26/04/2012 | PrimeTel PLC Report and Financial Statements for the ...

PRIMETEL PLCREPORT AND FINANCIAL STATEMENTSFor the year ended 31 December 2011

PRIMETEL PLCREPORT AND FINANCIAL STATEMENTSFor the year ended 31 December 2011C O N T E N T SBoard of Directors, professional advisers and registered office 1Chairman‟s statement 2Declaration of Directors and the Company‟s officials responsiblefor the financial statements 3Board of Directors‟ report 4 - 7PageIndependent Auditors‟ Report 8 & 9Consolidated statement of comprehensive income 10Consolidated statement of financial position 11Consolidated statement of changes in equity 12Consolidated statement of cash flows 13Parent Company statement of comprehensive income 14Parent Company statement of financial position 15Parent Company statement of changes in equity 16Parent Company statement of cash flows 17Notes to the financial statements 18 - 55

PRIMETEL PLCBOARD OF DIRECTORS, PROFESSIONAL ADIVSERS ANDREGISTERED OFFICE1Board of DirectorsPericles Manglis (Chairman)Hermes Stephanou (Managing Director)Philippos VatiliotisNicos EllinasIoannis TirkidesAndreas ChristodoulidesAndreas EleftheriadesAlexis PhotiadesSecretaryA.A.A. Regent Consultants LimitedIndependent AuditorsKPMG LimitedLegal advisersChrysses Demetriades & CoAndreas KarydesBankersBank of Cyprus Public Company LimitedMarfin Popular Bank Public Company LimitedHellenic Bank Public Company LimitedAlpha Bank Cyprus LimitedCo-operative Central Bank LimitedPiraeus Bank (Cyprus) LimitedRegistered office141 Omonias Avenue,The Maritime Center,3045 LimassolRegistration number 139104

PRIMETEL PLCCHAIRMAN’S STATEMENT2Dear Shareholders,2011 can no doubt be characterized as a challenging year due to the persisting, both in duration and magnitude,financial crisis which affected all the countries in the world and mainly the business enterprises. During the year, anumber of unexpected incidents occurred, such as the explosion in Mari which resulted to the total destruction of themain electricity power station in the country. Consequently, this has created a huge insufficiency in electrical powerand a significant increase in the cost of electricity. The financial crisis in banking sector and the weakness to funddevelopment projects, has accelerated the impact of the financial crisis on the Cyprus market.Despite the above unfavorable factors, the turnover of the Company was maintained at about the same levels as lastyear 2010. More specifically, in 2011 the turnover has reached €32.8 million compared to €32.7 millions in 2010.In order to deal with the consequences of the financial crisis, the Company has taken all the possible measures fordrastic reduction of its operational cost, for the preservation and further development of its turnover and for itssmooth operation.Apart from the above consequences, the financial crisis has led to the imposition of heavy financial burdens, in theform of new taxes, for businesses while the down grading of Cyprus economy by rating agencies led to a significantincrease in the borrowing interest rates.As a result of the above, financing expenses have shown a dramatic rise to the turn of 18% and at the same timeunfavorable borrowing terms have been introduced for loans and funding for any development projects.Cost of sales decreased significantly by 6% whereas selling and administration expenses have increased by 12% as aresult of the increasing the staff costs, depreciation and electricity cost, reaching €16.2 million compared to €14.4million during the period of 2010.In the frame work of continued development, expansion and upgrades of its services, the Company continued theexpansion and upgrading of its infrastructure, for example the great project of fiber to the home(FITH), which isexpected to be completed by the end of 2013.The Supreme Court has ruled in favor of the Company in its legal action against the Municipality of Yeroskipou fortheir decision to deny the issue of a building permit to the company for the construction of a landing station of seacables. This incident has opened the way for the claim of significant damages.Since May 2011, the Company has been involved in the provision of mobile telecommunications services, with thedeployment and operation of a Mobile Virtual Network (MVNO) under the brand PrimeTel Mobile.Another important decision of the Company was to secure the exclusive rights to transmit the home games of thefootball team Omonia Nicosia for the football period 2013-2016, an investment which will enrich the athleticcontents of PrimeTV.Our basic objectives for this year are the increase of the turnover and the decrease of operational expenses, theachievement of accelerated deployment and the increase in market share and further improvement in the quality ofthe service we provide to our customers.Concluding I would like to express my warmed appreciation and many thanks to the members of the Board ofDirectors for their immaculate cooperation, the Company‟s management for their exceptional and effective work aswell as the staff of the company which I consider to be the most precious asset, without which nothing could beachieved. I look forward to their continued and trust to the Company a pledge to the success.Pericles ManglisPresident

PRIMETEL PLCDECLARATION OF DIRECTORS AND THE COMPANY OFFICIALS RESPONSIBLE FORTHE FINANCIAL STATEMENTSIn accordance with article 9 section 3(c) and (7) of the Transparency Requirements (Trade Securitiesin Regulated Markets) Law 2007 („Law‟) we, the members of the Board of Directors and otherpeople responsible for the financial statements of the Company and the consolidated financialstatements of the Group of Primetel Plc, for the year ended 31 December 2011, to the best of ourknowledge and believe, declare that:a) The annual financial statements which are presented on pages 10 to 55,i. have been prepared in accordance with the applicable International Financial ReportingStandards as adopted by the European Union and in accordance with the provisions ofArticle 9, section (4) of the Law, and3ii.provide a true and fair view of the particulars of assets and liabilities, the financialposition and the profit or loss of Primetel Plc and the entities included in the consolidatedand separate financial statements as a whole andb) The Board of Directors‟ report provides a fair view of the developments and the performance aswell as the position of Primetel Plc and the entities included in the consolidated and separatefinancial statements, as a whole, together with a description of the main risks and uncertaintieswhich they face.The Members of the Board of Directors……………………………Pericles ManglisChairman………….………………Hermes StephanouManaging Director……………………………Philippos Vatiliotis………………………….Nicos Ellinas…………………………….Ioannis Tirkides…………………………..Andreas Christodoulides……………………………Alexis Photiades………………………….Andreas EleftheriadesPerson responsible for the preparation of the annual financial statements…………………………………….Loucas HadjiloucasFinancial ManagerLimassol, 25 April 2012

PRIMETEL PLCREPORT OF THE BOARD OF DIRECTORS4The Board of Directors of Primetel Plc (the ΄Company΄) presents to the members their Annual Reporttogether with the audited financial statements of the Group and the Company for the year ended 31December 2011.PRINCIPAL ACTIVITIESThe principal activities of the Company continued to be the provision of services of Voice, Data andVideo through autonomous fiber-optic network. The telephony, the broadband network and the digitaltelevision are some of the services offered by the Company to individuals, enterprises and othertelecommunications carriers, as well as to companies that provide network services in Cyprus.The main activities of the subsidiary company M&S Medproperties Limited is the investment incomefrom leasehold land, while the subsidiary company Silverlink Investments Limited remained dormant.EXAMINATION OF THE DEVELOPMENT, POSITION AND PERFORMANCE OF THEACTIVITIES OF THE COMPANYThe financial position of the Group as presented in the financial statements is considered satisfactoryunder the current economic conditions. The Board of Directors expects further expansion of the Groupoperations in the foreseeable future, which are expected to contribute to the improvement of Group‟sresults.TURNOVERThe turnover of the Group for the year ended 31 December 2011 amounted to €32.756.029 compared to€32.738.008 for the year 2010.FINANCIAL RESULTSThe results of the Group and the Company for the year ended 31 December 2011 are set out on page 10and 14, respectively.The Board of Directors proposes that the loss for the year of the Group and of the Company that isattributable to the members of the parent company to be transferred to the revenue reserve.Deviation from the indicative resultsThe loss of the Group after taxation as shown above is reduced by €6.000 compared to the indicativeresults announced by the Group. The difference is due to the following reasons:Reversal of provision for impairment of investments 6.000Total difference 6.000€DIVIDENDSThe Board of Directors does not recommend the payment of a dividend and the net loss for the year istransferred to the reserves.BOARD OF DIRECTORSThe members of the Board of Directors as at 31 December 2011 and at the date of this report are shownon page 1. All of them were members of the Board of Directors throughout the year ended 31 December2011.In accordance with the Memorandum of the Company all current members of the Board of Directorsretire but they are eligible for re-election.There were no significant changes in the composition, assignment of responsibilities and remuneration ofthe Board of Directors.

PRIMETEL PLC5MAIN RISKS AND UNCERTAINTIESREPORT OF THE BOARD OF DIRECTORSFor the year ended 31 December 2011The most significant risks faced by the Group and the steps taken to manage these risks, are described innote 27 of the financial statements.FUTURE DEVELOPMENTSThe Board of Directors anticipates significant increase of the activities of the Company in the foreseeablefuture from the provision of new services.The Group continues to increase its clientele especially in the individual sector of the market.SHARE CAPITALOn 28 March 2011 following the exercise of Rights in accordance with the Prospectus, 191.219.828ordinary shares of €0.05 cent each were issued and allotted at their nominal value.REASERCH AND DEVELOPMENTThe Company invests in the design and administration of network systems and billing services ofsoftware, central systems and basis of data and especially for the development of the Triple Playplatform. As well as with the design of proper systems to enable the smooth operation of the Company.CORPORATE GOVERNANCEPrimetel Plc is committed to the community and so the need for offering in environmental andcommunity matters are of high importance.Knowing well that the practices of a Company are affected by and at the same time affect the community,Primetel Plc continues its activities in matters related to sports events, environmental issues and in thesensitive community.PARTICIPATION OF DIRECTORS IN THE COMPANY’S SHARE CAPITALThe percentage of share capital of the Company held directly or indirectly by each member of the Boardof Directors (in accordance with the Article (4) (b) of the Directive DI190-2007-04), as at 31 December2011 and on 20 April 2012 (5 days before the date of approval of the financial statements by the Board ofDirectors were as follows:31 December 2011 20 April 2012% %Pericles Manglis 39,71 39,71Hermes Stephanou 13,17 13,17Philippos Vatiliotis 1,19 1,19Nicos Ellinas 0,05 0,05Andreas Christodoulides 0,02 0,02Ioannis Tirkides 0,00 0,00Alexis Photiades 0,31 0,31Andreas Eleftheriades 0,14 0,14The percentage of Mr. Pericles Manglis and Mr. Hermes Stephanou include their direct and indirectparticipation in the Company.

PRIMETEL PLC6REPORT OF THE BOARD OF DIRECTORSSIGNIFICANT CONTRACTS AND TRANSACTIONS WITH RELATED PARTIES ANDMANAGEMENTThe main terms of the agreements that exist with the related parties in which directly or indirectly theirshareholders or directors are also directors of the Company are:Agreement with the company Logica Developments Limited for the lease of its offices situated inOmonias Avenue 141. The Maritime Center, 3045 Limassol. The rent is €30.812 per month.Agreement with the Francoudi & Stephanou Group of Companies to provide services of electroniccommunications to the Francoudi & Stephanou Group.Agreement with the Francoudi & Stephanou Limited for the provision of management services to theCompany. The monthly charge is €7.500.The agreement with the company Lametus Holdings Ltd for consultancy services. The monthly fee is€14.450.Agreement with the company Vatiliotis and Vatiliotou Consultancy Services Ltd for the provision ofconsultancy services and technical services for the installation of network. The monthly fee is €5.810.Agreement with Teledev East Limited for the lease of a building in Nicosia. The rent is €9.739monthly.BRANHESThe Company keeps eight branches, two in Nicosia, three in Limassol, one in Larnaca and one in Paphos.STATEMENT ON CORPORATE GOVERNANCEAccording to Paragraphs (a) to (ia) of Articles of Directive D1190-2007-04 (contents of the AnnualFinancial Report) issued in accordance with the Transparency Requirements Law (Traded Securities toRegulated Market, N.19 (I)/2007) as adopted by the SEC the Board states the following:Par. (a) (b) (c)Although the Company is not obliged to follow the Corporate Governance Code (the ΄΄Code΄΄) since itsshares are traded in the Alternative market in accordance with the rules of the Cyprus Stock Exchange itseeks to apply the rules and regulations of the Code to the extent permitted by the current circumstances.To this extent the Board of Directors has appointed the three committees that are stipulated by the Code ithas issued the terms of reference of each one and which are met as provided. The composition of thecommittees which does not in fact follow the rules of the Code, is as follows:Remuneration CommitteeThe Remuneration Committee consists of Messrs. Pericles Manglis (President) and Hermes Stephanou(Member) and Ioannis Tirkides (Member).Audit CommitteeThe Audit Committee consists of Messrs. Ioannis Tirkides (President) and Periklis Manglis (Member).Appointment CommitteeThe Appointment Committee consists of Messrs. Hermes Stephanou (President), Philippos Vatiliotis(Member) and Nicos Ellinas (Member).Par. (d)The Financial Manager of the Company in consultation with the Board of Directors shall ensure througheffective internal control procedures and risk management for the drafting and the preparation of periodicinformation required from listed companies.

PRIMETEL PLC7REPORT OF THE BOARD OF DIRECTORSSTATEMENT ON CORPORATE GOVERNANCE (continued)Appointment Committee (continued)Par. (e)List of persons who hold significant share in the capital:The persons that at the following dates held directly (in accordance with Article 5 (e) of the Directors D1190-2007to 2004) significant share (more than 5%) in the share capital of the Company on December 31.2011 and 20 April2012 (five days before the date of approval of the financial statements by the Board of Directors) were thefollowing:31/12/2011 20/4/2012% %Thunderworx Limited 15,30 15,30Manglis (Holdings) LimitedCelltech Limited31,9326,5531,9326,55HNS Limited 6,75 6,75Par. (f) (g)The Company has not issued any preference shares and there are no restrictions in the voting rights of the ordinaryshares.Par. (h)The appointment and replacement of the Board members take place at the Annual General Meeting in accordancewith the provisions of the Company‟s Articles of Association.The Company‟s Article of Association is amended following the approval of a special resolution at an ExtraordinaryGeneral Meeting.Par. (i)The Board of Directors upon the approval of the Company‟s shareholders may proceed to an issue or repurchase ofCompany shares.The issue of any new shares is subject to further provisions of the Company‟s Articles of Association, the applicablelegislation and the principle of equal treatment of the existing shareholders.Par. (j)The Company was incorporated under the Companies Law.Par. (ia)The Board of Directors consists of 8 members and meets at regular intervals. The responsibilities of the Boardinclude the approval of the strategy and the supervision of the implementation of the Company‟s strategic growth ofthe Company. The Board monitors and examines the implementation of the investment policy by the InvestmentManager and its results.The remuneration of the Board members and its analysis is presented in Note 9 of the financial statements.POST BALANCE SHEET EVENTSSignificant events that have been occurred after the year end are described on the note 30 of the financial statements.INDEPENDENT AUDITORSThe independent auditors of the Group, KPMG Limited have expressed their willingness to continue in office and aresolution authorising the Board of Directors to fix their remuneration will be submitted to the forthcoming AnnualGeneral Meeting.By order of the Board,A.A.A. Regent Consultants LimitedSecretaryLimassol, 25 April 2012

8INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OFPRIMETEL PLCReport on the Consolidated and Company’s Separate Financial StatementsWe have audited the accompanied consolidated financial statements of Primetel Plc (the "Company")and its subsidiaries (the “Group”) and the Company‟s separate financial statements on pages 10 to 55,which comprise the statement of financial position of the Group and Company as at 31 December 2011,and the consolidated and separate statements of comprehensive income, the statement of changes inequity and cash flows for the year then ended, and summary of significant accounting policies and otherexplanatory notes..Board of Directors' Responsibility for the Financial StatementsThe Board of Directors is responsible for the preparation of financial statements that give a true and fairview in accordance with International Financial Reporting Standards as adopted by the European Unionand the requirements of the Cyprus Companies Law, Cap 113, and for such internal control as the Boardof Directors determines is necessary to enable the preparation of financial statements that are free frommaterial misstatement, whether due to fraud or error.Auditors' ResponsibilityOur responsibility is to express an opinion on these consolidated and separate financial statements basedon our audit. We conducted our audit in accordance with International Standards on Auditing. ThoseStandards require that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance whether the financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe consolidated and separate financial statements. The procedures selected depend on the auditor‟sjudgment, including the assessment of the risks of material misstatement of the consolidated and separatefinancial statements, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the entity‟s preparation of the consolidated and separate financialstatements that give a true and fair view in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity'sinternal control. An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by the Board of Directors as well as evaluating the overallpresentation of the consolidated and separate financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.

INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OFPRIMETEL PLC9OpinionIn our opinion, the consolidated and the Company‟s separate financial statements of Primetel Plc give atrue and fair view of the financial position of the Group and the Company as at 31 December 2011, and ofits financial performance and its cash flows for the year then ended in accordance with InternationalFinancial Reporting Standards as adopted by the EU and the requirements of the Cyprus Companies Law,Cap. 113.Report on other legal and regulatory requirementsPursuant to the requirements of the Auditors and Statutory Audits of Annual and Consolidated AccountsLaw of 2009, we report the following:We have obtained all the information and explanations we considered necessary for the purposes ofour audit.In our opinion, proper books of account have been kept by the CompanyThe Cyprus Branch financial statements are in agreement with the books of account.In our opinion and to the best of the information available to us, and according to the explanationsgiven to us, the financial statements give the information required by the Cyprus Companies Law,Cap. 113, in the manner so required.In our opinion, the information gives in the report of the Board of Directors on pages 4 to 7 consistwith the consolidated and separate financial statements.Pursuant to the requirements of the Directive D1190-2007-04 of the Cyprus Securities and ExchangeCommission, we report that a corporate governance statement has been made for the information relatingto paragraphs (a), (b), (c), (f) and (g) of article 5 of the said Directive, and it forms a special part of theReport of the Board of Directors.Other MatterThis report, including the opinion, has been prepared for and only for the Group‟s members as a body inaccordance with Section 34 of the Auditors Audits of Annual and Consolidated Accounts Law of 2009and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any otherpurpose or to any other person to whose knowledge this report may come to.Panicos G. LoizouCertified Public Accountant and Registered Auditorfor and on behalf ofKPMG LimitedCertified Public Accountants and Registered Auditors16th June 1943 Street, No. 11,3022 Limassol,Cyprus.Limassol 25 April 2012

PRIMETEL PLC10CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 31 December 20112011 2010Note € €Turnover 5 32.756.029 32.738.008Cost of sales (19.593.834) (20.764.626)Gross profit 13.162.195 11.973.382Other income from operations 6 355.158 440.671Selling and distribution expenses (2.066.508) (1.720.277)Administration expenses (14.134.704) (12.715.521)Operating loss (2.683.859) (2.021.745)Other operating expenses 7 (15.631) (3.510)Operating loss before financingincome/(expenses) 8 (2.699.490) (2.025.255)Finance income 10 871 2.118Finance expenses 10 (3.657.723) (3.106.769)Net finance expenses (3.656.852) (3.104.651)Loss before taxation (6.356.342) (5.129.906)Taxation 11 (82) (100.924)Loss for the year (6.356.424) (5.230.830)Other comprehensive lossOther comprehensive expenses for the yearafter taxation - -Total comprehensive loss for the year (6.356.424) (5.230.830)Basic and fully diluted (loss)/earnings per share (cent) 12 (1.89) (2,74)The notes on pages 18 to 55 form an integral part of these consolidated financial statements.

11AssetsPRIMETEL PLCCONSOLIDATED STATEMENT OF FINANCIAL POSITIONAt 31 December 20112011 2010Note € €Property, plant and equipment 13 34.445.009 32.295.368Intangible assets 14 28.478.733 25.866.908Other investments 16 12.500 28.131Total of non current assets 62.936.242 58.190.549Inventories 17 1.182.437 1.274.350Trade and other receivables 18 9.333.212 10.298.485Cash at bank and in hand 19 466.181 332.764Total current assets 10.981.830 11.905.599Total assets 73.918.072 70.096.006EquityShare capital 20 19.121.983 9.560.991Accumulated lossesFrom ordinary operations (25.569.487) (19.176.562)From acquisition of enterprises (losses) (14.245.087) (14.245.087)From share capital reduction 22.946.380 22.946.380Other reserves 4.712.001 4.747.001Total equity attributable to shareholders of theCompany 6.965.790 3.832.723Minority interest 4.000 4.000Total equity 6.969.790 3.836.723LiabilitiesLong-term loans 21 40.859.617 27.734.741Bonds 22 4.984.514 4.978.320Deferred tax liability 23 778.360 778.360Total non-current liabilities 46.622.491 33.491.421Bank overdrafts and current portionof long-term loans 21 5.345.687 10.064.155Trade and other payables 24 14.972.168 22.690.867Tax payable 25 7.936 12.840Total current liabilities 20.325.791 32.767.862Total liabilities 66.948.282 66.259.283Total equity and liabilities 73.918.072 70.096.006The consolidated financial statements were approved by the Board of Directors on 25 April 2012.Pericles ManglisHermes Stephanou.................................... ....................................DirectorDirectorThe notes on pages 18 to 55 form an integral part of these consolidated financial statements.

PRIMETEL PLC12CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2011Reserve Reserve fromSharefrom issue conversion ofof shares at share capital Accumulated Minoritycapital a premium into Euro loss interest TotalNote € € € € € €Balance 1 January 2010 32.507.371 4.624.430 122.571 (28.190.819) 4.000 9.067.553Loss for the year - - (5.20.830) - (5.230.830)Issue of share capital 202.787 - - - - 202.787Reduction of nominal valueof shares 20 (22.946.380) - - 22.976.380 - -Balance 31 December 2010 9.560.991 4.624.430 122.571 (10.475.269) 4.000 3.836.723Balance at 1 January 2011 9.560.991 4.624.430 122.571 (10.475.269) 4.000 3.836.723Loss for the year - - - (6.356.424) - (6.356.424)Issue of new shares 9.560.992 - - - - 9.560.992Expenses of issue of new sharesand listing on Cyprus StockExchange 20 - (35.000) - - - (35.000)Special contribution to thedefence fund on deemeddistribution - - - (36.501) - (36.501)Balance 31 December 2011 19.121.983 4.589.430 122.571 (16.868.194) 4.000 9.969.790The reserve from issue of share capital at a premium and the reserve from the conversion of share capital are notavailable for distribution.Companies which do not distribute 70% of their profits after tax, as defined by the Special Contribution for the Defenceof the Republic Law, during the two years after the end of the year of assessment to which the profits refer, will bedeemed to have distributed this amount as dividend. Special contribution for defence 20% from 1 January 2012 to 31December 2013 (15% to 30 August 2011, 17% from 31 August 2011 to 31 December 2011 and from 1 January 2014)well be payable on such deemed dividend to the extent that the owners (individuals and companies) at the end of theperiod of two years from the end of the year of assessment to which the profits refer are Cyprus tax residents. Theamount of this deemed dividend distribution is reduced by any actual dividend paid out of the profits of the relevantyear at any time. This special contribution for defence is paid by company for the account of the shareholders.In the accumulated losses an amount of €14.245.087 consists of the difference between the acquisition cost and thebook value of the activities and assets of the company Thunderworx Limited, that took place on 31 December 2005,which was written off.The notes on pages 18 to 55 form an integral part of these consolidated financial statements.

PRIMETEL PLC13Cash flow from operating activitiesCONSOLIDATED STATEMENT OF CASH FLOWSFor the year ended 31 December 20112011 2010Σημ. € €Loss for the year (6.356.424) (5.230.830)Adjustment for:Depreciation of property plant and equipment 13 3.713.773 3.359.346Amortisation of computer software 14 857.957 719.563Amortising of rights of use 14 5.620.676 3.892.786Profit from the sale of property plant and equipment 6&7 (1.669) (5.756)Impairment of investments 7 15.631 -Loss from the sale of other investments 7 - 3.374Interest income 10 (871) (2.118)Interest expense 10 3.340.448 2.427.221Taxation 11 82 100.924Cash flows from operations before working capital changes 7.189.603 5.264.510Decrease in inventories 91.913 727.166Decrease in trade other receivables 965.273 198.759(Decrease)/increase in trade and other payables (7.718.699) 7.977.729Cash flow from operations 528.090 14.168.164Tax paid (4.986) 7.875Net cash from operating activities 523.104 14.176.039Cash flows from investing activitiesPayment for purchase of intangible assets 14 (9.090.458) (5.292.774)Payment for purchase of property, plant and equipment 13 (5.896.000) (9.135.241)Other investments 16 - (12.500)Proceeds from sale of property, plant and equipment 34.255 11.178Proceed from sale of investment - 261.886Interest received 871 2.118Net cash used in investing activities (14.951.332) (14.165.333)Cash flows from financing activitiesProceeds from issue of share capital 20 9.560.992 -Expenses for issue of capital and introduction in the CyprusStock Exchange (35.000) -Proceeds of borrowings 4.815.466 -Borrowings from related companies 8.000.000 -Repayment of borrowings (2.515.412) (2.065.809)Interest paid (3.127.298) (2.421.886)Special contribution to the defence fund on deemeddistribution paid (36.501) -Net cash from financing activities 16.662.247 (4.487.695)Net increase/(decrease) in cash and cash equivalent 2.234.019 (4.476.989)Cash and cash equivalents at the beginning of the year (3.970..539) 506.450Cash and cash equivalent at the end of the year 19 (1.736.520) (3.970.539)The notes on pages 18 to 55 form an integral part of these consolidated financial statements.

PRIMETEL PLC14PARENT COMPANY STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 31 December 20112011 2010Note € €Turnover 5 32.756.029 32.738.008Cost of sales (19.593.834) (20.764.626)Gross profit 13.162.195 11.973.382Other income from operations 6 355.158 440.671Selling distribution expenses (2.066.508) (1.720.277)Administrative expenses (14.124.604) (12.712.406)Profit from operating (2.673.759) (2.018.630)Other expenses 7 (15.631) (5.223)Operating loss before financingincome/(expenses) 8 (2.689.390) (2.023.853)Financial income 10 871 2.118Financial expenses 10 (3.657.723) (3.106.769)Net financing expenses (3.656.852) (3.104.651)Loss before taxation (6.346.242) (5.128.504)Taxation 11 (82) (100.924)Loss for the year (6.346324) (5.229.428)Other comprehensive lossOther comprehensive expenses for the yearafter taxation - -Total comprehensive loss for the year (6.346.324) (5.229.428)Basic and fully diluted loss per share (cent) 12 (1.88) (2,73)The notes on pages 18 to 55 form an integral part of these consolidated financial statements.

PRIMETEL PLC15PARENT COMPANY STATEMENT OF FINANCIAL POSITIONAt 31 December 2011Assets2011 2010Note € €Property, plant and equipment 13 34.109.135 31.995.368Intangible assets 14 28.478.733 25.866.908Investment in subsidiaries 15 306.000 306.000Deferred taxation 16 12.500 28.13162.906.368 58.196.407Total non current assetsInventories 17 1.182.437 1.274.350Trade and other receivables 18 9.367.296 10.287.515Cash in hand and in bank 19 466.181 332.764Total current assets 11.015.914 11.894.629Total assets 73.922.282 70.091.036Capital and reservesShare capital 20 19.121.983 9.560.991ReserveFrom ordinary operations (accumulated losses) (21.006.884) (14.624.059)From acquisition of operations (losses) (18.786.283) (18.786.283)From share capital reduction 22.946.380 22.946.380Other reserves 4.712.001 4.747.001Total equity attributable to shareholders of the Company 6.987.197 3.844.030LiabilitiesLong term loans 21 40.859.617 27.734.741Bonds 22 4.984.514 4.978.320Deferred tax liability 23 778.360 778.360Total non-current liabilities46.622.491 33.491.421Current portion of long-term loans 21 5.345.687 10.064.155Trade and other payables 24 14.959.017 22.678.636Tax payable 25 7.890 12.79420.312.594 32.755.585Total current liabilitiesTotal liabilities 66.935.085 66.247.006Total equity and liabilities 73.922.282 70.091.036The financial statements were approved by the Board of Directors on 25 April 2012.Pericles ManglisHermes Stephanou.................................... ....................................DirectorDirectorThe notes on pages 18 to 55 form an integral part of these consolidated financial statements.

PRIMETEL PLC16PARENT COMPANY STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2011SharecapitalReserves formissue of sharesReserve fromconversation ofshare capitalinto EuroAccumulatedlosses TotalNote € € € € €Balance 1 January 2010 32.507.371 4.624.430 122.571 (23.639.718) 13.614.654Loss for the year - - - (5.229.428) (5.229.428)Absorption of operations fromsubsidiary companySpidernet Services Public Ltd 15 - - - (4.541.196) (4.541.196)Reduction of nominal valueof shares 20 (22.946.380) - - 22.946.380 -Balance 31 December 2010 9.560.991 4.624.430 122.571 (10.463.962) 3.844.030Balance 1 January 2011 9.560.991 4.626.430 122.571 (10.463.962) 3.844.030Loss of the year - - - (6.346.324) (6.346.324)Issue of shares 20 9.560.992 - - - (9.560.992)Expenses for issue of sharesand listing on CyprusStock Exchange - (35.000) - - (35.000)Special contribution to thedefence fund on deemeddistribution - - - (36.501) (36.501)Balance 31 December2011 19.121.983 4.589.430 122.571 (16.846.787) 6.987.197The reserve from issue of share capital at a premium and the reserve from the conversion of share capital are notavailable for distribution.Companies which do not distribute 70% of their profits after tax, as defined by the Special Contribution for theDefence of the Republic Law, during the two years after the end of the year of assessment to which the profits refer,will be deemed to have distributed this amount as dividend. Special contribution for defence 20% from 1 January2012 to 31 December 2013 (15% to 30 August 2011, 17% from 31 August 2011 to 31 December 2011 and from 1January 2014) well be payable on such deemed dividend to the extent that the owners (individuals and companies) atthe end of the period of two years from the end of the year of assessment to which the profits refer are Cyprus taxresidents. The amount of this deemed dividend distribution is reduced by any actual dividend paid out of the profitsof the relevant year at any time. This special contribution for defence is paid by company for the account of theshareholders.In the accumulated losses an amount of €14.245.087 consists of the difference between the acquisition cost and thebook value of the activities and assets of the company Thunderworx Limited that took place on 31 December 2005,which was written off. It also includes losses of €4.541.196 from the absorption of operations of the subsidiarycompany Spidernet Services Public Ltd that took place on 1 January 2010.The notes on pages 18 to 55 form an integral part of these consolidated financial statements.

PRIMETEL PLC17PARENT COMPANY CASH FLOWS STATEMENTFor the year ended 31 December 2011Cash flow from operating activities2011 2010Note € €Loss for the year (6.346.324) (5.229.428)Adjustments for:Depreciation of property plant and equipment 13 3.713.773 3.359.346Amortisation of computer software 14 857.957 719.563Amortising of rights of use 14 5.620.676 3.892.786Profit/(loss) from the sale/discards of property, plant and equipment 6 & 7 (1.669) (5.756)Loss from sale of investment in associated company - 5.223Impairment charge on the subsidiary and other company 7 15.631 -Interest income 10 (871) (2.118)Interest expense 10 3.340.448 2.427.221Income tax expense 11 82 100.9247.199.703 5.267.761Decrease in inventories 91.913 727.166Decrease in trade and other receivables 920.219 279.252(Decrease)/increase in trade and other payables (7.719.619) 7.893.985Cash flow from operations 492.216 14.168.164Tax (paid)/refunded (4.986) 7.875Net cash from operating activities 487.230 14.176.039Cash flows from investing activitiesPayment for acquisition of property, plant and equipment 13 (5.860.126) (9.135.241)Payment for acquisition of intangible assets 14 (9.090.458) (5.292.774)Payment for acquisition on investments held-to-maturity 16 - (12.500)Absorption of operations from subsidiary company - (448.562)Proceeds from disposal of property, plant and equipment 13 34.255 11.178Proceeds from sale of investments of an associate - 261.886Interest received 871 2.118Net cash used in investing activities (14.915.458) (14.613.895)Cash flows from financing activitiesProceeds from issue of share capital 20 9.560.992 -Expenses for issue of capital and introduction in the CyprusStock Exchange (35.000) -Proceeds from borrowings 4.815.466 -Proceeds from related companies 8.000.000 -Repayment of borrowing (2.515.412) (2.065.809)Interest paid (3.127.298) (2.421.886)Special contribution to the defence fund on deemeddistribution paid (36.501) -Net cash flows from /(used in) financing activities 16.662.247 (4.487.695)Net increase/(decrease) in cash and cash equivalent (2.234.019) (4.925.551)Cash and cash equivalent at 1 January 19 (3.970.539) 955.012Cash and cash equivalent at 31 December 19 (1.736.520) (3.970.539)The notes on pages 18 to 55 form an integral part of these consolidated financial statements.

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2011181. INCORPORATION AND PRINCIPAL ACTIVITIESPrimetel Co Limited (the ''Company'') was incorporated in Cyprus on 18 June 2003 as a privatecompany with limited liability in accordance with the Cyprus Company Law Cap.113. It‟s registeredoffice is at Omonias Avenue 141, The Maritime Center, 3045 Limassol. On 28 March 2006 by aspecial resolution it was renamed to Primetel Limited. On 4 June 2007 by a special resolution theCompany become Public in accordance with the Companies Law Cap. 113 and renamed PrimetelPublic Company Limited. Then on 30 August 2007 it was renamed Primetel PLC. On 14 July 2008the Company was entered in the Alternative Market of the Cyprus Stock Exchange (C.S.E.).The principal activities of the Company continue to be the services of Voice, Data and Video thoughautonomous fiber-optic network. The telephony, the broadband network and the digital television aresome of the services provided by the Company to individuals, enterprises and othertelecommunications carriers as well as to companies that provide network service in Cyprus.The principal activities of the subsidiary company M&S Medproperties Limited is the investmentincome from leasehold land while the subsidiary company Silver Link Investments Limited remainsdormant.2. BASIS OF PREPARATION(a) Statement of complianceThe consolidated and separate financial statements have been prepared in accordance withInternational Financial Reporting Standard (IFRSs) as adopted by the European Union (EU) and therequirements of the Cyprus Companies Law Cap 113, and the Cyprus Stock Exchange Laws andRegulations.(b) Basis of presentation(i) The consolidated financial statements of the Company as at 31 December 2011 include theCompany and its subsidiaries (together are referred as the “Group”).(ii) The consolidated and separated financial statements have been prepared under the historicalcost convention, except as mentioned differently.(c) Adoption of new and revised International Financial Reporting StandardsThe Company adopted all the new and revised International Financial Reporting Standards (IFRS) andInternational Accounting Standards (IAS) that are relevant to their operations and are effective foraccounting periods beginning on 1 January 2011. This adoption did not have a material effect on theaccounting policies of the Company.The following standards, amendments to standards and Interpretations had been issued but are not yeteffective for the year ended 31 December 2011:(i) Standards and Interpretations adopted by the EUIFRS 7 (Amendment) „Financial Instruments Disclosures‟ Transfers of Financial Assets (effective forannual periods beginning on or after 1 July 2011)/ . . . .

PRIMETEL PLC19NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 20112. BASIS OF PREPARATION (continued)(c) Adoption of new and revised International Financial Reporting Standards (cont’d)(ii) Standards and Interpretations not adopted by the EUIFRS 1 – Severe Hyperinflation and Removal of Fixed Dates for First-Time Adopters (amendments)(effective for annual periods beginning on or after 1 July 2011).IFRS 7 (Amendments) „Financial Instruments Disclosures‟ „Offsetting of financial assets andfinancial liabilities‟ (effective for annual periods beginning on or after 1 January 2013).IFRS 7 (Amendments) „Financial Instruments Disclosures‟ Disclosure for transfer to IFR 9 (effectivefor annual periods beginning on or after 1 July 2015).IFRS 9 ''Financial Instruments'' (effective for annual periods beginning on or after 1 January 2015).IFRS 10 „Consolidated Financial Instruments‟ (effective for annual periods on or after 1 January2013).IFRS 11 „Joint Arrangements‟ (effective for annual periods beginning on or after 1 January 2013).IFRS 12 „Disclosures of Interests in Other Entities‟ (effective for annual periods beginning on or after1 January 2013).IFRS 13 „Fair Value Measurement‟ (effective for annual periods beginning on or after 1 January2013).IAS 1 (Amendments) „Presentation of items of other Comprehensive Income‟ (effective fro annualperiods beginning on or after 1 July 2012).IAS 12 (Amendments) „Deferred tax‟: Recovery of Underlying Assets: (effective for annual periodbeginning on or after 1 January 2012).IAS 19 (Amendments) „Employee Benefits‟ (amendments) (effective for annual periods beginning onor after 1 January 2013).IAS 27 (Revised): „Consolidated and Separate Financial Statements‟ (effective for annual periodsbeginning on or after 1 January 2013).IAS 28 (Revised): „Investments in Associates‟ (effective for annual periods beginning on or after 1January 2013).IAS 32 (Revised) 'Offsetting of financial assets and financial liabilities (effective for annual periodsbeginning on or after 1 January 2014).IFRIC 20 'Stripping costs in the production phase of a surface mine effective for annual periodsbeginning on or after 1 January 2013).The Board of Directors expects that the adoption of the above financial reporting standards in futureperiods will not have a material effect on the financial statements of the Group.The Adoption of IFRS 9 could change the classification and measurement of financial assets. Theextent of the impact has not been determined./ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2011202. BASIS OF PREPARATION (continued)(d)Use of estimates and judgmentsThe preparation of financial statements in accordance with IFRSs requires from Management theexercise of judgment, to make estimates and assumptions that influence the application ofaccounting principles and the related amounts of assets and liabilities, income and expenses. Theestimates and underlying assumptions are based on historical experience and various other factorsthat are deemed to be reasonable based on knowledge available at that time. Actual results maydeviate from such estimates.The estimates and underlying assumptions are revised on a continuous basis. Revisions inaccounting estimates are recognised in the period during which the estimate is revised, if theestimate affects only that period, or in the period of the revision and future periods, if the revisionaffects the present as well as future periods.In particular, information about significant areas of estimation, uncertainty and critical judgmentsin applying accounting policies that have the most significant effect on the amount recognised inthe financial statements are described below:Provision for bad and doubtful debtsThe Group reviews its trade and other receivables for evidence of their recoverability. Suchevidence includes the customer‟s payment record and the customer‟s overall financialposition. If indications of irrecoverability exist, the recoverable amount is estimated and arespective provision for bad and doubtful debts is made. The amount of the provision ischarged through the statement of comprehensive income. The review of credit risk iscontinuous and the methodology and assumptions used for estimating the provision arereviewed regularly and adjusted accordingly.Provision for obsolete and slow-moving inventoryThe Group reviews its inventory records for evidence regarding the saleability of inventoryand its net realizable value on disposal. The provision for obsolete and slow-movinginventory is based on management‟s past experience, taking into consideration the value ofinventory as well as the movement and the level of stock of each category of inventory.The amount of provision is recognized in the statement of comprehensive income. Thereview of the net realisable value of the inventory is continuous and the methodology andassumptions used for estimating the provision for obsolete and slow-moving inventory arereviewed regularly and adjusted accordingly.Income taxesSignificant judgment is required in determining the provision for income taxes. There aretransactions and calculations for which the ultimate tax determination is uncertain during theordinary course of business. The Group recognises liabilities for anticipated tax audit issuesbased on estimates of whether additional taxes will be due. Where the final tax outcome ofthese matters is different from the amounts that were initially recorded, such differences willimpact the income tax and deferred tax provisions in the period in which such determinationis made./ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2011212. BASIS OF PREPARATION (continued)(d)(e)Use of estimates and judgments (continued)Impairment of investments in subsidiaries/associatesThe Group periodically evaluates the recoverability of investments in subsidiaries/associateswhenever indicators of impairment are present. Indicators of impairment include such itemsas declines in revenues, earnings or cash flows or material adverse changes in the economicor political stability of a particular country, which may indicate that the carrying amount ofan asset is not recoverable. If facts and circumstances indicate that investment in subsidiariesmay be impaired, the estimated future undiscounted cash flows associated with thesesubsidiaries/associates would be compared to their carrying amounts to determine if a writedownto fair value is necessary.Valuation of non-listed investmentsThe Group uses various valuation methods to value non-listed investments. These methodsare based on assumptions made by the Board of Directors which are based on marketinformation at the reporting date.Impairment of intangible assetIntangible assets are initially recorded at acquisition cost and are amortized on a straight linebasis over their useful economic life. Intangible assets that are acquired through a businesscombination are initially recorded at affair value at the date of acquisition. Intangible assetswith indefinite useful life are reviewed for impairment at least once per year.The impairmenttest is performed using the discounted cash flows expected to be generated through the use ofthe intangible assets, using a discount rate that reflects the current market estimations and therisks associated with the asset. When it is impractical to estimate the recoverable amount ofan asset, the Group estimates the recoverable amount of the cash generating unit in which theasset belongs to.Functional and presentation currencyThe financial statements are presented in Euro (€) which is the functional currency of the Republicof Cyprus and in the case of the Group is the primary currency used that reflects better theeconomic substance of its activities.3. SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies adopted in the preparation of these financial statements are setout below. These policies have been consistently applied to all periods presented in theseconsolidated financial statements unless otherwise stated./ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2011223. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)Basis of consolidationThe Group consolidated financial statements comprise the financial statements of the parentCompany and its subsidiaries. Subsidiaries are entities controlled by the Group. Control existswhere the Group has the power to govern the financial and operating policies of an entity so as toobtain benefits from its activities.The financial statements of subsidiaries acquired or disposed of during the year are included in theconsolidated financial statements from the date that control commences until the date controlceases. Intra-group balances, and any unrealised income and expenses arising from intra-grouptransactions are eliminated in preparing consolidated financial statements.Where necessary, adjustments are made to the financial statements of subsidiaries to bring theiraccounting policies into line with those used by other members of the Group.Minority interests in the net assets of consolidated subsidiaries are identified separately from theGroup's equity therein. Minority interests consist of the amount of those interests at the date of theoriginal business combination (see below) and the minority's share of changes in equity since thedate of the combination. Losses applicable to the minority in excess of the minority's interest in thesubsidiary's equity are allocated against the interests of the Group except to the extent that theminority has a binding obligation and is able to make an additional investment to cover the losses.Business combinationsThe acquisition of subsidiaries is accounted for using the purchase method. The cost of theacquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given,liabilities incurred or assumed, and equity instruments issued by the Group in exchange for controlof the acquiree, plus any costs directly attributable to the business combination. The acquiree'sidentifiable assets, liabilities and contingent liabilities that meet the conditions for recognitionunder IFRS 3 are recognised at their fair values at the acquisition date, except for non-currentassets (or disposal groups) that are classified as held for sale in accordance with IFRS 5''Non-current Assets Held for Sale and Discontinued Operations'', which are recognised andmeasured at fair value less costs to sell.Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being theexcess of the cost of the business combination over the Group's interest in the net fair value of theidentifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, theGroup's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingentliabilities exceeds the cost of the business combination, the excess is recognised immediately instatement of comprehensive income.The interest of minority shareholders in the acquiree is initially measured at the minority'sproportion of the net fair value of the assets, liabilities and contingent liabilities recognised./ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2011233. SIGNIFICANT ACCOUNTING POLICIES (continued)Revenue recognitionRevenue comprises the invoiced amount for the sale of products net of Value Added Tax, rebatesand discounts. Revenues earned by the Group are recognised on the following basis:Rendering of servicesInvoice from connection fees are recognised when significant risks and rewards of ownershiphave been transferred to the subscribers. The transfer is done when the connection iscompletely finish.The rates of rent and communications are recognised on the accruals basis.Sale of goodsSales of goods are recognised when significant risks and rewards of ownership of the goods have beentransferred to the customer, which is usually when the Company has sold or delivered goods to thecustomer, the customer has accepted the goods and collectibility of the related receivable is reasonablyassured.Employee benefitsThe Company and its employees contribute to the Government Social Insurance Fund based on employees'salaries. In addition the Company contributes to a defined contribution scheme the percentage of which isdetermined by agreement made with the Unions and the assets of which are held in a separatetrustee-administered fund. The scheme is funded by payments from employees and by the Company.The Company's contributions are expensed as incurred and are included in staff costs. The Company has nolegal or constructive obligations to pay further contributions if the scheme does not hold sufficient assets topay all employee benefits relating to their services in the current and prior periods.Segment reportingThe Group is organized by business segments and this is the primary format for segmental reporting. Eachbusiness segment provides products or services which are subject to risks and returns that are different fromthose of other business segments. The Group operates in Cyprus and overseas. The operations of the Groupby segment are dividend in the provision of services to individuals, to trade customers and to the providersof telecommunication services.Finance incomeFinance income includes interest income which is recognised based on accrual basis.Financing expensesInterest expense and other costs on borrowings to finance construction or production of qualifying assetsare capitalised, during the period of time that is required to complete and prepare the asset for its intendeduse. All other borrowing costs are expensed. Apart from interest, finance expenses include bank chargesand exchange differences./ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2011241 SIGNIFICANT ACCOUNTING POLICIES (continued)Foreign currency transactionsForeign currency transactions are translated into the functional currency using the exchange ratesprevailing at the dates of the transactions. Foreign exchange gains and losses resulting from thesettlement of such transactions and from the translation at year-end exchange rates of monetaryassets and liabilities denominated in foreign currencies are realized in the statement ofcomprehensive income.Monetary assets and liabilities denominated in foreign currencies are translated into Euro usingthe rate of exchange ruling at the balance sheet date. The exchange differences that arise aretransferred to the statement of comprehensive income, and are presented separately whenconsidered material.TaxationIncome tax expense represents the sum of the tax currently payable and deferred tax.The tax currently payable is based on taxable profit for the year. Taxable profit differs from profitas reported in the statement of comprehensive income because it excludes items of income orexpense that are taxable or deductible in other years and it further excludes items that are nevertaxable or deductible. The Group‟s liability for current tax is calculated using tax rates that havebeen enacted or substantively enacted by the statement of financial position date.Deferred tax is realized on differences between the carrying amounts of assets and liabilities inthe financial statements and the corresponding tax bases used in the computation of taxableprofit, and is accounted for using the statement of financial position liability method. Deferredtax liabilities are generally realized for all taxable temporary differences and deferred tax assetsare realized to the extent that it is probable that taxable profits will be available against whichdeductible temporary differences can be realized. Such assets and liabilities are not realized if thetemporary difference arises from goodwill or from the initial recognition (other than in a businesscombination) of other assets and liabilities in a transaction that affects neither the taxable profitnor the accounting profit.Deferred tax liabilities are realized for taxable temporary differences arising on investments insubsidiaries and associates, and interests in joint ventures, except where the Group is able tocontrol the reversal of the temporary difference and it is probable that the temporary differencewill not reverse in the foreseeable future.The carrying amount of deferred tax assets is reviewed at each statement of financial positiondate and reduced to the extent that it is no longer probable that sufficient taxable profits will beavailable to allow all or part of the asset to be recovered.Deferred tax is calculated at the tax rates that are expected to apply in the period when theliability is settled or the asset realized. Deferred tax is charged or credited to profit or loss, exceptwhen it relates to items charged or credited directly to other comprehensive income or equity, inwhich case the deferred tax is also dealt with in other comprehensive income or equity.Deferred tax assets and liabilities are offset when there is a legally enforceable right to set offcurrent tax assets against current tax liabilities and when they relate to income taxes levied by thesame taxation authority and the Group intends to settle its current tax assets and liabilities on anet basis./ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2011253. SIGNIFICANT ACCOUNTING POLICIES (continued)Property, plant and equipmentProperty, plant and equipment are measured at cost less accumulated depreciation and impairmentlosses.Properties in the course of construction for production, rental or administrative purposes, or forpurposes not yet determined, are carried at cost, less any recognised impairment loss. Cost includesprofessional fees and, for qualifying assets, borrowing costs capitalised in accordance with theGroup's accounting policy. Depreciation of these assets, on the same basis as other property assets,commences when the assets are ready for their intended use.Depreciation is recognised in the income statement on the straight-line method over the useful livesof each part of an item of property, plant and equipment. The annual depreciation rates used for thecurrent and comparative periods are as follows:Property under construction 0Additions and improvements to the rental properties 4 -10Fiber - Optic network 4Motor vehicles 10 – 20Telecommunication equipment 10-20Machinery, plant, furniture, fittings and office equipment 10 - 331/3Computers and electronical equipment 10 - 331/3%No depreciation is provided on land.Depreciation methods, useful lives and residual values are reassessed at the reporting date.Where the carrying amount of an asset is greater than its estimated recoverable amount, the asset iswritten down immediately to its recoverable amount.Expenditure for repairs and maintenance of property, plant and equipment is charged to the incomestatement of the year in which it is incurred. The cost of major renovations and other subsequentexpenditure are included in the carrying amount of the asset when it is probable that future economicbenefits in excess of the originally assessed standard of performance of the existing asset will flow tothe Group. Major renovations are depreciated over the remaining useful life of the related asset.Gains and losses on disposal of property, plant and equipment are determined by comparingproceeds with carrying amount and are included in the statement of comprehensive income.Intangible assets(i) Rights of use of local and international networksExpenditure incurred by the Company in respect of rights of use of local and internationalnetworks initially are capitalised and are depreciated to the statement of comprehensive incomein a period of ten to seventeen years which represent the period in which the Company has theright to use these networks. The depreciation is included in the cost of sales./ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL SATEMENTSFor the year ended 31 December 2011263. SIGNIFICANT ACCOUNTING POLICIES (continued)Intangible assets (continued)(ii) Computer softwareCosts that are directly associated with identifiable and unique computer software productscontrolled by the Company and that will probably generate economic benefits exceeding costsbeyond one year are recognised as intangible assets. Subsequently computer software is carriedat cost less any accumulated amortisation and any accumulated impairment losses. Expenditurewhich enhances or extends the performance of computer software programmes beyond theiroriginal specifications is recognised as a capital improvement and added to the original cost ofthe computer software. Costs associated with maintenance of computer software programmesare recognised as an expense when incurred. Computer software costs are amortised using thestraight-line method over their useful lives, in a period between three and ten years.Amortisation commences when the computer software is available for use and is includedwithin administrative expenses.(iii) Internally-generated intangible assetsAn internally-generated intangible asset arising from the development of software programs ofthe Company and the Group is recognised only if all of the following conditions are met:an asset is created that can be identified (such as software and new processes);it is probable that the asset created will generate future economic benefits; andthe development cost of the asset can be measured reliably.Internally-generated intangible assets are amortised in the consolidated and separate statementof comprehensive income on a straight-line basis over their estimated useful lives. Where nointernally-generated intangible asset can be recognised, development expenditure is charged tothe statement of comprehensive income in the period in which it is incurred.Deferred incomeDeferred income represents income receipts which relate to future periods.LeasingLeases are classified as finance leases whenever the terms of the lease transfer substantially all therisks and rewards of ownership to the lessee. All other leases are classified as operating leases.The Group as lessorAmounts due from lessees under finance leases are recorded as receivables at the amount of theGroup's net investment in the leases. Finance lease income is allocated to accounting periods so as toreflect a constant periodic rate of return on the Group's net investment outstanding in respect of theleases.Rental income from operating leases is recognised on a straight-line basis over the term of therelevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are addedto the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.Operating leasesRentals payable under operating leases are charged to the statement of comprehensive income on astraight-line basis over the term of the relevant lease. Benefits received and receivable as anincentive to enter into an operating lease are also spread on a straight-line basis over the lease term./ . . . .

PRIMETEL PLC27NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 20113. SIGNIFICANT ACCOUNTING POLICIES (continued)Financial instrumentsFinancial assets and financial liabilities are recognised when the Group becomes a party to the contractualprovisions of the instrument.(i)Trade receivablesTrade receivables are initially measured at fair value, and are subsequently measured at amortised cost usingthe effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognisedin income statement when there is objective evidence that the asset is impaired. The allowance recognised ismeasured as the difference between the asset's carrying amount and the present value of estimated future cashflows discounted at the effective interest rate computed at initial recognition.(ii) Investments(v)Investments in subsidiariesWhere the Company owns, directly or indirectly, more than 50% of the voting rights, and/or exercises controlover the financial and operational affairs of other companies, the investments are referred to as investments insubsidiary companies and are stated at cost in the financial statements of the parent company, less anyprovision for permanent diminution in value. Any diminution in relation to the net realisable value is debitedto the statement of comprehensive income. Details of the investments in subsidiaries are presented in note 15.Investments in private companiesInvestments in private companies are stated at cost less amounts written off to recognise diminution, other thantemporary in the value of the investment. Details of the other investments are presented in note 16.Cash and cash equivalentsFor the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held atcall with banks and bank overdrafts. In the balance sheet, bank overdrafts are included in borrowings in currentliabilities.(iv) Borrowings(v)Borrowings are recorded initially at the proceeds received, net of transaction costs incurred. Borrowings aresubsequently stated at amortised cost. Any differences between the proceeds (net of transaction costs) and theredemption value is recognized in the income statement over the period of the borrowings using the effectiveinterest method.Trade payablesTrade payables are initially measured at fair value, and are subsequently measured at amortised cost, using theeffective interest rate method.Derecognition of financial assets and liabilitiesFinancial assetsA financial asset (or, where applicable a part of a financial assets or part of a group of similar financial assets) isderecognized when:the rights to receive cash flows from the asset have expired;the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them infull without material delay to a third party under a 'pass through' arrangement; orthe Group has transferred its rights to receive cash flows from the asset and either (a) has transferredsubstantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially allthe risks and rewards of the asset, but has transferred control of the asset./ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTS28For the year ended 31 December 20113. SIGNIFICANT ACCOUNTING POLICIES (continued)Financial instruments (continued)Derecognition of financial assets and liabilities (continued)Financial liabilitiesA financial liability is derecognised when the obligation under the liability is discharged or cancelled orexpires.When an existing financial liability is replaced by another from the same lender on substantially differentterms, or the terms of an existing liability are substantially modified, such an exchange or modification istreated as a derecognition of the original liability and the recognition of a new liability, and the difference inthe respective carrying amounts is recognised in the statement of comprehensive income.Impairment of assetsAssets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment.Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events orchanges in circumstances indicate that the carrying amount may not be recoverable. An impairment loss isrecognized for the amount by which the asset‟s carrying amount exceeds its recoverable amount. Therecoverable amount is the higher of an asset‟s fair value less costs to sell and value in use. For the purposes ofassessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cashflows (cash-generating units).Offsetting financial instrumentsFinancial assets and financial liabilities are offset and the net amount reported in the balance sheet if, and onlyif, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settleon a net basis, or to realise the asset and settle the liability simultaneously.InventoriesInventories are stated at the lower of cost and net ealizable value. The cost is determined using the weightedaverage method. Net ealizable value is the estimated selling price in the ordinary course of business, less thecosts to completion and selling expenses.Share capitalOrdinary shares are classified as equity.ProvisionsProvisions are recognized when the Group has a present legal or constructive obligation as a result of pastevents, it is probable that an outflow of resources will be required to settle the obligation, and a reliableestimate of the amount can be made. Where the Group expects a provision to be reimbursed, for exampleunder an insurance contract, the reimbursement is recognized as a separate asset but only when thereimbursement is virtually certain.Non-current liabilitiesNon-current liabilities represent amounts that are due more than twelve months from the financial positiondate.ComparativesWhere necessary, comparative figures have been adjusted to conform to changes in presentation in the currentyear.4. INFORMATION BY OPERATION SEGMENTThe Group has three basic segment operations which are mentioned below:Provision of services to Home CustomersProvision of services to Corporate CustomersProvision of services to other Telecom OperatorsThe Managing director reviews the monthly financial statements prepared by the Group monitoring the salesby segment, the total gross profit, the selling expenses, administration and finance expenses as well as theadditions to the property plant and equipment and intangible assets. Based on the results appropriate decisionsare taken for the better operation and development of the Group./ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTS29For the year ended 31 December 20112 INFORMATION BY OPERATION SEGMENT (continued)2011Individual CorporateProviders oftelecommunica-Totalclients customers tion services %€ € € €Sales 19.268.506 8.263.399 5.224.124 32.756.029Cost of sales (13.973.158)Gross profit 18.782.871Percentage of gross profit 57,3Other operating income 355.158Administration and selling and distribution expenses (11.629.482)Earnings before interest, Tax, Depreciation(EBITDA) 7.508.547Depreciations (10.192.406)Earnings before interest, Tax (EBIT) (2.683.859)Net financing expenses (3.656.852)Loss from operation before other expenses (6.340.711)Other expenses (15.631)Loss before taxation (6.356.32)Taxation (82)Loss for the year (6.356.424)Total assets 73.918.072Capital expenditureProperty, plant and equipment 5.896.000Intangible asset 9.090.458Total capital expenditure 14.986.458Depreciation on property, plant and equipment 3.713.773Amortisation of intangible assets 6.478.6332010 IndividualclientsTradeclientsProviders oftelecommunicationservices %10.192.406Total€ € € €Sales 19.204.113 6.537.030 6.996.845 32.738.008Cost of sales (16.871.840)Gross profit 15.866.168Percentage of gross profit 48,5Other operating income 440.671Administration and selling and distribution expenses (10.356.889)Earnings before interest, Tax, Depreciation(ΔΒΙΤDΑ) 5.949.950Depreciations (7.971.695)Earnings before interest, Tax ((EBIT) (2.021.745)Net financing expenses (3.104.651)Loss from operation before other expenses (5.126.396)Other expenses (3.510)Loss before taxation (5.129.906)Taxation (100.924)Loss for the year (5.230.830)Total assets 70.096.006Capital expenditureProperty, plant and equipment 9.135.241Intangible asset 5.292.458Total capital expenditure 14.428.015Depreciation on property, plant and equipment 3.359.346Amortisation of intangible assets 4.612.3497.971.695/ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTS30For the year ended 31 December 20114. INFORMATION BY OPERATION SEGMENT (continued)Geographical segmentFor the presentation of information based on geographical segment, the sales by geographical segments arebased on the geographical location of the clients and assets are based on their geographical location.2011 2010€ €Cyprus 25.551.791 28.696.542Europe and Asia 7.071.929 3.913.786Other countries 132.309 127.68032.756.029 32.738.0085. INCOMETHE GROUPTHE COMPANY2011 2010 2011 2010€ € € €Services rendered 32.521.110 32.481.260 32.521.110 32.481.260Sales of goods 234.919 256.748 234.919 256.74832.756.029 32.738.008 32.756.029 29.738.0086. OTHER OPERATING INCOMETHE GROUPTHE COMPANY2011 2010 2011 2010€ € € €Amounts receivable from the E.U forresearch and development 353.489 412.054 353.489 412.054Profit from sale of property plant andequipment 1.669 5.756 1.669 5.756Other income - 22.861 - 22.861355.158 440.671 355.158 440.6717. OTHER OPERATING EXPENSESTHE GROUPTHE COMPANY2011 2010 2011 2010€ € € €Impairment of investments (Note 16) 15.631 - 15.631 -Loss on disposal of investment in associatecompany - 3.374 - 5.223Other expenses - 136 - -15.631 3.510 15.631 5.223/ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTS31For the year ended 31 December 20118. (LOSS) /PROFIT FROM OPERATIONSLoss from operations before the financeincome/(expenses) and is stated aftercharging the following amounts:THE GROUPTHE COMPANY2011 2010 2011 2010€ € € €Depreciation of computer software (includedin administration expenses). (Note.14) 857.957 719.563 857.957 719.563Depreciation of rights of use(included cost of sales). (Note.14) 5.620.676 3.892.786 5.620.676 3.892.786Depreciation of property, plant and equipment(Note.13) 3.713.773 3.359.346 3.713.773 3.359.346Staff costs (Note.9) 6.187.276 5.631.742 6.187.276 5.631.742Rents payable 729.127 674.793 735.377 674.793Auditor‟s remuneration 47.000 61.000 47.000 60.000Trade receivables –provision for doubtful debts 325.000 151.860 325.000 151.8609. STAFF COSTSTHE GROUPTHE COMPANY2011 2010 2011 2010€ € € €Wages and salaries 5.129.690 4.649.577 5.129.690 4.649.577Directors remunerations – as below - 24.000 - 24.000Social insurance contributions e.t.c. 738.160 672.022 738.160 672.022Provident fund contributions 319.426 286.143 319.426 286.143Total staff costs 6.187.276 5.631.742 6.187.276 5.631.742The number of employees employed by the Group as at 31 December 2011 was 289 (2010: 326).The Group participates in a defined contribution scheme, the Provident Fund of Employees which is foundedseparately and prepares its own financial statements whereby the employees are entitled of certain benefitsupon retirement or prior termination of their service.Directors remuneration - as directorsTHE GROUPTHE COMPANY2011 2010 2011 2010€ € € €Pericles Manglis - 3.000 - 3.000Hermes Stephanou - 3.000 - 3.000Philippos Vatiliotis - 3.000 - 3.000Nicos Ellinas - 3.000 - 3.000Ioannis Tirkides - 3.000 - 3.000Andreas Christodoulides - 3.000 - 3.000Andreas Eleftheriades - 3.000 - 3.000Alexis Photiades - 3.000 - 3.000As above - 24.000 - 24.000/ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTS32For the year ended 31 December 201110. FINANCE INCOME AND EXPENSESTHE GROUPTHE COMPANY2011 2010 2011 2010€ € € €Finance incomeBank interest 871 459 871 459Interest from tax refund - 1.659 - 1.659871 2.118 871 2.118THE GROUPTHE COMPANY2011 2010 2011 2010€ € € €Finance expensesInterest payableOn loans 1.998.514 1.543.416 1.998.514 1.543.416On bonds 342.188 342.188 342.188 342.188On bank overdrafts 414.726 198.767 414.726 198.767On taxation 169 - 169 -To related companies 512.892 260.128 512.892 260.128To others 71.959 82.722 71.959 82.722Other finance expensesBank charges 302.943 372.625 302.943 372.625Loss on transactions in foreign currencyRealised exchange loss 14.332 306.923 14.332 306.9233.657.723 3.106.769 3.657.723 3.106.76911. TAXATIONTHE GROUPTHE COMPANY2011 2010 2011 2010€ € € €Special contribution to the defence fundCurrent year 82 5.113 82 5.113Deferred tax – Debit (Note 23) - 95.811 - 95.811Debit for the year 82 100.924 82 100.924/ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTS33For the year ended 31 December 201111. TAXATION (CONT’D)Reconciliation of taxation based on the taxable income and taxation based on accounting profits:THE GROUPTHE COMPANY2011 2010 2011 2010€ € € €Accounting loss before tax (6.356.424) (5.129.906) (6.346.242) (5.128.504)Tax calculated at the applicable tax rates (635.642) (512.991) (634.624) (512.850)Tax effect of expenses not deductible for taxpurposes 44.755 26.012 44.755 26.012Tax effect allowance and income notsubject to tax (29.644) (58.209) 29.644 (58.209)Tax effect of tax losses for the year 561.243 640.999 560.225 640.858Special contribution to the defence fund -current year 82 5.113 82 5.113Tax charge 82 100.924 82 100.924The corporation tax rate is 10%.Under certain conditions interest receivable may be subject to defence contribution at the rate of 15% (10%until 30 August 2011). In such cases 100% of the interest income is exempt from corporation tax.Due to tax losses sustained in the year, no tax liability arises on the Group. Tax losses may be carriedforward until their final write off.Group companies may deduct losses against profits arising during the same tax year. As at 31 December2011 the balance of tax losses which is available for offset against future taxable profits amounts to€27.994.548 for which no deferred tax is recognized in the statements of financial position as assets.12. EARNINGS PER SHARETHE GROUPTHE COMPANY2011 2010 2011 2010€ cent € cent € cent € centLosses attributable toshareholders (€) (6.356.424) (5.230.830) (6.346.324) (5.229.428)Weighted average number of ordinaryshares in issue during the year 336.861.231 191.219.828 336.861.231 191.219.828Basic and fully diluted loss pershare (cent) (1,89) (2,74) (1,88) (2,73)/ . . . .

13. PROPERTY, PLANT AND EQUIPMENTTHE GROUPAdditions andimprovements toleasehold buildingsPRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2011Land and buildingsunder construction(note)Fiber-opticnetwork andtelecommunicationequipmentMotorvehiclesMachinery plant,furniture and fittingsand officeequipmentComputers andequipmentTotal2011€ € € € € € €2011CostBalance 1 January 2011 1.504.769 3.637.691 11.726.481 627.314 13.079.799 11.923.732 42.499.786Additions 459.545 - 2.526.782 15.442 2.157.192 377.039 5.896.000Disposals - - - (9.689) (33.972) (264) (43.925)Transfer of amount 2.720.252 (2.720.252) (603.006) - 603.006 - -Balance 31 December 2010 4.684.566 917.439 13.650.257 633.067 16.166.025 12.300.507 48.351.861DepreciationBalance as at 1 January 2011 159.939 - 1.288.640 397.952 2.629.738 5.728.149 10.204.418Transfer amount - - (121.346) - 121.346 - -Charge for the year 110.242 - 492.523 93.095 1.307.240 1.710.673 3.713.773On disposals - - - (7.714) (3.468) (157) (11.339)Balance 31 December 2011 270.181 - 1.659.817 483.333 4.054.856 7.438.665 13.906.852Net book valueBalance 31 December 2011 4.114.385 917.439 11.990.440 149.734 12.111.169 4.861.842 34.445.0092010CostBalance 1 January 2010 1.504.769 2.159.298 9.355.167 522.736 8.514.150 11.153.074 33.209.194Additions - 1.478.393 2.325.570 97.817 4.524.236 709.225 9.135.241Disposals - - - (21.372) (1.076) (12.895) (35.343)Transfer - - (5.968) - - - (5.968)Re-adjustments of balances - - 51.712 28.133 42.489 74.328 196.662Balance 31 December 2010 1.504.769 3.637.691 11.726.481 627.314 13.079.799 11.923.732 42.499.786DepreciationBalance as at 1 January 2010 110.100 - 837.232 293.053 1.638.805 3.799.141 6.678.331Charge for the year 49.839 - 449.404 94.802 936.008 1.829.293 3.359.346Disposals - - - (21.223) (758) (7.940) (29.921)Re-adjustments of balances - - 2.004 31.320 55.683 107.655 196.662Balance 31 December 2010 159.939 - 1.288.640 397.952 2.629.738 5.728.149 10.204.418Net book valueBalance 31 December 2010 1.344.830 3.637.691 10.437.841 229.362 10.450.061 6.195.583 32.295.36834Note: The balance at 31 December 2011 represents the cost of the land at Yeroskipou, Paphos, which originally was intended for the construction of the binding station for sea cables (see note 30)./ . . . .

13. PROPERTY, PLANT AND EQUIPMENT (CONT’D)PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 201135The Company2011CostAdditions andimprovements toleasehold buildingsLand and buildingsunder construction(note)Fibre-opticnetwork andtelecommunicationequipmentMotorvehiclesMachinery plant,furniture and fittingsand officeequipmentComputers andequipmentTotal2011€ € € € € € €Balance 1 January 2011 1.204.769 3.637.691 11.726.481 627.314 13.079.799 11.923.732 42.199.786Additions 459.545 - 2.526.782 15.442 2.481.318 377.039 5.860.126Disposals - - - (9.689) (33.972) (264) (43.925)Transfer 2.720.252 (2.720.252) (603.006) - 603.006 - -Balance 31 December 2011 4.384.566 917.439 13.650.257 633.067 16.130.151 12.300.507 48.015.987DepreciationsBalance 1 January 2011 159.939 - 1.288.640 397.952 2.629.738 5.728.149 10.204.418Transfer - - (121.346) - 121.346 - -Charge for the year 110.242 - 492.523 93.095 1.307.240 1.710.673 3.713.773Disposals - - - (7.714) (3.468) (157) (11.339)Balance 31 December 2011 270.181 - 1.659.817 483.333 4.054.856 7.438.665 13.906.852Net book valueBalance 31 December 2011 4.114.385 917.439 11.990.440 149.734 12.075.295 4.861.842 34.109.135Balance 1 January 2010 1.204.769 2.159.298 9.355.167 515.705 8.263.461 10.851.654 32.350.054Additions - 1.478.393 2.325.570 97.817 4.524.236 709.225 9.135.241Disposals - - - (21.372) (1.076) (12.895) (35.343)Transfer amount - - (5.968) - - - (5.968)Re-adjustments of balances - - 51.712 35.164 293.178 375.748 755.802Balance 31 December 2010 1.204.769 3.637.691 11.726.481 627.314 13.079.799 11.923.732 42.199.786DepreciationsBalance 1 January 2010 110.100 - 837.232 289.210 1.579.194 3.696.347 6.512.083Charge for the year 49.839 - 449.404 94.802 936.008 1.829.293 3.359.346Disposals/discards - - - (21.223) (758) (7.940) (29.921)Re-adjustments of balances - - 2.004 35.163 115.294 210.449 362.910Balance 31 December 2010 159.939 - 1.288.640 397.952 2.629.738 5.728.149 10.204.418Net book valueBalance 31 December 2010 1.044.830 3.637.691 10.437.841 229.362 10.450.061 6.195.583 31.995.368Note: The balance at 31 December 2011 represents the cost of the land at Yeroskipou, Paphos, which originally was intended for the construction of the building station for sea cables (see note 30)./ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 20113613. PROPERTY, PLANT AND EQUIPMENT (CONT’D)Accumulated borrowings costs capitalized for qualifying assets until 31.12.2011 amounted to €572.340 (2010:€472.340). Borrowings costs capitalized for the year amounted to €100.000 (2010: €258.000).In the cash flow statement, proceeds from sale of property, plant and equipment comprise:THE GROUPTHE COMPANY2011 2010 2011 2010€ € € €Net book value 32.586 5.422 32.586 5.422Profit of the sale of property,plant and equipment (Note.6) 1.669 5.756 1.669 5.756Proceeds from disposal of property,plant and equipment 34.255 11.178 34.255 11.17814. INTANGIBLE ASSETSTHE GROUPComputersoftware andinternalDevelopmentcostsgeneratedsoftware Rights of use Total€ € € €Balance 1 January 2011- 6.771.267 28.794.311 35.565.578Additions - 1.153.980 7.936.478 9.090.458Balance 31 December 2011 - 7.925.247 36.730.789 44.656.036AmortizationBalance 1 January 2011 - 2.653.318 7.045.352 9.698.670Amortization for the year - 857.957 5.620.676 6.478.633Balance 31 December 2011 - 3.511.275 12.666.028 16.177.303Net book valueBalance 31 December 2011 - 4.413.972 24.064.761 28.478.733Balance 1 January 2010 159.073 5.212.381 24.983.752 30.355.206Additions - 1.482.215 3.810.559 5.292.774Transfers (159.073) 28.761 - (130.312)Re-adjustments of balances - 47.910 - 47.910Balance 31 December 2010 - 6.771.267 28.794.311 35.565.578AmortizationBalance 1 January 2010 - 1.885.845 3.152.566 5.038.411Amortization for the year - 719.563 3.892.786 4.612.349Re-adjustments of balances - 47.910 - 47.910Balance 31 December 2010 - 2.653.318 7.045.352 9.698.670Net book valueBalance 31 December 2010 - 4.117.949 21.748.959 25.866.908/ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 20113714. INTANGIBLE ASSETS (continued)THE COMPANY2011CostCompter Rightssoftware of useTotal€ € €Balance 1 January 2011 6.771.267 28.794.311 35.565.578Additions 1.153.980 7.936.478 9.090.458Balance 31 December 2011 7.925.247 36.730.789 44.656.036AmortizationBalance 1 January 2011 2.653.318 7.045.352 9.698.670Amortization for the year (Note. 8) 857.957 5.620.676 6.478.633Balance 31 December 2011 3.511.275 12.666.028 16.177.303Net book valueBalance 31 December 2011 4.413.972 24.064.761 28.478.7332010CostBalance 31 December 2010 4.642.867 24.983.752 29.626.619Additions 1.482.215 3.810.559 5.292.774Absorption of operations by subsidiary companySpidernet Services Public Limited 646.184 - 646.184Balance 31 December 2010 6.771.266 28.794.311 35.565.577AmortizationBalance 1 January 2010 1.667.363 3.152.566 4.819.929Amortization for the year (Note 8) 719.563 3.892.786 4.612.349Absorption of operations by subsidiary companySpidernet Services Public Limited 266.391 - 266.391Balance 31 December 2010 2.653.317 7.045.352 9.698.669Net book valueBalance 31 December 2010 4.117.949 21.748.959 25.866.908/ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 20113815. INVESTMENT IN SUBSIDIARY COMPANIESTHE COMPANYDirect subsidiariesNameNoteCountry ofincorporationPrincipleactivitiesShareholdingSilver LinkInvestmentsLimited 1 Cyprus Dormant 60 6.000 6.000Μ&S MedpropertiesLimited 2 Cyprus Leashold land 100 300.000 300.000%2011€2010306.000 306.000€1) Silver Link Investments Limited was incorporated on 31 December 2007 and since then, has remained dormant.2) On 6 November 2009, the Company acquired 100% shareholding of M&S Medproperties Limited which has asprincipal activity the leasing of land.16. OTHER INVESTMENTSTHE GROUPTHE COMPANY2011 2010 2011 2010€ € € €Balance 1 January 28.131 - 28.131 -Absorption of the operators of subsidiary company - 15.631 - 15.631Additions - 12.500 - 12.500Impairment charge (Note 7) (15.631) - (15.631) -Balance 31 December 12.500 28.131 12.500 28.131Analyzed as below:Shareholding THE GROUP THE COMPANY2011 2010 2011 2010At cost € € € €Ermis Research & Incubator (Eric) Ltd 5% - 15.631 - 15.631Velister Ltd 12,5% 12.500 12.500 12.500 12.50012.500 28.131 12.500 28.131/ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 20113917. INVENTORIESTHE GROUPTHE COMPANY2011 2010 2011 2010€ € € €Telecommunication apparatus andequipment 1.182.437 1.274.350 1.182.437 1.274.3501.182.437 1.274.350 1.182.437 1.274.350The main part of the inventories consist of raw materials and spare parts which are used for theexpansion of the network and Company‟s infrastructure. They are transferred to fixed assets on theirrecognized.18. TRADE AND OTHER RECEIVABLESTHE CROUPTHE COMPANY2011 2010 2011 2010€ € € €Trade receivables 8.196.264 8.706.765 8.196.264 8.706.765Less: Provision for bad debts (690.738) (633.581) (690.738) (633.581)Trade receivable – net 7.505.526 8.073.184 7.505.526 8.073.184Amounts receivable from subsidiaries(Note 26 (b) (i)) - - 37.739 1.435Amounts receivable from relatedcompanies (Note 26 (b) (ii)) 1.072.227 1.042.100 1.072.227 1.042.100Deposits and prepayments 755.459 1.017.163 751.804 1.004.758VAT refundable - 166.038 - 166.0389.333.212 10.298.485 9.367.296 10.287.515Concentrations of credit risk with respect of trade receivables are limited due to the Group‟s largenumber of customers. The Group‟s historical experience in collection of accounts receivable falls withinthe targeted allowances. Due to these factors, management believes that no additional credit risk beyondamounts already provided is necessary.The Group has recognized a loss of €325.000 (2010: €151.860) for the impairment of its tradereceivables during the year ended 31 December 2011. The loss has been included in selling anddistribution costs in the statement of comprehensive income.The Group does not hold any collateral over the trading balances.Movement of provision for doubtful debts:THE GROUPTHE COMPANY2011 2010 2011 2010€ € € €Balance at 1 January 633.581 376.954 633.581 386.000Absorption of operations of subsidiarycompany - - - 95.721Provision change for the year 325.000 151.860 325.000 151.860Amount written off as not collectible (267.843) (7.441) (267.843) -Balance 31 December 690.738 633.581 690.738 633.581/ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 20114019. CASH AND CASH EQUIVALENTSTHE GROUP THE COMPANY2011 2010 2011 2010€ € € €Cash in hand 35.176 14.249 35.176 14.249Cash at bank 431.005 318.515 431.005 318.515466.181 332.764 466.181 332.764For the purpose of the cash flow statement the cash and cash equivalents include the following:THE GROUP THE COMPANY2011 2010 2011 2010€ € € €Cash at bank and in hand 466.181 332.764 466.181 332.764Bank overdrafts (Note 21) (2.202.701) (4.303.303) (2.202.701) (4.303.303)(1.736.520) (3.970.539) (1.736.520) (3.970.539)20. SHARE CAPITALAuthorised2011 2011 2010 2010Number ofNumber ofshares € shares €Ordinary shares of € 0,05 per share 850.000.000 42.500.000 850.000.000 42.500.000Issued and fully paidBalance 1 January 191.219.828 9.560.991 191.219.828 32.507.371Reduction of the normal value of shares - - - (22.946.380)Issue of shares 191.219.829 9.560.992 - -Balance 31 December 382.439.656 19.121.983 191.219.828 9.560.991On 28 March 2011 following the exercise of the Rights in accordance with the Prospectus, 191.219.828ordinary shares were issued of €0,05 cent at their nominal value./ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 20114121. LONG TERM LOANS AND BANK OVERDRAFT ACCOUNTSTHE GROUPTHE COMPANY2011 2010 2011 2010Non-current liabilities € € € €(i) Long term bank loans(i) Loan repayable until 2016 508.817 588.598 508.817 588.598(ii) Loan repayable until 2020(see note below) 35.286.830 32.906.995 35.286.830 32.906.99535.795.647 33.495.593 35.795.647 33.495.593(ii) Loans from related companies(Note 26 (b) (vii)) 8.206.956 - 8.206.956 -44.002.603 33.495.593 44.002.603 33.495.593Amount payable within one year (3.142.986) (5.760.852) (3.142.986) (5.760.852)The repayments of the long-term amounts of these loans are scheduled as follows:40.859.617 27.734.741 40.859.617 27.734.741THE GROUPTHE COMPANY2011 2010 2011 2010€ € € €Between one and two years 4.148.790 7.058.825 4.148.790 7.058.825Between two and five years 20.907.027 18.524.091 20.907.027 18.524.091More than five years 15.803.800 2.151.825 15.803.800 2.151.825Current liabilities40.859.617 27.734.741 40.859.617 27.734.741Bank current accounts 2.202.701 4.303.303 2.202.701 4.303.303Current portion of long term loans 3.142.986 5.760.852 3.142.986 5.760.852Note:5.345.687 10.064.155 5.345.687 10.064.155On 5 March 2012 the Company proceeded to a new agreement with Bank of Cyprus Public Company Limited forthe merge of its loans including the two loans taken by related companies on behalf of the Company (Note.26(b)(vi)), into one loan with new repayment conditions.Interest ratesThe bank loans and the bank overdrafts bear interest at the following rates:- For bank overdrafts:(i) 6 months Euribor + 1,75%(ii) Basic interest rate of banker‟s Businesses + 1,75%- For bank loans:(i) 6 months Euribor 1,75%(ii) Basic interest rate of Businesses with variance from 1,5% - 2,75%(iii) Basic interest rate of the ECB + 1,5%/ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 20114221. LONG TERM LOANS AND BANK OVERDRAFT ACCOUNTS (CONT’D)THE GROUP AND THE COMPANYSecuritiesThe loans and bank overdraft accounts are secured with:Personal guarantees of Mr. Pericles Manglis for a total amount of €1.000.000.Personal guarantees of Mr. Hermes Stephanou for a total amount of €1.000.000.Personal guarantees of Mr. Hermes Stephanou as well as of Good Hope Investments Limited forthe amount of €13.348.000.Personal guarantee of Mr. Pericles Manglis as well as of Ayios Andronikos Development Co.Limited for the amount of €9.592.000.Corporate security of Aeolos Swiss (Capo Bay) Limited for an amount of €5.500.000.Existing ΄A΄ Mortgage on the property with registration no. 2/50 in the area of Yeroskipou atPaphos belongs to the company Primetel Plc for the amount of €750.000.Existing G‟ and H‟ Mortgage on the hotel Capo Bay which is owned by Aeolos Swiss (Capo Bay)Limited for the amount of €3.000.000 and €2.500.000, respectively.Floating Charge on the Company‟s assets for €15.000.000.InterestThe bank interest on loans for the year amounted to €1.998.514 (2010: €1.543.416) for the Group andthe Company.In addition the interest capitalized is €100.000 (2010: €258.000).22. BONDSTHE GROUPTHE COMPANY2011 2010 2011 2010€ € € €500 bonds of €10.000 each 5.000.000 5.000.000 5.000.000 5.000.000Less issue expenses of the bonds (15.486) (21.680) (15.486) (21.680)4.984.514 4.978.320 4.984.514 4.978.320On 21 July 2009, the Company issued 500 bonds of nominal value €10.000 each maturing on 30 June2014. The bonds carry a fixed rate of 6,75% of the nominal value.The bonds constitute subordinated unsecured securities of the Company, which are guaranteed by Bankof Cyprus Public Company Ltd (΄΄Guarantor΄΄, ΄΄Bank΄΄) and are ranked pari passu.The Company has the right to early redemption of the bonds in full on 30 June 2011 or on any interestpayment date following, the purchase price as defined below, plus any accrued interest.Purchase price plus premium 2% of their nominal value reduction of 0,5% each year:2012: €10,150 per bond2013: €10.100 per bond2014: €10.050 per bondInterestThe interest on debentures for the year amounted to €342.188 (€342.188)./ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 20114323. DEFERRED TAX LIABILITIESThe total deferred tax arises as follows:Temporary differences betweendepreciation and capital allowances2011€THE GROUP2010€THE COMPANY2011€2010€Balance 1 January (778.360) (682.549) (778.360) (682.549)Deferred tax for the year (note 11) - (95.811) - (95.811)Balance 31 December (778.360) (778.360) (778.360) (778.360)Deferred tax is calculated in full on all temporary differences under the liability method using the applicable taxrates (Note 11).Deferred tax assets are recongised to the extent that it is probable that future taxable profit will be available againstwhich the temporary differences can be utilised. The Board of Directors assessing the results of the Group for theyear and because of the adverse effects of the unfair practices of the competitions and of the lengthy response fromthe relevant Government Department, which contributed to the losses of the year, believe that the Group is notexpected to cover the taxable losses in the foreseeable future. For this reason it was decided not to recognizedeferred tax assets of the Group for the year.Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assetsagainst current tax liabilities and when the deferred taxes relate to the same tax authority.24. TRADE AND OTHER PAYABLESTHE GROUPTHE COMPANY2011 2010 2011 2010€ € € €Trade payables 8.186.691 11.556.328 8.186.691 11.556.328Shareholders‟ current accounts credit balances(Note 26 (b) (iii)) 2.207.071 7.528.685 2.207.071 7.528.685VAT 569.247 - 569.247 -Accruals 459.684 351.990 446.533 338.539Other payables 15.206 62.254 15.206 62.254Deferred income 1.831.448 1.060.659 1.831.448 1.060.659Special contribution to the defence fundwithheld on interest 60.608 - 60.608-Amount payable to related companies(Note 26 (b) (v)) 1.642.213 2.130.951 1.642.213 2.130.951Amount payable to subsidiary company(Note 26 (b) (iv)) - - - 1.22014.972.168 22.690.867 14.959.017 22.678.636The fair value of trade and other payables due within one year approximate to their carrying amounts as representedin the balance sheet date. The deferred income consist of receipts against income relating to future financial period./ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 20114425. TAXATION DUETHE GROUP THE COMPANY2011 2010 2011 2010€ € € €Special contribution to the defence fund, due 7.936 12.840 7.890 12.79426. RELATED PARTY TRANSACTIONSα. Transactions(i) Sales of services7.936 12.840 7.890 12.794THE COMPANY2011 2010€ €With subsidiary companiesSale of fixed asetsSilverlink Investments Limited 33.415 -33.415 -To related partiesTHE GROUP THE COMPANY2011 2010 2011 2010€ € € €Francoudi & Stephanou Limited 18.731 29.542 18.731 29.542Aeolos Travel 132.426 114.011 132.426 114.011Teledev East Limited 1.886 2.553 1.886 2.553Aeolos (Cyprus) Travel Limited 73 2.547 73 2.547Alpha Copy Limited - 4.070 - 4.070Aeolos Swiss (CapoBay) Limited 19.877 3.072 19.877 3.072Teleset Limited - 43 - 43Hollandia Aviation Limited 597 748 597 748Francoudi & Stephanou Insurance Ltd 6.421 5.941 6.421 5.941Lametus Holdings Ltd 49.600 - 49.600 -Velister Ltd 38.110 - 38.110 -Beluggaweb Ltd 29.167 - 29.167 -Photos Photiades Distributors Limited 4.850 3.786 4.850 3.786Photos Photiades Brewery Limited 15.756 11.499 15.756 11.499Photos Photiades Limited 451 519 451 519Photos Photiades Group Limited 436 115 436 115Αyios Andronicos Development Co Limited 10.800 2.315 10.800 2.315Logica Development Limited 960 - 960 -Alert Management Services Ltd 188 - 188 -330.329 180.761 330.329 180.761The sales to the subsidiary and to the related companies were made on commercial terms and conditions./ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 20114526. RELATED PARTY TRANSACTIONS (CONT’D)α. Transactions(ii) Purchases of products and servicesTHE GROUP THE COMPANY2011 2010 2011 2010Subsidiary companies Name of transactions € € € €M&S Medproperties Ltd Right to utilize space - - 6.250 -Related partiesTeledev East Limited Rent 116.868 112.084 116.868 112.084Francoudi & StephanouInsurance Limited Insurances 244.654 278.666 244.654 278.666Francoudi & Stephanou Services and534.538 301.201 534.538 301.201LimitedelectricityLogica Development Rents 439.485 425.428 439.485 425.428LimitedLametus Holdings Limited Advisory services 193.800 204.000 193.800 204.000Aeolos Cyprus Travel Tickets overseas 29.916 44.897 29.916 44.897LimitedAeolos Travel Rent 34 1.527 34 1.527Alpha Copy Limited Purchases - 38 - 38Federated Agencies Limited Rents - 7.894 - 7.894Teleset Limited Services 4 160 4 160The HNS Property Trust Rents 15.631 15.000 15.631 15.000Beluggaweb Ltd Services 525 - 525 -HNS Ltd Purchases 1.330 - 1.330 -Aeolos Swiss (Capo Bay) Services 312 - 312 -Ltd1.577.097 1.390.895 1.577.097 1.390.895The purchases from the subsidiary companies were made on commercial terms and conditions.(iii) Interest paid 2011 2010€ €Lametus Holdings Limited 91.392 131.443Manglis (Holdings) Limited 84.190 66.356Celltech Limited 93.780 59.996Ayios Andronicos Developments Ltd 121.765 -Good Hope Investments Limited 121.765 -The HNS Property Trust - 2.333512.892 260.128/ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 20114626. RELATED PARTY TRANSACTIONS (CONT’D)b. Balances at the year end(i) Amounts receivable from subsidiary companies (Note.20)THE COMPANYNature of transactions 2011 2010Name € €SilverLink Investments Limited Other 34.654 -M&S Medproperties Limited Other 3.085 1.43537.739 1.435The amounts receivable from subsidiary companies are interest free and they have no specified repaymentdate.(ii) Amounts receivable from related companies (Note.18)Nature ofTHE GROUPTHE COMPANYtransactions2011 2010 2011 2010Name € € € €Aeolos Travel Limited Trade 42.693 73.349 42.693 73.349Aeolos Swiss (Capo Bay) Limited Trade 28.303 17.718 28.303 17.718R&D Primetel Ltd Trade 1.610 1.610 1.610 1.610HNS Limited Trade 314 30.858 314 30.858Hollandia Aviation Limited Trade 140 140 140 140Teledev East Limited Trade 155.361 103.637 155.361 103.637Thunderworx Limited (Shareholders) Finance 547.257 547.247 547.257 547.247Photos Photiades Group Limited Trade 114 - 114 -Photos Photiades Trade 439 439 439 439Photos Photiades Brewery Limited Trade 11.584 10.267 11.584 10.267Photos Photiades Distributors Limited Trade 1.325 194 1.325 194Aeolos Cyprus Travel Trade 649 3.384 649 3.384The HNS Property Trust Trade - 1.656 - 1.656Ayios Andronicos Development Co Trade 3.191 1.601 3.191 1.601LimitedF&S Marina Limited Trade 459 - 459Elvora Holdings Limited Trade 16.855 - 16.855 -Repina Holdings Limited Trade 203 - 203 -Velister Limited Trade 11.730 - 11.730 -Velister Limited Finance 250.000 250.000 250.000 250.0001.072.227 1.042.100 1.072.227 1.042.100(iii) Credit balances of shareholders’ current account (Note 24)THE GROUP THE COMPANY2011 2010 2011 2010€ € € €Μanglis (Holdings) Limited 596.184 4.066.356 596.184 4.044.356Celltech Limited 1.610.887 3.462.329 1.610.887 3.462.3292.207.071 7.528.685 2.207.071 7.528.685The above amounts bear interest 7% per annum (see note 26.α. (iii))./ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 20114726. RELATED PARTY TRANSACTIONS (CONT’D)(iv) Amount payable to subsidiary company (Note.24)THE GROUP THE COMPANYNature of 2011 2010 2011 2010transaction € € € €Silverlink Investments Limited Other - - - 1.220- - - 1.220(v) Amounts payable to related companies (Note 24)Nature of THE GROUP THE COMPANYtransaction 2011 2010 2011 2010Name € € € €Francoudi & Stephanou InsuranceLimited Trade 149.789 107.520 149.789 107.520Francoudi & Stephanou Limited Trade 23.779 90.196 23.779 90.196Logica Development Limited Trade 138.724 - 138.724 -Lametus Holdings Limited Trade 1.299.778 1.933.146 1.299.778 1.933.146The HNS property Trust Trade 12.028 - 12.028 -Teleset Limited Trade 1 39 1 39Beluggaweb Limited Trade 18.114 - 18.114 -Two Serve Airport ServicesLimited Trade - 50 - 501.642.213 2.130.951 1.642.213 2.130.951The above amounts are payable within one year and they are interest free except from Lametus HoldingsLimited which bears interest 7% p.a. (see note 26.a.(iii)).(vi) Loans from related companies (Note 21)THE GROUP THE COMPANY2011 2010 2011 2010€ € € €Good Hope Investments Limited 4.103.456 - 4.103.456 -Ayios Andronikos Development Co. Ltd 4.103.500 - 4.103.500 -8.206.956 - 8.206.956 -Note:The above related companies have taken a loan from Bank of Cyprus Public Company Limited on behalf ofthe Group. The loans bear interest as provided in this agreement, the Basic Interest of Enterprises + 2%./ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 20114827. FINANCIAL MANAGEMENT RISK(a) Financial risk factorsThe Group is exposed to the following risks from its use of financial instruments:Credit riskLiquidity riskMarket price riskCompliance riskReputation riskOperating riskLegislation riskOther risksThe Board of Directors has overall responsibility for the establishment and oversight of theCompany‟s risk management framework.The Company‟s risk management policies are established to identify and analyse the risks faced bythe Company, to set appropriate risk limits and controls, and monitor risks and adherence to limits.Risk management policies and systems are reviewed regularly to reflect changes in marketconditions and the Group‟s activities.(i) Credit riskCredit risk arises when a failure by counter parties to discharge their obligations could reducethe amount of future cash inflows from financial assets on hand at the date of the statements offinancial position. The Group has no significant concentration of credit risk. The Group haspolicies in place to ensure that sales of products and services are made to customers with anappropriate credit history and monitors on a continuous basis the ageing profile of itsreceivables. Cash balances are held with high credit quality financial institutions and the Grouphas policies to limit the amount of credit exposure to any financial institution.Trade and other receivablesThe Group‟s exposure to credit risk is influenced mainly by the individual characteristics of eachcustomer.The Group establishes an allowance for impairment that represents its estimate of incurred losses inrespect of trade and other receivables. The main components of this allowance are a specific losscomponent that relates to individually significant exposures, and a collective loss componentestablished for groups of similar assets in respect of losses that have been incurred but not yetidentified.Exposure to credit riskExcept as detailed in the following table, the carrying amount of financial assets recorded in thefinancial statements, which is net of impairment losses, represents the maximum credit exposurewithout taking account of the value of any collateral obtained:THE GROUPTHE COMPANY2011 2010 2011 2010€ € € €Cash at bank 466.181 332.764 466.181 332.764Trade and other receivables 9.333.212 10.298.485 9.367.296 10.287.5159.799.393 10.631.249 9.833.477 10.620.279/ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 20114927. FINANCIAL MANAGEMENT RISK (CONT’D)(a)27.(i).1Financial risk factors (cont’d)Credit quality of financial assetsThe credit quality of financials assets that are neither past due nor impaired can be assessed by reference toexternal credit ratings (if applicable) or to historical information about counterparty default rates:Faulty performing trade receivablesTHE GROUP2011€2010€THE COMPANY2011 2010€€Counterparties without external credit ratingsGroup 1 340.653 303.545 340.653 303.545Group 2 6.812.753 7.308.299 6.812.753 7.308.299Group 3 352.120 461.340 352.120 461.340Total faulty performing trade receivables 7.505.526 8.073.184 7.505.526 8.073.184Faulty performing other receivablesGroup 4 1.072.227 1.042.100 1.109.966 1.043.535Group 5 755.459 1.183.201 751.804 1.170.796Total faulty performing other receivables 1.827.686 2.225.301 1.861.770 2.214.331Cash at bank, short term bank deposits and cash inhand9.333.212 10.298.485 9.367.296 10.287.515Notice accounts 31.397 17.270 31.397 17.270Current accounts 399.608 301.245 399.608 301.245Cash in hand 35.176 14.249 35.176 14.249Group 1 – new customers (less than 6 months).466.181 332.764 466.181 332.764Group 2 – existing customers (more than 6 months) with no defaults in the past.Group 3 – existing customers (more than 6 months) with some defaults in the past. All defaults were fullyrecovered.Group 4 – companies within the group, common control companies and associates with no defaults in the past.Group 5 – Advances, prepayments and VAT refundable.None of the financial assets that are fully performing has been renegotiated.(ii)Liquidity riskLiquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatchedposition potentially enhances profitability, but can also increase the risk of losses. The Company hasprocedures with the object of minimizing such losses such as maintaining sufficient cash and other highlyliquid current assets and by having available an adequate amount of committed credit facilities./ . . . .

PRIMETEL PLC50NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 201127. FINANCIAL MANAGEMENT RISK (CONT’D)The following are the contractual maturities of financial liabilities, including estimated interest payments:THE GROUPCarryingamountContractualcash flows 3 monthsBetween 3and 12months 1-2 years 2-5 yearsMore than 5years€ € € € € € €31 December 2011Bank loans 44.002.603 60.173.544 146.063 3.033.018 9.350.274 24.611.016 23.033.173Bonds 4.984.514 6.687.500 - - - 6.687.500 -Bank overdrafts 2.202.701 2.202.701 2.202.701 - - - -Trade and otherpayables 14.972.168 14.972.168 14.972.168 - - - -66.161.986 84.035.913 17.320.932 3.033.018 9.350.274 31.298.516 23.033.17331 Γεκεμβρίου2010Bank loans 33.495.593 41.602.828 1.471.952 4.128.094 14.791.545 18.293.337 2.917.900Bonds 4.978.320 6.687.500 - - - 6.687.500 -Bank overdrafts 4.303.303 4.303.303 4.303.303 - - - -Trade and otherpayables 22.690.867 22.690.867 22.690.867 - - - -65.468.083 75.284.498 28.466.122 4.128.094 14.791.545 24.980.837 2.917.900THE COMPANYCarryingamountContractualcash flows 3 monthsBetween 3and 12months 1-2 years 2-5 yearsMore than 5years€ € € € € € €31 December 2011Bank loans 44.002.603 60.173.544 146.063 3.033.018 9.350.274 24.611.016 23.033.173Bonds 4.984.514 6.687.500 - - - 6.687.500 -Bank overdrafts 2.202.701 2.202.701 2.202.701 - - - -Trade and otherpayables 14.959.017 14.959.017 14.959.017 - - - -31 December 201057.736.233 84.022.762 17.307.781 3.033.018 9.350.274 31.298.516 23.033.173CarryingamountContractualcash flows 3 monthsBetween 3and 12months 1-2 years 2-5 yearsMore than 5years€ € € € € € €Bank loans 33.495.593 41.602.828 1.471.952 4.128.094 14.791545 18.293.337 2.917.900Bonds 4.978.320 6.687.500 - - - 6.687.500 -Bank overdrafts 4.303.303 4.303.303 4.303.303 - - - -Trade and otherpayables 22.678.636 22.678.636 22.678.636 - - - -65.455.852 75.272.267 28.453.891 4.128.094 14.791545 24.980.837 2.917.900/ . . . .

PRIMETEL PLCNOTES THE FINANCIAL STATEMENTSFor the year ended 31 December 20115127. FINANCIAL MANAGEMENT RISK (CONT’D)(iii) Market riskMarket risk is the risk that changes in market prices, such as foreign exchange rates, interest rate andequity prices will affect the Group‟s income or the value of its holdings of financial instruments.Interest rate riskInterest rate risk is the risk that the value of financial instruments will fluctuate due to changes inmarket interest rates. Borrowings issued at variable rates expose the Group to cash flow interest raterisk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group‟smanagement monitors the interest rate fluctuations on a continuous basis and acts accordingly.At the reporting date the interest rate profile of interest-bearing financial instruments was:THE GROUP THE COMPANY2011 2010 2011 2010€ € € €Fixed rate instrumentsFinancial liabilities 4.984.514 4.978.320 4.984.514 4.978.320Variable rate instrumentsFinancial liabilities 46.205.304 37.798.896 46.205.304 37.798.896Sensitivity analysis51.189.818 42.777.216 51.189.818 42.777.216An increase of 100 basis points in interest rates at 31 December 2011 would have increased(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that allother variables, in particular foreign currency rates, remain constant, For a decrease of 100 basispoints there would be an equal and opposite impact on the profit and other equity.THE GROUP THE COMPANYProfit or (loss)Profit or loss2011 2010 2011 2010€ € € €Financial instruments of floating chargeIncrease 462.053 377.989 462.053 377.989Decrease 462.053 377.989 462.053 377.989Currency riskCurrency risk is the risk that the value of financial instruments will fluctuate due to changes inforeign exchange rates. Currency risk arises when future commercial transactions and recognizedassets and liabilities are denominated in a currency that it not the Group‟s measurement currency.The Group is exposed to foreign exchange risk arising from various currency exposures primarilywith respect to the dollars of United States and the British Pounds. The Company‟s managementmonitors the exchange rate fluctuations on a continuous basis and acts accordingly.The carrying amounts of the Group‟s foreign currency denominated monetary assets and monetaryliabilities at the reporting date are as follows:/ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 20115227. FINANCIAL MANAGEMENT RISK (CONT’D)THE GROUP31 December 2011United States BritishTotal Euro dollars poundsAssets € € € €Trade and other receivables 9.333.212 8.978.546 320.462 34.204Cash in hand and at bank 466.181 465.885 296 -9.799.393 9.444.431 320.758 34.204LiabilitiesBank current accountsand long term loans 46.205.304 46.205.304 - -Bonds 4.984.514 4.984.514 - -Taxation due 7.936 7.936 - -Trade and other payables 14.972.168 14.388.969 577.194 6.005(66.169.922) (65.586.723) (577.194) (6.005)Net exposure (56.370.529) (56.142.292) (256.436) 28.19931 December 2010Assets € € € €Trade and other receivables 10.298.485 10.224.878 73.067 -Cash in hand and at bank 332.764 331.995 769 -10.631.249 10.556.873 74.376 -LiabilitiesBank current accountsand long term loans 37.798.896 37.798.896 - -Bonds 4.978.320 4.978.320 - -Taxation due 12.840 12.840 - -Trade and other payables 22.690.867 20.786.409 1.900.356 4.102(65.480.923) (63.576.465) (1.900.356) (4.102)Net exposure (54.849.674) (53.019.592) (1.825.980) (4.102)THE COMPANY31 December 2011United States BritishTotal Euro dollars poundsAssets € € € €Trade and other receivables 9.367.296 9.012.630 320.462 34.204Cash in hand and at bank 466.181 465.885 296 -9.833.477 9.478.515 320.758 34.204LiabilitiesBank current accountsand long term loans 46.205.304 46.205.304 - -Bonds 4.984.514 4.984.514 - -Taxation due 7.890 7.890 - -Trade and other payables 14.959.017 14.375.818 577.194 6.005(66.156.725) (65.573.526) (577.194) (6.005)Net risk exposure (56.323.248) (56.095.011) (256.436) 28.199/ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 20115327. FINANCIAL MANAGEMENT RISK (CONT’D)31 December 2010AssetsUnited States BritishTotal Euro dollars pounds€ € € €Trade and other receivables 10.287.515 10.213.908 73.607 -Cash in hand and at bank 332.764 331.995 769 -10.620.279 10.545.903 74.376 -LiabilitiesBank current accounts and long term loans 37.798.896 37.798.896 - -Bonds 4.978.320 4.978.320 - -Taxation due 12.794 12.794 - -Trade and other payables 22.678.636 20.774.178 1.900.356 4.102(65.468.646) (63.564.188) (1.900.356) (4.102)Net exposure (54.848.367) (53.018.285) (1.825.980) (4.102)The important exchange rates prevailing during the year were:As at the balance sheet date2011 2010€ €United States dollars 1,29 1,35British pounds 0,84 0,84Sensitivity analysisA 10% strengthening of the Euro against the following currencies at 31 December 2011 would have increased(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, inparticular interest rates, remain constant. For a 10% weakening of the Euro against the relevant currency at 31December 2011, there would be an equal and opposite impact on the profit and equity.31 December THE GROUP THE COMPANYProfit or(loss)Profit or(loss) Profit or (loss) Profit of (loss)2011 2010 2011 2010€ € € €United States dollars 18.072 165.998 18.072 165.998British pounds (2.369) (373) (2.369) (373)(iv) Compliance riskCompliance risk is the risk of financial loss, including fines and other penalties, which arises from noncompliancewith laws and regulations of the state. The risk is limited to a significant extent due to thesupervision applied by the Compliance Officer, as well as by the monitoring controls applied by the Group.(v) Reputational riskThe risk of loss of reputation arising from the negative publicity relating to group‟s operations (whether true orfalse) may result in a reduction of its clientele, reduction in revenue and legal action against the group. Thegroup applies procedures to minimize this risk./ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 20115427. FINANCIAL MANAGEMENT RISK (CONT’D)(vi) Operational riskOperational risk is the risk that arises from the deficiencies relating to the Group‟s informationtechnology and control systems as well as the risk of human error and natural disasters. TheGroup‟s systems are evaluated, maintained and upgraded continuously.(vii) Litigation riskLitigation risk is the risk of financial loss, interruption of the Group‟s operations or any otherundesirable situation that arises from the possibility of non-execution or violation of legalcontracts and consequentially of lawsuits. The risk is restricted to the contracts entered by theGroup for its operations.(viii) Other risksThe general economic environment prevailing in Cyprus and internationally may affect theCompany‟s operations to a great extent. Concepts such as inflation, unemployment, and thedevelopment of the gross domestic product are directly linked to the economic activity of everycountry and any variation in these and the economic environment in general may create chainreactions in all areas thus affecting the Group.Capital managementThe Group manages its capital to ensure that it will be able to continue as a going concern whilemaximising the return to shareholders through the optimization of the debt and equity balance. TheGroup‟s overall strategy remains unchanged from last year.28. FAIR VALUESThe fair value of the financial assets and liabilities of the Group approximate their carryingamounts that are referred in the statement of financial position.29. CAPITAL/ CONTINGENT LIABILITIESThe Group had capital/contingent liabilities as at 31 December 2011 as follows:Capital commitmentsAt 31 December 2011 the Company had capital commitments to Electricity Authority ofCyprus, CYTA, LTV, Sigma Radio TV., Apollo Podosfero (Public) Limited, Athletic ClubOmonia, Nicosia, etc., for a total amount of €14.618.367 out of which €1.555.242 (2010:€2.462.600) are covered by bank guarantees.Further to the above in accordance with the existing agreement between the Company andEAC, the Company will pay to EAC 3% of the net profit each year./ . . . .

PRIMETEL PLCNOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 20115529. CAPITAL/ CONTINGENT COMMITMENTS (CONT’D)Operating lease commitmentsThe Group has committed on various contracts under non-cancellable operating leases for renting ofoffices and shops with the method of leasing. These leases can be cancelled only with the consent ofboth parties.The total commitments of the Group as at 31 December 2011 are analysed as follows:2011 . 2010To related 2011parties Other Total Total€ € € €Payable within one year 408.700 132.398 541.098 677.232Payable between one and five years 369.744 126.496 496.240 224.670Payable more than five years - - - 10.000Capital commitments778.444 258.894 1.037.338 911.902Capital commitments contracted in previous years and during 2011 but have not yet fully incurredand which are included in the capital commitments above are as follows:THE GROUP THE COMPANY2011 2010 2011 2010€ € € €Intangible assets 13.063.125 11.964.798 13.063.125 11.964.79831. POST BALANCE SHEET EVENTSOn 19 September 2008 the Company had applied to the Municipality of Yeroskipou for buildingpermit for the construction of a landing station for international sea cables on private property with apurpose of the view of strengthening of the international communications of Cyprus. Although theCompany had secured all necessary permits and approvals from all relevant Ministries and Agencies,the Municipality of Yeroskipou rejected the application on the grounds that the Planning permission΄΄was wrongly given and it was illegal and / or undocumented΄΄. As a result, the Company applied tothe Supreme Court in 2009 seeking the annulment of the decision of the Municipality of Yeroskipou.On 31 January 2012 the Supreme Court, in its judgment, having observed that the invalidityimparting a perfectly legitimate transaction raises serious background error as to the facts, concludedthat the claim of Primetel against the municipality of Yeroskipou is successful without considerationof other pleas decision . Therefore, the decision of the Municipality of Yeroskipou was recalled withcosts in Favor of the applicants-that of the Company. The Supreme‟s decision paves the way forclaiming substantial damages for losses suffered by the Company from the unlawful decision of theMunicipality of Yeroskipou.