairment of property, plant and equipment 81

Income from reversal of provisions 476 378

Capitalised own products and services 264 Reversal of revaluation of trade receivables and

inventories 36 117

Indemnities, subsidies and grants received 8 92

Other 330 45

Total 950 1,002

5. Net financial income (expenses)

in EUR

thousand

2007 2006

Interest income 69 118

Income from dividends and other profit shares 254 308

Foreign exchange gains 0

Income from sale of investments 541 1,053

Other financial income 1,533 423

- Change in fair value of investments through profit

or loss 1,505 406

- Other 28 17

Total financial income 2,397 1,902

67

Interest expense 640 487

Foreign exchange losses 4 15

Loss in disposal of investments 137 2

Other financial expenses 11 10

Financial expenses owing to impairment 10 7

Total financial expenses 802 521

Total net financial income 1,595 1,381

6. Taxes

in EUR

thousand

2007 2006

Current tax

Deferred tax (from Income Statement) 213 -97

Total 213 -97

Effective corporate income tax rates

in EUR

thousand

2007 2007 2006 2006

Total profit or loss before tax 1,170 854

Tax effects:

Tax at general tax rate 23.0% 269 25.0% 214

Tax exempt income -9.0% -105 -14.3% -122

Non-deductible expenses 12.7% 149 37.7% 322

Tax relief -8.0% -94 -28.6% -245

Tax loss -0.4% -5 -31.2% -267

Other changes to tax base -0.1% -1 0.1% 1

Total tax expense 18.2% 213 -11.3% -97

Deferred taxes recognised directly in equity.

in EUR thousand

2007 2006

Investments 109 -163

Total 109 -163

7. Disclosure of auditor fees

The total amount spent on payment of all auditing services amounted to EUR 49 thousand in 2007.

8. Property, plant and equipment

In 2007, the Company invested EUR 4,551 thousand in land, buildings, plant and equipment.

68

Accounts payable for the purchase of tangible fixed assets amounted to EUR 615 thousand at the end

of 2007.

Changes in property, plant and equipment

in EUR thousand

Land Buildings Equipment Other

equipment PPE in

progress Advances

given Total

Cost

Balance at 1 January 2006 1,220 14,483 37,523 27 84 17 53,354 Adjustment of the opening balance 2 2 4

Acquisitions in the period 43 1,065 1 1,109

Change to PPE in progress 13 13

Disposals 1,479 17 1,496

Balance at 31 December 2006 1,220 14,528 37,111 28 97 52,984

Balance at 1 January 2007 1,220 14,528 37,111 28 97 52,984 Adjustment of the opening balance



Disposals 2 1,436 1,438

Balance at 31 December 2007 1,220 14,730 39,768 28 351 65 56,162

Allowance

Balance at 1 January 2006 6,862 25,196 32,058

Depreciation 403 2,899 3,302

Disposals 1,297 1,297

Balance at 31 December 2006 7,265 26,798 34,063

Balance at 1 January 2007 7,265 26,798 34,063



Balance at 31 December 2007 7,671 28,467 36,138

Book value

Balance at 1 January 2006 1,220 7,621 12,327 27 84 17 21,296

Balance at 31 December 2006 1,220 7,263 10,313 28 97 18,921

Balance at 1 January 2007 1,220 7,263 10,313 28 97 18,921

Balance at 31 December 2007 1,220 7,059 11,301 28 351 65 20,024

69

Disposals made in 2007 mainly comprise the sale of commercially and technically outdated, yet still

functional machinery.

Mortgages entered in the Land Register to secure liabilities from borrowings amounted to EUR 14,155

thousand and the pledged plant and equipment to EUR 9,440 thousand (the remaining debt is only

EUR 12,405 thousand); the lien and guarantees received amounted to EUR 3,820 thousand.

9. Intangible assets

Long-term property rights mainly include computer software for the renovation of the business

information system. Long-term deferred development costs are recognised costs of projects that prove to be feasible for the project completion and eligible for the use or sale. The purpose is to

complete the project and sell or use it in view of the probability of the economic benefits and the

capability of a reliable measurement of costs attributable to the respective intangible asset.

In 2007, the Company invested EUR 237 thousand in long-term property rights stated under

acquisitions in the period and change to PPE in progress. Deferred development costs are recorded for

the public documents project.

in EUR

thousand

Long-term deferred

costs

Long-term property rights

Intangible assets under

construction Total

Cost

Balance at 1 January 2006 118 1,391 3 1,512

Acquisitions in the period 185 1,208 1,393 Additions to intangible assets under construction -3 -3

Balance at 31 December 2006 303 2,599 2,902

Balance at 1 January 2007 303 2,599 2,902

Acquisitions in the period 220 220 Additions to intangible assets under construction 17 17

Disposals 7 7

Balance at 31 December 2007 303 2,812 17 3,132

Allowance


Depreciation 39 146 185

Disposals 0




Disposals 7 7


Book value

70

Balance at 1 January 2006 79 171 3 253



Balance at 31 December 2007 167 1,191 17 1,375

10. Investments in subsidiaries

in EUR

thousand

2007 2006

Cetis Zagreb 1,691 1,691

Cetis Tirana 5 5

Amba 1,920

Total 3,616 1,696

Subsidiaries are:

CETIS – ZG, Poduzeče za trgovinu i usluge, d.o.o., Industrijska 11, Sveta Nedelja, Croatia, measured

at cost.

AMBA CO d.o.o., Leskoškova cesta 11, Ljubljana, measured at cost.

The Company compiles a consolidated financial statement for the above two companies – Cetis-ZG,

d.o.o. and AMBO CO, both 100 percent owned by the controlling company. The subsidiaries submit

monthly reports to the controlling company and the latter conducts quarterly analyses and an internal

audit at least once a year. Both companies are obliged to have their financial statements audited.

The stake in CETIS – TIRANA Sh.p.k.,R.r. Deshmoret e 4, Shkurtit.P.7, Tirana, Albania is measured at

cost. It is also 100 % owned by Cetis d.d. and all transactions are comprised in Cetis’s financial

statements. The company acts solely as an intermediary in acquiring business and has a status of a

small enterprise in accordance with the local legislation not obliged to prepare its financial statements.

Changes to investments in Group companies

in EUR thousand

Cost Allowance (impairment) Net value

Balance at 1

January 2006 2,068 188 1,880

Sale -372 -188 -184

Balance at 1 January 2007 1,696 1,696

Purchase 1,920 1,920 Balance at 31

December 2007 3,616 3,616

71

11. Investments in associates

Associated companies include:

- Druckman Hungary, in which the Company holds a 33 % stake for which it has made

allowance for the entire investment since the associated company has not operated for

several years and is not disclosed in movement in investments.

- La Societe Nationale des Loteries Sportives, BP 2150, Libreville, Gabon, with the stake

measured at cost.

- KIG KGA, proizvodnja, trgovina, inženiring d.o.o., Zagorica 18, 1292 Ig; stake measured at

cost, with Cetis not exercising a dominant influence.

- Lotaria Nacionale SH.A Rruga Kavajes, Porta Kry Esore, Misto Mame, Tirana

The shares are measured at cost.

in EUR thousand

2007 2006

La Societe Sationale des Loteries Sportives (SNLS),Libreville,Gabon - 31 % ownership 47 47

KIG KGA,proizvodnja,trgovina,inženiring d.o.o. - 50 % ownership 17 17

Lotaria Nacionale SH.A Rruga Kavajes,Porta Kry Esore, Misto Mame,Tirana – 46.6% ownership 8 8

Total 72 72

12. Available-for-sale investments

in EUR thousand

Type 2007 2006

Available-for-sale investments 13,016 13,960

Subsequent to initial recognition, 59.7 % of investments were measured at cost. The Company treats

all investments as marketable since it verifies them in the market on a regular basis even though only

a part of these investments are listed on the stock exchange.

Movements in investments

in EUR thousand

Cost

Allowance

(impairment) Net value

Balance at 1 January 2006 12,990 172 12,818

Purchase 2,474 2,474

Sale -2,228 -172 -2,056

Change in fair value 724 724



Sale -4,718 -4,718


Balance at 31 December 2007 13,016 13,016

72

13. Loans

in EUR

thousand

Type 2007 2006

Loans granted 1,550 1,303

Loans granted include loans to associated company, loans to employees for purchase of flats and

construction, and funds invested in long-term bonds issued by a bank.

Changes in loans granted

in EUR thousand

Cost Allowance (impairment) Net value

Balance at 1 January 2006 661 661

Increase 770 770

Repayment 93 93

Transfer to short-term loans 35 35

Balance at 1 January 2007 1,303 0 1,303

Increase 500 500

Repayment 221 221


Balance at 31 December 2007 1,550 0 1,550

14. Non-current trade receivables

in EUR thousand

Type 2007 2006

Long-term commercial loans to associated companies

Other non-current trade receivables for associated companies 878

Total 878 0

Changes in non-current trade receivables

in EUR thousand

Cost

Allowance



Increase 878 878

Balance at 31 December 2007 878 0 878

73

15. Deferred tax assets and liabilities

In EUR thousand

Tax assets Tax assets Tax liabilities

Tax liabilities Tax assets-Tax liabilities

31/12/2007 31/12/2006 31/12/2007 31/12/2006 31/12/2007 31/12/2006

Investments 21 21 132 245 -111 -224

Receivables 52 49 52 49

Inventories 25 25 Provisions for termination pay 209 246 209 246

Other provisions 17 17

Tax loss 81 222 81 222

Total 363 580 132 245 231 335

The Company used a 22 % tax rate in deferred tax accounting, except in tax loss where the Company

applied a tax rate ranging from 20% to 22% based on the estimation of tax loss utilisation in the

coming years. Deferred tax liabilities are based on surpluses arising from revaluation of available-for-

sale investments, measured at fair value through equity.

Deferred tax assets are based on provisions for anniversary bonuses and termination pays on

retirement, tax loss and temporary differences arising from accounting for income tax on investments,

receivables, inventories and other provisions to be recognised as tax deductible in subsequent periods.

The Company recognised deferred tax assets for the tax loss based on the estimate that in the coming years taxable profits will be available, against which the deferred tax assets can be used in the future.

In the periods of tax loss utilisation a decrease in deferred tax assets will mean a corresponding decrease in profits.

In 2007, the investment incentive allowance amounted to EUR 9 thousand and the unexploited tax

loss to EUR 395 thousand.

Changes in temporary differences in 2006

in EUR thousand

1/1/2006 Recognised under income/expenses

Recognised under equity 31/12/2006

Investments -56 -5 -163 -224

Receivables 56 -7 49

Inventories 30 -5 25 Provisions for termination pay, other 337 -91 246


Tax loss 34 188 222

Total 401 97 -163 335

74


in EUR thousand

1/1/2007 Recognised under income/expenses


Investments -224 4 109 -111

Receivables 49 3 52

Inventories 25 -25 Provisions for termination pay, other 246 -37 209

Other provisions 17 -17

Tax loss 222 -141 81

Total 335 -213 109 231

16. Inventories

in EUR thousand

Type 2007 2006

Materials 1,641 2,006

Work in process 518 895

Products 1,144 527

Merchandise 5 8

Total 3,308 3,436

The Company wrote off for the year 2007 the assets of EUR 492 thousand related to materials and

products which had no longer been usable. The largest product write-offs related to labels, plastic

cards and wrappings as well as documents as a result of the use of inadequate material. The

Company managed to reduce partially the related costs through claims concerning the materials, as

shown in production cost.

A surplus of EUR 115 thousand was recorded, mainly in material, and a deficit of EUR 48 thousand in

material assets. The reasons for discrepancies lie in the introduction of a new information system and

the recording method used by the responsible providers.

Allowances are accounted for by type of inventories and movement. No new allowances had to be

made other than those made in the past periods. When examining the inventories in the stores accommodating items under complaint, the inventories of materials, products and merchandise that

did not show any movement for more than 12 months, the Company applied the same policies as in

the preceding years.

The increase in work in progress results from open work orders, not being evident from the table, yet

the value of work orders shows an increase of EUR 244 thousand. As at 31 December 2006, the value

of work in progress also comprised the value of semi-manufactures totalling EUR 652 thousand; as at

31 December 2007, however, the value of semi-manufactures as products was included in the value of

finished products, disclosing an increase over the preceding year.

A change in accounting estimate concerning the evaluation of inventory of work in progress and

finished products is disclosed due to the exclusion of production cost in 2007. Expense in inventory of

work in progress amounts to EUR 12 thousand and EUR 37 thousand in inventory of finished products,

which means that the total expense transferred to other operating expenses accounted for EUR 49

thousand in 2007.

75

17. Current investments at fair value

in EUR thousand

Type 2007 2006

Current investments 2,156 1,839

Total 2,156 1,839

in EUR

thousand

Cost

Allowance



Purchase 387 387

Sale -883 -7 -876

Change in fair value 406 7 399


Transfer after division to available-for-sale shares -98 -98

Sale -188 -3 -185



All current investments directly affecting profit or loss refer to securities (shares) and investments in mutual funds listed on stock exchange or traded on regulated markets.

18. Short-term loans

in EUR thousand

Type 2007 2006

Short-term loans given 386

Current portion of long-term loans 32 36

Total 418 36

19. Trade and other receivables

in EUR thousand

Type 2007 2006

Short-term trade receivables 5,055 4,271

Short-term trade receivables from group companies 198 283

Short-term trade receivables from associated companies 9 403

Short-term trade receivables from third parties 138 894

Short-term advances receivable 34 24

Total 5,434 5,875

76

20. Cash and cash equivalents

in EUR

thousand

Type 2007 2006

Cash in banks, cheques and cash in hand 1 158

Deposits in banks 500 572

Total 501 730

21. Equity

Total equity consists of issued capital, capital surplus, legal and statutory reserves, retained earnings, own shares (deducted from equity), and fair value reserve. The Company issued 200,000 no par value

shares registered at Central Securities Clearing Corporation (KDD).

In 2007, the Company acquired no own shares. As at 31 December 2007, the Company recorded 201

CETG designated own shares.

The fair value reserve was decreased mainly due to the sale of an investment accounted for under

equity method.

Determination of distributable profits

in EUR

thousand

Item 2007 2006

A. Net profit for the year 957 951

B. Retained net profit/loss 107 -825

C. Decrease in revenue reserves (1 to 1) 1

1. Decrease of other revenue reserves 1

D. Increase in revenue reserves (1 to 1) 191

1. Increase of statutory reserves 191

E. Distributable profits (A+B+C-D) 873 127

The Company allocated 20% of 2007 profits to statutory reserves according to Article 8.4. of Cetis’ Articles of Incorporation.

22. Net earnings per share

2007 2006

Net profit for the year in EUR 957,197 951,294

Weighted average number of ordinary shares 199,799 199,799

Net earnings per share in EUR 4.79 4.76

Net earnings per share are calculated by dividing net profit for the year by the weighted average number of shares as denominator. Diluted earnings per share are identical as the Company holds

neither any preference nor convertible shares.

77

23. Borrowings

Borrowings comprise long-term and short-term borrowings including the current portion of long-term

borrowings.

Long-term borrowings

in EUR thousand

Type 2007 2006

Bank loans 8,445 7,940

The largest single loan is the loan for financing a long-term investment totalling EUR 6,400 thousand

with a 7-year repayment period and its principal already being repaid.

Short-term borrowings

in EUR

thousand

Type 2007 2006

Current portion of long-term loans from banks repayable within one year 2,718 2,243

Short-term bank loans 52 1,461

Short-term borrowings from others 1,190 41

Total 3,960 3,745

Guarantees granted

The guarantees granted amount to EUR 23,595 thousand and are recorded under off-balance sheet

items.

Loan repayments

in EUR

thousand

Type Total repayment

Interest

2007

Principal

2007

Short-term loans of up to one year 3,881 57 3,824

Long-term loans of 1 to 5 years 1,841 583 1,258

Long-term loans with maturity longer than 5 years 985 985

Total 6,707 640 6,067

in EUR thousand

Type Total repayment

Interest

2006

Principal

2006


Long-term loans of 1 to 5 years 1,208 385 823


Total 5,405 487 4,918

78

The Company made no distinction between interest on long-term loans by maturity and therefore the

interest covers the period from 1 to 5 years.

24. Long-term operating liabilities

in EUR

thousand

Type 2007 2006

Long-term operating liabilities from advances 3 0

Total 3 0

The Company received an advance on the basis of a contract and disclosed it under long-term

operating liabilities for the sake of maturity.

25. Provisions

in EUR

thousand

Type 2007 2006

Provisions for warranties 99 126

Provisions for legal action 89 395

Provisions for other costs 26 13

Provisions for anniversary bonuses 231 233

Provisions for termination pays 743 835

Total 1,188 1,602

Movement in provisions

in EUR

thousand

Type 31/12/2006 Made Used Reversed 31/12/2007

Provisions for warranties 126 55 82 99

Provisions for legal action 395 306 89

Provisions for other costs 13 13 26

Provisions for anniversary bonuses 233 35 37 231

Provisions for termination pays 835 4 88 743

Total 1,602 103 41 476 1,188

The Company reviewed the provisions made, took account of changes and decreased total provisions

for the purpose of long-term deferred revenues and provisions for long-term accrued costs.

Provisions are made in accordance with contracts, legal bases and opinions by experts.

79

Provisions for termination pays and anniversary bonuses

As a result of a change in employee number the Company could decrease provisions in the amount of

EUR 94 thousand on the basis of a calculation for each employee using the projected unit method,

prepared by the certified actuary.

26. Trade and other liabilities

in EUR thousand

Type 2007 2006

Trade payables 5,319 4,171

Short-term operating liabilities based on advances 1,328 733

Payables to employees 557 684

Payables to state and other institutions 416 270

Other payables 374 115

Total 7,994 5,973

The bases are the original documents that define an event in terms of time and substance.

Disclosures to Cash Flow Statement

The Cash Flow Statement has been prepared under the indirect method using the data from the

Balance Sheet as at 31 December 2007 and the Balance Sheet as at 31 December 2006, and from the

data of the 2007 Income Statement, as well as the additional data required for the adjustment of inflows and outflows and for adequate breakdown of major items.

27. Financial instruments – risk management

Risk exposure and management

At the time of a stable euro exchange rate, currency risks were excluded since almost all foreign

transactions outside the EMU were made in EUR.

The Company is aware of the importance attributed to regular control and management of financial risks to which the Company is exposed in the markets, and views it as a relevant precondition for

successful operations and achieving of strategic goals. In 2007, the interest rate risks were primarily predominant (a general growth of interest rates). The analysis of these risks showed that the interest

rate risk was higher also due a new borrowing of the Company or the guarantees issued. The

Company expects these risks to increase also in the future as a result of the operations of the parent company and its subsidiaries.

All the long-term debts are denominated in Euros. Interest rates are based on the market principles

governing the price of money in the European banking market. The interest rate risks have not been hedged so far, as the Company assesses that the interest rate fixations offered are still above the

variable rates or that long-term movements in interest rates will allow more favourable cost of funding

in the whole borrowing period. The Company also decided not to assume any new (currency) risks due to lower interest rates of other currencies.

- Interest rate risks increased due to the extent of loans and sudden movements and

increases in interest rates. The interest rate level was assessed to be still acceptable for all

long-term loans, with its contractually agreed variability and taking into account the maturity. The Company’s exposure to interest rate risks is higher than in the preceding year.

80

- Property risks and related risks were systematically and analytically assigned in 2007 to

insurance companies.

- Liquidity risks are low at Cetis over the short period of time as a result of efficient asset

management, adequate credit lines for cash flow control, satisfactory financial flexibility and good access to the necessary financial resources, whereby the Company takes into account

the circumstances in financial environment and on financial markets.

Financial instruments – credit risk

in EUR

thousand

Note 31/12/2007 31/12/2006

Available-for-sale financial assets 12 13,016 13,960

Financial assets at fair value through profit or loss 17 2,156 1,839

Loans given 13,18 1,968 1,339

Long- and short-term operating receivables 14,19 6,312 5,875

Cash and cash equivalents 20 501 730

Total 23,953 23,743

The highest credit risk exposure for loans at the reporting date by geographical regions was the following:

Book value

in EUR thousand 2007 2006

Domestic 398 652

Other European countries 383 0

Other regions – Africa 1,187 687

Total 1,968 1,339

The highest credit risk exposure for trade receivables at the reporting date by geographical regions was

the following:

Book value


Domestic 3,943 4,011

Euro zone countries 304 694

Other European countries 462 767

Other regions - Africa 1,603 403

Total 6,312 5,875

The highest credit risk exposure for trade receivables at the reporting date by type of customers was

81

the following:

Book value


Wholesale customers 1,087 1,175

Customers, end users 5,225 4,700

Total 6,312 5,875

Impairment losses

Trade receivables on the reporting date:

Gross impairment Gross impairment

in EUR thousand 2007 2007 2006 2006

Not yet due 6,177 3,756

Past due 0-30 days 347 1,629

Past due 31-120 days 321 64 699 209

Past due 121-365 days 53 53 55 55

More than one year 340 809 683 683

Total 7,238 926 6,822 947

Movement in allowances for impairment of trade receivables in the period:


Balance at 1 January 947 982

New allowances 64 209

Written-off allowances made -49 -127

Paid written-off allowances -36 -117

Balance at 31 December 926 947

82

Currency risk

Currency risk was based on nominal amounts:

Thousand EUR USD GBP CHF DKK EUR USD CHF DKK CZK

31 Dec.07 31 Dec.06

Trade receivables 6,619 0 0 0 0 5,892 0 2.189

Accounts payable -5,214 -0.1 -26 -111 -12 -4,142 -3 -19 -36 -386

Secured bank loans

Gross exposure of

balance sheet 1,405 -0.1 -26 -111 -12 1,750 -3 -17 -36 -386

The Company is not exposed to any specific currency risks.

83

Liquidity risk

31/12/2007 Book Contractual Up to 6 6 to 12 1 to 2 2 to 5 Over 5

in EUR thousand Value cash flow months months years years years

Transaction account (TRR) overdraft 52 -54 -54

Secured bank loans 11,163 -12,810 -1,789 -1,628 -3,140 -6,253

Other loans (account 2726000) 1,189 -1,235 -301 -934

Accounts payable and other liabilities 7,994 -7,994 -7,994

Total 20,398 -22,093 -10,138 -2,562 -3,140 -6,253

3-moth Euribor 31/12/2007 4.684

6-month Euribor 31/12/2007 4.707

31/12/2006 Book pogodbeni Up to 6 6 to 12 1 to 2 2 to 5 Over 5

in EUR thousand value Cash flow months months years years years

Transaction account (TRR)

overdraft 0

Secured bank loans 10,183 -11,548 -1,031 -1,341 -2,356 -5,467 -1,353

Other loans (account 2726000) 42 -46 -46

Accounts payable and other

liabilities 5,973 -5,973 -5,973

Total 16,198 -17,567 -7,050 -1,341 -2,356 -5,467 -1,353

3-month Euribor 31/12/2006 3.725

6-month Euribor 31/12/2006 3.853

Interest rate risk

At the reporting date, loan contracts signed by Cetis d.d. were with a fixed and variable interest rate.

in EUR thousand

Instruments with a fixed interest rate 2007 2006

Financial assets 1,223 1,136

Financial liabilities -889 0

Difference 334 1,136

Instruments with a variable interest rate 2007 2006

Financial assets 718 687

Financial liabilities -11,515 -10,226

Difference -10,797 -9,539

84

Sensitivity analysis of fair value for instruments with a fixed interest rate

A change in interest rates by one percentage points at the reporting date would result in an increase

or decrease of the equity by EUR 2 thousand.

Sensitivity analysis of cash flow for instruments with a variable interest rate

A change in interest rates by one percentage point at the reporting date would result in an increase

(decrease) of the equity and profit or loss by EUR 12 thousand.

Interest rates used in determination of fair value.

2007 2006

Cash, loans, deposits 0.2% - 7% 0.2% - 7%

28. Fair value

Fair and book value of assets and liabilities

in EUR

thousand

Note

Book value

at 31/12/2007

Fair value at 31/12/2007

Book value

at 31/12/2006


Available-for-sale investments 13,016 13,016 13,960 13,960

Loans 1,550 1,550 1,303 1,303

Long-term trade liabilities 878 878

Investments at fair value through

profit or loss 2,156 2,156 1,839 1,839

Trade and other receivables 5,434 5,434 5,875 5,875

Short-term loans 418 418 36 36

Cash and cash equivalents 501 501 730 730

Long-term borrowings -8,445 -8,445 -7,940 -7,940

Short-term borrowings -3,960 -3,960 -3,745 -3,745

Trade and other payables -7,994 -7,994 -5,973 -5,973

Total 1,398 1,398 4,246 4,246

Available-for-sale investments are measured at fair value and depend on the recognition of the

investment after the trade date.

Investments at fair value through profit or loss are measured at stock market price.

Loans and borrowings are measured at amortised cost calculated using the method of effective

interest rate that does not differ from the contractual interest rate. Accordingly, the contractual interest rate is used in the calculations.

In trade and other receivables, the impairment to fair value is taken into account in view of

collectability. The receivables are not discounted owing to their short-term nature.

The same applies to trade and other payables that are not discounted owing to their short-term

nature.

85

Other disclosures

Disclosures by group of persons: members of the Management Board, Supervisory Board,

and staff employed under individual employment contracts

Total remunerations received by groups of persons for the performance of functions or duties

in the financial year:

- Management Board EUR 120 thousand

- Other staff employed under individual employment contracts (13 persons) EUR 929 thousand

- Supervisory Board EUR 33 thousand

Liabilities under earmarked loans granted by the Company to persons from these groups

amounted to EUR 0.5 thousand at the end of 2007.

In 2007, the loan repayments amounted to EUR 2 thousand.

Related-party transactions

The transactions between the Company and the related parties were based on contracts of sale whereby market prices of products and services were used.

Post balance sheet events

Major post balance sheet events are described in the introduction section of the Business Report.

86

V. CETIS GROUP FINANCIAL REPORT

87

CONSOLIDATED INCOME STATEMENT

in EUR

thousand

Note 2007 2006

REVENUE 1 39,520 32,007

Cost of goods sold -4,942 -3,635

Production costs -23,181 -19,926

Cost of goods sold and production costs 2 -28,123 -23,561

GROSS PROFIT 11,397 8,446

Other (operating) income 3 1,011 1,244

Distribution expenses 2 -5,719 -6,087

Administrative expenses 2 -6,635 -3,410

Other (operating) expenses 2 -476 -446

Total -11,819 -8,699

OPERATING PROFIT OR LOSS BEFORE FINANCING COSTS -422 -253

Financial income 4 2,426 1,852

Financial expenses 4 -1,554 -670

NET FINANCIAL EXPENSES 872 1,182

PROFIT OR LOSS BEFORE TAXATION 450 929

Tax 5 -277 69

NET PROFIT 173 998

Net and diluted earnings per share (in EUR) 20 0.86 5.00

88

CONSOLIDATED BALANCE SHEET

in EUR

thousand

Note 31/12/2007 31/12/2006

ASSETS

Property, plant and equipment 7 27,304 21,591

Intangible assets 8 2,185 1,496

Investments in associated companies 9 18 72

Available-for-sale investments 10 14,305 13,965

Loans 11 1,249 1,303

Long-term trade receivables 12 878

Deferred tax assets 13 364 581

Total non-current assets 46,303 39,008

Inventories 14 4,187 3,745

Current investments at fair value 15 2,156 1,839

Short-term loans 16 362 36

Trade and other receivables 17 7,738 6,695

Cash and cash equivalents 18 1,003 1,057

Total current assets 15,446 13,372

TOTAL ASSETS 61,749 52,380

EQUITY AND LIABILITIES

Issued capital 10,015 10,015

Capital reserves 17,859 17,859

Reserves (legal and statutory) 1,901 1,709

Retained earnings 306 317

Own shares -26 -26

Fair value reserve 341 690

Total equity 19 30,396 30,564

Borrowings 21 11,840 9,210

Non-current operating liabilities 22 78

Provisions 23 1,242 1,607

Deferred tax liabilities 13 571 245

Total non-current liabilities 13,731 11,062

Borrowings 21 7,652 4,006

Trade and other liabilities 24 9,970 6,748

Total current liabilities 17,622 10,754

Total liabilities 31,353 21,816

TOTAL EQUITY AND LIABILITIES 61,749 52,380

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CONSOLIDATED CASH FLOW STATEMENT

in EUR

thousand

2007 2006

CASH FLOWS FROM OPERATING ACTIVITIES

Profit or loss for the period 173 998

Adjustments for: 4,512 3,099

Depreciation of property, plant and equipment 3,832 3,775

Amortisation of intangible assets 339 191

(Reversal) of impairment loss 179 79

Foreign exchange loss 13 33

Investment income -541 -1,052

Financial expenses 1,115 511

Share of associated companies in earnings/losses -54

Gain on disposal of property, plant and equipment -57 -26

Revenue form a decrease in long-term provisions -374 -412

Tax expenses 60

FUNDS FLOWS FROM OPERATING ACTIVITIES BEFORE

CHANGES IN NET OPERATING ASSETS AND PROVISIONS 4,685 4,097

Change in trade and other receivables -2,353 -781

Change in inventories -308 -93

Change in trade and other liabilities 3,272 -204

Change in provisions and employee benefits 8 69

CASH GENERATED FROM OPERATIONS 619 -1,009

Interest paid -820 -83

NET CASH FROM OPERATING ACTIVITIES 4,484 3,005

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from the sale of property, plant and equipment 57 268

Proceeds from the sale of investments 541 1,052

Interest received 72 85

Dividends received 254 308

Acquisition of property, plant and equipment -9,546 1,625

Acquisition of other investments -1,169 -1,057

Acquisition of intangible assets -1,028 -1,426

NET CASH FROM INVESTING ACTIVITIES -10,819 855

CASH FLOWS FROM FINANCING ACTIVITIES

Changes in equity 5 3

Borrowings 18,543 4,546

Repayment of borrowings -12,267 -7,777

Dividends paid -1

NET CASH FROM FINANCING ACTIVITIES 6,281 -3,229

Net increase in cash and cash equivalents -54 631

Cash and cash equivalents at the beginning of period 1,057 426

CASH AND CASH EQUIVALENTS AT THE END OF PERIOD 1,003 1,057

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

in EUR

thousand

Issued capital

Capital reserves

Legal and

statutory reserves

Own shares

Retained earnings

Fair value reserve

Total equity

Balance at 1 January 2006 10,015 17,859 1,709 -26 -689 134 29,002

Profit 2006 998 998

Exchange differences CETIS

ZG,IPI,BS 7 7

Dividends on own shares 1 1

Increase in fair value 556 556

Balance at 31 December 2006 10,015 17,859 1,709 -26 317 690 30,564

Profit 2007 173 173

Allocation to statutory reserves 192 -192

Payment of bonuses -20 -20

Adjustment from prev. years – refund DURS 25 25

Exchange differences CETIS ZG 3 3

Decrease in fair value -349 -349

Balance at 31 December

2007 10,015 17,859 1,901 -26 306 341 30,396

The Management Board of Cetis, d.d. approves the financial statements and notes thereto for the financial year ended on 31 December 2007.

Statement of Management responsibility The Management Board is responsible for the preparation of the financial statements which give a

true and fair view of the financial position at the end of financial year and of the income statement for this period.

The Management Board confirms that the appropriate accounting policies have been applied

consistently and that the accounting estimates have been prepared under the principle of

conservatism and due care. The Management Board also confirms that the financial statements have been prepared in compliance with International Financial Reporting Standards. The financial

statements have been prepared under the going concern assumption.

The Management Board recognizes its responsibility for adequate and orderly accounting, acceptance

of measures, for safeguarding of the Company’s assets, and prevention and detection of frauds and other irregularities.

April 2008

Simona Potočnik, MA

General Manager

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO THE FINANCIAL STATEMENTS

1. Group profile

The Group’s core business is providing comprehensive solutions in the field of communications through printed media and other forms of media. The corporate vision envisions Cetis as the leading

company in Slovenia, with the right developmental, investing and marketing activities and the best qualified staff, looking ahead to increase its market share outside Slovenia as well. The Company

offers a programme of diversified printed matter, such as security, variable and commercial printed

matter, graphic design incl. accessory services, like personalisation of documents, the implementation and personalisation of micro chips or magnetic tapes, archiving, identity management and

consultancy, project management and other services.

The Group’s consolidated financial statements for the year that ended on 31 December 2007 comprise

the Company and its subsidiaries as well as the Group's stakes in associated companies.

The Group comprises Cetis, d.d., Celje Parent company’s stake

Cetis-ZG, d.o.o., Zagreb

- Cetis Print, d.o.o., Beograd*

100 %

65 %

AMBA Co., d.o.o., Ljubljana 100 %

*Note: Cetis Print, d.o.o., Beograd, is under the process of foundation, with the subscribed capital not

being fully paid in and the company not being included in the 2007 consolidated financial statements.

Associated companies Company Stake in %

Druckman, Hungary – does not operate 33 %

La Societe Nationale des Loteries Sportives (SNLS), Libreville, Gabon 31 %

KIG KGA, proizvodnja, trgovina, inženiring d.o.o. 50 %

Nacional Sh.a., Rruga Kavajes, Porta Kry Esore, Misto Mame,Tirana 46.6 %

2. Basis for preparation of consolidated financial statements

a) Statement of compliance The 2007 financial statements have been prepared in accordance with International Financial

Reporting Standards (IFRS) published by the International Accounting Standards Board (IASB) and the interpretations by the IFRS Interpretations Committee (IFRSIC), as adopted by the European

Union.

The Management Board approved the financial statements on 18 April 2008.

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b) Basis of measurement The 2007 consolidated financial statements have been prepared on a historical cost basis, except for

the following cases that have been measured at fair value:

financial instruments at fair value through profit or loss

available-for-sale financial assets

The methods used to measure fair value are described below.

c) Functional and presentation currency The financial statements are presented in Euros, i.e. in the Company's functional currency and are

rounded off to EUR thousand.

d) Use of estimates and judgements The preparation of financial statements in conformity with International Financial Reporting Standards

(IFRS) requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and

expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on a regular basis. Revisions to accounting

estimates are recognised in the period in which the estimate is revised and in any future periods

affected.

Information about significant areas of estimation uncertainty and critical judgements, prepared by the management in applying accounting policies that have the most significant effect on the amount

recognised in the financial statements are described in the following notes:

Note 7 – Business combinations

Note 8 – Measurement of recoverable amounts of cash generating units, including goodwill

Note 13 – Utilisation of tax losses

Notes 23 and 24 – Provisions and contingent liabilities

Note 25 – Valuation of financial instruments

3. Significant accounting policies

The accounting policies set out below have been applied consistently by the Group companies to all

periods presented in these consolidated financial statements.

a) Basis for consolidation Subsidiaries Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to

govern the financial and operating policies of an entity so as to obtain benefits from its activities. When assessing the impact, the existence and effect of potential voting rights should be considered

that are currently exercisable or convertible. The financial statements of subsidiaries are included in

the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been modified or adapted to those of the Group,

if necessary.

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Associates and joint ventures (jointly controlled entities accounted for using equity method) Associates are those entities in which the Group has significant influence, but not control, over the

financial and operating policies. A significant influence exists if a group holds from 20 to 50 percent of

votes in another entity.

Associates are accounted for using equity method. Upon initial recognition, they are measured at historical cost. The Group’s investment comprises goodwill arising upon the acquisition and net value of

incurred losses due to impairment. The consolidated financial statements include the Group’s share in profits and losses of associates, calculated using the equity method, after the alignment of accounting

policies, from the date that significant influence commences until the date that it ceases. When the Group’s share of losses in an associate exceeds its interest in the associate, the carrying amount of

that interest is reduced to nil (including all long-term investments) and the recognition of further

losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the associate.

Transactions eliminated on consolidation Intra-group balances, and any unrealised gains and losses or income and expenses arising from intra-

group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with jointly controlled entities are eliminated to the extent of the Group’s

interest in the associate. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

b) Foreign currency

Transactions in foreign currency Any transactions disclosed in foreign currency are converted into the relevant functional currency of the Group companies at the exchange rate on the date of transaction.

Assets and liabilities expressed in foreign currency are converted into EUR at the date of the transaction and at the end of the accounting period at the (ECB) reference exchange rate of the Bank

of Slovenia.

Monetary assets and liabilities stated in foreign currency at the balance sheet date are translated into

functional currency at the applicable exchange rate. The foreign exchange gains or losses are the differences between the amortised cost in the functional currency at the beginning of the period,

adjusted by the amount of effective interest and the payments effected during the accounting period, as well as the amortised cost expressed in a foreign currency and translated at the exchange rate at

the end of the period. Non-monetary items and liabilities stated in foreign currency and measured at

the fair value are converted into the functional currency at the exchange rate effective on the date on which the fair value was set. Foreign exchange gains and losses are recognised in the income

statement.

Foreign entities Assets and liabilities of foreign entities are converted into EUR at the exchange rate effective on the

balance sheet date. Revenues and expenses of foreign entities are converted into EUR at exchange

rates effective on the date of conversion.

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c) Financial instruments Non-derivative financial instruments Non-derivative financial instruments include investments in equity and debt securities, trade and other

receivables, cash and cash equivalents, borrowings and loans, and trade and other liabilities.

Non-derivative instruments are recognised initially at fair value increased by directly attributable

transaction costs. Subsequent to initial recognition, non-derivative financial instruments are measured as explained below.

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are

repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents in the Cash Flow Statement.

Accounting of financial income and expenses is described in point l) Financial income and expenses.

Available-for-sale financial assets Investments in equity securities and certain debt securities are classified as available-for-sale financial assets. Subsequent to initial recognition, these investments are measured at fair value. The changes

in fair value, except for impairment losses are recognised directly in equity. When an investment is

derecognised, the cumulative gain or loss in equity is transferred to profit or loss.

Investments at fair value through profit or loss An instrument is classified as at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit or

loss if the Group manages such investments and makes purchase and sale decisions based on their

fair value. Upon initial recognition, attributable transactions costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and a

change in fair value is recognised in profit or loss.

Other Other non-derivative financial instruments are measured at amortised cost using the effective interest

method, less any impairment losses.

Share capital Ordinary shares

Ordinary shares form part of the share capital.

Repurchase of own shares When own shares are repurchased, the amount of the consideration paid, including directly

attributable costs, without any tax effect, is recognised as a change in equity. Repurchased shares are

classified as own shares and are presented as a deduction from equity. When own shares are sold the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is recognised in equity.

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d) Property, plant and equipment

Presentation and measurement Property, plant and equipment are carried at cost less allowance for depreciation and the incurred

impairment loss. At the date of transition to IFRS, property, plant and equipment were carried at their

hypothetical cost at 1 January 2005.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-

constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of

dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that

equipment. Borrowing costs related to the purchase or construction of property are recognised in profit or loss as incurred.

Parts of an item of property, plant and equipment with different useful lives are accounted for as separate items of property, plant and equipment. Gains and losses on disposal of an item of property, plant and equipment are determined by

comparing the proceeds from disposal with the carrying amount of property, plant and equipment and

are recognised within »other operating income« in Income Statement.

Subsequent costs related to property, plant and equipment The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying

amount of the item if it is probable that future economic benefits embodied within the part will flow to the Group and its cost can be reliably measured. All other costs, such as day-to-day servicing, are

recognised in profit or loss as incurred.

Depreciation

Depreciation is recognised on a straight-line basis over the estimated useful lives of each part of an

item of property, plant and equipment. Land is not depreciated.

Depreciation rates are based on the estimated useful life of the assets as follows:

in years, min. in years,

max.

Buildings 7 40

Plant and equipment for graphic activity 3 20

Laboratory equipment 3 10

Vehicles 5 8

Telephone sets, telegraph switchboard 3 5

Furniture 5 6

Typewriters, computer equipment 3 8

Computer equipment for fire safety 3 3

Measuring and control appliances 4 6

Useful life is determined and examined in accordance with the Accounting Manual. The item Buildings

includes parts, such as hydraulic bridge-over plate, with a 14.2% depreciation rate or useful life of 7 years.

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Depreciation methods, useful life and the residual value are examined at the reporting date in

accordance with the Accounting Manual.

e) Intangible assets

Goodwill Goodwill (badwill) arises upon the acquisition of subsidiaries, associated companies and joint ventures.

Acquisitions as from date of transition to IFRS

In acquisitions made on or after 1 January 2006 goodwill is defined as the excess or difference

between the purchase price and the Group’s share in the net fair value of identified assets, liabilities

and contingent liabilities of the acquired company. If the excess is negative (badwill), it is directly

recognised in the Income Statement.

Subsequent measurement

Goodwill is carried at cost less any accumulates impairment losses. With the receiver of investments,

accounted for by equity method, the book value of goodwill is included in the investment book value.

Research and development Expenditure on research activities aiming to achieve new scientific and professional knowledge and

understanding is recognised in profit or loss when incurred.

The development activities involve a plan or design for the production of new or essentially improved

products and processes. An expense for development is recognised if it can be reliably measured, if the product or process is technically and operationally feasible, if there is a potential for future

economic benefits, if the Group has adequate resources for the completion of development, and if it intends to use or sell such assets. The recognised expenditure comprises the cost of materials, direct

labour costs, and other costs which can be directly attributable to qualifying the asset for its intended

use. Borrowing costs related to the development of qualifying assets and other expenditure are recognised in profit or loss as incurred.

Capitalised development expenditure is measured at cost less accumulated amortisation and

accumulated impairment losses.

Other intangible assets Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortisation and accumulated impairment losses.

Subsequent expenditure Subsequent expenditure related to intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is

recognised in profit or loss as incurred.

Amortisation Amortisation is accounted for on a straight-line basis over the estimated useful lives of intangible assets. Amortisation of an asset begins when the asset is available for use. The estimated useful lives

for the current and comparative periods are as follows:

Depreciation rates are based on the estimated useful life of the assets:

in years, min. in years,

max.

Intangible assets 3 10

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f) Leased assets

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are

classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal

to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to

that asset.

g) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the First-In-First-Out method (FIFO), and includes expenditure incurred in acquiring the

inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an

appropriate share of production overheads based on normal operating capacity.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated

costs of completion and selling expenses.

h) Impairment of assets

Financial assets A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence

indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the

difference between its carrying amount, and the present value of the estimated future cash flows

discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value.

Individually significant financial assets are tested for impairment on an individual basis. The remaining

financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available-

for-sale financial asset recognised previously directly in equity is transferred to profit or loss.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the

impairment loss was recognised. For financial assets measured at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognised in profit or loss. For available-

for-sale financial assets that are equity securities, an impairment loss cannot be reversed through profit or loss.

Non-financial assets At each reporting date, the carrying amount of non-financial assets of the Group other than inventories and deferred tax assets, is examined to find out any indication of impairment. If such an

indication exists then the asset’s recoverable amount is estimated. For goodwill and intangible assets

that have indefinite useful lives or that are not yet available for use, recoverable amount is estimated at each reporting date.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its

fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the

98

time value of money and the risks specific to the asset. For the purpose of impairment testing, assets

are grouped together into the smallest group of assets that generates cash inflows from continuing

use that are largely independent of the cash inflows of other assets or groups of assets (the »cash-generating unit«). The goodwill acquired in a business combination, for the purpose of impairment

testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit

exceeds its recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any

goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss

has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the

extent that the asset’s carrying amount does not exceed the carrying amount that would have been

determined, net of depreciation or amortisation, if no impairment loss had been recognised in previous periods.

i) Employee benefits Other long-term employee benefits Net liability of the Group that arises in connection with long-term employee benefits is a sum of future

benefits paid to the employees in exchange for their work performed in the current and previous

periods. Such amount of benefits is discounted to determine its present value, and then decreased by

the fair value of all related assets. At the reporting date, the discount rate is the recorded yield of AA

rated bonds, with the maturity approximately the same as the maturity of the Group’s liabilities. The

calculation is made using the projected unit credit method. Any actuarial gains and losses are

recognised in the profit or loss in the period in which they occur.

Short-term employee benefits Obligations for short-term employee benefits are measured on an undiscounted basis and are expensed as the related service is provided.

The liability is disclosed in the amount for which payment is expected in the form of a premium,

payable within twelve months after the expiry of the period of performing the work, or a profit sharing scheme, if the Group has a present legal or constructive obligation to make such payments due to

previous work performed by the employee and such obligation can be measured reliably.

j) Provisions

A provision is recognised if, as a result of a past event, the Group has present legal or constructive obligations that can be estimated reliably, and it is probable that an outflow of economic benefits will

be required to settle the obligation. Provisions are determined by discounting the expected future cash

flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

Warranties for products and services A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their

associated probabilities.

99

k) Revenues Revenues from the sale of products Revenue from the sale of products is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised

when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable and the associated costs or possible return of goods and when there is

no continuing Group involvement with the products sold, and when the level of revenues can be

measured reliably.

Transfers of risks and rewards vary depending on the individual terms of the contract of sale. For sales of goods, transfer usually occurs when the product is received at the customer’s warehouse;

however, for some international shipments transfer occurs upon loading the goods onto the relevant

carrier.

Revenues from services Revenue from services rendered is recognised in profit or loss in proportion to the stage of completion

of the transaction at the reporting date. The stage of completion is assessed by reference to surveys

of work performed.

Rental income Rental income is recognised in income on a straight-line basis over the term of the lease.

l) Financial income and expenses Financial income comprises interest income on funds invested (including available-for-sale financial

assets), dividend income, gains on the disposal of available-for-sale financial assets and changes in

the fair value of financial assets held for trading at fair value through profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method.

Dividend income is recognised on the date that the shareholder’s right to receive payment is

established, which in the case of quoted securities is the ex-dividend date.

Financial expenses comprise interest expense on borrowings, dividends on preference shares classified

as liabilities, foreign currency losses, changes in the fair value of financial assets at fair value through profit or loss and impairment losses recognised on financial assets that are recognised in profit or loss.

All borrowing costs are recognised in profit or loss using the effective interest method.

Exchange gains and losses are disclosed in net amount.

m) Income tax

Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is

recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous

years.

Deferred tax is recognised using the balance sheet method, providing for temporary differences

between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. All temporary differences are taken into consideration. Deferred

tax is measured at the tax rates that are expected to be applied to the temporary differences when

100

they reverse, based on the laws that have been enacted or substantively enacted by the reporting

date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax

liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on

a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which a deferred tax asset can be utilised. Deferred tax assets are reduced to the

extent that it is no longer probable that the related tax benefit will be realised.

Additional income tax that arises from the distribution of dividends is recognised at the same time as

the liability to pay the related dividend is recognised.

n) Net earnings per share

The Group presents basic earnings per share data for its ordinary shares. The basic earnings per share are calculated by dividing the profit or loss attributable to ordinary shareholders by the

weighted average number of ordinary shares in the period. Diluted earnings per share are identical as the Group holds neither any preference nor convertible shares.

o) Segment reporting

A segment is a distinguishable component of the Group that is engaged either in providing related products or services (business segment), or in providing products or services within a particular

economic environment (geographical segment), which is subject to risks and returns that are different from those of other segments.

The Group’s segment reporting is based on business segments.

Inter-segment pricing is determined on an arm’s length basis.

Segment results, assets and liabilities include items directly attributable to a segment as well as those

that can be allocated on a reasonable basis. Unallocated assets include investments whereas unallocated liabilities include capital.

o) New standards and interpretations not yet effective

A number of new standards, amendments to standards and interpretations are not yet effective for

the year ended 31 December 2007, and have not been applied in preparing these financial statements:

• IFRS 8 – Operating Segments introduces the “management approach” to segment reporting.

IFRS 8, which becomes mandatory for the Group’s 2009 financial statements, will require the

disclosure of segment information based on the internal reports regularly reviewed by the Group’s Chief Operating Decision Maker in order to assess each segment’s performance and to

allocate resources to them. Currently the Group presents segment information in respect of its business segment (see Note No. 1).

• Revised IAS 23 – Borrowing Costs removes the option to expense borrowing costs and

requires that an entity capitalise borrowing costs directly attributable to the acquisition,

construction or production of a qualifying asset as part of the cost of that asset. The revised IAS 23 will become mandatory for the Group’s 2009 financial statements and will constitute a

change in accounting policy. In accordance with the transitional provisions the Group will apply the revised IAS 23 to qualifying assets for which capitalisation of borrowing costs

commences on or after the effective date.

101

• IFRIC 11 IFRS 2 – Group and Treasury Share Transactions requires a share-based payment

arrangement in which an entity receives goods or services as consideration for its own equity

instruments to be accounted for as an equity-settled share-based payment transaction, regardless of how the equity instruments are obtained. IFRIC 11 will become mandatory for

the Group’s 2008 financial statements, with retrospective application required. It is not expected to have any impact on the financial statements.

• IFRIC 12 – Service Concession Arrangements provides guidance on certain recognition and measurement issues that arise in accounting for public-to-private service concession

arrangements. IFRIC 12, which becomes mandatory for the Group’s 2008 financial statements, is not expected to have any effect on the financial statements.

• IFRIC 13 – Customer Loyalty Programmes addresses the accounting by entities that operate,

or otherwise participate in, customer loyalty programmes for their customers. It relates to

customer loyalty programmes under which the customer can redeem credits for awards such as free or discounted goods or services. It is not expected that IFRIC 13, which becomes

mandatory for the Group’s 2009 financial statements, will have an impact on the financial statements.

• IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction clarifies when refunds or reductions in future contributions in relation to

defined benefit assets should be regarded as available and provides guidance on the impact of minimum funding requirements (MFR) on such assets. It also addresses when a MFR might

give rise to a liability. IFRIC 14, which becomes mandatory for the Group’s 2008 financial statements, is not expected to have any impact on the financial statements.

4. Determination of fair value A number of the Group’s accounting policies and disclosures require the determination of fair value,

for both financial and non-financial assets and liabilities. Fair values have been determined for

measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to

that asset or liability.

a) Property, plant and equipment The fair value of property, plant and equipment recognised as a result of a business combination is based on market values. The fair value of property is the estimated amount for which a property could

be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and

without compulsion. The market value of items of plant and equipment is based on offered market

price of similar items.

b) Intangible assets The fair value of intangible assets is determined as the present value of estimated future cash flows

expected to be derived from their use and eventual sale.

c) Inventories The fair value of inventories in business combinations is determined on the basis of their expected

sales value achieved in ordinary business reduced by the estimated cost of completion and the

estimated sale costs and an adequate margin with regard to the work for completion and sale of

inventories.

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d) Investment in equity and debt securities The fair value of financial assets at fair value through profit or loss, held-to-maturity investments and

available-for-sale financial assets is determined by reference to their quoted bid price at the reporting date. The fair value of held-to-maturity investments is determined for disclosure purposes only.

e) Trade and other receivables The fair value of trade and other receivables is estimated as the present value of future cash flows,

discounted at the market rate of interest at the reporting date.

f) Non-derivative financial liabilities Fair value, which is determined for disclosure purposes, is calculated based on the present value of

future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases the market rate of interest is determined by reference to similar lease

agreements.

5. Financial risk management

The Group is exposed to the following risks arising from financial instruments:

Credit risk

Liquidity risk

Market risk.

This section deals with the Group and its exposure to the above risks, its objectives, policies and

procedures for risk measurement and management, and its equity management. Other quantitative

disclosures are indicated below.

Management is entirely responsible to set up the Group’s risk management framework.

The risk management policies are designed to identify and analyse risks that can pose a threat to the

Group, on the basis of which adequate constraints and controls are determined, as well as risks are

monitored and constraints considered. The risk management policies and systems are subject to a

regular review and updated information on market conditions and activities of the Group is regularly

communicated. The Group endeavours through training and risk management standards and

procedures to develop a disciplined and constructive environment in which all the employees are

aware of their role and obligations.

Credit risk

Credit risk is the risk of suffering financial loss should any of the clients or parties to the financial

instrument contract fail to meet their contractual obligations. Credit mainly occurs due to Group’s

trade receivables and investment securities.

Trade and other receivables

The Group’s exposure to credit risk mainly depends on individual client’s characteristics. The

demographics of the Group’s client base as well as payment risk in terms of industry or country in

which a client operates does not have such impact on credit risk. Approximately 2.5 % of Group’s

revenues may be attributed to sales with one client alone. In geographical terms, there is no credit

risk concentration.

The Group shapes its credit policy according to which a creditworthiness analysis of each new client is

made before the Group offers them its standard payment and delivery conditions. The Group review

includes any exterior estimates, if available and in certain cases also bank’s references. Purchase limits

– to be determined in the form of the highest open amount – are set for each client separately; such

limits are verified every three months. Any transactions with a client not meeting the standard

103

creditworthiness are carried out solely through advance payments.

The ownership is retained in the goods until those goods have been paid up in full. In the event of a

non-payment for the goods the Group’s claim is therefore secured. As for trade and other receivables,

the Group requires no surety.

The Group makes allowance for the value of impairment, representing the amount of estimated losses

arising from trade and other receivables as well as investments. The main elements of this allowance

are a special portion of the loss related to individual key risks, and the total loss, formed for groups of

similar assets due to incurred losses not yet defined. An allowance for total amount of loss is

determined by taking into account historical data referring to payment statistics of similar financial

resources.

Allowances for trade receivables are made on the basis of a collectability analysis of each receivable.

Allowance is based on receivables which remain unpaid 90 days after the maturity. The average trade

receivables allowance accounts for 1.5 % of net sales revenue or 0.8 percentage points more than in

2006. Total trade receivables are divided into:

- Past due of EUR 2,712 thousand

- Not yet due of EUR 6,768 thousand

Investments

The Group reduces its credit risk exposure through investments in liquid securities of contractual

parties with adequate credit rating.

Guarantees

In accordance with its policy, the Group provides financial guarantees or sureties solely to subsidiaries

fully owned by the controlling company. As of 31 December 2007, the Company records guarantees

granted under off-balance sheet items.

Liquidity risk

Liquidity risk is the risk arising from the Group’s inability to meet its financial obligations when they fall

due. The Group manages to ensure the highest possible liquidity by always having sufficient liquid

assets available to settle its obligations within the set time limits, both under normal and stressful

circumstances, without incurring unacceptable losses or risking harm to the Group’s reputation.

Evaluation of products and services is based on activities aimed at monitoring the Group’s cash flow

needs and optimising return on investments. The Group also claims it has sufficient cash (sight

deposits) to cover operating expense for a period of 60 days, including servicing financial liabilities;

the latter excludes any potential consequences of unpredictable extraordinary circumstances, such as

natural disasters for example.

The Group has the following credits lines:

for approved overdrafts with domestic banks totalling EUR 1,151 thousand; interest rate ranges

up to maximum 7%. As of 31 December 2007, the overdraft amounted to EUR 73 thousand.

Market risk

Market risk is the risk that changes in market prices, such as exchange rates, interest rates and equity

instruments may impact the Group’s revenues or the value of financial instruments. The objective of

market risk management is to manage and control the market risk exposure within reasonable limits

while optimising the profit.

104

The Group trades in financial instruments and assumes financial obligations, both with the aim of

managing market risks. All these transactions are carried out in compliance with the Group’s policies.

In order to reduce the fluctuations in earnings to the lowest possible level the Group makes sustained

efforts to use accounting treatment for risk protection purposes.

Currency risk

The Group is exposed to currency risk in purchasing and sales, namely in transactions in currencies

not being functional currencies of the Group companies. The Group performs the majority of its

transactions in EUR, HRK, USD, GBP, CHF and DKK. As far borrowings are concerned, transactions

are carried out in Euros. The Group made no special hedging against currency risks.

Interest rate risk

The Group is exposed to interest rate risks since a variable interest rate applies to most of its financial

liabilities. The Group has so far had no specific hedging against changes to interest rates.

Capital management

The Management Board has made a decision to keep a large capital volume so as to maintain

confidence of shareholders, creditors and market and the Group’s sustainable development. The

Supervisory Board monitors the return on equity defined by the Group as net earnings divided by

average equity less net profit for financial year.

The Group seeks to maintain a balance between the higher returns that might be possible with higher

levels of borrowings and the advantages and security afforded by a sound capital position. The Group’s goal for 2007 was to achieve a 6.1 percent return on the capital employed. The actual return

achieved was 0.57 percent.

During the reporting year, no changes related to capital management occurred at the Group.

Neither the parent company nor its subsidiaries were subject to capital requirements to be determined

by external bodies.

105

6. Segment reporting

Segmental breakdown in EUR thousand

Security printed

matter

Commercial printed

matter Other Total

2007 2006 2007 2006 2007 2006 2007 2006

Net sales revenue 9,261 6,318 27,552 23,348 2,707 2,340 39,520 32,007

Net profit or loss -139 -123 -243 -84 -41 -46 -423 -253

Assets by business

segments 11,035 11,683 31,008 36,371 3,226 4,327 45,270 52,381

Unallocated assets 16,479

Total assets 11,035 11,683 31,008 36,371 3,226 4,327 61,749 52,381

Total liabilities 7,081 4,566 22,202 15,559 2,070 1,691 31,354 21,817

Investments 1,561 590 2,963 1,976 452 216 4,976 2,782

Depreciation 1,165 816 2,666 2,847 341 302 4,171 3,966

Sales revenue stated under Other comprises revenue from sale of materials, merchandise and fixed

assets.

The Group primarily does business in Europe (97%), which is why it does not report by geographical

segments.

7. Acquisition of subsidiary

Cetis, d.d., Celje as controlling company of the Group acquired on 3 January 2007 a 100% stake in AMBA Co., d.o.o., Ljubljana worth EUR 1,920 thousand.

Acquired assets and debts of AMBA Co., d.o.o., Ljubljana subsidiary as at the date of

acquisition on 1 January 2007

in EUR thousand

Book value

Fair value

adjustment

Recognised value upon

acquisition

Property, plant and equipment 5,143 -30 5,113

Intangible assets 108 -1 107

Inventories 599 599

Trade and other receivables 1,462 1,462

Cash and cash equivalents 95 95

Borrowings -4,152 -4,152

Trade and other liabilities -1,469 -1,469

Provisions -27 -27

Deferred tax liabilities -442 7 -435

Net identifiable assets and liabilities 1,317 -24 1,293

Cost 1,920

Goodwill -627

Goodwill derives from good positioning of the acquired company in foreign markets.

106

INCOME STATEMENT DISCLOSURES

1. Revenues

in EUR

thousand

Sales revenue by type 2007 2006

Sale of products in domestic market 21,838 14,922

Sale of services in domestic market 740 2,568

Rental revenues in domestic market 121 62

Sale of products in foreign market 14,028 9,086

Sale of services in foreign market 458 477

Sale of materials and merchandise in domestic market 1,509 1,237

Sale of materials and merchandise in foreign market 826 3,655

Total 39,520 32,007

2. Expenses

in EUR

thousand

Expenses by primary types, change in value of inventories 2007 2006

Cost of goods and materials sold 4,942 3,635

Cost of materials used and services 20,661 16,792

Labour cost 10,421 8,508

Depreciation and amortisation expense 4,171 3,966

Other (operating) expense 928 727

Change in inventories of finished products, work-in- progress and semi-manufactures -170 -124

Total (operating) expenses 40,953 33,504

Labour cost

in EUR

thousand

2007 2006

Gross wages and salaries 7,353 5,924

Pension insurance cost 814 700

Cost of other social insurance 605 448

Other labour cost 1,649 1,436

Total labour cost 10,421 8,508

The wages and salaries costs are accounted for in compliance with collective agreements, internal

rules and regulations governing wages and other emoluments, the Decree on the amount of costs

recognised as deductible expense, and individual employment agreements. Other labour cost comprises the cost of meal allowances, commuting allowances, holiday bonuses, retirement bonus,

and payroll tax.

In 2007, the Group also allocated EUR 260 thousand for additional pension insurance, together with

the employees who allocated 1,615% of their gross wages to the same purpose. In the preceding year, the parent company paid EUR 218 thousand for this purpose under the same terms.

107

3. Other operating income

in EUR

thousand

Item 2007 2006

Gain in disposal of fixed assets 107 40

Reversal of impairment of property, plant and equipment 81

Income from reversal of provisions 476 431

Capitalised own products and services 264

Reversal of revaluation of trade receivables and inventories 38 120

Indemnities, subsidies and grants received 29 92

Other 361 216

Total 1,011 1,244

4. Net financial income (expenses)

in EUR

thousand

2007 2006

Interest income 82 122

Income from dividends and other profit shares 254 308

Foreign exchange gains 8 9

Income from sale of investments 541 989

Other financial income 1,541 424

- Change in fair value of investments through profit or loss 1,505 406

- Other 36 18

Total financial income 2,426 1,852

Interest expense 957 614

Foreign exchange losses 13 38

Loss in disposal of investments 137 2

Other financial expenses 437 10

Financial expenses owing to impairment 10 6

Total financial expenses 1,554 670

Total net financial income 872 1,182

5. Taxes

in EUR

thousand

2007 2006

Current tax 60 23

Deferred tax (from Income Statement) 217 -92

Total 277 -69

108

Effective corporate income tax rates

in EUR

thousand

2007 2007 2006 2006

Total profit or loss before tax 450 929

Tax effects:

Tax at general tax rate 23.0% 104 25.0% 232

Adjustment for tax rate from other tax territories -2.0% -9 -0.6% -6

Tax exempt income -23.3% -105 -13.2% -122

Non-deductible expenses 27.4% 124 34.8% 324

Losses for which deferred tax asset has not been recognised 50.2% 226

Tax relief -21.0% -95 -26.3% -245

Tax loss -1.1% -5 -28.7% -267

Other changes to tax base 8.3% 37 1.5% 14

Total tax expense 61.5% 277 -7.5% -69

Deferred taxes recognised directly in equity

in EUR

thousand

2007 2006

Property, plant and equipment -435

Investments 109 -163

Total -326 -163

6. Disclosure of auditor fees

The total amount spent on payment of all auditing services amounted to EUR 57 thousand in 2007.

109

Balance Sheet disclosures

7. Property, plant and equipment

In 2007, the Group invested EUR 4,682 thousand in land, buildings and equipment.

Movement in property, plant and equipment

in EUR

thousand

Land Buildings Equipmen

t Other

equipment PPE in

progress Advances

given Total

Cost


Adjustment of the opening balance 2 -184 180 -2

Acquisitions in the period 12 53 1,116 52 1,233


Disposals 2,249 2,054 142 17 4,462

Balance at 31/12/2006 1,518 15,874 38,647 119 215 56,373

Balance at 1 January 2007 1,518 15,874 38,647 119 215 56,373

Increase upon acquisition 2,392 1,516 1,204 5,112



Transfers -33 45 -92 80

Disposals 2 1,586 1,588

Balance at 31/12/2007 3,910 17,561 42,532 27 549 65 64,644

Allowance

Balance at 1 January 2006 6,929 25,658 2 32,589

Adjustment of the opening

balance -73 72 -1

Depreciation 491 3,255 31 3,777

Disposals 54 1,528 1 1,583

Balance at 31/12/2006 7,366 27,312 104 34,782

Balance at 1 January 2007 7,366 27,312 104 34,782



Transfers 104 -104

Balance at 31/12/2007 7,888 29,452 37,340

Book value


Balance at 31 December

2006 1,518 8,508 11,334 15 215 21,591

Balance at 1 January 2007 1,518 8,508 11,334 15 215 21,591 Balance at 31 December

2007 3,910 9,673 13,080 27 549 65 27,304

110

Disposals made in 2007 mainly comprise the sale of commercially and technically outdated, yet still

functional machinery.

Mortgages entered in the Land Register to secure liabilities from borrowings amounted to EUR 18,655

thousand and the pledged plant and equipment to EUR 9,440 thousand (the remaining debt is only EUR 12,405 thousand); the lien and guarantees received amounted to EUR 3,820 thousand.

Property, plant and equipment acquired under finance lease

in EUR

thousand

Type 2007 2006

Equipment 368 283

8. Intangible assets

Long-term property rights mainly include computer software for the renovation of the business

information system. Development costs are recognised costs of projects that prove to be feasible for

the project completion and eligible for the use or sale. The purpose is to complete the project and sell or use it in view of the probability of the economic benefits and the capability of a reliable

measurement of costs attributable to the respective intangible asset. In 2007, the Group invested EUR 294 thousand in intangible assets

In 2007, the Group disclosed goodwill arising from the acquisition of AMBA Co., d.o.o., Ljubljana

subsidiary, included in consolidation for the first time.

Changes in intangible assets

in EUR

thousand

Goodwill Development

cost

Long-term

property rights

Intangible assets

under construction Total

Cost

Balance at 1 January 2006 118 1,398 3 1,519

Adjustment of the opening balance 7 7

Acquisitions in the period 185 1,237 1,422

Change to PPE in progress -3 -3

Balance at 31/12/2006 303 2,642 2,945


Increase upon acquisition 627 5 103 735

Acquisitions in the period 257 257


Disposals 7 7

Balance at 31/12/2007 627 303 2,897 140 3,967

Allowance



Adjustment of the opening balance 1 1

Balance at 31/12/2006 79 1,370 1,449

111



Disposals 6 6

Balance 31/12/2007 137 1,645 1,782

Book value

Balance at 1 January 2006 79 178 3 260


Balance at 1 January 2007 224 1,272 1,496 Balance at 31 December

2007 627 166 1,252 140 2,185

9. Investments in associates

Associated companies include:

Druckman Hungary, in which the Company holds a 33 % stake for which it has made allowance

for the entire investment since the associated company has not operated for several years and is

not disclosed in movement in investments.

La Societe Nationale des Loteries Sportives, BP 2150, Libreville, Gabon, with the stake measured

using the equity method.

KIG KGA, proizvodnja, trgovina, inženiring d.o.o., Zagorica 18, 1292 Ig. KIG KGA is a jointly

controlled company; the stake is measured using the equity method.

Lotaria Nacionale SH.A Rruga Kavajes, Porta Kry Esore, Misto Mame, Tirana. The stake is

measured using the equity method.

in EUR

thousand

Type 2007 2006

La Societe Nationale des Loteries Sportives (SNLS),

Libreville,Gabon - 31 % stake 47

KIG KGA,proizvodnja,trgovina,inženiring d.o.o. -

50 % stake 18 17

Lotaria Nacionale SH.A Rruga Kavajes,Porta Kry Esore,

Misto Mame,Tirana – 46.6 % stake 8

Total 18 72

Movement in investments in associates

in EUR

thousand

Cost Net value


Balance at 31 December 2006 72 72

Write-up of proportional share in profit/loss -54 -54


112

La Societe Nationale des Loteries Sportives (SNLS),

Gabon - 31 % stake

in EUR

thousand

2007 2006

Non-current assets 210

Current assets 74

Total assets 284

Non-current liabilities -707

Current liabilities -108

Total liabilities -815

Revenues 83

Expenses -431

Income tax

Net profit or loss – recognised in profit or loss -348

KIG KGA,proizvodnja,trgovina,inženiring d.o.o. -

50 % stake

in EUR

thousand

2007 2006

Non-current assets

Current assets 88 29

Total assets 88 29

Non-current liabilities

Current liabilities -70 -11

Total liabilities -70 -11

Revenues 119 114

Expenses -119 -113

Income tax

Net profit or loss – recognised in profit or loss 1

Nacional Sh.a., Tirana, Albanija – 46.6 % stake

in EUR

thousand

2007 2006

Non-current assets 383

Current assets 120

Total assets 503

Non-current liabilities

Current liabilities -573

Total liabilities -573

Revenues 5

Expenses -83

Income tax

Net profit or loss – recognised in profit or loss -78

113

10. Available-for-sale investments

in EUR

thousand

Type 2007 2006

Available-for-sale investments 14,305 13,965

The Company treats all investments as marketable since it verifies them in the market on a regular

basis even though only a part of these investments are listed on the stock exchange.

Changes in available-for-sale investments

in EUR

thousand

Cost Allowance


Balance at 1 January 2006 12,998 -172 12,826


Sale -2,230 172 -2,058




Sale -4,718 -4,718


Balance at 31 December 2007 14,305 14,305

11. Loans

in EUR thousand

Type 2007 2006

Loans 1,249 1,303

Loans granted include loans to associated company, loans to employees for purchase of flats and construction, and funds invested in long-term bonds issued by a bank.

Changes in loans

in EUR thousand

Cost Allowance



Increase 770 770

Repayment 93 93



Increase 500 301 199

Repayment 221 221



114

12. Non-current trade receivables

in EUR

thousand

Type 2007 2006

Other non-current trade receivables for associated companies 878

Total 878

Changes in non-current trade receivables

in EUR

thousand

Cost Allowance


Balance at 1 January 2007

Increase 878 878


13. Deferred tax assets and liabilities

in EUR

thousand

Tax assets Tax liabilities Tax assets-tax liabilities

31/12/2007 31/12/2006 31/12/2007 31/12/2006 31/12/2007 31/12/2006

Property, plant and

equipment 439 -439

Investments 21 21 132 245 -111 -224

Receivables 52 48 52 48

Inventories 25 25 Provisions for termination

pay 210 247 210 247


Tax loss 81 222 81 222

Total 364 581 571 245 -207 336

The Group used a 22 % tax rate in deferred tax accounting, except in tax loss where it applied a tax

rate ranging from 20% to 22% based on the estimation of tax loss utilisation in the coming years.

Deferred tax liabilities are based on surpluses arising from revaluation of available-for-sale

investments, measured at fair value through equity.

Deferred tax assets are based on provisions for anniversary bonuses and termination pays on

retirement, tax loss and temporary differences arising from accounting for income tax on investments,

receivables, inventories and other provisions to be recognised as tax deductible in subsequent

periods.

The Group recognised deferred tax assets for the tax loss based on the estimate that in the coming

years taxable profits will be available, against which the deferred tax assets can be used in the future.

In the periods of tax loss utilisation a decrease in deferred tax assets will mean a corresponding

decrease in profits.

115

In 2007, the investment incentive allowance amounted to EUR 9 thousand and the unexploited tax

loss to EUR 395 thousand.


in EUR

thousand

1/1/2006

Recognised under income/

expenses

Recognised

under equity 31/12/2006

Investments -56 -5 -163 -224

Receivables 56 -8 48

Inventories 30 -5 25

Provisions for termination pay 343 -96 247


Tax loss 34 188 222

Total 407 92 -163 336


in EUR

thousand

1/1/2007

Recognised

under income/ expenses


Property, plant and equipment -4 -435 -439

Investments -224 4 109 -111

Receivables 48 4 52

Inventories 25 -25

Provisions for termination pay 247 -37 210

Other provisions 18 -18

Tax loss 222 -141 81

Total 336 -217 -326 -207

14. Inventories

in EUR

thousand

Type 2007 2006

Materials 2,126 2,006

Work in process 539 895

Products 1,288 591

Merchandise 234 253

Total 4,187 3,745

The Group wrote off for the year 2007 the assets of EUR 514 thousand related to materials and

products which had no longer been usable. The largest product write-offs related to labels, plastic

cards and wrappings as well as documents as a result of the use of inadequate material. The Group

managed to reduce partially the related costs through claims concerning the materials, as shown

consequently in production cost.

A surplus of EUR 115 thousand was recorded, mainly in material, and a deficit of EUR 48 thousand in

material assets.

116

Allowances are accounted for by type of inventories and movement. No new allowances had to be

made other than those made in the past periods. When examining the inventories in the stores

accommodating items under complaint, the inventories of materials, products and merchandise that did not show any movement for more than 12 months, the Group applied the same policies as in the

preceding years.

A change in accounting estimate concerning the evaluation of inventory of work in progress and

finished products is disclosed due to the exclusion of production cost in 2007. Expense in inventory of

work in progress amounts to EUR 12 thousand and EUR 37 thousand in inventory of finished products,

which means that the total expense transferred to other operating expenses accounted for EUR 49

thousand in 2007.

15. Current investments at fair value

in EUR

thousand

Type 2007 2006

Current investments 2,156 1,839

Total 2,156 1,839

All current investments directly affecting profit or loss refer to securities (shares) and investments in

mutual funds listed on stock exchange or traded on regulated markets.

in EUR

thousand

Cost

Allowance



Purchase 387 387

Sale -883 -7 -876



Transfer after division to available-for-sale shares -98 -98

Sale -188 -3 -185



16. Short-term loans

in EUR

thousand

Type 2007 2006

Short-term loans 330

Current portion of long-term loans 32 36

Total 362 36

117

17. Trade and other receivables

in EUR

thousand

Type 2007 2006

Short-term trade receivables 7,426 5,299

Short-term trade receivables from associated companies 9 403

Short-term trade receivables from third parties 256 969

Short-term advances receivable 47 24

Total 7,738 6,695

18. Cash and cash equivalents

in EUR

thousand

Type 2007 2006

Cash in banks, cheques and cash in hand 503 485

Deposits in banks 500 572

Total 1,003 1,057

19. Equity

Total equity consists of issued capital, capital surplus, legal and statutory reserves, retained earnings, own shares (deducted from equity), and fair value reserve.

In 2007, the Group acquired no own shares. As at 31 December 2007, the Group recorded 201 CETG

designated own shares.

The fair value reserve was decreased mainly due to the sale of an investment valued through equity.

20. Net earnings per share

Net earnings per share are calculated by dividing basic net earnings per share by the weighted average number of shares as denominator. Diluted earnings per share are identical as the Group holds

neither any preference nor convertible shares.

2007 2006

Net earnings in EUR 172,764 998,769

Weighted average number of ordinary shares 199,799 199,799

Net and diluted earnings per share in EUR 0.86 5.00

118

21. Borrowings

Borrowings comprise long- and short-term borrowings including the current portion of long-term

borrowings.

Long-term borrowings

in EUR

thousand

Type 2007 2006

Bank loans 11,840 9,210

The largest single debt is the loan for financing long-term investments totalling EUR 6,400 thousand with a 7-year repayment period and its principal already being repaid.

Short-term borrowings

in EUR

thousand

Type 2007 2006

Current portion of long-term bank loans repayable within one year 3,011 2,504

Short-term bank loans 3,451 1,461

Short-term borrowings from others 1,190 41

Total 7,652 4,006

Guarantees granted The guarantees granted amount to EUR 28,095 thousand and are recorded under off-balance sheet items.

Loan repayments

in EUR

thousand

Type

Total repayment

2007

Interest

2007

Principal

2007


Long-term loans of 1 to 5 years 2,215 729 1,486

Long-term loans with maturity longer than 5 years 1,246 1,246

Total 12,015 937 11,078

in EUR

thousand

Type

Total repayment

2006

Interest

2006

Principal

2006


Long-term loans of 1 to 5 years 1,254 430 824


Total 5,519 532 4,987

The Group made no distinction between interest on long-term loans by maturity and therefore the interest covers the period from 1 to 5 years.

119

22. Long-term operating liabilities

in EUR

thousand

Type 2007 2006

Long-term operating liabilities arising from finance lease contracts 74

Long-term operating liabilities arising from advances 4

Total 78

The Group received an advance on the basis of a contract and disclosed it under long-term operating

liabilities for the sake of maturity.

23. Provisions

in EUR thousand

Type 2007 2006

Provisions for warranties 99 126

Provisions for legal action 89 395

Provisions for other costs 40 13

Provisions for anniversary bonuses 247 236

Provisions for termination pays 767 837

Total 1,242 1,607

Change in provisions

in EUR

thousand

Type 31/12/2006 Made Used Reversed 31/12/2007

Provisions for warranties 126 55 82 99

Provisions for legal action 395 306 89

Provisions for other costs 13 27 40 Provisions for anniversary

bonuses 236 48 37 247

Provisions for termination pays 837 22 4 88 767

Total 1,607 152 41 476 1,242

The Group reviewed the provisions made, took account of changes and decreased total provisions for

the purpose of long-term deferred revenues and provisions for long-term accrued costs.

Provisions are made in accordance with contracts, legal bases and opinions by experts.

Provisions for termination pays and anniversary bonuses

On the basis of a calculation for each employee using the projected unit method, prepared by the

certified actuary, the provisions were decreased by EUR 60 thousand.

120

24. Trade and other payables

in EUR

thousand

Type 2007 2006

Trade payables 6,917 4,658

Short-term operating liabilities based on advances 1,329 733

Payables to employees 644 702

Payables to state and other institutions 653 408

Other payables 427 247

Total 9,970 6,748

The bases are the original documents that define an event in terms of time and substance.

Disclosures to Cash Flow Statement The Cash Flow Statement has been prepared under the indirect method using the data from the

Balance Sheet as at 31 December 2007 and the Balance Sheet as at 31 December 2006, and from the

data of the 2007 Income Statement, as well as the additional data required for the adjustment of inflows and outflows and for adequate breakdown of major items.

25. Financial instruments – risk management

Risk exposure and risk management At the time of a stable euro exchange rate, currency risks were almost completely excluded since

most of foreign transactions outside the EMU were made in EUR.

The Group is aware of the importance attributed to regular control and management of financial risks to which the Group is exposed in the markets, and views it as a relevant precondition for successful

operations and achieving of strategic goals. In 2007, the interest rate risks were primarily predominant (a general growth of interest rates). The analysis of these risks showed that the interest

rate risk was higher also due a new borrowing of the Company or the guarantees issued. The Group

expects these risks to increase also in the future as a result of the operations of the parent company and its subsidiaries.

All the long-term debts are denominated in Euros. Interest rates are based on the market principles

governing the price of money in the European banking market. The interest rate risks have not been

hedged so far, as the Group assesses that the interest rate fixations offered are still above the variable rates or that long-term movements in interest rates will allow more favourable cost of funding

in the whole borrowing period. The Group also decided not to assume any new (currency) risks due to lower interest rates of other currencies.

- Interest rate risks increased due to the extent of loans and sudden movements and increases in interest rates. The interest rate level was assessed to be still acceptable for all

long-term loans, with its contractually agreed variability and taking into account the maturity. The Group’s exposure to interest rate risks is higher than in the preceding year.

- Property risks and related risks were systematically and analytically assigned in 2007 to insurance companies.

- Liquidity risks are low at the Group over the short period of time as a result of efficient

asset management, adequate credit lines for cash flow control, satisfactory financial flexibility and good access to the necessary financial resources, whereby the Group takes into account

the circumstances in financial environment and on financial markets.

121

Financial instruments-credit risk

The highest credit risk exposure at the reporting date was the following:

Book value

In EUR thousand Note 2007 2006

Available-for-sale financial assets 10 14,305 13,965

Financial assets at fair value through profit or loss 15 2,156 1,839

Loans given 11,16 1,611 1,339

Long- and short-term operating receivables 12,17 8,616 6,695

Cash and cash equivalents 18 1,003 1,057

Total 27,691 24,895

The highest credit risk exposure for borrowings at the reporting date by geographical regions was the

following:

Book value


Domestic 398 652

Other European countries 327

Other regions – Africa 886 687

Total 1,611 1,339

Credit risk exposure

Book value

In EUR thousand Note 2007 2006

Receivables 12,17 8,616 6,695

Total 8,616 6,695

The highest credit risk exposure for trade receivables at the reporting date by geographical regions

was the following:

Book value


Domestic 4,861 4,011

Euro zone countries 815 694

Other European countries 1,337 1,587

Other regions - Africa 1,603 403

Total 8,616 6,695

The highest credit risk exposure for trade receivables at the reporting date by types of customers was

the following:

Book value


Wholesale customers 2,304 1,175

Customers, end users 6,312 5,520

Total 8,616 6,695

122

Impairment losses Trade receivables at the reporting date:

Gross Impairment Gross Impairment

In EUR thousand 2007 2007 2006 2006

Not yet due 7,671 4,003

Past due 0-30 days 566 1,860

Past due 31-120 days 508 64 863 209

Past due 121-365 days 350 244 183 55

More than one year 1,036 1,207 738 688

Total 10,131 1,515 7,647 952

Movement in allowances for impairment of trade receivables in the period:


Balance at 1 January 952 1.226

New allowances 648 224

Written-off allowances -49 -378

Paid written-off allowances -36 -120

Balance at 31 December 1,515 952

Currency risk Currency risk exposure was based on nominal amounts:

Thousand EUR HRK GBP CHF DKK EUR HRK USD CHF DKK CZK

31/12/2007 31/12/2006

Trade

receivables 8,165 7,146 5,978 7,467 2

Accounts payable -6,950 -3,351 -26 -111 -12 -4,557 -4,720 -3 -19 -36 -386

Secured bank loans -4,752

Balance sheet gross exposure -3,537 3,795 -26 -111 -12 1,421 2,747 -3 -17 -36 -386

Sensitivity analysis A 10 percent increase in value of euro against HRK, USD, GBP, CHF and DKK as at 31 December

would result in a decrease in equity and profit or loss by EUR 37 thousand. This analysis assumes that all other variables, interest rates in particular, remain constant.

123

Liquidity risk

31/12/2007 Book Contractual cash flow Up to 6 6 to 12 1 to 2 2 to 5 Over 5

in EUR thousand value months months years years years

Transaction account (TRR) overdraft 52 -54 -54


Other loans 1,189 -1,235 -301 -934

Accounts payable and other liabilities 10,047 -10,047 -10,023 -8 -16

TOTAL 28,377 -30,226 -15,731 -2,728 -3,446 -6,971 -1,350

3-month Euribor

31/12/2007 4.684

6-month Euribor 31/12/2007 4.707

31/12/2006 Book

Up to 6 6 to 12 1 to 2 2 to 5 Over 5

in EUR thousand value

Contractual

cash flow months months years years years

Transaction account (TRR) overdraft


Other loans 42 -46 -46

Accounts payable and

other liabilities 6,748 -6,748 -6,748

TOTAL 18,408 -19,965 -7,987 -1,501 -2,666 -6,326 -1,485

3-month Euribor 31/12/2006 3.725

6-month Euribor 31/12/2006 3.853

124

Interest rate risk At the reporting date, loan contracts signed by the Group were with a fixed and a variable interest rate.

Book value


Instruments with a fixed interest rate

Financial assets 1,223 1,136

Financial liabilities -4,280

Difference -3,057 1,136

Instruments with a variable interest rate

Financial assets 718 687

Financial liabilities -15,212 -11,668

Difference -14,494 -10,981

Sensitivity analysis of fair value for instruments with a fixed interest rate

A change in interest rates by one percentage point at the reporting date would result in an increase or

decrease of the equity by EUR 31 thousand.

Sensitivity analysis of cash flow for instruments with a variable interest rate

A change in interest rates by one percentage point at the reporting date would result in an increase

(decrease) of the equity and profit or loss by EUR 46 thousand.

Interest rates used in determination of fair value.

2007 2006

Cash, loans, deposits 0.2% - 7% 0.2% - 7%

26. Fair value

Fair and book value of assets and liabilities

in EUR

thousand

Book value at 31/12/2007


Book value at 31/12/2006


Available-for-sale investments 14,305 14,305 13,965 13,965

Loans 1,249 1,249 1,303 1,303

Long-term operating liabilities 878 878

Operating and other receivables 7,738 7,738 6,695 6,695

Investments at fair value through profit or loss 2,156 2,156 1,839 1,839

Short-term loans 362 362 36 36

Cash and cash equivalents 1,003 1,003 1,057 1,057

Long-term borrowings -11,840 -11,840 -9,210 -9,210

Short-term borrowings -7,652 -7,652 -4,006 -4,006

Trade and other payables -9,970 -9,970 -6,748 -6,748

Total -1,771 -1,771 4,931 4,931

125

Available-for-sale investments are measured at fair value and depend on the recognition of the investment after the trade date.

Investments at fair value through profit or loss are measured at stock market price.

Loans and borrowings are measured at amortised cost calculated using the method of effective interest rate that does not differ from the contractual interest rate. Accordingly, the contractual

interest rate is used in the calculations.

In trade and other receivables, the impairment to fair value is taken into account in view of

collectability. The receivables are not discounted owing to their short-term nature.

The same applies to trade and other payables that are not discounted owing to their short-term nature.

27. Related-party transactions

Relationships between related enterprises The transactions between the Group and the related parties were based on contracts of sale whereby

market prices of products and services were used.

La Societe Nationale des Loteries Sportives (SNLS), Gabon

in EUR thousand

Note 2007 2006

Sale of products and services 75 272

Costs -15

Interest

Loans given 12 500 687

Nacional Sh.a., Tirana, Albania in EUR

thousand

Note 2007 2006

Sale of products and services 23

Costs

Interest

Loans given 17 383

Disclosures by group of persons: members of the Management Board, Supervisory Board, and staff employed under individual employment contracts

Total remunerations received by groups of persons for the performance of functions or duties

in the financial year:

Management Board EUR 215 thousand

Other staff under individual employment contracts (13 persons) EUR 929 thousand

126

Supervisory Board EUR 33 thousand

Liabilities under earmarked loans granted by the Group to persons from these groups

amounted to EUR 0.5 thousand at the end of 2007.

In 2007, the loan repayments amounted to EUR 2 thousand.

Post balance sheet events

Major post balance sheet events are described in the introduction section of the Business Report.

127

cONTACTS

Management Simona Potočnik, MA, Managing Director

Strategic Development

Peter Aužner, Director

New Markets and Business Development

Gregor Mlakar, MA, Director

Economics and Finance

Srečko Gorenjak, MA, Finance Director

Controling Uroš Pilih Grah, Director

Business Integration and Human Resources Management

Barbara Germ Galić, MA, Director

Purchasing and Logistics

Nevenka Mužič, Director

Production

Boris Lipovšek, MBA, Technical Director

Research and Development of Graphic Technology Barbara Sušin, Director

Cetis New Technologies

Milan Kerič, Director

Sales

Commercial Printed Matter Mateja Luzar, Director Security Printed Matter Mihela Colnarič, Director

Cetis, grafične in dokumentacijske storitve, d.d. Čopova 24, 3000 Celje, Slovenia, EU

Tel: +386 (0)3 4278 500 Fax: +386 (0)3 4278 817

[email protected] www.cetis.si


http://www.cetis.si/

cetis d.d

Documents

cetis group

cetis company

business report

annual report

business orientation

business goals

supervisory board report

management code