Cetis d.d. by Izdelava strani noviSplet.com

ANNUAL REPORT 2007

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

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

I. INTRODUCTORY PART FINANCIAL HIGHLIGHTS OF THE CETIS GROUP AND THE CETIS COMPANY IN 2007

Operations in EUR thousand

Net sales revenues Sales – domestic market Sales – foreign markets Gross profit Net profit or loss for the financial year Investments Gross value added per employee Number of employees

2006 32,007 18,789 13,218 8,46 999

CETIS GROUP 2007 39,520 24,208 15,312 11,396 173

2006 26,990 18,790 8,200 6,313 951

CETIS d.d. 2007 28,411 21,625 6,786 8,423 957

2,781 27.7

4,976 28.4

2.512 25.9

4,788 27.2

441

499

419

436

Scope of investments

In EUR thousand Chain index

CETIS GROUP 2007 4,976 178.90

2006 2,782

2006 2,512

CETIS d.d. 2007 4,788 190.60

Structure of assets Asset/year in thousand Fixed assets Current assets Total assets

EUR

CETIS GROUP 2007

2006 39,008 13,372 52,380

46,303 15,446 61,749

2006 37,990 11,916 49,906

Cetis d.d. 2007 40,894 11,817 52,711

Structure of liabilities Liability/year in EUR thousand Capital Long-term liabilities Short-term liabilities Total liabilities

2006 30,564 11,062 10,754 52,380

CETIS GROUP 2007

2006

30,396 13,731 17,622 61,749

30,401 9,787 9,718 49,906

Cetis d.d. 2007 30,989 9,768 11,954 52,711

Sales in the companies of the Group Net sales revenues in EUR thousand Cetis-ZG d.o.o. Cetis-dooel Skopje Amba Co., d.o.o. Total

2006 4,897 240 / 5,137

2007 6,892 / 5,261 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, ﾄ経pova 24. In the Amba Co. Company the general manager changed in March. In the Nacional Sh.a. Company the general manager changed in March.

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 ÂťDevelopment and supply of health insurance cards and the supply of applets, the establishment and implementation of card personalizationÂŤ 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.

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 PotoÄ?nik, MA General Manager

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 54 th 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.

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 Companyâ&#x20AC;&#x2122;s Management worked well in 2007. The Supervisory Board confirms the Managementâ&#x20AC;&#x2122;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

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 shareholdersâ&#x20AC;&#x2122; 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.

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 Companyâ&#x20AC;&#x2122;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

GENERAL INFORMATION ON THE COMPANY

Company profile Company name: Cetis, Graphic and Documentation Services, d.d. Registered Office: Ä&#x152;opova 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. Banka Celje d.d Abanka Vipa d.d. Probanka d.d. Bank Austria Creditanstalt d.d. Telephone: Fax: E-mail address: Company's website:

02234-0011655374 06000-0026390798 05100-8000027831 25100-9704894196 29000-0003262161

03 4278 500 03 4278 817 info@cetis.si www.cetis.si

Companies of the Group

Cetis-ZG d.o.o., PoduzeÄ?e za trgovino i usluge, Industrijska ulica 11, 10431 Sveta Nedelja, Croatia e-mail address: cetis@cetis.hr 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: cetistirana@albnet.net t: +355 4 280 424 f: +355 4 280 425

Amba Co., proizvodnja in trgovina d.o.o., Ljubljana Leskoškova 11, 1000 Ljubljana, Slovenia e-mail address: info@amba-tc.si 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

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:

CETIS MANAGEMENT

SALES CPM

SALES SPM

PURCHASING AND LOGISTICS

PRAPHIC R&D

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

CENT

CI&HRM

FINANCE AND ECONOMICS

PRODUCTION

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.

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 2

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

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.

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%.

40.000 35.000 30.000 25.000 2006

20.000

2007

15.000 10.000 5.000 0 Čisti prihodki od prodaje

Prodaja domači trg

Prodaja tuji trg

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.

Sales in EUR thousand 2006

2007

Net sales revenues

26,990

28,411

Sales on the domestic market

18,790

21,625

8,200

6,786

Sales on foreign markets

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 Documents Flexible packaging Photo bags Cards Direct mail printed matter Non-self-adhesive labels Forms

2006 2,917 1,682 959 2,496 2,711 1,888 6,479

2007 4,952 2,401 1,138 3,763 2,436 1,540 4,709

Basic material used in production

1,087

1,564

Promotional printed matter Self-adhesive labels Lottery tickets Services Goods for resale Basic material and other Total

203 142 3,806 3,273 788 723 982 980 568 652 424 138 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

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 â&#x20AC;&#x201C; 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 â&#x20AC;&#x201C; 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.

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 e-mail address: cetis@cetis.hr 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 e-mail address: cetistirana@albnet.net

Amba Co., proizvodnja in trgovina d.o.o., Ljubljana LeskoĹĄkova 11, 1000 Ljubljana, Slovenia Tel: +386 (0)1 587 43 00 Fax: +386 (0)1 587 43 05 e-mail address: info@amba-tc.si 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 Cetis - ZG, d.o.o. Cetis â&#x20AC;&#x201C; dooel Skopje Amba Co., d.o.o. Ljubljana Total

2006 4,897 240 5,137

2007 6,892 5,261 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.

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 ZagrebaÄ?ka 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 CetisZG. 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, Ä&#x152;opova 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.

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 â&#x20AC;&#x201C; 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 Intangible fixed assets Land Buildings Equipment Total

2006 1,390

2007 237

44 1,078 2,512

204 4,347 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 Companyâ&#x20AC;&#x2122;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.

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 â&#x20AC;&#x201C; investments in 2006-2007 (non-consolidated) Inflows (offset) in EUR thousand Tangible fixed assets Financial investments Total

2006 268 1,052 1,320

2007 312 541 853

Outflows (offset) in EUR thousand Intangible fixed assets Tangible fixed assets Financial investments Total

2006 1,390 833 926 3,149

2007 237 4,551 1,802 6,590

Gross value added 2006-2007 Year Gross value added in EUR thousand Chain index

2006 10,838

2007 12,052

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 longterm 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 naloĹžbe and Raiffeisen Zentralbank. On 31 December 2007, the structure of share ownership was the following:

Shareholder Cetis-Graf d.d. Infond ID d.d. Kovinoplastika d.d. Kapitalska družba d.d. Slovenska odškodninska družba VS Probanka Glob. nal. sklad Triglav naložbe d.d. NFD Holding d.d. Merkur Raiffeisen Zentralbank a.g. Other legal and natural persons Total

Number of shares 78,493 27,358 18,649 15,609 14,948 12,049 12,043 3,500 530 459 16,362 200,000

Percentage of the share capital - % 39.25 13.68 9.32 7.80 7.47 6.02 6.02 1.75 0.27 0.23 8.19 100.00

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 2006 2007

Market value of a share in EUR (31 December) 100.15 93.15

Book value of a share in EUR (31 December) 152.00 154.94

Ratio between the two 65.9 60.1

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 PotoÄ?nik, 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 Net profit per share

2006 4,76

2007 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.

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 â&#x20AC;&#x201C; 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.

Orders and receiving year Total number of orders Total number of receipts Purchasing value in EUR

2005 2006 2007 5,371 5,006 5,003 5,864 5,833 19,043 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 % 2005 2006 2007

31 31 23

57 83 76

4 6 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.

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 â&#x20AC;&#x201C; 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 â&#x20AC;&#x201C; 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 Costs of transport of material Costs of transport services in Slovenia Costs of transport services related to export Total transport costs

15,247.08 EUR 66,171.83 EUR 160,765.08 EUR 200,334.99 EUR 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.

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

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 ÂťNacionalÂŤ 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, Cetisâ&#x20AC;&#x2122; 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.

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.

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 reissue 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 ÂťDevelopment and supply of health insurance cards and the supply of applets, the establishment and implementation of card personalizationÂŤ 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 â&#x20AC;&#x201C; the CeTacho application that enables data transfer, storage, search and archiving from tachograph cards and devices.

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.

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.

2005 2006 2007

552 441 499

430 419 436

22 22 22

AMBA Co., d.o.o., Ljubljana

Cetis-SK, dooel, Skopje

Cetis-Print, dooel, Skopje

Number of employees per organizational unit in Cetis, d.d. 2006 OU Management Sales KT Sales VT Purchasing and logistics CENT PI&UČV Finance and economics Marketing R&R graphic technologies Production Total

No of employees 2 0 0 0 0 21 13 93 12 278 419

% 0.48 0.00 0.00 0.00 0.00 5.01 3.10 22.20 2.86 66.35 100.00

2007 No of employees. 9 25 16 41 21 11 11 0 7 295 436

% 2.06 5.73 3.67

IND 06/07 450.00

9.40 4.82 2.52 2.52 0.00

52.38 84.62 0.00

1.61 67.66 100.00

58.33 106.12 104.06

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

4. Departures by

31 Dec. 2007

5. Situation

31 Dec. 2007

436

6. Fluctuation rate 7. Increased by 8. Deviation from the plan:

13,66 31 Dec. 2007

31 Dec. 2007

+32

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

2006 Number

II. Primary school III. Qualified workers IV. Qualified workers V. Secondary school VI. Vocational college VII. University degree VIII. Master’s degree Total

2007 %

96 7 138 106 29 39 4 419

Number

% 97 8 137 119 27 42 6 436

23 1.7 33 24.6 6.9 9.3 1 100

22.2 1.8 31.4 27.3 6.2 9.6 1.4 100

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 II. Primary school III. Qualified workers IV. Qualified workers V. Secondary school VI. Vocational college VII. University degree VIII. Master’s degree

2006 100 7 140 125 28

2007 103 7 149 143 30

42 5

52 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.

Labour costs and salaries â&#x201A;Ź/%

2006

2007

Average gross salary in Cetis 1,053.47 in EUR

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 29.18 of revenue in %

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 Seminars Computer science Foreign languages Trade fairs Part-time study Scholarships TOTAL

2006 209,397.29 3,489.45 7,136.12 37,539.56 23,721.75 26,556.86 307,841.03

2007 180,416.15 27,335.58 3,466.73 46,719.00 10,444.72 21,839.21 290,221.39

IND 06/07 86.16 783.38 48.58 124.45 44.03 82.24 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 noveltiesâ&#x20AC;Ś).

Statistical data for past five years

Datum Number of employees Share of women Share of men Average age of female employees Average age of male employees Average term of employment of female employees

2003 441 37.00% 63.00%

2004 451 37.00% 63.00%

Year 2005 430 37.21% 62.80%

2006 419 36.30% 63.70%

2007 436 40.60% 59.40%

40.7 years

41.4 years

41.89 years

42.18 years

40.75 years

40.5 years

40.98 years

41.65 years

41.71 years

40.82 years

21.7 years

21.01 years

22.78 years

22.98 years

20.58 years

Average term of employment of male employees Share of permanently employed Share of temporarily employed Fluctuation rate Share of women in management Arrivals Departures

20.7 years

22.27 years

21.56 years

21.48 years

20.13 years

96.10%

94.70%

95.80%

95.50%

84.60%

3.90% 8.51%

5.30% 2.80%

4.20% 7.09%

4.50% 7.51%

15.40% 13.66%

27.27% 11 32

30.00% 23 34

44.73% 86 69

29.41% 11 41

30.00% 23 13

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 January February March April May June July August September October November December Average

Sickness benefits chargeable to the company % 3.61 4.26 4.01 4.16 3.48 2.45 3.03 2.07 2.71 4.27 4.30 4.49 3.57

Reimbursed sickness benefits - % 3.03 3.16 3.01 2.67 2.36 2.08 2.16 2.30 2.37 2.15 2.06 2.41 2.48

Total - % 6.64 7.42 7.02 6.83 5.84 4.53 5.19 4.37 5.08 6.42 6.36 6.90 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 â&#x20AC;&#x201C; from 3.99% to 3.57% whereas the absence due to longer period of sickness leave slightly went up â&#x20AC;&#x201C; 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.

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 On the way to work At work Total

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

8 21 29

9 22 31

4 22 26

10 25 35

14 22 36

4 15 19

7 14 21

7 13 20

8 10 18

3 13 16

on the way to work

Number of accidents at work

40 30 20 total at work on the way to work

10 0 1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

on the way to work at work total

2007

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 Introduction of CTP technology Introduction of flexo CTP technology Construction of a warehouse for hazardous waste Total

Investments in EUR 400,000 117,892 330,000 847,892

Quantity of municipal waste Year Municipal waste in tonnes

2002 132

2003 67

2004 72

2005 75.9

2006 67.2

2007 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

17605

16662

15875

10301

10980

+6.6%

Packaging of 11854 dangerous substances

11022

10296

400

-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%

Cloth

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:

20.000 18.000 16.000 14.000 10.980

12.000

8.989

10.000 8.000 6.000

4.272

4.000 2.000 2.000

1.898 284

948

0 Krpe Embalaža 2004 nevarnih 2006 snovi

Barve

Lepila

Tonerji

Topila

Fiksirji

Razvijalci

2003 2005 2007

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. Year Natural gas consumption in ccm

2003 310,597

2004 284,389

2005 308,049

2006 238,323

2007 181,306

350.000

Natural gas consumption in ccm 310.597

308.049 284.389

300.000

238.323

250.000

181.306

200.000 150.000 100.000 50.000 0 2003

2004

2005

2006

2007

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

Electricity Year Consumption of electricity in kwh

2003

2004

2005

7,156,070

7,481,885

7,603,110

2006 7,492,920

2007 7,286,970

Poraba elektriÄ?ne energije v kWh

7.700.000

7.603.110 7.600.000 7.492.920

7.481.885

7.500.000 7.400.000

7.286.970

7.300.000 7.200.000

7.156.070

7.100.000 7.000.000 6.900.000 2003

2004

2005

2006

2007

Poraba elektriÄ?ne 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%.

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 Companyâ&#x20AC;&#x2122;s wastewater is within the legally prescribed limits for emissions into the public sewerage system.

Year Consumption of water in m3 35.000

2003 33.192

2004 21.024

33.192

2005 18.331

2006 13.090

2007 12.666

Consumption of water in m3

30.000 25.000 21.024 18.331

20.000 15.000

13.090

12.666

2006

2007

10.000 5.000 0 2003

2004

2005

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

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 LaĹĄko 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 Companyâ&#x20AC;&#x2122;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.

IV. FINANCIAL REPORT OF CETIS, d.d.

INCOME STATEMENTS (IFRS)

Achieved in 2007 28,411 -1,345 -18,643 -19,988

in EUR thousand Achieved in 2006 26,990 -1,517 -19,160 -20,677

8,423

6,313

950 -3,552 -6,095 -151 -8,848

1.002 -4,596 -2,951 -295 -6,840

-425

-527

2,397 -802

1,902 -521

NET FINANCIAL INCOME

1,595

1,381

PROFIT OR LOSS BEFORE TAXATION

1,170

854

-213

957

951

4.79

4.76

notes 2 3 3

REVENUE Cost of goods and materials sold Production costs Costs of goods sold and production costs GROSS PROFIT Other operating income Distribution expenses Administrative expenses Other operating expenses Total

4 3 3 3

OPERATING PROFIT OR LOSS EXCLUDING COSTS OF FINANCING Financial income Financial expenses

5 5

Tax

PROFIT OR LOSS FOR THE PERIOD Net earnings (loss) per share (in EUR)

BALANCE SHEET AS AT 31 DECEMBER 2007

Notes ASSETS Property, plant and machinery Intangible assets Investments in subsidiaries Investments in associates Investments available for sale Loans Long-term operating receivables Deferred tax assets Total non-current assets

in EUR thousand 31 Dec. 31 Dec. 2007 2006

8 9 10 11 12 13 14 15

20,024 1,375 3,616 72 13,016 1,550 878 363 40,894

18,921 1,458 1,696 72 13,960 1,303 0 580 37,990

16 17 18 19 20

3,308 2,156 418 5,434 501 11,817

3,436 1,839 36 5,875 730 11,916

52,711

49,906

10,015 17,859 1,901 899 -26 341 30,989

10,015 17,859 1,710 153 -26 690 30,401

Borrowings Long-term operating liabilities based on advanced payments Provisions '- long-term employee benefits '- other provisions Deferred tax liabilities Total long-term liabilities

8,445

7,940

24 25

3 1,188 1,050 138 132 9,768

0 1,602 1,170 432 245 9,787

Loans raised Operating and other liabilities Total short-term liabilities Total liabilities

23 26

3,960 7,994 11,954 21,722

3,745 5,973 9,718 19,505

52,711

49,906

Inventories Short-term investments at fair value through P&L Short-term loans Operating and other receivables Cash and cash equivalents Total current assets TOTAL ASSETS CAPITAL AND LIABILITIES Issued capital Capital reserves Reserves (legal and statutory) Retained earnings Own shares Fair value reserve Total capital

TOTAL EQUITY AND LIABILITIES

CASH FLOW STATEMENT (IFRS)

Achieved in 2007

in EUR thousand Achieved in 2006

957 3,249 3,254 320 -147 4 -541 798 -53 -386

951 2,616 3,302 185 64 10 -1,052 511 -26 -378

4,206 -1,099 291 1,648 -27

3,567 -1,339 -276 382 88

813 -533

-1,145 -11

4,486

2,411

312 541 69 254 -4,551 -1,802 -237 -5,414

268 1,052 81 308 -833 -926 -1,390 -1,440

-20 6,787 -6,067 -1 699

1 4,546 -4,921 -1 -375

-229

596

Cash and cash equivalents at beginning of period

730

134

CASH AND CASH EQUIVALENTS AT END OF PERIOD

501

730

CASH FLOWS FROM OPERATING ACTIVITIES Profit for the period Adjustments for: Depreciation of property, plant and equipment Depreciation of intangible assets (Reversal of) impairment loss Negative translation differences Investment income Financial expenses Gain on disposal of property, plant and equipment Revenue from a decrease in long-term provisions OPERATING PROFIT BEFORE CHANGES IN NET OPERATING ASSETS AND PROVISIONS Change in operating and other receivables Change in inventories Change in operating and other liabilities Change in provisions and employee earnings CASH GENERATED FROM OPERATIONS Interest paid NET CASH FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property, plant and equipment Proceeds from sale of investments Interest received Dividends received Acquisition of property, plant and equipment Acquisition of other investments Acquisition of intangible assets NET CASH FROM INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Changes in equity Borrowings Repayment of borrowings Dividends paid NET CASH FROM FINANCING ACTIVITIES Net increase in cash and cash equivalent

STATEMENT OG CHANGES IN EQUITY (ISRF)

in EUR thousand

Balance 1 Jan. 2006

Legal and Reserve Issued Capital statutory Own Profit for fair Total capital reserves reserves shares retained value capital 10,015 17,859 1,710 -26 -799 129 28,888

Profit 2006 Dividends for own shares Allocation of statutory reserves

951

Increase in fair value Balance 31 Dec. 2006

10,015

17,859

1,710

-26

Profit 2007

561

690

30,401

957

Allocation of statutory reserves

191

957

-191

Payment of bonuses Decrease in fair value Balance 31 Dec. 2007

153

561

-20 10,015

17,859

1,901

-26

899

-20 -349 341

-349 30,989

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

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 Companyâ&#x20AC;&#x2122;s assets and prevention and uncovering frauds and other irregularities. March 2008 Simona PotoÄ?nik, MA General Manager

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 Ä&#x152;opova 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 Companyâ&#x20AC;&#x2122;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.

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 â&#x20AC;&#x201C; utilisation of tax losses Points 24 and 25 â&#x20AC;&#x201C; provisions and contingencies Point 27 â&#x20AC;&#x201C; 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.

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 Groupâ&#x20AC;&#x2122;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) â&#x20AC;&#x201C; 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

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 Âťother operating incomeÂŤ.

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 Buildings Equipment â&#x20AC;&#x201C; graphic activities Laboratory equipment

7 3 3

In years, max 40 20 10

Vehicles Telephone sets, telegraphic switchboard

5 3

8 5

Furniture Typewriters, computer equipment Computer equipment for fire-safety Measuring and control devices

5 3 3 4

6 8 3 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.

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.

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 availablefor-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 availablefor-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 cashgenerating 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

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 Companyâ&#x20AC;&#x2122;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 employeeâ&#x20AC;&#x2122;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 customerâ&#x20AC;&#x2122;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.

k) Financial income and expenses Financial income is mainly accounted for by interest income on funds invested (including available-forsale 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 shareholderâ&#x20AC;&#x2122;s right to receive payment is established, which in the case of quoted securities is the exdividend 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

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

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

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

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.

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 Companyâ&#x20AC;&#x2122;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.

INCOME STATEMENT DISCLOSURES 1. Segment reporting Business segments

in EUR thousand Security printed Commercial printed matter matter 2007 2006 2007 2006

Net sales revenue Net profit or loss

Other 2007 2006

Total 2007 2006

9,261 -139

6,319 -123

16,443 -243

18,331 -358

2,707 -41

2,340 -46

28,411 -423

26,990 -527

Assets by business segments 11,035 Unallocated assets Total assets 11,035 Total liabilities 7,081 Investments 1,561 Depreciation 1,165

11,683

19,590

33,896

3,226

4,327

47,270

11,683 4,566 263 816

19,590 12,571 2,771 2,068

33,896 13,248 762 2,368

3,226 2,070 456 341

4,327 1,691 97 3,023

33,851 18,860 52,711 21,722 4,788 3,574

47,270 17,911 4,048 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

Sales revenue by type Sale of products in domestic market Sale of services in domestic market Rental revenues in domestic market Sale of products in foreign market Sale of services in foreign market Sale of materials and merchandise in domestic market Sale of materials and merchandise in foreign market Total

2007 19,374 667 88 5,502 458 1,496 826 28,411

in EUR thousand 2006 14,922 2,568 62 7,295 477 1,238 428 26,990

3. Expenses

Cost by primary type, change in value of inventories Cost of goods and materials sold Cost of materials used and services Labour cost Depreciation and amortisation expense Other (operating) expense Change in inventories of finished products, work-inprogress and semi-manufactures Total (operating) expenses

2007 1,345 15,914 8,729 3,574 465

in EUR thousand 2006 1,517 15,252 7,878 3,487 577

-241 29,786

-192 28,519

Labour cost

2007 5,991 792 459 1,487 8,729

Gross wages and salaries Pension insurance cost Cost of other social insurance Other labour cost Total labour cost

in EUR thousand 2006 5,385 700 398 1,395 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 2007 2006 100 25

Item Gain in disposal of fixed assets Reversal of impairment of property, plant and equipment Income from reversal of provisions Capitalised own products and services Reversal of revaluation of trade receivables and inventories Indemnities, subsidies and grants received Other Total

476

81 378 264

36 8 330 950

117 92 45 1,002

5. Net financial income (expenses)

Interest income Income from dividends and other profit shares Foreign exchange gains Income from sale of investments Other financial income - Change in fair value of investments through profit or loss - Other Total financial income

541 1,533

in EUR thousand 2006 118 308 0 1,053 423

1,505

406

28 2,397

17 1,902

2007 69 254

Interest expense Foreign exchange losses Loss in disposal of investments Other financial expenses Financial expenses owing to impairment Total financial expenses Total net financial income

640 4 137 11 10 802 1,595

487 15 2 10 7 521 1,381

6. Taxes in EUR thousand 2007 2006 Current tax Deferred tax (from Income Statement) Total

213 213

-97 -97

Effective corporate income tax rates in EUR thousand 2007 Total profit or loss before tax

2007

2006

1,170

2006 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%

213 -11.3%

-97

Total tax expense

18.2%

Deferred taxes recognised directly in equity. in EUR thousand 2007 2006 109 -163 109 -163

Investments Total

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.

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 Adjustment of the opening balance

1,220

Acquisitions in the period

14,483

37,523

1,065

4 1

Change to PPE in progress

1,109 13

Disposals

53,354

1,479

13 17

1,496

Balance at 31 December 2006

1,220

14,528

37,111

52,984

Balance at 1 January 2007 Adjustment of the opening balance

1,220

14,528

37,111

52,984

204

4,093

Acquisitions in the period

Change to PPE in progress

254

Disposals Balance at 31 December 2007

1,220

4,362 254

1,436

1,438

14,730

39,768

6,862

25,196

32,058

403

2,899

3,302

1,297

351

56,162

Allowance Balance at 1 January 2006 Depreciation Disposals Balance at 31 December 2006

7,265

26,798

34,063

Balance at 1 January 2007

7,265

26,798

34,063

406

2,848

3,254

1,179

7,671

28,467

36,138

Depreciation Disposals Balance at 31 December 2007

Book value Balance at 1 January 2006

1,220

7,621

12,327

Balance at 31 December 2006

1,220

7,263

10,313

Balance at 1 January 2007

1,220

7,263

10,313

Balance at 31 December 2007

1,220

7,059

11,301

351

21,296 18,921

18,921 65

20,024

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

Intangible assets under construction

Long-term property rights

Total

Cost Balance at 1 January 2006

118

1,391

Acquisitions in the period Additions to intangible assets under construction

185

1,208

Balance at 31 December 2006

303

2,599

2,902

Balance at 1 January 2007

303

2,599

2,902

220

Disposals

1,512 1,393

-3

Acquisitions in the period Additions to intangible assets under construction Balance at 31 December 2007

-3

3,132

303

2,812

Balance at 1 January 2006

1,220

1,259

Depreciation

146

185

Allowance

Disposals

Balance at 31 December 2006

1,366

1,444

Balance at 1 January 2007

1,366

1,444

Depreciation

262

320

1,621

1,757

Disposals Balance at 31 December 2007

136

Book value

Balance at 1 January 2006

171

253

Balance at 31 December 2006

225

1,233

1,458

Balance at 1 January 2007

225

1,233

1,458

Balance at 31 December 2007

167

1,191

1,375

10. Investments in subsidiaries in EUR thousand 2007 2006 1,691 1,691 5 5 1,920 3,616 1,696

Cetis Zagreb Cetis Tirana Amba Total

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 Allowance (impairment)

Cost Balance at 1 January 2006 Sale Balance at 1 January 2007 Purchase Balance at 31 December 2007

2,068 -372

Net value 188 -188

1,880 -184

1,696 1,920

3,616

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

KIG KGA,proizvodnja,trgovina,inženiring d.o.o. - 50 % ownership

Lotaria Nacionale SH.A Rruga Kavajes,Porta Kry Esore, Misto Mame,Tirana – 46.6% ownership Total

12. Available-for-sale investments in EUR thousand 2007 2006 13,016 13,960

Type Available-for-sale investments

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 Balance at 1 January 2006 Purchase Sale Change in fair value Balance at 1 January 2007 Purchase Sale Change in fair value Balance at 31 December 2007

Allowance (impairment) 12,990 172 2,474 -2,228 -172 724 13,960 3,336 -4,718 438 13,016

Net value 12,818 2,474 -2,056 724 13,960 3,336 -4,718 438 13,016

13. Loans

Type Loans granted

in EUR thousand 2006 1,303

2007 1,550

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 Allowance (impairment)

Cost Balance at 1 January 2006 Increase Repayment Transfer to short-term loans Balance at 1 January 2007 Increase Repayment Transfer to short-term loans Balance at 31 December 2007

661 770 93 35 1,303 500 221 32 1,550

Net value 661 770 93 35 1,303 500 221 32 1,550

14. Non-current trade receivables in EUR thousand Type Long-term commercial loans to associated companies Other non-current trade receivables for associated companies Total

2007

2006

878 878

Changes in non-current trade receivables in EUR thousand Allowance (impairment)

Cost Balance at 1 January 2007 Increase Balance at 31 December 2007

0 878 878

Net value

0 878 878

15. Deferred tax assets and liabilities In EUR thousand Tax assets

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 Investments Receivables Inventories Provisions for termination pay Other provisions Tax loss Total

21 52

21 49 25

209 81

246 17 222

363

580

132

245

-111 52

-224 49 25

209 81

246 17 222

231

335

245

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-forsale 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 Recognised under 1/1/2006 income/expenses Investments Receivables Inventories Provisions for termination pay, other Other provisions Tax loss Total

-56 56 30

-5 -7 -5

337

-91 17 188 97

34 401

Recognised under equity -163

-163

31/12/2006 -224 49 25 246 17 222 335

Changes in temporary differences in 2007 in EUR thousand Recognised under 1/1/2007 income/expenses Investments Receivables Inventories Provisions for termination pay, other Other provisions Tax loss

-224 49 25

4 3 -25

246 17 222

-37 -17 -141

Total

335

-213

Recognised under equity

31/12/2007 109

-111 52

209 81 109

231

16. Inventories in EUR thousand Type Materials Work in process Products Merchandise Total

2007 1,641 518 1,144 5 3,308

2006 2,006 895 527 8 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.

17. Current investments at fair value in EUR thousand Type

2007

Current investments Total

2006

2,156

1,839

2,156

1,839

in EUR thousand Allowance (impairment)

Cost Balance at 1 January 2006 Purchase Sale Change in fair value Balance at 1 January 2007 Transfer after division to available-for-sale shares Sale Change in fair value Balance at 31 December 2007

1,929 387 -883 406 1,839 -98 -188 610 2,163

-7 7

-3 10 7

Net value 1,929 387 -876 399 1,839 -98 -185 600 2,156

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 2007 2006 386 32 36 418 36

Type Short-term loans given Current portion of long-term loans Total

19. Trade and other receivables

Type Short-term Short-term Short-term Short-term Short-term Total

trade receivables trade receivables from group companies trade receivables from associated companies trade receivables from third parties advances receivable

2007 5,055 198 9 138 34 5,434

in EUR thousand 2006 4,271 283 403 894 24 5,875

20. Cash and cash equivalents

Type Cash in banks, cheques and cash in hand Deposits in banks Total

2007 1 500 501

in EUR thousand 2006 158 572 730

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

A. B. C. D. E.

Item Net profit for the year Retained net profit/loss Decrease in revenue reserves (1 to 1) 1. Decrease of other revenue reserves Increase in revenue reserves (1 to 1) 1. Increase of statutory reserves Distributable profits (A+B+C-D)

2007 957 107

191 191 873

in EUR thousand 2006 951 -825 1 1

127

The Company allocated 20% of 2007 profits to statutory reserves according to Article 8.4. of Cetisâ&#x20AC;&#x2122; Articles of Incorporation.

22. Net earnings per share 2007 957,197 199,799 4.79

Net profit for the year in EUR Weighted average number of ordinary shares Net earnings per share in EUR

2006 951,294 199,799 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.

23. Borrowings Borrowings comprise long-term and short-term borrowings including the current portion of long-term borrowings. Long-term borrowings in EUR thousand 2007 2006 8,445 7,940

Type Bank loans

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 Current portion of long-term loans from banks repayable within one year Short-term bank loans Short-term borrowings from others Total

2007

2006

2,718 52 1,190 3,960

2,243 1,461 41 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 Short-term loans of up to one year Long-term loans of 1 to 5 years Long-term loans with maturity longer than 5 years Total

Total repayment 3,881 1,841 985 6,707

Interest 2007 57 583 640

Principal 2007 3,824 1,258 985 6,067 in EUR thousand

Type Short-term loans of up to one year Long-term loans of 1 to 5 years Long-term loans with maturity longer than 5 years Total

Total repayment 3,847 1,208 350 5,405

Interest 2006 102 385 487

Principal 2006 3,745 823 350 4,918

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 Long-term operating liabilities from advances Total

2007 3 3

2006 0 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 Provisions Provisions Provisions Provisions Provisions Total

for for for for for

2007 99 89 26 231 743 1,188

warranties legal action other costs anniversary bonuses termination pays

2006 126 395 13 233 835 1,602

Movement in provisions

Type Provisions Provisions Provisions Provisions Provisions Total

for for for for for

warranties legal action other costs anniversary bonuses termination pays

31/12/2006 Made Used Reversed 126 55 82 395 306 13 13 233 35 37 835 4 88 1,602 103 41 476

in EUR thousand 31/12/2007 99 89 26 231 743 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.

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 Trade payables Short-term operating liabilities based on advances Payables to employees Payables to state and other institutions Other payables Total

2007 5,319 1,328 557 416 374 7,994

2006 4,171 733 684 270 115 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 â&#x20AC;&#x201C; 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. -

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 â&#x20AC;&#x201C; credit risk

Note 12

Available-for-sale financial assets Financial assets at fair value through profit or loss Loans given Long- and short-term operating receivables Cash and cash equivalents Total

17 13,18 14,19 20

in EUR thousand 31/12/2007 31/12/2006 13,016 13,960 2,156 1,968 6,312 501 23,953

1,839 1,339 5,875 730 23,743

The highest credit risk exposure for loans at the reporting date by geographical regions was the following:

Book value 2007 398 383 1,187 1,968

in EUR thousand Domestic Other European countries Other regions â&#x20AC;&#x201C; Africa Total

2006 652 0 687 1,339

The highest credit risk exposure for trade receivables at the reporting date by geographical regions was the following:

Book value 2007 3,943 304 462 1,603 6,312

in EUR thousand Domestic Euro zone countries Other European countries Other regions - Africa Total

2006 4,011 694 767 403 5,875

The highest credit risk exposure for trade receivables at the reporting date by type of customers was

the following:

Book value 2007 1,087 5,225 6,312

in EUR thousand Wholesale customers Customers, end users Total

2006 1,175 4,700 5,875

Impairment losses

Trade receivables on the reporting date: Gross impairment Gross impairment 2007 2007 2006 2006 6,177 3,756 347 1,629 321 64 699 209 53 53 55 55 340 809 683 683 7,238 926 6,822 947

in EUR thousand Not yet due Past due 0-30 days Past due 31-120 days Past due 121-365 days More than one year Total

Movement in allowances for impairment of trade receivables in the period:

in EUR thousand Balance at 1 January New allowances Written-off allowances made Paid written-off allowances Balance at 31 December

2007 947 64 -49 -36 926

2006 982 209 -127 -117 947

Currency risk Currency risk was based on nominal amounts: Thousand Trade receivables Accounts payable Secured bank loans Gross exposure of balance sheet

EUR USD 31 Dec.07 6,619 -5,214

GBP

CHF

0 -0.1

0 -26

1,405

-0.1

-26

DKK 0 -111

EUR USD 31 Dec.06 0 5,892 -12 -4,142

0 -3

2.189 -19

-36

-386

-111

-12

-3

-17

-36

-386

The Company is not exposed to any specific currency risks.

1,750

CHF

DKK

CZK

Liquidity risk 31/12/2007 Book in EUR thousand

Value

Transaction account (TRR) overdraft Secured bank loans Other loans (account 2726000) Accounts payable and other liabilities Total

6 to 12

months

-54 -12,810 -1,235

7,994 20,398

1 to 2

2 to 5

years

-54 -1,789 -301

-1,628 -934

-3,140

-6,253

-7,994 -7,994 -22,093 -10,138

-2,562

-3,140

-6,253

Over 5 years

4.684 4.707

31/12/2006 Book

Transaction account (TRR) overdraft Secured bank loans Other loans (account 2726000) Accounts payable and other liabilities Total

Up to 6

cash flow

52 11,163 1,189

3-moth Euribor 31/12/2007 6-month Euribor 31/12/2007

in EUR thousand

Contractual

value

pogodbeni

Up to 6

6 to 12

Cash flow

months

0 10,183 42

-11,548 -46

-1,031 -46

5,973 16,198

-5,973 -17,567

-5,973 -7,050

3-month Euribor 31/12/2006 6-month Euribor 31/12/2006

1 to 2

2 to 5

Over 5

years

-1,341

-2,356

-5,467 -1,353

-1,341

-2,356

-5,467 -1,353

3.725 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 Financial assets Financial liabilities Difference Instruments with a variable interest rate Financial assets Financial liabilities Difference

2007 1,223 -889 334

2006 1,136 0 1,136

2007 718 -11,515 -10,797

2006 687 -10,226 -9,539

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 0.2% - 7%

Cash, loans, deposits

2006 0.2% - 7%

28. Fair value Fair and book value of assets and liabilities in EUR thousand

Note Available-for-sale investments Loans Long-term trade liabilities Investments at fair value through profit or loss Trade and other receivables Short-term loans Cash and cash equivalents Long-term borrowings Short-term borrowings Trade and other payables Total

Book value Book value at Fair value at at Fair value at 31/12/2007 31/12/2007 31/12/2006 31/12/2006 13,016 13,016 13,960 13,960 1,550 1,550 1,303 1,303 878 878 2,156 5,434 418 501 -8,445 -3,960 -7,994 1,398

2,156 5,434 418 501 -8,445 -3,960 -7,994 1,398

1,839 5,875 36 730 -7,940 -3,745 -5,973 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.

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) - Supervisory Board

EUR 929 thousand 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.

V. CETIS GROUP FINANCIAL REPORT

CONSOLIDATED INCOME STATEMENT

Note 1

REVENUE Cost of goods sold Production costs Cost of goods sold and production costs

GROSS PROFIT Other (operating) income Distribution expenses Administrative expenses Other (operating) expenses Total

3 2 2 2

OPERATING PROFIT OR LOSS BEFORE FINANCING COSTS Financial income Financial expenses NET FINANCIAL EXPENSES

4 4

PROFIT OR LOSS BEFORE TAXATION Tax

NET PROFIT Net and diluted earnings per share (in EUR)

2007 39,520 -4,942 -23,181 -28,123

in EUR thousand 2006 32,007 -3,635 -19,926 -23,561

11,397

8,446

1,011 -5,719 -6,635 -476 -11,819

1,244 -6,087 -3,410 -446 -8,699

-422

-253

2,426 -1,554 872

1,852 -670 1,182

450

929

-277

173

998

0.86

5.00

CONSOLIDATED BALANCE SHEET in EUR thousand Note

31/12/2007

31/12/2006

7 8 9 10 11 12 13

27,304 2,185 18 14,305 1,249 878 364 46,303

21,591 1,496 72 13,965 1,303

14 15 16 17 18

4,187 2,156 362 7,738 1,003 15,446

3,745 1,839 36 6,695 1,057 13,372

TOTAL ASSETS

61,749

52,380

EQUITY AND LIABILITIES Issued capital Capital reserves Reserves (legal and statutory) Retained earnings Own shares Fair value reserve Total equity

10,015 17,859 1,901 306 -26 341 30,396

10,015 17,859 1,709 317 -26 690 30,564 9,210

ASSETS Property, plant and equipment Intangible assets Investments in associated companies Available-for-sale investments Loans Long-term trade receivables Deferred tax assets Total non-current assets Inventories Current investments at fair value Short-term loans Trade and other receivables Cash and cash equivalents Total current assets

581 39,008

Borrowings Non-current operating liabilities Provisions Deferred tax liabilities Total non-current liabilities

21 22 23 13

11,840 78 1,242 571 13,731

1,607 245 11,062

Borrowings Trade and other liabilities Total current liabilities Total liabilities

21 24

7,652 9,970 17,622 31,353

4,006 6,748 10,754 21,816

61,749

52,380

TOTAL EQUITY AND LIABILITIES

CONSOLIDATED CASH FLOW STATEMENT in EUR thousand 2006

2007 CASH FLOWS FROM OPERATING ACTIVITIES Profit or loss for the period Adjustments for: Depreciation of property, plant and equipment Amortisation of intangible assets (Reversal) of impairment loss Foreign exchange loss Investment income Financial expenses Share of associated companies in earnings/losses Gain on disposal of property, plant and equipment Revenue form a decrease in long-term provisions Tax expenses FUNDS FLOWS FROM OPERATING ACTIVITIES BEFORE CHANGES IN NET OPERATING ASSETS AND PROVISIONS Change in trade and other receivables Change in inventories Change in trade and other liabilities Change in provisions and employee benefits CASH GENERATED FROM OPERATIONS Interest paid NET CASH FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from the sale of property, plant and equipment Proceeds from the sale of investments Interest received Dividends received Acquisition of property, plant and equipment Acquisition of other investments Acquisition of intangible assets NET CASH FROM INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Changes in equity Borrowings Repayment of borrowings Dividends paid NET CASH FROM FINANCING ACTIVITIES Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of period CASH AND CASH EQUIVALENTS AT THE END OF PERIOD

173 4,512 3,832 339 179 13 -541 1,115 -54 -57 -374 60

998 3,099 3,775 191 79 33 -1,052 511

4,685 -2,353 -308 3,272 8

4,097 -781 -93 -204 69

619 -820

-1,009 -83

4,484

3,005

57 541 72 254 -9,546 -1,169 -1,028 -10,819

268 1,052 85 308 1,625 -1,057 -1,426 855

5 18,543 -12,267 6,281

3 4,546 -7,777 -1 -3,229

-54 1,057

631 426

1,003

1,057

-26 -412

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY in EUR thousand

Balance at 1 January 2006 Profit 2006 Exchange differences CETIS ZG,IPI,BS Dividends on own shares Increase in fair value Balance at 31 December 2006 Profit 2007 Allocation to statutory reserves Payment of bonuses Adjustment from prev. years – refund DURS Exchange differences CETIS ZG Decrease in fair value Balance at 31 December 2007

Issued capital 10,015

Capital reserves 17,859

Legal and statutory Own Retained Fair value reserves shares earnings reserve 1,709 -26 -689 134 998

Total equity 29,002 998

7 1

7 1 556

556 10,015

17,859

1,709

-26

192

317 173

690

30,564 173

-192 -20

-20

25 3

10,015

17,859

1,901

-26

306

-349

25 3 -349

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

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 100 % - Cetis Print, d.o.o., Beograd* 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 Druckman, Hungary – does not operate La Societe Nationale des Loteries Sportives (SNLS), Libreville, Gabon KIG KGA, proizvodnja, trgovina, inženiring d.o.o. Nacional Sh.a., Rruga Kavajes, Porta Kry Esore, Misto Mame,Tirana

Stake in % 33 % 31 % 50 % 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.

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.

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 intragroup 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.

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 Groupâ&#x20AC;&#x2122;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

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.

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 selfconstructed 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 Âťother operating incomeÂŤ 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. Buildings Plant and equipment for graphic activity Laboratory equipment

7 3 3

in years, max. 40 20 10

Vehicles Telephone sets, telegraph switchboard

5 3

8 5

Furniture Typewriters, computer equipment Computer equipment for fire safety Measuring and control appliances

5 3 3 4

6 8 3 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.

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 Groupâ&#x20AC;&#x2122;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. Intangible assets

in years, max. 10

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 availablefor-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-forsale financial assets that are debt securities, the reversal is recognised in profit or loss. For availablefor-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 assetâ&#x20AC;&#x2122;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

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 »cashgenerating 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.

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 customerâ&#x20AC;&#x2122;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 shareholderâ&#x20AC;&#x2122;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

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.

100

• 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.

101

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

102

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.

103

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 Groupâ&#x20AC;&#x2122;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 Groupâ&#x20AC;&#x2122;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 Groupâ&#x20AC;&#x2122;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.

104

6. Segment reporting Segmental breakdown

in EUR thousand Security printed matter 2007 2006

Net sales revenue Net profit or loss Assets by business segments Unallocated assets Total assets Total liabilities Investments Depreciation

Commercial printed matter 2007 2006

Other 2007 2006

Total 2007 2006

9,261 -139

6,318 -123

27,552 -243

23,348 2,707 2,340 -84 -41 -46

39,520 -423

32,007 -253

11,035

11,683

31,008

36,371 3,226 4,327

52,381

11,035 7,081 1,561 1,165

11,683 4,566 590 816

31,008 22,202 2,963 2,666

36,371 3,226 4,327 15,559 2,070 1,691 1,976 452 216 2,847 341 302

45,270 16,479 61,749 31,354 4,976 4,171

52,381 21,817 2,782 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

Property, plant and equipment Intangible assets Inventories Trade and other receivables Cash and cash equivalents Borrowings Trade and other liabilities Provisions Deferred tax liabilities Net identifiable assets and liabilities Cost Goodwill

Book value 5,143 108 599 1,462 95 -4,152 -1,469 -27 -442 1,317

Fair value adjustment -30 -1

7 -24

Goodwill derives from good positioning of the acquired company in foreign markets.

105

Recognised value upon acquisition 5,113 107 599 1,462 95 -4,152 -1,469 -27 -435 1,293 1,920 -627

INCOME STATEMENT DISCLOSURES 1. Revenues

2007 21,838 740 121 14,028 458 1,509 826 39,520

in EUR thousand 2006 14,922 2,568 62 9,086 477 1,237 3,655 32,007

2007 4,942 20,661 10,421 4,171 928

in EUR thousand 2006 3,635 16,792 8,508 3,966 727

-170 40,953

-124 33,504

2007 7,353 814 605 1,649 10,421

in EUR thousand 2006 5,924 700 448 1,436 8,508

2. Expenses

Expenses by primary types, change in value of inventories Cost of goods and materials sold Cost of materials used and services Labour cost Depreciation and amortisation expense Other (operating) expense Change in inventories of finished products, work-inprogress and semi-manufactures Total (operating) expenses

Labour cost

Gross wages and salaries Pension insurance cost Cost of other social insurance Other labour cost Total labour cost

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.

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3. Other operating income

2007 107 476 38 29 361 1,011

in EUR thousand 2006 40 81 431 264 120 92 216 1,244

4. Net financial income (expenses)

2007 82 254 8 541 1,541 1,505 36 2,426

in EUR thousand 2006 122 308 9 989 424 406 18 1,852

Interest expense Foreign exchange losses Loss in disposal of investments Other financial expenses Financial expenses owing to impairment Total financial expenses Total net financial income

957 13 137 437 10 1,554 872

614 38 2 10 6 670 1,182

2007 60 217 277

in EUR thousand 2006 23 -92 -69

5. Taxes

Current tax Deferred tax (from Income Statement) Total

107

Effective corporate income tax rates

2007

2007 450

2006

23.0%

104

25.0%

232

-2.0% -23.3% 27.4%

-9 -105 124

-0.6% -13.2% 34.8%

-6 -122 324

50.2% -21.0% -1.1% 8.3% 61.5%

226 -95 -5 37 277

-26.3% -28.7% 1.5% -7.5%

-245 -267 14 -69

Total profit or loss before tax Tax effects: Tax at general tax rate Adjustment for tax rate from other tax territories Tax exempt income Non-deductible expenses Losses for which deferred tax asset has not been recognised Tax relief Tax loss Other changes to tax base Total tax expense

in EUR thousand 2006 929

Deferred taxes recognised directly in equity 2007 -435 109 -326

Property, plant and equipment Investments Total

in EUR thousand 2006 -163 -163

6. Disclosure of auditor fees The total amount spent on payment of all auditing services amounted to EUR 57 thousand in 2007.

108

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

Land

Cost Balance at 1 January 2006 Adjustment of the opening balance Acquisitions in the period Change to PPE in progress Disposals Balance at 31/12/2006 Balance at 1 January 2007 Increase upon acquisition Acquisitions in the period Change to PPE in progress Transfers Disposals Balance at 31/12/2007

Buildings

Equipmen t

Other equipment

PPE in progress

1,506

18,068

39,769

2 53

-184 1,116

180 52

2,249 2,054 1,518 15,874 38,647 1,518 15,874 38,647 2,392 1,516 1,204 206 4,222

142 119 119

215 215

-92

254 80

Advances given

130

-33 45 2 1,586 3,910 17,561 42,532

Allowance Balance at 1 January 2006 Adjustment of the opening balance Depreciation Disposals Balance at 31/12/2006 Balance at 1 January 2007 Depreciation Disposals Transfers Balance at 31/12/2007 Book value Balance at 1 January 2006 Balance at 31 December 2006 Balance at 1 January 2007 Balance at 31 December 2007

in EUR thousan d

6,929

549

Total

59,474 -2 1,233 130 4,462 56,373 56,373 5,112 4,493 254 1,588 64,644

25,658

32,589

-73 491 3,255 54 1,528 7,366 27,312 7,366 27,312 522 3,310 1,274 104 7,888 29,452

72 31 1 104 104

-1 3,777 1,583 34,782 34,782 3,832 1,274

-104 37,340

1,506

11,139

14,111

1,518 1,518

8,508 8,508

11,334 11,334

15 15

215 215

3,910

9,673

13,080

549

109

26,885 21,591 21,591

27,304

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 Type Equipment

2007 368

in EUR thousand 2006 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 Cost Balance at 1 January 2006 Adjustment of the opening balance Acquisitions in the period Change to PPE in progress Balance at 31/12/2006 Balance at 1 January 2007 Increase upon acquisition Acquisitions in the period Change to PPE in progress Disposals Balance at 31/12/2007

Development cost

Long-term property rights

118

1,398

185

7 1,237

Intangible assets under construction 3

-3 303 303 627

2,642 2,642 5 257

103 37

627

Total 1,519 7 1,422 -3 2,945 2,945 735 257 37 7 3,967

303

7 2,897

39 40

1,220 149

1,259 189

1 1,370

1 1,449

Allowance Balance at 1 January 2006 Depreciation Adjustment of the opening balance Balance at 31/12/2006

110

140

Balance at 1 January 2007 Depreciation Disposals Balance 31/12/2007 Book value Balance at 1 January 2006 Balance at 31 December 2006 Balance at 1 January 2007 Balance at 31 December 2007

79 58 137

1,370 281 6 1,645

178

224 224

1,272 1,272

166

1,252

627

1,449 339 6 1,782

260 1,496 1,496

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.

Type

2007

La Societe Nationale des Loteries Sportives (SNLS), Libreville,Gabon - 31 % stake KIG KGA,proizvodnja,trgovina,inženiring d.o.o. 50 % stake Lotaria Nacionale SH.A Rruga Kavajes,Porta Kry Esore, Misto Mame,Tirana – 46.6 % stake Total

in EUR thousand 2006 47

8 72

Movement in investments in associates

Cost 72 72 -54 18

Balance at 1 January 2006 Balance at 31 December 2006 Write-up of proportional share in profit/loss Balance at 31 December 2007

111

in EUR thousand Net value 72 72 -54 18

La Societe Nationale des Loteries Sportives (SNLS), Gabon - 31 % stake 2007 210 74 284 -707 -108 -815

Non-current assets Current assets Total assets Non-current liabilities Current liabilities Total liabilities Revenues Expenses Income tax Net profit or loss – recognised in profit or loss

in EUR thousand 2006

83 -431 -348

KIG KGA,proizvodnja,trgovina,inženiring d.o.o. 50 % stake Non-current assets Current assets Total assets Non-current liabilities Current liabilities Total liabilities Revenues Expenses Income tax Net profit or loss – recognised in profit or loss

2007

in EUR thousand 2006

88 88

29 29

-70 -70

-11 -11

119 -119

114 -113 1

Nacional Sh.a., Tirana, Albanija – 46.6 % stake 2007 383 120 503

Non-current assets Current assets Total assets Non-current liabilities Current liabilities Total liabilities

-573 -573

Revenues Expenses Income tax Net profit or loss – recognised in profit or loss

5 -83 -78

112

in EUR thousand 2006

10. Available-for-sale investments

Type Available-for-sale investments

2007 14,305

in EUR thousand 2006 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 12,998 2,474 -2,230 723 13,965 4,620 -4,718 438 14,305

Balance at 1 January 2006 Purchase Sale Change in fair value Balance at 1 January 2007 Purchase Sale Change in fair value Balance at 31 December 2007

Allowance (impairment) -172 172

Net value 12,826 2,474 -2,058 723 13,965 4,620 -4,718 438 14,305

11. Loans Type Loans

2007 1,249

in EUR thousand 2006 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

Balance at 1 January 2006 Increase Repayment Transfer to short-term loans Balance at 1 January 2007 Increase Repayment Transfer to short-term loans Balance at 31 December 2007

661 770 93 35 1,303 500 221 32 1,550

113

Allowance (impairment)

Net value

301

661 770 93 35 1,303 199 221 32 1,249

12. Non-current trade receivables

Type Other non-current trade receivables for associated companies Total

2007 878 878

in EUR thousand 2006

Changes in non-current trade receivables in EUR thousand Allowance (impairment)

Cost Balance at 1 January 2007 Increase Balance at 31 December 2007

Net value

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 Investments Receivables Inventories Provisions for termination pay Other provisions Tax loss Total

21 52

21 48 25

210

247 18 222 581

81 364

439 132

245

-439 -111 52

-224 48 25

210

571

245

81 -207

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.

114

247 18 222 336

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

Investments Receivables Inventories Provisions for termination pay Other provisions Tax loss Total

1/1/2006 -56 56 30 343 34 407

Recognised under income/ Recognised expenses under equity -5 -163 -8 -5 -96 18 188 92 -163

Changes in temporary differences in 2007

1/1/2007 Property, plant and equipment Investments Receivables Inventories Provisions for termination pay Other provisions Tax loss Total

-224 48 25 247 18 222 336

31/12/2006 -224 48 25 247 18 222 336

in EUR thousand Recognised under income/ Recognised expenses under equity -4 -435 4 109 4 -25 -37 -18 -141 -217 -326

31/12/2007 -439 -111 52 210 81 -207

14. Inventories

Type Materials Work in process Products Merchandise Total

2007 2,126 539 1,288 234 4,187

in EUR thousand 2006 2,006 895 591 253 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.

115

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

Type Current investments Total

2007 2,156 2,156

in EUR thousand 2006 1,839 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 1,929 387 -883 406 1,839

Balance at 1 January 2006 Purchase Sale Change in fair value Balance at 1 January 2007 Transfer after division to available-for-sale shares Sale Change in fair value Balance at 31 December 2007

-98 -188 610 2,163

Allowance (impairment)

-7 7

-3 10 7

Net value 1,929 387 -876 399 1,839 -98 -185 600 2,156

16. Short-term loans

Type Short-term loans Current portion of long-term loans Total

2007 330 32 362

116

in EUR thousand 2006 36 36

17. Trade and other receivables

Type Short-term Short-term Short-term Short-term Total

trade receivables trade receivables from associated companies trade receivables from third parties advances receivable

2007 7,426 9 256 47 7,738

in EUR thousand 2006 5,299 403 969 24 6,695

2007 503 500 1,003

in EUR thousand 2006 485 572 1,057

18. Cash and cash equivalents

Type Cash in banks, cheques and cash in hand Deposits in banks Total

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 172,764 199,799 0.86

Net earnings in EUR Weighted average number of ordinary shares Net and diluted earnings per share in EUR

117

2006 998,769 199,799 5.00

21. Borrowings Borrowings comprise long- and short-term borrowings including the current portion of long-term borrowings.

Long-term borrowings Type Bank loans

2007 11,840

in EUR thousand 2006 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 Type Current portion of long-term bank loans repayable within one year Short-term bank loans Short-term borrowings from others Total

2007

in EUR thousand 2006

3,011 3,451 1,190 7,652

2,504 1,461 41 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 Short-term loans of up to one year Long-term loans of 1 to 5 years Long-term loans with maturity longer than 5 years Total

Total repayment 2007 8,554 2,215 1,246 12,015

Interest 2007 208 729

Type Short-term loans of up to one year Long-term loans of 1 to 5 years Long-term loans with maturity longer than 5 years Total

Total repayment 2006 3,850 1,254 415 5,519

Interest 2006 102 430

937

532

Principal 2007 8,346 1,486 1,246 11,078 in EUR thousand Principal 2006 3,748 824 415 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.

118

22. Long-term operating liabilities in EUR thousand Type Long-term operating liabilities arising from finance lease contracts Long-term operating liabilities arising from advances Total

2007 74 4 78

2006

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 Type Provisions Provisions Provisions Provisions Provisions Total

for for for for for

2007 99 89 40 247 767 1,242

warranties legal action other costs anniversary bonuses termination pays

Change in provisions Type Provisions Provisions Provisions Provisions bonuses Provisions Total

for for for for

warranties legal action other costs anniversary

for termination pays

31/12/2006 126 395 13

Made

Used 55 27

236 837 1,607

48 22 152

37 4 41

in EUR thousand 2006 126 395 13 236 837 1,607

in EUR thousand Reversed 31/12/2007 82 99 306 89 40

88 476

247 767 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.

119

24. Trade and other payables

Type Trade payables Short-term operating liabilities based on advances Payables to employees Payables to state and other institutions Other payables Total

2007 6,917 1,329 644 653 427 9,970

in EUR thousand 2006 4,658 733 702 408 247 6,748

The bases are the original documents that define an event in terms of time and substance.

25. Financial instruments â&#x20AC;&#x201C; 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 Groupâ&#x20AC;&#x2122;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.

120

Financial instruments-credit risk The highest credit risk exposure at the reporting date was the following: In EUR thousand Available-for-sale financial assets Financial assets at fair value through profit or loss Loans given Long- and short-term operating receivables Cash and cash equivalents Total

Note 10 15 11,16 12,17 18

Book value 2007 14,305 2,156 1,611 8,616 1,003 27,691

2006 13,965 1,839 1,339 6,695 1,057 24,895

The highest credit risk exposure for borrowings at the reporting date by geographical regions was the following: Book value In EUR thousand 2007 2006 Domestic 398 652 Other European countries 327 Other regions â&#x20AC;&#x201C; Africa 886 687 Total 1,611 1,339 Credit risk exposure In EUR thousand Receivables Total

Note 12,17

Book value 2007 8,616 8,616

2006 6,695 6,695

The highest credit risk exposure for trade receivables at the reporting date by geographical regions was the following: Book value In EUR thousand 2007 2006 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 In EUR thousand 2007 2006 Wholesale customers 2,304 1,175 Customers, end users 6,312 5,520 Total 8,616 6,695

121

Impairment losses Trade receivables at the reporting date: Gross Impairment 2007 2007 7,671 566 508 64 350 244 1,036 1,207 10,131 1,515

In EUR thousand Not yet due Past due 0-30 days Past due 31-120 days Past due 121-365 days More than one year Total

Movement in allowances for impairment of trade receivables in the period: In EUR thousand Balance at 1 January New allowances Written-off allowances Paid written-off allowances Balance at 31 December

Gross Impairment 2006 2006 4,003 1,860 863 209 183 55 738 688 7,647 952

2007 952 648 -49 -36 1,515

2006 1.226 224 -378 -120 952

Currency risk Currency risk exposure was based on nominal amounts: Thousand Trade receivables Accounts payable Secured bank loans Balance sheet gross exposure

EUR

HRK GBP CHF 31/12/2007

DKK

EUR

HRK

5,978

7,467

USD CHF 31/12/2006

DKK

CZK

8,165

7,146

-6,950

-3,351

-26

-111

-12

-4,557

-4,720

-3

-19

-36

-386

3,795

-26

-111

-12

1,421

2,747

-3

-17

-36

-386

-4,752 -3,537

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.

122

Liquidity risk

Contractual 31/12/2007 Book 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 Secured bank loans 17,089 -18,890 -5,353 -1,786 -3,446 -6,955 -1,350 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 6-month Euribor 31/12/2007

4.684 4.707

31/12/2006 Book in EUR thousand Transaction account (TRR) overdraft Secured bank loans Other loans Accounts payable and other liabilities TOTAL 3-month Euribor 31/12/2006 6-month Euribor 31/12/2006

value

Contractual cash flow

Up to 6

6 to 12

months

11,618 42

-13,171 -46

-1,193 -46

6,748 18,408

-6,748 -19,965

-6,748 -7,987

3.725 3.853

123

1 to 2

2 to 5

Over 5

years

-1,501

-2,666

-6,326

-1,485

-1,501

-2,666

-6,326

-1,485

Interest rate risk At the reporting date, loan contracts signed by the Group were with a fixed and a variable interest rate. Book value 2007 2006

In EUR thousand Instruments with a fixed interest rate Financial assets Financial liabilities Difference Instruments with a variable interest rate Financial assets Financial liabilities Difference

1,223 -4,280 -3,057

1,136 1,136

718 -15,212 -14,494

687 -11,668 -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 0.2% - 7%

Cash, loans, deposits

2006 0.2% - 7%

26. Fair value Fair and book value of assets and liabilities in EUR thousand

Available-for-sale investments Loans Long-term operating liabilities Operating and other receivables Investments at fair value through profit or loss Short-term loans Cash and cash equivalents Long-term borrowings Short-term borrowings Trade and other payables Total

Book value at 31/12/2007 14,305 1,249 878 7,738 2,156 362 1,003 -11,840 -7,652 -9,970 -1,771

124

Fair value at Book value at 31/12/2007 31/12/2006 14,305 13,965 1,249 1,303 878 7,738 6,695 2,156 362 1,003 -11,840 -7,652 -9,970 -1,771

1,839 36 1,057 -9,210 -4,006 -6,748 4,931

Fair value at 31/12/2006 13,965 1,303 6,695 1,839 36 1,057 -9,210 -4,006 -6,748 4,931

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 2007 2006 75 272 -15

Note Sale of products and services Costs Interest Loans given

687

in EUR thousand 2007 2006 23

Nacional Sh.a., Tirana, Albania Note Sale of products and services Costs Interest Loans given

500

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: ď&#x192;&#x2DC;

Management Board

EUR 215 thousand

ď&#x192;&#x2DC;

Other staff under individual employment contracts (13 persons)

EUR 929 thousand

125

ď&#x192;&#x2DC;

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.

126

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 info@cetis.si www.cetis.si

127