SAF Tehnika

Annual Report • Oct 20, 2014

for the year ended 30 June 2014

Contents

	raye
Information on the Company	3
Management Report	4-5
Statement of the Board's Responsibilities	6
Independent Auditors' Report	7 - 8
Financial statements:
Statement of Financial Position	9
Statement of Profit or Loss and Other Comprehensive Income	10
Statement of Changes to Shareholders' Equity	11
Statement of Cash Flows	12 - 13
Notes to the Financial Statements	14 - 47

Information on the Company
Name of the company	A/S "SAF Tehnika"
Legal status	Joint Stock Company
Number, place and date of registration	40003474109 Riga, Latvia, 27 December 1999 Registered with the Commercial Register on 10 March 2004
Address	Ganību dambis 24a Riga, LV-1005 Latvia
Name of shareholders	Didzis Liepkalns (17.05%) Andrejs Grišāns (10.03%) Normunds Bergs (9.74%) Juris Ziema (8.71%) Vents Lācars (6.08%) lvars Senbergs (5.27%) (līdz 04.09.2013) Koka Zirgs SIA (5.27%) (no 04.09.2013) Swedbank AS klienti (5.02%) Pārējie akcionāri (48.10%)
their positions	Names of the Council members, Vents Lacars - Chairman of the Council Juris Ziema - Member of the Council Andrejs Grišāns - Member of the Council Ivars Senbergs - Member of the Council Aivis Olšteins - Member of the Council
Names of the Board members, their positions	Normunds Bergs - Chairman of the Board Didzis Liepkalns - member of the Board Aira Loite - member of the Board
Reporting period	1 July 2013 - 30 June 2014
Previous reporting period	1 July 2012 - 30 June 2013
Auditors and address	KPMG Baltics SIA Licence nr. 55 Vesetas iela 7 Riga, LV-1013 Latvia
	Armine Movsisjana Sworn Auditor Certificate No 178

ప

Management report

Line of business

SAF Tehnika (hereinafter - the Company) is a developer, manufacturer and distributor of digital microwave equipment. The Company provides comprehensive and cost effective wireless broadband connectivity solutions for digital voice and data transmissions to fixed and mobile network operators and data transmission service providers in public and private sectors as an alternative to cable networks.

Company's net turnover in financial year 2013/ 2014 was 12.03 million EUR, 1.3 million or 9.7 % less than in the previous financial year 2012/ 2013. Considering the decline in demand in microwave radio market worldwide and the fierce competition, in the reporting year the Company performed its historically wide sales market assessment, focusing consequently on markets with strategically greater potential and decreasing resource involvement in less perspective regions. Also, Company's assessment and identification of the needs of specific customers was aimed to develop niche product supply. Additional revenue was drawn from the development of specific customer required functionality of SAF Tehnika products and from technical consultations provided for network planning and construction.

In comparison to the previous financial year, the turnover of European and CIS region had increased by 2%, however, this increase did not make up for the 34% decrease in turnover for Asia, Middle East and Africa countries - a fierce competition still dominates the market where wireless data transmission equipment is sold, and suppliers are challenged to price wars. Sales on the America's region, include countries of North, South and Central America, constituted 44% of annual turnover. In comparison to the previous year there was a 5% decrease. A notable contribution was made to the Company's product marketing in the USA and Canada by its USA subsidiary company 'SAF North America'. Besides, the subsidiary provided product warehouse and logistic services in the reporting year.

Export accounts for 97.2% of the turnover and was 11.69 million EUR. In the reporting period Company's production was exported to 79 countries worldwide.

SAF Services, jointly controlled entity 50% owned by the Company, was established with the aim to provide network construction and management services in the USA had built successfully it's the first trial network, but was not able to get return from this investment.

To promote the recognition of SAF brand, introduce existent as well as potential customers with SAF products and solutions, the Company continued an active participation in the most significant industry exhibitions in Europe, America and Africa. Company's export activities were supported by Investment and Development Agency of Latvia that co-financing the participation in some of industry exhibitions. An approval in assessment was given by customers to the new SAF Tehnika webpage that was launched on October 2013. To this point, comprehensively, detailed information about products and video materials on their application are available on the webpage.

In the reporting period, CFIP products were on the highest demand, and FreeMile, Lumina and Marathon were the best selling items. In a growing demand were the newest serial products that were given in the production in the course of the reporting year. These products were Spectrum Compact - a measurement equipment for field engineers and Integra - next generation radio systems that employing latest modem processing and radio technologies.

To increase its competitiveness, the Company was searching for a possible object as to reduce product, manufacturing and other costs. In result, Company's operational costs in the reporting year did not exceed budget levels, and, compared to the previous year, decreased for 10%.

SAF Tehnika has secured its financial stability. Company's net cash flow was positive regarding the 12 month period and constituted 1.32 million EUR. In March 2014, in compliance with warranty contract of export credit, the Company received compensation in the amount of 520 thousand USD by Latvian Guarantee Agency due to the unpaid deliveries made to the Brazilian partner on December 2012 in order to execute the project of Brazilian television broadcasting network.

Management report (continued)

In the reporting period, the Company invested 242 thousand EUR into IT infrastructure, production and research equipment, software, licenses and product certification purchases.

The Company finalized financial year 2013/ 2014 with a profit of 119 thousand EUR.

Research and development

In a long term, Company's precondition and key to success is its ability to constantly develop its products. In the reporting year, an Integra product line development expanding the proposal in different frequency bands continued, and solutions were drawn regarding the improvement of functionality and quality meters and reduction of product's manufacturing the desire of customers to lessen the time and money spent on commissioning of data transmission equipment, and, moreover, identifying the lack of easily-usable auxiliary equipment in the market, Company not only continued working on the spectrum analyzer Spectrum Compact's newest versions, but also created a new device - spectrum generator. Also new additions are made to existing products. In the reporting period, Company's product development projects has gained a cofinance from 'LEO Petijumu centrs" in the amount of 253 thousand EUR.

Future perspectives

SAF Tehnika is a company that has been able to gain long-term experience and knowledge in the microwave radio field and is able to provide excellent quality products to a wide range market, proposing unique offer and developments that are based on customer wishes and demands. Company is financially stable and able to withstand in these economically difficult times when other rivaling companies are not successful. The task of the Company is to continue the work on next generation data transmission equipment, putting a focus on advancement of functionality, reduction of production costs, the customer satisfaction, effective production and progress of inner procedures. The aim is to restore revenue levels to provide long-term positive net results.

Company remains financially stable and with positive outlook for the next financial year; however the Board of SAF Tehnika refrains from any forward-looking sales and financial results announcements.

Board's proposal for disposition of profits

The Board of the Company advances reporting year's profit to be distributed as dividends.

Normunds Bergs Chairman of the Board

Aira Loite Member of the Board

Riga, 17 October 2014

STATEMENT OF THE BOARD'S RESPONSIBILITIES

The Board of SAF Tehnika A/S (hereinafter - the Company) is responsible for preparing the financial statements of the Company.

The financial statements set out on pages 9 to 42 are prepared in accordance with the source documents and present fairly the financial position of the Company as at 30 June 2014 and the results of its financial performance and cash flows for the year then ended.

The above mentioned financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the European Union on a going concern basis. Appropriate accounting policies have been applied on a consistent basis. Prudent and reasonable judgments and estimates have been made by the Board in the preparation of the financial statements.

The Board of SAF Tehnika A/S is responsible for the maintenance of proper accounting records, the safeguarding of the Company's assets and the prevention and detection of fraud and other irregularities in the Company. The Board is also responsible for the compliance with the Latvian state laws.

6

On behalf of the Board:

Normunds Bergs Chairman of the Board

Sil

Didzis Liepkalns

Member of the Board

Aira Loite Member of the Board

Riga, 17 October 2014

KPMG Baltics SIA Vesetas iela 7 Riga LV 1013 Latvia

+371 670 380 00 Phone Fax +371 670 380 02 Internet: www.kpmg.lv

Independent Auditors' Report

To the shareholders of A/S SAF Tehnika

Report on the Financial Statements

We have audited the accompanying financial statements of A/S SAF Tehnika ("the Company"), which comprise the statement of financial position as at 30 June 2014, the statements of profit and loss and other comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory notes, as set out on pages 9 to 42.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and for such internal controls as management determines are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal controls. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

KPMG Baltics SIA, a Latvian limited liability company and a member
firm of the KPMG network of independent member firms affiliated
with KPMG International Cooperative ("KPMG

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Company as at 30 June 2014, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the your mean Union.

Report on Other Legal and Regulatory Requirements

In addition, our responsibility is to assess whether the accounting information included in the Management Report, as set out on pages 4 to 5, the preparation of which is the responsibility of management, is consistent with the financial statements. Our work with respect to the Management Report was limited to the aforementioned scope and did not include a review of any information other than drawn from the financial statements of the Company. In our opinion, the management report is consistent with the financial statements.

KPMG Baltics SIA License No 55

Armine Movsisjana Member of the Board Sworn Auditor Certificate No 178 Riga, Latvia 17 October 2014

Statement of Financial Position

		30 June
	Note	2014	2013
ASSETS		EUR	EUR
Non-current assets
Property, plant and equipment	6	520 822	699 624
Intangible assets	ഗ	208 171	201 639
Investments in subsidiaries and joint ventures	7	61 745	68 462
Investments in other companies	7	1 188	1 188
Long term trade receivables	ത	53 526	64 404
Deferred tax asset	13	98 684	123 194
Total non-current assets		944 136	1 158 511
Current assets
Stock	00	4 498 753	4 251 795
Corporate income tax receivable	26	69 194	163 791
Trade receivables	ത	1 890 122	2 609 938
Due from related parties	ு	44 393	70 506
Other receivables	10	261 620	220 716
Prepaid expenses		108 822	125 380
Loans	29	180 581	361 050
Placements with banks	11		590 581
Cash and cash equivalents Total current assets	12	4 078 828	2 759 929
Total assets		11 132 313	11 153 686
		12 076 449	12 312 197
SHAREHOLDERS EQUITY
Share capital	14	4 226 185	4 226 185
Share premium		2 851 725	2 851 725
Retained earnings		3 279 953	3 161 028
Total shareholders' equity		10 357 863	10 238 938
LIABILITIES
Current liabilities
Trade and other payables	15	880 883	1 259 132
Provisions	15	14 643	87 836
Other liabilities	15	684 961	425 945
Due to related parties		25 908	23 621
Loans	16	6 781	14 081
Deferred income	17	105 410	262 644
Total liabilities		1 718 586	2 073 259
Total equity and liabilities		12 076 449	12 312 197

The accompanying netes on pages 14 to 42 form an integral part of these financial statements.

Normunds Bergs Chairman of the Board

Didzis Liepkalns Member of the Board

Aira Loite Member of the Board

Riga, 17 October 2014

Statement of Profit or Loss and Other Comprehensive Income

		For the year ended 30 June
	Note	2014 EUR	2013 EUR
Net sales Cost of goods sold Gross profit	18 19	12 025 751 (9 272 062) 2 753 689	13 323 193 (10 227 940) 3 095 253
Sales and marketing expenses Administrative expenses Loss from operating activities	20 21	(1 982 730) (795 836) (24 877)	(2 305 445) (847 481) (57 673)
Other income Impairment of long term investment	22 7	330 149 (36 568)	84 750
Financial income Financial expenses Net financial costs Profit/ (loss) before taxes	23 24	19411 (144 680) (125 269) 143 435	55 778 (88 874) (33 096) (6 019)
Corporate income tax Current year's profit/ (loss) Other comprehensive income	25	(24 510) 118 925	(14 714) (20 733)
Total comprehensive income/ (loss)		118 925	(20 733)

Earnings/ (loss) per share attributable to the shareholders of the Company (EUR per share)

Basic and diluted earnings/ (loss) per share

0.040

(0.007)

The accompanying notes on pages 14 to 42 form an integral part of these financial statements.

Didzis Liepkalns Member of the Board

27

Normunds Bergs Chairman of the Board

doit

Aira Loite Member of the Board

Riga, 17 October 2014

Statement of Changes to the Shareholders' Equity

	Share capital EUR	Share premium EUR	Retained earnings EUR	Total EUR
Balance as at 30 June 2012 Transactions with owners of the Company, recognised directly in	4 226 185	2 851 725	3 604 379	10 682 239
Equity			(422 618)	(422 618)
Dividends for 2011/2012			(422 618)	(422 618)
Total comprehensive income			(20 733)	(20 733)
Loss for the year			(20 733)	(20 733)
Other comprehensive income
Balance as at 30 June 2013 Transactions with owners of the Company, recognised directly in	4 226 185	2 851 725	3 161 028	10 238 933
Equity
Total comprehensive income			118 925	118 925
Profit for the year			118 925	118 925
Other comprehensive income
Balance as at 30 June 2014	4 226 185	2 851 725	3 279 953	10 357 863

The accompanying notes on pages 14 to 42 form an integral part of these financial statements.

1 Normunds Bergs

Chairman of the Board

200

Aira Loite Member of the Board

Riga, 17 October 2014

6

Didzis Liepkalns Member of the Board

Statement of Cash Flows

	Note	For the year ended 30 June
		2014 Eur	2013 EUR
Profit/ (loss) before taxes		143 435	(6 019)
Adjustments for:
- depreciation	6	323 756	324 083
- amortisation	6	84 085	84 169
- changes in write-down to net realizable value	8	(147 159)	(99 837)
- changes in provision for guarantees		(2 049)	(5 132)
- changes in accrued liabilities for unused vacations	15	3 179	19679
- changes in provisions for bonuses		(71 144)	71 144
- changes in doubtful debt allowances	ு	(24 707)	123 998
- interest income	23	(19411)	(55 778)
- government grants	22	(297 609)	(63 372)
- (profit)/ loss on disposal of property, plant and
equipment		6 005	(1 555)
- loss from long term investment revaluation		36 568
Operating profit/ (loss) before changes in current assets
(Increase)/ decrease in stock		34 949	391 380
		(99 799)	71 583
(Increase)/ decrease in receivables		933 169	(867 930)
Increase/ (decrease) in payables Cash from operating activities		(108 382)	427 416
Government grants		759 937	22 449
Corporate income tax paid	22	111 957	70 183
Other payments related to corporate income tax	26	(69 194)	(44 232)
Net cash flows from operating activities	25		(3 927)
		802 700	44 473
Cash flows from investing activities
Purchase of property, plant and equipment		(155 456)	(438 842)
Proceeds from sales of property, plant and equipment		48	1 636
Purchase of intangible assets		(86 168)	(47 544)
Interest income		24 345	68 267
Investments in other companies			(477)
Investments in subsidiaries and joint ventures		(29 851)	(60 946)
Loans issued			(400 000)
Loans repayment received		180 000	75 103
Net cash received from placements with banks/
(placed with banks)		590 581	2 053 674
Net cash flows from investing activities		523 499	1 250 871

The accompanying notes on pages 14 to 42 form an integral part of these financial statements.

Statement of Cash Flows (continued)

	Note	For the year ended 30 June
		2014 EUR	2013 EUR
Cash flows from financing activities
(Repaid)/ received loans		(7 300)	6 276
Dividends paid			(422 618)
Net cash flows from financing activities		(7 300)	(416 342)
Net increase of cash and cash equivalents		1 318 899	879 002
Cash and cash equivalents at the beginning of the year		2 759 929	1 880 927
Cash and cash equivalents at the end of the year	12	4 078 828	2 759 929

The accompanying hotes on pages 14 to 42 form an integral part of these financial statements.

Normunds Bergs Chairman of the Board

Didzis Liepkalns Member of the Board

Aira Loite Member of the Board

Riga, 17 October 2014

Notes to the financial statements

1. General information

The core business activity of SAF Tehnika A/S (hereinafter - the Company) is the design, production and distribution of microwave radio data transmission equipment offering an alternative to cable channels. The Company offers products to mobile network operators, data service providers (such as Internet service providers and telecommunications companies), as well as state institutions and private companies.

Promotion of the Company's products and services, market research, attraction of new clients and technical support in North America is provided by a 100% subsidiary SAF North America LLC.

In August 2012 another company began operations in North America - SAF Services LLC, in which the Company holds 50% shares (joint venture arrangement). The objective of establishing SAF Services LLC was to provide local clients with services connected with the creation, long-term maintenance and management of data transmission networks. Both of these companies are registered in the USA and operate in Denver, Colorado.

The Company is a public joint stock company incorporated under the Republic of Latvia. Its legal address is Ganību dambis 24a, Riga, Republic of Latvia.

The shares of the Company are listed on NASDAQ OMX Riga Stock Exchange, Latvia.

These financial statements were approved by the Company's Board on 17 October 2014. The financial statements will be presented for approval to the shareholders' meeting. The shareholders have the power to reject the financial statements prepared and issued by management and the right to request that new financial statements be issued.

2. Summary of accounting principles used

These financial statements are prepared using the accounting policies and valuation principles set out below. These policies have been applied consistently to all the years presented, unless otherwise stated.

These are the Company's separate financial statements reflecting the investments in subsidiaries and joint ventures at their cost less impairment. The consolidated financial statements of the Company will be prepared separately. The previous sets of separate and consolidated financial statements were prepared for the financial year ended 30 June 2013 and are available at the Company's headquarter on Ganibu dambis 241, Riga, Republic of Latvia and at the Company's website: www.saftehnika.com

A Basis of preparation

These financial statements have been prepared in accordance with the International Financial Reporting Standards as adopted by the European Union (IFRSs). The financial statements have been prepared under the historical cost convention (including financial instruments available-for-sale as it is impracticable to determine their fair value).

New standards and interpretations

Standards, amendments to standards and interpretations for the first time are applicable to financial statements for year ended on 30 June 2014:

· Amendments to IFRS 7 Disclosures (effective for annual periods beginning on or after 1 January 2013; to be applied retrospectively) contain new disclosure requirements for financial assets and liabilities that are offset in the statement of financial position or subject to master netting arrangements or similar agreements. Amendments have no impact on the financial statements as financial asset and liabilities offsetting is not performed by the Company.

Notes to the financial statements (continued)

2. Summary of accounting principles used (continued)

New standards and interpretations (continued)

• · IFRS 13 Fair Value Measurement (effective prospectively for annual periods beginning on or after 1 January 2013). IFRS 13 replaces the fair value measurement guidance contained in individual IFRSs with a single source of fair value measurement guidance. It defines fair value, establishes a framework for measuring fair value and sets out disclosure requirements for fair value measurements. IFRS 13 explains 'how' to measure fair value when it is required or permitted by other IFRSs. Amendments have no impact on the financial statements since management considers the methods and assumptions currently used to measure the fair value of assets to be consistent with IFRS 13.
• · Amendments to IAS 12: Deferred Tax: Recovery of Underlying Assets (effective for annual periods beginning on or after 1 January 2013; to be applied retrospectively). The amendments introduce a rebuttable presumption that the carrying value of investment property measured using the fair value model would be recovered entirely by sale. Management's intention would not be relevant unless the investment property is depreciable and held within a business model whose objective is to consume substantially all of the asset's economic benefits over the life of the asset. This is the only instance in which the presumption can be rebutted. No investment property held by the Company, therefore amendments have no impact on the financial statements.
• IAS 19 (2011) Employee Benefits (effective for annual periods beginning on or after 1 January 2013; to be applied retrospectively. Transitional provisions apply). The amendment requires actuarial gains and losses to be recognized immediately in other comprehensive income. The amendment removes the corridor method previously applicable to recognizing actuarial gains and losses, and eliminates the ability for entities to recognize all changes in the defined benefit obligation and in plan assets in profit or loss, which currently is allowed under the requirements of IAS 19. The amendment also requires the expected return on plan assets recognized in profit or loss to be calculated based on rate used to discount the defined benefit obligation. Amendments have no impact on the financial statements.

B Foreign currency revaluation

(a) Functional and reporting currency

On 1 January 2014 the Republic of Latvia joined the euro-zone and the Latvian Lat which was the Company's functional currency, was replaced by the euro. As a result, the Company converted its financial accounting to euros as from 1 January 2014. Prior period comparative information translated into euros using the official exchange rate of LVL 0.702804 to EUR 1.

(b) Transactions and balances

All amounts in these financial statements are expressed in the Latvian national currency - euro (EUR).

Foreign currency transactions are translated into the Company's functional currency applying the official exchange rate established by the European Central Bank at the transaction date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss.

All monetary asset and liability items were revalued to the Company's functional currency according to the exchange rate of the European Central Bank on the last day of the reporting year. Nonmonetary items of assets and liabilities, and foreign exchange transactions are revalued to the Company's functional currency in accordance with the exchange rate set by the European Central Bank on the transaction date.

	30.06.2014.	30.06.2013.
1 USD	1.365800	1.303904
1 GBP	0.801500	0.849823
1 LVL		0.702804

Notes to the financial statements (continued)

2. Summary of accounting principles used (continued)

C Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes expenses directly related to acquisition of property, plant and equipment. Such cost includes the cost of replacing part of such plant and equipment if the asset recognition criteria are met

Leasehold improvements are capitalized and disclosed as property, plant and equipment. Depreciation of these assets is calculated over the shorter of the leasehold period or the estimated useful life on a straight line basis.

Where an item of property, plant and equipment has different useful live as the other items of the same property, plant and equipment, they are accounted for as separate items of property, plant and equipment.

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment is recognised in the profit or loss statement as incurred.

Maintenance costs of tangible assets are recognized in the profit and loss statement as incurred.

Depreciation is calculated on a straight-line basis to write down each asset to its estimated residual value over its estimated useful life using the following rates:

	% per year
Equipment	25 (previously - 33.33%)
Vehicles
Other equipment and machinery	20 - 50 (previously - 25% - 50%)

During the reporting year the management has evaluated and reviewed estimated useful life of tangible assets due to change in the pattern of use (see Note 5).

Capital repair costs on leased Property, plant and equipment are written off on a straight line basis during the shortest of the useful lifetime of the capital repairs and the period of lease.

The assets residual values, useful lives and methods are reviewed, and adjusted if appropriate, at each reporting date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount exceeds its estimated recoverable amount (see Note F).

Gains and losses on disposals are determined by comparing proceeds with the respective carrying amount and included in the profit or loss statement.

D Intangible assets

(a) Trademarks and licences

Trademarks and licenses have a definite useful life and are carried at cost less accumulated amortisation and any accumulated impairment losses. Amortisation is calculated on a straight-line basis to allocate the costs of trademarks and licenses over their estimated useful life, which usually is 3 years.

(b) Software

The acquired software licenses are capitalised on the basis of the purchase and installation costs. These costs are amortised over their estimated useful lives of four years. During the reporting year management has evaluated and reviewed estimated useful life of software licences from 3 years to 4 years (see Note 5).

Notes to the financial statements (continued)

2. Summary of accounting principles used (continued)

E Cost of research and development activities

Research costs are recognized in profit and loss statement as incurred. An intangible asset arising from the development expenditure on an individual project is recognized only when the Company can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intentions to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete and the ability to measure reliably the expenditure during the development. Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and impairment losses. Any expenditure capitalized is amortized over the period of the expected future sales from the related project.

F Impairment of non-financial assets

Intangible assets that are not put in use or have an indefinite useful life are not subject to amortisation and are reviewed for impairment on an annual basis.

Moreover, the carrying amounts of the Company's property, plant and intangible assets that are subject to amortisation and depreciation and other non-current assets except for inventory and deferred tax asset are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of the assets in the unit (group of unit) on a pro rata basis.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset in relation to which the future cash flows have not been adjusted.

All Company's assets are allocated to two cash generating units that are identified as Company's operating segments (see Note 18). There have been no impairment indicators noted.

In respect of non-current assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. Any impairment loss reversed is only reversed to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

G Operating segments

Information on the Company's operating segments is disclosed in Note 18. Segment results that are reported to the Chief Executive Officer include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company's headquarters), head office expenses, and tax assets and liabilities.

Notes to the financial statements (continued)

2. Summary of accounting principles used (continued)

H Government grants

Government grants are recognized where there is a reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognized as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate and accordingly accounts receivable are recognized. Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to the profit or loss statement over the expected useful life of the relevant asset by equal annual instalments.

Within the framework of the contract signed between A/S SAF Tehnika and "LEO Petijumu centrs SIA" a cooperation project on a competence centre for the Latvian industry of manufacturing electrical and optical devices is being implemented, regarding which "LEO Petiium or mintral and has signed a contract with Investment and Development Agency of Latvia in order to obtain financing from the European Regional Development Fund. As part of the above project, A/S SAF Tehnika is conducting two individual research activities to develop new products. In order to implement projects under these activities, co-financing is provided to cover remuneration of project staff and other costs related to the specific projects. Projects planned to be impelemented in two years time. Co-financing received relates to expense items recognized in Statement of Profit or Loss and Other Comprehensive Income and thus is recognized as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. In case the co-financing is granted, however the cash is not yet receivables are recognized in Statement of Financial Position under Other receivables.

I Stock

Stock is stated at the lower of cost or net realizable value. Cost is valued based on the FIFO method. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary to make the sale. Costs of finished goods and work-in-progress include cost of materials, personnel and depreciation

J Financial instruments

The Company's financial instruments consist of trade receivables, investments in subsidiaries and joint ventures, investments in other companies' equity, other receivables, cash and cash equivalents, borrowings, trade payables and other payables and derivatives. Investments in other companies equity are classified as available for sale. All other financial assets except for investments in subsidiaries, joint ventures and derivatives are classified as loans and receivables but liabilities - as liabilities at amortised cost.

Financial instruments except for derivatives are initially recognised on the date that they are originated at fair value plus directly attributable transaction costs.

Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognized if the Company's obligations specified in the contract expire or are discharged or cancelled.

Loans, receivables and other debts

Loans and receivables and other debts are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than held for trading. Loans and receivables are stated at their amortized cost after deducting allowance for estimated irrecoverable amounts. Amortized cost is determined using the effective interest rate method, less any impairment losses. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset. When calculating the effective interest rate, the Company estimates future cash flows considering all contractual terms of the financial instruments. An impairment allowance for impairment of loans and receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables.

Notes to the financial statements (continued)

2. Summary of accounting principles used (continued)

J Financial instruments (continued)

Significant financial difficulties of the debtor, probability that the debtor will enter bankruptsy or financial reorganisation, and default or delinquency in payments are considered indicators that the loan or trade receivable is impaired. The amount of the allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the profit or loss statement. When a loan, receivables and other debts are uncollectible, it is written off.

Available for sale financial investments

Financial investments available-for-sale are acquired to be held for an indefinite period of time. Financial investments, whose market value is not determined in an active market and whose fair value cannot be reliably measured, are carried at acquisition cost. All other financial investments available-for-sale are carried at fair value. Gains or losses resulting from the change in fair value of financial investments available-for-sale, except for impairment losses, are recognised in other comprehensive income until the financial asset is derecognised; thereafter, the cumulative gain or loss previously recognised in other comprehensive income is recognised in profit or loss.

Liabilities

Liabilities are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

Please see Note 3 (2) for the description of accounting policy for derivatives.

K Cash and cash equivalents

Cash and cash equivalents comprise current bank accounts balances and deposits, and short term highly liquid investments with an original maturity of three months or less.

L Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are charged against the share premium account.

M Corporate income tax and Deferred tax

Corporate income tax comprises current and deferred tax.

The calculated current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years.

Deferred taxation arising from temporary differences between carrying amounts for accounting purposes and for tax purposes is calculated using the liability method. However, if the deferred tax arises from initial recognition of an asset or liability in a transaction other than a business acquisition that at the time of the transaction affects neither accounting, non- taxable profit or loss, it is not accounted for. Deferred tax is determined using tax rates (and laws) that have been enacted by the financial position date and are expected to apply when the related deferred tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future.

Income taxes are recognized through profit or loss unless they relate to items recognized directly in equity.

Notes to the financial statements (continued)

2. Summary of accounting principles used (continued)

N Employee benefits

The Company makes social insurance contributions under the State's health, retirement benefit and unemployment schemes at the statutory rates in force during the year, based on gross salary payments. The Company will have no legal or constructive obligations to pay further contributions if the statutory fund cannot settle their liabilities towards the employees. The cost of these payments is included into the profit or loss statement in the same period as the related salary cost.

O Revenue recognition

Revenue comprises the fair value of the goods and services sold, net of value-added tax and discounts. Revenue is recognised as follows:

(a) Sales of goods

Sale of goods is recognised when a Company entity has passed the significant risks and rewards of ownership of the goods to the customer, i.e. delivered products to the customer and the customer has accepted the products in accordance with the contract terms, and it is probable that the economic benefits associated with the transaction will flow to the Company.

(b) Provision of services

Revenue is recognised in the period when the services are rendered.

(c) Provision of extended warranty service

The Company provides extended warranty service of three to five years in addition to standard one to five years period depending from product. Revenue is recognized over the warranty extension period.

P Leases

Leases of property, plant and equipment in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the profit or loss statement on a straight-line basis over the lease period.

Q Payment of dividends

Dividends payable to the Company's shareholders are recognised as a liability in the Company's financial statements in the period in which the dividends are approved by the Company's shareholders.

R Financial income and expenses

Financial income and expenses comprise interest payable on borrowings calculated using the effective interest rate method, interest receivable on funds invested, and foreign exchange gains and losses. Interest income and expense are recognized in profit or loss as they accrue, taking into account the effective interest rate of the assetliability. The interest expenses of finance lease payments are recognized in profit or loss using the effective interest rate method.

S New standards and interpretations not yet adopted

The following new Standards and Interpretations are not yet effective for the annual period ended 30 June 2014 and have not been applied in preparing these financial statements:

Amendments to IAS 32 on Offsetting Financial Assets and Financial Liabilities o

Amendments to IAS 32 (effective for annual periods beginning on or after 1 January 2014; to be applied retrospectively) clarify that an entity currently has a legally enforceable right to set-off if that right is not contingent on a future event and enforceable both in the normal course of business and in the event of default, insolvency or bankruptcy of the entity and all counterparties.

Notes to the financial statements (continued)

2. Summary of accounting principles used (continued)

S New standards and interpretations not yet adopted (continued)

The Company does not expect the amendments to have any impact on the financial statements since the Company does not apply offsetting to any of their financial assets and financial liabilities and have not entered into master netting arrangements.

• · IAS 27 (2011) Separate Financial Statements (effective for annual periods beginning on or after 1 January 2014) introduces minor clarifications. The Standard no longer addresses the principle of control and requirements relating to the preparation of consolidated financial statements, which have been incorporated into IFRS 10, Consolidated Financial Statements. The Company has not yet completed the assessment of the impact of these new standards on the Company's operations.
• IAS 28 (2011) Investments in Associates and Joint Ventures (Amendments effective for annual periods beginning on or after 1 January 2014; to be applied retrospectively). There are limited amendments made to IAS 28 (2008):
  • · Associates and joint ventures held for sale. IFRS 5, Non-current Assets Held for Sale and Discontinued Operations applies to an investment, or a portion of an investment, in an associate or a joint venture that meets the criteria to be classified as held for sale. For any retained portion of the investment that has not been classified as held for sale, the equity method is applied until disposal of the portion held for sale. After disposal, any retained interest is accounted for using the equity method if the retained interest continues to be an associate or a joint venture.
  • · Changes in interests held in associates and joint ventures. Previously, IAS 28 (2008) and IAS 31 specified that the cessation of significant influence or joint control triggered remeasurement of any retained stake in all cases, even if significant influence was succeeded by joint control. IAS 28 (2011) now requires that in such scenarios the retained interest in the investment is not remeasured.

The Company has not yet completed the assessment of the impact of these new standards on the Company's operations.

IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities (effective for annual periods beginning on or after 1 January 2013; to be applied retrospectively). IFRS 10 provides a single model to be applied in the control analysis for all investees, including entities that currently are SPEs in the scope of SIC-12. IFRS 10 introduces new requirements to assess control that are different from the existing requirements in IAS 27 (2008).

Under the new single control model, an investor controls an investee when:

• (1) it is exposed or has rights to variable returns from its involvements with the investee;
• (2) it has the ability to affect those returns through its power over that investee; and
• (3) there is a link between power and returns.

The new IFRS 10 also includes the disclosure requirements and the requirements relating to the preparation of consolidated financial statements.

Under the new IFRS 11, joint arrangements are divided into two types, each having its own accounting model defined as follows:

• · a joint operation is one whereby the jointly controlling parties, known as the joint operators, have rights to the assets, and obligations for the liabilities, relating to the arrangement.
• · A joint venture is one whereby the jointly controlling parties, known as joint venturers, have rights to the net assets of the arrangement.

Notes to the financial statements (continued)

2. Summary of accounting principles used (continued)

S New standards and interpretations not yet adopted (continued)

IFRS 11 effectively carves out from IAS 31 jointly controlled entities those cases in which, although there is a separate vehicle for the joint arrangement, separation is ineffective in certain ways. These arrangements are treated similarly to jointly controlled assets/operations under IAS 31, and are now called joint operations. IFRS 11 eliminates the free choice of equity accounting or proportionate consolidation; the equity method must always be used in financial statements.

IFRS 12 requires additional disclosures relating to significant judgements and assumptions made in determining the nature of interests in an entity or arrangement, interests in subsidiaries, joint arrangements and associates and unconsolidated structured entities.

The Company has not yet completed the assessment of the impact of these new standards on the Company's operations.

3. Financial risk management

(1) Financial risk factors

The Company's activities expose it to a variety of financial risks:

• (a) foreign currency risk;
• (b) credit risk;
• (c) liquidity risk;
• (d) interest rate risk.

The Company's overall risk management focuses on the unpredictability of financial markets and seeks to minimise its potential adverse effects on the Company's financial performance. The Company uses derivative financial instruments to hedge certain risk exposures. The responsibility for risk management lies with the Finance Department. The Finance Department identifies and evalually for risks and seeks for solutions to avoid financial risks in close co-operation with other operating units of the Company. Financial risks are managed both on Company and consolidated level.

(a) Foreign currency risk

The Company operates internationally and is exposed to foreign currency risk arising mainly from fluctuations of the U.S. dollar.

Foreign currency risk arises primarily from future commercial transactions and recognised assets and liabilities. To manage the foreign currency risk arising from future commercial transactions and recognised assets and liabilities, the Company uses forward foreign currency contracts. Foreign currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency different from the entity's functional currency. The Finance Deparment analyses the net open position in each foreign currency. The Company might decide to enter to forward foreign currency contracts or to maintain borrowings (in form of credit line) in appropriate currency and amount.

The following schedule summarises net open positions for currencies expressed in EUR as at 30 June 2014:

	EUR	USD	Other currencies	Total
Financial assets
Gross Trade receivables	1 046 596	1 310 733		2 357 329
Cash and cash equivalents	2 921 317	1 153 288	4 223	4 078 828
Total	3 967 913	2 464 021	4 223	6 436 157
Financial liabilities
Accounts payables	(406 666)	(216 863)		(623 529)
Other payables	(253 892)	(3 462)		(257 354)
Loans	(1 977)	(4 804)		(6781)
Total	(662 535)	(225 129)		(887 664)
Net open positions	3 305 378	2 238 892	4 2723	5 548 493

Notes to the financial statements (continued)

3. Financial risk management (continued)

(1) Financial risk factors (continued)

The following schedule summarises net open positions for currencies expressed in EUR as at 30 June 2013:

	LVL	EUR	USD	Total
Financial assets
Gross Trade receivables	3 948	740 349	2 507 140	3 251 437
Placements with banks		360 503	230 078	590 581
Cash and cash equivalents	234 205	1 703 577	822 147	2 759 929
Total	238 153	2 804 429	3 559 365	6 601 947
Financial libilities
Accounts payables	(144 654)	(319 038)	(533 045)	(996 737)
Other payables	(128 403)	(40 733)	(93 259)	(262 395)
Loans	(1 050)	(6 449)	(6 582)	(14 081)
Total	(274 107)	(366 220)	(632 886)	(1 273 213)
Net open positions	(35 954)	2 438 209	2 926 479	5 328 734

Sensitivity analysis

A 10 percent weakening of the euro against the USD on 30 June would have increased (decreased) profit or loss and equity by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis for 2012/ 2013 performed based on assumptions – a 10 percent weakening of the lat against the USD and a 1 percent weakening of the lat against the EUR on 30 June would have increased) profit or loss and equity by the amounts shown below The Latvian lat was pegged to Euro as at 30 June 2013.

	2013/ 2014	2012/ 2013
	effect in EUR	effect in EUR
USD	223 889	292 648
EUR		27 992
	223 889	320 640

(b) Credit risk

The Company has significant exposure of credit risk with its customers. The Company's policy is to ensure that wholesale of products is carried out with customers having appropriate credit history. If the customers are residing in countries with high credit risk, then Letters of Credit issued by reputable credit institutions are used as credit risk management instruments. In situations where no Letters of Credit can be obtained from reputable credit institutions, the prepayments from the customers are requested or State Export Guarantees purchased. Customers' financial position is monitored on regular bases and assigned credit limits has been changed based on credit history and customer's paying behaviour.

As at 30 June 2014, the Company's credit risk exposure to a single customer amounted to 11.01% of the total short and long-term receivables and 2.7% from total net sales (30.06.2013: 13.63% and 2.6 % accordingly). With respect to credit risk arising from the other financial assets of the Company, which comprise cash and cash equivalents, the Company's exposure to credit risk arises from the default of the counterparty, with a maximum exposure equal to the carrying amount of thee instruments. The Company's maximum credit risk exposure amounts to EUR 6 750 019 or 55.89% of total assets (30.06.2013: EUR 7 035 945 or 57.15% of total assets).

For more information on the Company's exposure to credit risk please refer to Note 9.

Notes to the financial statements (continued)

3. Financial risk management (continued)

(1) Financial risk factors (continued)

(c) Liquidity risk

The company follows a prudent liquidity risk management and hence maintains a sufficient quantity of liquid funds. The Company current ratio is 6.5 (30.06.2013: 5.4), quick ratio is 3.9 (3.06.2013: 3.3). The Company's management monitors liquidity reserves for the operational forecasting, based on estimated net cash flows. Most of the Company's liabilities are short term.

Management believes that the Company will have sufficient liquidity to be generated from operating activities and does not see significant exposure to liquidity risk.

For more information on the Company's exposure to liquidity risk please refer to Note 15.

(d) Interest rate risk

As the Company does not have significant interest bearing liabilities, thus the Company's cash flows and net results are largely independent of changes in market interest rates. The Company's cash flows from interest bearing assets are dependent on current market interest rates; however as the Company mainly has short-term interest-bearing assets and liabilities, the exposure is not significant.

(2) Accounting for derivative financial instruments

The Company uses derivative financial instruments such as forward currency contracts to hedge its risks associated with foreign currency fluctuations. Such derivative financial instruments ane initially recognized at fair value on the date on which derivative contract is entered to and are subsequency remeasured at fair value through profit and loss. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles.

Any gains or losses arising from changes in fair value of derivatives that do not qualify as hedge accounting are taken directly to profit or loss for the year.

As at 30 June 2014 and 30 June 2013 the Company did not have any open derivative financial instruments contracts.

(3) Fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal, or in its absence, lightlity reflects its non parfarket to which the Company has access at that date. The fair value of a liability reflects its non-performance risk.

When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability might be categorized in different levels of the fair value hierarchy, the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Fair value of financial assets and liabilities of the Company is deemed to approximate their face value immetarial. The term of all rarrying value on any subsequent date as the effect of discounting is immaterial. The term of all financial assets and liabilities of the Company is months. Fair value of the financial instrument available for sale cannot be measured.

Notes to the financial statements (continued)

4. Management of the capital structure

The Company manages its capital to ensure that the Company will be able to continue as a going concern while maximizing the return to stakeholders through the optimization of the debt and equity balance. The capital structure indicator of the Company consists of debt, which includes the borrowings disclosed in Note 16, cash and cash equivalents and equity, comprising issued capital, retained earnings and share premium. The gearing ratio at the year-end was as follows:

	30/06/2014 EUR	30/06/2013 EUR
Debt	1 718 586	2 073 259
Cash	(4 078 828)	(2 759 929)
Net debt	(2 360 242)	(686 670)
Shareholders' equity	10 357 863	10 238 938
Debt to equity ratio	17%	20%
Net debt * to equity ratio	-23%	-7%

* Net debt calculated as total debt net of cash and cash equivalents.

5. Key estimates and assumptions

The management makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Recoverable amount and impairment of non-current assets

When the events and circumstances indicate a potential impairment, the Company performs impairment tests for items of property, plant and equipment and intangible assets. According to these tests assets are written down to their recoverable amounts, if necessary. When carrying ut out impairment tests management uses various estimates for the cash flows arising from the use of the assets, sales, maintenance, and repairs of the assets, as well as in respect of the inflation and grown rates. If the situation changes in the future, either additional impairment could be recognised, or the previously recognised impairment could be partially or fully reversed. See also Note 2F.

As at the reporting date there are no indications of impairment of property, plant and equipment and intangible assets. The Company's cash flows from operating activities in the reporting year promoting year promotion to EUR 803 thousand (2012/ 2013: EUR 45 thousand). SAF Tehnika will continue pursuing its strategy to develop new competitive wireless data transmission products and solutions for export markets, maintain the current sound financial position and control over the production process with the aim to increase sales and profitability.

Impairment of loans and receivables

The Company recognizes allowances for doubtful loans and receivables. In order to set unrecoverable amount of receivables, management estimates the basis of which is the historical experience are used. Allowances for doubtful debts are recognized based on an individual management assessment of recoverability of each receivable. See also Note 2J.

Useful lives of property, plant and equipment

Management estimates the expected useful lives of property, plant and equipment in proportion to the expected duration of use of the asset based on historical experience with similar property, plant and equipment and based on future plans. Depreciation of property, plant and equipment is charged to the profit or loss statement on a straight-line basis over the estimated useful lives of the individual assets. Depreciation of property, plant and equipment is calculated over the shortest period - lease term or over the useful life. No depreciation is calculated for land. See also Note 2C.

The Company has revised its estimates of the useful lives of property, plant and equipment and intangibles. The effect was applied prospectively.

Notes to the financial statements (continued)

5. Key estimates and assumptions (continued)

The effect of change of estimates of depreciation rates for property, plant and equipment and intangibles on profit or loss is as follows:

Effect on profit or loss

3 546
3 546

Provisions and accruals

Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required from the Company to settle the obligation, and the amount of obligation can be measured reasonably. If the Company foresees that the expenses required for recognizing the provision will be partly of fully repaid, for example, within an insurance contract, the recovery of such expenses is recognized as separate assets only when it is certain that such expenses will be recovered. Expenses connected with any provisions are recognized in the profit or loss statement less recovered. Expenses.

As at the reporting date, the following provisions and accruals were recognized:

• provisions for potential warranty expenses are recognized based on the management . assessment of the risk of expected warranty repairs relating to the concluded contracts. The standard warranty period is one to five years depending from product.
• accrued liabilities for unused vacations are calculated in accordance with the number of vacation days unused as at 30 June 2014 and the average remuneration during the last six months of the reporting year.
• · provision for bonuses is calculated in accordance with the procedures approved by management.

Recognition of deferred tax asset

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax amounts are reduced to the extent that it is no longer probable that the related tax benefit will be realised. See also Note 2M.

Notes to the financial statements (continued)

6. Property, plant and equipment and intangible assets

	Software and licences	Long term investments in leased fixed assets	Equipment and machinery	Other fixed assets	Total
	EUR	EUR	EUR	EUR	EUR
Reporting year ended 30 June 2013
Opening balance	131 479	357 118	278 809	55 806	823 212
Acquisitions	154 329	44 086	84 676	203 295	486 386
Disposals				(83)	(83)
Charge for the period	(84 169)	(118 020)	(166 318)	(39 745)	(408 252)
Closing balance	201 639	283 184	197 167	219 273	901 263
Reporting year ended 30 June 2014
Opening balance	201 639
Acquisitions		283 184	197 167	219 273	901 263
Disposals	90 617		131 090	19 917	241 624
Charge for the period			(1 166)	(4 887)	(6 053)
Closing balance	(84 085)	(119 400)	(141 459)	(62 897)	(407 841)
	208 171	163 784	185 632	171 406	728 993
30 June 2012
Historical cost	899 188	1 069 783	3 206 627	558 995	5 734 593
Accumulated depreciation	(767 709)	(712 665)	(2 927 818)	(503 189)	(4 911 381)
Carrying amount	131 479	357 118	278 809	55 806	823 212
30 June 2013
Historical cost	1 052 632
		1 113 869	3 251 299	740 600	6 158 400
Accumulated depreciation	(850 993)	(830 685)	(3 054 132)	(521 327)	(5 257 137)
Carrying amount	94 854	283 184	197 167	216 402	901 263
30 June 2014
Historical cost	1 140 750	1 113 869	3 277 359	752 964	6 284 942
Accumulated depreciation	(932 579)	(950 085)	(3 091 727)	(581 558)	(5 555 949)
Carrying amount	208 171	163 784	185 632	171 406	728 993

During the reporting year, the Company did not enter into any operating or finance lease agreements.

Historical cost of disposals for the reporting year ended 30 June 2014 is EUR 7 101 EUR and accumulated depreciation EUR 1 048 (2012/ 2013: EUR 117 and EUR 34 accordingly).

Depreciation of EUR 171 344 is included in the profit or loss statement item Cost of sales (2012/ 2013: EUR 192 921); depreciation of EUR 160 842 in Sales and marketing costs (2012/ 2013: EUR 158 783); and depreciation of EUR 75 655 in Administrative expenses (2012/2013) EUR 56 548), including depreciation of EUR 188 under Other administrative experies (2012/ 2013: EUR 1 056).

The acquisition costs of fully depreciated property, plant and equipment that is still in use at the reporting date amounted to EUR 4 082 178 (2012/ 2013: EUR 3 858 633).

The Equipment and machinery group includes items bought with EU co-financing and according to the agreement with the EU have restrictions in operations. In operations in total cost of such items amount to EUR 64 983 (2012/ 2013: EUR 64 983), at 30 June 2014 PPE are fully depreciated (2012/ 2013: EUR 14 816). The restrictions apply until December 2014.

Fauity share

Notes to the financial statements (continued)

7. Investments in companies

Name

		- 8 0 1 0 ) SIMIN
	30/06/2014	30/06/2013
	0/0	%
LEO Petijumu centrs SIA	10	10
SAF North America LLC	100	100
SAF Sevices LLC	50	50
LEITC SIA	16.75	16.75
		EUR
Balance as at 30.06.2012.		8 227
Investments during the year		61 423
Balance as at 30.06.2013.		69 650
Investments during the year		29 851
Impairment during the year		(36 568)
Balance as at 30.06.2014.		62 933

LEO Petijumu centrs is a limited liability company established in 2010 by the members of the Latvian Electrical Engineering and Electronic Industry Association (LETERA) and the company's objective is to attract EU funding for research and development of new products in the sphere of electronics and electrical engineering. The Company has invested EUR 711 in its share captal and has become the owner of 10% of its shares.

SAF North America LLC is a 100% subsidiary of the Company that operates in Colorado, USA that started active operations in the spring of 2012 and promotes the Company's products and services, performs marketing, market research, attraction of new clients and provides technical and support in North America. During 2013/ 2014, the Company increased its share of investment in SAF North America LLC by EUR 2 262 and as at 30 June 2014 it amounted to EUR 32 893 (2012/ 2013: EUR 30 631).

In August 2012, a joint venture, SAF Services LLC began operations in North America, the Company invested in it EUR 65 420 which is a 50% holding. The objective of establishing SAF Services LCC was to provide local clients with services connected with the creation, long-term maintenance and management of data transmission networks. Joint control is established through equal voting rights and contractual arrangement. During 2013/ 2014, the Company increased its share of investment in SAF Services LLC by EUR 27 589 and as at 30 June 2014 its gross value amounted to EUR 65 420 (2012/ 2013: EUR 37 831).

In September 2012, the Company acquired the shares of LEITC SIA (Latvijas Elektronikas iekārtu testesanas centrs) and became the owner of 16.75% shares through an investment of FUR& 477. The mission of LEITC is to support research of electromagnetic compatibility (EMC) and educational projects that aim to expand the knowledge base, the range of equipment and to set up a group of specialists capable of addressing today's and future EMC issues.

Notes to the financial statements (continued)

Stock oo

	30/06/2014 EUR	30/06/2013 EUR
Raw materials Work in progress Finished goods	1 396 275 1 620 329 1 482 149 4 498 753	1 214 647 1 751 221 1 285 927 4 251 795

During the reporting year, write-down to net realizable value reversal of EUR 147 159 (2012/ 2013: reversal of EUR 99 837) was recognised and included in cost of sales.

The item Finished goods within Stock include property, plant and equipment sent to clients for trial with an option to buy or return the equipment and the equipment sent to substitute damaged equipment. As at 30 June 2014 the value of equipment sent to Subsitues damaged EUR 186 559 (2012/ 2013: EUR 222 254).

Included under stock items "Work in Progress" and "Finished goods" are Salary expenses (including accruals for vacation pay) in amount of EUR 21 599 (2013: EUR 23 318), Social insurance (including accruals for vacation pay) in amount of EUR 5 197 (2012/ 2013: EUR 5 603) and depreciation and amortization expenses in amount of EUR 3 870 (2012/ 2013: EUR 4 072).

9. Trade receivables

	30/06/2014 EUR	30/06/2013 EUR
Long term trade receivables	53 526	64 404
Trade receivables Due from related parties Allowances for bad and doubtful trade receivables Short-term trade receivables, net Total trade receivables, net	2 259 410 44 393 (369 288) 1 934 515 1 988 041	3 116 528 70 506 (506 590) 2 680 444 2744 848

As at 30 June 2014, the fair value of receivables approximated their carrying amount.

In the reporting year, included in the profit or loss statement caption Administrative expenses was the net decrease of allowances for bad and doubtful trade receivables in the amount of EUR 24 707 (2012/ 2013: increase EUR 86 585).

The maturity of long-term receivables is 31 March 2022.

Movement in Allowances for bad and doubtful trade receivables

	EUR
Allowances for bad and doubtful trade receivables as at 30 June 2012	420 005
Written-off	(37 413)
Additional allowances	165 456
Recovered debts	(41 458)
Allowances for bad and doubtful trade receivables as at 30 June 2013	506 590
Written-off	(112 595)
Additional allowances	6 833
Recovered debts	(31 540)
Allowances for bad and doubtful trade receivables as at 30 June 2014	369 238

Notes to the financial statements (continued)

9. Trade receivables (continued)

Split of Gross Trade receivables by currencies expressed in EUR

	30/06/2014 EUR	30/06/2014 %	30/06/2013 EUR	30/06/2013 0/0
LVL			3 948	0.12
USD	1 310 733	55.60	2 507 140	77.11
EUR	1 046 596	44 40	740 349	22.77
Total trade receivables	2 357 329	100%	3 251 437	100%

Ageing of Trade receivables at the reporting date

	30/06/2014 Gross EUR	30/06/2014 Impairment EUR	30/06/2013 Gross EUR	30/06/2013 Impairment EUR
Not overdue	1 521 868
			2 200 205	(44 323)
Overdue by 0 - 89 days	468 365	(2 192)	553 637	(1 537)
Overdue by 90 and more days	367 096	(367 096)	497 595	(460 730)
Total trade receivables	2 357 329	(369 288)	3 251 437	(506 590)

10. Other receivables

	30/06/2014 EUR	30/06/2013 EUR
Government grants* Overpaid value added tax (refer to Note 26) Advance payment to suppliers Deposits paid for participation in LEO Petijumu centrs SIA project Other receivables	226 220	45 754
		45 370
	26 626	24 761
		102 447
	8 774	2 384
	261 620	220 796

* Government grants receivable relate to development project realized in cooperation with the Company's associate LEO Petijumu centrs SIA.

11. Placements with banks

	30/06/2014 EUR	30/06/2013 EUR
Deposits -	590 581
	I	590 581

No free cash resources deposited with initial maturity exceeding 90 days as at 30 June 2014. The average maturity of deposits as at 30 June 2014 is 11 months.

Notes to the financial statements (continued)

1. Placements with banks (continued)

Split of Deposits by currencies expressed in EUR
	30/06/2014 EUR	30/06/2014 0/0	30/06/2013 EUR	30/06/2013 %
EUR USD Deposits			360 503 230 078 590 581	61.04 38.96 100%
Split of Deposits by banks			30/06/2014 EUR	30/06/2013 EUR
PrivatBank AS Deposits				590 581 590 581

12. Cash and cash equivalents

	30/06/2014 EUR	30/06/2013 EUR
Cash in bank	4 078 828	2 759 929
	4 078 828	2 759 929

Split of cash and cash equivalents by currencies expressed in EUR

	30/06/2014 EUR	30/06/2014 0/0	30/06/2013 EUR	30/06/2013 0/0
LVL USD EUR GBP	1 153 288 2 921 317 4 223	28.28 71.62 0.10	234 205 822 147 1 703 577	8 49 29.79 61.72
Cash and cash equivalents	4 078 828	100%	2 759 929	100%

Split of cash and cash equivalents by banks

	30/06/2014 EUR	30/06/2013 EUR
Swedbank AS Nordea bank AB Latvian branch JP Morgan Chase bank DNB Bank AS Other	1 013 185 2 396 746 302 776 366 117 4	966 376 1 567 435 209 260 16 858
	4 078 828	2 759 929

Notes to the financial statements (continued)

13. Deferred tax (assets)/ liabilities

Deferred tax has been calculated from the following temporary differences between assets and liabilities values for financial accounting and tax purposes:

	Balance at 30/06/2012 EUR	Recognized in profit or loss 2012/ 2013 EUR	Balance at 30/06/2013 EUR	Recognized in profit or loss 2013/ 2014 EUR	Balance at 30/06/2014
Temporary difference on Property, plant and equipment depreciation and intangible					EUR
asset amortisation Tax losses carried forward Temporary difference in the accrued liabilities for unused	13 458	6 384	19 842	7 324 (13 154)	27 166 (13 154)
vacations Temporary difference on inventory write-down to net	(25 424)	(2 951)	(28 375)	(477)	(28 852)
realizable value Temporary difference on	(116 460)	14 975	(101 485)	22 075	(79410)
provisions for guarantees Temporary difference on	(3274)	770	(2 504)	308	(2 196)
provisions for goods returned Temporary difference on				(2 238)	(2 238)
provisions for bonuses Temporary difference on allowance for trade		(10 672)	(10672)	10 672
receivables Unrecognized temporary differences related to foreign trade receivables	(63 000)	(12 988)	(75 988)	20 595	(55 393)
recoverability Deferred tax (asset), net	63 000 (131 700)	12 988 8 506	75 988 (123 194)	(20 595) 24 510	55 393 (98 684)

Deferred income tax asset for the Company is recognised to the extent that the realisation of the related tax benefit through the future taxable profits is probable. Management believes that there is reasonable assurance that taxable profits in the next traxation beneves that there is recognized deferred tax asset in full; this is also supported by the generation of taxable profits in the current year.

Notes to the financial statements (continued)

14. Share capital

As at 30 June 2014 the registered and paid-up share capital amounted to EUR 4 226 185, converting registered share capital of LVL 2 970 180 into euros using the official exchange rate of LVL 0.702804 to EUR 1, and consisted of 2 970 180 ordinary bearing the online frate of LV2 07/22/04/2013 rights (2013) 2 970 180 shares). Share capital re-registration into euroshas not been completed yet. According to Latvian legislation it has to be completed until 30 June 2016.

15. Payables, provisions and other liabilities

	30/06/2014 EUR	30/06/2013 EUR
Trade accounts payables	623 529	996 737
Other accounts payables	257 354	262 395
Trade and other payables	880 883	1 259 132
Provisions for warranties Provisions for bonuses Provisions	14 643 14 643	16 692 71 144 87 836
Accrued liabilities for unused vacations	192 349	189 170
Customer advances	216 086	97 849
Taxes and social security payments (refer to Note 26)	116 155	107 389
Other liabilities	160 371	31 537
Other liabilities	684 961	425 945
Total Trade payables, provisions and other liabilities	1 580 487	1 772 913

During the reporting period the increase in accrued liabilities for unused vacation pay included in profit or loss amounted to EUR 3 179 (2012/2013: increase of EUR 19 678).

Movement in provisions

Warranties EUR	Bonuses EUR	Total EUR
21 824		21 : 24
	71 144	71 144
(2 187)		(2 187)
(2 945)		(2 945)
16 692	79 144	87 836
(2 049)		(73 193)
14 643		14 643
		(71 144)

Movement in Provisions in the reporting year included in the profit or loss statement.

Notes to the financial statements (continued)

1. Payables, provisions and other liabilities (continued)

Split of trade payables and other payables by currencies expressed in EUP

	30/06/2014 EUR	30/06/2014 %	30/06/2013 EUR	30/06/2013 0/0
LVL
			273 059	21.69
USD	220 325	25.01	626 304	49.74
EUR	660 558	74.99	359 769	28.57
Trade accounts payables and other	880 883
payables		100%	1 259 132	100%

Ageing analysis of trade accounts payables and other payables

	JULIO LUIG EUR	SUIUDIZUTS EUR
Not overdue	878 455	1 090 033
Overdue by 0 - 30 days	2 428	169 099
Trade accounts payables and other payables	880 883	1 259 132

OURCIONA

The carrying amounts of the Company's financial liabilities do not significantly differ from the gross cash flows, as the influence of the interest payments for short term financial instruments is minor.

16. Loans

	30/06/2014 EUR	30/06/2013 EUR
Credit cards	6 781	14 081
17. Deferred income
	30/06/2014 EUR	30/06/2013 EUR
Deferred income for goods not delivered yet Other deferred income Government grants	85 948 19 462 105 410	233 397 24 061 5 186 262 644

】【下一】【字】【

Notes to the financial statements (continued)

18. Segment information and sales

a) The Company's operations are divided into two major structural units:

SAF branded equipment designed and produced in-house - CFIP and Freemile (Etherent/Hybrid/ superPDH systems), Integra (Integrated carrier-grade Ethernet microwave radio), Spectrum Compact (measurement tools for radio engineers) as the first structural unit and 3rd party products for resale, like Antennas, cables, some OEMed products and accessories as the second unit.

CFIP -product line is represented by:

• a split mount PhoeniX hybrid radio system with Gigabit Ethernet + 20 E1 interfaces;
• Lumina high capacity Full Outdoor all-in-one radio with Gigabit Ethernet traffic interface;
• CFIP-108 entry level radio perfect for upgrade of E1 networks into packet data networks;
• Marathon FIDU low frequency low capacity system for industrial applications and rural telecom use.

All CFIP radios are offered in most widely used frequency bands from 300MHz to 38 GHz, thus enabling the use of CFIP radios all across the globe. PhoeniX radio represents the type of microwave radio which is still dominating market share point of view.

Freemile 17/24, an all outdoor hybrid radio system to be used in 17 and 24 GHz unlicensed frequency bands and providing Ethernet/E1 interfaces for user traffic.

Integra - is a next generation radio system employing latest modem technology on the market as well as radio technology in an innovative packaging.

Spectrum Compact is the latest product line in SAF's portfolio, it is a measurement tool for field engineers for telecom, broadcasting and other industries using radio technologies. It comprises of a number of units covering several frequency bands and proving various functionality.

· Operations related to sales of products purchased from other suppliers, like antennas, cables, SAF renamed (OEMed) products and different accessories - as the second unit.

Notes to the financial statements (continued)

18. Segment information and sales (continued)

	CFIP; FreeMile, Integra, Spectrum Compact		Other		Total
	2013/14	2012/13	2013/14	2012/13	2013/14	2012/13
	EUR	EUR	EUR	EUR	EUR	EUR
Assets Reportable segment
assets	5 821 207	5 937 712	1 634 109	2 185 040	7 455 316	8 122 752
Unallocated assets Total assets					4 621 133	4 189 445
					12 076 449	12 312 197
Segment liabilities Unallocated liabilities	1 100 284	1 076 684	283 091	332 429	1 383 375 352 211	1 409 113 664 146
Total liabilities					1 718 586	2 073 259
Net sales	9 469 940	9 843 486	2 555 811	3 479 707	12 025 751
Segment result	2 380 703	2 400 607	1 007 888	1 393 016	3 388 591	13 323 193 3 793 623
Unallocated expenses Loss from operating					(3 413 468)	(3 851 296)
activities					(24 877)	(57 673)
Other income					330 149	84 750
Financial expenses, net Impairment of long term					(125 269)	(33 096)
investment					(36 568)
Profit/(loss) before taxes					143 435	(6 019)
Corporate income tax Current year's profit/					(24 510)	(14 714)
(loss) Other information					118 925	(20 733)
Additions of property plant and equipment and intangible assets Unallocated additions of	113 955	120 146			113 955	120 146
property plant and equipment and intangible assets Total additions of					127 669	366 240
property plant and equipment and intangible assets					241 624	486 386
Depreciation and amortization	142 509	191 329	1 119	2574	143 628	193 903
Unallocated depreciation and amortization					264 213	214 349
Total depreciation and amortization					407 841	408 252

Notes to the financial statements (continued)

18. Segment information and sales (continued)

b) This note provides information on division of the Company's net sales and assets by geographical segments (only trade receivables are allocated to regions based on customer residency, all other assets remain unallocated).

	Net sales		Assets
	2013/2014	2012/2013	30/06/2014	30/06/2013
	EUR	EUR	EUR	EUR
USA	5 337 085	5 636 321	818 659	1 301 928
Europa, CIS Asia, Africa, Middle	4 617 586	4 537 193	942 404	653 008
East	2 071 080	3 149 679	226 978	790 963
	12 025 751	13 323 193	1 988 041	2 745 899
Unallocated assets			10 088 408	9 566 298
	12 025 751	13 323 193	12 076 449	12 3 2 197

01 07 2012

04 07 2042

Please also refer to Note 3 (1b) for the description of dependence on individual customers.

19. Cost of goods sold

	1 = 2 = 2 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 = 1 30.06.2014 EUR	VI.VI.LU L. 30.06.2013 EUR
Purchases of components and subcontractors services Salary expenses	6 897 391	7 833 894
(including accrued liabilities for unused vacations)	1 457 196	1 448 091
Depreciation and amortization (refer to Note 6) Social insurance	171 344	188 849
(including accrued liabilities for unused vacations)	344 253	345 863
Rent of premises	196 740	179 706
Public utilities	92 734	106 321
Transport	27 455	26 582
Communication expenses	10 448	14 600
Business trip expenses	11 457	5 756
Low value articles	2275	3 853
Other production costs	60 769	74 425
	9 272 062	10 27 940

Research and development related expenses of EUR 1 003 445 (2012/ 2013: EUR 1 031 696) are included in the profit or loss statement caption Purchases of components and subcontracters services.

Notes to the financial statements (continued)

20. Sales and marketing expenses

	01.07.2013- 30.06.2014 EUR	01.07.2012- 30.06.2013 EUR
Advertisement and marketing expenses Salary expenses	111 151	141 883
(including accrued liabilities for unused vacations) Business trip expenses	734 928 225 428	804 129 345 408
Depreciation and amortization (refer to Note 6) Delivery costs	160 842 337 859	158 783 424 650
Social contributions (including accrued liabilities for unused vacations)	174 915	194 155
Other selling and distribution costs	237 607 1 982 730	236 437 2 305 445
21. Administrative expenses
	01.07.2013- 30.06.2014 EUR	01.07.2012- 30.06.2013 EUR
Salary expenses
(including accrued liabilities for unused vacations) Depreciation and amortization (refer to Note 6) Social insurance	360 090 75 467	307 689 55 492
(including accrued liabilities for unused vacations) IT services	85 811 52 359	74 122 31 663
Expenses on cash turnover	14 080	15 469
Representation expenses	23 555	46 943
Training	11 525	33 031
Public utilities	14 242	14 068
Business trip expenses	1 097	57

22 053

24 012

2 755

2 718

4 351

123 998

89 060

847 481

23 931

23 715

6 060

10 114

4 717

(24 707)

113 780

795 836

Other administrative expenses include the annual statutory audit fee in the amount of EUR 9 490 (2012/ 2013: EUR 9 700). During the year the Company did not receive any other services from the auditor.
22. Other income
	01,07.2013- 30.06.2014	01.07.2012- 30.06.2013
	EUR	EUR
Government grants*	297 609	63 372
Other income	32 540	21 378
	220 110	OA 7EA

* Government grants receivable relate to development project realized in cooperation with LEO Petijumu centrs SIA.

During the reporting year the Company received a government grant payment of EUR 111 957 (2012/ 2013: EUR 70 183).

Rent of premises

Office maintenance

Communication expenses

Other administrative expenses

Allowances for bad and doubtful trade receivables

Insurance

Sponsorship

Notes to the financial statements (continued)

23. Financial income

	01.07.2013- 30.06.2014 EUR	01.07.2012- 30.06.2013 EUR
Interest income	19411 19 411	55 778 55 778
24. Financial expenses
	01.07 2013- 30.06.2014 EUR	01.07.2012- 30.06.2013 EUR
Net result of currency exchange fluctuations	144 680 144 680	88 874 88 874
25. Corporate income tax
	01.07.2013- 30.06.2014 EUR	01.07.2012- 30.06.2013 EUR
Change in deferred tax asset (see Note 13) Corporate income tax for the reporting year Other charges related to corporate income tax	24 510 24 510	8 506 2 281 3 927 14 714

Corporate income tax differs from the theoretically calculated tax amount that would arise applying the statutory 15% rate to the Company's profit before taxation:

	01.07.2013- 30.06.2014 EUR	01.07.2012- 30.06.2013 EUR
Profit/ (loss) before tax	143 435
Tax rate	15%	(6 019)
Tax calculated theoretically	21 515	15% (904)
Effect of non-deductible expenses	16 007	14 737
Effect of changes in unrecognized temporary differences	(3 706)	18 600
Impact of tax benefit	(9 306)	(17 719)
Corporate income tax	24 510	14714

The State Revenue Service may inspect the Company's books and records for the last 3 years and impose additional bechnop with penalty interest and records for the last 3 years and not aware of any circumstances, which may give rise to a potential hability in this respect (The State Revenue Service had not performed complex that material liability in this respension date).

Notes to the financial statements (continued)

26. Taxes and compulsory state social security contributions
	VAT	Social	Personal	Corporate	Business	CIT for	Total
		contributions	income tax	income tax	risk duty	services
						provided
						by non-
						residents
	EUR	EUR	EUR	EUR	EUR	EUR	EUR
Payable as at
30.06.2013.		70 273	37 056		60		107 389
(Overpaid) as at
30.06.2013.	(45 370)			(163 673)		(118)	(209 161)
Calculated
during the
reporting year	(177 516)	883 385	494 857		701	239	1 201 666
Repaid by SRS	239 411
Transferred							239 411
to/from other
taxes		(106 876)	(56 915)	163 791
Paid during the
reporting year	(10 554)	(775 911)	(435 745)
Payable as at				(69 194)	(701)	(239)	(1 292 344)
30.06.2014.	5 971	70 871	39 253
(Overpaid) as at					60		116 155
30.06.2014.
				(69 076)		(118)	(69 194)

27. Earnings/ loss per share

Earnings per share are calculated by dividing profit by the weighted average number of shares during
the vear the year.

	EUR	01.07.2013- 01.07.2012- 30.06.2014 30.06.2013 EUR
Profit / (loss) of the reporting year (a)
	118 925	(20 733)
Ordinary shares as at 1 July (b)	2 970 180	2 970 180
Basic and diluted earnings / (losses) per share for the reporting
year (a/b)	0.040	(0.007)

28. Management remuneration

Information on the remuneration of the members of the Board and Council

Remuneration of the Board members	01.07.2013- 30.06.2014 EUR	01.07.2012- 30.06.2013 EUR
· salary · social contributions	192 963 45 949	211 794 50 970
Remuneration of the Council members · salary · social contributions Total	112 780 26 841 378 533	115 043 27 713 405 520

Notes to the financial statements (continued)

29. Related party transactions

Related parties represent both legal entities and private individuals related to the company in accordance with the following rules.

• a) A person or a close member of that person's family is related to a reporting entity if that person:
  • i. has control or joint control over the reporting entity;
  • has a significant influence over the reporting entity; or ii.
• iii. is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.
• b) An entity is related to a reporting entity if any of the following conditions applies:
  • i. The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
  • One entity is an associate or joint venture of the other entity (or an associate or joint venture ii. of a member of a group of which the other entity is a member).
  • Both entities are joint ventures of the same third party. iii.
  • iv. One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
  • The entity is a post-employment benefit plan for the benefit of employees of either the V. reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity.
• vi. The entity is controlled, or jointly controlled by a person identified in (a).
• vii. management personnel of the entity (or of a parent of the entity).

Related party transaction - a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a consideration is determined.

	Transactions for the year ended 30 June		Balance as at 30 June
	2014 EUR	2013 EUR	2014 EUR	2013 EUR
Sale of goods and services Subsidiaries Joint venture	35 833	88 968 49 892	44 393	20 861 49 645
Purchase of goods and services Subsidiaries Joint venture	464 867	146 584 2 968	25 908	23 008 613
Loans issued and related interest income Other related parties		412 721	180 581	361 050

On 18 June 2012 the Company signed a loan agreement with the related party through management SIA Namipašumu pārvalde regarding the issuance of a loan of EUR 400 000. The loan has been transferred to borrower's account as at 2 July 2012. In the reporting year, a share of the loan was repaid amounting to EUR 180 000 and the outstanding loan balance as at 30 June 2014 was EUR 180 581, including principal of EUR 180 000 and unpaid interest of EUR 581 (30.06.2013: principal EUR 360 000 and unpaid interest of EUR 1 050). The annual interest rate of the loan is 3.5%. The loan matures on 31 July 2014. The loan is secured with a mortgage of real estate.

All outstanding balances with these related parties are priced on an arm's length basis and are to be settled in cash. None of the balances apart from the loan issued is secured. No expense has been recognized in the current year or prior year for bad or doubtful debts in respect of arounts oved by related parties.

Notes to the financial statements (continued)

30. Personnel costs

	011.07 2013- 30.06.2014 EUR	01.07.2012- 30.06.2013 EUR
Staff remuneration Social contributions Total	2 552 214 604 979 3 157 193	2 559 909 614 140 3 174 049
31. Average number of employees
Average number of staff in the reporting year	01.07.2013- 30.06.2014 165	01.07.2012- 30.06.2013 167

32. Operating lease

A

On 10 December 2002 the Company signed the rent agreement Nr. S-116/02 with AS Dambis on the rent of premises with the total area of 5 851 m² until 16 September 2009. Starting from 17 September 2009 the total leased area reduced to 5 672 m². The premises are located at 24a Ganibu Gambis In the beginning of 2014 agreement amendments concluded on term of the agreement extension till 1 March 2020. According to the signed agreements, the Company has the following lease payment commitments at the reporting period end:

	30.06.2013
EUR	EUR
266 130	249 445
1 064 521	718 560
178 899
1 509 550	968 005
	30.06.2014

33. Contingent liabilities

As part of its primary activities, the Company has issued performance guarantees to third parties amounting to EUR 1 770 (2012/ 2013: EUR 12 994).

34. Going concern

The Company's cash flows from operating activities in the reporting year amount to EUR 803 ration the renating data in 15 thousand), cash position is EUR 4 079 thousand and the liquidity ratio at the reporting date is 6.5.

SAF Tehnika will continue pursuing its strategy to develop new competitive wireless data transmission products and solutions for export markets, maintain the current sound financial position and control over the production process with the aim to increase sales and profitability.

35. Subsequent events

No significant subsequent events have occurred in the period from the year-end to the date of these financial statements that would have a material impact on the Company's financial position as at 30 June 2014 or its performance or cash flows for the year then ended.