Consolidated Financial Statements - Minoan Lines

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MINOAN LINES SHIPPING S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENS (Amounts expressed in thousands of drachmae unless otherwise stated) 12. Long-term Provisions Long-term provisions are analysed as follows: 1999 Unaudited 2000 Provision for retirement indemnities 172,775 189,011 Provision for taxes 119,348 119,348 Provision for legal contingency 1,075,750 1,075,750 Other 75,000 75,000 Provision for retirement indemnities 1,442,873 1,459,109 The Company maintains a provision for retirement indemnities for all its employees in conformity with Greek labour laws. The provision as at December 31, 1998 was based upon the advice of independent actuaries, which include the following main assumptions: Rate of Return of Investments 7.12% Rate of Salary Increases 3% Mortality Table Greek Model 1980 Age of Retirement In accordance with labour laws The anticipated annual cost to build up this provision is approximately 1.2% of administration payroll cost and 0.2% of labour payroll cost. Income taxes Greece does not impose any tax on income derived from shipping operations. Income tax is imposed on income from non-shipping (mainly bank interest earned). In accordance with fiscal rules, the Company’s books, records and tax returns are subject to tax audits. The unaudited financial years are 1997, 1998 and 1999. In common practice in Greece, additional taxes are assessed following tax audits and additional tax assessments may vary from the amounts accrued, however management of the Company believes that any additional tax liability over and above the amount accrued would not have a material adverse impact on the results of operations or financial position. Legal contingency The Directorate General IV for Competition of the European Commission has determined that the Company, together with eight other ferry operations have infringed Article 85 of the European Community Treaty. The fine imposed on the Company is EURO 3.26 million. ? he Company has recorded in the 1997 accounts the full provision of GRD 1,075,750 for the penalty. The Company is contesting this decision and believes that the outcome of this decision will not have a material adverse effect on the Company’s results of operations or financial position since the penalty has been fully provided for. 19
MINOAN LINES SHIPPING S.A. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENS (Amounts expressed in thousands of drachmae unless otherwise stated) 13. Deferred Income Deferred income represents government grants received from the Greek and Norwegian Governments for the construction of vessels and is analysed as follows: Unaudited 1999 2000 Cost: Opening balance 5,585,547 5,585,547 Additions - - Closing balance 5,585,547 5,585,547 Accumulated amortization: Opening balance 1,018,982 1,214,029 Released to profit 195,047 97,522 Closing balance 1,214,029 1,311,551 Net unamortised balance 4,371,518 4,273,996 14. Share Capital and Earnings per Share The Company's share capital at December 31, 1999 and June 30, 2000 consisted of: 1999 Unaudited 2000 Number of shares outstanding 53,194,500 70,926,000 Nominal value per share 750 750 Total share capital (in GRD thousands) 39,895,875 53,194,500 During 1998, the Company was successful in selling 4,728,500 shares on the Athens Stock Exchange and 236,100 shares by a private placement to Company’s employees and to investment institutions. Both the public and the private placement were sold at a premium of GRD 2,350 per share or GRD 11,666,810. In May, 1999 the Company's share capital increased by GRD 8,865,750 through the issuance of 11,821,000 bonus shares of a nominal value of GRD 750 each by capitalizing GRD 8,865,750 of the share premium account. In July 1999 the Company's share capital increased by GRD 13,298,625 through the issuance of 17,731,500 shares. Shares of 10,638,900 and 224,619 were sold to investment institutions at a premium of GRD 4,350 per share or GRD 47,256,308. Shares of 6,867,981 were sold to the old shareholders (three new shares for every ten old shares) at a premium of GRD 2,450 per share or GRD 16,826,553. Following the annual general meeting of shareholders on May 28, 2000, the Company's share capital increased (in June 2000) by GRD 13,298,625 through the issuance of 17,731,500 bonus shares (one bonus share for every three existing shares) of a nominal value of GRD 750 each by capitalising GRD 13,298,625 of the share premium account. 20
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Consolidated Financial Statements - Minoan Lines

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