IRF.L Regulatory News (IRF)

19 Mar 2007 13:40

IRF European Fin Investments Ltd 19 March 2007 Press Release 19 March 2007 IRF European Finance Investments Ltd ("IRF" or "the Company") Final Results IRF European Finance Investments Ltd (AIM:IRF) announces its audited financialresults for the 12 months ended 31 December 2006. Highlights - Group Net Income increases to €63.8 million- Dividend declared of $0.26 per share- Company Net Asset Value per share on 31 December 2006 of $5.36- Electronic Settlement expected to commence 2 April 2007 Angeliki Frangou, Chairman of IRF said: "We are delighted with our manyachievements during 2006. The Company located an attractive investmentopportunity in the form of Proton Bank and closed on the acquisition of acontrolling interest in Proton Bank in June 2006. Three months later, inSeptember of 2006, Proton Bank merged with Omega Bank. As a result of thismerger, the Company has increased exposure to the Greek banking market. We areconfident that the combined bank will enjoy further growth during 2007 given thesynergies from 12 months of combined operation as opposed to the 3 months ofcombined operation during 2006. We will continue to survey the market forattractive investment opportunities relating to control positions in financialinstitutions. However, consolidation of the market requires discipline inselecting an appropriate target or merger partner." Ms. Frangou continued that "the capital gain from the Company's investment andsubsequent sale of shares in Piraeus Bank demonstrates that we can alsoopportunistically enjoy the benefits of consolidation in the banking industrythrough the purchase of shares in publicly traded companies. We recentlypurchased shares in Marfin Popular Bank and believe there is a potential forcapital appreciation and current income from this investment and others." Below are the financial highlights of the Company, and that of the Company andits subsidiaries (the "Group"), for the 12 months ended 31 December 2006. Financial Highlights Amounts in • 000 The Group The CompanyIncome Statement itemsNet Income 63,865 20,659Profit before income tax 36,825 20,047Income tax expense 2,916 -Profit after tax 33,909 20,047Attributable to equity holders of the 23,571 20,047CompanyMinority Interests 10,338 -Basic earnings per share (in euro/ 0.41 0.35share)Diluted earnings per share (in euro/ 0.37 0.32share)Balance Sheet ItemsCash and cash equivalents 203,917 3,880Total assets 1,745,739 219,082Total liabilities 1,198,987 185Total Equity 546,752 218,897Equity attributable to equity holders 238,607 218,897of the CompanyMinority Interests 308,145 - Dividend Payment Based upon 2006 results, the Company has declared a dividend payment of US$0.26per common share in respect of 2006. The record date has been fixed at 23 March2007 with 18 April 2007 being the dividend payment date. Commenting on the declaration of the dividend, Angeliki Frangou said: "Our 2006financial results permitted the board to declare a dividend of US$0.26 pershare. While further dividends will depend on future financial performance, theBoard has indicated that it would like to provide shareholders with a currentreturn." Net Asset Value On 31 December 2006, the Company determined that its shares had a net assetvalue ("NAV") of US$5.36 per share, determined as follows: The Company owned a 20.16% interest in Proton Bank, whose shares trade on theAthens Stock Exchange. The market value of this holding, based on the closingshare price as of 29 December 2006, the last trading day of 2006, was • 138.5million. Common shares outstanding equaled 56.9 million shares. The Company intends to determine and publish NAV on a periodic basis. Thisestimated NAV is provided for information purposes only and should not be reliedupon for investment decisions. Electronic Settlement The Company is also pleased to announce that CREST members will shortly be ableto settle the transfer of its common shares and warrants within CREST, pursuantto a depositary interest facility to be established by the Company (the "DIFacility"). This is expected to take effect on 2 April 2007. The Company has arranged for Capita IRG Trustees Limited to issue a depositaryinterest in respect of its shares and warrants and the depositary interests maybe held and transferred within CREST. Importantly, the DI Facility will allowfor CREST members to transfer and settle trades in the shares and warrantselectronically. In CREST, the depositary interests will carry the same ISINs as the security towhich it relates. Please note the ISIN designation for the Company's shares andwarrants are: Common Shares ISIN BMG443831058Warrants ISIN BMG493831132 More information on the DI Facility will be provided shortly. - Ends - For further information:IRF European Finance Investments LtdSheldon Goldman, Deputy Chairman Tel: +1 212 404 5740Collins Stewart Europe LimitedSeema Paterson, Corporate Finance Tel: +44 (0) 20 7523 8321 Media enquiries:AbchurchHenry Harrison-Topham / Franziska Boehnke Tel: +44 (0) 20 7398 7700franziska.boehnke@abchurch-group.com www.abchurch-group.com About IRF IRF was formed to invest in the financial services industry throughout Europewith a primary focus on credit institutions and insurance companies in SouthEastern Europe. IRF's current strategy is the acquisition of financialinstitutions having valuations which do not reflect their potential and wheremarketing and operational efficiencies are possible. IRF owns a 20.16% interestin Proton Bank and a 1.6% interest in Marfin Popular Bank. About Proton Bank Proton Bank is a full-service financial services institution, including retailand investment banking as well as the provision of specialized corporateadvisory and investment services. Proton Bank is listed on the Athens StockExchange under the symbol "PRO". About Marfin Popular Bank Marfin Popular Bank is full-services financial institution that was createdthrough the recent merger of Marfin Financial Group, Laiki Hellas and EgnatiaBank. As a result, Marfin is a regional financial institution with 312 branchesin 12 countries. Marfin Popular Bank is listed on the Athens Stock Exchangeunder the symbol "MARFB". Forward-looking statements All statements, other than statements of historical fact, included in thisrelease are forward looking statements within the meaning of the PrivateSecurities Litigation Reform Act of 1995. These statements are based uponcurrent expectations and are subject to a number of risks, uncertainties andassumptions that could cause actual results to differ materially from thosedescribed in the forward-looking statements. IRF assumes no obligation andexpressly disclaims any duty to update the information contained herein exceptas required by law. Below are the financial highlights of the Company, and that of the Company andits subsidiaries (the "Group"), for the 12 months ended 31 December 2006. INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2006 THE GROUP THE COMPANYAmounts presented in • '000 Note 01/01 - 31/12 08/09 - 31/12/ 01/01 - 31/12/ 08/09 - 31/ /2006 2005 2006 12/2005 Interest and similar income 28,992 6 5,797 6Interest and similar expenses (12,263) (1,329) (756) (1,329)Net interest income 8 16,729 (1,323) 5,042 (1,323)Fee and commission income 10,296 - - -Fee and commission expense (2,430) - (375) -Net fee and commission income 9 7,866 - (375) -Income from insurance activities 7,284 - - -Expense from insurance activities 506 - - -Net Income from insurance 10 7,790 - - -activitiesDividend income 11 1,626 - 15,095 -Net result from financial 12 28,555 - - -activitiesOther operating income 13 1,299 - 897 -Total Net Income 63,865 (1,323) 20,659 (1,323) Staff costs 14 (8,233) - (155) -Other operating expenses 15 (12,642) (72) (457) (72)Depreciation 16 (878) - - -Insurance claims 17 (4,968) - - -Impairment losses 18 (558) - - -Total operating expenses (27,280) (72) (612) (72) Share of profits / (losses) of 240 - - -associates Profit before tax 36,825 (1,396) 20,047 (1,396)Income tax expense 19 (2,916) - - -Profit after tax 33,909 (1,396) 20,047 (1,396) Attributable to:Shareholders of the Company 23,571 (1,396) 20,047 (1,396)Minority Interest 10,338 - - - 33,909 (1,396) 20,047 (1,396)Earning per Share ( •/share )- Basic 47 0.41 (0.05) 0.35 (0.05)- Diluted 47 0.37 (0.05) 0.32 (0.05) BALANCE SHEET Amounts presented in • '000 THE GROUP THE COMPANY Note 31/12/2006 31/12/2005 31/12/2006 31/12/2005ASSETSCash and balances with Central Bank 20 37,397 - - -Loans and advances to financial 21 181,885 2,206 3,880 2,206institutionsRestricted cash held in Trust 22 - 210,294 - 210,294Trading Portfolio and other financial 23 264,174 - - -assets at fair value through Profit &LossDerivative financial instruments 24 2,611 - - -Loans and advances to customers 25 941,214 - - -Insurance Assets 26 18,060 - - -Investment Portfolio 27 37,977 - - -Investments in Subsidiaries 28 - - 126,687 -Investments in Associates 29 4,604 - - -Property, plant and equipment 30 33,402 - - -Investment Property 30 50 - - -Non current assets held for sale 31 64 - - -Goodwill and other intangible assets 32 186,216 - - -Deferred Tax Assets 33 3,200 - - -Other Assets 34 34,885 5 88,516 5TOTAL ASSETS 1,745,739 212,506 219,082 212,506 EQUITY AND LIABILITIESDue to financial institutions 35 90,897 - - -Due to Customers 36 1,042,157 - - -Derivative financial instruments 24 6,319 - - -Issued Debt Securities 37 1,500 - - -Compound financial instrument 38 - 203,426 - 203,426Provisions for insurance contracts 39 34,093 - - -Retirement benefit obligations 40 1,228 - - -Current income tax liabilities 41 1,349 - - -Other liabilities 42 21,445 170 185 170Total Liabilities 1,198,987 203,596 185 203,596 Shareholders equityShare Capital 43 71 71 71 71Share Premium 43 200,174 10,234 200,174 10,234Revaluation Reserve 44 (2) - - -Other reserves 44 16,156 - - -Retained Earnings / (losses) 44 22,208 (1,396) 18,652 (1,396)Total equity attributable to 238,607 8,910 218,897 8,910shareholders' of the CompanyMinority Interest 308,145 - - -Total equity 546,752 8,910 218,897 8,910 TOTAL LIABILITIES AND EQUITY 1,745,739 212,506 219,082 212,506 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Attributable to shareholders of the Company Minority Amounts presented in • '000 Note Share Share Revaluation Other Retained Total Interest Total Capital Premium Reserve Reserves Earnings / (losses) Opening balance as at 8th September - - - - - - - - 2005Net result for the period 08/09-31/ - - - - (1,396) (1,396) - (1,396)12/2005Total profit /(loss) recognised for - - - - (1,396) (1,396) - (1,396)the financial yearIssue of common stock to initial 14 - - - - 14 - 14shareholdersIssue of shares on offering, net of 57 10,234 - - - 10,291 - 10,291offering costs 71 10,234 - - - 10,305 - 10,305Balance as at 31st December 2005 71 10,234 - - (1,396) 8,910 - 8,910 Opening balance as at 1st January 71 10,234 - - (1,396) 8,910 - 8,9102006Net result for the year 01/01-31/12 - - - - 23,571 23,571 10,338 33,909/2006Available for sale instruments:- Valuation gains /(losses) taken - - 1,740 - - 1,740 (9) 1,731to equity- Transferred to Profit & Loss on - - (1,742) - - (1,742) - (1,742)saleExchange Differences on translating - - - 2 - 2 9 11foreign operationsTotal profit /(loss) recognised for - - (2) 2 23,571 23,571 10,337 33,909the financial yearDecrease in Share Capital due to 43 (0.54) 0.54 - - - (0) - (0)the cancelled sharesConversion of Compound Financial 43 - 189,940 - - - 189,940 - 189,940Instruments to Common Shares(after the acquisition of PROTON)Acquisition (absorption) of OMEGA - - - 16,153 - 16,153 297,677 313,831BANK by PROTON BANKPurchase of Treasury Shares of - - - - (322) (322)(1,275) (1,597)PROTON BANKSale of Treasury Shares of PROTON - - - - 355 355 1,405 1,760BANK (1) 189,941 - 16,153 33 206,126 297,808 503,934Balance as at 31st December 2006 71 200,174 (2) 16,156 22,208 238,607 308,145 46,752 STATEMENT OF CHANGES IN EQUITY (THE COMPANY) Attributable to shareholders of the CompanyAmounts presented in • '000 Note Share Share Premium Retained Total Capital Earnings / (losses) Opening balance as at 8th September 2005 - - - -Net results for the period 08/09-31/12/2005 - - (1,396) (1,396)Total profit /(loss) recognised for the financial - - (1,396) (1,396)yearIssue of common stock to initial shareholders 14 - - 14Issue of shares on offering, net of offering 57 10,234 - 10,291costs 71 10,234 10,305Balance as at 31st December 2005 71 10,234 (1,396) 8,910 Opening balance as at 1st January 2006 71 10,234 (1,396) 8,910Net results for the period - - 20,047 20,047Total profit /(loss) recognised for the financial - - 20,047 20,047yearShare Capital return to Shareholders due to 43 (0.54) 0.54 - -cancelled sharesConversion of Compound Financial Instruments to 43 - 189,940 - 189,940Common Shares (after the acquisition of PROTON) (0.54) 189,941 20,047 209,987 Balance as at 31st December 2006 71 200,174 18,652 218,897 CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2006 THE GROUP THE COMPANYAmounts presented in • '000 Note 2006 2005 2006 2005Cash flows from operating activitiesProfits before tax 36,825 (1,396) 20,047 (1,396)Adjustments for:Depreciation 878 - - -Profit /(Loss) from investment activities (16,149) - - -Provision for employee benefit plan 94 - - -Impairment loss on investment and loans 558 - - -Share of profit /loss from associates (240) - - -Profit /(loss) from disposal of fixed (2) - - -assetsInterest and other non cash income / (1,562) 1,328 (1,562) 1,328expensesDividends Received from subsidiaries - - (15,095) -Cash flows from operating activities 20,402 (67) 3,390 (67)before changes in working capitalChanges in working capitalTrading portfolio (72,346) - - -Cash reserves held in Central Bank (4,196) - - -Loans and advances to customers 26,748 - - -Insurance Receivables 3,455 - - -Reinsurance Receivables 302 - - -Derivatives 1,789 - - -Other Assets 38,941 (5) (73,415) (5)Due to financial institutions 14,926 - - -Due to customers 92,088 - - -Provisions for insurance contracts (1,243) - - -Other Liabilities (145,587) 170 61 170Cash flows from operating activities (24,720) 97 (69,964) 97before payment of income taxIncome tax paid (3,048) - - -Net cash flows from operating activities (27,768) 97 (69,964) 97 Investing activitiesAdditions /Disposals of investment 9,727 - - -securitiesPurchase of tangible and intangible assets (1,081) - - -Acquisition of subsidiaries and associates 46.3 22,106 - (126,687) -Proceeds from sale of property, plant & 61 - - -equipment & intangible assetsNon current assets held for sale (64) - - -Release of cash placed on Trust 201,266 (209,493) 201,266 (209,493)Net cash flow from investing activities 232,014 (209,493) 74,580 (209,493) Financing activitiesGross proceeds from initial public - 228,538 - 228,538offeringPayment of costs of initial public - (16,950) - (16,950)offeringIssuance of common shares - 14 - 14Amount Repayable to Shareholders of 43 (1,915) - (1,915) -Negative VoteSales of treasury shares 406 - - -Proceeds from other borrowed funds 75,000 237 75,000 237Repayments of other borrowed funds (75,000) (237) (75,000) (237)Net cash flow from financing activities (1,509) 211,602 (1,915) 211,602 Net increase / decrease in cash and cash 202,738 2,206 2,701 2,206equivalentsCash and cash equivalents at the beginning 2,206 - 2,206 -of the financial yearEffect of exchange rate fluctuations on (1,028) - (1,028) -cash heldCash and cash equivalents at the end of 45 203,917 2,206 3,880 2,206the financial year BOARD OF DIRECTORS Name PositionAngeliki Frangou Chairman, Non - Executive DirectorSheldon Goldman Deputy ChairmanLoukas Valetopoulos Chief Executive Officer, DirectorAlexander Meraclis Secretary of the CompanyJohn Karakadas Non - Executive Director Changes in the Board of Directors • On July 6th 2006, Andreas Vgenopoulos Deputy Chairman and Company Secretary resigned and at the same date Sheldon Goldman was appointed as Deputy Chairman and Alexander Meraclis as Secretary of the Company. • On September 29th 2006, George Kintis Chief Executive Officer and Director of the Company resigned and Loukas Valetopoulos was appointed as Director and as Chief Executive Officer of the Company. • On January 25th 2007, Dennis Malamatinas Director resigned from the Board of IRF. STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL ACCOUNTS The Directors are responsible for preparing annual accounts and consolidatedannual accounts for each financial year which present fairly the financialposition and the performance of the Company and that of the Group (ref. Note 5)in accordance with applicable law and regulations. They have elected to prepare the financial statements and consolidated financialstatements in accordance with the IFRS as adopted by the EU. In preparing these annual accounts, the Directors: • select suitable accounting policies and then apply them consistently;• make judgments and estimates that are reasonable and prudent;• state whether they have been prepared in accordance with the IFRS as adopted by EU and;• prepare the annual accounts on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The Directors are responsible for keeping proper accounting records thatdisclose with reasonable accuracy at any time the financial position of theCompany and that of the Group and enable them to ensure that their annualaccounts comply with applicable laws and regulations. They have generalresponsibility for taking such steps as are reasonably open to them to safeguardthe assets of the Group and the Company and to prevent and detect fraud andother irregularities. INDEPENDENT AUDITOR'S REPORT To the Shareholders of IRF EUROPEAN FINANCE INVESTMENTS LIMITED Report on the Financial Statements We have audited the accompanying financial statements of "IRF European FinanceInvestments Limited" ("the Company") as well as the consolidated financialstatements of the Company and its subsidiaries ("the Group"), which comprise(for both the Company and the Group), the balance sheet as at December 31, 2006,and the income statement, statement of changes in equity and cash flow statementfor the year then ended, and a summary of significant accounting policies andother explanatory notes. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of thesefinancial statements in accordance with International Financial ReportingStandards that have been adopted by the European Union. This responsibilityincludes designing, implementing and maintaining internal control relevant tothe preparation and fair presentation of financial statements that are free frommaterial misstatement, whether due to fraud or error; selecting and applyingappropriate accounting policies; and making accounting estimates that arereasonable in the circumstances. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements basedon our audit. We conducted our audit in accordance with the Greek AuditingStandards, which are based on the International Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance whether the financial statements arefree from material misstatement. An audit involves performing procedures to obtain audit evidence about theamounts and disclosures in the financial statements. The procedures selecteddepend on the auditor's judgment, including the assessment of the risks ofmaterial misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal controlrelevant to the entity's preparation and fair presentation of the financialstatements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity's internal control. An audit also includesevaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by management, as well as evaluatingthe overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion. Opinion In our opinion, the abovementioned financial statements present fairly, in allmaterial respects, the financial position of the Company and that of the Groupas of December 31, 2006, and the financial performance and the cash flows of theCompany and those of the Group for the year then ended in accordance withInternational Financial Reporting Standards that have been adopted by theEuropean Union. Emphasis Without qualifying our opinion, we draw attention to note 50.2 of theconsolidated financial statements. Tax returns of the Greek subsidiaries havenot been inspected by Greek Tax Authorities yet, and therefore can not beconsidered as final. It is possible that additional taxes and penalties will beimposed when Tax Authorities examine the relevant tax returns. The outcome ofthe tax inspection could not be estimated at this stage and therefore norelevant provision has been made. Athens, March 16th, 2007 Grant Thornton The Certified Chartered Accountant 44, Vas. Konstantinou Av. Vassilis Kazas 116 35 Athens, Greece SOEL Reg. No. 13281 SOEL Reg. No. 127 NOTES TO THE FINANCIAL STATEMENTS 1. GENERAL INFORMATION Country of incorporation IRF European Finance Investments Ltd. was incorporated on 8th September 2005under the Bermuda Companies Act. The Company is listed on AIM, a marketoperated by the London Stock Exchange plc. The Company's registered office isat Canon's Court 22 Victoria Street, Hamilton HM12, Bermuda. Principal Activities The Group, through its subsidiaries, is engaged in the provision of banking,financial and insurance services. IRF was formed as an investing company toserve as a vehicle for the acquisition of an entity in the financial servicesindustry in Europe, with a primary focus on credit institutions and insurancecompanies in Greece, Bulgaria, Romania and Turkey. In June 2006, the Company acquired a controlling interest in PROTON BANK, aGreek bank, listed on the Athens Stock Exchange. Proton Bank and itssubsidiaries operate in the sectors of retail, corporate and investment banking,portfolio management, insurance and other financial services. PROTON BANK is licensed by the Bank of Greece to operate as a financialinstitution in Greece. The Bank, which is established in Greece and is supervised by the Bank ofGreece, operates through a network of 21 branches. On 7th September 2006, theExtraordinary General Meeting of Shareholders of PROTON BANK decided the mergerof the Bank with the companies OMEGA BANK and PROTON SECURITIES. The merger wascompleted in September 2006. 2. BASIS OF FINANCIAL STATEMENT PREPARATION 2.1 Statement of Compliance The financial statements of the Company and the Group for the year ended 31December 2006 have been prepared according to the International FinancialReporting standards (IFRS), which were published by the International AccountingStandards Board (IASB) and in compliance with to their interpretations, whichhave been published by the International Financial Reporting InterpretationsCommittee (IFRIC) and have been adopted by the European Union. The Group has adopted all International Accounting Standards, InternationalFinancial Reporting Standards and their interpretations which apply to theGroup's activities. 2.2 Basis of Measurement The financial Statements have been prepared on the historical cost basis exceptfor the following items which are measured at fair value: • Financial assets and liabilities at fair value through Profit & Loss (including derivatives),• Financial assets available for sale,• Investment Properties, and,• Land and Buildings. 2.3 Functional and Presentation Currency The current financial statements are presented in Euro, which is the functionalcurrency of the Group. The functional currency is the currency of the primaryeconomic environment in which an entity operates and is normally the one inwhich it primarily generates and expends cash. Management used its judgment todetermine the functional currency that most faithfully represents the economiceffects of the underlying transactions, events and conditions. As part of this approach, management considers various factors stated in IAS 21. Priority is given to factors such as the currency that mainly influences costsand sales. This currency is mainly Euro since the Group is and will be engagedin a business combination in Europe. The Company has also issued financialinstruments in US$. However, according to par. 12 of IAS 21, this factor is notgiven priority. All amounts are presented in thousand Euro unless mentioned otherwise. It isessential to mention that due to rounding, numbers presented throughout thecondensed separate and consolidated financial statements, may not add upprecisely to the totals provided in the financial statements, the same appliesto percentages. 2.4 Comparative Figures The Group's financial statements for the year ended December 31st, 2006 are itsfirst consolidated financial statements. Consolidated balance sheet,Consolidated Income statement and Consolidated Cash flow Statement for the year2006 include the Company's as well as its subsidiaries' items, while therelevant statements for the year 2005 refer only to the Company. Furthermore,Consolidated and Separate Income Statement for the year 2005 covers thefour-month period from the incorporation of the Company (8th September 2005)until the year end (31st December 2005), while Income Statement of 2006 coversthe whole twelve-month period. Thereby, the balance sheet, income statement and cash flow of the year for theCompany and the Group are not comparable with the respective statements of theprior year. 2.5 Use of Estimates The preparation of the financial statements requires management to makeestimates, judgements and assumptions that affect the application of accountingpolicies and the reporting amounts of assets, liabilities, income and expenses. Assumptions and estimates are reviewed on an ongoing basis and are revised basedon experience and other factors. Revisions of the accounting estimated arerecognised in the period in which estimates are revised and in any futureperiods affected. Assumptions and estimates include expectations on futureevent and outcomes that are considered as reasonable given the currentconditions. Actual results may differ from these estimates. Significant areas of estimates uncertainty and items that are significantlyaffected by judgements in applying accounting policies are presented inparagraph 4. 2.6 Adoption of new and revised IFRS In the current year, the Group adopted all new and revised InternationalAccounting Standards (IAS) and IFRS, which are relevant to its operations andapplicable for annual accounting periods commencing from 1st January, 2006. Theadoption of the new and amended standards and interpretations did not have amaterial effect on the Company's and the Group's financial statements: • IAS 39 (Amendment): The Fair Value Option• IAS 39 and IFRS 4 (Amendment): Financial Guarantee Contracts• IAS 19 (Amendment): Employee Benefits With this amendment, which is compulsory for the financial years commencing asof 01/01/2006, an additional method is introduced for the recognition ofactuarial gains or losses. Furthermore, it imposes, in some instances,additional requirements for recognition of benefit programmes in which multipleemployers participate. Lastly, it imposes additional disclosures. The Groupdid not alter its accounting policy for recognition of actuarial gains andlosses, nor did it participate in multiple employer programmes. Therefore, theadoption of the amended standard affects only the structure and extent of thedisclosures provided. This amendment introduces the option of an alternativerecognition approach to actuarial gains and losses. It also adds newrecognition and disclosure requirements for multiemployer plans. The Group didnot change the accounting policy adopted for recognition of actuarial gains andlosses. • IAS 21 (Amendment): Net Investment in a Foreign Operation• IAS 39 (Amendment): Cash flow Hedge Accounting of Forecast Intragroup Transactions• IFRIC 4: Determining whether an Arrangement contains a Lease The amended standards below as well as the new interpretations requirecompulsory application for the financial year presented, but do not have anyeffect on the Group's financial statements as they are not relevant to itsactivities: • IFRS 1 (Amendment): First-time Adoption of International Financial Reporting Standards• IFRS 6 (Amendment): Exploration for and Evaluation of Mineral Resources• IFRIC 5: Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds• IFRIC 6 Liabilities arising from Participating in a Specific Market - Waste Electrical and electronic Equipment 2.7 New Standards and Interpretations On the date of approval of these consolidated financial statements, thefollowing accounting standards have been issued but are not applicable in thepreparation of these consolidated financial statements: (a) IFRS 7, Financial Instruments: Disclosures and IAS 1 (Revised) Presentation of Financial Statements - Capital Disclosures (effective from 1st January, 2007): IFRS 7 introduces new disclosures to improve the information about financialinstruments. It requires the disclosure of qualitative and quantitativeinformation about exposure to risks arising from financial instruments,including specified minimum disclosures about credit risk, liquidity risk andmarket risk, including sensitivity analysis to market risk. It replaces IAS 30Disclosures in the Financial Statements of Banks and similar FinancialInstitutions, and disclosure requirements in IAS 32 Financial Instruments:Disclosure and Presentation. The amendment to IAS 1 introduces disclosuresabout the level of an entity's capital and how it manages capital. The Groupassessed the impact of IFRS 7 and the amendment to IAS 1 and the additionaldisclosures required. The Group will apply IFRS 7 and the amendment to IAS 1from 1 January, 2007. (b) IFRS 8 Operating Segments (effective from 1st January 2009): IFRS 8 replaces IAS 14 "Reporting Financial Information by Segment". The newIFRS requires a management approach to information presentation regarding thedifferent operational segments of the Group. The information disclosed is theinformation that management used in assessing the efficiency of each segment aswell as the way financial resources are distributed to each segment. Thisinformation will probably differ from the information used in preparing thebalance sheet and income statement. Lastly, explanations should be provided onthe base of preparation of business segments reporting as well asreconciliations with the financial statement accounts. The Group is studyingthe consequences of IFRS 8 on the quality of disclosures provided as well as theprobability of its prior application. (c) IFRIC 7, Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies (effective for annual periods beginning on 1st March 2006): This Interpretation is not applicable to the Group's operations. (d) IFRIC 8, Scope of IFRS 2 (effective for annual periods beginning on 1st May 2006): The adoption of this interpretation will not affect the Group's financialstatements. (e) IFRIC 9, Reassessment of Embedded Derivatives (effective for annual periods beginning on 1st June 2006): The Group assesses whether an embedded derivative needs to be separated from thehost contract and accounted for as a derivative when the Group first becomes aparty to the contract. According to this Interpretation, subsequentreassessment is prohibited unless there is a change in the terms of thecontract. The Group applies this Interpretation from 1st January, 2007. (f) IFRIC 10, Interim Financial Reporting and Impairment (effective for annual periods beginning on 1st November 2006): This Interpretation requires an entity not to reverse an impairment lossrecognised in a previous interim period in respect of goodwill or an investmentin either an equity instrument or a financial asset carried at cost. The Groupintends to apply this Interpretation from 1st January, 2007. (g) IFRIC 11, Group and Treasury Share Transactions (effective for annual periods beginning on 1st March 2007): IFRIC 11 refers to various issues relating to IFRS 2 and in particular toshare-based payment arrangements involving an entity's own equity instrumentsand share-based payment arrangements involving equity instruments of the parent. The Group intends to apply this Interpretation from 1st January, 2008. (h) IFRIC 12, Service Concession Arrangements (effective for annual periods beginning on 1st January 2008): The specific interpretation is not applicable to the Group's activities. 3. SUMMARY OF IMPORTANT ACCOUNTING POLICIES 3.1 Consolidation Subsidiaries: Subsidiary are entities controlled by the Company. Control existswhen the Company has the power to govern the financial and operating policies ofan entity so as to obtain benefits from its activities. Control is presumed toexist if the Company has ownership, directly of indirectly, over more than halfof the voting rights. The Group has also adopted a policy to consider as asubsidiary an entity over which the Company is in the position to have effectivecontrol, even though it has the ownership of less than half of the votingrights. The Group has developed several criteria in order to determine whetherit has the "de facto" control over the entity, including the actualrepresentation of the Company in the Board of Directors and the management ofthe subsidiary and the fact that there is no realistic possibility that all theother shareholders of the subsidiary will be organised and take control over theentity. Subsidiaries are fully consolidated using the purchase method from the date onwhich control commences until the date that control ceases. The acquisitioncost of a subsidiary is measured at the fair value of the assets given, theshares issued and the liabilities undertaken on the date of the exchange, plusany other cost directly attributable to the acquisition. Identifiable assetsacquired, liabilities and contingent liabilities assumed in a businesscombination are measured at their fair values on the acquisition date. Theexcess between the cost of acquisition and the fair value of the net assetsacquired is recorded as goodwill. If the cost of acquisition is less than thefair value of the net assets of the subsidiary acquired, the difference isrecognised directly in the income statement. Intra-group transactions, balances and unrealized gains on transactions betweenGroup companies are eliminated. Unrealised losses are also eliminated unlessthe transaction provides evidence of impairment of the asset transferred. AllGroup subsidiaries follow the same accounting policies as those adopted by theGroup. Associates: Associates are entities over which the Group has significantinfluence but not control. Significant influence is presumed to exist if theGroup holds between 20% and 50% of the voting rights of another company.Investments in associates are initially recognised at acquisition cost andsubsequently are accounted under the equity method. At the each balance sheetdate, investments carrying amount is increased by the Group's proportion in theassociate's changes in equity and decreases by the amount of dividends receivedfrom the associate. The Group's share in the associate's profits or losses,after the acquisition date, is recognised in the Income Statement whereas, theGroup's share in changes in reserves, is recognised directly in equity accounts. In case when the Group's participation in the associate's losses is equal orexceeds its cost of participation, inclusive of any doubtful debts, the Groupdoes not account for any further losses, except if it has covered allliabilities or has made payments on behalf of the associate as well as thosearising in the context of the shareholding. 3.2 Foreign Currency (i) Foreign Operations: The assets and liabilities of foreign operations, including goodwill and fairvalue adjustments due to business combinations, are translated into Euro atexchange rates applicable on the balance sheet date. The income and expensesare translated into Euro at exchange rate at the dates of transactions or, if itis impracticable, based on the average exchange rates during the reportingperiod. Any differences arising from the translation of the assets,liabilities, income and expenses are recognised into "Other reserves" withinequity. (ii) Foreign Currency Transactions Foreign currency transactions are translated into the respective functionalcurrency of the Group entities at the exchange rates at the dates oftransactions. Monetary asset and liability denominated in foreign currencies atthe reporting date are retranslated into the functional currency at the exchangerate at that date. The non-monetary assets denominated in foreign currenciesthat are measured at fair value are retranslated to the functional currency atthe exchange rate at the date that the fair value was determined. Foreigncurrency differences arising on the execution of foreign currency transactionsand on the retranslation of monetary assets and liabilities are recognised inprofit or loss. 3.3 Interest income and expense Interest income and expense are recognised on an accrual basis in the incomestatement for all interest bearing assets and liabilities, based on theeffective interest method. Interest income and expense include the amortisationof any discount or premium, transaction costs or other differences between theinitial cost of an interest bearing financial asset and the amount to bereceived or paid at maturity using the effective interest rate method. The effective interest rate is the rate that exactly discounts any estimatedfuture payment or receipt through the expected life of a financial instrument(or until the next date of interest reset), to the carrying amount of thefinancial instrument, including any fees or transaction costs incurred. 3.4 Fee and commissions income Fees and commissions are generally recognised on an accrual basis when therelevant services have been provided. Commission and fees arising fromnegotiating, or participating in the negotiation of, a transaction for a thirdparty are recognised on completion of the underlying transaction. Portfoliomanagement fees and other advisory and service fees are recognised in the incomestatement according the applicable service contract, usually on atime-apportionate basis. 3.5 Dividend Income Dividend income is recognised in the income statement when the right to receivepayment is established. 3.6 Financial instruments A financial instrument is any contract that gives rise to a financial asset ofone entity and a financial liability or equity instrument of another entity. 3.6.1 Initial Recognition Financial assets and liabilities are recognised at the trade date which is thedate when the Group becomes a part to the contractual provision of theinstruments. The financial assets and liabilities are initially measured atfair value plus, in the case of a financial asset or financial liability not atfair value through profit or loss, transaction costs that are directlyattributable to the acquisition or issue of the financial asset or financialliability. 3.6.2 Classification and Measurement of Financial Assets Management determines the classification of its investments at initialrecognition. Financial assets are classified into the following categories: i) Financial Assets and Liabilities at Fair Value through Profit & Loss This category has two sub-categories: financial assets held for trading andthose designated at fair value through profit or loss at inception. A financialasset is classified in the held for trading category if acquired principally forthe purpose of generating a profit from short-term fluctuations in price.Derivative financial instruments are also categorised as held for trading unlessthey are designated as accounting hedges in which case hedge accounting isapplied. Financial assets designated as at fair value through profit or loss atinception are those that are managed and their performance is evaluated on afair value basis, in accordance with a documented investment strategy.Information about these financial assets is provided internally on a fair valuebasis to key management personnel. ii) Loans and Receivables These include non-derivative financial assets with fixed or determinablepayments that are not quoted in an active market and which the Group does notindent to sell in the short-term. They arise when the Group provides money,goods or services directly to a debtor with no intention of trading thereceivable. Loans and receivables are measured at amortised cost using theeffective interest method. iii) Held to maturity investments Held-to-maturity financial assets are non-derivative financial assets with fixedor determinable payments and fixed maturities that the management has thepositive intention and ability to hold to maturity. When the Group to sellother than an insignificant amount of held-to-maturity assets, then he entirecategory tainted and reclassified as available-for-sale. iv) Available for sale investment Available-for-sale investments are those intended to be held for an indefiniteperiod of time, which may be sold in response to needs for liquidity or changesin interest rates, exchange rates or equity prices. Purchases and sales of financial assets at fair value through profit or loss,held-to-maturity, and available-for-sale are recognised at trade date - the dateon which the Group commits to purchase or sell the asset. Loans are recognisedwhen cash is advanced to the borrowers. Financial assets are initially recognised at fair value plus transaction costsfor all financial assets not carried at fair value through profit or loss.Financial assets are derecognised when the rights to receive cash flows from thefinancial assets have expired or where the Group has transferred substantiallyall risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value throughprofit or loss are subsequently carried at fair value. Loans and receivablesand held-to-maturity investments are carried at amortised cost using theeffective interest method. 3.6.3 Off setting Financial assets and liabilities are offset and the net amount is presented inthe Balance sheet when there is a legally enforceable right to offset therecognised amounts and there is an intention to settle on a net basis, orrealise the asset and settle the liability simultaneously. Income and expenses are offset only when permitted by the accounting standards,or for gains and losses arising from a group of similar transactions. 3.6.4 Fair value measurement For the measurement of assets and liabilities at fair value, the Group usescurrent market prices for every financial instrument. For those assets andliabilities whose current market price was not available, the values that werederived by applying valuation methods do not differ much from their carryingvalues. In particular: • The listed securities are valued at fair value, which is determined according to the current market price on the day of the balance sheet date• Non listed securities are valued at cost of acquisition less any impairment.• The fair value of derivative financial instruments that are not quoted in active markets is determined by using valuation techniques. These models, even though dependent on measurable data, may require estimates and judgments (i.e. volatility and credit risk). Those estimates are assessed regulatory and when market conditions change. 3.6.5 Impairment of financial assets (a) Assets carried at amortised cost The Group assesses at each balance sheet date whether there is objectiveevidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairmentlosses are incurred if, and only if, there is objective evidence of impairmentas a result of one or more events that occurred after the initial recognition ofthe asset (a "loss event") and that loss event (or events) has an impact on theestimated future cash flows of the financial asset or group of financial assetsthat can be reliably estimated. Objective evidence that a financial asset or agroup of assets is impaired includes observable data that comes to the attentionof the Group about the following loss events: (i) significant financial difficulty of the obligor;(ii) a breach of contract, such as a default or delinquency in interest or principal payments;(iii) the Group granting to the borrower, for economic or legal reasons relating to the borrower's financial difficulty, a concession that the lender would not otherwise consider;(iv) it becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or(v) observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group; including: • adverse changes in the payment status of borrower in the group; or • national or local economic conditions that correlate with defaults on the assets in the group. The Group first assesses whether objective evidence of impairment existsindividually for financial assets that are individually significant, andindividually or collectively for financial assets that are not individuallysignificant. If the Group determines that no objective evidence of impairmentexists for an individually assessed financial asset, whether significant or not,it includes the asset in a group of financial assets with similar credit riskcharacteristics and collectively assesses them for impairment. Assets that areindividually assessed for impairment and for which an impairment loss is orcontinues to be recognised are not included in a collective assessment ofimpairment. If there is objective evidence that an impairment loss on financial assets hasbeen incurred, the amount of loss is measured as the difference between thecarrying amount of the financial asset and the present value of estimated futurecash flows (excluding future credit losses that have not been incurred)discounted at the financial asset's original effective interest rate. Thecarrying amount of the asset is reduced through the use of an allowance accountand the amount of the loss is recognised in the income statement. If a loan ora held-to-maturity investment has a variable interest rate, the discount ratefor measuring any impairment loss is the current effective interest ratedetermined under the contract. The calculation of the present value of the estimated future cash flows of acollateralised loan reflects the cash flows that may result from foreclosureless costs for obtaining and selling the collateral, whether or not foreclosureis probable. For the purposes of a collective evaluation of impairment, financial assets aregrouped on the basis of similar credit risk characteristics (i.e. on the basisof the Group's grading process that considers asset type, industry, geographicallocation, collateral type, past-due status and other relevant factors). Thosecharacteristics are relevant to the estimation of future cash flows for groupsof such assets by being indicative of the debtors' ability to pay all amountsdue according to the contractual terms of the assets being evaluated. Future cash flows in a group of financial assets that are collectively evaluatedfor impairment are estimated on the basis of the contractual cash flows of theassets in the group and historical loss experience for assets with credit riskcharacteristics similar to those in the group. Historical loss experience isadjusted on the basis of current observable data to reflect the effects ofcurrent conditions that did not affect the period on which the historical lossexperience is based and to remove the effect of conditions in the historicalperiod that do not exist currently. The methodology and assumptions used of estimating future cash flows arereviewed regularly by the Group to reduce any differences between loss estimatesand actual loss experience. When a loan is uncollectible, it is written-off against the related provisionfor loan impairment. Such loans are written off after all the necessaryprocedures have been completed and the amount of the loss has been determined.Subsequent recoveries of amounts previously written off decrease the amount ofthe provision for loan impairment in the income statement. If, in a subsequent period, the amount of the impairment loss decreases and thedecrease can be related objectively to an event occurring after the impairmentwas recognised, the previously recognised impairment loss is reversed byadjusting the allowance account. The amount of the reversal is recognised inthe income statement. (b) Assets carried at fair value The Group assesses at each balance sheet date whether there is objectiveevidence that a financial asset or group of financial assets is impaired. Inthe case of equity investments classified as available-for-sale, a significantor prolonged decline in the fair value of the security below its cost isconsidered in determining whether the asset is impaired. If any such evidenceexists for available-for-sale financial assets, the cumulative loss measured asthe difference between the acquisition cost and the current fair value, less anyimpairment loss on that financial asset previously recognised in profit or lossis removed from equity and recognised in the income statement. Impairmentlosses recognised in the income statement on equity instruments are not reversedthrough the income statement. If, in a subsequent period, the fair value of adebt instrument classified as available-for-sale increases and the increase canbe objectively related to an event occurring after the impairment loss wasrecognised in profit or loss, the impairment loss is reversed through the incomestatement. 3.6.6 Derivative financial instruments and hedge accounting Derivative financial instruments include forward exchange contracts, currencyand interest rate swaps, stock, currency and index futures, equity and currencyoptions and other derivative financial instruments. These are initiallyrecognised in the balance sheet at fair value, and subsequently are re-measuredat their fair value. Fair values are obtained from quoted market prices,discounted cash flow models and other appropriate pricing models. Allderivatives are shown as financial assets at fair value through profit or losswhen fair value is positive and as financial liabilities when fair value isnegative. The best evidence of the fair value of a derivative at initial recognition isthe transaction price (i.e. the fair value of the consideration given orreceived). Certain derivatives embedded in other financial instruments are treated asseparate derivatives when their economic characteristics and risks are notclosely related to those of the host contract and the host contracts is notcarried at fair value through profit or loss. These embedded derivatives aremeasured at fair value with changes in fair value recognised in the incomestatement. The method of recognizing the resulting fair value gain or loss depends onwhether the derivative is designated as a hedging instrument, and if so, thenature of the items being hedged. The Group designates certain derivatives aseither (1) hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedge); or(2) hedges of highly probable future cash flows attributable to a recognised asset or liability, or a forecasted transaction (cash flow hedge). Hedge accounting is used for derivatives designated in this way provided certain criteria are met. The Group documents, at the inception of the transaction, the relationshipbetween hedging instruments and hedged items, as well as its risk managementobjective and strategy for undertaking various hedge transactions. The Groupalso documents its assessment, both at hedge inception and on an ongoing basis,of whether the derivatives that are used in hedging transactions are highlyeffective in offsetting changes in fair values or cash flows of hedged items. Fair value hedge - For fair value hedges that meet the criteria for hedgeaccounting, any profit or loss from the revaluation of the derivative at fairvalue is recognised in the income statement. Any profit or loss of the hedgedinstrument that is due to the hedged risk, adjusts the book value of the hedgedinstrument and is recognised in the income statement, irrespective of theclassification of the financial instrument (e.g. available-for-sale financialinstruments). If the hedge no longer meets the criteria for hedge accounting, the adjustmentto the carrying amount of a hedged item for which the effective interest methodis used is amortised to profit or loss over the period to maturity. Theadjustment to the carrying amount of a hedged equity security remains inretained earnings until the disposal of the equity security. Cash flow hedge - For cash flow hedges that meet the criteria of hedgeaccounting, the part of the profit or loss from the derivative that isdesignated as an active hedge is recognised directly in reserves and the partthat is designated as a non-active hedge is recognised in the income statement. Any profit or loss that has been recognised directly into reserves istransferred to the income statement in the period when the hedged transactionaffects the results. Hedge accounting is discontinued when the hedging instrument expires or is sold,is terminated or exercised, or when the hedge no longer meets the criteria forhedge accounting. In case a hedged transaction is no longer expected to berealized, the net accumulated profit or loss that has been recognised into thereserves will be transferred to the income statement. When derivative instruments are used for hedges of net investments in foreignoperations and the criteria for hedge accounting as set out by IAS 39 are met,changes in the fair value of the hedging instrument are recognised in reserves. 3.6.7 Sale and repurchase agreements The Group enters into agreements for purchases (sales) of investments and toresell (repurchase) substantially identical investments at a certain date in thefuture at a fixed price. Investments purchased, on condition that they will beresold in the future (reverse repos), are not recognised in the balance sheet.The amounts paid for purchase thereof are recognised as receivables from otherbanks or customers. The difference between the sale and repurchaseconsideration is recognised as interest income or expense during the repurchaseagreement period on an accrual basis. Investments sold under repurchase agreements continue to be recognised in thebalance sheet and are measured in accordance with the accounting policy foreither assets held for trading or available-for-sale as appropriate. Theproceeds from the sale of the investments are reported as liabilities to eitherbanks or customers. 3.7 Insurance contracts Through its insurance subsidiaries, the Group issues insurance contracts tocustomers. Under these contracts the Group accepts significant insurance risk,by agreeing to compensate the contract holder on the occurrence of a specified,uncertain future event. Since January 1st 2005 risk bearing contracts have been separated into insurancecontracts and financial contracts (IFRS 4). Group's insurance company issuesonly insurance contracts covering property and casualty risks up to one year ofduration. Property and casualty insurance contracts are separated in two categories: a) Automobile third party liability. This category includes insurance contracts covering the risk of automobile third party liability.b) Non-automobile lines. This category includes insurance contracts covering the risk of fire and allied lines, marine, general liability, legal protection, road assistance, etc. Gross insurance premiums are recognised in the income statement over the periodcovered by the related insurance contract. The insurance premiums arerecognised before the deduction of the relevant commissions. Contract costs Costs incurred for the initiation or the renewal of insurance contract, such asbrokers commission, are deferred and recognised as an asset. The relevantamounts are amortised to Profit or Loss on a systematic basis over thecontractual term of the relevant insurance contract. Liabilities from insurance contracts Provisions for outstanding claims are revised at each balance sheet date and anychange is recognised in Profit or Loss to the extend that it refers to claimcovered by the Group, while any amount covered by reinsurance is recognised asan asset (receivable) according to the reinsurance contracts. (a) Unearned Premiums Gross insurance premiums for general insurance business are recognised in theincome statement over the period covered by the related insurance contract. Theproportion of premiums which relates to periods of risk extending beyond the endof the year is reported as unearned premium and is calculated on a daily basis. (b) Provisions for claims incurred Provisions for outstanding claims are based on the estimated ultimate cost ofall claims incurred but not settled at the balance sheet date, whether reportedor not, together with related claims handling costs. The amount of provisionsis estimated based on available information (adjuster reports, court decisionsetc.) at the balance sheet date. Provisions for outstanding claims include reserves for incurred claims, whichare not reported to the company at the balance sheet date (I.B.N.R.).Provisions for outstanding claims are reported at the balance sheet dateaccording to the requirements of regulatory authority legislation in force (law400/1970). Specifically the automobile third party liability related claimsreserves, are checked according to the K3-3975/11.10.1999 decision of TheMinistry of Development, forming the greater possible reserve. I.B.N.R.provisions are estimated based on the K3-3974/11.10.1999 decision of TheMinistry of Development. Provisions for outstanding claims include reserves for incurred claims, whichare not reported to the company at the balance sheet date (I.B.N.R.).Provisions for outstanding claims are reported at the balance sheet dateaccording to the requirements of regulatory authority legislation in force (law400/1970). Specifically the automobile third party liability related claimsreserves, are checked according to the K3-3975/11.10.1999 decision of TheMinistry of Development, forming the greater possible reserve. I.B.N.R.provisions are estimated based on the K3-3974/11.10.1999 decision of TheMinistry of Development. The difference in non-life insurance contract liabilities (increase / decrease)related to their previous assessment is transferred to the profit and lossaccounts as far as the company's own retention, while the rest is transferred tothe reinsurance accounts, according to the reinsurance agreements. Reinsurance contracts Reinsurance contracts are contracts entered into by the Group's insurancesubsidiaries, under which the Group is compensated for losses incurred underinsurance contracts issued by the Group's insurance subsidiaries. Thereinsurance contracts entered into by the Group's insurance subsidiaries, inwhich the issuer of the insurance contract is another insurer (inwardsreinsurance) are included in reinsurance contracts. Any amounts recovered from reinsures, that derive from the reinsurance contractsof the Group, are recognised in assets. The amounts recovered from or toreinsures are calculated based on the amounts related with the reinsurancecontracts and are based on the terms of each reinsurance contract. Thereinsurance liabilities are mainly premiums payable for reinsurance contractsand are recognised as expenses on an accrual basis. The Group evaluates its reinsurance assets for impairment. If there isobjective evidence that the reinsurance assets have incurred an impairment, theGroup reduces the carrying amount of the reinsurance asset to its recoverableamount and recognizes the reduction in its value in the income statement. Liability adequacy test At each balance sheet date, liability adequacy tests are performed by theGroup's insurance companies to ensure the adequacy of liabilities that arisefrom their operations. In performing these tests, current best estimates ofoperational and investment income and operational and administration expensesare based on past experience and financial results. In case when the adequacy test reveals insufficient reserves, provisions areadjusted accordingly. The liability is derecognised when the contract expires,is discharged or is cancelled. 3.8 Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprisebalances with less than three months maturity and include cash and nonrestricted balances with Central Bank, government bonds and treasury bills andamounts due from other banks and short-term government securities. 3.9 Intangible assets The Group has included in this category goodwill from acquisitions and softwarewhich is carried at amortised cost less accumulated amortisation. (a) Goodwill and other intangible assets Goodwill represents the excess of the cost of an acquisition over the fair valueof the net identifiable assets of the acquired undertaking at the date ofacquisition. Goodwill on acquisitions of subsidiaries is included in thebalance sheet in "Goodwill and other intangible assets". Negative goodwill is recognised immediately as gain in the income statement. Goodwill is tested for impairment annually and whenever there are indications ofimpairment and is carried at cost less accumulated impairment losses. Goodwillis allocated to cash-generating units for the purpose of impairment testing,using the country of operation and economic segment as the allocation bases. (b) Computer software Costs that are directly associated with identifiable and unique computersoftware products controlled by the Group and that will probably generateeconomic benefits exceeding costs beyond one year are recognised as intangibleassets. Subsequently computer software are carried at cost less any accumulatedamortisation and any accumulated impairment losses. Expenditure, which enhancesor extends the performance of computer software programmes beyond their originalspecifications is recognised as a capital improvement. Costs associated with maintenance of computer software programmes are recognisedas an expense when incurred. Computer software costs are amortised using thestraight-line method over their useful lives, not exceeding a period of fiveyears. Amortisation commences when the computer software is available for useand is included within "Depreciation" in the income statement. 3.10 Property, plant and equipment All plant and equipment are stated at historical cost less depreciation, exceptland and buildings which are shown at fair value based on valuations by externalindependent valuers, less subsequent depreciation for buildings. Historical cost includes expenditure that is directly attributable to theacquisition of the items. Expenditure for repairs and maintenance of propertyand equipment is charged to the income statement of the year in which they wereincurred. Depreciation on buildings and other tangible assets are calculatedusing the straight line method to allocate their cost or fair value to theirresidual values over their estimated useful lives. The carrying amount of impaired assets is written down to their recoverableamounts. Gains and losses from disposals are recognised in the incomestatement. Land is not depreciated but is reviewed for impairment. Depreciation on otherproperty and equipment is calculated using the straight-line method to allocatethe cost or revalued amount of each asset less their residual values, over theirestimated useful lives. The estimated useful lives are as follows: • Buildings: 50 years• Lease hold improvements: depreciated on a straight-line basis over the term of the lease• Computers: 3 years• Vehicles: 5-7 years• Furniture and equipment: 10 years• The commercial value of leased assets is depreciated over the lease period The assets' residual values and useful lives are reviewed, and adjusted ifappropriate, at each balance sheet date. When the carrying amount of an assetis greater than its estimated recoverable amount, it is written down immediatelyto its recoverable amount. The recoverable amount is the higher of the asset'sfair value less costs to sell and value in use. Gains and losses on disposal of property and equipment are determined bycomparing proceeds to carrying amount and are included in the income statement. 3.11 Assets held for sale This category includes fixed assets that will be sold within 12 months whosecarrying amount will be recovered principally through the sale transaction.Assets held for sale, according to IFRS 5 "Non current assets held for sale anddiscontinued operations", are valued at the lower of their carrying amount andfair value less costs to sell. Assets held for sale are not depreciated but aresubject to impairment. Gains / losses from sale of these assets are recognisedin the income statement. 3.12 Leases 3.12.1 A Group company is a lessee (a) Finance lease The Group has not entered into a finance lease agreement in the capacity of alessee. (b) Operating leases: Leases where the risks and rewards of ownership remain with the lessor areclassified as operating leases. Payments made under operating leases (net ofany incentives received by the lessor) are charged to the income statement on astraight line basis over the period of the lease. 3.12.2 A Group company is a lessor (a) Finance lease: When assets are leased out under finance lease / hire purchase, the presentvalue of the lease payments is recognised as a receivable. Lease income andhire purchase fees are recognised in the income statement in a systematicmanner, based on instalments receivable during the year so as to provide aconstant periodic rate using the net investment method. (b) Operating leases: Assets leased out under operating leases are carried on the Group's financialstatements and are depreciated over their useful economic lives. Paymentsreceived under operating leases are recorded in the income statement on astraight line basis. 3.13 Financial liabilities Financial liabilities are treated as held for trading if: a) acquired principally for the purpose of selling or repurchasing them in the near termb) a derivative financial instrument (except for a designated and effective hedging instrument). Financial liabilities are initially recognised at fair value. Subsequently anychanges in their fair value are recognised in the income statement. The Group has classified in this category derivative financial instruments notheld and qualifying for hedging purposes. Derivative financial liabilities that are part of a hedging relationship aremeasured at fair value. Subsequently, any changes in their fair value aresubject to principles described in note 2.13. Liabilities not included in theabove categories are carried at amortised cost using the effective interest ratemethod. 3.14 Share capital (a) Share issue costs Incremental costs directly attributable to the issue of new shares are deductedfrom equity. (b) Dividends on ordinary shares The dividend distribution to ordinary shareholders is recognised in the periodin which the dividend is approved by the Company's shareholders. Dividend forthe year that is declared after the balance sheet date is disclosed in Note 48. (c) Treasury Shares. Where the Company or other members of the Group purchase the Company's equityshare capital, the consideration paid is deducted from total shareholders'equity as treasury shares. Where such shares are subsequently sold or reissued,any consideration received is included in shareholders' equity. 3.15 Fiduciary activities Assets and income arising thereon together with related undertakings to returnsuch assets to customers are excluded from these financial statements where theGroup acts in a fiduciary capacity such as nominee, trustee or agent. 3.16 Provisions Provisions are recognised when the Group has a present legal or constructiveobligation as a result of past events, when it is more likely than not that anoutflow of resources will be required to settle the obligation, and a reliableestimate of the amount of the obligation can be made. If the effect ismaterial, provisions are determined by discounting the expected future cashflows at a pre-tax rate that reflects current market assessments of the timevalue of money. Where the Group expects a provision to be reimbursed, the reimbursement isrecognised as a separate asset but only when the reimbursement is virtuallycertain. The Group recognises a provision for onerous contracts when the expectedbenefits to be derived from a contract are less than the unavoidable costs ofmeeting the obligations under the contract. 3.17 Employee benefits (a) Defined contribution plans A defined contribution plan is a plan under which the company and the employeespay fixed contributions into a separate fund. The benefits provided to theemployees participating in defined contribution plans are based on the return ofthe fund. Each fund is governed by specified regulations as agreed between thetwo parties and in compliance with relevant statutory obligations. Thecontributions of the Group to the defined contribution plans are charged to theincome statement in the year in which they arise. The Group's personnel is insured for its main pension to publicly administeredpension insurance funds (i.e Social Security Foundation and other) depending ontheir specialty. The contributions paid by the Group are included in "Staffcosts". The Group's personnel is also insured for medical care in multiemployerfunds. In these funds, there are no separate accounts for each company, henceaccounting for defined contribution is followed. Once the contribution has beenpaid, the Group has no further payment obligations. (b) Defined benefit plans The Group operates defined contribution and benefit plans in Greece. Provisionsfor employee retirement, such as compensation defined under Law 2112/20, aredetermined actuarially using the projected unit credit method. A definedbenefit plan is a plan that defines an amount of lump sum or pension benefit tobe provided upon retirement which is determined by taking into account factorssuch as years of service and employee salary. Retirement benefit costs relatingto the defined benefit plans and which are those included in staff costs areassessed using the projected unit credit method. Under this method, the cost ofproviding defined benefit pensions is charged to the income statement so as tospread the regular cost over the service lives of employees in accordance withthe advice of professionally qualified actuaries who value the plan at the endof each year. The obligation for the defined benefit plans is measured at the present value ofthe estimated future cash outflows using interest rates of governmentsecurities, which have terms to maturity approximating the terms of the relatedliability less the fair value of the plan assets. Actuarial gains or losses which exceed 10% of the greater of the present valueof the Group's obligation and the fair value of the plan assets, are amortisedover the expected average remaining working lives of the participatingemployees. Actuarial gains or losses below the 10% corridor are not recognised. c) Share-based compensation The Group rewards key management executives, according to their efficiency withoptions on its own shares. At each balance sheet date, the Group revises itsestimates for the number of options that are expected to become exercisable.The fair value of the employee services received in exchange for the grant ofthe options is recognised as an expense (Staff costs) with a correspondingincrease in equity during the grand date and exercise date. The proceedsreceived are credited to share capital and share premium when the options areexercised. 3.18 Income Tax Current tax liabilities and assets for the current and prior periods aremeasured at the amount expected to be paid to or recovered from the taxationauthorities using the tax rates and laws that have been enacted or substantiallyenacted by the balance sheet date. Deferred tax is provided in full, using the liability method, on all temporarydifferences arising between the tax bases of assets and liabilities and theircarrying amounts in the financial statements. Deferred tax is determined usingtax rates and laws that have been enacted or substantially enacted by thebalance sheet date and are expected to apply when the related deferred tax assetis realised or the deferred tax liability is settled. The following temporarydifferences are not provided for: goodwill not deductible for tax purposes, theinitial recognition of assets or liabilities that affect neither accounting nortaxable differences. Deferred tax assets are recognised to the extent that it is probable that futuretaxable profit will be available against which the temporary differences can beutilised. In Greece submitted tax returns are not considered as final until taxauthorities audit the companies books and records, or until the statute oflimitation expires. In Greece the results reported to the tax authorities by anentity are provisional and are subject to revision until the tax authoritiesexamine the books and records of the entity and the related tax returns areaccepted as final. Therefore, entities remain contingently liable foradditional taxes and penalties which may be assessed on such tax examination.It is common practice in Greece for the tax authorities to audit an entity'sbooks and records and to disallow expenses arbitrarily and to assess additionaltaxes. 3.19 Segment reporting A segment is a distinguishable component of the Group that is engaged either inproviding products or services (business segment) or in providing products orservices within a particular environment (geographical segment), which issubject to risks and rewards that are different from those of other segments.Segment is analyzed in Note 7. This information is provided by RNS The company news service from the London Stock Exchange