IFRS Illustrative Consolidated Financial Statements

IFRS Illustrative Consolidated Financial Statements For the year ended 31 December 2013

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IFRS Illustrative Consolidated Financial Statements RSM International Limited has prepared a model set of consolidated financial statements for a fictitious company called IFRS Statements Limited which, for the purpose of the exercise, is described as a company listed in Big City Stock Exchange and incorporated and domiciled in a fictitious country, Newland. No such company or jurisdiction exists and any preparers of financial statements will need to ensure that their financial statements comply with local laws as well as all relevant International Financial Reporting Standards (“IFRS”).

In addition, it should be noted that this company operates in a fictitious environment which does not replicate the economic environment that characterised the year 2013. Hence, the preparation of IFRS consolidated financial statements in the 2012 and 2013 economic environment might require specific considerations and disclosures that have not been contemplated while designing these illustrative consolidated and comparative financial statements.

The consolidated financial statements assume that IFRS Statements Limited is an existing IFRS preparer and is trading internationally as well as in its own country of incorporation and actively expanding. Accordingly, it is not a first-time adopter of IFRS. First-time adopters should instead refer to IFRS1 First-time Adoption of International Financial Reporting Standards.

The illustrative financial statements do not include separate financial statements for the parent, which may be required by local laws or regulations, or may be prepared voluntarily. Where an entity presents separate financial statements that comply with IFRS, the requirements of IAS 27 Separate Financial Statements will then apply to those separate financial statements.

The IFRS consolidated financial statements have been prepared according to all relevant standards and interpretations in force as at 31 December 2013. Where applicable, we have illustrated the effects of adopting a number of new, revised or amended pronouncements in 2013 (see Note 2A for details).

Suggested disclosures are cross-referenced to the underlying requirements in the texts of the relevant standards and interpretations. References are generally to the version of the relevant standard or interpretation mandatorily effective for the 2013 financial statements (unless specified otherwise).

Whilst the illustrative financial statements illustrate many presentation and disclosure requirements for the consolidated financial statements of the fictitious group of companies that report under International Financial Reporting Standards, the financial statements do not purport to be all inclusive. No single set of example financial statements can illustrate all possible presentations or required disclosures. Common additional and alternative disclosures are illustrated in the appendices. In practice, many entities will have followed special transitional rules that depended on when individual new standards were adopted or IFRS were applied for the first time. The model financial statements represent one form of presentation.

Alternative presentations of IFRS may be appropriate and acceptable.

The preparation of financial statements complying with IFRS is the responsibility of the management of the relevant entity.

Accordingly, the model financial statements provided cannot be taken as a definitive reference; they do not replace the need for professional judgement having regard to relevant standards and other requirements and all the relevant circumstances relating to the issue under review. For the avoidance of doubt, the model financial statements are not based on any actual legal framework in any one or more jurisdictions.

Although the illustrative consolidated financial statements have been prepared by RSM International Limited, the views expressed are the consolidated views of a group of professionals known as “RSM IFRS Leadership Group” for illustrative purposes only and not those of any Member Firm of RSM International Limited itself.

The copyright in this published work belongs to and vests in RSM International Association and all rights are reserved. No part of this publication may be reproduced, stored in any system or transmitted in any form or by any means whether electronic, mechanical, photocopying, recording or otherwise without the prior permission in writing of RSM International Association.

CONTENTS CONSOLIDATED FINANCIAL STATEMENTS

Page

Consolidated Statement of Profit or Loss

1

Consolidated Statement of Comprehensive Income

2

Consolidated Statement of Financial Position

3

Consolidated Statement of Changes in Equity

4

Consolidated Statement of Cash Flows

5

Notes

6

APPENDICES APPENDIX 1

Consolidated Statement of Profit or Loss by nature of expense

63

APPENDIX 2

Consolidated Statement of Profit or Loss using a columnar approach to discontinued operations

65

APPENDIX 3

Consolidated Statement of Financial Position in order of liquidity

66

APPENDIX 4

Financial Instruments under IFRS 9

68

APPENDIX 5

Investment Properties

70

APPENDIX 6

Construction Contracts

72

KEY TO DISCLOSURE REFERENCES IASXpY

Paragraph Y of International Accounting Standard X

IFRSXpY

Paragraph Y of International Financial Reporting Standard X

IFRICX

International Financial Reporting Interpretations Committee number X

SIC-X

Standing Interpretations Committee number X

These consolidated financial statements are presented in CU. Unless otherwise stated, all amounts are expressed in thousands of CU. Decimal symbol is dot (“.”) and digit-grouping symbol is comma (“,”)

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(b);10A

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 2013 This illustrates the presentation of comprehensive income in two statements, by function of expense.

IAS1p10(ea)

Notes

IAS1p113;51(d),(e) IAS1p82(a) IAS1p99;103 IAS1p85 IAS1p99;103 IAS1p99;103 IAS1p99;103 IAS1p82(b) IAS1p82(c) IAS1p85;94 IFRS3p42 IAS1p85 IAS1p82(d) IAS1p85 IAS1p82(ea) IAS1p81A(a)

IAS1p81B(a)(ii) IAS1p81B(a)(i)

Revenue Cost of sales

3 4

GROSS PROFIT Distribution costs Administrative expenses Other operating expenses Finance costs Share of the profit (loss) of associates Gain (loss) on disposal of available-for-sale financial assets Gain (loss) on revaluation of an associate becoming a subsidiary PROFIT BEFORE TAX

4 4 4 5 13 6 17

Income tax expense PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS LOSS FOR THE YEAR FROM DISCONTINUED OPERATIONS PROFIT FOR THE YEAR

IAS33p68;68A;69 IAS33p66;67;67A

IAS33p66;67;67A IAS33p68;68A;69 IAS33p66;67;67A

21

PROFIT FOR THE YEAR ATTRIBUTABLE TO: Owners of the parent company Non-controlling interests

EARNINGS PER SHARE BASIC IAS33p66;67;67A

7

Continuing operations Discontinued operations Total basic earnings per share DILUTED Continuing operations Discontinued operations Total diluted earnings per share

Page 1 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

2013 CU'000

2012 (restated) CU'000

22,803 (18,697) 4,106 (889) (1,222) (42) (91) 140 63 490 2,555

15,160 (11,720) 3,440 (747) (1,015) (130) (95) 300 18 1,771

(682) 1,873 (110) 1,763

(562) 1,209 (226) 983

1,658 105 1,763

931 52 983

Cents

Cents

4.34 (0.27) 4.07

3.53 (0.69) 2.84

4.25 (0.26) 3.99

3.30 (0.65) 2.65

8

8

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(b);10A

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2013

IAS1p10(ea)

Notes

IAS1p113;51(d),(e) IAS1p10A;81A(a)

PROFIT FOR THE YEAR

2013

2012 (restated)

CU'000

CU'000

1,763

983

(100)

(36)

-

-

(100)

(36)

OTHER COMPREHENSIVE INCOME IAS1p82A(a) IAS19p120(c) IAS1p90;91(b)

IAS1p82A(b)

ITEMS THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS Remeasurement of the net defined benefit liability / asset Income tax relating to items that will not be reclassified

26

1

ITEMS THAT WILL BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS WHEN SPECIFIC CONDITIONS ARE MET

IAS1p82A

Exchange translation difference

32

72

54

IAS1p82A

Gains on available-for-sale financial assets

6

10

12

6

(63)

(18)

23

85

51

23

87

61

7

(28)

(17)

163

143

IAS1p92;94

Reclassification adjustments on disposal of available-for-sale financial assets

IAS1p82A

Cash flow hedges

IAS1p82A

Net investment hedge

IAS1p90;91(b)

IAS1p81A(b) IAS1p81A(c)

Income tax relating to items that may be reclassified

2

1

OTHER COMPREHENSIVE INCOME FOR THE YEAR - NET OF TAX TOTAL COMPREHENSIVE INCOME FOR THE YEAR

63

107

1,826

1,090

1,731

1,047

95

43

1,826

1,090

TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO: IAS1p81B(b)(ii)

Owners of the parent company

IAS1p81B(b)(i)

Non-controlling interests

1 IAS1p90

Alternatively each component of other comprehensive income can be presented net of tax effect, with income tax relating to each component disclosed in the notes.

2

IAS1p94

Alternatively reclassification adjustments may be presented in the notes.

Page 2 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(a)

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2013

Notes

CU'000

31/12/12 (restated) CU'000

10 11 12 13 15 28

5,800 1,329 2,414 281 274 243 10,341

5,520 605 803 249 269 140 7,586

6,066 738 786 79 257 57 7,983

18 19 20

2,623 2,586 622 5,831 1,016 6,847 17,188

1,995 1,517 360 3,872 3,872 11,458

1,713 1,437 306 3,456 3,456 11,439

31 32

2,596 1,035 6,309 9,940 306 10,246

1,870 295 5,151 7,316 35 7,351

1,810 64 4,725 6,599 42 6,641

22 23 24 26 28 29 30

2,182 17 195 466 780 92 60 3,792

823 10 161 250 297 38 156 1,735

992 13 202 133 125 119 1,584

Short-term borrowings Derivative financial instruments Trade and other payables Short-term retirement benefit obligations Current tax payable Short-term provisions

22 23 24 26 7 29

964 186 1,017 9 523 151 2,850

Liabilities directly associated with non-current assets classified as held for sale Total current liabilities TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES

21

300 3,150 6,942 17,188

748 103 1,045 42 415 19 2,372 2,372 4,107 11,458

1,527 164 1,175 17 329 2 3,214 3,214 4,798 11,439

31/12/13

IAS1p10(ea),(f) IAS1p113;51(d),(e)

01/01/12 1 (restated) CU'000

ASSETS IAS1p60 IAS1p54(a) IAS1p55 IAS1p54(c) IAS1p54(e) IAS1p54(d) IAS1p54(o);56

IAS1p60 IAS1p54(g) IAS1p54(h) IAS1p54(i)

IAS1p54(j)

NON-CURRENT ASSETS Property, plant and equipment Goodwill Other intangible assets Investments in associates Available-for-sale financial assets Deferred tax assets Total non-current assets CURRENT ASSETS Inventories Trade and other receivables Cash and cash equivalents Non-current assets classified as held for sale Total current assets TOTAL ASSETS

21

EQUITY AND LIABILITIES IAS1p54(r) IAS1p54(r) IAS1p54(r)

IAS1p54(q)

IAS1p60 IAS1p55 IAS1p54(m) IAS1p54(k) IAS1p55 IAS1p54(o);56 IAS1p54(l) IAS1p55

IAS1p60 IAS1p55 IAS1p54(m) IAS1p54(k) IAS1p55 IAS1p54(n) IAS1p54(l)

IAS1p54(p)

IAS1p40A

EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT COMPANY Capital Reserves Retained earnings NON-CONTROLLING INTERESTS TOTAL EQUITY NON-CURRENT LIABILITIES Long-term borrowings Derivative financial instruments Trade and other payables Long-term retirement benefit obligations Deferred tax liabilities Long-term provisions Other non-current liabilities Total non-current liabilities CURRENT LIABILITIES

1

Although the retrospective changes in accounting policies, restatements or reclassifications of items as detailed in Note 2A do not have a material effect on the information in the Group’s statement of financial position at the beginning of the preceding period, a third statement of financial position as at 1 January 2012 is presented for illustration purposes only.

Page 3 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(c);106

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2013

IAS1p106(b)

At 1 January 2012 (as previously reported) Impact of changes in accounting policies At 1 January 2012 (restated) Profit for the year Other comprehensive income for the year Total comprehensive income for the year Share options Equity dividends paid At 31 December 2012 (restated) Profit for the year Other comprehensive income for the year Total comprehensive income for the year Ordinary shares issued on acquisition of subsidiary Share options Issue of convertible bonds Equity dividends paid Purchase of treasury shares Non-controlling interest adjustment due to an associate becoming a subsidiary At 31 December 2013

Noncontrolling Interests

TOTAL EQUITY

Capital

Reserves

CU’000 1,810 -

CU’000 64 -

CU’000 4,722 3

CU’000 6,596 3

CU’000 42 -

CU’000 6,638 3

1,810 60 1,870

64 231 231 295

4,725 931 (115) 816 80 (470) 5,151

6,599 931 116 1,047 140 (470) 7,316

42 52 (9) 43 (50) 35

6,641 983 107 1,090 140 (520) 7,351

-

192 192

1,658 (119) 1,539

1,658 73 1,731

105 (10) 95

1,763 63 1,826

31 31 32 9 31

774 62 (110)

548 -

24 (405) -

774 86 548 (405) (110)

(384) -

774 86 548 (789) (110)

17

2,596

1,035

6,309

9,940

560 306

560 10,246

Notes

IAS1p113;51(d),(e)

Attributable to Owners of the Parent

Retained Earnings

2A

32 31 9

Page 4 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(d)

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2013 This illustrates the direct method of reporting cash flows from operating activities

2013

2012

Notes

CU'000

CU'000

37

22,563 (20,164) 2,399 (115) (447) 1,837

15,300 (12,857) 2,443 (108) (250) 2,085

(303) (100) 306 76 167 (1,841) (1,713)

273 25 (902) (307)

(75) 80 7 12 (3,384)

5 11 (895)

62 1,572 (110) 648 123 (51) (500) 1,744

60 92 (599) (44) (470) (961)

IAS1p10(ea) IAS1p113;51(d),(e) IAS7p10

IAS7p31 IAS7p35

IAS7p10

IAS7p31 IAS7p31

IAS7p10

IAS7p31

IAS7p28

CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Net cash flow generated from operations Interest paid Income taxes paid Net cash generated by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of subsidiary (net of cash acquired) Delayed payment for earlier acquisition Disposal of subsidiary (net of cash disposed of) Proceeds from sale of property, plant and equipment Proceeds from sale of intangible assets Purchase of property, plant and equipment Purchase of intangible assets Available-for-sale investments: - bought - sold Interest received Dividends received Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Proceeds from issue of convertible bonds Purchase of treasury shares Proceeds of new bank loans and derivatives Net fresh factor borrowings Repayment of bank loans Finance lease repayments Dividends paid to owners of the parent company Net cash generated by (used in) financing activities CASH AND CASH EQUIVALENTS At 1 January Net increase in the year Effect of exchange rate changes on cash and cash equivalents held At 31 December COMPRISING Cash in hand and at bank Short-term investments CASH AND CASH EQUIVALENTS PER THE STATEMENT OF FINANCIAL POSITION Less bank overdrafts CASH AND CASH EQUIVALENTS FOR THE STATEMENT OF CASH FLOWS PURPOSES

Page 5 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

17 30 21 10 12 10 12 15

5 5

31 22 31 22 22 22 22 9 20

223

(4)

197 420

229 (2) 223

334 288

285 75

622

360

(202)

(137)

420

223

IAS1p51(a) IAS1p49;51(b),(c)

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39

General information Summary of significant accounting policies Segment information Analysis of expenses by nature Finance income and costs Gain / loss on available-for-sale financial assets Income tax expense Earnings per share Dividends on equity shares Property, plant and equipment Goodwill Other intangible assets Investments in associates Joint arrangements Available-for-sale financial assets Subsidiaries Business combinations Inventories Trade and other receivables Cash and cash equivalents Non-current assets classified as held-for-sale and discontinued operations Borrowings Derivative financial instruments and hedge accounting Trade and other payables Information on financial risks Retirement benefit obligations Share-based payments Deferred tax Provisions Other non-current liabilities Equity capital Other reserves Related party transactions Key management compensation Commitments Contingent liabilities Reconciliation of profit to net cash flow generated from operations Events after the reporting period Significant judgements and key sources of estimation uncertainty

Page 6 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

Page 7 7 22 26 27 27 28 29 30 30 31 33 34 35 35 35 36 37 37 38 38 40 41 42 43 47 50 51 53 54 54 55 56 57 57 57 58 58 59

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

NOTES FOR THE YEAR ENDED 31 DECEMBER 2013

1 GENERAL INFORMATION

IAS1p138

IFRS Statements Limited is a corporation domiciled in, and registered under the laws of, the Republic of Newland, where the head office is located. IFRS Statements Limited together with its subsidiaries (“the Group”) is organised into three business segments: mechanical, electronic and chemicals.

The Group operates in 40 countries worldwide, essentially in Europe, America and Asia. It includes 21 commercial subsidiaries across those three continents and 5 manufacturing plants in Europe and Asia. Markets where the Group is not present via a subsidiary and that are considered significant are served using local distributors.

IFRS Statements Limited is listed on the Big City stock exchange in the Republic of Newland.

IAS24p13

The Group is ultimately controlled by Newmagic Corporation domiciled in Newland, which holds 51% of the ordinary shares of IFRS Statements Limited.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

IAS1p117

IAS1p116 IAS1p16;25

(A) BASIS OF PREPARATION These consolidated financial statements have been prepared on a going concern basis and in accordance with International Financial Reporting Standards (“IFRS”), being standards and interpretations issued by the International Accounting Standards Board (“IASB”), in force at 31 December 2013.

The consolidated financial statements comprise a statement of profit or loss, a statement of comprehensive income, a statement of financial position, a statement of changes in equity, a statement of cash flows, and notes. Income and expenses, excluding the components of other comprehensive income, are recognised in the statement of profit or loss. Other comprehensive income is recognised in the statement of comprehensive income and comprises items of income and expenses (including reclassification adjustments) that are not recognised in the statement of profit or loss, as required or permitted by IFRS. Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognised in other comprehensive income in the current or previous periods. Transactions with the owners of the Group in their capacity as owners are recognised in the statement of changes in equity.

IAS1p99

The Group presents the statement of profit or loss using the classification by function of expenses. The Group believes this method provides more useful information to the readers of the financial statements as it better reflects the way operations are run from a business point of view. The statement of financial position format is based on a current / non-current distinction.

IAS1p117(a)

Measurement bases The consolidated financial statements have been prepared under the historical cost convention, unless mentioned otherwise in the accounting policies below (eg certain financial instruments that are measured at fair value). Historical cost is generally based on the fair value of the consideration given in exchange for assets.

IFRS13p9

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When measuring the fair value of an asset or a liability, the Group uses market observable data to the extent possible. If the fair value of an asset or a liability is not directly observable, it is estimated by the Group (working closely with external qualified valuers) using valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs (eg by use of the market comparable approach that reflects recent transaction prices for similar items, discounted cash flow analysis, or option pricing models refined to reflect the issuer’s specific circumstances). Inputs used are consistent with the characteristics of the asset / liability that market participants would take into account.

IFRS13p61;67;69

IFRS13p72;73

Fair values are categorised into different levels in a fair value hierarchy based on the degree to which the inputs to the measurement are observable and the significance of the inputs to the fair value measurement in its entirety:   

IFRS13p95

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices).

Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Transfers between levels of the fair value hierarchy are recognised by the Group at the end of the reporting period during which the change occurred.

Page 7 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IAS8p28

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

Application of new and revised pronouncements For the preparation of these consolidated financial statements, the following new, revised or amended pronouncements are mandatory for the first time for the financial year beginning 1 January 2013 (the list does not include information about new or amended requirements that affect interim financial reporting or first-time adopters of IFRS since they are not relevant to IFRS 1 Statements Limited). 

Amendments to IAS 1 titled Presentation of Items of Other Comprehensive Income (issued in June 2011) - These amendments, that are effective retrospectively, enhance the presentation of the components of other comprehensive income. The Group is required to group items presented in OCI based on whether or not they will be reclassified to profit or loss subsequently. Although not mandatory, the Group has applied the new terminology for “income statement”, ie “statement of profit or loss”. The retrospective application of the amendments did not have any impact other than on the presentation of items of other comprehensive income.



Amendments to IAS 1 Presentation of Financial Statements (Annual Improvements to IFRSs 2009–2011 Cycle, issued in May 2012) - The amendments clarify that additional comparative information is not necessary for periods beyond the minimum required by IAS 1. However, if voluntarily presented, it should be in accordance with IFRS, without triggering a requirement to provide a complete set of financial statements. They also clarify that, in the case of changes in accounting policies retrospectively or a retrospective restatement or reclassification which has a material effect on the information in the statement of financial position at the beginning of the preceding period, the Group should present the statement of financial position at the end of the current period and the beginning and end of the preceding period. However, other than disclosure of certain specified information, related notes are not required to accompany the opening statement of financial position as at the beginning of the preceding period.



Amendment to IAS 16 Property, Plant and Equipment (Annual Improvements to IFRSs 2009–2011 Cycle, issued in May 2012) - The amendment clarifies that items such as spare parts, stand-by equipment and servicing equipment should be recognised as PPE when they meet the definition in IAS 16 and as inventory otherwise. It has had no impact on the Group’s financial statements.



Revised IAS 27 Separate Financial Statements (issued in May 2011) – The revised and re-titled standard now only deals with the requirements for separate financial statements, which have been carried over largely unchanged from IAS 27 Consolidated and Separate Financial Statements. The standard mainly requires that when an entity prepares separate financial statements, investments in subsidiaries, associates, and joint ventures are accounted for either at cost, or in accordance with IFRS 9 Financial Instruments / IAS 39 Financial Instruments: Recognition and Measurement. It also deals with the recognition of dividends, certain group reorganisations and includes a number of disclosure requirements. It is not applicable to the Group as it deals only with separate financial statements.



Revised IAS 28 Investments in Associates and Joint Ventures (issued in May 2011) – The revised and re-titled standard prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. It defines “significant influence”, provides guidance on how the equity method of accounting is to be applied (including exemptions from applying the equity method in some cases) and prescribes how investments in associates and joint ventures should be tested for impairment. It has had no material effect on the Group’s consolidated financial statements.



Amendment to IAS 32 Financial instruments: Presentation (Annual Improvements to IFRSs 2009–2011 Cycle, issued in May 2012) - The amendment clarifies that income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction should be accounted for in accordance with IAS 12. It is has had no impact on the Group’s financial statements.



Amendments to IFRS 7 titled Disclosures - Offsetting Financial Assets and Financial Liabilities (issued in December 2011) The amendments allow investors to bridge differences in the offsetting reporting requirements of IFRS and US GAAP and introduce new disclosures that provide better information on how companies mitigate credit risk, including on related collateral pledged or received. They are applied retrospectively. As the Group does not have any offsetting arrangements in place, the application of the amendments has had no material effect on its consolidated financial statements.

1

Although some of these new/revised/ amended pronouncements did not significantly affect IFRS Statements Limited, they are given for illustration purposes. Only those changes that have an effect on the current period or any prior period, would have such an effect except that it is impracticable to determine the amount of the adjustment, or might have an effect on future periods, are required to be disclosed.

Page 8 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013 

IFRS 10 Consolidated Financial Statements (issued in May 2011 and amended in June 2012 for its transitional provisions) – The new standard replaces all of the guidance on control and consolidation in IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation— Special Purpose Entities. The core principle that a consolidated entity presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the consolidation procedures.

IFRS 10 introduces a single consolidation model that identifies control as the basis for consolidation for all types of entities, where control is based on whether an investor has power over the investee, exposure / rights to variable returns from its involvement with the investee and the ability to use its power over the investee to affect the amount of the returns. The new standard also includes guidance on participating and protective rights and on agent / principal relationships. The application of the new standard has had no material effect on the Group’s consolidated financial statements, as its scope of consolidation remains unchanged.



IFRS 11 Joint Arrangements (issued in May 2011 and amended in June 2012 for its transitional provisions) – The new standard (that replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled Entities—Non-Monetary Contributions by Venturers) requires a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing its rights and obligations, and then account for those rights and obligations in accordance with that type of joint arrangement. Joint arrangements are either joint operations or joint ventures: o

In a joint operation, parties have rights to the assets and obligations for the liabilities relating to the arrangement.

Joint operators recognise their assets, liabilities, revenue and expenses in relation to their interest in the joint operation.

o

In a joint venture, parties have rights to the net assets of the arrangement. A joint venturer applies the equity method of accounting for its investment in a joint venture in accordance with IAS 28 Investments in Associates and Joint Ventures (2011). Unlike under IAS 31, the use of “proportionate consolidation” is not permitted.

The effect of IFRS 11 on the Group’s consolidated financial statements is immaterial given that the jointly controlled entities (set up as partnerships), previously accounted for under the proportionate consolidation method, were all assessed to be joint operations under IFRS 11, thus with similar accounting. 

IFRS 12 Disclosure of Interests in Other Entities (issued in May 2011 and amended in June 2012 for its transitional provisions) – The new standard combines, enhances and replaces the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities. It requires extensive disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with, interests in other entities and the effects of those interests on the Group’s financial position, financial performance and cash flows. Its application has resulted in more extensive disclosures in the Group’s consolidated financial statements.



IFRS 13 Fair Value Measurement (issued in May 2011) – The new standard defines fair value, sets out a single framework for measuring fair value and requires disclosures about fair value measurements. IFRS 13 applies when other standards require or permit fair value measurements. It does not introduce any new requirements to measure an asset or a liability at fair value, change what is measured at fair value in IFRS or address how to present changes in fair value. The new requirements have been applied prospectively. In addition, specific transitional provisions were given to entities such that they need not apply the disclosure requirements set out in the Standard in comparative information provided for periods before the initial application of the Standard. Other than the additional disclosures required, the application of IFRS 13 has had no material effect on the Group’s consolidated financial statements. Also, in accordance with the standard’s transitional provisions, the Group has not made any new disclosures required by IFRS 13 for the 2012 comparative period.



IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine (issued in October 2011) - The interpretation provides guidance on the accounting for waste removal (stripping) costs in the production phase of a mine. Such stripping costs should be recognised as an asset if they generate a benefit of improved access to an identifiable component of the ore body, it is probable that the benefits will flow to the entity and the costs can be measured reliably. Capitalised stripping costs are amortised over the useful life of the identified component. On transition, existing production stripping costs must be written off to retained earnings, unless they can be attributed to an identifiable component of an ore body. IFRIC 20 has had no effect on the Group.



Revised IAS 19 Employee Benefits (issued in June 2011) - The key amendments include elimination of the “corridor approach”, modification of accounting for termination benefits and improvement of the recognition, presentation and disclosure requirements for defined benefit plans. The amendments have been applied retrospectively in accordance with IAS 8 (except for changes to the carrying value of assets that include employee benefit costs in the carrying amount).

Besides the more extensive disclosures (see Note 26), the amendments had the following effect on the Group’s consolidated financial statements.

Page 9 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IAS8p28(f)(i)

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

2013

2012

CU'000

CU'000

(11)

(8)

1

-

(10)

(8)

18

15

-

-

18

15

8

7

(10)

(8)

-

-

(10)

(8)

Owners of the parent company

8

7

Non-controlling interests

-

-

8

7

IMPACT OF IAS 19 (AS REVISED IN 2011) ON TOTAL COMPREHENSIVE INCOME Increase in service costs Decrease in income tax expenses Decrease in profit for the year

Increase in remeasurement of the net defined benefit liability / asset Increase in income tax relating to items of other comprehensive income Increase in other comprehensive income for the year

Increase in total comprehensive income for the year

Decrease in profit for the year attributable to: Owners of the parent company Non-controlling interests

Increase in total comprehensive income for the year attributable to:

IAS8p28(f)(ii)

IAS8p28(f)(i)

The above changes affected the Group’s results from continuing operations only. Their effect on the amounts reported for both basic and diluted earnings per share was 0.18 cents in 2013 and 0.09 cents in 2012.

31/12/13

31/12/12

01/01/12

CU'000

CU'000

CU'000

Increase in deferred tax liabilities

12 -

10 -

3 -

Increase in retained earnings

12

10

3

Increase in equity

12

10

3

IMPACT OF IAS 19 (AS REVISED IN 2011) ON ASSETS, LIABILITIES AND EQUITY Decrease in retirement benefit obligation

IAS8p30,31

New and revised pronouncements in issue but not yet effective The Group has not applied the following new, revised or amended pronouncements that have been issued by the IASB but are not yet effective for the financial year beginning 1 January 2013 (the list does not include information about new requirements that affect interim financial reporting or first-time adopters of IFRS since they are not relevant to IFRS Statements Limited).

The Directors anticipate that the new standards, amendments and interpretations will be adopted in the Group's consolidated financial statements when they become effective. The Group has assessed, where practicable, the potential impact of all these 1 new standards, amendments and interpretations that will be effective in future periods.

1

Since this list of new/revised/amended standards and interpretations was drafted in September 2013, it should be extended to include all such changes up to the date of authorisation for issue of the 2013 financial statements.

Page 10 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013 





Amendments to IAS 32 titled Offsetting Financial Assets and Financial Liabilities (issued in December 2011) – The amendments address inconsistencies in current practice when applying the offsetting criteria in IAS 32, mainly by clarifying the meaning of “currently has a legally enforceable right of set-off” and that some gross settlement systems may be considered equivalent to net settlement. They are effective for annual periods beginning on or after 1 January 2014, with retrospective application. As the Group does not have offsetting arrangements in place, the Directors do not anticipate any effect on its consolidated financial statements.

Amendments to IAS 36 titled Recoverable Amount Disclosures for Non-Financial Assets (issued in May 2013) – The amendments reduce the circumstances in which the recoverable amount of assets or cash-generating units is required to be disclosed, clarify the disclosures required, and introduce an explicit requirement to disclose the discount rate used in determining impairment (or reversals) where recoverable amount (based on fair value less costs of disposal) is determined using a present value technique. They are effective for annual periods beginning on or after 1 January 2014.



Amendments to IAS 39 titled Novation of Derivatives and Continuation of Hedge Accounting (issued in June 2013) – The amendments permit the continuation of hedge accounting in a situation where the counterparty to a derivative designated as a hedging instrument is replaced by a new central counterparty (known as ‘novation of derivatives’), as a consequence of laws or regulations, if specific conditions are met. They are effective for annual periods beginning on or after 1 January 2014. The Directors do not anticipate any effect on the Group’s consolidated financial statements, in the absence of such transactions.



Amendments to IFRS 10, IFRS 12 and IAS 27 titled Investment Entities (issued in October 2012) – The amendments define “investment entities” and provide them an exemption from the consolidation of subsidiaries; instead, an investment entity is required to measure the investment in each eligible subsidiary at fair value through profit or loss in accordance with IFRS 9 / IAS 39 (the exception does not apply to subsidiaries that provide services relating to the investment entity’s investment activities). An investment entity is required to account for its investment in a relevant subsidiary in the same way in its consolidated and separate financial statements, and additional disclosures are introduced. The amendments are effective for annual periods beginning on or after 1 January 2014, retrospectively with some transitional provisions. The Directors do not anticipate any effect on the Group’s consolidated financial statements as the parent company is not an investment entity.



IFRS 9 Financial Instruments (issued in November 2009 and amended in October 2010) - This standard introduces new requirements for the classification and measurement of financial assets and financial liabilities and for derecognition. o IFRS 9 requires all recognised financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of each accounting period. All other debt investments and equity investments are measured at their fair value at the end of each accounting period. o

The most significant effect of IFRS 9 regarding the classification and measurement of financial liabilities relates to the accounting for changes in fair value of a financial liability, that is designated as at fair value through profit or loss, attributable to changes in the credit risk of that liability. Specifically, under IFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognised in other comprehensive income, unless the recognition of the effects of changes in the liability's credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability's credit risk are not subsequently reclassified to profit or loss. Currently, under IAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss is recognised in profit or loss.

o

The derecognition provisions are carried over almost unchanged from IAS 39.

IFRS 9 is effective for annual periods beginning on or after 1 January 2015, by which time it will include requirements and guidance on impairment and hedge accounting. The Directors anticipate that IFRS 9 will be adopted in the Group's consolidated financial statements when it becomes mandatory and that the application of the new standard might have a significant impact on amounts reported in respect of the Groups’ financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed. 

IFRIC 21 Levies (issued in May 2013) – The interpretation provides guidance on when to recognise a liability for a levy imposed by a government. The obligating event for the recognition of a liability is the activity that triggers the payment of the levy in accordance with the relevant legislation. It also provides guidance on recognition of a liability to pay levies: the liability is recognised either progressively if the obligating event occurs over a period of time, or when the minimum threshold is reached if an obligation is triggered on reaching that minimum threshold. The interpretation is effective for annual periods beginning on or after 1 January 2014 and is not expected to impact the Group’s consolidated financial statements.

Page 11 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IAS18p35(a)

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

(B) REVENUE RECOGNITION

IAS18p14

Revenue from the sale of goods Revenue from the sale of goods is recognised in the consolidated statement of comprehensive income on the date that goods are delivered to the customer and legal title has passed. Revenue is the fair value of the consideration received or receivable for goods and is net of estimated returns, trade discounts and sales-based taxes (eg value added tax).

IAS18IE10

Installation fees Installation fees are recognised by reference to the stage of completion of the installation activity at the reporting date, unless they are incidental to the sale of a product, in which case they are recognised when the goods are sold. In general, the stage of completion is based on man-hours or cost incurred, the appropriate method depending on the type of contract.

IAS18IE11

Servicing fees Servicing fees are recognised over the term of the servicing contract.

IAS18p13

Multiple element arrangements In certain circumstances, the products are sold together with other additional items (“package”). The package might include one or more of the following items: servicing, installation, future technical upgrades or other case-by-case items. In such cases, the recognition criteria specified above are applied to the separately identifiable components of the package in order to reflect the substance of the transaction.

IAS18p30(a)

Interest income Interest income is recognised on a time-proportion basis using the effective interest method.

IAS18p30(b)

Royalty income Fixed fee royalty income is recognised, in accordance with the substance of the agreement, on a straight-line basis over the period of the sub-licences and sales-linked royalty income is recognised in profit or loss when the products are sold by the licensee.

IAS18p30(c)

Dividend income Dividend income is recognised when the right to receive the dividend is established.

(C) BASIS OF CONSOLIDATION IFRS10AppendixA

IFRS10pB47;B22

IFRS10pB86;20

Subsidiaries A subsidiary is an entity controlled by the Group, ie the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its current ability to direct the entity’s relevant activities (power over the investee).

The existence and effect of substantive potential voting rights that the Group has the practical ability to exercise (ie substantive rights) are considered when assessing whether the Group controls another entity.

The Group’s financial statements incorporate the results, cash flows, assets and liabilities of IFRS Statements Limited and all of its directly and indirectly controlled subsidiaries. Subsidiaries are consolidated from the effective date of acquisition, which is the date on which the Group effectively obtains control of the acquired business, until that control ceases. All intragroup transactions, balances, income and expenses are eliminated in full on consolidation.

IIFRS10p22

The non-controlling interests in the net assets and net results of consolidated subsidiaries are shown separately in the consolidated statement of financial position, consolidated statement of profit or loss, and consolidated statement of comprehensive income.

IFRS10pB94

Total comprehensive income (ie profit or loss and each component of other comprehensive income) is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

IFRS10p23;B96

Changes in the Group's ownership interest in a subsidiary that do not result in the Group losing control are accounted for as transactions with owners in their capacity as owners (ie equity transactions). The carrying amounts of the Group's and noncontrolling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the parent.

IFRS10pB98

Upon loss of control of a subsidiary, the Group’s profit or loss is calculated as the difference between (i) the fair value of the consideration received and of any investment retained in the former subsidiary and (ii) the previous carrying amount of the assets (including any goodwill) and liabilities of the subsidiary and any non-controlling interests.

Page 12 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS11p4;6;7;14

IFRS11AppendixA IFRS11p20;24

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

Joint arrangements A joint arrangement (ie either a joint operation or a joint venture, depending on the rights and obligations of the jointly controlling parties to the arrangement), is one in which the Group is party to an arrangement of which two or more parties have joint control, which is the contractually agreed sharing of control of the arrangement; it exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

In a joint operation, the parties with joint control have rights to the assets, and obligations for the liabilities, relating to the arrangement. Therefore, the Group recognises its share of the operation’s assets, liabilities, income and expenses that are combined line by line with similar items in the Group’s financial statements.

In a joint venture, the parties with joint control have rights to the net assets of the arrangement. The Group’s interests in joint ventures are recognised using the equity method in accordance with IAS 28 Investments in Associates and Joint Ventures (see next paragraph under “Associates”).

IAS28p3

IAS28p10

Associates Associates are entities over which the Group has the power to participate in the financial and operating policy decisions of the entity, but which is not control or joint control. Associates are accounted for using the equity method of accounting.

Under the equity method, the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the investor’s share of comprehensive income of the associate. On acquisition of the investment, any difference between the cost of the investment and the investor’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities is accounted for in accordance with IFRS 3 Business Combinations. The goodwill (net of any accumulated impairment loss) relating to an investment in an associate is included within the carrying amount of that investment.

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the statement of profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment.

Distributions received from an investee reduce the carrying amount of the investment.

IAS28p38;39

If the Group’s share of losses of an associate equals or exceeds its interest in the associate, the Group does not provide for additional losses, unless it has incurred obligations or made payments on behalf of the associate.

IAS28p28

Profits / losses on Group transactions with associates are eliminated to the extent of the Group’s interest in the relevant associate.

IAS21p39

IAS21p40

Translation of financial statements of foreign entities The assets and liabilities of foreign operations are translated into CU using exchange rates at the reporting date. The components of shareholders’ equity are stated at historical value.

Average exchange rates for the period are used to translate income and expense items of foreign operations. However, if exchange rates fluctuate significantly, the exchange rates at the dates of the transactions are used.

All resulting exchange differences are recognised in other comprehensive income and accumulated in a separate component of equity.

IAS21p47

Any goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of that foreign operation and, as such, translated at the closing rate.

IAS21p48;48A;48B

On the disposal of a foreign operation, all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the parent company are reclassified to profit or loss. The cumulative amount of the exchange differences relating to that foreign operation that had been attributed to the non-controlling interests are derecognised, but without reclassification to profit or loss. The same applies in case of loss of control, joint control or significant influence.

IAS21p48C

On the partial disposal without loss of control of a subsidiary that includes a foreign operation, the proportionate share of exchange differences accumulated in the separate component of equity are re-attributed to non-controlling interests (they are not recognised in profit or loss). For any other partial disposal of foreign entity (ie associates or joint arrangements without loss of significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss.

IFRS3p4;18;21

Business combinations The Group applies the acquisition method to account for all acquired businesses, whereby the identifiable assets acquired and the liabilities assumed are measured at their acquisition-date fair values (with few exceptions as required by IFRS 3 Business Combinations).

Page 13 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

IFRS3p37

The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, the liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group.

IFRS3p53

Acquisition-related costs (eg finder’s fees, consulting fees, administrative costs, etc.) are recognised as expenses in the periods in which the costs are incurred and the services are received.

IFRS3p32

On acquisition date, goodwill is measured as the excess of the aggregate of consideration transferred, any non-controlling interests in the acquiree, and acquisition-date fair value of the Group's previously held equity interest in the acquiree (if business combination achieved in stages) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

IFRS3p34;36

If, after appropriate reassessment, the amount as calculated above is negative, it is recognised immediately in profit or loss as a bargain purchase gain.

IFRS3p19

At acquisition date, non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation are measured at either fair value or the present ownership instruments’ proportionate share in the recognised amounts of the acquiree's identifiable net assets. This choice of measurement is made separately for each business combination. Other components of non-controlling interests are measured at their acquisition-date fair values, unless otherwise required by IFRS.

IFRS3p39;45;58

The acquisition-date fair value of any contingent consideration is recognised as part of the consideration transferred by the Group in exchange for the acquiree. Changes in the fair value of contingent consideration that result from additional information obtained during the measurement period (maximum one year from the acquisition date) about facts and circumstances that existed at the acquisition date are adjusted retrospectively against goodwill. Changes resulting from events after the acquisition date are adjusted only when the contingent consideration is classified as an asset or a liability. The adjustment is recognised in profit or loss or other comprehensive income in accordance with the requirements for changes in assets or liabilities of the same nature.

IFRS3p42

In a business combination achieved in stages, the Group remeasures its previously held equity interest in the acquiree at its acquisition-date fair value and any resulting gain or loss is recognised in profit or loss. If any, changes in the value of the Group’s equity interest in the acquiree that have been previously recognised in other comprehensive income are reclassified to profit or loss, if appropriate had that interest been disposed of directly.

(D) PROPERTY, PLANT AND EQUIPMENT IAS16p15;16

On initial recognition, items of property, plant and equipment are recognised at cost, which includes the purchase price as well as any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

IAS16p73(a)

After initial recognition, items of property, plant and equipment are carried at cost less any accumulated depreciation and impairment losses.

IAS16p50;73(b),(c)

Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over its useful econom ic life as follows: Buildings 2% straight line Plant and equipment 10-33% straight line Computer equipment 25% straight line Motor vehicles 25% straight line Land is not depreciated

IAS16p51

Useful lives, residual values and depreciation methods are reviewed, and adjusted if appropriate, at the end of each reporting period.

IAS16p67;68

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

IAS17p8

Leased assets Leases are classified as finance leases if substantially all the risks and rewards of ownership are transferred to the lessee. All other leases are classified as operating leases.

Page 14 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

IAS17p20

Assets and liabilities arising from finance lease contracts are initially recognised in the consolidated statement of financial position at their fair value at the inception of the lease or, if lower, at the present value of the minimum future lease rentals.

IAS17p27

After initial recognition, the depreciation policy applied is consistent with that for depreciable assets that are owned. As a result, the depreciation recognised is calculated in accordance with the useful life stated for property, plant and equipment (the Group does not hold leased intangible assets). In cases where there is no reasonable certainty that the lessee will obtain ownership by the end of the lease term, the asset is fully depreciated over the shorter of the lease term and its useful life.

IAS17p25

The interest element of rental obligations is charged to profit or loss over the period of the lease at a constant rate on the balance of finance lease obligations outstanding.

IAS17p33

Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the lease term.

SIC-15

Incentives to take out operating leases are credited to profit or loss, as a reduction of rental expense, on a straight-line basis over the lease term.

IAS37p66

Provision is made in the consolidated statement of financial position for the present value of the onerous element of operating leases. This typically arises when the Group ceases to use premises and they are left vacant to the end of the lease or are sublet at rentals, which fall short of the amount payable by the Group under the lease.

(E) INTANGIBLE ASSETS IFRS3p32

IAS36p10(b)

IAS38p24;27

Goodwill Goodwill arising in a business combination is initially measured at its cost, being the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

After initial recognition, goodwill acquired in a business combination is measured at cost less any accumulated impairment losses. Goodwill is not amortised.

Separately acquired intangible assets On initial recognition, intangible assets acquired separately are measured at cost. The cost of a separately acquired intangible asset comprises its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates and any directly attributable cost of preparing the asset for its intended use.

IAS38p74;104

After initial recognition, intangible assets are carried at cost less any accumulated amortisation and impairment losses. The estimated useful life and amortisation method are revised at the end of each reporting period with the effect of any changes in estimate being accounted for on a prospective basis.

IAS38p112;113

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.

IAS38p57

IAS38p71

Internally generated intangible assets Development costs represent typical internally generated intangible assets of relevance for the Group. Costs incurred in relation to individual projects are capitalised only when the future economic benefit of the project is probable and the following main conditions are met: (i) the development costs can be measured reliably, (ii) the technical feasibility of the product has been ascertained and (iii) management has the intention and ability to complete the intangible asset and use or sell it.

Given the type of businesses managed by the Group and the cumulative experience gained by the Group, usually the fact that the intangible asset will generate probable future economic benefits is reasonably certain only shortly before a product is launched into the market. Costs incurred before that point in time are not reinstated.

Internally generated intangible assets primarily relate to internally developed software and internally developed patented technology as well as processes or recipes.

IAS38p54

Research costs are expensed as incurred.

After initial recognition, internally generated intangible assets follow the accounting policies of separately acquired intangible assets as stated above.

Page 15 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IAS38p34

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

Intangible assets acquired in a business combination Identifiable intangible assets acquired as part of a business combination are initially recognised separately from goodwill if the asset’s fair value can be measured reliably, irrespective of whether the asset had been recognised by the acquiree before the business combination. An intangible asset is considered identifiable only if it is separable or if it arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

After initial recognition, intangible assets acquired as part of a business combination follow the accounting policies of separately acquired intangible assets as stated above.

IAS38p118(a),(b)

Amortisation For intangible assets with finite useful lives, amortisation is calculated so as to write off the cost of the asset, less its estimated residual value, over its useful economic life as follows: Licences 5% straight line Customer lists 15 – 33% straight line Brands (except Brand Supervalve) 5% straight line Development costs 20% straight line Intangible assets with an indefinite useful life are not amortised, but subject to review for impairment as described below. Brand Supervalve was acquired as part of a business combination and its useful life was determined to be indefinite.

(F) IMPAIRMENT OF NON-FINANCIAL ASSETS IAS36p9;18;22

Impairment of Property, plant and equipment and Intangible assets The carrying amounts of such assets are reviewed at each reporting date for indications of impairment and where an asset is impaired, it is written down as an expense through the consolidated statement of profit or loss to its estimated recoverable amount. Recoverable amount is the higher of value in use and the fair value less costs of disposal of the individual asset or the cash-generating unit. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. If this is the case, recoverable amount is determined for the cash-generating unit to which the asset belongs.

IAS36p30;55

Value in use is the present value of the estimated future cash flows of the asset / unit. Present values are computed using pre-tax discount rates that reflect the time value of money and the risks specific to the asset / unit whose impairment is being measured.

IAS36p104;119

Impairment losses for cash-generating units are allocated first against the goodwill of the unit and then pro rata amongst the other assets of the unit. Subsequent increases in the recoverable amount caused by changes in estimates are credited to profit or loss to the extent that they reverse the impairment.

IAS36p10

IAS36p80

Impairment of Goodwill Irrespective of whether there is any indication of impairment, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired.

For the purpose of impairment testing, goodwill is allocated to each cash-generating unit, or groups of cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree were assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated represent the lowest level within the entity at which the goodwill is monitored for internal management purposes and is not larger than an operating segment.

IAS36p124

Goodwill impairment is not reversed in any circumstances.

IAS2p36(a)

(G) INVENTORIES Inventories are carried in the consolidated statement of financial position at the lower of cost and net realisable value. Cost is determined on a first-in first-out (FIFO) basis. The cost of work in progress and finished goods comprises materials, direct labour and attributable production overheads based on normal levels of activity.

Write-down is made for obsolete and slow-moving items based on their expected future use and net realisable value.

IAS2p6

Net realisable value is the estimated sales price in the ordinary course of business after allowing for all further costs of completion and disposal.

Page 16 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS7p21

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

(H) FINANCIAL INSTRUMENTS

IAS39p14;43

Initial recognition and measurement The Group recognises a financial asset or a financial liability in the consolidated statement of financial position when, and only when, it becomes a party to the contractual provisions of the instrument. On initial recognition, the Group recognises all financial assets and financial liabilities at fair value. The fair value of a financial asset / liability on initial recognition is normally represented by the transaction price. The transaction price for financial assets / liabilities other than those classified at fair value through profit or loss includes the transaction costs that are directly attributable to the acquisition / issue of the financial instrument. Transaction costs incurred on acquisition of a financial asset and issue of a financial liability classified at fair value through profit or loss are expensed immediately.

IFRS7pB5(c)

The Group recognises financial assets using settlement date accounting, thus an asset is recognised on the day it is received by the Group and derecognised on the day that it is delivered by the Group.

Subsequent measurement of financial assets Subsequent measurement of financial assets depends on their classification on initial recognition. The Group classifies financial assets in one of the following four categories:

IAS39p9

Financial assets at fair value through profit or loss (FVTPL) Assets are classified in this category when they are held principally for the purpose of selling or repurchasing in the near term (trading assets) or are derivatives (except for a derivative that is a designated and effective hedging instrument) or meet the conditions for designation in this category at initial recognition.

IAS39p55(a) IFRS7pB5(e)

Gains or losses arising on remeasurement of financial assets at FVTPL incorporate any dividend or interest earned, and are recognised in profit or loss.

For the years ended on 31 December 2013 and 2012, the Group did not classify any financial assets as held for trading or designated as at fair value through profit or loss.

IAS39p9;46(a)

Loans and Receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Assets that the Group intends to sell immediately or in the near term cannot be classified in this category. These assets are carried at amortised cost using the effective interest method (except for short-term receivables where interest is immaterial) minus any reduction for impairment or uncollectibility.

Typically trade and other receivables, bank balances and cash are classified in this category.

IAS39p9;46(b)

Held-to-maturity financial assets These are non-derivative financial assets with fixed or determinable payments and fixed maturity that an entity has the positive intention and ability to hold to maturity. Financial assets that upon initial recognition the Group designates as at fair value through profit or loss or available-for-sale and those that meet the definition of loans and receivables cannot be classified in this category. Similar to Loans and Receivables, these assets are carried at amortised cost using the effective interest method minus any reduction for impairment or uncollectibility.

For the years that ended on 31 December 2013 and 2012, the Group did not carry any financial asset classified in this category.

IAS39p9;46 IAS39p46(c);AG81

IAS39p55(b);67

IFRS7pB5(f);37(b)

Available-for-sale (AFS) financial assets These are non-derivative financial assets that are designated as available for sale on initial recognition or are not classified in one of the previous categories. They are carried at their fair value. However, unquoted equity instruments are carried at cost, where it is not possible to reliably measure their fair value.

Except for foreign exchange gains and losses, interest income and dividends that are recognised in profit or loss, changes in the carrying amount of AFS financial assets are recognised in other comprehensive income and accumulated in revaluation reserve, until the investment is disposed of or is determined to be impaired. At that time, the cumulative gain or loss previously accumulated in the revaluation reserve is reclassified to profit or loss.

Impairment of financial assets

IAS39p58;59

At the end of each reporting period, the Group assesses whether its financial assets (other than those at FVTPL) are impaired, based on objective evidence that, as a result of one or more events that occurred after the initial recognition, the estimated future cash flows of the (group of) financial asset(s) have been affected. Objective evidence of impairment could include significant financial difficulty of the counterparty, breach of contract, probability that the borrower will enter bankruptcy, disappearance of an active market for that financial asset because of financial difficulties, etc.

IAS39p61

For AFS equity instruments, a significant or prolonged decline in the fair value of the investment below its cost is considered also to be objective evidence of impairment.

Page 17 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

IAS39p64

In addition, for trade receivables that are assessed not to be impaired individually, the Group assesses them collectively for impairment, based on the Group's past experience of collecting payments, an increase in the delayed payments in the portfolio, observable changes in economic conditions that correlate with default on receivables, etc.

IFRS7pB5(d)

Only for trade receivables, the carrying amount is reduced through the use of an allowance account and subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

For all other financial assets, the carrying amount is directly reduced by the impairment loss.

IAS39p65

For financial assets measured at amortised cost, if the amount of the impairment loss decreases in a subsequent period and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed (either directly or by adjusting the allowance account for trade receivables) through profit or loss.

However, the reversal must not result in a carrying amount that exceeds what the amortised cost of the financial asset would have been had the impairment not been recognised at the date the impairment is reversed.

IAS39p69;70

For AFS debt securities, impairment losses are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss. In respect of AFS equity securities, an increase in fair value subsequent to an impairment loss is recognised in other comprehensive income and accumulated in revaluation reserve; impairment losses are not reversed through profit or loss.

IAS39p17

Derecognition of financial assets Irrespective of the legal form of the transactions, financial assets are derecognised when they pass the “substance over form” based derecognition test prescribed by IAS 39. That test comprises two different types of evaluations which are applied strictly in sequence:  Evaluation of the transfer of risks and rewards of ownership  Evaluation of the transfer of control Whether the assets are recognised / derecognised in full or recognised to the extent of the Group’s continuing involvement depends on accurate analysis which is performed on a specific transaction basis.

Subsequent measurement of financial liabilities Subsequent measurement of financial liabilities depends on how they have been categorised on initial recognition. The Group classifies financial liabilities in one of the following two categories:

IAS39p9;47(a)

Liabilities at fair value through profit or loss (FVTPL) Liabilities are classified in this category when they are held principally for the purpose of selling or repurchasing in the near term (trading liabilities) or are derivatives (except for a derivative that is a designated and effective hedging instrument) or meet the conditions for designation in this category. All changes in fair value relating to liabilities at fair value through profit or loss are charged to profit or loss as they arise.

For the years that ended on 31 December 2013 and 2012, the Group did not classify any financial liabilities held for trading or designated as at fair value through profit or loss.

IAS39p9;47

Other financial liabilities All liabilities which have not been classified in the previous category fall into this residual category.

These liabilities are carried at amortised cost using the effective interest method.

Typically, trade and other payables and borrowings are classified in this category. Items classified within trade and other payables are not usually remeasured, as the obligation is known with a high degree of certainty and settlement is short-term.

IAS32p18(a)

Preference shares These are classified as liabilities in accordance with their substance rather than their legal form. Preference shares represent financial liabilities classified in the “other liabilities” category and are therefore carried at amortised cost. Dividends on preference shares are classified as an interest expense.

IAS39p39;41

Derecognition of financial liabilities A financial liability is removed from the Group’s statement of financial position only when the liability is discharged, cancelled or expired (ie extinguished). The difference between the carrying amount of the financial liability derecognised and the consideration paid is recognised in profit or loss.

IAS39p86

Hedging The normal course of the Group’s business exposes it to currency and interest rate risks. In order to hedge these risks in accordance with the Board’s written treasury policies, the Group uses derivatives and other hedging instruments. IAS 39 allows 3 types of hedging relationships: Page 18 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013   

IAS39p88

Fair value hedge Cash flow hedge Hedge of a net investment in a foreign operation

The Group uses hedge accounting only when the following conditions at the inception of the hedge are satisfied:  The hedging instrument and the hedged item are clearly identified  Formal designation and documentation of the hedging relationship is in place. Such hedge documentation includes the hedge strategy and the method used to assess the hedge’s effectiveness; and  The hedge relationship is expected to be highly effective throughout the life of the hedge.

The above documentation is subsequently updated at each reporting date in order to assess whether the hedge is still expected to be highly effective over its remaining life.

IAS39p89;92

Fair value hedge The gain or loss from remeasuring the hedging instrument at fair value (for a derivative hedging instrument) or the foreign currency component of its carrying amount (for a non-derivative hedging instrument) is recognised in profit or loss.

The gain or loss on the hedged item attributable to the hedged risk is also recognised in profit or loss. If the hedge is terminated, no longer meets the criteria for hedge accounting or is revoked, the adjusted carrying amount of a hedged financial instrument for which the effective interest method is used is amortised to profit or loss.

IAS39p95

Cash flow hedge The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised (net of tax) in other comprehensive income and accumulated under hedging reserve, and the ineffective portion of the gain or loss on the hedging instrument is recognised in profit or loss.

No adjustment is made to the hedged item.

IAS39p97

If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the associated gains or losses that were recognised in equity are reclassified to profit or loss in the same period or periods during which the asset acquired or liability assumed affects profit or loss.

IAS39p98(b);99

If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or a non-financial liability, or a forecast transaction for a non-financial asset or non-financial liability becomes a firm commitment for which fair value hedge accounting is applied, then the Group removes the associated gains and losses that were accumulated in equity and includes them in the initial cost or other carrying amount of the asset or liability (basis adjustment).

IAS39p102

Hedge of a net investment in a foreign operation Hedges of a net investment in a foreign operation are accounted for similarly to cash flow hedges. The effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income and accumulated in the foreign currency translation reserve, whilst the ineffective portion is recognised immediately in profit or loss.

The gain or loss on the hedging instrument that has been accumulated in equity is reclassified to profit or loss on disposal of the foreign operation.

Derivatives All derivatives are initially recognised and subsequently carried at fair value. The Group policy is to use derivatives only for hedging purposes. Accounting for derivatives engaged in hedging relationships is described in the above section.

Sometimes, the Group enters into certain derivatives in order to hedge some transactions but the strict hedging criteria prescribed by IAS 39 are not met. In those cases, even though the transaction has its economic and business rationale, hedge accounting cannot be applied. As a result, changes in the fair value of those derivatives are recognised in profit or loss and accounting for the hedged item follows the Group’s policies for that item.

IAS39p11

IAS7p6

IAS7p8

Embedded derivatives Derivatives embedded in non-derivative host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL. Cash and cash equivalents Cash and cash equivalents comprise cash in hand, on demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to insignificant risk of changes in value.

For the purpose of the statement of cash flows only, cash and cash equivalents include bank overdrafts repayable on demand.

Since the characteristics of such banking arrangements are that the bank balance often fluctuates from being positive to overdrawn, they are considered an integral part of the Group’s cash management.

Page 19 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

(I) DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE IFRS5p31-34

Discontinued operations These are either separate major lines of business or geographical operations that have been sold or classified as held for sale.

When held for use, discontinued operations were a cash-generating unit or a group of cash-generating units. They comprise operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. Their results are shown separately in the consolidated statement of profit or loss and comparative figures are restated to reclassify them from continuing to discontinued operations.

IFRS5p6-8;15

Non-current assets (or disposal groups) held for sale A non-current asset (or disposal group) held for sale represents an asset whose carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the sale must be highly probable and the non-current asset (or disposal group) must be available for immediate sale in its present condition. The appropriate level of management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from its classification. Disposal groups and non-current assets held for sale are included in the consolidated statement of financial position at fair value less costs to sell, if this is lower than the previous carrying amount.

Once an asset is classified as held for sale or included in a group of assets held for sale, no further depreciation or amortisation is recorded.

IFRS5p25

IAS20p39(a)

(J) GOVERNMENT GRANTS Government grants are recognised when the conditions for receipt are met and there is reasonable assurance that the grant will be received. Grants related to assets are initially taken to deferred income and then released to profit or loss on a systematic and rational basis over the useful lives of the related assets. The majority of grants received by the Group are to assist with the purchase of plant and machinery. Grants related to income are deducted in reporting the related expense.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable.

IAS23p8

(K) BORROWING COSTS Interest on borrowings to finance the purchase and development of a self-constructed qualifying asset (ie an asset that necessarily takes a substantial period of time to get ready for its intended use or sale) is included in the cost of the asset until such time as the asset is substantially ready for use or sale. Such borrowing costs are capitalised net of any investment income earned on the temporary investment of funds that are surplus pending such expenditure.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

IAS21p23;28

(L) FOREIGN CURRENCY TRANSACTIONS Foreign currency monetary assets and liabilities are translated into the functional currency of the concerned entity of the Group using the exchange rates at the reporting date. Gains and losses arising from changes in exchange rates after the date of the transaction are recognised in profit or loss (except when deferred in other comprehensive income as qualifying cash flow hedges).

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency (eg available-for-sale equity instruments) are translated using the exchange rates at the date when the fair value is determined.

(M) RETIREMENT BENEFITS The Group operates a defined benefit obligation scheme for some employees and various defined contribution schemes cover other employees.

IAS19p51

Defined contribution schemes The annual contributions payable in respect of defined contribution schemes are charged to profit or loss in the period to which they relate. Any cumulative difference between amounts payable and amounts paid are shown in the statement of financial position as receivables or payables, but otherwise the assets and liabilities of those schemes are not included in the financial statements as the employer is not exposed to their risks and rewards, which instead lie with the members of those schemes.

Page 20 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

Defined benefit schemes The defined benefit scheme offers retirement benefits that are linked to the service, age and remuneration of employees. The assets of the scheme are held in trust funds separately from those of the Group.

IAS19p120(a),(b)

Operating expenses in the consolidated statement of profit or loss include:  The service cost of the defined benefit plan (ie current service costs, past service costs (including curtailment gains or losses) and any gain or loss on settlement)  The net interest on the net defined benefit liability / asset.

IAS19p120(c );122 IAS19p127

Remeasurements of the net defined benefit liability / asset are recognised in other comprehensive income, with no reclassification to profit or loss in a subsequent period. Remeasurements comprise all actuarial gains / losses, the effect of changes to the asset ceiling (where applicable) and the return on plan assets, excluding amounts included in net interest on the net defined benefit liability / asset.

IAS19p57;59;63;83

The Group’s consolidated statement of financial position includes the excess of the present value of the defined benefit obligations in respect of service up to the reporting date, over the fair value of the scheme assets. An independent qualified actuary annually advises the Group of the defined benefit obligation using the Projected Unit Credit Method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturi ty approximating the terms of the related pension liability. In countries where there is no deep market in such bonds, the market rates on government bonds are used.

(N) SHARE-BASED PAYMENTS IFRS2p15

Share-based payments of the Group are equity-settled share options granted to employees, for which an option pricing model is used to estimate the fair value at grant date. That fair value is charged on a straight-line basis as an expense in the consolidated statement of profit or loss over the period that the employee becomes unconditionally entitled to the options (vesting period), with a corresponding increase in equity.

IFRS2p19;20

The number of such options is adjusted annually to reflect best estimates of those expected to vest (ignoring purely marketbased conditions) with consequent changes to the expense. Equity is also increased by the proceeds received, as and when employees choose to exercise their options.

IFRS2p27

If the Group modifies the terms and conditions on which the equity instruments were granted, as a minimum, the services received measured at the grant date fair value of the equity instruments granted (unless those equity instruments do not vest because of failure to satisfy a vesting condition other than a market condition) are charged to profit or loss.

IFRS2p28

Cancellations of grants of equity instruments during the vesting period (other than a grant cancelled by forfeiture when the vesting conditions are not satisfied) are accounted for as an acceleration of vesting, therefore the unrecognised remaining amount is recognised immediately in the consolidated statement of profit or loss.

(O) INCOME TAXES IAS12p46

Tax currently payable is calculated using the tax rates in force or substantively enacted at the reporting date. Taxable profit differs from accounting profit either because some income and expenses are never taxable or deductible, or because the time pattern that they are taxable or deductible differs between tax law and their accounting treatment.

IAS12p15

Using the statement of financial position liability method, deferred tax is recognised in respect of all temporary differences between the carrying value of assets and liabilities in the consolidated statement of financial position and the corresponding tax base, with the exception of goodwill not deductible for tax purposes and temporary differences arising on initial recognition of assets and liabilities that do not affect taxable or accounting profit.

IAS12p47

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date.

IAS12p24;34

Deferred tax assets are recognised only to the extent that the Group considers that it is probable (ie more likely than not) that there will be sufficient taxable profits available for the asset to be utilised within the same tax jurisdiction.

IAS12p74

Deferred tax assets and liabilities are offset only when there is a legally enforceable right to offset current tax assets against current tax liabilities, they relate to the same tax authority and the Group’s intention is to settle the amounts on a net basis.

Page 21 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

IAS12p58;61A

The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except if it arises from transactions or events that are recognised in other comprehensive income or directly in equity. In this case, the tax is recognised in other comprehensive income or directly in equity, respectively. Where tax arises from the initial accounting for a business combination, it is included in the accounting for the business combination.

IAS12p39

Since the Group is able to control the timing of the reversal of the temporary difference associated with interests in subsidiaries, associates and joint arrangements, a deferred tax liability is recognised only when it is probable that the temporary difference will reverse in the foreseeable future mainly because of a dividend distribution.

At present, no provision is made for the additional tax that would be payable if the subsidiaries in certain countries remitted their profits because such remittances are not probable, as the Group intends to retain the funds to finance organic growth locally. As far as joint arrangements and associates are concerned, the Group is not in a position to determine their dividend policies. As a result, all significant deferred tax liabilities for all such taxable temporary differences are recognised.

IAS37p14;36;47;72

(P) PROVISIONS Where, at the reporting date, the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that the Group will settle the obligation, a provision is made in the statement of financial position. Provisions are made using best estimates of the amount required to settle the obligation and are discounted to present values using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. Changes in estimates are reflected in profit or loss in the period they arise. Warranty provisions are measured using probability models based on past experience.

Restructuring provisions are only recognised once the formal plan has been communicated to affected parties.

(Q) EQUITY IAS32p11

Equity instruments are contracts that give a residual interest in the net assets of the Group. Ordinary shares are classified as equity. Equity instruments are recognised at the amount of proceeds received net of costs directly attributable to the transaction.

To the extent those proceeds exceed the par value of the shares issued they are credited to a share premium account.

IAS10p12;13

Dividend distribution Dividends are recognised as liabilities when they are declared (ie the dividends are appropriately authorised and no longer at the discretion of the entity). Typically, dividends are recognised as liabilities in the period in which their distribution is approved at the Shareholders’ Annual General Meeting. Interim dividends are recognised when paid.

IAS32p33

Treasury shares The cost of treasury shares purchased is shown as a deduction from equity in the consolidated statement of financial position.

When treasury shares are sold or reissued they are credited to equity. As a result, no gain or loss on treasury shares is included in the consolidated statement of comprehensive income.

IAS32p32

Convertible bonds When convertible bonds are issued, the proceeds (net of issue costs) are split to separately identify a liability component (equal to the net present value of their scheduled future cash flows applying interest rates at the date of issue of similar bonds that do not have a conversion option). The remainder of the issue proceeds is deemed to relate to the conversion option and is credited to an equity reserve. The liability component is carried at amortised cost until extinguished on conversion of the option or maturity of the bond. The equity component is not subsequently remeasured.

3 SEGMENT INFORMATION IFRS8p22

For management purposes, the Group is split into three major strategic units which operate in different industries and are managed separately: mechanical, electronic and chemical.

Such structural organisation is determined by the nature of risks and returns associated with each business segment and defines the management structure as well as the internal reporting system. It represents the basis on which the Group reports its segment information.

Business information regarding the three units is also analysed by the management on a country basis and sub-aggregated in 5 macro-regions: the Republic of Newland, the rest of Europe, North America, South America and Asia Pacific.

Information provided by internal financial reporting comprises two major reports which include the same type of quantitative information analysed by business unit and by country.

The segment analysis presented in these financial statements reflects operations analysed by business. This best describes the Page 22 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

way the Group is managed and provides a meaningful insight into the business activities of the Group.

The mechanical segment is a manufacturer of spring-loaded instruments, bicycles and clockwork equipment.

The electronic segment is a manufacturer of sophisticated electronic equipment used in the automotive, aerospace and shipbuilding industries.

The chemical segment is a manufacturer of plastic containers, which are sold in bulk to food packagers.

IFRS8p27(a)

Inter-segment sales are measured on the basis that the entity actually uses to price the transfers. Internal transfer pricing policies of the Group are based on arm’s length prices.

The discontinued operations relate to the disposal of the clockwork component of the mechanical segment (Note 21).

IFRS8p27(b)

The information disclosed in the tables below is derived directly from the internal financial reporting system used by the Board (ie chief operating decision maker) to monitor and evaluate the performance of the operating segments separately.

The Group’s management reporting system evaluates performances based on a number of factors; however, the primary profitability measurement to evaluate segment’s operating results comprises two major financial indicators: i) earnings from operations before depreciation, amortisation, non-recurring items, interest and income taxes (called “Recurring EBITDA”) and ii) operating result before interests and income taxes (called “ORBIT”).

Non-recurring items typically include restructuring costs and other costs originated by unexpected events which occur rarely and that cannot be controlled by the management.

As described below (see considerations about cash discounts), some items are considered to be finance components when included in the internal reporting system, but are included within operating items when reported under IFRS.

IFRS8p23

The following tables illustrate the information about the reportable segments profit or loss, assets and liabilities at 31 December 2013 and 2012.

MECHANICAL ELECTRONIC CHEMICAL TOTAL CU’000 CU’000 CU’000 CU’000 2013 REVENUE BY SEGMENT Sale of Goods Servicing and installation fees Royalty income Other Total Revenue by Segment

4,236 443 35 4,714

9,392 182 9,574

9,225 9,225

22,853 443 182 35 23,513

IFRS8p23

Inter-segment sales External sales revenue Recurring EBITDA Depreciation Amortisation Impairment Other non-recurring items ORBIT

(127) 4,587 922 (257) (23) (244) (109) 289

(158) 9,416 2,013 (559) (198) 1,256

9,225 1,005 (302) (50) 653

(285) 23,228 3,940 (1,118) (271) (244) (109) 2,198

IFRS8p23

REPORTABLE SEGMENT ASSETS 3,011 412

140 281 8,053 3,498

4,039 721

15,103 4,656

529

1,263

312

2,104

IAS18p35(b) IAS18p35(b) IAS18p35(b) IAS18p35(b) IFRS8p23 IFRS8p23(b) IFRS8p23(a) IFRS8p23 IFRS8p23(e) IFRS8p23(e) IFRS8p23(i)

IFRS8p23(g) IFRS8p24

IFRS8p23

Share of profit from associates Investment in associates Reportable segment assets Expenditures for reportable non-current assets REPORTABLE SEGMENT LIABILITIES Reportable segment liabilities Page 23 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

IFRS8p23

2012 (restated) REVENUE BY SEGMENT Sale of Goods Servicing and installation fees Royalty income Other Total Revenue by Segment Inter-segment sales External sales revenue Recurring EBITDA Depreciation Amortisation Impairment Other non-recurring items ORBIT

IFRS8p23

REPORTABLE SEGMENT ASSETS

IAS18p35(b) IAS18p35(b) IAS18p35(b) IAS18p35(b) IFRS8p23 IFRS8p23(b) IFRS8p23(a) IFRS8p23 IFRS8p23(e) IFRS8p23(e) IFRS8p23(i)

IFRS8p23(g) IFRS8p24

IFRS8p23

MECHANICAL CU’000

ELECTRONIC CU’000

CHEMICAL CU’000

TOTAL CU’000

4,368 452 76 4,896 (101) 4,795 1,078 (257) (23) (244) 554

5,262 160 5,422 (143) 5,279 1,486 (559) (198) 729

5,462 5,462 5,462 760 (249) (50) 461

15,092 452 160 76 15,780 (244) 15,536 3,324 (1,065) (271) (244) 1,744

3,949 360

300 249 3,211 453

3,612 366

10,772 1,209

283

1,189

277

1,749

Share of profit from associates Investment in associates Reportable segment assets Expenditures for reportable non-current assets REPORTABLE SEGMENT LIABILITIES Reportable segment liabilities

IFRS8p28

IFRS8p28(a)

The following tables illustrate the reconciliations of reportable segments’ revenue, profit or loss, assets and liabilities to the Group’s corresponding amounts reported in the consolidated financial statements.

RECONCILIATION OF REPORTABLE SEGMENTS' REVENUE Total revenue for reportable segments Cash discounts Elimination of inter-segment revenue Group’s revenue from continuing operations

2013 CU'000 23,513 (425) (285) 22,803

2012 CU'000 15,780 (376) (244) 15,160

Receivables collection policies vary depending on the type of industry, type of client and the country where customers are domiciled. In the vast majority of cases, receivables are due for collection between 30 and 90 days after the invoice has been issued. However, in order to speed up the cash collection, it is the Group’s policy to provide cash discounts to clients that agree to pay receivables within 15 days from the date of issuance of the invoice.

For internal reporting purposes, these discounts are presented as an operating component but are considered a finance component for the preparation of the IFRS financial statements.

Page 24 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS8p28(b)

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

RECONCILIATION OF REPORTABLE SEGMENTS' PROFIT Operating result for reportable segments (ORBIT) Cash discounts Finance costs Other corporate expense Share of profit (loss) of associates Gain on sale of investments Gain (loss) on revaluation of an associate becoming a subsidiary Group’s profit before tax from continuing operations

2012 (restated) CU'000 1,744 (376) (95) 180 300 18 1,771

2013 CU'000 2,198 (425) (91) 180 140 63 490 2,555

See above information with regard to cash discounts and ORBIT. See Note 13 for Share of profit or loss of associates and Note 6 for Gain on sale of investments.

IFRS8p28(c)

RECONCILIATION OF REPORTABLE SEGMENTS' ASSETS Total assets for reportable segments Corporate assets (Headquarters) Other Total assets for the statement of financial position (net of non-current assets classified as held for sale)

2013 CU'000 15,103 478 591

2012 CU'000 10,772 455 231

16,172

11,458

Corporate assets are mainly represented by the Property, plant and equipment of the Headquarters in Newland. Unallocated assets are represented by Deferred tax assets, Available-for-sale investments and Cash and cash equivalents which are typically managed by central treasury and tax departments at corporate level.

IFRS8p28(d)

RECONCILIATION OF REPORTABLE SEGMENTS' LIABILITIES Total liabilities for reportable segments Corporate liabilities (Headquarters) Other Total liabilities for the statement of financial position (net of liabilities directly associated with non-current assets classified as held for sale)

2,104 89 4,449

2012 (restated) CU'000 1,749 75 2,283

6,642

4,107

2013 CU'000

Corporate liabilities are mainly represented by pension schemes and other miscellaneous employee payables relating to corporate personnel.

Unallocated liabilities are represented by borrowings and current and deferred tax liabilities which are typically managed by central treasury and tax departments at a corporate level.

IFRS8p33(a)

Geographical information The segmental information below is based on the segment revenue from external customers by country of domicile of customers. The global scale operations of the Group are divided into five principal geographical areas. In each geographical area the Group has all the three business segments described above. In Europe, information for Newland is reported separately.

2013 REVENUE FROM EXTERNAL CUSTOMERS CU'000 Newland 3,420 Europe 2,159 Asia Pacific 3,702 North America 7,543 South America 5,979 Group’s revenue from continuing operations 22,803 Page 25 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

2012 CU'000 2,890 1,247 3,852 3,420 3,751 15,160

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS8p33(b)

IFRS8p34

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

NON-CURRENT ASSETS Newland Europe Africa Asia Pacific North America South America Unallocated Total non-current assets

2013 CU'000 3,103 1,230 879 2,848 1,560 721 10,341

2012 CU'000 1,278 959 1,124 831 1,650 1,149 595 7,586

Revenues totalling approximately CU 3,400 (2012: CU 2,900) thousands and relating to the electronic segment are originated by sale transactions carried out across the globe with one multinational group.

4 ANALYSIS OF EXPENSES BY NATURE IAS1p104

IAS1p104

IAS19p53

IAS1p104

The following table illustrates the breakdown by nature of cost of sales, distribution costs and other administrative expenses.

2012 (restated) CU'000

7,424 778 40 780 24 9,046

6,143 650 36 665 80 7,574

100 24 271 550 945

120 256 501 877

1,165 120 12 1,297 108 21 7,177 16 87 567 322 19 1,245 20,850

1,126 13 1,139 95 12 1,986 11 26 643 104 14 1,131 13,612

EMPLOYEE BENEFITS EXPENSE Wages and salaries Social security costs Defined contribution costs Defined benefit obligation costs Share-based payments: equity settled Groups’ revenues from continuing operations INTANGIBLE ASSETS Impairment of goodwill Impairment of other intangible assets Amortisation of other intangible assets Research and development

IAS1p104

2013 CU'000

PROPERTY, PLANT AND EQUIPMENT Depreciation of property, plant and equipment Impairment of property, plant and equipment Loss on disposal of property, plant and equipment Operating leases Foreign exchange differences Consumables and raw materials used Write-down of inventories (net of reversal) Freight costs expense Transportation costs Advertising costs Write-off and provision of doubtful receivables - net Other expenses TOTAL COST OF SALES, DISTRIBUTION COSTS AND ADMINISTRATIVE EXPENSES Page 26 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

Employee benefits costs are stated net of government grants obtained as a result of the delivery of a training programme on new safety and security laws that will be in force in Newland starting from the beginning of 2016. The Group decided to implement such resolutions earlier and therefore was granted by the government a special contribution amounting to CU 20,000.

All conditions attached to the government programme have been fulfilled.

5 FINANCE INCOME AND COSTS

IFRS7p20(b) IFRS7p20(b)

The following table analyses the total amount of finance income and costs classified by underlying category of financial assets and liabilities.

2012 2013 (restated) CU'000 CU'000 Interest expense on financial liabilities measured at amortised cost 110 111 Interest income on financial assets measured at amortised cost (7) (5) Dividend income from available-for-sale investments (Note 6) (12) (11) NET FINANCE COSTS 91 95 During 2013 and 2012, the Group has not classified financial assets as held-to-maturity and financial assets or liabilities at fair value through profit or loss. The following table analyses the amount of total interest income and total interest expense for financial assets and liabilities measured at amortised cost.

IFRS7p20(b)

IAS23p26

NET INTEREST EXPENSE ON FINANCIAL INSTRUMENTS MEASURED AT AMORTISED COST Finance leases Factored debts Bank borrowings Preference share dividends Convertible bonds Provisions: discount unwinding Borrowing costs capitalised at 6% Total interest expense on financial liabilities measured at amortised cost Interest income from instruments measured at amortised cost NET INTEREST EXPENSE

6 IFRS7p20(a)(ii)

(7) 103

2012 (restated) CU'000 22 37 24 25 3 111 (5) 106

2013 CU'000

2012 CU'000

12 63 75

11 18 29

10 (63) (53)

12 (18) (6)

2013 CU'000 26 42 10 25 12 4 (9) 110

GAIN / LOSS ON AVAILABLE-FOR-SALE FINANCIAL ASSETS

The following table analyses the amount of total gain or loss generated by available-for-sale investments.

NET INCOME (LOSS) RECOGNISED IN THE STATEMENT OF PROFIT OR LOSS Income recognised directly in profit or loss (Note 5) Gain reclassified to profit or loss from equity NET INCOME (LOSS) RECOGNISED IN EQUITY (NOTE 32) Income recognised in other comprehensive income Gain reclassified to profit or loss from equity

Page 27 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

7

INCOME TAX EXPENSE

Current taxes Deferred taxes TOTAL INCOME TAX EXPENSE

2013 CU'000 619 63 682

2012 (restated) CU'000 452 110 562

2013 CU'000

2012 (restated) CU'000

638 (19) 619

472 (20) 452

5 58 63 682

110 110 562

2013 CU'000 (37) (37)

2012 (restated) CU'000 (29) (21) (50)

The following table illustrates the detail of the tax charged to profit or loss.

IAS12p80(a) IAS12p80(b)

IAS12p80(d) IAS12p80(c)

TAX CHARGE ON CONTINUING OPERATIONS CURRENT Current tax for the year Adjustments recognised in the year for current tax of prior periods DEFERRED Change in tax rates Temporary differences TOTAL INCOME TAXES ON CONTINUING OPERATIONS

TAX CHARGE ON DISCONTINUED OPERATIONS Current Deferred TOTAL INCOME TAXES ON DISCONTINUED OPERATIONS IAS12p81(d)

IAS12p81(c)

On 30 November 2013, local tax authorities of the Republic of Dryland have approved a tax reform that will result in the increase of the corporate tax rate from the year 2015. This change has resulted in additional deferred tax liabilities of CU 5,000.

TAX EXPENSE RECONCILIATION Profit for the year Corporation tax charge thereon at 30% (2012 at 30%) ADJUSTED FOR THE EFFECTS OF: Expenses not deductible for tax purposes Change in tax rates Different tax rates in foreign jurisdictions Income not liable to tax Not deductible goodwill impairment Adjustments to tax in respect of previous periods Other minor items INCOME TAX EXPENSE FOR THE YEAR EFFECTIVE TAX RATE Page 28 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

2013 CU'000 2,555 766

2012 (restated) CU'000 1,771 531

28 5 31 (122) 30 (19) (37) 682 26.7%

53 43 (71) 36 (20) (10) 562 31.7%

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

The amount of income taxes outstanding as of 31 December 2013 was CU 523,000 (2012: CU 415,000). Such an amount is net of tax advances, which, according to the tax rules of certain jurisdictions, were paid before the year end.

IAS12p81(g),(h)

Note 21 provides additional details with regard to current and deferred tax on discontinued operations and Note 28 provides additional details with regard to deferred tax at the reporting date.

The effective tax rate for 2013 was 26.7% (31.7% in 2012). The theoretical income taxes are determined by applying the domestic corporate tax rate in Republic of Newland, where the parent is domiciled. The effective tax rate is calculated including the share of post-tax results of associates. This calculation is consistent with that used in prior years.

IAS12p81(a)

IAS12p81(ab)

Total income tax recognised directly in equity amounts to CU 234,000 (2012: nil).

The following table sets out the tax relating to each component of other comprehensive income.

2013

2012

CU'000

CU'000

(25)

(10)

Deferred tax on hedge transfer to inventory

(3)

(5)

Deferred tax on hedge transfer to profit

(2)

(4)

Deferred tax on revaluation of investments

(3)

(4)

5

6

(28)

(17)

Deferred tax on cash flow hedges gains

Deferred tax on realised on disposal INCOME TAX RELATING TO ITEMS OF OTHER COMPREHENSIVE INCOME

8

EARNINGS PER SHARE

The following table illustrates the numerators and denominators used to calculate basic and diluted earnings per share of continuing and discontinued operations at years ended 31 December.

IAS33p70(a)

NUMERATORS: EARNINGS ATTRIBUTABLE TO EQUITY Continuing operations: profit for the year Non-controlling interests Continuing operations attributable to owners of the parent company Discontinued operations: loss for the year TOTAL BASIC EARNINGS Interest on convertible bonds Current and deferred tax on convertible bond interest DILUTED EARNINGS

IAS33p70(b)

DENOMINATORS: WEIGHTED AVERAGE NUMBER OF EQUITY SHARES BASIC Dilutive share options effect Conversion of convertible bonds to equity DILUTED

12 (3)

2012 (restated) CU'000 1,209 (52) 1,157 (226) 931 -

1,667

931

No.’000 40,700 708 370 41,778

No.’000 32,750 2,347 35,097

2013 CU'000 1,873 (105) 1,768 (110) 1,658

The weighted average number of equity shares refers to shares in circulation during the period, that is after the neutralisation of treasury shares.

The dilutive effect derives from two categories of transaction: share options (Note 27) and convertible bonds (Note 22).

Page 29 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

9

IAS1p107

DIVIDENDS ON EQUITY SHARES 2013 CU'000

DIVIDENDS PAID ON EQUITY SHARES Final [0.5 cents (2012: 0.9531 cents) per share] Interim [0.5 cents (2012: 0.5 cents) per share] TOTAL DIVIDENDS PAID IN THE YEAR

2012 CU'000 305 165 470

165 240 405

Since the year end, the Directors have proposed a final dividend in respect of 2013 of 0.8 cents per share which it is estimated will total CU 384,000.

10 PROPERTY, PLANT AND EQUIPMENT

IAS16p73(d) IAS16p73(e) IAS16p73(e) IAS16p73(e) IAS16p73(d) IAS16p73(e) IAS16p73(e) IAS16p73(e) IAS16p73(e) IAS16p73(e) IAS16p73(d)

IAS16p73(d) IAS16p73(e) IAS16p73(e) IAS16p73(e) IAS16p73(e) IAS16p73(d) IAS16p73(e) IAS16p73(e) IAS16p73(e) IAS16p73(e) IAS16p73(e) IAS16p73(d)

IAS17p31(a)

COST AT 1 JANUARY 2012 Exchange adjustments External additions Disposals AT 31 DECEMBER 2012 Exchange adjustments Acquisitions (Note 17) External additions Transfer to held for sale (Note 21) Disposals AT 31 DECEMBER 2013 DEPRECIATION AND IMPAIRMENT AT 1 JANUARY 2012 Exchange adjustments Depreciation for the year Impairment for the year (Note 11) Disposals AT 31 DECEMBER 2012 (restated) Exchange adjustments Depreciation for the year Impairment for the year (Note 11) Transfer to held for sale (Note 21) Disposals AT 31 DECEMBER 2013 NET CARRYING AMOUNT At 1 January 2012 (restated) At 31 December 2012 (restated) AT 31 DECEMBER 2013 INCLUDES FINANCE LEASES WITH NET CARRYING AMOUNT At 31 December 2012 (restated) AT 31 DECEMBER 2013 Page 30 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

PROPERTY

PLANT

VEHICLES

COMPUTER EQUIPMENT

TOTAL

CU’000

CU’000

CU’000

CU’000

CU’000

2,966 (36) (120) 2,810

2,391 (20) 363 (298) 2,436

1,757 (2) 327 (335) 1,747

364 (2) 212 (74) 500

7,478 (60) 902 (827) 7,493

50 121 1,058 (800) 3,239

32 214 402 (51) (20) 3,013

8 158 270 (183) 2,000

20 107 111 (10) (40) 688

110 600 1,841 (861) (243) 8,940

241 (12) 60 289 27 69 385

420 (8) 592 (168) 836 17 495 120 (10) (15) 1,443

548 (2) 393 (320) 619 4 444 (110) 957

203 (2) 81 (53) 229 4 157 (5) (30) 355

1,412 (24) 1,126 (541) 1,973 52 1,165 120 (15) (155) 3,140

2,725 2,521 2,854

1,971 1,600 1,570

1,209 1,128 1,043

161 271 333

6,066 5,520 5,800

-

285 330

-

-

285 330

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

The impairment relates to the clockwork division which is part of the mechanical segment. As described in Note 11, such impairment test was carried out while preparing the interim financial statements as at 30 June 2013.

IAS16p74(b)

Property includes buildings in the course of construction that have a cost of CU 258,000 (2012: Nil).

IAS16p74(a)

All of the Group’s property is pledged as security for its bank loans.

Impairment charges and amortisation have been charged entirely to cost of sales.

IAS17p31(c),(e)

IAS16p79(b)

The Group leases some plants located in the Republic of Newland under non-cancellable lease agreements.

Interest rates applied to such agreements are variable. All such lease arrangements include a purchase option that can be exercised at the end of the lease term. Contingent rents recognised as an expense in the period amounted to CU 21,000 (2012: CU 18,000).

Fully depreciated plant still in use had a cost of CU 250,000 (2012: CU 262,000).

11 GOODWILL The Group carried out the impairment test of goodwill for the interim period that ended on 30 June 2013. In particular, the decreasing performance of the clockwork division was considered sufficient evidence to trigger the impairment test of the cashgenerating unit. As detailed below, the impairment test resulted in the recognition of a loss.

IAS36p130

IAS36p126(a)

The impairment loss relates to the entire goodwill of the clockwork cash-generating unit, which is part of the mechanical segment. It has suffered from a fall in demand. Accordingly, it has been written down to value in use.

The impairment charge has been accounted for in cost of sales.

The test has been repeated as of 31 December 2013, with no impairment charges recognised; the carrying amounts of all cashgenerating units were lower than their recoverable amounts.

IFRS3pB67(d)

GROSS AMOUNT AT 1 JANUARY Exchange adjustments Acquisitions (Note 17) BALANCE AT 31 DECEMBER ACCUMULATED IMPAIRMENT AT 1 JANUARY Exchange adjustments Recognised in the year BALANCE AT 31 DECEMBER NET CARRYING AMOUNT

Page 31 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

2013 CU'000 723 20 809 1,552

2012 CU'000 738 (15) 723

118 5 100 223

(2) 120 118

1,329

605

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IAS36p134

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

For the purpose of impairment testing, the carrying amount of goodwill and other assets has been allocated to cash-generating units as follows: 2013 2012 CU’000 CU’000 CU’000 CU’000 CU’000 CU’000 At 31 December

At 31 December

Mechanical

Electronic

Chemical

Mechanical

Electronic

Chemical

Goodwill Intangible assets with indefinite useful life Other intangible assets Property, plant and equipment TOTAL IMPAIRMENT CHARGE FOR THE YEAR

100 256 869 1,225

1,234 1,125 801 2,960 6,120

95 256 1,670 2,021

220 129 1,939 2,288

410 122 274 1,680 2,486

95 278 1,420 1,793

Goodwill Intangible assets with indefinite useful life Intangible assets Property, plant and equipment TOTAL

(100) (24) (120) (244)

-

-

(120) (120)

-

-

ASSETS ALLOCATION (PRIOR TO IMPAIRMENT CHARGE FOR THE PERIOD)

Impairment charges for the year 2013 resulted from the impairment test carried out in relation to the preparation of the interim financial statements as at 30 June 2013.

IAS36p134(c)

In each case, a recoverable amount has been determined based on a value in use calculation.

IAS36p134(d)

The principal assumptions made in determining value in use of each cash-generating unit are consistent with those used for the calculation performed as at 30 June 2013 and are analysed as follows: Mechanical The impairment test has been carried out using a Discounted Cash Flow unlevered model covering a 10-year period. Cash flow projections are based on the next three years budgets and plans approved by management; cash flow projections beyond that three-year period have been extrapolated on the basis of a 2% growth rate.

Such a growth rate does not exceed the long-term average growth rate of the sector. The discount rate applied (pre-tax Weighted Average Cost of Capital “WACC”) is 8% per annum (in 2013 and 2012).

Electronic The impairment test has been carried out using a Discounted Cash Flow unlevered model covering an 8-year period.

Cash flow projections are based on the next three years budgets and plans approved by management; cash flow projec tions beyond that three-year period have been extrapolated on the basis of a zero growth rate.

The discount rate applied (pre-tax WACC) is 10% per annum (in 2013 and 2012). Management believes that any reasonably possible change in the key assumptions on which mechanical division’s recoverable amount is based would not cause the carrying amount to exceed its recoverable amount.

Chemical The impairment test has been carried out using a Discounted Cash Flow unlevered model covering a 10-year period.

Cash flow projections are based on the next three years budgets and plans approved by management; cash flow projections beyond that three-year period have been extrapolated on the basis of a 5% growth rate.

Such a growth rate does not exceed the long-term average growth rate of the sector. The discount rate applied (pre-tax WACC) is 8% per annum (in 2013 and 2012). Management believes that any reasonably possible change in the key assumptions on which mechanical division’s recoverable amount is based would not cause the carrying amount to exceed its recoverable amount.

IAS36p134(f)

If the revised estimated pre-tax discount rate applied to the discounted cash flows had been 10% less favourable than management’s estimates, the Group would need to reduce pro-rata the carrying value of property, plant and equipment and intangible assets by CU 16,000. If the actual gross margin and the pre-tax discount rate had been more favourable than management’s estimates, the Group would be able to reverse any impairment losses that arose on previously impaired assets other than goodwill (IAS 36 does not permit reversing an impairment loss for goodwill).

Page 32 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

12 OTHER INTANGIBLE ASSETS CUSTOMER LISTS

BRANDS

DEVELOPMENT COSTS

TOTAL

CU’000

CU’000

CU’000

CU’000

CU’000

203 (9) 10 (21) 183 25 126 180 (112) (187) 215

158 (5) 52 205 6 115 22 (123) 225

331 108 (15) 424 3 59 1,421 1,907

651 (2) 137 786 3 202 90 (145) 936

1,343 (16) 170 137 (36) 1,598 37 502 1,623 90 (380) (187) 3,283

LICENCES

IAS38p118(c) IAS38p118(e) IAS38p118(e) IAS38p118(e) IAS38p118(e) IAS38p118(c) IAS38p118(e) IAS38p118(e) IAS38p118(e) IAS38p118(e) IAS38p118(e) IAS38p118(e) IAS38p118(c)

IAS38p118(c) IAS38p118(e) IAS38p118(e) IAS38p118(e) IAS38p118(e) IAS38p118(c) IAS38p118(e) IAS38p118(e) IAS38p118(e) IAS38p118(e) IAS38p118(e) IAS38p118(c)

IAS38p118(d)

IAS38p126

COST AT 1 JANUARY 2012 Exchange adjustments External additions Internally developed additions Disposals AT 31 DECEMBER 2012 Exchange adjustments Acquisitions (Note 17) External additions Internally developed additions Transfer to held for sale (Note 21) Disposals AT 31 DECEMBER 2013 AMORTISATION AND IMPAIRMENT AT 1 JANUARY 2012

147

88

100

222

557

Exchange adjustments Amortisation for the year Impairment for the year (Note 11) Disposals AT 31 DECEMBER 2012

(4) 20 (11) 152

(2) 49 135

87 187

(1) 100 321

(7) 256 (11) 795

Exchange adjustments Amortisation for the year Impairment for the year (Note 11) Transfer to held for sale (Note 21) Disposals AT 31 DECEMBER 2013 NET CARRYING AMOUNT

5 12 17 (51) (20) 115

3 51 7 (75) 121

106 293

1 102 (84) 340

9 271 24 (210) (20) 869

At 1 January 2012 At 31 December 2012 AT 31 DECEMBER 2013

56 31 100

70 70 104

231 237 1,614

429 465 596

786 803 2,414

Impairment charges and amortisation have been charged entirely to cost of sales.

Research and development costs not recognised as assets amounted to CU 550,000 (2012: CU 501,000).

IAS38p122(a)

Brands include the brand Supervalve which was separately acquired during 2013 and whose carrying value is CU 1,125,000. It has an indefinite useful life, thus not amortised but has passed its annual impairment test together with the goodwill in the Electronic cash-generating unit, which it forms part of. Its recoverable amount was determined as shown in Note 11. The Group earns royalty income from allowing the local manufacture of brand Supervalve under licence in countries where the Group is not represented. The brand is a leader in its markets, where it has been established for over 50 years and as sales continue to rise even when competitor products are launched, there is no sign of its life being limited.

IAS38p128(b)

International Financial Reporting Standards do not permit the recognition of internally generated brands on the statement of financial position. The Group’s portfolio of globally recognised brands includes brand Superpaste and brand Superscrew.

IAS38p128(a)

Software that is still in use includes fully depreciated software that costs CU 21,000 (2012: CU 21,000).

Page 33 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

13 INVESTMENTS IN ASSOCIATES

IFRS12pB14(b)

GROUP INTEREST AT 1 JANUARY Exchange adjustments Share of the profit (loss) for the year Dividends Other equity movements Transfer to subsidiary (Note 17) BALANCE AT 31 DECEMBER

2013 CU'000 249 2 140 (40) (70) 281

2012 CU'000 79 (5) 300 (125) 249

As a result of a step acquisition completed in 2013, Fine Products Inc. became a subsidiary and has been therefore fully consolidated (Note 17).

IFRS12p21

The remaining associates are Paste Inc. (incorporated in Newland) and SuperDrill Ltd (incorporated in Wonderland), both local distributors of chemical products. They are accounted for in the Group’s consolidated financial statements using the equity method.

Dividends received by the Group from Paste Inc. amount to CU 30,000 (2012: CU 95,000) and from SuperDrill Ltd to CU 10,000 (2012: CU 30,000).

IFRS12pB12;B14

The summarised financial information detailed below, with reconciliation to the carrying amount of the Group’s interest in the associates, is based on each associate’s financial statements prepared in accordance with IFRS.

2013 CU'000

Current assets Non-current assets Current liabilities Non-current liabilities Net assets of the associate Proportion of the Group’s ownership interest in the associate Carrying amount of the Group’s interest in the associate Revenue Profit (or loss) from continuing operations Profit for the year Total comprehensive income for the year SUPERDRILL LTD

990 896 (631) (412) 843 28% 236 2,543 321 321 321

2012 CU'000 757 750 (618) (357) 532 28% 149 2,461 857 857 857

Current assets Non-current assets Current liabilities Non-current liabilities Net assets of the associate Proportion of the Group’s ownership interest in the associate Carrying amount of the Group’s interest in the associate Revenue Profit or loss from continuing operations Profit for the year Total comprehensive income for the year

196 208 (97) (103) 204 22% 45 605 68 68 68

203 188 (132) (122) 137 22% 30 595 91 91 91

PASTE INC.

Page 34 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

IFRS12p21(b)(iii)

Investment in Paste Inc.’s fair value (based on the Big City Stock Exchange quoted price) is CU 384,000 (2012: CU 356,000). SuperDrill Ltd is not a listed entity.

FRS12p22(a)

There are no significant restrictions on the ability of Paste Inc. and SuperDrill Ltd to transfer funds to the Group in the form of cash dividends.

14 JOINT ARRANGEMENTS IFRS12p7(b),(c) IFRS12p21(a)

The only significant joint arrangement is a 25% interest in JointCPU, a partnership located in Jointland and active in the production of special purpose-built CPUs for the aerospace sector. JointCPU is jointly controlled with three other parties as a result of a contractual agreement involving sharing of control over the relevant activities of JointCPU. Since the contractual arrangement specifies that the parties have rights to the assets and obligations for the liabilities relating to the arrangement, the Group is assessed to be party to a joint operation.

15 AVAILABLE-FOR-SALE FINANCIAL ASSETS IFRS7p31

Balances as of 31 December 2013 include a portfolio of equity securities listed on the New York Stock Exchange that is spread across various industrial and geographical sectors to reduce exposure to price risk. These equity instruments have been bought to invest temporary excess funds.

BALANCE AT 1 JANUARY Additions Disposals Changes in fair value recognised in other comprehensive income BALANCE AT 31 DECEMBER IFRS7p34(c)

2013 CU'000 269

2012 CU'000 257

75 (80) 10 274

12 269

All securities listed above are denominated in USD.

16 SUBSIDIARIES IFRS12p7(a);9(b)

Included in the Group is FarEast Co., 40% owned since its inception in 2011. Even though only 40% of the shares are still currently owned by Group companies, FarEast Co. is consolidated due to the fact that control is obtained through potential voting rights. The Group has an agreement with another shareholder, an investment bank, which owns a further 11% of the voting shares. According to this agreement, the Investment Bank has agreed always to vote in the same way as the Group. The nature of this agreement results in the Group having the power to influence FarEast Co.’s variable returns.

IFRS12p10(b);13

There are no particular significant restrictions on the ability of subsidiaries to transfer funds to the parent in the form of cash dividends or to repay loans or advances, except for restrictions regarding subsidiaries located in the Republic of Dryland as explained in Note 20.

IFRS12p4;10(a)(i)

The composition of the Group at the end of the reporting period was as follows.

Region of incorporation and operation

IFRS12p10(a)(ii)

Number of wholly-owned subsidiaries

Number of non-wholly-owned subsidiaries

2013

2012

2013

2012

Europe

6

7

2

2

Asia Pacific

2

2

3

3

North America

5

5

2

1

South America

2

2

4

4

15

16

11

10

There are no subsidiaries that have non-controlling interests that are considered material to the Group.

Page 35 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

17 BUSINESS COMBINATIONS IFRS3p59(a);B64

On 30 June 2013, the Group acquired a further 20% of the share capital of Fine Products Inc. (incorporated in Oceanland) taking its holding to 60% and from that date the Group gained control, holding shares that carry 60% of its votes. Thus, Fine Products Inc. ceased to be an associate and became a subsidiary in the electronic segment specialising in aerospace products.

It had been a 40% associate since its inception.

For the 6-month period as a subsidiary it contributed CU 170,000 to Group profit.

For the 12 months to 31 December 2013 it had revenue of CU 3,460,000 and profits of CU 250,000.

The assembled workforce, high existing profitability and the synergies that the Group will obtain all contributed to the amount paid for goodwill. Those assets do not meet the recognition criteria prescribed by IFRS 3 Business Combinations and therefore have not been recognised as separate intangible assets, but subsumed in goodwill.

The fair values shown below for Fine Products Inc. are provisional as the allowed hindsight period has not yet expired. A detailed expert report on the fair value of provisions is expected to be available in time for the next set of interim financial statements.

PRE-ACQUISITION CARRYING AMOUNT UNDER IFRS

PROVISIONAL FAIR VALUE

ASSETS Licences Customer lists Brands Development costs Property Plant Vehicles Computer equipment Inventories Receivables Cash and cash equivalents Groups’ revenues from continuing operations LIABILITIES

CU'000 100 95 195 150 95 315 367 10 1,327

CU'000 126 115 59 202 121 214 158 107 340 367 12 1,821

Borrowings Trade payables Defined benefit obligations Deferred tax Provisions Groups’ revenues from continuing operations NET ASSETS

15 172 40 18 62 307 1,020

15 172 57 115 62 421 1,400

Net assets acquired by the Group in the year (20%) Goodwill recognised on those 20% Cost of the additional 20% Satisfied by: 14,000,000 shares issued at market price (less issue costs of CU 26,000) Cash paid Total cost of the combination in the year

Page 36 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

280 809 1,089 774 315 1,089

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

Carrying value of net assets of 40% when was associate Revaluation to fair values at the date of becoming a subsidiary FAIR VALUE OF THE 40% OF NET ASSETS ON BECOMING A SUBSIDIARY

70 490 560

GOODWILL RECONCILIATION Goodwill on acquisition of 40% - Cash paid - Total cost of 40% investment - Fair value of 40% net assets at the time they were acquired by the Group Goodwill on acquisition of further 20% in the year as calculated above TOTAL GOODWILL RECOGNISED IN CONNECTION WITH ACQUISITION OF FINE PRODUCTS INC.

40 40 40 809 809

18 INVENTORIES

IAS2p36(b) IAS2p36(b) IAS2p36(b)

Raw materials Work in progress Finished goods BALANCE AT 31 DECEMBER

2013 CU'000 821 1,042 760 2,623

2012 CU'000 792 624 579 1,995

IAS2p36(d)

The amount of inventories recognised as an expense during the period amounted to CU 18,697,000 (2012: CU 11,720,000).

IAS2p36(e)

Write down of inventories to their net realisable value amounted to CU 14,000 (2012: CU 16,000) and mostly relate to finished products.

IAS2p36(f)

The amount of reversals of any write-down recognised as a reduction in the amount of inventories recognised as an expense was nil in 2013 (2012: CU 5,000).

IAS2p36(h)

There are no inventories pledged as security for liabilities.

19 TRADE AND OTHER RECEIVABLES 2013 CU'000

IAS1p78(b) IFRS7p29(a)

IFRS7p42B(a);42D

IFRS7p16

Gross trade receivables Allowance for impairment losses Net trade receivables Other receivables Prepayments and accrued income BALANCE AT 31 DECEMBER

2,363 (46) 2,317 106 163 2,586

2012 CU'000 1,413 (27) 1,386 49 82 1,517

There is no material difference between the fair value of receivables and their carrying amount.

Included within trade receivables are factored receivables of CU 946,000 (2012: CU 801,000). The related advance from the factoring company of CU 683,000 (2012: CU 560,000) is included in borrowings (Note 22). Since those receivables did not meet the IAS 39 derecognition requirements, they are recognised as receivables even though they were legally sold without recourse.

Amongst other clauses there was a deferred purchase price clause, under which a portion of transferred receivables were paid to the Group only upon full collection of the receivables. This resulted in substantial risks and rewards not being transferred to the transferee and therefore the IAS 39 derecognition criteria were not met.

The table below analyses changes in the allowance for impairment losses in the period.

Page 37 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS7p20(e)

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

ALLOWANCE FOR IMPAIRMENT LOSSES BALANCE AT 1 JANUARY

2013 CU'000 27

2012 CU'000 13

43 (19) (5) 46

28 (9) (5) 27

Provision for the year Utilised in the year Reversed in the year on collection of receivables BALANCE AT 31 DECEMBER

Provisions, write-off of uncollectible receivables and utilisation of the allowance for impairment losses are presented in the consolidated statement of profit or loss within administrative expenses.

20 CASH AND CASH EQUIVALENTS 2013 CU'000

IAS7p45

Cash in hand Bank balances Short term deposits (under 30 days maturity) BALANCE AS STATED IN THE STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER Less bank overdrafts shown as liabilities in the statement of financial position BALANCE AS STATED IN THE STATEMENT OF CASH FLOWS AT 31 DECEMBER IAS7p8

IAS7p48

IFRS7p29(a)

51 283 288 622 (202) 420

2012 CU'000 45 240 75 360 (137) 223

As described in the accounting policies, bank overdrafts repayable on demand fluctuate from being positive to overdrawn and are considered an integral part of the Group’s cash management for statement of cash flow purposes.

Foreign exchange restrictions in the Republic of Dryland prevent the remittance to the parent of cash balances of CU 27,000 (2012: CU 18,000). However, such cash balances can be used in order to meet short-term cash commitments in relation to transaction undertaken within the Republic of Dryland.

There is no material difference between the fair value and the carrying amount of cash and cash equivalents.

Short term deposits represent temporary excess of liquidity invested in low-risk short-term bank deposits with a maturity not exceeding 30 days.

21 NON-CURRENT ASSETS CLASSIFIED AS HELD-FOR-SALE AND DISCONTINUED OPERATIONS IFRS5p30;41(a)

IFRS5p33(b)

On 15 July 2013, the Board decided to sell the clockwork component of the mechanical division. On 15 September 2013, the Group closed the sale with a private investor. As a result, the entire clockwork component was sold except for the African clockwork component which is included in non-current assets held for sale at 31 December 2013.

The table below analyses key amounts relating to the discontinued clockwork component.

2013 CU'000 Revenue Expenses Loss before tax Income taxes LOSS AFTER TAX BEFORE DISPOSAL LOSS Loss on disposal of subsidiary Tax on disposal loss AFTER TAX DISPOSAL LOSS TOTAL LOSS ON DISCONTINUED OPERATIONS Page 38 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

1,110 (1,234) (124) 30 (94)

2012 CU'000 2,108 (2,384) (276) 50 (226)

(23) 7 (16) (110)

(226)

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS5p33(c)

IFRS5p38

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

Before disposal, the discontinued operations contributed CU 255,000 (2012: CU 8,000 outflow from) to operating cash inflows, CU 32,000 (2012: CU 12,000) to investing cash outflows and CU 103,000 (2012: CU 205,000) to financing cash outflows.

The following table summarises the carrying value of the clockwork component’s assets and liabilities that were sold on 15 September 2013.

ASSETS Licenses Plant Vehicles Computer equipment Inventories Receivables Cash and equivalents

CU'000 167 10 43 5 102 107 5 439

LIABILITIES Borrowings Trade payables Deferred tax Net assets disposed of Cash proceeds LOSS ON DISPOSAL IFRS5p41(c)

(85) (15) (5) (105) 334 (311) 23

The loss on disposal was included in loss on discontinued operations in the consolidated statement of profit or loss.

The sale of the remaining African clockwork unit of the mechanical segment is expected to take place before the next interim consolidated financial statements are published. It is currently estimated that the unit will realise its carrying amount (net of disposal costs).

IFRS5p38

The following table summarises the carrying amount of the African clockwork component after classification as held for sale.

ASSETS INTANGIBLES - Licences - Customer lists - Development costs PROPERTY, PLANT AND EQUIPMENT TOTAL ASSETS AT 31 DECEMBER 2013 LIABILITIES

CU'000 61 48 61 170 846 1,016

Trade and other payables Long term provisions TOTAL LIABILITIES AT 31 DECEMBER 2013

191 109 300

NET CARRYING AMOUNT OF DISPOSAL GROUP AT 31 DECEMBER 2013

716

Page 39 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

22 BORROWINGS CURRENT PORTION Bank loans and overdrafts Finance leases Advance from factoring company Debt element of convertible bonds BALANCE AT 31 DECEMBER

2013 CU'000 202 55 683 24 964

2012 CU'000 137 51 560 748

The bank overdrafts are unsecured and repayable on demand.

IFRS7p29(a)

There is no material difference between the carrying amount and the fair value of the Group’s current portion of borrowings.

NON-CURRENT PORTION Bank loans (secured on Group property) Finance leases Debt element of convertible bonds Preference shares BALANCE AT 31 DECEMBER

2013 CU'000 680 236 766 500 2,182

2012 CU'000 32 291 500 823

The following table illustrates the estimated fair value of liabilities classified within borrowings.

IFRS7p25

FAIR VALUE OF NON-CURRENT BORROWINGS Bank loans (secured on Group property) Finance leases Debt element of convertible bonds Preference shares BALANCE AT 31 DECEMBER

IFRS13p97 IFRS13p93(b);(d)

2013 CU'000 678 239 758 495 2,170

2012 CU'000 32 288 505 825

Fair values The Group uses the following valuation techniques to determine the fair value of financial instruments that are not traded in an active market:  The fair value of non-current bank loans was estimated by discounting the future cash flows payable under the terms of the loan using the year-end market interest rate applicable to loans of similar terms and conditions (Level 2).  The fair value of finance leases was estimated by discounting the future cash flows payable under the terms of the leases using the year-end interest rate applicable to similar finance leases (Level 3).  The fair value of the debt element of convertible bonds was estimated by discounting the future cash flows payable under the terms of the loan using the year-end market interest rate applicable to similar loans without a conversion option (Level 2).  The preference shares are unquoted, so their fair value is computed by discounting the future scheduled cash flows on the assumption that dividends and redemption payments will continue to be made in accordance with the terms of issue (Level 3).

IFRS7p31

IAS7p50(a)

Bank loans The bank loans are all nominally at floating rates linked to interest rates in the countries concerned. However, as described below, an interest rate swap has been entered into that effectively converts some of them to fixed rates.

The Group had undrawn floating rate borrowing facilities available of CU 3,098,000 (2012: CU 3,831,000). These facilities expire in 3 years (2012: 4 years’ time).

Page 40 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

Finance leases IAS17p31

FINANCE LEASES: MINIMUM LEASE PAYMENTS Within one year Over one year but within 5 years After 5 years TOTAL PAYABLE Future finance charges BALANCE AT 31 DECEMBER Presented as current borrowings Presented as non-current borrowings - due later than one year and not later than five years - due later than five years

2013 CU'000 77 279 65 421 (130) 291

2012 CU'000 77 279 142 498 (156) 342

55 236 181 55

51 291 253 38

Additional information about leased assets is shown in Note 10.

IFRS7p17

Debt element of convertible bonds The 3% convertible bonds issued in the year have a face value of CU 1,572,000 and are repayable in full in 10-years time to the extent that the holders have not exercised their annual right to convert to equity at a rate of 1 ordinary share per CU of loan.

Preference shares PREFERENCE SHARES AUTHORISED, ISSUED AND FULLY PAID: 500,000 PREFERENCE SHARES OF 1 CU EACH

IAS1p79

2013 CU'000 500

2012 CU'000 500

The preference shares have a right to a fixed cumulative dividend of 5% per annum and are redeemable at their issue price of CU 1 each in 2015. They rank ahead of ordinary shares in the event of liquidation, both for their entitlement to a return of capital and for any arrears of dividend. The preference shares are non-voting unless dividends become in arrears.

23 DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING At 31 December 2013, the Group has in place derivatives held for cash flow hedging purposes only.

The table below summarises the fair value of derivatives engaged in cash flow hedge relationships at 31 December.

CASH FLOW HEDGES CONTRACTS WITH NEGATIVE FAIR VALUE Forward foreign currency contracts Interest rate swaps CONTRACTS WITH POSITIVE FAIR VALUE Net balance at 31 December

IFRS7p22

IFRS7p23(a)

2013 CU'000

2012 CU'000

(122) (76) (198)

(101) (12) (113) (113)

(198)

Forward foreign currency contracts At 31 December 2013, the Group had in place forward currency contracts with a fair value of CU 122,000 (2012: CU 101,000).

The purpose of these contracts is to mitigate the fluctuations of expected sales and purchases (forecast transactions) denominated in USD and primarily relating to the US market. The forward exchange contracts are put in place in order to hedge the excess of anticipated sales over purchases that will be made in USD over the next year. The Group prepares sales and purchase forecasts in USD for the following year on a monthly basis and designates as the hedged item the part of monthly sales exceeding the purchases of the month.

Cash flows are expected to occur and affect the consolidated statement of comprehensive income in the month concerned.

Page 41 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS7p22;31

IFRS7p22

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

Interest rate swaps The notional amount of the interest rate swaps is CU 754,000 (2012: CU 123,000). They are designed to convert floating rate borrowings to fixed rate exposure for the next two years at 7.5 % (2012: 7.6 %).

Hedge of foreign net investments There are Euro borrowings with a fair value of CU 1,078,000 (2012: CU 410,000) which have been designated to hedge a portion of the Group’s currency exposure arising from its investment in the net assets of its US Dollars area subsidiaries. The effective portion of the foreign exchange gain of CU 87,000 (2012: CU 61,000) has been taken to other comprehensive income.

The movements to the hedge reserve in equity that occurred during the years ended 31 December 2013 and 2012 are set out in Note 32.

IFRS7p24(c)

All the hedges were deemed to be effective during 2013 and 2012 and any hedge ineffectiveness recognised in profit or loss was not material.

IFRS13p93(d)

Fair value measurement Neither the forward currency contracts nor the interest rate swaps are traded in an active market. As a result, their fair value is based on valuation techniques that are consistent with generally accepted valuation methodologies for pricing financial instruments and they incorporate all factors and assumptions that market participants would consider in setting the price.

The fair value of forward currency contracts is based on the current value of the difference between the contractual exchange rate and the market rate at the reporting date.

The fair value of interest rate swaps is determined on the basis of the current value of the difference between the contractual interest rate and the market rate at the reporting date.

24 TRADE AND OTHER PAYABLES

Trade payables Other payables Accrued liabilities Deferred income BALANCE AT 31 DECEMBER Presented as: - Current - Non-current

OTHER PAYABLES COMPRISE: Social security Taxes other than income taxes Miscellaneous minor items BALANCE AT 31 DECEMBER

2013 CU'000 818 218 96 80 1,212

2012 CU'000 802 234 110 60 1,206

1,017 195

1,045 161

2013 CU'000

2012 CU'000 82 84 68 234

102 98 18 218

Accrued liabilities and deferred income represent miscellaneous contractual liabilities that relate respectively to expenses that were incurred but not paid for at the year-end and to income received during the period for which the Group had not supplied the goods or services at the end of the year.

IFRS7p29(a)

The carrying amount of trade and other payables, accrued liabilities and deferred income is considered to be in line with their fair value at the reporting date.

Page 42 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

25 INFORMATION ON FINANCIAL RISKS IFRS7p31;33

In performing its operating, investing and financing activities, the Group is exposed to the following financial risks:  Credit risk: the possibility that a debtor will not repay all or a portion of a loan or will not repay in a timely manner and therefore will cause a loss to the Group.  Liquidity risk: the risk that the Group may not have, or may not be able to raise, cash funds when needed and therefore encounter difficulty in meeting obligations associated with financial liabilities.  Market risk: the risk that the value of a financial instrument will fluctuate in terms of fair value or future cash flows as a result of a fluctuation in market prices. Basically, the Group is exposed to three market risk components: Interest rate risk Currency risk Equity price risk In order to effectively manage those risks, the Board of Directors has approved specific strategies for the management of financial risks, which are in line with corporate objectives. These guidelines set up the short and long term objectives and action to be taken in order to manage the financial risks that the Group faces.

The major guidelines of this policy are the following:  Minimise interest rate, currency and price risks for all kinds of transactions  Maximise the use of “natural hedge” favouring as much as possible the natural off-setting of sales and costs and payables and receivables denominated in the same currency, and therefore put in place hedging strategies only for the excess balance. The same strategy is pursued with regard to interest rate risk  Enter into derivatives or any other similar instrument solely for hedging purposes  All financial risk management activities are carried out and monitored at central level  All financial risk management activities are carried out on a prudent and consistent basis and following the best market practices  The Group can invest in shares or similar instruments only in the case of temporary excess of liquidity and such transactions have to be authorised by the Board of Directors.

The Group employs a corporate treasurer who reports to the treasury sub-committee of the Board of Directors.

Internal audits are conducted to ensure that the Group’s policies and procedures are followed in practice.

In particular, with regard to derivatives, the Group’s risk management policies are as follows:  Document carefully all derivatives including the relationship between them and the hedged items at inception and throughout their life  Recognise ineffectiveness in profit or loss as soon as it arises  Assess effectiveness at the inception of the hedge and at each reporting date ensuring that IAS 39 criteria are met  Use only high quality financial institutions as counterparties for derivatives.

IFRS7p8

IFRS7p8

The following table summarises the carrying amount of financial assets and financial liabilities recorded by category.

2013 FINANCIAL ASSETS CU'000 Cash and cash equivalents 622 At fair value through profit or loss Available-for-sale investments 274 Loans and Receivables: Trade and other receivables 2,586 Held-to-maturity investments BALANCE AT 31 DECEMBER 3,482 FINANCIAL LIABILITIES At fair value through profit or loss Derivative financial instruments Measured at amortised cost: - Borrowings 1

- Trade and other payables BALANCE AT 31 DECEMBER 1 Excludes other payables (non-contractual liabilities). See Note 24.

Page 43 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

2012 CU'000 360 269 1,517 2,146

203

113

3,146

1,571

994 4,343

972 2,656

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS13p93(a);(b)

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

FAIR VALUE MEASUREMENT AT END OF THE REPORTING PERIOD USING:

IFRS13p94

ASSETS MEASURED AT FAIR VALUE AS OF 31 DECEMBER 2013 Available-for-sale investments (Equity investments) Forward foreign currency contracts Interest rate swaps TOTAL

LEVEL 1 274 274

LEVEL 2

LEVEL 3

122 81 203

-

FAIR VALUE MEASUREMENT AT END OF THE REPORTING PERIOD USING:

IFRS7p27B

ASSETS MEASURED AT FAIR VALUE AS OF 31 DECEMBER 2012 Available-for-sale investments (Equity investments) Derivative financial instruments TOTAL

LEVEL 1 269 269

LEVEL 2

LEVEL 3

113 113

-

Available-for-sale assets comprise a portfolio of equity securities listed on the New York Stock Exchange (Note 15).

The Group does not carry any financial liability classified in the category “at fair value through profit or loss”.

IFRS13p93(c)

IFRS7p33

There were no transfers between Level 1 and 2 in the period.

Credit risk The Group controls its exposure to credit risk by setting limits on its exposure to individual customers and these are disseminated to operating companies; compliance is monitored by the Central Treasury Department. As part of the process of setting customer credit limits, different external credit reference agencies are used, according to the country of the customer.

The Group has adopted a policy of dealing only with creditworthy counterparties.

IFRS7p34(c)

There are no significant concentrations of credit risk.

IFRS7p36(a)

The maximum credit risk to which the Group is exposed is summarised in the following table.

2013 CU'000 Cash and cash equivalents Trade and other receivables BALANCE AT 31 DECEMBER

571 2,586 3,157

2012 CU'000 315 1,517 1,832

As explained in Note 20, cash and cash equivalents balances represent bank balances and short term deposits with a less than 30-day maturity.

IFRS7p36(b)

IFRS7p37

The Group does not hold collateral for any of its receivables.

All the receivables that are past due at reporting date are impaired as appropriate. Note 19 provides an analysis of the allowance for doubtful receivables.

All of the available-for-sale assets are in the form of investments in equity securities and therefore they have no exposure to credit risk.

IFRS7p39

Liquidity risk - Financial liabilities maturity analysis The Group manages liquidity risk on the basis of expected maturity dates.

IFRS7pB11;B11D

The following tables analyse financial liabilities by remaining contractual maturity (contractual and undiscounted cash flows).

Page 44 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

BORROWINGS

Less than 1 year 1 - 3 years 3 - 5 years Over 5 years BALANCE AT 31 DECEMBER 2013

CU'000 964 1,488 139 805 3,396

BORROWINGS

Less than 1 year 1 - 3 years 3 - 5 years Over 5 years BALANCE AT 31 DECEMBER 2012

CU'000 748 611 198 107 1,664

DERIVATIVES CU'000 132 85 217

DERIVATIVES CU'000 71 38 9 118

TRADE AND OTHER PAYABLES CU'000 849 201 1,050

TRADE AND OTHER PAYABLES CU'000 856 188 1,044

TOTAL CU'000 1,945 1,774 139 805 4,663

TOTAL CU'000 1,675 837 207 107 2,826

At present, the Group expects to pay all liabilities at their contractual maturity. In order to meet such cash commitments, the Group expects the operating activity to generate sufficient cash inflows. In addition, the Group holds financial assets for which there is a liquid market and that are readily available to meet liquidity needs.

IAS7p50(a)

IFRS7p33(a)

At the reporting date, there are undrawn borrowing facilities of CU 3,098,000 (2012: CU 3,831,000) available for operating activities and to settle capital commitments. The Group maintains substantial borrowing facilities to ensure that it can manage to fund its budgeted operations and take advantage of expansion opportunities as they arise. The finance director provides the Board with a monthly schedule showing the maturity of financial liabilities and unused borrowing facilities to assist the Board in monitoring liquidity risk.

Interest rate risk The Group’s exposure to interest rate risk mainly concerns financial liabilities which are both fixed rate and floating rate. At present, the Group does not hold loans and receivables that are long-term in nature. The following table analyses the breakdown of liabilities (excluding derivatives) by type of interest rate.

FINANCIAL LIABILITIES Fixed rate Floating rate Non-interest bearing BALANCE AT 31 DECEMBER IFRS7p33(b)

IFRS7p40

2013 CU'000 2,653 493 994 4,140

2012 CU'000 1,092 479 972 2,543

In order to manage the interest rate risk, the Group enters into interest rate swaps. Note 23 explains the interest rate hedging activities in place at 31 December 2013.

Sensitivity analysis The analysis has been performed separately for fixed interest rate financial liabilities and floating interest rate financial liabilities.

The impact of a change in interest rates on floating interest rate financial liabilities has been assessed in terms of changing of their cash flows and therefore in terms of the impact on net expenses and has been quantified as follows:  A hypothetical increase / decrease in interest rates by 100 basis points on a parallel yield curve would cut / increase profits after tax by CU 28,000 (2012: CU 13,000).  A hypothetical increase / decrease in interest rates by 200 basis points on a parallel yield curve would cut / increase profits after tax by CU 55,000 (2012: CU 25,000).

Page 45 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

The impact of a change in interest rates on fixed interest rate financial liabilities has been assessed in terms of changing of their fair value. The potential loss in fair value of fixed rate financial liabilities held at 31 December 2013 has been quantified as follows:  A hypothetical increase / decrease in interest rates by 100 basis points on a parallel yield curve would cut / increase profits after tax by CU 97,000 (2012: CU 47,000).  A hypothetical increase / decrease in interest rates by 200 basis points on a parallel yield curve would cut / increase profits after tax by CU 178,000 (2012: CU 83,000).

IFRS7p33

Foreign currency risk Since the Group operates internationally, it is exposed to foreign currency risk as part of its normal industrial and commercial business. In particular, the Group is significantly exposed to USD risk due to the large value of sales made in the United States.

In this respect, the Group enters into foreign currency contracts on a rollover basis for the purpose of hedging the excess of anticipated sales in USD over purchases in USD. Note 23 explains the foreign currency hedging activities in place at 31 December 2013.

The Group’s overseas operations are partly financed by local currency loans and the equity element is largely hedged by longterm foreign currency borrowings. In addition, forward currency contracts are used as cash flow hedges of exposures on certain net foreign currency sales exposures as described below.

IFRS7p34

Financial assets by currency Financial assets as at 31 December are analysed by currency as follows: AVAILABLEFOR-SALE

TRADE AND OTHER RECEIVABLES

CASH AND CASH EQUIVALENTS

TOTAL

CU'000 274 274

CU'000 756 405 326 688 213 198 2,586

CU'000 123 46 145 79 120 109 622

CU'000 879 451 471 767 607 307 3,482

269 269

509 296 330 105 102 175 1,517

123 4 80 33 95 25 360

632 300 410 138 466 200 2,146

CU Japanese Yen Euro British Pound US Dollars Other BALANCE AT 31 DECEMBER 2013 CU Japanese Yen Euro British Pound US Dollars Other BALANCE AT 31 DECEMBER 2012 (restated) IFRS7p34

Financial liabilities by currency The following table analyses the breakdown of liabilities (excluding derivatives) by currency.

BORROWINGS

CU Japanese Yen Euro British Pound US Dollars Other BALANCE AT 31 DECEMBER 2013 Page 46 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

CU'000 1,410 1,078 658 3,146

TRADE AND OTHER PAYABLES CU'000 192 210 156 180 132 124 994

TOTAL CU'000 1,602 210 1,234 180 790 124 4,140

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

CU Japanese Yen Euro British Pound US Dollars Other BALANCE AT 31 DECEMBER 2012 (restated)

BORROWINGS CU'000

TRADE AND OTHER PAYABLES CU'000

TOTAL CU'000

701 410 460 1,571

192 185 123 155 227 90 972

893 185 533 155 687 90 2,543

IFRS7p33

In order to manage the foreign currency risk, the Group enters into forward currency contracts. Note 23 explains the foreign currency hedging activities in place at 31 December 2013.

IFRS7p40

Sensitivity analysis A hypothetical 10% increase / decrease in the exchange rate of the CU against the Euro would cut / increase profits after tax by CU 82,000 (2012: CU 21,000).

A hypothetical 10% increase / decrease in the exchange rate of the CU against the USD would cut / increase profits after tax by CU 76,000 (2012: CU 25,000).

A hypothetical 10% increase / decrease in the exchange rate of the CU against the Japanese Yen would cut / increase profits after tax by CU 12,000 (2012: CU 6,000).

A hypothetical 10% increase / decrease in the exchange rate of the CU against all other currencies would cut / increase profits after tax by CU 195,000 (2012: CU 58,000).

The analysis above has been carried out on the following basis:  Hedged transactions were not taken into consideration. It is reasonable to expect that fluctuations on the value of hedged items are almost fully offset by hedging items.  The currency risk relating to available-for-sale investments in companies listed on the New York Stock Exchange was taken into consideration (see below).

IFRS7p42

In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the year-end exposure does not reflect the exposure during the year. Actually, CU denominated sales are seasonal, with lower volumes in the last quarter of the year resulting in low CU receivables at year end.

IFRS7p33

Equity price risk As stated in the Group financial risk policies approved by the Board of Directors, the Group can invest temporary excess liquidity in shares or similar instruments. Investments in derivatives for speculative purposes are banned.

As at 31 December 2013, the Group holds some available-for-sale shares in companies listed on the New York Stock Exchange (Note 15). As a result, such investments are exposed to both currency risk and changes in fair value risk.

IFRS7p40

Sensitivity analysis Listed entities on the New York Stock Exchange are subject to fair value risk. The fair value of those assets as at 31 December 2013 amounted to CU 274,000. A hypothetical 10% decrease / increase in the fair value of those assets would result in a loss / gain of CU 27,400 (such loss / gain would be recognised in other comprehensive income). This figure does not reflect the currency risk, which has been considered in the foreign currency risks analysis section only.

26 RETIREMENT BENEFIT OBLIGATIONS IAS19p139(a)

The Group operates a funded defined benefit plan for qualifying employees. Under this plan, the employees are entitled to retirement benefits of 1/80th of final salary for each year of service and a half pension to surviving spouses. Final salary is the average of the last three year’s remuneration before retirement of the employee concerned. The scheme is constituted as a trust and the assets are kept separate from those of the Group.

Page 47 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IAS19p139(b)

IAS19p144

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

The plan exposes the Group to actuarial risks, in particular:  Salary risk: any increase in the plan participants’ salary will increase the plan’s liability. 

Longevity risk: any increase in the plan participants’ life expectancy will increase the plan’s liability.



Investment risk: if the actual return on plan assets is below the discount rate used in calculating the defined benefit plan liability, a plan deficit will arise; however, the composition of plan assets is balanced enough not to expose the Group to significant concentrations of investment risk.



Interest rate risk: a decrease in the bond interest rate will increase the plan liability (however, partially counterbalanced by an increase in the return on the plan’s debt investments).

The principal actuarial assumptions used for the purpose of the actuarial valuation at 31 December were as follows: 2013 Discount rate Expected rate of salary increases Average longevity at retirement age for current and future pensioners

5.00% 4.75% 26.9

2012 5.25% 5.20% 26.5

IAS19p81

The assumptions relating to longevity used to compute the defined benefit obligation liabilities are based on the Group’s best estimate of the mortality of plan members both during and after employment.

IAS19p145(a)

For each of the above significant actuarial assumptions, a sensitivity analysis has been determined based on reasonably possible changes of the assumption occurring at the end of the reporting period, while holding all other assumptions constant:  If the discount rate is 1% higher (lower), the defined benefit obligation would decrease by CU 53,000 (increase by CU 51,500).

IAS19p145(b)



If the expected rate of salary growth increases (decreases) by 1%, the defined benefit obligation would increase by CU 40,000 (decrease by CU 41,000).



If the average life expectancy increases (decreases) by one year, the defined benefit obligation would increase by CU 61,000 (decrease by CU 63,000).

For the above sensitivity analysis, the present value of the defined benefit obligation has been determined using the Projected Unit Credit Method at the end of the reporting period, which is the same as that applied in the statement of financial position.

Such sensitivity analysis might not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another.

Page 48 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IAS19p135(b);141

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

The following table analyses the components of defined benefit costs recognised in comprehensive income.

Current service cost Past service cost and loss arising from settlements Net interest expense COMPONENTS OF DEFINED BENEFIT COSTS RECOGNISED IN PROFIT OR LOSS (CHARGED TO COST OF SALES) Return on plan assets (excluding amounts included in net interest expense) Actuarial losses arising from changes in demographic assumptions Actuarial gains arising from changes in financial assumptions Actuarial losses arising from experience adjustments COMPONENTS OF DEFINED BENEFIT COSTS RECOGNISED IN OTHER COMPREHENSIVE INCOME

IAS19p140;141

2013 CU'000 636 52 92

2012 (restated) CU'000 562 103

780

665

(1,062) 904 (28) 286

(784) 759 (22) 83

100

36

880

701

The following tables analyse the movements in plan liabilities.

PRESENT VALUE OF DEFINED BENEFIT OBLIGATIONS (WHOLLY OR PARTLY FUNDED) Current service cost Net interest expense Past service cost and loss arising from settlements Actuarial losses arising from changes in demographic assumptions Actuarial gains arising from changes in financial assumptions Actuarial losses arising from experience adjustments Obligations assumed in business combinations (Note 17) Exchange differences on foreign plans Benefits paid Increase during the year At 1 January BALANCE AT 31 DECEMBER

2013 CU'000 636 92 52 904 (28) 286 169 (2) (224) 1,885 10,292 12,177

2012 (restated) CU'000 562 103 759 (22) 83 (6) (207) 1,272 9,020 10,292

FAIR VALUE OF PLAN ASSETS Return on plan assets (excluding amounts included in net interest expense) Employer contributions Assets acquired in business combinations Exchange differences on foreign plans Benefits paid Increase during the year At 1 January BALANCE AT 31 DECEMBER

2013 CU'000 1,062 750 112 2 (224) 1,702 10,000 11,702

2012 CU'000 784 550 3 (207) 1,130 8,870 10,000

IAS19p147(b)

The best estimate of contributions expected to be paid to the plan during 2014 is CU 700,000.

IAS19p147(c)

The average duration of the benefit obligation at 31 December 2013 is 15.8 years (2012: 15.1 years).

Page 49 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IAS19p142

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

The following table analyses the major categories of plan assets and the composition of the fair value of the plan assets at 31 December.

2013

2012

CU'000

CU'000

Manufacturing

2,913

2,095

Financial institutions

2,198

1,997

Oil and gas

2,612

2,232

7,723

6,324

1,859

1,403

949

912

2,808

2,315

Residential properties

675

728

Commercial properties

496

633

1,171

1,361

11,702

10,000

ANALYSIS OF THE FAIR VALUE OF PLAN ASSETS Equity investments by industry

Debt investments by type of issuer Government bonds High quality corporate bonds Real estate by nature

TOTAL IAS19p142

Only the fair values of the equity and debt instruments are determined based on quoted market prices in active markets.

27 SHARE-BASED PAYMENTS IFRS2p45(a)

During March 2009, the Board of Directors approved an equity-settled stock option plan, which provides certain managers across the Group with the option to purchase ordinary shares of IFRS Statements Limited at a fixed price.

Management are eligible after 3-years’ service to join the share option scheme under which they are granted options which, provided they remain within the Group’s employment for an additional 1 year, are exercisable over a fixed period of time of 7 years from the vesting date at the market price of the shares. No performance conditions were attached to the plan.

IFRS2p45(b),(c)

The table below summarises the number of options that were outstanding, their weighted average exercise price as at 31 December, as well as the movements during the period.

2013 No.'000 At 1 January Granted Exercised Forfeited Expired BALANCE AT 31 DECEMBER IFRS2p51(a)

1,920 200 (1,000) (120) 1,000

2012 No.'000 2,950 120 (1,000) (150) 1,920

Weighted average exercise price 2013 2012 cents cents 32.5 22.1 130.0 125.0 6.2 6.0 135.0 135.0 66.1 32.5

In 2013, the Board of Directors cancelled 120,000 share-options granted to top management that had not yet vested. The grant date fair value of the options as originally priced and not yet charged to profit or loss has been taken immediately to profit or loss.

During 2013, the total charge to profit or loss amounted to CU 24,000 (2012: CU 80,000). Such amounts include CU 5,000 (2012: Nil) recorded immediately in profit or loss because of the abovementioned cancellation.

Page 50 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS2p46;47

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

The estimate of the grant date fair value of each option issued is based on a binomial lattice model. In order to approximate the expectations that would be reflected in a current market or negotiated exchange price for these options, the calculation takes into consideration factors like behavioural considerations and non-transferability of the options granted (ie exercise restrictions including the probability of meeting market conditions attached to the option, if applicable).

Inputs to the model included the following: 2013 shown below

Grant date exercise price Historical and expected volatility Dividend yield Risk-free interest rate Forfeiture probability: leaving pre-vesting

40% 2.5% 4.0% 28%

2012 shown below 40% 2.0% 4.0% 25%

Expected volatility was determined taking into consideration the company’s volatility over a five-year period prior to each award date. Dividends used are those last known at the date the plan was approved.

IFRS2p45(d)

The outstanding number of options at 31 December in 2013 and 2012 was the following:

EXERCISE PRICE

GRANTED ON

EXERCISE PERIOD

6.2 Cents 120 Cents 125 Cents 130 Cents 135 Cents TOTAL AT 31 DECEMBER

31 March 2009 31 March 2010 31 March 2011 31 March 2012 31 March 2013

From 31 March 2010 to 31 March 2017 From 31 March 2011 to 31 March 2018 From 31 March 2012 to 31 March 2019 From 31 March 2013 to 31 March 2020 From 31 March 2014 to 31 March 2021

Number of shares outstanding on 31 December 2013 2012 No.’000 No.’000 500 1,500 100 100 200 200 120 200 1,000 1,920

28 DEFERRED TAX The following table illustrates the deferred tax balances recognised in the consolidated statement of financial position.

2013 CU’000

2012 CU’000

243 (780) (537)

140 (297) (157)

-

(5) (5)

DEFERRED TAX ON CONTINUING OPERATIONS Deferred tax assets Deferred tax liabilities NET BALANCE AT 31 DECEMBER DEFERRED TAX ON DISCONTINUED OPERATIONS Deferred tax assets Deferred tax liabilities NET BALANCE AT 31 DECEMBER IAS12p81(g)

The tables below illustrate, in respect of each type of temporary difference, the movements of deferred tax assets and liabilities on continuing operations recognised in the period.

Page 51 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

Recognised in OTHER COMPREHENSIVE INCOME 7 19 26 30 56

DEFERRED TAX ASSETS AS AT 1 JANUARY 2012 Tax losses Provisions Cash flow hedges Other AS AT 31 DECEMBER 2012 Tax losses Provisions Cash flow hedges Other AS AT 31 DECEMBER 2013 IAS12p81(e);82

PROFIT OR LOSS

TOTAL

50 15 19 30 114 62 11 187

57 15 19 19 30 140 62 30 11 243

The tax losses are recognised as assets because insofar as they exceed taxable profits from the reversal of existing temporary differences, sufficient taxable profits are expected in the tax jurisdictions concerned and a significant amount of those tax losses have unlimited expiry. As a result, there are no unused tax losses for which deferred tax assets have not been recognised.

DEFERRED TAX LIABILITIES AS AT 1 JANUARY 2012

Recognised in OTHER PROFIT COMPREHENSIVE OR INCOME LOSS 30 95

-

-

125

Defined benefit obligations Property, plant and equipment Available-for-sale investments Other AS AT 31 DECEMBER 2012

(2) 28

13 132 6 23 269

-

-

13 132 4 23 297

Defined benefit obligations Property, plant and equipment Acquisitions (Note 17) Available-for-sale investments Convertible debt Other AS AT 31 DECEMBER 2013

(2) 26

28 45 5 1 57 405

234 234

115 115

28 45 115 3 235 57 780

EQUITY

ACQUISITIONS

TOTAL

IAS12p81(f)

As explained in the accounting policies with regard to joint arrangements and associates, the Group is not currently in a position to determine their dividend policy. However, no deferred tax liability has been recognised for all their taxable temporary differences because they are not significant.

With regard to subsidiaries, deferred tax on the undistributed earnings have not been provided for since the Group is able to control the timing of the distribution and it is probable that they will not be distributed in the foreseeable future.

IAS 12p82A

Under the Income Tax law of the Republic of Newland, if the entire retained earnings were paid out as dividends to shareholders, a further CU 162,000 of income tax would become payable.

Page 52 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

29 PROVISIONS

RESTRUCTURING

IAS37p84

BALANCE AT 1 JANUARY 2012 Discount unwinding Additional provisions Utilised BALANCE AT 31 DECEMBER 2012 Acquisitions (Note 17) Discount unwinding Additional provisions Utilised BALANCE AT 31 DECEMBER 2013

LITIGATION

WARRANTIES

ONEROUS LEASES

TOTAL

CU’000 2 -

CU’000 -

CU’000 -

CU’000 55 -

CU’000 2 55 -

2 109 (2)

50 (15)

62 (5)

55 4 (17)

57 62 4 159 (39)

109

35

57

42

243

Presented as: - Current liability - Non-current liability BALANCE AT 31 DECEMBER

2013 CU'000 151 92 243

2012 CU'000 19 38 57

IAS37p85

Restructuring The restructuring of the Group’s clockwork operations is expected to be completed within a year. The restructuring provision includes the estimated amounts of benefit payable to employees on termination of CU 67,000, costs relating to exiting activities of CU 32,000 and other administration costs for CU 10,000.

IAS37p85

Litigation All litigation in which the Group is involved is analysed at each reporting date. When necessary, legal advice is sought and provisions are recorded. As at 31 December 2013, the provision booked refers to a legal action against a former Director that is expected to come to court within 2 years. The provision includes expected costs up to and including a first hearing, but not for any appeal.

IAS34p26

On legal advice, the estimated provision of CU 60,000 that was reported in the 30 June 2013 interim consolidated financial statements has been revised downwards to CU 50,000 following the discovery of further documents relating to the case and it was subsequently utilised for CU 15,000.

IAS37p85

Warranties Certain products made by Fine Products Inc. before it entered the Group have on occasions failed within the 5-year warranty period. The expected cost of supplying replacements to the customers who bought that discontinued product line has been provided for on a statistical basis. The warranty period expires within 3 years and replacements are expected to be supplied evenly over that period as the product failure is random, not related to particular batches.

IAS37p85

Onerous leases Expansion by organic growth and acquisition led the Group to construct a new centralised manufacturing facility.

One of the old disused sites has so far proved difficult to sub-let at an appropriate rent. Whilst the head lease has 10 years to run, the provision only covers the present value of the next 3 years rent at CU 17,000 per annum.

This reflects the advice of the Group’s new real estate agents on the expected time before a tenant willing to pay the full rent can be found. The Directors have been advised that a short term sub-let at less than the head lease rental is unlikely to generate as large a net present value. The provision has been determined by discounting risk adjusted and pre-tax cash flows using an interest rate of 8.5%.

Page 53 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

30 OTHER NON-CURRENT LIABILITIES 2013 CU'000 Deferred consideration Other liabilities BALANCE AT 31 DECEMBER

2012 CU'000 100 56 156

60 60

Other liabilities comprise miscellaneous amounts owed to various authorities that will be settled in 2-5 years. In most of the cases, such liabilities bear interest that is determined by contractual or statutory obligations. The effect of discounting would be negligible.

31 EQUITY CAPITAL IAS1p79

ORDINARY 5C SHARES

SHARE CAPITAL

SHARE PREMIUM

TREASURY SHARES

No.’000 32,000

CU’000 1,600

CU’000 210

CU’000 -

CU’000 1,810

Exercise of share options At 31 December 2012

1,000 33,000

50 1,650

10 220

-

60 1,870

Acquisition (Note 17) Exercise of share options Treasury shares purchased At 31 December 2013

14,000 1,000 48,000

700 50 2,400

74 12 306

(110) (110)

774 62 (110) 2,596

At 1 January 2012

Authorised: 60,000,000 ordinary shares of 5 cents each Allotted, issued and fully paid: 48,000,000 ordinary shares of 5 cents each

TOTAL

2013 CU'000

2012 CU'000

3,000

3,000

2,400

1,650

As approved by the General Shareholders’ Meeting, 100,000 treasury shares were acquired in the period on the Newland Stock Exchange in order to serve the current stock option plan awarded to Group managers (Note 27) for a consideration of CU 110,000. As at 31 December 2013, they have a market value of CU 115,000.

IAS1p134;135

The Group’s long-term policy is that net debt should be in the range of 12-25% of total capital resources equity.

This policy aims to ensure that the Group both maintains its BB credit rating and lowers its net of tax weighted average cost of capital.

The table below illustrates the gearing ratio at 31 December 2013 and 2012.

CAPITAL RESOURCES

2013 CU'000

Borrowings (Note 22) Less Cash and cash equivalent (Note 20) Net debt Total equity Total capital resources Gearing ratio

3,146 (622) 2,524 10,246 12,770 19.8%

Page 54 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

2012 (restated) CU'000 1,571 (360) 1,211 7,351 8,562 14.1%

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

The only externally imposed capital requirement for the Group is, in order to maintain its listing on the Newland Stock Exchange, to have share capital of at least CU 1 million and a free float of at least 25% of the shares. The Group met the capital requirement on its initial listing and the rules limiting treasury share purchases mean it will automatically continue to satisfy that requirement, as it did throughout the year. Management receives a report from the registrars weekly on substantial share interests showing the non-free float and it demonstrated continuing compliance with the 25% limit throughout the year. At the year-end, 32% of the shares were in public hands.

32 OTHER RESERVES IAS1p106A

AT 1 JANUARY 2012 (restated) Exchange difference Net investment hedge Gains on cash flow hedges - deferred tax thereon Hedge transfer to inventory - deferred tax thereon Hedge transfer to profit - deferred tax thereon Revaluation of investments - deferred tax thereon Realised on disposal - deferred tax thereon Share-based payments: Service provided AT 31 DECEMBER 2012 (restated) Exchange difference Net investment hedge Gains on cash flow hedges - deferred tax thereon Hedge transfer to inventory - deferred tax thereon Hedge transfer to profit - deferred tax thereon Revaluation of investments - deferred tax thereon Realised on disposal - deferred tax thereon Equity element of the issue - deferred tax thereon Share-based payments: Service provided AT 31 DECEMBER 2013

CURRENCY TRANSLATION

HEDGING RESERVE

REVALUATION RESERVE

CONVERTIBLE BOND

SHARE-BASED PAYMENTS

TOTAL

CU’000

CU’000

CU’000

CU’000

CU’000

CU’000

(67)

47

70

-

14

64

54 -

61 30 (10) 17 (5) 12 (4) -

12 (4) (18) 6

-

-

54 61 30 (10) 17 (5) 12 (4) 12 (4) (18) 6

-

-

-

-

80

80

(13)

148

66

295

87 75 (25) 9 (3) 6 (2) -

10 (3) (63) 5 -

782 (234)

94

72 -

-

72 87 75 (25) 9 (3) 6 (2) 10 (3) (63) 5 782 (234)

59

295

15

548

24 118

24 1,035

Page 55 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

The currency translation reserve accumulates all foreign exchange differences on translating the results and net assets of foreign operations that the Group controls.

The hedging reserve (net of deferred tax) accumulates after tax gains and losses on cash flow hedges.

The revaluation reserve (net of deferred tax) arises from the annual revaluation of available-for-sale financial assets. It is not distributable until it is reclassified to the statement of profit or loss on the disposal of the investments.

The convertible bond reserve represents the equity component of the instrument (net of tax). If and when the option to convert to equity is exercised, a transfer will be made from this reserve and from debt to share capital and share premium account.

Reserves classified on the face of the consolidated statement of financial position as retained earnings represent accumulated earnings and are distributable. All the other reserves are non-distributable.

33 RELATED PARTY TRANSACTIONS IAS24p13

The Group is controlled by Newmagic Corporation domiciled in The Republic of Newland, which holds 51% of the ordinary shares of the Group. Newmagic Corporation is controlled by Mr Mechanic who is the ultimate controlling party of the Group.

Newmagic Corporation produces financial statements available for public use.

2013 CU'000

2012 CU'000

21 102 15 21 25 17

20 83 10 13 7 18

RECEIVABLES Joint ventures Associates Close members of Newmagic corporation Entities controlled by key management Entities controlled by Group’s parent PAYABLES

11 33 3 4 3

8 19 2 3 3

Joint ventures Associates Entities controlled by key management Entities controlled by Group’s parent

25 1 2

1 3

IAS24p18;19

WITH OTHER ENTITIES

AMOUNT OF TRANSACTIONS: Sales to joint ventures Sales to associates Sales to close members of Newmagic Corporation Sales to entities controlled by key management Purchases from associates Purchases from entities controlled by Group’s parent

OUTSTANDING BALANCES AT 31 DECEMBER:

The above transactions were made on the same terms as equivalent transactions with unrelated parties.

IAS24p18;19

The following table illustrates the transactions with key management that occurred during the period concerned.

WITH KEY MANAGEMENT Sales of goods to key management OUTSTANDING LIABILITY ON SUCH SALES (UNSECURED) Gross Doubtful debt allowance NET LIABILITY AT 31 DECEMBER Page 56 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

2013 CU'000 5

2012 CU'000 6

5 5

2 2

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

34 KEY MANAGEMENT COMPENSATION1 IAS24p17

2013 CU'000 740 75 24 839

Wages, salaries and short-term benefits Post-employment benefits Share–based payments (Note 27) TOTAL AT 31 DECEMBER

2012 CU'000 614 66 80 760

35 COMMITMENTS IAS17p35(d)

The Group entered into various non-cancellable operating leases relating to offices, industrial buildings and warehouses as well as motor vehicles used by the sales force. The lease agreements have an average life of 7–15 years and include various terms such as renewable rights and inflation features.

IAS17p35(a)

The following table shows the total of future minimum operating lease payments.

PROPERTY

ON LEASES EXPIRING: Within one year More than 1 year but within 5 years After 5 years IAS17p35(c)

IAS16p74(c) IAS38p122(e)

MOTOR VEHICLES

2013

2012

2013

2012

CU’000

CU’000

CU’000

CU’000

124 289 441

96 340 475

233 716 87

228 704 102

Operating lease payments recognised as an expense in 2013 amounted to CU 108,000 (2012: CU 95,000).

The following table illustrates the amount of capital expenditure contracted for, but not provided for in the consolidated financial statements.

2013 2012 CU'000 CU'000 307 Group property, plant and equipment 248 21 Group intangible assets 7

36 CONTINGENT LIABILITIES IAS20p39(c) IAS37p86

IFRS12p23(b)

The Group might have to repay government grants of CU 20,000 (2012: CU 20,000) to the Republic of Dryland unless its factory in Dryland remains open until the end of 2014.

The Groups’ share of contingent liabilities relating to other entities incurred jointly with other investors is as follows:

Associates Joint ventures IAS37p86

2013 CU'000 17 14

2012 CU'000 15 12

Other contingent liabilities are not disclosed because the possibility of an outflow of resources embodying economic benefits is considered by the Directors to be remote.

1

This disclosure could be grouped in a single note with Related Parties.

Page 57 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

37 RECONCILIATION OF PROFIT TO NET CASH FLOW GENERATED FROM OPERATIONS

CASH FLOWS GENERATED FROM OPERATIONS Profit for the year Adjustments for: Income Tax expense recognised in profit Share of the profit of associates Gain on sale of investments Gain on revaluation of associate becoming a subsidiary Loss on disposal of subsidiary Finance costs - net Amortisation of other intangible assets Depreciation of property, plant and equipment Loss on disposal of property, plant and equipment Impairment of property, plant and equipment Impairment of financial assets Impairment of intangible assets Foreign exchange losses Defined benefit obligations Share-based payment Increase in inventories Increase in receivables Increase / (Decrease) in payables Increase / (Decrease) in provisions NET CASH FLOWS FROM OPERATIONS IAS7p50(c)

2013 CU'000 1,763

2012 (restated) CU'000 983

645 (140) (63) (490) 23 91 271 1,165 12 120 19 124 21 (95) 24 (655) (1,069) (28) 99 1,837

612 (300) (18) 95 231 1,243 13 14 120 12 80 (454) (520) 40 (66) 2,085

An estimated cash inflow of CU 1,400,000 (2012: CU 1,300,000) is needed to maintain operating capacity and the balance of the Group’s cash flows can be used to expand operating capacity.

38 EVENTS AFTER THE REPORTING PERIOD IAS10p17

IAS10p21 IFRS3p59(b)

These consolidated financial statements were authorised for issue by the Board of Directors on 15 February 2014.

In order to expand its activities in Eastern Europe, on 31 January 2014 the Group provisionally acquired 100% voting shares (all shares have voting power) of WaterPump, a manufacturer of electric water pumps used in dishwashers and washing machines industry. WaterPump’s headquarter and all industrial premises are based in the Republic of Eastland.

WaterPump was bought in cash for an amount of CU 420,000. The authorisation from the Eastland antitrust authority is still pending, however it is expected to be received by the end of the first quarter of 2014. By that date, it is also expected the transaction will be finalised.

At the date of issue of these consolidated financial statements, the purchase price allocation process is not yet completed.

However, it is expected that at the end of the process, the Group will recognise goodwill as a result of cost synergies that the Group will obtain from combining WaterPump activities with those of the Group. The Group foresees that this acquisition will also give the opportunity to expand in new sectors and therefore existing operations of the Group will not be disposed of or reduced in terms of production capacity as a result of the acquisition.

For the year that ended in 2012, WaterPump posted a net profit of CU 13,000 and revenue for CU 512,000. Profit and revenue for the year that ended as at 31 December 2013 are expected to be substantially in line with those of the year 2012.

IAS10p21

In January 2014, a fire destroyed a manufacturing site used by the Group in Oldland. There should be no major loss to the Group as spare capacity on another site enabled the Group to resume normal production within two weeks. The loss of the facility should be covered by insurance and so should the loss of profits caused by the short interruption to business, although it is too early to quantify the exact financial effect.

Page 58 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IAS1p122;125;129

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

39 SIGNIFICANT JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY1 In preparing its consolidated financial statements, the Group has made significant judgements, estimates and assumptions that impact on the carrying value of certain assets and liabilities, income and expenses as well as other information reported in the notes. The Group periodically monitors such estimates and assumptions and makes sure they incorporate all relevant information available at the date when financial statements are prepared. However, this does not prevent actual figures differing from estimates.

The judgements made in the process of applying the Group’s accounting policies that have the most significant effect on the amounts recognised in the financial statements, and the estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

Revenue recognition The Group makes provisions for trade discounts, volume rebates and charge back for product returns allowed by the sale contracts when recognising the revenue derived from goods and services. Such deductions represent estimates, which are subject to judgements and assumptions based on past experience as well as the Group’s knowledge available at the time the estimate is made.

In certain circumstances, the Group enters into multiple element arrangements (“packages”). As described in paragraph 2B above, the package might include one or more items which are subject to different recognition criteria. In this case, separate measurement of the fair value of each component is required. The estimate of the fair value of each component involves estimates and assumptions which affect the way revenue is recognised.

Allowance for doubtful receivables The determination of the recoverability of the amount due from customers involves the identification of whether there is any objective evidence of impairment. Bad debts are written off when identified, to the extent that it is feasible that impairment and uncollectibility are determined individually for each item. In cases where that process is not feasible, a collective evaluation of impairment is performed. As a consequence, the way individual and collective evaluations are carried out and the timing relating to the identification of objective evidence of impairment require significant judgement and may materially affect the carrying amount of receivables at the reporting date (as reflected in Note 19).

Asset impairment tests A financial asset or a group of financial assets, other than those categorised at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Impairment exists only when the Group ascertains that a “loss event” affecting the estimated future cash flows of the financial asset has occurred. It may not be possible to identify a single, discrete event that caused the impairment, and moreover to determine when a loss event has occurred might involve the exercise of significant judgement.

The amount of impairment loss recognised for financial assets carried at amortised cost is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

With regard to equity investments categorised as available-for-sale, the Group considers those assets to be impaired when there has been a significant or prolonged decline in the fair value below cost. The determination of what is “significant” or “prolonged” requires significant judgement.

The impairment analysis of goodwill and tangible and other intangible assets requires an estimation of the value in use of the asset or the cash-generating unit to which the assets are allocated. Estimation of the value in use is primarily based on discounted cash flow models which require the Group to make an estimate of the expected future cash flows from the asset or the cash-generating unit and also to choose an appropriate discount rate in order to calculate the present value of the cash flows.

1

The disclosures required in this area are dictated by the circumstances of each reporting entity and by the significance of judgements and estimates made (these are only examples). Also, instead of disclosing this information in a separate note, it could be included in the relevant asset and liability notes.

Page 59 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

Net realisable value of inventories Inventories are stated at the lower of cost and net realisable value. The cost of inventories is written down to their estimated realisable value when their cost may no longer be recoverable, such as when inventories are damaged or become wholly or partly obsolete or their selling prices have declined. In any case, the realisable value represents the best estimate of the recoverable amount, is based on the most reliable evidence available at the reporting date and inherently involves estimates regarding the future expected realisable value. The benchmarks for determining the amount of write-downs to net realisable value include ageing analysis, technical assessment and subsequent events. In general, such an evaluation process requires significant judgement and may materially affect the carrying amount of inventories at the reporting date (as reflected in Note 18).

IFRS13p93(d),(g)

Fair value measurements Some of the Group’s assets and liabilities are measured at fair value for financial reporting purposes. In estimating the fair value of an asset or a liability, the Group uses market-observable data to the extent it is available. Where Level 1 inputs are not available (eg for unquoted investments), the Group works closely with external qualified valuers who perform the valuation, based on agreed appropriate valuation techniques and inputs to the model (eg use of the market comparable approach that reflects recent transaction prices for similar instruments, discounted cash flow analysis, option pricing models refined to reflect the issuer’s specific circumstances). Prices determined then by the valuers are used by the Group without adjustment. Changes in the fair value of assets and liabilities and their causes are quarterly analysed by the Group’s valuation sub-committee of the Board of Directors. Such valuations require the Group to select among a range of different valuation methodologies and to make estimates about expected future cash flows and discount rates.

Deferred tax estimation Recognition of deferred tax assets and liabilities involves making a series of assumptions. As far as deferred tax assets are concerned, their realisation ultimately depends on taxable profits being available in the future. Deferred tax assets are recognised only when it is probable that taxable profits will be available against which the deferred tax asset can be utilised and it is probable that the entity will earn sufficient taxable profit in future periods to benefit from a reduction in tax payments. This involves the Group making assumptions within its overall tax-planning activities and periodically reassessing them in order to reflect changed circumstances as well as tax regulations. Moreover, the measurement of a deferred tax asset or liability reflects the manner in which the entity expects to recover the asset’s carrying value or settle the liability.

Provisions for liabilities and charges Provisions can be distinguished from other liabilities because there is uncertainty about the timing and / or amount of settlement. The more common provisions recorded by the Group arise from obligations in relation to manufacturer’s warranties, refunds, guarantees, onerous contracts, outstanding litigation and business restructuring.

The recognition and measurement of provisions require the Group to make significant estimates with regard to the probability (if the event is more likely than not to occur) that an outflow of resources will be required to settle the obligation and make assumptions whether a reliable estimate can be made of the amount of the obligation.

Moreover, the Group’s accounting policy requires recognition of the best estimate of the amount that would be required to settle an obligation and the estimate may be based on information that produces a range of amounts. Since the measurement is based on present value, it involves making estimates around the appropriate discount rate in order to reflect the risks specific to the liability.

In particular, as far as restructuring provisions are concerned, considerable judgement is required to determine whether an obligating event has occurred. All the available evidence must be assessed to determine whether a plan is detailed enough to create a valid expectation of management’s commitment to the restructuring by starting to implement the plan or announce its main features to those affected by it.

Contingencies Contingent liabilities of the Group are not recognised but disclosed, unless the possibility of an outflow of resources embodying economic benefits is remote.

Contingent liabilities represent possible obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. They are not recognised because it is not probable that an outflow of resources will be required to settle the obligation and the amount of the obligation cannot be measured with sufficient reliability.

Inevitably, the determination that the possibility that an outflow of resources embodying economic benefits is remote and that the occurrence or non-occurrence of one or more uncertain future events is not wholly within the control of the Group requires significant judgement.

Page 60 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IAS1p10(e);112

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2013

Actuarial assumptions on defined benefit retirement plans Accounting for defined benefit plans may be complex because actuarial assumptions are required to measure the obligation and the expense, with the possibility that actual results differ from the assumed results. These differences are known as actuarial gains and losses. Defined benefit obligations are measured using the Projected Unit Credit Method (PUCM), according to which the Group has to make a reliable estimate of the amount of benefits earned in return for services rendered in current and prior periods, using actuarial techniques. In addition, in cases where defined benefit plans are funded, the Group has to estimate the fair value of plan assets. As a result, the use of the PUCM involves a number of actuarial assumptions. These assumptions include demographic assumptions such as mortality, turnover and retirement age and financial assumptions such as discount rates, salary and benefit levels. Such assumptions are subject to judgements and may develop materially differently than expected and therefore may result in significant impacts on defined benefit obligations.

Share-based payments Share-based payments are measured at grant date fair value. For share options granted to employees, in many cases market prices are not available and therefore the fair value of the options granted shall be estimated by applying an option pricing model. Option pricing models need input data such as expected volatility of the share price, expected dividends or the risk-free interest rate for the life of the option. The overall objective is to approximate the expectations that would be reflected in a current market or negotiated exchange price for the option. Such assumptions are subject to judgements and may turn out to be significantly different than expected.

Fair value determined at the grant date of equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest. The estimate of the number of equity instruments expected to vest is revised by the Group at the end of each reporting period through settlement. Revisions of the original estimates, if any, is recognised in profit or loss so that the cumulative expense includes the revised estimate, with the corresponding adjustment to the reserve for employee equity-settled benefits.

Page 61 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

APPENDICES ALTERNATIVE FINANCIAL STATEMENT LAYOUTS APPENDIX 1

Consolidated Statement of Profit or Loss by nature of expense (two-statement approach)

Page 63

APPENDIX 2 Consolidated Statement of Profit or Loss columnar approach to discontinued operations (twostatement approach)

65

APPENDIX 3

66

Consolidated Statement of Financial Position in order of liquidity

POLICIES AND DISCLOSURES FOR AREAS NOT RELEVANT TO IFRS STATEMENTS LIMITED APPENDIX 4

Financial Instruments under IFRS 9

68

APPENDIX 5

Investment Properties

70

APPENDIX 6

Construction Contracts

72

Page 62 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

APPENDIX 1 CONSOLIDATED STATEMENT OF PROFIT OR LOSS PRESENTED USING THE “BY NATURE OF EXPENSE” METHOD IAS 1 paragraph 99 states that “An entity shall present an analysis of expenses recognised in profit or loss using a classification based on either their nature or their function within the entity, whichever provides information that is reliable and more relevant.”

Under the “nature of expense” approach, the IFRS preparer should aggregate expenses within profit or loss according to their nature (for example, depreciation, purchases of materials, transport costs, employee benefits, advertising costs), and not reallocate them among various functions within the entity.

Based on the “function of expense” approach, cost of sales is shown separately on the face of the statement of profit or loss and other income and expenses are categorised in accordance with their function (for example, costs of distribution or of administrative activities).

In both cases, IAS 1 does not provide a strict definition of how and when to categorise income and expense items. As a result, a certain degree of judgement must be exercised.

It is worth mentioning that the guidelines in IAS 1 paragraph 99 must be combined with the requirements of IAS 1 paragraphs 81B and 82 which require, as a minimum, the following line items to be shown on the face of the statement of profit or loss: a) b) c) d) e) f)

Revenue Finance costs Share of the profit or loss of associates and joint ventures accounted for using the equity method Tax expense A single amount for the total of discontinued operations Profit or loss for the period and its allocation as attributable to: i) non-controlling interests, and ii) owners of the parent.

IFRS preparers that choose to present expenses using the “by function” approach must disclose additional information on the nature of expenses, including depreciation and amortisation expense and employee benefits expense.

IAS 1 paragraph 105 provides some guidelines in order to assist IFRS preparers in choosing between the “function of expense” and the “nature of expense” methods, such as considering historical and industry factors as well as the nature of the entity.

However, since both methods of presentation have merit for different types of entities, ultimately the choice should be driven by the aim to present information in a way that best complies with the principles of relevance and reliability illustrated in the Framework.

Below we provide an example of the statement of profit or loss by nature of expenses. Only the statement of profit or loss is presented, simulating a two-statement approach with regard to comprehensive income.

Page 63 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

IAS1p10(ea) IAS1p113;51(d),(e) IAS1p82(a) IAS1p99 IAS1p99 IAS1p99 IAS1p99 IAS1p99 IAS1p99

IAS1p82(b) IAS1p82(c) IAS1p85 IFRS3p42 IAS1p85 IAS1p82(d)

REVENUE Changes in inventories of finished goods and work in progress Raw materials and consumables used Employee benefit expense Depreciation and amortisation Impairment of property plant and equipment Impairment of goodwill and other intangibles Other expenses Finance costs Share of the profit (loss) of associates Gain (loss) on sale of financial assets Gain (loss) on revaluation of an associate becoming a subsidiary PROFIT BEFORE TAX

Notes 1 X X X X X X X X X X X X X

22,803 599 (8,574) (9,046) (1,436) (120) (124) (2,149) (91) 140 63 490 2,555

2012 (restated) CU'000 15,160 569 (3,229) (7,574) (1,382) (120) (1,876) (95) 300 18 1,771

2013 CU'000

Income tax expense PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS

X

(682) 1,873

(562) 1,209

IAS1p82(ea)

LOSS FOR THE YEAR FROM DISCONTINUED OPERATIONS

X

IAS1p81A(a)

PROFIT FOR THE YEAR

(110) 1,763

(226) 983

X X

1,658 105 1,763 Cents

931 52 983 Cents

4.34 (0.27) 4.07

3.53 (0.69) 2.84

4.25 (0.26) 3.99

3.30 (0.65) 2.65

IAS1p85

IAS1p81B(a)(ii) IAS1p81B(a)(i)

Attributable to: Owners of the parent company Non-controlling interests

EARNINGS PER SHARE

IAS33p68;68A;69

BASIC Continuing operations Discontinued operations

IAS33p66;67;67A

Total

IAS33p66;67;67A

DILUTED Continuing operations Discontinued operations

IAS33p66;67;67A

IAS33p68;68A;69 IAS33p66;67;67A

Total 1

Notes will have to be re-arranged in order to reflect the new statement of profit or loss format.

Page 64 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

X

X

IAS1p51(a) IAS1p49;51(b),(c)

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

APPENDIX 2 CONSOLIDATED STATEMENT OF PROFIT OR LOSS PRESENTED BY FUNCTION OF EXPENSE AND IN A COLUMNAR APPROACH TO DISCONTINUED OPERATIONS IFRS 5 paragraph 33 allows the presentation of discontinued operations in the statement of profit or loss as a single amount or with a more detailed analysis (alternatively, the detailed analysis could be presented in the notes). In any case, discontinued operations shall be presented on the face of the statement of profit or loss in a separate section identified as relating to discontinued operations in order to clearly distinguish them from continuing operations.

Moreover, IFRS 5 paragraph 34 states that comparatives for the prior period(s) shall be re-presented so that the disclosures relate to all operations that have been discontinued by the reporting date for the latest period presented.

IFRS 5 provides an illustrative example of how to present discontinued operations on the face of the statement of profit or loss as a single amount, but does not provide an example on how that single amount should be further analysed on the face of the statement of profit or loss.

Below we provide an example using a columnar format regarding how such an analysis could be provided.

Only the statement of profit or loss is presented, simulating a two-statement approach with regard to comprehensive income.

IAS1p10(ea)

IAS1p113;51(d),(e) IAS1p82(a) IAS1p99;103 IAS1p85 IAS1p99;103 IAS1p99;103 IAS1p99;103 IAS1p82(b) IAS1p82(c) IAS1p85

IFRS3p42 IAS1p85 IAS1p82(d) IAS1p81A(a);82(ea)

IAS1p81B(a)(ii) IAS1p81B(a)(i)

IAS33p66-69

REVENUE Cost of sales GROSS PROFIT Distribution costs Administrative expenses Other operating expenses Finance costs Share of the profit or loss of associates Gain on sale of financial assets Loss on disposal of subsidiary Gain on revaluation of an associate becoming a subsidiary PROFIT (LOSS) BEFORE TAX

Notes 3 4

BASIC DILUTED

FOR THE YEAR ENDED 31 December 2012 (restated) Continuing Discontinued Total CU'000 CU'000 CU'000 15,160 2,108 17,268 (11,720) (2,000) (13,720) 3,440 108 3,548

(18,697) 4,106

(984) 126

(19,681) 4,232

4 4 4 5 13 6 21

(889) (1,222) (42) (91) 140 63 -

(45) (64) (3) (138) (23)

(934) (1,286) (45) (229) 140 63 (23)

(747) (1,015) (130) (95) 300 18 -

(101) (142) (20) (121) -

(848) (1,157) (150) (216) 300 18 -

17

490 2,555

(147)

490 2,408

1,771

(276)

1,495

(682) 1,873

37 (110)

(645) 1,763

(562) 1,209

50 (226)

(512) 983

1,768 105 1,873

(110) (110)

1,658 105 1,763

1,157 52 1,209

(226) (226)

931 52 983

Cents

Cents

Cents

Cents

Cents

Cents

4.34 4.25

(0.27) (0.26)

4.07 3.99

3.53 3.30

(0.69) (0.65)

2.84 2.65

Income tax expense PROFIT (LOSS) FOR THE YEAR Attributable to: Owners of the parent company Non-controlling interests

EARNINGS PER SHARE

FOR THE YEAR ENDED 31 December 2013 Continuing Discontinued Total CU'000 CU'000 CU'000 22,803 1,110 23,913

8

Page 65 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

APPENDIX 3 CONSOLIDATED STATEMENT OF FINANCIAL POSITION WITH ASSETS AND LIABILITIES PRESENTED IN ORDER OF LIQUIDITY IAS 1 paragraph 60 states that an IFRS preparer shall present assets and liabilities on the face of the statement of financial position using the current / non-current distinction approach, unless presentation of assets and liabilities in order of liquidity is reliable and more relevant (eg for financial institutions).

However, the choice between those two approaches is not entirely elective. In fact, the current / non-current distinction is preferable and the liquidity presentation can be chosen only when it provides information that is reliable and is more relevant than a current / non-current presentation. IAS 1 paragraph 60 clarifies that “when that exception applies, an entity shall present all assets and liabilities in order of liquidity”.

The order of liquidity can be either increasing or decreasing.

Most interestingly, IAS 1 paragraph 64 allows entities to use also a “mixed format”. In fact, an IFRS preparer is “permitted to present some of its assets and liabilities using a current / non-current classification and others in order of liquidity when this provides information that is reliable and more relevant. The need for a mixed basis of presentation might arise when an entity has diverse operations”.

In any case, IFRS preparers should bear in mind that the ultimate goal is to choose the format that provides readers with best information about expected dates of realisation of assets and liabilities and therefore helps to adequately assess the liquidity and solvency of the entity. As explained by IAS 1 paragraph 65, such a goal should be achieved in conjunction with the disclosures required by IFRS 7 Financial instruments: Disclosures.

Below we provide an example of a statement of financial position prepared in increasing order of liquidity.

Page 66 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

Notes 10 11 12 13 15 28 18 19 20

CU'000 5,800 1,329 2,414 281 274 243 2,623 2,586 622 16,172

31/12/12 (restated) CU'000 5,520 605 803 249 269 140 1,995 1,517 360 11,458

21

1,016 17,188

11,458

11,439

31 32

2,596 1,035 6,309 9,940 306 10,246

1,870 295 5,151 7,316 35 7,351

1,810 64 4,725 6,599 42 6,641

26 22 29 23 28 24 30 7

475 3,146 243 203 780 1,212 60 523 6,642

292 1,571 57 113 297 1,206 156 415 4,107

150 2,519 2 177 125 1,377 119 329 4,798

21

300 6,942 17,188

4,107 11,458

4,798 11,439

31/12/13 IAS1p113;51(d),(e) IAS1p54(a) IAS1p55 IAS1p54(c) IAS1p54(e) IAS1p54(d) IAS1p54(o) IAS1p54(g) IAS1p54(h) IAS1p54(i)

IAS1p54(j)

ASSETS Property, plant and equipment Goodwill Other intangible assets Investments in associates Available-for-sale financial assets Deferred tax assets Inventories Trade and other receivables Cash and cash equivalents Non-current assets classified as held for sale TOTAL ASSETS

01/01/12 (restated) CU'000 6,066 738 786 79 257 57 1,713 1,437 306 11,439

EQUITY IAS1p54(r) IAS1p54(r) IAS1p54(r)

IAS1p54(q)

EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT Capital Other reserves Retained earnings NON-CONTROLLING INTERESTS TOTAL EQUITY

LIABILITIES IAS1p55 IAS1p55 IAS1p54(l) IAS1p54(m) IAS1p54(o) IAS1p54(k) IAS1p55 IAS1p54(n)

IAS1p54(p)

Retirement benefit obligations Borrowings Provisions Derivative financial instruments Deferred tax liabilities Trade and other payables Other liabilities Current tax payables Liabilities directly associated with non-current assets classified as held for sale TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES

Page 67 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

IAS1p51(a) IAS1p49;51(b),(c)

APPENDIX 4 CLASSIFICATION AND MEASUREMENT OF FINANCIAL INSTRUMENTS UNDER IFRS 9 In November 2009, the International Accounting Standards Board (IASB) issued IFRS 9 Financial Instruments that introduces new classification and measurement requirements for financial assets in replacement of the classification and measurement requirements previously included in IAS 39 Financial Instruments: Recognition and Measurement. In October 2010, the IASB issued a revised version of IFRS 9 in which requirements for classification and measurement of financial liabilities were added.

Many users and preparers of financial statements have been arguing for a long time that the requirements of IAS 39 are difficult to understand, apply and interpret. Some of the complexity surrounding IAS 39 derives from an approach that in many instances can be defined as predominantly rules-based rather than principles-based.

Over the last years, the global financial crisis has accelerated the need for an improved and less complex standard on financial instruments. The publication of IFRS 9 represents the completion of the first stage of a three-phases project to entirely replace IAS 39 with a new standard:  Phase 1: Classification and measurement  Phase 2: Impairment methodology  Phase 3: Hedge accounting The following is a summary of the main changes introduced by IFRS 9 (phase 1). 

Classification and measurement of financial assets: Two-measurement-categories approach IFRS 9 uses a single approach to determine whether a financial asset is measured at amortised cost or fair value, replacing the many different rules in IAS 39. Financial assets are now classified in one of two measurement categories, instead of in four classes per IAS 39.

The classification approach in IFRS 9 is based on: • How an entity manages its financial instruments (its business model), and • The contractual cash flow characteristics of the financial asset.

The category into which the asset is classified determines whether it is measured on an ongoing basis at: • Amortised cost, or • Fair value



Reclassification after initial recognition IAS 39 incorporates some “rules” that allow entities to reclassify financial instruments in cases where some specific criteria are met.

IFRS 9 does not permit, after initial recognition, financial assets to be reclassified between the amortised cost and fair value categories, except in rare circumstances when the entity’s business model changes. Moreover, the “tainting rules” that forced entities to reclassify to fair value all instruments that had been classified as held-to-maturity, in the event that one of those instruments is sold, have been eliminated.



Classification and measurement of financial liabilities Whereas most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9, one major change introduced by IFRS 9 in the classification and measurement of financial liabilities relates to the accounting for changes in fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability.

Specifically, under IFRS 9, for financial liabilities that are designated as at fair value through profit or loss (under the FVO), the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognised in other comprehensive income, unless the recognition of the effects of changes in the liability's credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability's credit risk are not subsequently reclassified to profit or loss. Previously, under IAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was recognised in profit or loss.

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IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

IAS1p51(a) IAS1p49;51(b),(c)



Fair value option IAS 39 allows the use of the so-called “fair value option (FVO)” at initial recognition in three specific circumstances: • When doing so results in more relevant information, because it eliminates or significantly reduces a measurement or recognition inconsistency (referred to as “an accounting mismatch”) • When doing so results in more relevant information, because a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis • When a contract contains one or more embedded derivatives, an entity may designate the entire hybrid (combined) contract as a financial asset or financial liability at fair value through profit or loss if certain criteria are met.

Whereas the above is unchanged for financial liabilities, IFRS 9 allows the fair value option for financial assets only when it would eliminate or significantly reduce an accounting mismatch.



Elimination of the cost exception for unquoted equities IAS 39 explains that normally it is possible to estimate the fair value of a financial asset that an entity has acquired from an outside party. However, if the range of reasonable fair value estimates is significant and the probabilities of the various estimates cannot be reasonably assessed, an entity is precluded from measuring the instrument at fair value. Instead, it can use cost as measurement basis.

IFRS 9 removes the exception, thus requiring all equity investments and derivatives on them to be measured at fair value.

In addition, application guidance on how to measure the fair value of such instruments is now provided by IFRS 13 Fair Value Measurement.



Embedded derivatives IAS 39 contains guidance on identifying embedded derivatives that have to be accounted for separately from the host contract. Embedded derivatives are accounted for separately when: • The economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics and risks of the host contract; • A separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and • The hybrid (combined) instrument is not measured at fair value with changes in fair value recognised in profit or loss.

Under IFRS 9, the complex and rule-based requirements in IAS 39 for embedded derivatives have been eliminated by no longer requiring that embedded derivatives be separated from financial asset host contracts. As a result, hybrid instruments are accounted for in their entirety either at fair value through profit or loss or at amortised cost, according to the classification criteria.

However, the above IAS 39 requirements remain unchanged under IFRS 9 for a hybrid contract containing a host that is not an asset within the scope of IFRS 9 (ie for contracts with a financial liability or a non-financial host).



Fair value through other comprehensive income (OCI) (the presentation exception) Under IAS 39, some instruments are classified at initial recognition as available-for-sale financial assets. Gains or losses on an available-for-sale financial asset must be recognised in OCI until the financial asset is derecognised (except for impairment losses, foreign exchange gains and losses, interest calculated using the effective interest method and dividends).

IFRS 9 has eliminated the category of available-for-sale financial assets. However, if an entity buys equity investments for strategic purposes, rather than for the primary purpose of generating returns from dividends and changes in the value of the investment, IFRS 9 allows presenting the changes in the fair value of the investment in OCI. Entities are not permitted to recycle any amounts from OCI to profit or loss.

Accordingly, IFRS 9 requires dividends received to be recognised in profit or loss, to the extent that they are a return on, rather than a return of, the investment.



Effective date and transition requirements 1

The effective date for mandatory adoption of IFRS 9 is 1 January 2015 , with early adoption permitted. IFRS 9 provides some transition relief from the requirement to restate comparatives with specific transition disclosure requirements in IFRS 7.

1

Amendments to IFRS 9 published by the IASB on 16 December 2011 deferred the effective date of the standard from 1 January 2013 to 1 January 2015.

Page 69 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

APPENDIX 5 INVESTMENT PROPERTIES Overview of investment properties under IAS 40 Investment properties are a distinct class of assets held to earn rentals and / or for capital appreciation to be shown separately on the face of the statement of financial position with full movements shown in the notes. Investment properties are initially recognised at cost. For subsequent measurement, IAS 40 offers a choice between the fair value model and the cost model. The accounting policies need to clearly state which model is used.

Under the cost model, investment properties are measured in accordance with IAS 16. That is, investment properties shall be carried at cost less any accumulated depreciation and any accumulated impairment losses. Depreciation and impairment are charged to the statement of profit or loss.

The attractions of accounting for investment properties using the fair value model under IAS 40 include the strength of having the statement of financial position directly showing up-to-date values. Any fresh revaluation gains are treated as income for the year. Under the IAS 40 fair value model, investment properties are not subjected to an annual depreciation charge. The IAS 40 fair value model is different to the IAS 16 revaluation model. In fact, under IAS 16, changes in fair value of the asset are recognised in equity while depreciation and impairment are charged to the statement of profit or loss.

Disclosure of accounting policy Investment properties are held to earn rental income and / or for capital appreciation.

Investment properties are measured initially at cost, including transaction costs. The cost comprises the purchase price and any directly attributable expenditure (eg professional fees for legal services, property transfer taxes).

IAS40p75(a),(e)

IAS40p75(b)

Subsequently, investment properties are carried at fair value at the reporting date and, unlike operational properties, they are not depreciated. Fair value is based on active market prices adjusted as necessary to reflect the specific assets’ location and condition. In cases where active market prices are not available, the Group engages independent valuers who hold a recognised and relevant professional qualification. Changes in fair value are recognised in the statement of profit or loss.

Leased assets are not classified and accounted for as investment properties.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognised.

Presentation on the face of the statement of financial position and statement of profit or loss According to IAS 1 paragraph 54(b), investment properties have to be separately presented on the face of the statement of financial position. No separate presentation on the face of the statement of profit or loss is required for gains / losses generated by investment properties, unless such presentation is relevant to an understanding of the entity’s financial performance (IAS 1 paragraph 85).

Presentation in the notes The table below illustrates the movements that occurred during the year.

IAS40p76

INVESTMENT PROPERTIES BALANCE AT 1 JANUARY Business combination addition Additional properties acquired in the year Enhancement expenditure capitalised Exchange adjustments Increase / (decrease) in fair value Transfer to non-current assets held for sale BALANCE AT 31 DECEMBER

Page 70 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

2013 CU'000 723 102 246 53 20 87 (120) 1,111

2012 (restated) CU'000 510 191 25 3 (6) 723

IAS1p51(a) IAS1p49;51(b),(c)

IAS40p75(e) IFRS13p91(a) IFRS13p93(d),(i)

IFRS13p93(a),(b)

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

The fair value of the Group’s investment property at the reporting date is measured by external professionally qualified Chartered Surveyors ABC & Co. based on a comparison with market evidence of recent transaction prices for similar properties.

In estimating the fair value of the properties, their highest and best use is their current use. There has been no change to the valuation technique during the year.

The Group’s investment properties and fair value hierarchy as at 31 December 2013 are as follows:

Residential property units in Propland

IFRS13p93(c)

IAS40p75(f)

IAS40p75(g)

Level 1

Level 2

Level 3

Total Fair Value

CU'000

CU'000

CU'000

CU'000

-

1,525

-

1,525

There were no transfers between Levels 1 and 2 during the year.

INCOME AND EXPENDITURE RELATING TO INVESTMENT PROPERTIES Rental income Direct operating expenses of properties that generated income Direct operating expenses of properties that generated no income BALANCE AT 31 DECEMBER

2013 CU'000 79 (12) (3) 64

2012 (restated) CU'000 67 (10) (2) 55

There are no restrictions on the realisability of investment property or the remittance of income and proceeds of disposal.

Page 71 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

IAS1p51(a) IAS1p49;51(b),(c)

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

APPENDIX 6 CONSTRUCTION CONTRACTS Overview of construction contracts under IAS 11 IAS 11 paragraph 3 defines a construction contract as “a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use”.

As explained in the Objective of IAS 11, “because of the nature of the activity undertaken in construction contracts, the date at which the contract activity is entered into and the date when the activity is completed usually fall into different accounting periods. Therefore, the primary issue in accounting for construction contracts is the allocation of contract revenue and contract costs to the accounting periods in which construction work is performed”.

Entities need to be able to identify and disclose revenue from all construction contracts under IAS 11. The revenue (ie turnover) disclosure relates to both short-term and long-term construction contracts.

At a glance, the following major disclosures are required by IAS 11:  Numerical disclosures relating to construction contracts that were in progress at the reporting date. Total advances (ie money received before work is performed) are separately disclosed and these liabilities are not netted off any other asset balances on the same contract. At each year-end, entities are required to look at each construction contract in progress and work out whether it gives rise to an asset or a liability due from or to the customer.  All contracts that represent a net asset are aggregated and shown as assets (gross amount due from customers for contract work). On the other hand, all the contracts that represent net liabilities are similarly aggregated and shown as liabilities (gross amount due to customers for contract work).  Disclosure of retentions for construction contracts in progress. These are defined as progress billings for work performed on construction contracts in progress at the reporting date that are not paid until the satisfaction of conditions specified in the contract or until defects are remedied.  For construction contracts in progress at the reporting date, the following disclosure: costs incurred + recognised profits recognised losses to date. These costs include goods delivered to site but not used by the period-end.

IAS11p39(b),(c)

Disclosure of accounting policy Revenue from construction contracts is recognised as the sales value of work performed in the period. The Group uses the “percentage-of-completion method” to determine the appropriate amount to recognise in a given period. The stage of completion is measured by reference to the contract costs incurred up to the end of the reporting period as a percentage of total estimated costs for each contract.

Contract costs are expensed in the period as incurred.

When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Contract variations, claims and incentive payments are only recognised as revenue when the customer has agreed their value.

Presentation on the face of the statement of financial position and statement of profit or loss Construction contracts are not required to be separately presented on the face of the statement of financial position, unless such presentation is relevant to an understanding of the entity’s financial position (IAS 1 paragraph 55).

No separate presentation on the face of the statement of profit or loss is required for gains / losses generated by construction contracts, unless such presentation is relevant to an understanding of the entity’s financial performance (IAS 1 paragraph 85).

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IAS1p51(a) IAS1p49;51(b),(c)

IFRS STATEMENTS LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013

Presentation in the notes Disclosures to the statement of profit or loss includes the following:

IAS11p39(a) IAS11p40(a)

Revenue from construction contracts recognised in the year Contract expenses and expected losses recognised PROFIT (LOSS) FROM CONTRACTS

2013 CU'000 1,300 (1,285) 15

2012 (restated) CU'000 1,240 (1,300) (60)

2013 CU'000 220 50

2012 (restated) CU'000 135 30

2013 CU'000 (70) (125)

2012 (restated) CU'000 (15) -

Disclosures to Trade and other receivables include the following additional lines:

IAS11p42(a) IAS11p40(c)

Gross amount due from customers for contract work Retentions Disclosures to Trade and other payables include the following additional lines:

IAS11p42(b) IAS11p40(b)

Gross amount due to customers for contract work Advances received

Page 73 ILLUSTRATIVE IFRS CONSOLIDATED FINANCIAL STATEMENTS

RSM International Executive Office 11 Old Jewry London EC2R 8DU T: +44 (0)20 7601 1080 F: +44 (0)20 7601 1090 E: rsmcommunications@rsmi.com www.rsmi.com RSM is the brand used by a network of independent accounting and advisory firms each of which practices in its own right. The network is not itself a separate legal entity of any description in any jurisdiction.

The network is administered by RSM International Limited, a company registered in England and Wales (company number 4040598) whose registered office is at 11 Old Jewry, London EC2R 8DU. The brand and trademark RSM and other intellectual property rights used by members of the network are owned by RSM International Association, an association governed by article 60 et seq of the Civil Code of Switzerland whose seat is in Zug. Š RSM International Association, 2013