IRF.L Regulatory News (IRF)

19 Mar 2007 13:40

IRF European Fin Investments Ltd 19 March 2007 4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS Accounting estimates and judgements are continually evaluated and are based onhistorical experience and other factors, including expectations of future eventsthat are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resultingaccounting estimates will, by definition, seldom equal the related actualresults. The estimates, judgements and assumptions that have a significant riskof causing a material adjustment to the carrying amounts of assets andliabilities within the next financial year are discussed below: (a) Impairment losses on loans and advances The Group reviews its loan portfolio to assess impairment at least quarterly.In determining whether an impairment loss should be recorded in the incomestatement, the Group makes judgements as to whether there is sufficient evidenceindicating that the balance of a loan or a portfolio of homogenous loansoutstanding will not be fully recovered. This evidence includes: • violation of the contractual terms resulting in the delay of capital or interest payment,• significant deterioration in the loan repayment ability,• legal action,• bankruptcy, and• other objective evidence that leads to the conclusion that the Group will not collect the full amount due. For a loan that has been characterized as impaired, the realisable value of itssecurities is considered to be the present value of its future cash flows. Inaddition, for significant amounts other factors such as the financial status ofthe customer, the alternative sources of funds available and the extent to whichcredit worthy guarantors can support the customer are considered. The provisionamount is calculated as the difference between the loan's carrying amount andthe realisable amount, including all securities and guarantees. (b) Fair value of financial instruments The fair value of financial instruments that are not quoted in an active marketis determined using valuation techniques. The Group uses its judgement toselect a variety of methods and make assumptions that are mainly based on marketconditions existing at each balance sheet date. The valuation techniques usedare frequently assessed to ensure their validity and appropriateness. Changes inmethods and assumptions about these factors could affect the reported fair valueof financial instruments. (c) Impairment of available for sale financial assets The Group follows the guidance in IAS 39 to determine if an investment has beenimpaired. This decision requires critical judgement. Available for sale equityinvestments are impaired when there has been a significant or prolonged declinein fair value below its cost. When the declines in fair value are consideredsignificant or prolonged, the fair value reserve is transferred to the incomestatement. Furthermore, estimates are used to determine the fair value ofequity investments which are not quoted in active markets. For thoseinvestments, the fair value is determined by using valuation techniques takingunder consideration assumptions about industry and sector performances as wellas the financial health of the investee. (d) Income taxes The Group is subject to income tax according to the tax legislation in Greece.In order to establish the corporation tax, as presented in the balance sheet,significant assumptions are required. For specific transactions andcalculations the ultimate tax determination is uncertain. The Group recognisesliabilities for anticipated tax issues based on estimates of whether additionaltaxes will be due. Where the final tax outcome of these matters is differentfrom the amounts that were initially recorded, such differences will impact theincome tax and deferred tax provisions in the period in which such determinationis made. (e) Retirement benefits The present value of liabilities arising from staff retirement benefits isdetermined by means of an actuarial valuation using specific assumptions. Theseassumptions are disclosed in Note 39. According to the relevant Group's accounting policy for retirement benefits, anychanges in the assumptions are likely to have an effect on the level of theunrecognised actuarial gain or loss. (f) Insurance claims Insurance liabilities for claims are calculated by using information relating tothe claim. The Group assesses each claim separately and the estimated liabilityis based on the facts of each claim, experience and other relevant factors, on acase-by-case basis. The Group is liable for all events covered by the policyeven if the loss is discovered after the policy's expiry date. A provision ismade for claims incurred but not yet reported (IBNR). Reserve adequacy test wasperformed through the link ratio methodology, using last six years data. Themethodology assumes persistence of accumulated losses ratios (paid andoutstanding claims). (g) Financial Instruments Classification The Group's accounting policies require financial assets and liabilities to beclassified into different categories at their inception: • Investments held to maturity. Management judgement is required when applying this classification, which takes into account the Group's intention & ability to hold investment to maturity.• Financial instruments for trading purposes include Investments and derivatives held to achieve short-term profit. (h) Control over subsidiaries The Group has adopted a policy to consider as a subsidiary an entity over whichit has the "de facto" power to control its financing and operating activities nomatter whether it holds less than half of the voting rights. Managementexercises its judgment and has developed certain criteria to determine whethereffective control exist, such as representation in the entities governing body,ability to control the General Meeting of Shareholders decision and structure ofvoting rights of the entity. 5. STRUCTURE OF THE GROUP The following table indicates the Group structure as at 31/12/2006: Company Name Head Office Direct Indirect Total Proton's Relation that Share-holding % share- dictated the Share- Share- consolidation holding % holding % holdingIRF European Finance Bermudes ParentInvestments LimitedSUBSIDIARIESMimosa Trading SA Marshall 100.00% 0.00% 100% The Islands participation percentageMyrtle Trading Company Marshall 100.00% 0.00% 100% The Islands participation percentageProton GroupProton Bank AE Greece 20.16% 0.00% 20.16% Parent of Control over Proton the entity GroupProton Asset Management Greece 0.00% 20.14% 20.14% 99.90% Control overAENEY the entity Proton Mutual Funds Mgt Greece 0.00% 20.14% 20.14% 99.90% Control overCo SA the entityFirst Global Brokers SA Serbia 0.00% 16.63% 16.63% 82.49% Control over the entityOmega Mutual Funds Mgt Greece 0.00% 18.76% 18.76% 93.07% Control overCo SA the entityOmega Insurance & Greece 0.00% 13.31% 13.31% 66.00% Control overReinsurance Services SA the entityOmega Insurance SA Greece 0.00% 16.69% 16.69% 82.78% Control over the entityIntellectron Systems Greece 0.00% 11.42% 11.42% 56.64% Control over the entityOmega Kahn Financial Switzerland 0.00% 16.13% 16.13% 80.00% Control overServices SA the entityOmega SA Financial Greece 0.00% 20.16% 20.16% 100.00% Control overAdvisors - Investments & the entityReal Estate MgtASSOCIATESOmega Porfolio Greece 0.00% 5.80% 5.80% 28.75%Investment SA PROTON BANK is fully consolidated because of the "de facto" power of the Companyto control its financial and operating activities. In particular, the Companyowns the 20.16% of the voting rights of PROTON while the percentage of votingrights controlled be the Company is increased to 26.14% after taking intoconsideration the holding of two other shareholders of PROTON who are committedto vote in accordance with IRF's instructions based on an agreement. Company's directors use their judgment in order to ascertain whether IRF has theeffective control of PROTON according to the accounting policy adopted. Basedon all relevant information currently available, Company concludes that it hasthe ability to control PROTON and therefore fully consolidated its financialstatements. The following reasons advocate that IRF has control over PROTON: a) IRF has already exercised its effective power and appointed six members in the eleven-member Board of Directors of PROTON, including PROTON's chairman,b) Based on the Purchase Agreement, the vendors, who are currently directors and shareholders of PROTON, agree to vote in such a way that will protect IRF's power to appoint the majority of the PROTON's Board of Directors,c) There is no realistic possibility that all the other shareholders, who represent the 73.86% of the voting rights, will be organized in such a way as to in practice block the exercise of IRF's power. In particular, the 73.86% of the shares of PROTON is held by more than 10.000 investors, the majority of whom do not usually attend the Shareholders' Meeting. Moreover, no one of them controls more than 5% of the entity andd) The relevant judgment is compliance the relevant Greek regulations. All other subsidiaries comprising PROTON Group are consolidated because of theindirect, through PROTON Bank, ownership of the majority of their voting rights. The method of consolidation is the Purchase Method. Investment in associates isaccounted under the equity method. 5.1 Changes in Group Structure during the Year 2006 During the financial year the following changes took place in the GroupStructure: 1) PROTON BANK: On 29th June 2006 IRF European Finance Investments Ltd acquired a 28% stake in the share capital of the listed on the Athens Stock Exchange company "PROTON BANK". The range of activities of PROTON Group of Companies covers almost the whole spectrum of the financial industry. More precisely, PROTON Group is specialised in investment banking. The IRF Group consolidated PROTON BANK for the first time at 30/06/2006, date at which control was deemed to be acquired. "Control" is the right to lead the financial and business policies of an entity in order to receive benefits from its operation. On 7th September 2006, the Extraordinary General Meeting of shareholders of PROTON BANK approved the merger of the Bank with Omega Bank and Proton Securities. According to the Merger Contract, which was approved by the General Assembly, the exchange ratio was 1 share of Omega Bank for 0.90 shares of PROTON BANK. As Proton Bank holds 100% of Proton Securities shares, there was no exchange ratio. Additionally, the General Assembly decided the amendment of article 5 of its Articles of Association in order for the bank's share capital to rise after the merger, to a total amount of • 281,450,360.78 divided into 62,683,822 common voting shares of nominal value • 4.49 each. The merger was completed on 29th September 2006. Following Proton's Bank merger with Omega and taking into account the shares issued therewith, the Company now owns a 20.16% interest in PROTON BANK. For the above merger the provisions of IFRS 3 " Business Combinations" were followed which applies to business combinations after 31st March 2004. 2) ARROW ASSET FINANCE SA: The consolidated financial statements for the year ended 31st December 2006 do not include ARROW ASSET FINANCE SA, since on 30th September the dissolution of ARROW ASSET FINANCE SA was completed, as the Extraordinary General Meeting of the PROTON's shareholders, approved the start up and liquidation balance sheet according to the article 47 of Law 2190/1920 and 35 of the company's Articles of Association. The dissolution and liquidation of the company had no material effect on the Group's net assets since PROTON's investment in the particular subsidiary with a cost of • 369 thous. was written off. The impairment loss of • 369 thous. was charged against the income statement of PROTON of the year 2005. Consolidated P&L for the year 2006, includes the net result 01/07-30/09/2006. 3) MIMOSA TRADING SA: The Company is duly incorporated and has filed articles of incorporation under the provisions of the Marshall islands Business Corporation Act on 6th July 2006. The IRF European Finance Investments Ltd is the owner of five hundred (500) fully paid and non-assessable shares of the capital stock of the corporation. The aggregate number of shares of stock that the Corporation is authorized to issued to issue is five hundred (500) registered and/or bearer shares without par value. 4) MYRTLE TRADING COMPANY: The Company is duly incorporated and has filed articles of incorporation under the provisions of the Marshall islands Business Corporation Act on 6th July 2006. The IRF European Finance Investments Ltd is the owner of five hundred (500) fully paid and non-assessable shares of the capital stock of the corporation. The aggregate number of shares of stock that the Corporation is authorised to issued to issue is five hundred (500) registered and/or bearer shares without par value. 6. RISK MANAGEMENT For risk management purposes, financial risks are monitored at two differentlevels: risks faced by Proton Group and risks faced by the Company. The natureof these risks and the ways they are dealt with by management are explainedbelow. The Proton Group is exposed to several risks, as all financial institutions.These risks are continually monitored through various methods so that theconcentration of unreasonable risks is avoided. On the other hand, the Company (including the wholly owned subsidiaries - MyrtleTrading Company and Mimosa Trading SA) is exposed to a limited level of risks.The Company indents to minimise its exposure to credit, liquidity and interestrate risk, while it is exposed to market risks due to its investments in equityshares. 6.1 Credit Risk Group is exposed to credit risk, which is the risk of default of a counterparty,regarding its contractual obligations. Specifically in the case of loans, it isthe risk of a counterparty to default on part, of its debt. Provisions forlosses (impairment) are recognised when it is estimated that losses exist at thebalance sheet date. The Group gives great consideration to the propermanagement of credit risk, due to the fact that significant changes in economyor in business sector represent a material part of the Group's portfolio andmight cause losses that exceed existing provisions. The Group mitigates the level of credit risk it undertakes by setting acceptablerisk levels for each counterparty or group of counterparties in each businessand geographical segment. The risks are periodically reviewed and adjusted.Limits have been placed on a product and sector level. The undertaken risk for each borrower including banks, is furthermore reduced byplacing sub-limits on and off balance sheet items. Loan balances are comparedto credit limits on a daily basis. The Group controls the exposure to credit risk with regular reviews on theborrowers capability to satisfy their interest and principal obligations byadjusting credit limits when necessary. Credit risk is partially covered withacceptable collaterals. 6.2 Market Risk The Group takes on exposure to market risks. Market risk is the risk that thefair value of future cash flows of a financial instrument will fluctuate becauseof changes in market prices. Market risks arise from open positions in interestrate, currency and equity products, all of which are exposed to general andspecific market movements and changes. The Group applies modern methodologies,such as "value at risk", to measure market risk. VAR is a statistically based estimate of the potential loss on the currentportfolio from adverse market movements. It expresses the maximum amount theBank might lose, but only to a certain level of confidence over a certainperiod. The method does not estimate the potential loss extreme marketmovements (non normal). The Group calculates a VAR estimate for a 99%confidence level and a 10 day holding period. The Group regularly applies on a daily basis a back testing program to controlthe VAR estimates, by comparing the actual changes in the portfolio with therespective VAR measures. 6.3 Liquidity Risk Liquidity risk arises from the Group's financing process and management of theopen positions in the market. Liquidity risk is the risk that the Group isunable to meet its payment obligations associated with financing liabilitieswhen they fall due and to replace funds when are withdrawn. The consequence maybe the failure, to meet obligations to repay depositors, to fulfil commitmentsto lend, and to liquidate its financial assets at fair value. The Group uses a large financing base which is achieved through a wide range ofproducts including, deposits, debt securities and equity. This improves itsfinancing capability, reduces the dependence on a single source, and generallylowers its borrowing cost. The Group tries to balance the need betweenfinancing and flexibility, by maintaining a portfolio with different maturities. The Group continually assesses liquidity risk by controlling and monitoring therequired changes in order to meet its business goals in the frame of itsstrategy. The table below presents the Group's net liquidity gap by taking intoconsideration the contractual maturity assets and liabilities as well asguidelines issued by the Bank of Greece. Liquidity Risk THE GROUPAmounts presented in • '000 Up to 1 1 to 3 3 to 12 1 to 5 years Over 5 years Total month months monthsAs at 31st December 2006Asset liquidityCash and balances with Central 37,397 - - - - 37,397BankLoans and advances to financial 151,903 16,227 13,755 - - 181,885institutionsDerivative financial instruments 2,611 - - - - 2,611Trading Portfolio and other 117,972 134,390 11,812 - - 264,174financial instruments at fairvalue through Profit & LossLoans and advances to customers 220,072 65,563 227,536 428,043 - 941,214Insurance Receivables - - 16,721 - - 16,721Investment Portfolio 5,884 - 354 6,739 25,000 37,977Investments in associates - - - - 4,604 4,604Property, plant and equipment - - - - 33,402 33,402Investment Property - - - - 50 50Non current assets held for sale - - 64 - - 64Goodwill and other intangible - - - - 186,216 186,216assetsReinsurance contracts - - 1,339 - - 1,339Deferred tax assets - - - 3,200 - 3,200Other assets 2,767 2,484 10,400 1,203 18,031 34,885Total assets 538,606 218,664 281,981 439,185 267,303 1,745,739 Up to 1 1 to 3 3 to 12 1 to 5 years Over 5 years Total month months monthsLiability liquidityDue to financial institutions 33,934 6,165 35,235 15,563 - 90,897Derivative financial instruments 6,319 - - - - 6,319Due to Customers 90,379 399,953 398,922 152,903 - 1,042,157Issued Debt Securities - - - - 1,500 1,500Provisions for insurance - - 34,093 - - 34,093contractsRetirement benefit obligations - - - 1,228 - 1,228Current income tax liabilities - - 1,349 - - 1,349Other liabilities 199 - 7,356 13,889 - 21,444Total liabilities 130,831 406,118 476,955 183,583 1,500 1,198,987 Net liquidity gap 407,776 (187,454) (194,974) 255,602 265,803 546,752 As at 31st December 2005Total assets 538,606 218,664 281,981 439,185 267,303 1,745,739Total liabilities 130,831 406,118 476,955 183,583 1,500 1,198,987Net liquidity gap 407,776 (187,454) (194,974) 255,602 265,803 546,752 THE GROUPAmounts presented in • '000 Up to 1 1 to 3 3 to 12 1 to 5 Over 5 Total month months months years yearsAs at 31st December 2005Asset liquidityCash and balances with Central 2,206 - - - - 2,206BankRestricted cash held in Trust - - 210,294 - - 210,294Other assets 5 - - - - 5Total assets 2,212 - 210,294 - - 212,506 Up to 1 1 to 3 3 to 12 1 to 5 Over 5 Total month months months years yearsLiability liquidityOther liabilities 170 - - - - 170Compound financial instrument - - - 203,426 - 203,426Total liabilities 170 - - 203,426 - 203,596 Net liquidity gap 2,042 - 210,294 (203,426) - 8,910 As at 31st December 2005Total assets 2,212 - 210,294 - - 212,506Total liabilities 170 - - 203,426 - 203,596Net liquidity gap 2,042 - 210,294 (203,426) - 8,910 6.4 Currency Risk The Group undertakes currency risk arising from the exposure to the effects offluctuations in the prevailing foreign currency exchange rates on its financialposition and cash flows. The Proton Group sets limits on the level of exposureby currency and in aggregate for both overnight and intra-day positions, whichare monitored daily. The following tables summarise the Groups' exposure to currency risk. TheGroup's assets and liabilities at carrying amounts, categorized by currency areincluded in the table. THE GROUPAmounts presented in • '000 EUR USD GBP JPY Other Total CurrenciesAs at 31st December 2006Currency risk for assetsCash and balances with Central 37,257 129 9 - 2 37,397BankLoans and advances to financial 167,957 7,044 2,466 835 3,582 181,885institutionsDerivative financial instruments (123,901) (4,525) (20) 171,523 (40,466) 2,611Trading portfolio and other 253,563 7,504 650 - 2,457 264,174financial assets at fair valuethrough Profit & LossLoans and advances to customers 849,089 58,168 9 - 33,948 941,214Investment Portfolio 37,753 224 - - - 37,977Investments in associates 4,550 - - - 54 4,604Goodwill and other intangible 186,216 - - - - 186,216assetsInvestment Property 50 - - - - 50Property, plant and equipment 33,402 - - - - 33,402Non current assets held for sale 64 - - - - 64Insurance Receivables 16,721 - - - - 16,721Reinsurance contracts 1,339 - - - - 1,339Deferred tax assets 3,200 - - - - 3,200Other assets 32,178 2,338 227 (38) 179 34,884Total assets 1,499,439 70,882 3,341 172,320 (244) 1,745,739 Amounts presented in • '000Currency risk of liabilities EUR USD GBP JPY Other Total CurrenciesDue to financial institutions 70,016 20,881 - - - 90,897Derivative financial instruments 6,312 7 - - - 6,319Due to customers 811,020 50,825 3,535 175,636 1,141 1,042,157Issued Debt Securities 1,500 - - - - 1,500Provision for insurance contracts 34,093 - - - - 34,093Retirement benefit obligations 1,228 - - - - 1,228Current income tax liabilities 1,349 - - - - 1,349Other liabilities 21,169 494 55 (16) (257) 21,445Total liabilities 946,687 72,207 3,590 175,620 884 1,198,987 Net on-balance sheet position 552,752 (1,325) (249) (3,300) (1,128) 546,752 As at 31st December 2006Total assets 1,499,439 70,882 3,341 172,320 (244) 1,745,739Total liabilities 946,687 72,207 3,590 175,620 884 1,198,987Net on-balance sheet position 552,752 (1,325) (249) (3,300) (1,128) 546,752 Net off-balance sheet position THE GROUP Amounts presented in • '000 EUR USD GBP JPY Other Total CurrenciesAs at 31st December 2005Currency risk for assetsLoans and advances to financial - 2,206 - - - 2,206institutionsRestricted cash held in Trust - 210,294 - - - 210,294Other Assets - 5 - - - 5Total assets - 212,506 - - - 212,506 Currency risk of liabilities EUR USD GBP JPY Other Total CurrenciesOther liabilities 85 (48) 133 - - 170Compound financial instrument - 203,426 - - - 203,426Total liabilities 85 203,378 133 - - 203,596 Net on-balance sheet position (85) 9,127 (133) - - 8,910 As at 31st December 2005Total assets - 212,506 - - - 212,506Total liabilities 85 203,378 133 - - 203,596Net on-balance sheet position (85) 9,127 (133) - - 8,910 6.5 Interest Rate Risk Interest rate risk is the risk of a negative impact on the Group's financialcondition due to its exposure to interest rates. Fluctuations in marketinterest rates significantly affect the present value of expected future cashflows from investments and liabilities. The following tables summarise the Group's exposure to interest rate risks.Included in the tables are the Group's assets and liabilities at carryingamounts categorised by contractual reprising date for floating rate items andmaturity day for fixed rate items. THE GROUPAmounts presented in • '000 Up to 1 1-3 3-12 1-5 years Over 5 Non-interest Total month months months years bearing As at 31st December 2006AssetsCash and balances with Central 15,776 - - - - 21,621 37,397BankLoans and advances to financial 151,765 16,227 13,765 - - 128 181,885institutionsDerivative financial - - - - - 2,611 2,611instrumentsTrading portfolio and other - - 3,197 66,026 68,364 126,587 264,174financial assets at fair valuethrough Profit & LossLoans and advances to customers 116,712 437,380 240,513 146,609 - - 941,214Insurance Receivables - - - - - 16,721 16,721Investment Portfolio - - - 447 31,646 5,884 37,977Investments in associates - - - - - 4,604 4,604Property, plant and equipment - - - - - 33,402 33,402Investment Property - - - - - 50 50Non current assets held for - - - - - 64 64saleGoodwill and other intangible - - - - - 186,216 186,216assetsReinsurance contracts - - - - - 1,339 1,339Deferred tax assets - - - - - 3,200 3,200Other assets - - - - - 34,885 34,885Total assets 284,253 453,607 257,475 213,082 100,010 437,312 1,745,739 LiabilitiesDue to financial institutions 34,371 6,165 34,798 15,563 - - 90,897Derivative financial - - - - - 6,319 6,319instrumentsDue to customers 768,154 155,005 86,150 32,848 - - 1,042,157Obligations from bonds - - - - 1,500 - 1,500Provision for insurance - - - - - 34,093 34,093contractsRetirement benefit obligations - - - - - 1,228 1,228Current income tax liabilities - - - - - 1,349 1,349Other liabilities - - - - - 21,445 21,445Total liabilities 802,525 161,170 120,948 48,411 1,500 64,434 1,198,987 Total interest sensitivity gap (518,272) 292,437 136,527 164,671 98,510 372,878 546,752 As at 31st December 2005Total assets 284,253 453,607 257,475 213,082 100,010 437,312 1,745,739Total liabilities 802,525 161,170 120,948 48,411 1,500 64,434 1,198,987Net interest sensitivity gap (518,272) 292,437 136,527 164,671 98,510 372,878 546,752 THE GROUPAmounts presented in • '000 Up to 1 1-3 3-12 1-5 years Over 5 Non-interest Total month months months years bearingAs at 31st December 2005Asset liquidityCash and balances with Central 2,206 - - - - - 2,206BankRestricted cash held in Trust - - 210,294 - - - 210,294Other assets - - - - - 5 5Total assets 2,206 - 210,294 - - 5 212,506 Up to 1 1-3 3-12 1-5 years Over 5 Non-interest Total month months months years bearingLiability liquidityOther liabilities - - - - - 170 170Compound financial instrument - - - 203,426 - - 203,426Total liabilities - - - 203,426 - 170 203,596 Net liquidity gap 2,206 - 210,294 (203,426) - (165) 8,910 As at 31st December 2005Total assets 2,206 - 210,294 - - 5 212,506Total liabilities - - - 203,426 - 170 203,596Net liquidity gap 2,206 - 210,294 (203,426) - (165) 8,910 7. SEGMENTAL ANALYSIS 7.1 By Business segment (primary segment) The Group has defined the following business segments: Investment Banking, otherbanking activities and insurance and other activities Amounts presented in • '000 Investment Other Banking Insurance and Total Banking Activities other activitiesFinancial year 1st January - 31stDecember 2006Net Income- from interest 8,535 8,231 (37) 16,729- from fees and commissions (1,698) 9,569 (5) 7,866- from insurance activities - - 7,790 7,790- from dividends 1,620 - 6 1,626- net trading income and other income 28,677 943 234 29,854Total Net Income 37,133 18,743 7,988 63,864Profit before tax 27,498 9,699 (372) 36,825Tax (2,916)Result after Tax 33,909 Other items by segmentDepreciation (Note 16) (483) (355) (40) (878)Insurance claims (Note 17) - - (4,968) (4,968)Impairment Losses (Note 18) 1,809 (2,367) - (558)Investments in associates - - - 240 Financial Year 8th September - 31stDecember 2005Net Income -- from interest (1,323) - - (1,323)Total Net Income (1,323) - - (1,323)Profit before tax (1,396) (1,396)Tax -Result after Tax (1,396) Other items by segmentOther operating expenses (72) - - (72) Amounts presented in • '000 Investment Other Banking Insurance and Total Banking Activities other activities31st December 2006Assets 1,066,959 505,359 173,422 1,745,739Total Liabilities & Equity 822,640 533,216 389,884 1,745,739 31st December 2005Assets 212,506 - - 212,506Total Liabilities & Equity 212,506 - - 212,506 7.2 By Geographical segment A geographical segment is defined as a particular economic environment in whichthe Group is engaged in providing services and that is subject to differentrisks and return from those in other economic environments. The substantialpart of assets and liabilities are currently held in Greece. 8. NET INTEREST INCOME Amounts presented in • '000 THE GROUP THE COMPANY 31/12/2006 31/12/2005 31/12/2006 31/12/2005Interest and Similar IncomeFrom loans and advances to banks 8,466 6 5,797 6From securities 3,070 - - -From Loans and receivables 17,424 - - -Other Interest related income 31 - - -Total 28,992 6 5,797 6 Interest and Similar ExpensesDue to financial institutions 81 - - -Due to customers 9,281 - - -Contribution Law 128 1,321 - - -Interest on Compound instrument - 1,328 - 1,328Interest on Borrowing Funds (Financing Loans) 726 - 726 -Other Interest related expenses 853 0.2 29 0.2Total 12,263 1,329 756 1,329 Net Interest Income 16,729 (1,323) 5,042 (1,323) During the year the Company fully utilized a financial facility of • 75 mil.granted by three banks. The relevant funds were raised in October 2006 and werefully repaid in the end of November. 9. NET FEE AND COMMISSION INCOME Amounts presented in • '000 THE GROUP THE COMPANY 31/12/2006 31/12/2005 31/12/2006 31/12/2005Fee and commission income from:Loans and advances to customers 989 - - -Letters of guarantee 111 - - -Imports-Exports 106 - - -Credit Cards 676 - - -Foreign Exchange Transactions 86 - - -Securities brokerage 5,840 - - -Remittance 32 - - -Management of Securities and Investment Banking 2,456 - - -Total 10,296 - - - Fee and commission expense from:Guarantees, Credit Cards 275 - - -Securities brokerage 1,780 - - -Loans Fees and Commissions 375 - 375 -Total 2,430 - 375 - Net fee and commission income 7,866 - (375) - 10. NET INCOME FROM INSURANCE SERVICES Amounts presented in • '000 THE GROUP 31/12/2006 31/12/2005Income from insurance activities 7,284 -Expenses from insurance activities 506 -Total 7,790 - 11. DIVIDEND INCOME Amounts presented in • '000 THE GROUP THE COMPANY 31/12/2006 31/12/2005 31/12/2006 31/12/2005Dividends from AFS securities 23 - - -Dividends from trading securities 1,603 - - -Dividends from Subsidiaries (Note 49) - - 15,095 -Total 1,626 - 15,095 - 12. NET RESULT FROM FINANCIAL ACTIVITIES Amounts presented in • '000 THE GROUP 31/12/2006 31/12/2005Foreign Exchange Differences 522 -Purchase and sale of securities 24,176 -Valuation of securities 11,853 -Foreign Exchange Differences 177 -Derivative instruments (8,243) -Discount interests 70 -Total 28,555 - 13. OTHER OPERATING INCOME Amounts presented in • '000 THE GROUP THE COMPANY 31/12/2006 31/12/2005 31/12/2006 31/12/2005Building rentals 20 - - -Non-banking activities 392 - - -Proceeds from sale of fixed assets 2 - - -Exchange Differences (other than trading 897 - 897 -activities)Other income (12) - - -Total 1,299 - 897 - 14. STAFF COSTS Amounts presented in • '000 THE GROUP THE COMPANY 31/12/2006 31/12/2005 31/12/2006 31/12/2005Wages and salaries 6,853 - 155 -Social insurance contribution 1,289 - - -Pension and retirement costs (8) - - -Other employee costs 97 - - -Total 8,233 - 155 - The number of staff is given below: On 31st December 2006 the Group employed 640 employees, while the Companyemployed just 1 employee. THE GROUP THE COMPANY 31/12/2006 31/12/2005 31/12/2006 31/12/2005Number of employees 640 - 1 - 15. OTHER OPERATING EXPENSES Amounts presented in • '000 THE GROUP THE COMPANY 31/12/2006 31/12/2005 31/12/2006 31/12/2005Rentals 1,151 - - -Maintenance costs 363 - - -Promotion and advertising costs 247 - - -Telephone expenses and postage 556 - - -Other third parties fees 1,484 - 204 -Contribution to Hellenic Deposit Guarantee Fund 277 - - -Subscriptions and other contribution expenses 3,238 - - -Insurance fees 72 - - -Consumables 259 - - -Taxes (Value Added, Property, etc.) 905 - - -Insurance agency costs 1,994 - - -Other operating expenses 2,096 72 252 72Total 12,642 72 457 72 16. DEPRECIATION Amounts presented in • '000 THE GROUP 31/12/2006 31/12/2005Property, plant & equipment 601 -Intangible assets 277 -Total 878 - 17. INSURANCE CLAIMS Amounts presented in • '000 THE GROUP 31/12/2006 31/12/2005Automobile third party liability 1,838 -Non-motor property and casualty lines 3,130 -Total 4,968 - 18. IMPAIRMENT LOSSES Amounts presented in • '000 THE GROUP 31/12/2006 31/12/2005Loans and receivables 275 -Financial investments 261 -Other assets 22 -Total impairment charge for credit losses 558 - 19. INCOME TAX EXPENSE The tax charge for the year is analysed below: Amounts presented in • '000 THE GROUPCurrent Year Tax 31/12/2006 31/12/2005Current Tax expense 2,285 -Deferred Tax 631 -Total tax charge 2,916 - The reconciliation of the income tax expense for the year is as follows: Amounts presented in • '000 THE GROUP 31/12/2006 31/12/2005Profit before tax 36,825 -Less: Taxable profits in other jurisdictions at 0% (20,047) -Taxable in Greece at 24% 16,778 - Income tax at normal rates (24%) 4,027 - Adjustments for:Non-taxable income (3,577) -Non-deductible expense 8 -Addition tax on property, plant and equipment 5 -Special taxation of prior years' reserves 2,453 -Income tax expense 2,916 - Current income tax 2,285 -Deferred tax 631 -Total income tax expense 2,916 - The Group operates in a number of different jurisdictions. Income generated byentities established under Greek Law is subject to income tax according to theGreek Income Taxation Code. Profits recorded in the jurisdictions of Bermudaand Marshall Islands are tax free. Under Greek legislation, normal income tax rates applicable to all entitiesincorporated in the form of societe anonyme are 29% for the year 2006 and 25%thereafter. PROTON BANK took advantage of the Law 2992/2002 tax incentivescheme, applicable to entities engaged into mergers, and was taxed at a reducedrate of 24% in 2006. In 2007 PROTON BANK will be taxed at the reduced rate of20%. Certain types of income, such as profits from trading with securities, aretax-free or taxed at lower rates as long as they are transferred into a specialreserve. However, the relevant profits are taxable at normal tax rates in theevent of distribution to the shareholders. According to the Ministry ofFinance's resolution 1135/22.11.06 a special tax was imposed on those reservesduring the year. The relevant income tax charge was • 2.453 thousand. Aftertaking into consideration the above, effective tax rate for the PROTON Group is17.4%. The Group's effective tax rate is 7.9%. Income tax liability for Proton Group is not considered as final as it isfurther analysed in Note 50.2. Deferred tax recognised in the income statement is attributable to: Amounts presented in • '000 THE GROUP 31/12/2006 31/12/2005Loans and receivables (523) -Employee bonuses (195) -Accrued income (214) -Other assets (43) -Financial receivables (13) -Retirement benefit obligations 2 -Financial liabilities 20 -Revaluation on OTC forwards 128 -Property, plant & equipment and intangible assets 207 -Total deferred tax (631) - 20. CASH AND BALANCES WITH CENTRAL BANK Amounts presented in • '000 THE GROUP 31/12/2006 31/12/2005Cash on hand and cash in course of collection 10,014 -Cheques receivable 12,018 -Included in cash and cash equivalents (Note 45) 22,032 -Mandatory reserve deposits with Central Bank 15,365 -Total 37,397 - Mandatory reserves with the central bank are not available for everyday use bythe Group. 21. LOANS AND ADVANCES TO FINANCIAL INSTITUTIONS Amounts presented in • '000 THE GROUP THE COMPANY 31/12/2006 31/12/2005 31/12/2006 31/12/2005Deposits placed in other financial institutions 48,264 2,206 3,880 2,206Nostro accounts 47,877 - - -Time deposits 84,367 - - -Cheques receivables 1,377 - - -Total 181,885 2,206 3,880 2,206 The Company's cash equivalents refer to sight deposits in other financialinstitutions. 22. RESTRICTED CASH HELD IN TRUST Amounts presented in • '000 THE GROUP THE COMPANY 31/12/2006 31/12/2005 31/12/2006 31/12/2005Restricted cash held in Trust - 210,294 - 210,294Total - 210,294 - 210,294 Under the terms of the Offering (Ref. Note 43), the net offering proceedsamounting to • 209,493,368 (US$ 252,083,370) were placed in a trust Account.Under the agreement the Trust Funds would only be invested in United Statesgovernment securities having a maturity of 180 days or less. The balancerecorded at market value, including interest and movements in the value ofinvestments at the balance sheet date at 31st December 2005. The market valueof investments held in trust amounted to • 210,294,081 (US$ 253,046,867) at 31December 2005. Following the acquisition of Proton and the relevant decision of theShareholders the funds held in Trust were released and were available for use bythe Company without any restriction. 23. TRADING PORTFOLIO AND OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT &LOSS Amounts presented in • '000 THE GROUP 31/12/2006 31/12/2005Government bonds 18,441 -Corporate entities bonds 119,146 -Mutual funds 23,996 -Securities 102,591 -Total 264,174 - 24. DERIVATIVE FINANCIAL INSTRUMENTS The notional and fair values of derivatives held at 31st December 2006 were: THE GROUP 31st December 2006 FAIR VALUEAmounts presented in • '000 Notional amount Assets LiabilitiesDerivatives held for trading a) trading in ExchangesOptions 12,648 224 (100)Forwards / Futures 335,751 - - 348,399 224 (100) b) OTCInterest rate swaps 594,452 1,992 (2,427)Options 3,037 28 (7)FX Forwards 281,187 - (3,753)Credit default swaps 13,417 42 (32)Total return swap 10,000 325 - 902,093 2,387 (6,219) Total recognised derivative assets /liabilities 1,250,492 2,611 (6,319) The notional amount of certain types of derivative financial instruments providea basis for comparison with instruments recognised on the balance sheet but donot necessarily indicate the amounts of future cash flows involved or thecurrent fair value of the instruments and, therefore, do not indicate theGroup's exposure to credit or price risks. The derivative instruments becomefavourable (assets) or unfavourable (liabilities) as a result of fluctuations inmarket interest rates or foreign exchange rates relative to their terms. Theaggregate contractual or notional amount of derivative financial instruments onhand, to the extent to which instruments are favourable or unfavourable, andthus the aggregate fair values of derivative financial assets and liabilities,can fluctuate significantly from time to time. The Group does not apply hedge accounting as described in IAS 39, therefore thegains and losses arising on derivative financial instruments are recognised inthe income statement. 25. LOANS AND ADVANCES TO CUSTOMERS The loan portfolio at a Group level is analyzed as follows: Amounts presented in • '000 THE GROUP 31/12/2006 31/12/2005Retail CustomersMortgages 51,810 -Consumer Loans /Loans to individuals 88,372 -Credit cards 28,197 -Total loans and receivables to individuals 168,379 - Corporate CustomersAgriculture 5,259 -Mining 1,149 -Heavy industry 42,373 -Small Industry 14,957 -Building / construction 73,454 -Energy 2,163 -Commercial / Insurance 202,202 -Transportation 93,516 -Services 36,954 -Other companies 328,720 -Total loans and receivables to companies 800,745 -Finance lease receivables 11,388 -Total Loans and receivables 980,512 -Less: Allowances for losses (impairment) on loans and advances to (39,298) -customersTotal 941,214 - Loans are measured at amortised cost. Loans fair value is not materiallydifferent from their carrying amount. The movements in the provisions account are as follows: Amounts presented in • '000 Allowances for Allowances for Total losses on loans to losses on loans individuals to companiesBalance at beginning of year (01.01.2006) - - -Allowances from acquisitions (Proton Bank) (265) (909) (1,174)Allowances from acquisitions (Omega Bank) (16,957) (23,114) (40,071)Expense for the year (212) (63) (275)Loans written-off 1,163 1,059 2,222Balance at end of year (31.12.2006) (16,271) (23,027) (39,298) Loans and advances to customers include finance lease receivables: THE GROUPAmounts presented in • '000 31/12/2006 31/12/2005Net investment in finance leasesGross Investment in leased equipment 17,185 -Less: unearned finance income (5,797) -Net investments in leased equipment 11,388 - The Net finance leases receivables comprises:Less than 1 year 1,143 -Between 1 to 5 years 3,734 -More than 5 years 6,511 -Total 11,388 - 26. INSURANCE ASSETS Amounts presented in • '000 THE GROUP 31/12/2006 31/12/2005Insurance ReceivablesInsurance Debtors 8,498 -Past due insurance debtors 1,248 -Cheques receivable 7,520 -Promissory notes and other receivables 110 -Less: provisions for losses (impairment) (655) - 16,721 -Reinsurance ReceivablesReinsurance Debtors 1,332 -Receivables from reinsurance activities 7 - 1,339 -Total Insurance Assets 18,060 - 27. INVESTMENT PORTFOLIO The Group's investment portfolio comprises financial instruments available forsale and held to maturity. Amounts presented in • '000 THE GROUP THE COMPANY 31/12/2006 31/12/2005 31/12/2006 31/12/2005Investments held to maturityGovernment bonds 6,646 - - -Total investment held to maturity 6,646 - - - Available for sale portfolio (at fair value)Corporate bonds 28,458 - - -Equity securities 5,502 - - -Mutual Funds 30 - - -Other investments 345 - - -Less: Provision for losses (impairment) (3,004) - - -Total available for sale securities 31,331 - - - Total Investment Portfolio 37,977 - - - H-T-M investments mainly refer to Greek Government Bonds for which the Group hasthe ability and the intention to hold to maturity. The fair value of the abovementioned financial instruments at 31 December 2006 is calculated at 6.648thousands euros. The movement in the investment portfolio for the year ended 31/12/2006 may besummarised as follows: THE GROUPAmounts presented in • '000 Investments Financial assets Total held-to-maturity available for saleBalance as at 1st January 2006 - - -Additions from the acquisition of Proton Bank - 855 855Additions from the acquisition of Omega Bank - 31,024 31,024Additions 6,768 171,317 178,085Redemptions - (171,876) (171,876)Gains / (losses) from changes in fair value 11 11Amortization of premium/ discount (122) - (122)Balance as at 31st December 2006 6,646 31,331 37,977 During the year the Company, through its wholly owned subsidiaries, MYRTLETRADING COMPANY and MIMOSA TRADING SA, acquired a stake in Piraeus bank (acompany listed to ASE) for a total consideration of • 171 million. Theinvestment in Piraeus Bank was disposed in November 2006 at the total amount of• 185 million, generating a profit of • 13.9 million. 28. INVESTMENTS IN SUBSIDIARIES Investments in subsidiaries are analyzed as follows: Amounts presented in • '000 THE COMPANY 31/12/2006 31/12/2005Opening balance - -Acquisitions 126,687 -Closing balance 126,687 - Investments in Subsidiaries are measured at acquisition cost. 29. INVESTMENTS IN ASSOCIATES Investment in associates refers to a 28.75% holding of Proton Bank to theclosed-end fund Omega AEEX, a company listed on ASE. Some brief financial information on the associates is given below: Amounts presented in • '000 Domicile Assets Liabilities Profits / Participation % (losses)Omega Portfolio Investment SA Greece 16,122 83 1,695 5.80% The movement in the investment in associates account for the year 2006 was asfollows: Amounts presented in • '000 THE GROUP 31/12/2006 31/12/2005Beginning of yearAdditions from acquisitions (Omega Bank) 4,356 -Transfer from trading portfolio 8 -Group share of profit /(loss) 240 -Total 4,604 - Investments in associates are accounted under the equity method. The marketvalue of the investment in Omega as at 31st December 2006 was • 3,777 thous. 30. PROPERTY, PLANT AND EQUIPMENT AND INVESTMENT PROPERTY THE GROUPAmounts presented in • Land and Mechanical Transportation Furniture & Total Investment'000 Buildings Equipment means or other Property vehicles equipmentCost or revaluation at 1st - - - - - -January 2005Less: Accumulated - - - - - -depreciationCarrying amount at 1st - - - - - -January 2006Acquisition - PROTON BANK 1,246 23 169 2,304 3,742 -Acquisition (absorption) - 24,666 37 50 7,267 32,020 50OMEGA BANKAdditions 533 3 - 381 917 -Write-off /Disposals - - - (259) (259) -Depreciation for the year (220) (4) (19) (358) (601) -Depreciation attributable - - - 200 200 -to disposed - written offAccumulated depreciation of (545) (20) (64) (1,988) (2,617) -acquired subsidiary (ProtonBank)Carrying amount at 1st 25,680 39 136 7,547 33,402 50January 2006 Cost or Revaluation at 31st 26,445 63 219 9,693 36,420 50December 2006Less: Accumulated (765) (24) (83) (2,146) (3,018) -depreciationCarrying amount at 31st 25,680 39 136 7,547 33,402 50December 2006 31. NON CURRENT ASSETS HELD FOR SALE THE GROUPAmounts presented in • '000 31/12/2006 31/12/2005 Land resulting from foreclosure 64 - The account includes land acquired by means of foreclosure and auctions.According to IFRS 5, the Group must sell any assets of this category withintwelve months from the date of acquisition. 32. GOODWILL AND OTHER INTANGIBLE ASSETS THE GROUPAmounts presented in • '000 Goodwill & other Software Total intangible assets acquired in business combinationAcquisition cost at 31st December 2005 - - -Less: Accumulated depreciation - -Carrying amount at 31st December 2005 - - - Acquisition of PROTON BANK 68,754 1,124 69,878Acquisition of OMEGA BANK 114,211 3,384 117,595Impairment - (109) (109)Additions - 164 164Depreciation for the year - (277) (277)Accumulated amortization of acquired subsidiary - (1,035) (1,035)(Proton Bank) 182,965 3,251 186,216 Acquisition cost at 31st December 2006 182,965 4,563 187,528Less: Accumulated Amortization - (1,312) (1,312)Carrying amount at 31st December 2006 182,965 3,251 186,216 "Goodwill and other intangible assets" include business combination differencesas described in Note 46. The relevant amount has been determined provisionally,since the process of identifying and measuring the identifiable intangibleassets has not been finalised. The significant intangible assets that it isexpected to arise are bank customer relationships, brokerage customerrelationships, trade name and core deposits. The first impairment test ofgoodwill and intangible assets will take place when the purchase priceallocation is finalised. 33. DEFERRED TAX Deferred tax has been calculated based on the nominal tax rate applicable forthe financial years in which a temporary taxable and deductible differencereversal is expected. Deferred income tax assets and liabilities are attributable to the followingitems: THE GROUP Amounts presented in • '000 31/12/2006 31/12/2005Deferred tax assetsRetirement benefit obligations 392 -Financial liabilities 242 -Staff bonuses and allowances 216 -Property, plant & equipment and Intangible assets 118 -Tax loss 276 -Fair value adjustments to loans acquired in business combination 2,492 -Total deferred tax assets 3,736 -Deferred tax liabilitiesFinancial assets (6) -Loan impairment and other credit risk provisions (37) -Derivatives Listed in ADEX (10) -Deferred income (440) -Leasing (43) -Total deferred tax liabilities (536) - Total 3,200 - 34. OTHER ASSETS The Group's other assets account is analysed as follows: Amounts presented in • '000 THE GROUP 31/12/2006 31/12/2005Other AssetsAdvances to employees 26 -Advances to third parties 50 -Contributions to Co-Guarantee Fund and Supplementary Fund 4,901 -Guarantee fees 7,698 -Prepayments to third parties 68 -Brokerage fees receivables 8 -Credit card receivables 2,095 -Prepaid Taxes and other tax advances 3,946 -Sundry debtors and other receivables 16,904 5Bad debts (other than loans and receivables) 1,199 - 36,895 5Less Provisions for losses (impairment) of receivables besides (2,010) -loansTotal 34,885 5 The Company's other assets are analysed as follows: Amounts presented in • '000 THE COMPANY 31/12/2006 31/12/2005Other AssetsSundry debtors and other receivables 26 5Loans to subsidiaries (Note 49) 73,395 -Dividend receivables (Note 49) 15,095 -Total 88,516 5 The Company is financing its wholly owned subsidiaries, MYRTLE and MIMOSA, fortheir trading activities. The amount of • 73,395 thous. is the amount due fromthe subsidiaries as at 31st December 2006. The abovementioned subsidiaries haveundertaken the obligation to repay the Company any amounts from time to timelent to them, on first demand. The amount of • 15,095 thous. refers to the dividend receivables of the Companyfrom its wholly owned subsidiaries, MYRTLE (amount of • 4,127 thous.) and MIMOSA(amount of • 10,968 thous.). 35. DUE TO FINANCIAL INSTITUTIONS Amounts presented in • '000 THE GROUP 31/12/2006 31/12/2005Interbank deposits 33,933 -Short-Term Loans 438 -Sale and repurchase agreement (REPOS) 56,526 -Total 90,897 - All the Sale and repurchase agreements (REPOS) have a maturity of one month fromthe date of 31st December 2006. 36. DUE TO CUSTOMERS Amounts presented in • '000 THE GROUP 31/12/2006 31/12/2005Due to CustomersRetail CustomersSavings account 64,497 -Sight deposits 1,122 -Time deposits 586,410 - 652,029 -Corporate CustomersSight deposits 72,104 - Time deposits:Companies 134,417 -Public Organizations 7,788 -Public companies 4,565 -Other time deposits 84,401 -Sale and repurchase agreement (REPOS) 920 - 304,195 -Blocked deposits 29 -Pledged deposits 50,361 -Margin accounts 35,543 -Total 1,042,157 - All the Sale and repurchase agreements (REPOS) have a maturity of one month fromthe date of 31st December 2006. 37. ISSUED DEBT SECURITIES Amounts presented in • '000 THE GROUP 31/12/2006 31/12/2005Issued Debt Securities 1,500 -Total 1,500 - Debt securities refer to a convertible bond issued by Omega Insurance SA andwhich is hold by the Chief Executive Director of the subsidiary. The basiccharacteristics of the convertible bond are the following: Issue date : June 27th, 2006Par value : • 1,500 thous.Coupon rate : 5%Title form and number : 500,000 coupon bonds with par value • 3 each, can be formed in a single or multiple cumulative title.Duration : Perpetuity with five-year notice of prepayment from the issuer, or relevant decision of the general assembly of bondholders.Conversion ratio : One (1) bond is convertible to one (1) ordinary share with par value • 3.Use of funds : Improve solvency and capital adequacy ratio of Omega Insurance. 38. COMPOUND FINANCIAL INSTRUMENT Amounts presented in • '000 THE GROUP THE COMPANY 31/12/2006 31/12/2005 31/12/2006 31/12/2005Compound financial instruments - 203,426 - 203,426Total - 203,426 - 203,426 The Company's compound financial instruments at 31st December 2005 representedthe present value of the cash held in trust, including estimated interest ($244,783 thous.), which would be payable to shareholders within 24 monthsfollowing the date of the offering if no qualifying business combination hadoccurred. In 2006, following the acquisition of Proton Bank, the amount of • 1,915 thous.($ 2,425 thous.) was repaid to shareholders and the balance was transferred toshare premium account (ref. Note 43). 39. PROVISION FOR INSURANCE CONTRACTS Amounts presented in • '000 THE GROUP 31/12/2006 31/12/2005Total provisions for insurance contracts 01/01/2005 - -Additions through acquisitions (Omega Bank) 35,336 -Unearned premiums 01/10-31/12/2006 (1,424) -Outstanding claim reserves 01/10-31/12/2006 181 -Total provisions for insurance contracts 31/12/2006 34,093 - Analysed as follows: Amounts in • '000 Gross Provision Reinsure's share Net ProvisionUnearned Premiums 10,720 975 9,745Outstanding claims 23,373 574 22,799Balance at 31 December 2006 34,093 1,549 32,534 40. RETIREMENT BENEFIT OBLIGATION The retirement benefit obligations to personnel is described as follows: Amounts presented in • '000 THE GROUP 31/12/2006 31/12/2005Amount recognised in Balance SheetPresent value of defined benefit obligations 1,382 -Unrecognised actuarial profits / ( losses) (154) -Total Liabilities at the end of period 1,228 - THE GROUPAmounts recognised in Income Statement 31/12/2006 31/12/2005Current service cost 87 -Interest cost 6 -Unrecognised actuarial profits / ( losses) 1 -Expense recognised in Income Statement 94 - The change in liabilities is described below: Amounts presented in • '000 THE GROUPChange in liabilities: 31/12/2006 31/12/2005Opening balance - -Increase due to acquisition of Proton Bank 221 -Increase due to business combination with Omega 1,124 -Expense for the period 94 -Compensation paid (211) -Total liability recognised in Balance Sheet 1,228 - The main actuarial assumptions used are provided below: 31/12/2006 31/12/2005Discount Rate 4.10% 3.72%Future salary increases 4.70% 4.70%Expected return on plan assets 4.10% 3.72% 41. CURRENT INCOME TAX LIABILITIES Amounts presented in • '000 THE GROUP 31/12/2006 31/12/2005Income Tax on Taxable Profits 1,349 -Total 1,349 - 42. OTHER LIABILITIES Amounts presented in • '000 THE GROUP THE COMPANY 31/12/2006 31/12/2005 31/12/2006 31/12/2005Withholding taxes arising from salaries 510 - - -Taxes and duties payable from customers' deposits 253 - - -Other withholding taxes and duties 2,332 - - -Prior year income taxes (from tax audit) 1,320 - - -Social security contributions 859 - - -Dividends Payable 34 - - -Withholdings in favour of third parties 2 - - -Salaries Payable 311 - - -Brokerage transactions in foreign derivatives 13,782 - - -Brokerage services securities and derivatives 74 - - -Brokerage services -Cyprus 31 - - -Suppliers and other third party liabilities 1,919 153 167 153Amounts payable to related parties (Note 49.4) 19 17 19 17Total 21,445 170 185 170 43. SHARE CAPITAL & SHARE PREMIUM Amounts in US $ Amounts in •Amounts presented in • Number of Number of Nominal Share Share Share Share Total'000 shares units value Capital Premium Capital Premium (US$)Balance at 8 September - - - - - - - -2005Issue of common stock to 8,000,000 - 0.0015 12 - 10 - 10initial shareholders (15/09/2005)Share capital increase by 3,458,335 - 0.0015 5 - 4 4issuing new shares (04/11/2005)Sold units on the - 45,833,340 6.0000 - - - - -Offering on 14/11/2005Issue of shares on 45,833,340 - 0.0015 69 (69) 57 (57) -offering, net of offeringcostsExpenses related to issue - - - - 12,383 - 10,291 10,291of shares on net offeringShares classified as - - -liabilities at date ofofferingBalance at 31 December 57,291,675 86 12,314 71 10,234 10,3052005 Decrease in Share Capital (430,000) - 0.0015 (0.6) 0.6 (0.54) 0.54 -due to the sharescancelled as a result ofrepurchase rightsConversion of Compound - - - - 241,449 - 189,940 189,940Financial Instruments toCommon Shares (after theacquisition of PROTONBANK at 30th June 2006)Balance at 31 December 56,861,675 85 253,764 71 200,174 200,2452006 Year 2005 On 15 September 2005, 8,000,000 common shares, having a par value of $0.0015each, were issued for a total consideration of $12,000 and the authorized sharecapital was increased to 136,500,000 common shares of $0.0015 each. On 4 November 2005, further 3,458,335 common shares of $0.0015 were issued for atotal consideration of $5,187.50 and the authorised share capital was increasedto $148,958,355 common shares of $0.0015 each. On 14 November 2005 the Company consummated its initial public offering (the"Offering"). The Company sold 45,833,340 units in the Offering at a price of$6.00 per Unit, generating gross offering proceeds of $275,000,040(€228,538,220). Each Unit consisted of one share of the Company's common stock(the "Common Stock"), and two warrants ("Warrants"). Each Warrant entitles theholder to purchase from the Company one share of Common Stock at an exerciseprice of $5.00 per share. According to the Offering circular, the net proceeds of the Offering, amountingto • 209,493,368 (US$252,083,370), were placed in a trust account (the "TrustFund") to be held there until the earlier of the completion of a BusinessCombination, the exercise by any person who acquired common shares and warrantsat the offering (a "New Shareholder") of his repurchase rights or thedistribution of such funds to the New Shareholders. Moreover, if a businesscombination was not completed within 18 months (or within 24 months if a letterof intent or definitive agreement was entered into prior to the end of the 18month period or unless extended by majority shareholder approval) after theeffective date of the initial registration statement, funds held in the Trustaccount would be returned to the shareholders of the Company. On this basis and according to IAS 32, the proceeds received on issue of theunits were allocated between debt and equity. In particular, the amount of •201,297,018 ($ 242,220,702) representing the present value of the cash held intrust, including estimated interest, which would be payable to shareholderswithin 24 months following the date of the offering if no qualifying businesscombination had occurred was recognised in liabilities (compound financialinstruments). The amount allocated to equity was the difference between the netproceeds and the value of the liability and represented the nominal value of theshares issued and the relative fair market value of each warrant attached to theUnit. Year 2006 On 27 June 2006 the Special General Meeting of the Company's Shareholdersapproved the acquisition of PROTON BANK. The respective acquisition qualifiedas a business combination according to the Offering circular with the followingconsequences: • Funds held under the Trust Account were released and were available to the Company for the acquisition of PROTON and for any other use.• The Company was relieved from the obligation to repay the Offering proceeds to the shareholders, except for the shareholder who elected in the General Meeting to redeem their shares. In particular, shareholders of 430.000 shares elected to have their shares repurchased by the Company. Based on the decision of the General Meeting of the shareholders: • 430.000 shares were cancelled and therefore the number of common and fully paid shares was reduced to 56,861,675.• The amount of • 1,914,672 ($ 2,425,392) was repaid to these shareholders.• The balance of • 189,940,006 ($ 241,449,403) was transferred from the liabilities (compound financial instrument) to equity (share premium account).• Warrants issued during the Offering became exercisable (refer below). On 20 December 2006 the Annual General Meeting of Shareholders decided theincrease of the authorized share capital of the Company from US$ 223,687.53 toUS$ 300,250 by the creation of an additional 51,041,645 common shares of parvalue US$ 0.0015 each and the relevant amendment of the bye-law 3 of theCompany's bye-laws in order to reflect the increase. Warrants On the Offering the Company issued 45,833,340 Units. Each Unit consisted of oneshare of the Company's common stock and two warrants. Each Warrant entitles theholder to purchase from the Company one share of Common Stock at an exerciseprice of $5.00 per share. According to the Offering, each warrant would become exercisable on the earlierof (i) completion of a business combination which, when combined with all ofprevious business combinations, has an aggregate transaction value of at least50 per cent of the initial amount placed in Trust together with such funds asare deposited in the Trust fund following the stabilization period (a "QualifiedBusiness Combination") and (ii) where a business combination has occurred but aQualified Business Combination is not completed within 18 months afteradmission, or within 24 months after admission if a letter or intent, agreementin principle or definitive agreement has been signed by the Company during theinitial 18 month period but such acquisition has not been consummated, or unlessextended by majority shareholder approval (the date by which such QualifiedBusiness Combination has to occur in any of these circumstances being the "Extended Date"),the relevant date shall be the extended date and will expire onthe earlier of redemption or the date that is four years after the admissiondate. Following the approval of the acquisition of PROTON BANK by the SpecialShareholders Meeting, the 91.666.680 Warrants became exercisable and may beexercised by 14 November 2009. Preference Shares of US$ Common Shares of US$Amounts presented in • 0.0001 each 0.0015 eachAuthorised Number Amount in Amount in • Number Amount in Amount in • US$ US$In issue at 31 December 2005 2,500,000 250 208 148,958,355 223,438 185,687Increase of authorized share - - - 51,041,645 76,562 63,627capital according the decisionof Annual General Meeting (20December 2006)Authorised at 31 December 2006 2,500,000 250 208 200,000,000 300,000 249,314 Amounts presented in • Preference Shares of $ 0.0001 each Common Shares of $ 0.0015 eachAlloted, called up and fully Number Amount in $ Amount in • Number Amount in $ Amount in •paidIn issue at 31 December 2005 - - - 57,291,675 85,938 71,418Decrease in Share Capital due - - - (430,000) (645) (536)to the shares cancelled as aresult of repurchase rightsIn issue at 31 December 2006 - - - - 56,861,675 85,293 70,882fully paid The holders of common shares are entitled to receive dividends as declared fromtime to time and are entitled to one vote per share on a poll at meetings of theCompany. The Company is authorised to issue 2,500,000 shares of preferred stock with suchdesignations, voting and other rights and preferences as may be determined fromtime to time by the Board of Directors. 44. OTHER RESERVES AND RETAINED EARNINGS THE GROUP THE COMPANYAmounts presented in • '000 Revaluation Other Total Retained Retained Reserve Reserves Reserves Earnings / Earnings / (losses) (losses)Opening balance as at 8th September 2005 - - - - -Net result for the period 08/09-31/12/ - - - (1,396) (1,396)2005Total profit /(loss) recognised for the - - - (1,396) (1,396)financial yearBalance as at 31st December 2005 - - - (1,396) (1,396) Opening balance as at 1st January 2006 - - - (1,396) (1,396)Net result for the period 01/01-31/12/ - - - 23,571 20,0472006Fair value gains of a.f.s. financial 1,740 - 1,740 - -assetsReversal of Revaluation Reserve due to (1,742) - (1,742) - -disposal of a.f.s. financial assetsTotal profit /(loss) recognised for the (2) - (2) 23,571 20,047financial yearAcquisition of the Subsidiary (PROTON - 16,153 16,153 (0.43) -BANK) on 30 June 2006Exchange Differences on translating - 2 2 - -foreign operationsPurchase of Treasury Shares of PROTON - - - (322) -BANKSale of Treasury Shares of PROTON BANK - - - 355 - - 16,156 16,156 32 -Balance as at 31st December 2006 (2) 16,156 16,153 22,208 18,652 As mentioned in note 5 "Group Structure" on 7th September 2006 the ExtraordinaryGeneral Meeting of shareholders of PROTON BANK decided on the merger of the Bankwith Omega Bank and Proton Securities. According to the Merger Contract, whichwas approved by the Proton's General Assembly, the exchange ratio was 1 share ofthe Omega Bank for 0.90 shares of PROTON BANK. As the Bank held 100% of theshares of Proton Securities, there was no exchange ratio. Due to the share exchange ration, Proton's shareholders increased their portionin the net assets of the combined entity. The net assets of Proton attributableto the Company increased by • 16,156 thous. and the relevant amount wastransferred from minority rights to Group's reserves. 45. CASH AND CASH EQUIVALENTS - CASH FLOW STATEMENT For the purposes of preparing the Cash Flow Statement of the Group, theshort-term placements in other financial institutions, which are eitherimmediately available or available within 90 days, were included in the cashaccount. Amounts presented in • '000 THE GROUP THE COMPANY 31/12/2006 31/12/2005 31/12/2006 31/12/2005Cash and balances with Central Bank (Note 20) 22,032 - - -Loans and advances to credit institutions (Note 21) 181,885 2,206 3,880 2,206Total - Included in cash and cash equivalents 203,917 2,206 3,880 2,206 46. BUSINESS ACQUISITIONS 46.1 Acquisition of a 28% stake in the share capital of PROTON BANK In June 2006 the Company entered into an acquisition agreement which wasconditional on approval of the shareholders. At a special shareholders generalmeeting 75.74% of the votes and 69.67% of the shares voted in favour of theacquisition. On June 29th 2006, the Company acquired a 28.00 per cent stake inthe share capital of PROTON BANK, a Greek investment bank, listed on the AthensStock Exchange. The acquisition was completed after the approval of thecompany's shareholders. Details of net assets acquired and goodwill are as follows: Amounts presented in • '000Purchase consideration: - Cash paid 120,061 - Direct costs relating to the acquisition 6,625Total purchase consideration 126,687Less: Fair value of net assets acquired (57,932)Goodwill & other tangible assets (Note 32) 68,754 The Group is in the process of completing the fair valuation of the net assetsacquired, including intangible assets. The excess between the cost ofacquisition and the fair value of identifiable assets, liabilities andcontingent liabilities, will be recognised as Goodwill and will be subject toimpairment testing. Consequently the Group has applied initial accountingdetermined provisionally according to IFRS 3 "Business Combinations". Accordingto the IFRS3, the purchase price allocation should be completed within one yearfrom the acquisition date. Through the acquisition the Group achieved banking license, trade name, clientrelationships and web banking licenses in Greece. The abovementioned licenseswill allow the Group to take advantage of significant growth margins of theGreek banking sector. The assets and liabilities arising from the acquisition are as follows: Amounts presented in • '000 Fair Value recognised on Acquiree's acquisition carrying amountCash and balances with central bank 2,217 2,217Loans and advances to financial institutions 14,739 14,739Trading Portfolio and other financial instruments at fair value 151,560 151,560through Profit & LossLoans and advances to customers 276,961 276,961Investment Portfolio 855 855Property, plant and equipment 1,125 1,125Goodwill and Intangible assets 89 422Deferred tax assets 420 420Other assets 21,985 21,985Due to financial institutions (44,138) (44,138)Due to Customers (62,705) (62,705)Derivative financial instruments (159) (159)Retirement benefit obligations (221) (221)Other liabilities (155,808) (155,808) 206,919 207,253Equity minority interests (18) (18)Shareholders net assets 206,901 207,235Acquisition Percentage of the Share Capital 28% 28%Net Assets Acquired 57,932 58,026Plus: Goodwill & other intangible assets 68,754Total consideration 126,687 The acquisition resulted in an increase of assets and liabilities by • 469,951thousands and • 263,032 thousands respectively. Proton's net profits for theperiod 01/07-31/12/2006 amounting to • 13,528 thous. were fully consolidated tothe Group's Income Statement. If the acquisition was completed at 1st January2006, then Group's net revenues and net profit after tax would be increased by •42,679 thous. and • 20,485 thous. respectively. 46.2 Acquisition (absorption) of OMEGA BANK by PROTON BANK On 7th September 2006, the Extraordinary General Assembly of shareholders ofProton Bank decided on the merger of the Bank with Omega Bank and ProtonSecurities (ref. Note 5.1). The acquisition (merger) of Omega Bank was affectedby means of issuing and exchanging shares. The purchase consideration wasdetermined based on the market price of Proton's share at the date of exchange. Amounts presented in • '000Purchase consideration:Fair value of equity instruments exchanges (17,547,930 x • 164,2499.36 share)Direct costs relating to the acquisition 601Total cost of business combination 164,850Less: Fair value of net assets acquired (50,639)Goodwill & other intangible assets (Note 32) 114,211 The assets and liabilities arising from the acquisition are as follows: Amounts presented in • '000 Fair Value recognised Acquiree's carrying on acquisition amountCash and balances with Central Bank 11,169 11,169Loans and advances to financial institutions 155,982 155,982Loans and advances to customers 756,641 766,608Insurance Receivables 20,176 20,176Trading Portfolio and other financial instruments at fair value 40,276 40,276through Profit & LossInvestment Portfolio 31,024 31,024Derivative financial instruments 368 368Investments in associates 4,356 4,356Property, plant and equipment 32,020 32,632Property Investment 50 50Intangible assets 3,384 3,384Reinsurance Receivables 1,641 1,641Deferred Tax Asset 3,612 1,120Other Assets 16,860 16,860Due to financial institutions (95,417) (95,417)Derivative financial instruments (2,128) (2,128)Due to Customers (877,363) (877,363)Issued Debt Securities (1,500) (1,500)Provisions for insurance contracts (35,336) (35,336)Other liabilities (13,465) (13,978)Retirement benefit obligations (1,124) (1,392) 51,226 58,532Equity minority interests (587)Net Assets Acquired 50,639 58,532Plus: Goodwill & other intangible assets 114,211Total consideration 164,850 58,532 According to IFRS3 the above combination was accounted for by applying thepurchase method. The acquisition date is the date when control is transferredto the Group. The merger of the two banks was approved by the General Meetingof the Shareholders at 7th September 2006. However the merger was effectivesince 29th September 2006 when it was approved by all relevant authorities. The Group is in the process of completing the fair valuation of the net assetsacquired, including intangible assets. The excess between the cost ofacquisition and the fair value of identifiable assets, liabilities andcontingent liabilities, will be recognised as Goodwill and will be subject toimpairment testing. Consequently the Group has applied initial accountingdetermined provisionally according to IFRS 3 "Business Combinations". Accordingto IFRS3, the Purchase Price Allocation should be completed within one (1) yearfrom the acquisition date. The acquisition of OMEGA BANK by PROTON BANK resulted in an increase of assetsand liabilities by • 1,077,599 thous. and • 1,026,333 thous. respectively. Thebusiness combination had effect in the Group's results for the three monthperiod ended at 31/12/2006 since the date of acquisition was the 29th September2006. If the acquisition had occurred on 1st January 2006, the Group's netrevenues would have been increased by • 61,687 thous. and net profit after taxwould be have been decreased by • 7.979 thous. 46.3 Net Cash flow from the acquisitions THE GROUP THE COMPANYAmounts presented in • '000 01/01 - 31/12/2006 01/01 - 31/12/2006 Net cash outflow from the acquisition of PROTON BANK at 30/06/ (109,730) (126,687)2006Net cash inflow from the absorption of OMEGA BANK by PROTON 131,836 0BANK at 29/09/2006Acquisition of subsidiaries, net of cash acquired 22,106 (126,687) The net cash outflow from the acquisition of Proton Bank is analysed as follows: Amounts presented in • '000Cash flow on acquisition:Cash Paid (126,687)Less: "Cash and balances with central bank" 2,217Less: "Due from Banks" 14,739Net cash outflow (109,730) The net cash inflow from the acquisition (merger) of Omega Bank is analysed asfollows: Amounts presented in • '000Cash flow on acquisition:Cash Paid (costs directly attributable to the acquisition) (601)Plus: "Loans and advances to Credit Institutions" 155,982Less: "Elimination of cash and cash equivalents between (23,545)Omega Bank and Proton Bank"Net cash inflow 131,836 47. EARNINGS PER SHARE Basic earnings per share are calculated by dividing the net profit attributableto shareholders by the weighted average number of shares in issue during theyear. Diluted earnings per share are calculated by adjusting the weightedaverage number of common shares outstanding to assume exercise of the warrants(Note 43). Basic and diluted earnings per share are analysed below: Amounts presented in • '000 THE GROUP THE COMPANYBasic Earnings per share 01/01 - 31/12 08/09 - 31/12/ 01/01 - 31/12/06 08/09 - 31/12/ /06 05 05 Profits / (Loss) attributable to the 23,571,472 (1,395,525) 20,047,191 (1,395,527)Company's ShareholdersWeighted average number of shares in issue 57,118,508 28,134,141 57,118,508 28,134,141Basic earnings per Share ( •/Share ) 0.41 (0.05) 0.35 (0.05)Diluted Earnings per Share Profits / (Loss) attributable to the 23,571,472 (1,395,525) 20,047,191 (1,395,527)Company's Shareholders according to theIncome Statement of the year Weighted average number of shares 57,118,508 28,134,141 57,118,508 28,134,141Plus: Shares with no consideration 5,990,329 - 5,990,329 -(adjustment in number of shares due toprobable exercise of Warrants)Weighted average number of shares for the 63,108,837 28,134,141 63,108,837 28,134,141purposes of diluted earnings per shareDiluted earnings per Share (•/Share ) 0.37 (0.05) 0.32 (0.05) 48. DIVIDEND PER SHARE The Company's Board of Directors decided and will propose, at the RegularGeneral Shareholders Meeting the distribution of $ 0.26 dividend per share forthe year 2006. As the distribution of dividends requires approval of theshareholder's meeting, no liability in this respect is recognised in 2006financial statements. 49. RELATED PARTIES TRANSACTIONS 49.1 Transactions between companies included in Consolidation Amounts presented in • '000 THE COMPANY 31/12/2006 31/12/2005Asset AccountsLoans 73,395 -Receivables from dividends 15,095Total 88,490 - IncomeDividend Income 15,095 -Total 15,095 - The aforementioned balances of the Company with its subsidiaries have beeneliminated from the consolidated financial statements. The Company is financing its wholly owned subsidiaries, MYRTLE TRADING COMPANYand MIMOSA TRADING SA, for their trading activities. The amount of • 73,395thous. is the amount due from the subsidiaries as at 31st December 2006. Theabovementioned subsidiaries have undertaken the obligation to repay the Companyany and all amounts from time to time lent to them, on first demand. The amount of • 15,095 thous. refers to the dividends of the Company from itswholly owned subsidiaries, MYRTLE TRADING COMPANY (amount of • 4,127 thous.) andMIMOSA TRADING SA (amount of • 10,968 thous.). In particular, at 29th December2006 the Board of Directors of the abovementioned companies decided todistribute the above amounts within the first quarter of 2007, as cash dividend. 49.2 Transactions with Associates Amounts presented in • '000 THE GROUP 31/12/2006 31/12/2005Asset AccountsOther amounts due 11 -Total 11 - Liability AccountsDeposits 6,574 -Total 6,574 - Income /ExpensesInterest and similar expenses 28 -Other income 26 -Total 54 - The aforementioned balances regarding transactions have not been eliminated fromthe consolidated financial statements. 49.3 Transactions with Management and Members of the Board of Directors Amounts presented in • '000 THE GROUP THE COMPANY 31/12/2006 31/12/2005 31/12/2006 31/12/2005Asset accountsLoans 8,100 - - -Other assets 375 - - -Total 8,475 - - - Liability accountsDeposits 34,868 - - -Other Liabilities 216 - - -Total 35,084 - - - Letters of Guarantee 127 - - - IncomeInterest and similar income 212 - - -Other income 1,405 - - -Total 1,617 - - - ExpensesRemuneration 2,436 - 155 -Interest and similar expenses 314 - - -Other expenses 1,119 - - -Total 1,433 - - - Directors of the Company and their immediate relatives control 16,40 per cent ofthe voting shares of the Company. No salaries or loans were they paid to the Directors of the Company for theperiod, apart from salaries paid to CEO of the Company. 49.4 Other related party transactions An affiliated company of Mrs Angeliki Frangou, Chairman of the BoD of theCompany, provided general and administrative services including office space,utilities and secretarial support (for $10,000 per month). All sums due inconnection with such services ceased to be payable on the completion of thebusiness combination. During the year the expenses that have been recognised inthe Income Statement amount to • 56.756. This balance bears no interest. Theamount of • 18.550 due at 31st December 2006 was repaid on 11th January 2007. On 20 July 2006, the Company paid a success-based advisory fee of • 790,000 to SGoldman Advisors Limited, in connection with the acquisition of PROTON BANK.Sheldon Goldman, then a Director of the Company, is also managing director of SGoldman Advisors Limited. On 30 June 2006, the Company paid IBG a success-based advisory fee of •3,300,000 on completion of the acquisition of PROTON BANK. IBG is affiliatedwith Marfin Financial Group ("MFG") and Marfin Bank AS. Andreas Vgenopoulos, theCompany's Deputy Chairman, was also the Vice President of MFG and Chairman ofMarfin Bank SA. 50. COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES 50.1 Contingent Legal Liabilities As at 31 December, 2006 there were pending litigations against the Group inconnection with its activities. Based on legal advice the Board of Directorsbelieves that there is adequate defence against all claims and it is notprobable that the Group will suffer any significant damage. Therefore, noprovision has been made in the financial statements regarding these cases. Material litigation settled during the year: The Company had one claim during the year 2006. In particular, the AmaranthLLC, a shareholder of the Company, issued proceedings against the Companyalleging that the Company failed to repurchase shares owned by Amaranth in theCompany, in accordance with the Company's bye-laws. On 23rd October 2006, theSupreme Court of Bermuda ordered the legal action previously instituted byAmaranth LLC against the Company to be discontinued. No sums were paid by theCompany to Amaranth in connection with this order. 50.2 Contingent Tax Liabilities Proton Group is subject to Greek tax legislation. Under Greek Law, submittedtax returns are not considered as final and are subject to revision by taxauthorities as a result of tax inspection in entities books and records. Taxliabilities are considered as final by stature after the completion of fiveyears from the end of the relevant fiscal year, however it is common that thetax authorities will audit the entity's books and records. The tax authoritiescommonly seek to disallow expenses on the basis that they are not properlydocumented or that they do not represent proper business expenses, relying on asubstantial degree of subjective judgement on the part of the tax management inorder an out-of-court settlement to be reached. In practice, both companies andtax authorities tend to reach an out-of-court settlement at an acceptable levelof additional taxes. The accounting years that have not been inspected yet by the tax authorities foreach of the Group's companies are as follows: Company Name Domicile Open tax yearsMimosa Trading SA 1 Marshall Islands -Myrtle Trading Company 1 Marshall Islands -Proton Bank AE Greece 2005-2006Proton Asset Management AE Greece 2005-2006Proton Mutual Funds Management Co AE Greece 2005-2006First Global Brokers SA Serbia 2002-2006Intellectron Systems SA Greece 2001-2006Omega Kahn Financial Services SA Switzerland 2004-2006 Company Name Domicile Open tax yearsOmega SA Financial advisors - Investments & Real Estate Mgt Greece 2006Omega Mutual Funds Mgt Co SA Greece 2006Omega Insurance AE Greece 2006OMEGA Insurance Services AE Greece 2006Omega Portfolio investment SA Greece 2006 Note 1: Not subject to income tax As a result of the above the Group's respective tax obligations for periodscovering one to six accounting years have not been finalised. No additionalprovision was recorded as the outcome of the tax audit cannot be reliablyestimated at this stage. 50.3 Off balance sheet items Amounts presented in • '000 THE GROUP THE COMPANY 31/12/2006 31/12/2005 31/12/2006 31/12/2005Letters of Guarantee 85.172 - - -Letters of credit 2.804 - - -Total 87.976 - - - 50.4 Assets given as Collaterals Government and Bank bonds of nominal value • 5,500 thous. and • 10,500respectively have been pledged as securities for liquidity and credit limitpurposes. 50.5 Finance lease - Operating lease commitments (a) The Group as a lessor, has signed non cancellable operating lease agreements with a value of 1,049 thousand euros. (b) The Group leases for its operating purposes, offices for head quarters and branches. The future minimum lease payments under non cancellable operating leases, are as follow: Amounts presented in • '000 31/12/2006Less than 1 year 3,712Between 1 to 5 years 16,206More than 5 years 39,969Total 59,887 Monthly lease payment 309Guarantees which will be offset at the lease termination 1,123 (c) The Group leases vehicles for private use. The future minimum lease payments for cars under non cancellable operating lease arrangements are as follows: • Leased tangible assets: vehicles for private use• Lease term: 4 years per leased vehicle.• Lease guarantees offset at the end of the lease: 14 thousand euros• Accrued lease payments recognised in the income statement during the period: 101 thousand euros. Amounts presented in • '000 31/12/2006Less than 1 year 204Between 1 to 5 years 309More than 5 years -Total 513 (d) The amount of unutilized approved finance lease facilities at 31st December 2006 was • 3,935 thous. 50.6 Stock Option Plan of Proton Group On 24th November 2006, the Extraordinary General Meeting of Shareholders ofProton Bank approved a share option plan for the members of the Board ofDirectors, key management, its employees and the Bank's related companies in theform of stock options according to the article 13 of Law 2190/1920 after theproposition of the Board of Directors and the Remuneration Committee. Theprogram has a contractual term of six years ending in December 2012. Accordingto the plan, if all share options are exercised, then a number of up to6.268.382 shares will be issued on behalf of the plan beneficiaries. Theexercise price will be 10.46 euro per share and the options are exercisable fora three year period from the grand date. In the event that not all shares areexercised and the share capital increase is not fully covered, then according tothe provisions of the article 13 (S)1 of Law 2190/1920, the share capital willincrease up to the amount of coverage. The above program has not beenimplemented yet, since the final details of the program have not been set by theRemuneration Committee and approved by the Board of Directors. 50.7 Purchase of treasury shares by Proton Group On 24 November 2006, the Extraordinary General Meeting of Shareholders of ProtonBank approved of the acquisition of up to 10% of the Bank's shares (6.268.382),for a price range from five (5) to fifteen (15) euros per share for the twelvemonth period starting from the date of approval by the General Meeting ofShareholders. No treasury shares were acquired since the decision of theGeneral Meeting of Shareholders. 51. POST-BALANCE SHEET EVENTS 1. In the year 2007 the subsidiary of the Company MIMOSA TRADING SA completedthe acquisition in the open market of approximately 12,55 million shares inMarfin Popular Bank, a commercial banking group listed on the Athens and CyprusStock Exchange, for approximately • 105,1 million. This acquisition was fundedthrough cash balances and a loan facility. The Company's current intention is toretain this minority stake as an investment. Marfin Popular Bank is the resultof a merger between Marfin Financial Group, Egnatia and Cyprus Popular Bankwhich occurred in the last quarter of 2006 and as a result is a significant bankin both Greece and Cyprus, with diversified banking interests in the retail,commercial and investment banking sectors. These shares represent approximately1.6% of Marfin Popular Bank's outstanding shares as of December 31, 2006. 2. On 31 January 2007, Proton Bank and the majority shareholders of theinsurance company "International Life SA Life Insurance" agreed to the purchaseof 51% of the shares of International Life by the Proton in cash. Theagreement provides for the purchase price to be equal to 1.55 the book value ofInternational Life as of 31st December 2006 times the percentage to be acquired. The completion of this agreement is subject to the due diligence on thecompanies belonging to the International Life Group and the approval of therelevant regulatory authorities. The transaction is expected to be completedwithin three (3) months by April 30th 2007. Apart from the events mentioned above there are no other subsequent events,which regard the Company or the Group which, according to the InternationalFinancial Reporting Standards, need to be mentioned. 52. APPROVAL OF FINANCIAL STATEMENTS The financial statements of "IRF European Finance Investments Limited" ("theCompany") as well as the consolidated financial statements of the Company andits subsidiaries ("the Group"), for the year ended 31 December 2006 wereapproved by the Company's Board of Directors on March 16th, 2007 and are subjectto the final approval of the General Meeting of the Shareholders according theCompany's Bye-laws. Independent Auditors Report on pages 5 to 6. Athens, March 16th 2007 Angeliki Frangou Loukas Valetopoulos _________________________________ _________________________________ Chairman, Non - Executive Director Chief Executive Officer, Director This information is provided by RNS The company news service from the London Stock Exchange