IRF European Fin Investments Ltd
30 November 2006
IRF European Finance Investments Limited
Interim Financial Statements for the nine month period from the 1st of January
to the 30th of September 2006
30 November 2006
IRF European Finance Investments Ltd (AIM:IRF) announces its interim results for
the nine months ended 30 September 2006.
Highlights:
2006 is IRF's first year of actual operation, and as a result there is no
comparison available for the previous year. In addition, reference is confined
to the most significant figures of 2006.
- IRF's main investment activity was the acquisition of a controlling stake in
Proton Bank. Following the acquisition, Proton merged with Omega Bank on 29
September 2006. As a result, IRF currently owns 20.16 per cent of Proton.
- Shareholders' equity increased from € 8.9 million to € 225 million following
the acquisition of Proton Bank and the release from trust of the net proceeds
from IRF's initial public offering.
- Profit after tax for the period 1 January to 30 September reached €14.3
million (including minority interests of €4.4 million) and was derived from net
interest income on funds invested in short term money instruments as well as
trading profit.
- IRF's results for the period include Proton's bank results for the period
post-acquisition but do not include Omega bank results.
- (diluted) earnings per share reached € 0.16 based on 63.4 million fully
diluted shares.
Commenting on the results, Angeliki Frangou, chairperson of IRF European Finance
Investments Ltd, said: 'We are pleased to announce IRF's interim results for
the period 1 January to 30 September 2006. The acquisition of Proton Bank has
already been reflected in the Group's increase in equity while the profit for
the period has resulted in earnings per share of €0.16. We look forward to the
continued implementation of our strategic business plan over the coming months.'
For further information:
IRF European Finance Investments Ltd
Angeliki Frangou, Chairperson Tel: +30 (0) 210 4280560
Collins Stewart Europe Limited
Kripa Radhakrishnan / Stewart Wallace,
Corporate Finance Tel: +44 (0) 20 7523 8350
About IRF
IRF was formed to invest in the financial services industry throughout Europe
with a primary focus on credit institutions and insurance companies in South
Eastern Europe. IRF's current strategy is the acquisition of financial
institutions having valuations which do not reflect their potential and where
marketing and operational efficiencies are possible. IRF owns a 20.16 per cent.
interest in Proton Bank S.A..
About Proton Bank
Proton Bank is a full service financial services institution, including retail
and investment banking as well the provision of specialised corporate advisory
and investment services. Proton Bank is listed on the Athens Stock Exchange.
Statement of Directors' responsibilities in respect of the interim accounts
The Directors are responsible for preparing the interim accounts and
consolidated interim accounts which present fairly the financial position and
the performance of the Company and the Group (ref. par. 6.5) in accordance with
applicable law and regulations.
They have elected to prepare the interim financial statements and consolidated
interim financial statements in accordance with the IFRS as adopted by the EU.
In preparing these interim 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 interim 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 that
disclose with reasonable accuracy at any time the financial position of the
Company and the Group and enable them to ensure that their interim accounts
comply with applicable laws and regulations. They have general responsibility
for taking such steps as are reasonable open to them to safeguard the assets of
the Group and the Company and to prevent and detect fraud and other
irregularities.
Auditor's Review Report
To the shareholder of 'IRF European Finance Investments Limited'
We have reviewed the accompanying Interim Financial Statements and the
Consolidated Interim Financial Statements of the 'IRF European Finance
Investments Limited', as of and for the nine-month period ended 30 September
2006. These interim financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with the Greek Review Standard, which has
adopted the International Standard on Review Engagements. This Standard requires
that we plan and perform the review to obtain moderate assurance as to whether
the interim financial statements are free of material misstatement. A review is
limited primarily to inquiries of company personnel and analytical procedures
applied to financial data, and thus provides less assurance than audit. We have
not performed an audit and, accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe
that the accompanying Interim Financial Statements of the Company and of that of
the Group do not give a true and fair view in accordance with the International
Financial Reporting Standards that have been adopted by the European Union.
Without qualifying our review conclusion, we draw attention to note 23.2 to the
interim financial statements that the tax obligations of the Group for periods
covering one to five years and the period ended 30 September 2006 have not yet
been audited by the tax authorities and accordingly its tax obligations for
these years are not considered final. The outcome of a tax audit cannot be at
this stage reliably estimated.
1. Income Statement
THE GROUP THE COMPANY
Amounts in thousands € Note 01/01 - 30/09/ 01/07 - 30/09/ 01/01 - 30/09/ 01/07 - 30/09/
2006 2006 2006 2006
Continuing Operations
Interest and Similar Income 10.030 3.550 7.031 550
Interest and Similar Charges (1.374) (1.374) (1) (1)
Net Interest Income 8.656 2.176 7.030 550
Fee and Commision Income 3.065 3.065 0 0
Fee and Commision Expense (2.197) (2.153) (430) (385)
Net Fee and Commission Income 867 912 (430) (385)
Dividend Income 661 661 0 0
Net Trading Income 8.338 8.338 0 0
Other Operating Income 930 930 888 888
Total Net Income 19.452 13.016 7.489 1.053
Operating Expenses (3.567) (3.388) (348) (169)
Total Operating Expenses (3.567) (3.388) (348) (169)
Profit before Income Tax 15.886 9.628 7.141 884
Income Tax Expense 20 (1.534) (1.534) 0 0
Profit for the Period 14.351 8.094 7.141 884
Attributable to:
Equity holders of the parent 9.941 3.684 7.141 884
Minority Interests 4.410 4.410 0 0
14.351 8.094 7.141 884
Basic earnings per Share (in Euro / 21 0,17 0,06 0,12 0,02
share)
Diluted earnings per Share (in Euro 21 0,16 0,06 0,11 0,01
/share)
The results above relate to continuing operations. The notes on the following
pages form an integral part of these interim financial statements and
consolidated interim financial statements.
2. Balance Sheet
Amounts in thousands € THE GROUP THE COMPANY
Note 30/9/2006 31/12/2005 30/9/2006 31/12/2005
ASSETS
Cash and balances with central bank 11 31.646 0 0 0
Loans and advances to Credit Institutions 12 153.087 0 0 0
Cash and other cash equivalents 13 6.749 2.206 4.685 2.206
Loans and advances to customers, net 839.916 0 0 0
Restricted cash held in Trust 15 0 210.294 0 210.294
Insurance Related Assets 21.817 0 0 0
Financial Assets at Fair Value through 214.744 0 0 0
profit or loss
Available-for-sale Financial Assets 16 187.840 0 0 0
Derivative financial instruments - assets 781 0 0 0
Investments in Subsidiaries 0 0 126.687 0
Investments in Associates 4.363 0 0 0
Property, plant and equipment, net 33.662 0 0 0
Investment Property 50 0 0 0
Goodwill and other Intangible Assets 10 179.180 0 0 0
Deferred Tax Assets 1.393 0 0 0
Other Assets 80.960 5 148.942 5
Total Assets 1.756.189 212.506 280.314 212.506
LIABILITIES
Due to banks 44.221 0 0 0
Due to Customers 1.002.643 0 0 0
Derivative financial instruments - 2.413 0 0 0
liabilities
Obligations from bonds 1.500 0 0 0
Provision for insurance contracts 35.336 0 0 0
Retirement benefit obligations 1.625 0 0 0
Other borrowed funds 17 75.000 0 75.000 0
Other liabilities 67.473 170 507 170
Compound financial instrument 18 134 203.426 134 203.426
Total Liabilities 1.230.344 203.596 75.641 203.596
SHAREHOLDERS' EQUITY
Equity
Share Capital 19 71 71 71 71
Warrants Reserve 19 198.856 10.234 198.856 10.234
Revaluation Reserves 1.742 0 0 0
Other reserves 16.099 0 0 0
Retained Earnings / (losses) 8.278 (1.396) 5.746 (1.396)
Equity attributable to shareholders' of the 225.047 8.910 204.673 8.910
parent
Minority Interest 300.799 0 0 0
Total Shareholders Entity 525.846 8.910 204.673 8.910
Total Equity and Total Liabilities 1.756.189 212.506 280.314 212.506
3. Statement of Changes in Equity (Group)
Consolidated Statement of Changes in Equity
Share Capital Attributable To Shareholders Minority Total
Amounts in thousands € Share Warrants Revaluation Other Retained Total Interest
Capital Reserve Reserves Reserves Earnings /
(losses)
Company's Equity at 1st January 2006 71 10.234 0 0 (1.396) 8.910 0 8.910
according to IFRS
Net Profit for the period 01/01-30/09/2006 0 0 0 0 9.941 9.941 4.410 14.351
Decrease in Share Capital due to the (0,5) 0 0 0 0 (0,5) 0 (0,5)
cancelled shares (Note 19)
Conversion of Compound Financial 0 188.623 0 0 0 188.623 0 188.623
Instruments to Common Shares (after the
acquisition of PROTON)
Minority Interest from the Acquisition of 0 0 0 0 0 0 148.987 148.987
the Subsidiary (PROTON BANK) on 30 June
2006
Reserves from the revaluation of 0 0 1.742 0 0 1.742 0 1.742
Available-for-Sale Financial Assets
Exchange Differences on translating 0 0 0 0 0 0 (7) (7)
foreign operations
Acquisition (absorption) of OMEGA BANK by 0 0 0 16.099 (267) 15.832 147.409 163.241
PROTON BANK
Total Profit /Loss for the Period 0 188.623 1.742 16.099 9.673 216.137 300.799 516.936
Total shareholders' equity at 30 September 71 198.856 1.742 16.099 8.278 225.047 300.799 525.846
2006
The notes on the following pages form an integral part of these interim
financial statements and consolidated interim financial statements.
4. Statement of Changes in Equity (Company)
Company Statement of Changes in Equity
Share Capital Attributable To Shareholders
Amounts in thousands € Share Capital Warrants Reserve Retained Earnings Total
/ (losses)
Equity at 1st January 2006 according to IFRS 71 10.234 (1.396) 8.910
Changes in Equity for the period 01/01 - 30/09/2006
Net Profit for the period 01/01-30/09/2006 0 0 7.141 7.141
Decrease in Share Capital due to the cancelled shares (0,5) 0 0 (0,5)
(Note 19)
Conversion of Compound Financial Instruments to 0 188.623 0 188.623
Common Shares (after the acquisition of PROTON BANK at
30 June 2006)
Total Profit /Loss for the Period 0 188.623 7.141 195.763
Total shareholders' equity at 30 September 2006 71 198.856 5.746 204.673
The notes on the following pages form an integral part of these interim
financial statements and consolidated interim financial statements.
5. Cash Flow Statement
Amounts in thousands € Notes THE GROUP THE COMPANY
Cash Flows from operating activities 01/01 - 30/09/ 01/01 - 30/09/2006
2006
Profit Before Taxation 15.886 7.141
Adjustments for
Add: Impairment Losses on financial assets 261 0
Add: Depreciation 134 0
Add: Retirement Benefit Charge 12 0
Gains/Losses from valuation of trading securities (5.039) 0
Reverse of provisions (1.944) (1.944)
Exchange Differences (888) (888)
Cash Flows from operating activities before changes in operating 8.422 4.309
assets and liabilities
Changes in operating assets and liabilities:
Net (increase) / decrease in trading securities (19.503) 0
Net (increase) / decrease in derivatives (288) 0
Net (increase) / decrease in loans and advances to customers 144.048 0
Net (increase) / decrease in other assets (9.465) (148.937)
Net increase / (decrease) in due to banks (41.750) 0
Net increase / (decrease) in due to customers 62.720 0
Net increase / (decrease) in other liabilities (105.555) 330
Net cash flow from operating activities before tax payment 38.629 (144.298)
Income Tax Paid (1.328) 0
Net cash flow from operating activities 37.301 (144.298)
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired 9.3 22.105 (126.687)
Restricted cash placed on Trust 201.266 201.266
Purchases / (proceeds) of tangible & intangible assets (69) 0
(Purchases) / proceeds of Available for Sales Securities (154.805) 0
Amount Payable for Compound Financial Instruments (1.782) (1.782)
Net cash flow from investing activities 66.715 72.798
Cash flows from financing activities
Purchases of treasury shares (2.446) 0
Sales of treasury shares 2.558 0
Net increase / (decrease) in other borrowed funds 75.000 75.000
Net cash flows from financing activities 75.112 75.000
Net increase /)decrease) in cash and cash equivalents 179.129 3.500
Cash and Cash Equivalents at the beginning of period 2.206 2.206
Unrealised gains and losses arising from changes in foreign (1.021) (1.021)
currency exchange rates of the account 'Cash & cash equivalents'
Cash and Cash Equivalents at the end of period 14 180.314 4.685
The notes on the following pages form an integral part of these interim
financial statements and consolidated interim financial statements.
6. Additional Information
6.1 Organization and business operations
IRF European Finance Investments Ltd. (the 'Company') was incorporated on 8th
September 2005 under the Bermuda Companies Act. The Company was formed as an
investing company (or cash shell) to serve as a vehicle for the acquisition of
an entity in the financial services industry in Europe, with a primary focus on
credit institutions and insurance companies in Greece, Bulgaria, Romania and
Turkey. IRF European Finance Investments Limited (IRF) is a company listed on
AIM, a market operated by the London Stock Exchange plc (AIM).
The principal legislation governing the Company is the Bermudian Companies Act
and regulations issued thereunder. The Company comply with the Corporate
Governance Guidelines for AIM Companies as published by the Quoted Companies
Alliance (as far as applicable) following the Company's Acquisition as discussed
below.
In November 2005, the Company completed its Initial Public Offering ('the
Offering') in which 45.833.340 units were sold to institutional and other
investors at a price of $ 6.00 per unit. Each unit consisted of one Share and
two Warrants. The Shares and Warrants were admitted to trading on AIM on 14th
November 2005.
The net proceeds of the Company's Offering, after payment of underwriting
discounts and expenses, being € 209.493.368 ($252.083.370) was placed in a trust
and invested in U.S. Treasury bills having a maturity date of 180 days or less.
The funds in the Trust were only be used by the Company to finance one or more
business combinations approved by the Shareholders. However, since a Qualified
Business Combination(as defined in the Company's Offering Circular) was
completed, funds in Trust were released to the Company and the Company may use
these funds without restriction.
On 27th June 2006, a special general meeting of the Shareholders' approved the
acquisition of the 28 per cent of the issued share capital of PROTON Investment
Bank SA (being 12.638.050 shares), a Greek investment bank, listed on the Athens
Stock Exchange at a price of € 9.50 per Proton share, for a total consideration
of € 120.061.475. The acquisition of PROTON INVESTMENT BANK SA completed on 30
June 2006.
PROTON INVESTMENT BANK SA was formed in September 2001 under the name Arrow
Investment Bank S.A.. Proton's trade name was changed to Proton Investment Bank
S.A. in November 2001. In the same year, Proton was licensed by the Bank of
Greece to operate as a financial institution in Greece. Proton focuses on
investment banking and the provision of specialized corporate advisory and
investment services. Proton operations are dividend into four segments:
investments, banking, brokerage and mutual funds and asset management.
The change in the business name from 'PROTON INVESTMENT BANK SA' to 'PROTON BANK
SA' was registered in the Registry of Societes Anonyme on November 4th 2006. The
Bank is listed in the Athens Stock Exchange since December 2005 and apart from
the General Index it is included in FTSE-40 index. On 7th September 2006, the
Extraordinary General Meeting of Shareholders of PROTON INVESTMENT BANK decided
the merger of the Bank with the companies OMEGA BANK and PROTON SECURITIES. The
merger was completed on 29th September 2006.
6.2 Statement of Compliance
The interim financial statements and consolidated financial statements for the
nine months ended 30 September 2006 have been prepared in accordance with the
International Financial Reporting Standards (IFRS), IAS 34 'Interim Financial
Statements' as adopted by the European Union (EU) and conform to the interim
financial reporting.
6.3 Basis of Presentation
The following accounting principles (par. 7) have been applied consistently in
dealing with the items which are material in relation to the financial
information of IRF European Finance Investments Limited set out in this report.
The Consolidated Financial Statements of the Group have been prepared in
accordance with International Financial Reporting Standards (IFRS) as adopted by
the European Union.
The accounts are prepared on the historical cost basis except for financial
instruments classified as available-for-sale securities, financial assets and
financial liabilities held at fair value through the income statement and
derivatives which are valued at fair value.
The amounts presented in these financial statements are in thousands euros,
unless otherwise stated.
6.4 Currency Presentation
The financial statements are presented in Euros which is the functional currency
of the Group.
The functional currency is the currency of the primary economic environment in
which an entity operates and is normally the one in which it primarily generates
and expends cash. Management used its judgment to determine the functional
currency that most faithfully represents the economic effects of the underlying
transactions, events and conditions. As part of this approach, management
considers various factors stated on IAS 21. Priority is given to factors such as
the currency that mainly influences costs and sales. This currency is mainly
Euro since the Group is and will be engaged in a business combination in Europe.
The Company has also issued financial instruments in USD. However, according to
par. 12 of IAS 21, these factor is not given priority.
6.5 Basis of consolidation
The consolidated financial statements include the financial statements of the
Company and its subsidiaries and hereafter referred to as ''Group'. Subsidiaries
are entities which are controlled by the parent company (ref. par.8). Control
exists when the Company has the power, directly or indirectly, to govern the
financial and operating policies of an entity so as to obtain benefits from its
activities.
The financial statements of the subsidiaries have been prepared according to the
parent company's balance sheet date. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency with the policies adopted by
the Company.
All subsidiaries are consolidated according to the method of full consolidation.
Subsidiaries are included in the consolidated financial statements from the date
that control commences until that control ceases. In the income statement the
proportion of the subsidiaries is included from the day of their acquisition.
The associate company is consolidated under the Equity Method.
6.6 Comparative Figures
The Group prepared the consolidated financial statements for the first time for
the six month period ended on 30th June 2006. Thereby, the consolidated interim
balance sheet does not present relevant comparative figures for the year ended
31st December 2005.
The Company's interim balance sheet for the nine month period ended 30 September
2006 presents relevant comparative figures with those reported for the year
ended 31 December 2005 (8th September 2005 to 31st December 2005).
The Income Statement does not include comparative information since the Company
was incorporated in Bermuda on 8th September 2005 and PROTON BANK was acquired
on 30th June 2006.
6.7 Income seasonality
The Group and the Company operate in the sectors of banking, financial services,
portfolio management, insurance and other services, the income of which are not
characterized by seasonality.
7. Accounting Principles
The accounting policies applied and the judgment and estimates used in these
interim financial statements conform to the International Financial Reporting
Standards (IFRS) that have been issued by the International Accounting Standards
Board (IASB) and their interpretations that have been issued by the
International Financial Reporting Interpretations Committee (IFRIC) of the IASB.
The interim financial statements and consolidated financial statements of IRF
European Finance Investments Ltd for the nine month period of 2006, do not
include all the information that are necessary during the annual financial
statements, therefore the use of the annual financial statements of 2005 is
appropriate. The accounting principles that had been used in the preparation of
the annual financial statements of 2005 have not been changed during 2006.
The preparation of the financial statements according to IFRS requires the use
of estimates and assertions. Major assumptions made by the management in order
to apply certain accounting policies have been highlighted were appropriate. The
estimations and the assertions in which the management proceeds are always
valued and come from the experience and other factors, included future
expectations under reasonable circumstances.
The Group adopted the revised International Accounting Standard (IAS 39) from
1st January 2006 with respect to 'financial guarantee contracts'.
7.1 Consolidation
Subsidiaries: All the companies that are managed or controlled, directly or
indirectly, by another company (parent) either through the majority of voting
rights or through control of the business decisions taken. Therefore,
subsidiaries are companies in which control is exercised by the parent. The
existence of potential voting rights that are exercisable at the time the
financial statements are prepared, is taken into account in order to determine
whether the parent exercises control over the subsidiaries. Subsidiaries are
consolidated completely (full consolidation) using the purchase method from the
date that control over them is acquired and cease to be consolidated from the
date that control no longer exists.
The acquisition of a subsidiary by the Group is accounted for using the purchase
method. The acquisition cost of a subsidiary is the fair value of the assets
given as consideration, the shares issued and the liabilities undertaken on the
date of the acquisition plus any costs directly associated with the transaction.
The individual assets, liabilities and contingent liabilities that are acquired
during a business combination are valued during the acquisition at their fair
values regardless of the participation percentage. The acquisition cost over and
above the fair value of the individual assets acquired is booked as goodwill. If
the total cost of the acquisition is lower than the fair value of the individual
assets acquired, the difference is immediately transferred to the income
statement.
Inter-company transactions, balances and unrealized profits from transactions
between Group companies are eliminated in consolidation. Unrealized losses are
also eliminated except if the transaction provides indication of impairment of
the transferred asset. The accounting principles of the subsidiaries have been
amended so as to be in conformity to the ones adopted by the Group.
Associates: Associates are companies on which the Group can exercise significant
influence but not 'control' and which do not fulfill the conditions to be
classified as subsidiaries or joint ventures. The assumptions used by the group
imply that holding a percentage between 20% and 50% of a company's voting rights
suggests significant influence on the company. Investments in associates are
initially recognized at cost and are subsequently valued using the Equity
method. At the end of each period, the cost of acquisition is increased by the
Group's share in the associates' net assets change and is decreased by the
dividends received from the associates.
Any goodwill arising from acquiring associates is contained in the cost of
acquisition. Whether any impairment of this goodwill occurs, this impairment
decreases the cost of acquisition by equal charge in the income statement of the
period. The Group, applying IFRS 3, does not amortize goodwill. Therefore,
goodwill is presented at its net book value as at 31.12.2003, less any
impairment losses.
After the acquisition, the Group's share in the profits or losses of associates
is recognized in the income statement, while the share of changes in reserves is
recognized in Equity. The cumulated
changes affect the book value of the investments in associated companies. When
the Group's share in the losses of an associate is equal or larger than the
carrying amount of the investment, including any other doubtful debts, the Group
does not recognize any further losses, unless it has guaranteed for liabilities
or made payments on behalf of the associate or those that emerge from ownership.
Unrealized profits from transactions between the Group and its associates are
eliminated according to the Group's percentage ownership in the associates.
Unrealized losses are eliminated, except if the transaction provides indications
of impairment of the transferred asset. The accounting principles of the
associates have been adjusted to be in conformity to the ones adopted by the
Group.
7.2 Investments in debt and equity instruments
The Group classifies its investments as held for trading, held-to-maturity or
available-for-sale. The classification is decided upon at initial recognition.
Initially, all investments are recorded on the trade date at fair value.
Transactions costs are capitalized, if they relate to available-for-sale and
held-to-maturity investments, whereas they are recorded directly to the income
statement if they pertain to held-for-trading investments.
Trading securities: This category includes investments that are acquired in
order to generate short term profit and includes securities such as stocks,
bonds, and mutual fund units. After initial recognition, investments held for
trading are stated at fair value. The gains or losses arising from the changes
in the fair value of these investments are included in the income statement.
Available-for-sale securities: This category includes financial assets that are
intended to be held for an indefinite period of time, to maturity or to be sold
in response to needs for liquidity or to gain from the changes in interest rates
or foreign currency exchange rates. After initial recognition, the investments
classified as available-for-sale are carried at fair value. Gains and losses
arising from changes in fair value of these investments are recognized directly
in equity. These gains or losses are removed from equity and recognized in the
income statement when they are sold or when there is objective evidence of
impairment.
Fair value of financial instruments:
Fair value is the value at which a financial instrument can be traded (purchase/
sale) between two parties that are aware of the market and this trade is
executed for commercial reasons. The financial instruments of the Group, as
indicated by the IFRS, are included on the balance sheet captions and on off
balance sheet accounts in cases where these concern letters of guarantee of the
Bank. Short term positions of the Group as well as short term deposits from
clients are reported on cost value since these financial instruments have short
term expirations and are turned into cash or redeem without significant
transaction costs. Loans to clients and letters of guarantee are reported at
their cost value minus estimated impairment. Trading Portfolio and available for
sale securities are reported at their fair value, which is determined by their
market price on the balance sheet date.
Trade Date
All regular purchases or sales of a financial asset are recognized on the trade
date which is the date that the Group commits itself to purchase or sell an
asset. The term 'regular' transactions requires that the delivery of a financial
asset is realized within the time period specified by either the responsible
committee or is established by the existing practice.
7.3 Sale and Repurchase agreements (Repos)
Securities sold subject to a linked repurchase agreement (Repos) are disclosed
in the financial statements as available-for-sale investments either as held for
sale, while the respective liability is disclosed, depending on the counter
party, as amounts due to credit institutions, to customers or other deposits.
Securities purchased under agreements to resell (Reverse Repos) are recorded in
the financial statements as due from credit institutions. The difference between
sale and repurchase price is recorded in the income statement and is accrued
over the term of the agreement using the effective interest rate method.
7.4 Derivative financial instruments and hedging
The Group uses Derivative financial instruments for the purpose of acquisition
of profit and for its customers. Derivative financial instruments include
forward foreign exchange contracts, interest rate swaps, foreign exchange swaps
and other derivative financial instruments.
Derivatives for trading purposes: Derivatives that do not qualify for hedging
purposes are considered as entered into for trading purposes. Initially,
derivatives are recognized in the balance sheet at fair value (which is
essentially the transaction cost) on the date on which the contract is entered
into. Subsequently they are remeasured at fair value. Fair values are obtained
from quoted market prices, discounted cash flow models and options pricing
models as appropriate. All derivatives are carried as assets when their fair
value is positive and as liabilities when their fair value is negative.
Embedded Derivatives: A derivative may be a component of a financial instrument.
The combined financial instrument includes both a derivative and a host contract
and is known as embedded derivative. An embedded derivative should be separated
from the host contract and accounted for as a derivative if all of the following
conditions are met: a) the economic characteristics and risks of the embedded
derivative are not closely related to the economic characteristics and risks of
the host contract, b) a separate instrument with the same terms as the embedded
derivative would meet the definition of a derivative and c) the hybrid
(combined) instrument is not measured at fair value with changes in fair value
reported in the income statement.
Changes in the fair value of derivatives are reported in the income statement.
Hedging: For the purposes of hedge accounting, hedging is designated as a fair
value hedge, when the exposure to changes in the fair value of a recognized
asset or liability is hedged or as cash flow hedge when the exposure to
variability in cash flows that is attributable to a particular risk associated
with a recognized asset or liability is hedged. For the derivatives that are
used for hedging purposes the Group applies hedge accounting which includes a
description of the hedged item, of the hedging instrument, the nature of the
risk being hedged and the enterprise's risk management strategy. Furthermore, it
documents whether or not the hedging is effective at inception and throughout
the life of the hedge. That is whether or not fair value changes derived from
the hedged exposure are offset by the changes of the hedging instrument and are
within a range of 80% to 125%.
In fair value hedge transactions which meet the criteria for hedge accounting,
gains or losses which are due to the valuation of the hedging instrument to fair
value are recorded in the income statement. The hedged item is valued at fair
value and the gains or losses are recorded in the income statement.
Changes in the fair value of the effective portion of derivatives that are
designated and qualify as cash flow hedges and that prove to be highly effective
in relation to the hedged risk, are recognized in the hedge reserve in equity.
Otherwise, gains and losses which refer to the ineffective portion of the hedge
are recorded in the income statement.
When the criteria for hedge accounting are no longer met, due to the hedging
being no longer effective or due to the fact that the hedged exposure has been
derecognized, then the related accumulated gains or losses recognized in equity
are transferred to the income statement.
7.5 Property, Plant & Equipment
Land and buildings are used by the Group either for operational purposes of the
Group or for administrative purposes. Fixed assets include land, buildings,
leasehold improvements, furniture and other equipment and vehicles. Fixed assets
are stated at cost less accumulated depreciation and impairment losses.
Depreciation: Depreciation on the other assets is calculated using the
straight-line method over their expected useful life, which is reviewed
annually, as follows:
Furniture and other equipment 5 - 8 years
Machinery 7 - 14 years
Vehicles 7 - 9 years
Leasehold improvements are depreciated over either the useful life of the
improvement or the duration of
the lease whichever is the shorter.
Impairment: The Group reviews annually its fixed assets in order to find any
indications of impairment. If there are indications of impairment the carrying
value of the fixed asset is reduced to its recoverable amount with the
respective decrease in the operating results.
7.6 Intangible Assets
Goodwill: All business combinations are accounted under the purchase method
according to IFRS 3. The difference between the cost of acquisition of the
subsidiaries and the Group's portion in the fair value of their net assets is
recognized as goodwill and is presented under 'Goodwill and other intangible
assets'.
At each balance sheet date, on annual basis, the carrying amount of goodwill is
reviewed by the Group management for evidence of impairment. In case where the
recoverable value is lower than the carrying amount, the goodwill is reduced to
its recoverable amount.
Software: Software which is acquired and can be clearly identified is
capitalized at each cost of acquisition. Subsequently, software is carried at
each cost less any accumulated amortization and any impairment losses. Software
is amortized over 3 years.
7.7 Loans and advances to customers and provision for loan losses
Loans and advances are recorded on the disbursement date at cost, which is the
fair value of the capital, including the direct expenses and income which relate
to the loan. Subsequent to initial recognition, loans and advances are carried
at amortized cost using the effective interest rate method. Loans and advances
are carried on the balance sheet after deducting provisions for losses.
The recoverability of loans and advances is reviewed on an individual basis for
those loans which the Group considers as significant. The evaluation takes into
account the financial position, past repayment pattern, the credit worthiness of
guarantors and the realizable value of collaterals.
When a loan is considered as doubtful, its carrying value is reduced to its
recoverable amount. Reversal of provision for loan losses is conducted only in
the case that the credibility of the client has improved to such extend as to
consider the collectibility of capital and interest according to the terms of
the loan contract possible or without delay.
Loans and advances are written off against the related provision, when they are
considered uncollectible.
7.8 Leases
Operating Leases
The Group has entered into operating lease contracts where risks and rewards of
ownership of the assets remain with the lessor. Payments made under operating
leases are charged to the income statement on a straight-line basis over the
period of the lease.
Finance Leases
The Group has entered into finance lease contracts where risks and rewards of
ownership of the leased assets have been assumed by the Group.
Finance leases are carried at the lower between the fair value of the lease
payments and the present value of the minimum lease payments.
The leased assets are depreciated over the shorter period between the length of
the contract and the useful life unless it is almost certain that the Group will
assume the property of the asset upon the termination of the contract. If the
lease transfers the ownership of the asset upon the termination of the contract
or if there is the option of purchase at a lower price, then the depreciable
period is the asset's useful life.
Lease payments are distinguished in the amount referring to capital repayment
and interest repayment. The distinction is made in order to achieve a fixed
repayment schedule. Interest payments are charged to the income statement.
7.9 Pension Benefits
The Group participates both to defined benefit and defined contribution plans.
For the defined contribution plans the Group is obliged to pay on a regular
basis specific amounts to the pension funds.
A defined benefit plan is essentially a pension plan according to which the
Group obligation is determined by the compensation amount determined by Law 2112
/1920, that the employee will receive at retirement date based on his or her
age, years of employment and salary. The liability in respect of a defined
benefit pension plan reported on the Balance Sheet is calculated annually by
independent actuaries using the projected unit credit method. The present value
of the defined benefit obligation is determined by discounting the estimated
future cash outflows using interest rates of government securities which have
terms to maturity approximating the terms of the related liability.
Accumulated actuarial gains and losses which arises due to the deviation from
the estimated amounts and the realized amounts as well as variations of the used
actuarial assumptions, for the portion that is in excess of 10% of accrued
obligations, are charged to the income statement over the service lives of the
related employees.
7.10 Borrowing Costs
Borrowing cost, according to IAS23, is recognized as an expense in the income
statement of the year in which it incurred.
7.11 Custodian Services
The Bank offers custodian services to its subsidiary that manages mutual funds.
The value of securities that the Bank holds through this activity is not
included in the attached financial statements as they are not considered assets
of the Bank as of 30 September 2006.
7.12 Offsetting
Financial assets and liabilities are offset and the net amount is reported in
the financial statements when there is a legal right to offset and there is
intention to settle on a net basis, to realize the asset and settle the
liability simultaneously.
7.13 Derecognition of a financial instrument from the financial statements
The Group derecognizes a financial asset when, and only when:
(a) the contractual rights to the cash flows from the financial asset expire;
or
(b) it transfers the financial asset and the transfer qualifies for
derecognition in accordance with IAS39.
8. Group Structure and Method of Consolidation
Group companies, included in the consolidated financial statements of 30
September 2006 are:
Companies consolidated under the full consolidation method:
Company Country Participation Relation that Note
Percentage dictated the
consolidation
IRF European Finance Investments Limited Bermudes Parent
MIMOSA TRADING COMPANY Marshall 100% The participation Direct stake
Islands percentage
MYRTLE TRADING COMPANY Marshall 100% The participation Direct stake
Islands percentage
PROTON BANK SA Greece 20,16% Control over the Direct stake
entity
PROTON ASSET MANAGEMENT SA Greece 20,14% Control over the Indirect stake through
entity 'PROTON BANK'
PROTON MUTUAL FUNDS MANAGEMENT CO SA Greece 20,14% Control over the Indirect stake through
entity 'PROTON BANK'
FIRST GLOBAL BROKERS SA Serbia 16,63% Control over the Indirect stake through
entity 'PROTON BANK'
OMEGA MUTUAL FUNDS MGT CO SA Greece 18,76% Control over the Indirect stake through
entity 'PROTON BANK'
OMEGA INSURANCE SERVICES SA Greece 13,31% Control over the Indirect stake through
entity 'PROTON BANK'
OMEGA INSURANCE SA Greece 16,69% Control over the Indirect stake through
entity 'PROTON BANK'
INTELLECTRON SYSTEMS Greece 11,42% Control over the Indirect stake through
entity 'PROTON BANK'
OMEGA KAHN FINANCIAL SERVICES SA Switzerland 16,13% Control over the Indirect stake through
entity 'PROTON BANK'
OMEGA SA FINANCIAL ADVISORS - Greece 20,16% Control over the Indirect stake through
INVESTMENTS & REAL ESTATE MGT entity 'PROTON BANK'
Companies consolidated under the equity method:
Company Country Participation Note
Percentage
OMEGA PORTFOLIO INVESTMENT SA Greece 5,80% Indirect stake through 'PROTON BANK'
PROTON BANK SA:
On 30th 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
INVESTMENT BANK SA'. The range of activities of PROTON Group of Companies covers
almost the whole spectrum of the financial industry. More precisely, PROTON
Group is specialized on investment banking. The IRF Group consolidated 'PROTON
INVESTMENT BANK SA' 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 form its operation.
On 7th September 2006, the Extraordinary Meeting of Shareholders of PROTON
INVESTMENT BANK SA (the acquirer) decided the merger of the Bank with the
companies OMEGA BANK (first acquiree) and PROTON SECURITIES (second acquiree).
According to the Draft Merger Contract, which was approved by the General
Meeting, the exchange ratio was 1 share of the first acquiree for 0,90 shares of
the acquirer. As the bank held 100% of the second acquiree's shares, there was
no exchange ratio. Additionally, the General Meeting 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 for business combinations after 31st
March 2004.
The Company continues to maintain a controlling position within PROTON BANK and
has now appointed six of the eleven members on PROTON BANK's board. In
particular on 7th September 2006, the Extraordinary General Meeting of PROTON
BANK elected a new Board of Directors and redefined responsibilities (six
members of the Board out of eleven, are nominated by IRF). Also, under the
purchase agreement the two other main shareholders agree to vote in the next
General Meetings of the Shareholders in such a way that IRF will always appoint
more than half of the BoD members. Under all these circumstances IRF effectively
controls Proton and therefore required to present consolidated financial
statements and includes Proton's financial statements.
ARROW ASSET FINANCE SA:
These consolidated financial statements for the period ending 30 September 2006
do not include ARROW ASSET FINANCE SA, since on 30 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 thousands euro was written off. The impairment
loss of 369 thousands euro was charged against the income statement of PROTON of
the year 2005.
MIMOSA 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 authorized to
issued to issue is five hundred (500) registered and/or bearer shares without
par value.
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 authorized to
issued to issue is five hundred (500) registered and/or bearer shares without
par value.
9 Financial effect of acquisitions
9.1 Acquisition of a 28% stake in the share capital of the 'PROTON INVESTMENT
BANK SA'.
The assets acquired and the liabilities undertaken due to the above acquisition
are as follows:
Amounts in thousands €
Cash and balances with central bank 2.217
Due from banks 14.739
Financial Assets at fair value through profit or loss 151.560
Loans and advances to customers, net 276.961
Assets classified as held for sale 855
Property, plant and equipment, net 1.125
Intangible assets, net 89
Deferred Tax Assets 420
Other Assets 21.985
Due to banks (44.138)
Due to Customers (62.705)
Derivative financial instruments (159)
Retirement benefit obligations (221)
Other liabilities (155.808)
206.919
Less: 'Minority Interest' (18)
Shareholders net assets 206.901
Acquisition Percentage of the Share Capital 28%
Net Assets Acquired 57.932
Plus: Goodwill & other intangible assets 68.754
Acquisition Cost 126.687
Less: 'Cash and balances with central bank' (2.217)
Less: 'Due from Banks' (14.739)
Net cash outflow from the acquisition of the Subsidiary 109.730
The acquisition resulted in an increase of assets and liabilities by € 469.951
thousands and € 263.032 thousands respectively. The business combination had
effect in the Group's results for the period from 01/07 to 30/09/2006 since the
date of acquisition was the 30th June 2006. If the company was consolidated from
the beginning of the period the Group's Earning after tax would be increased by
€ 5.406 thousands.
9.2 Acquisition (absorption) of OMEGA BANK SA by PROTON INVESTMENT BANK SA
The identifiable assets and liabilities acquired on the date of acquisition are
as follows:
Amounts in thousands €
Cash and balances with central bank 11.169
Loans and advances to Credit Institutions 155.982
Loans and advances to customers, net 766.608
Insurance Receivables 20.176
Financial Instruments at fair value through profit or loss 40.276
Available-for-sale financial assets 31.024
Derivative financial instruments - assets 368
Investments in Subsidiaries 4.356
Property, plant and equipment 32.632
Investment Property 50
Intangible assets, net 3.384
Reinsurance contracts 1.641
Deffered Tax Assets 1.120
Other Assets 16.860
Due to banks (95.417)
Derivative financial instruments - liabilities (2.128)
Obligations from bonds (1.500)
Due to Customers (877.363)
Provision for insurance contracts (35.336)
Other liabilities (13.978)
Retirement benefit obligations (1.392)
Total Assets 58.532
Less: 'Minority Interest' (587)
Net Assets Acquired 57.945
Acquisition Cost
Less: Cash consideration (costs directly attributable to (601)
the acquisition)
Plus: 'Loans and advances to Credit Institutions' 155.982
Less: 'Elimination of cash and cash equivalents between (23.545)
Omega Bank and Proton Bank'
Net cash inflow to acquire business, net of cash acquired 131.836
The acquisition of OMEGA BANK SA by PROTON INVESTMENT BANK SA on the date of
acquisition (29/09/2006) resulted in an increase of assets and liabilities by €
1.085.646 thousands and € 1.027.114 thousands respectively. The business
combination had no effect in the Group's results for the nine month period ended
at 30/09/2006 since the date of acquisition was the 29th September 2006. If the
acquisition had occurred on 1st January 2006, the Group's Earning after tax for
the period ending 30 September 2006 would be decreased by € 1.527 thousands
(loss € 7.573ths * 20,16%).
9.3 Net Cash flow from the acquisitions
Net cash flow from the acquisitions THE GROUP THE COMPANY
01/01 - 30/09/2006 01/01 - 30/09/2006
Amounts in thousands €
Net cash outflow from the acquisition of the PROTON BANK at (109.730) (126.687)
30/06/2006
Net cash inflow from the absorption of the OMEGA BANK by 131.836 0
PROTON BANK at 29/09/2006
Acquisition of subsidiaries, net of cash acquired 22.105 (126.687)
10. Goodwill & other intangible assets
Acquisition of a 28% stake in the share capital of the 'PROTON INVESTMENT BANK
SA'.
The effect of the acquisition of PROTON INVESTMENT BANK SA was goodwill and
intangible assets of € 68.754.226 as shown as shown at the following table:
Goodwill & other intangible assets from PROTON BANK acquisition
Amounts in thousands €
Date of acquisition 30/6/2006
Acquired percentage 28%
Shares (Total): 45.135.892
Acquired shares: 12.638.050
Cost of acquisition
Cash Paid 120.061
Direct Expenses related to acquisition 6.625
Total Cost of acquisition 126.687
Less: Fair Value of Assets and Liabilities acquired (57.932)
Goodwill & other intangible assets from acquisition 68.754
The fair value estimation process of the identifiable assets, liabilities and
contingent liabilities of PROTON BANK is under way. After the final
determination of the fair value of identifiable assets, the Company will
allocate the cost of acquisition recognizing the assets, liabilities and
contingent liabilities of the acquiree at their fair values on the date of
acquisition. The excess between the cost of acquisition and the fair value of
identifiable assets, liabilities and contingent liabilities, will be recognized
as goodwill. Consequently the Group has applied initial accounting determined
provisionally according to IFRS 3 'Business Combinations'.
Through the acquisition the Group achieved banking license, trade name, client
relationships and web banking licenses in Greece. The abovementioned licenses
will allow the Group to take advantage of significant growth margins of the
Greek banking sector.
Acquisition (absorption) of OMEGA BANK SA by PROTON INVESTMENT BANK SA
The cost of acquisition amounted to 164.850 thousands euros and was determined
by the marker value of the acquirer's shares on 29 September 2006, and is
analyzed as follows:
Goodwill & other intangible assets from acquisition (absorption) of OMEGA BANK SA
Amounts in thousands Euro
Date of acquisition (absorption) 29/9/2006
Fair value of equity instruments exchanged (17.547.930 * € 164.249
9,36 per share)
Direct Expenses related to acquisition 601
Total Cost of business combination 164.850
Less: Fair Value of Assets and Liabilities acquired (57.945)
Goodwill & other intangible assets from acquisition 106.905
The fair value estimation process of the identifiable assets, liabilities and
contingent liabilities of Omega Bank (the acquire) is under way. After the final
determination of the fair value of identifiable assets, the acquirer will
allocate the cost of acquisition recognizing the assets, liabilities and
contingent liabilities of the acquiree at their fair values on the date of
acquisition. The excess between the cost of acquisition and the fair value of
identifiable assets, liabilities and contingent liabilities, will be recognized
as goodwill. Consequently the Group has applied initial accounting determined
provisionally according to IFRS 3 'Business Combinations'.
11. Loans and balances with Central Banks
Amounts in thousands € THE GROUP THE COMPANY
30/9/2006 31/12/2005 30/9/2006 31/12/2005
Cash in hand 7.611 0 0 0
Cheques receivable 12.866 0 0 0
Included in cash and cash equivalents (Note 14) 20.477 0 0 0
Mandatory reserve deposits with Central Bank 11.169 0 0 0
Total 31.646 0 0 0
12. Loans and advances to Credit Institutions
Amounts in thousands € THE GROUP THE COMPANY
30/9/2006 31/12/2005 30/9/2006 31/12/2005
Placements with other banks 23.977 0 0 0
Items in course of collection from other banks 743 0 0 0
Reverse repurchase agreements 128.367 0 0 0
Total - Included in cash and cash equivalents 153.087 0 0 0
13. Cash and cash equivalents
THE GROUP THE COMPANY
Amounts in thousands € 30/9/2006 31/12/2005 30/9/2006 31/12/2005
Bank Deposits 6.749 2.206 4.685 2.206
Total 6.749 2.206 4.685 2.206
14. Cash and cash equivalents - Cash Flow Statement
For the purposes of preparing the Cash Flow Statement, cash and cash equivalents
include balances with maturity less than three months such as: cash, balances
with Central Bank and other credit institutions and money market instruments.
THE GROUP THE COMPANY
Amounts in thousands € 30/9/2006 30/9/2006
Cash and balances with Central Bank (Note 11) 20.477 0
Loans and advances to credit institutions (Note 12) 153.087 0
Bank Deposits (Note 13) 6.749 4.685
Total - Included in cash and cash equivalents 180.314 4.685
15. Restricted cash held in Trust
The Company funded the acquisition of PROTON INVESTMENTS BANK SA, entirely out
of a portion of the net proceeds from its completed Initial Public Offering,
which were held in the Trust.
The market value of investments held in trust amounted to € 210.294.081 (US $
253.046.867) at 31 December 2005.
In November 2005, the Company completed its Initial Public Offering ('the
Offering') in which 45.833.340 units were sold to institutional and other
investors at a price of $ 6.00 per unit. Each unit consisted of one Share and
two Warrants. The Shares and Warrants were admitted to trading on AIM on 14
November 2005. The net proceeds of the Company's Initial Public Offering were
placed in a trust and invested in U.S.
The funds in the Trust were only be used by the Company to finance one or more
business combinations approved by the Shareholders. Given the fact that a
Business Combination was completed (acquisition at 30/06/2006 of PROTON
Investment Bank SA), funds in the Trust Accounts were released to the Company
and transferred to Bank Call Accounts, so the Company may use these funds
without restriction.
16. Available for Sale Financial Assets
Amounts in thousands € THE GROUP THE COMPANY
30/9/2006 31/12/2005 30/9/2006 31/12/2005
Corporate Bonds 34.727 0 0 0
Listed Shares 149.343 0 0 0
Unlisted Shares 6.502 0 0 0
Other investments 272 0 0 0
Less: Allowance for losses (3.004) 0 0 0
Total 187.840 0 0 0
The Company through its wholly owned subsidiaries, MYRTLE TRADING COMPANY and
MIMOSA TRADING COMPANY, both of the Marshall Islands has purchased a number of
shares in the BANK OF PIRAEUS SA ('Piraeus Bank'). The fair value of the
abovementioned listed shares at 30 September 2006 amounts to € 149.343 ths. The
shares owned by the Group represent 2,8% of Piraeus Bank's outstanding shares as
of September 30, 2006. The percentage 2,8% include a 2% position purchased by
IRF in a block transaction on September 21st, 2006 at price € 20,50 per share.
17. Other borrowed funds
On 26th September 2006 a financial agreement signed between the Company and
INVESTMENT BANK OF GREECE SA, MARFIN BANK Societe Anonyme Bancaire of Greece and
EGNATIA BANK SA of Greece for a loan facility of up to € 75 million to be made
available to the Company for the purpose of providing the Company with
investment capital. With the Notice Drawdown of 28th September 2006 the Company
borrowed the amount of € 75 million (€ 22 million from INVESTMENT BANK OF GREECE
SA, € 21,5 million from MARFIN BANK, € 31,5 million from EGNATIA BANK SA).
The abovementioned facility is a long term liability and is payable by the
Company to the Banks in one amount in Euro on 26th September 2008 or such later
date as the parties may agree. Interest on the outstanding amount of the
Facility accrue at an annual rate of 2,25% over Euribor.
18. Compound financial instrument
Amounts in thousands € THE GROUP THE COMPANY
30/9/2006 31/12/2005 30/9/2006 31/12/2005
Compound financial instruments 134 203.426 134 203.426
Total 134 203.426 134 203.426
The Company's compound financial instruments at 31st December 2005 represented
the present value of the cash held in trust, including estimated interest, which
would be payable to shareholders following the date when the business
combination occurred ($ 244.782.690).
On the Special General Meeting of the Shareholders' at 27 June 2006,
Shareholders who held 430.000 shares voted against the resolution and had
requested to have their shares repurchased. The price was determined in
accordance with its Bye-laws to $5.62 per Share, as of 31st May 2006, plus net
interest earned since that date (430.000 shares x 5,640447 = $ 2.425.392,21). Up
to 30th September the Company had paid the shareholders of 400.000 shares ($
2.256.178). The compound financial instrument as at 30th September 2006 amounted
€ 133.659,88 (30.000 shares x 5,640447 = $ 169.213,41) and refers to the
remaining amount that must be paid to the shareholders who validly elected to
have their shares repurchased.
19. Share Capital - Warrants Reserve
At 31st December 2005 the Company had issued 57.291.675 common shares for a
consideration of €228.552.504 (before offering costs), settled in cash. On the
Special General Meeting of the Shareholders' on the 27th June 2006, Shareholders
who held 430.000 shares elected, conditional upon completion of the Acquisition,
to have such shares repurchased by the Company. These shares would be cancelled
by the Company upon receipt of original share certificates and payment of the
repurchase price. Since 30th September 2006, 400.000 shares have been cancelled
so the current number of issued common shares is 56.891.675 (ref. par. 18).
The number of warrants remains unchanged.
Preference Common Shares Preference Common Preference Common
Shares of $ Shares of $ Shares Shares of $ Shares
0,0001 each 0,0001 each 0,0001 each
Issued for cash Number Amounts in $ Amounts in €
At 31 December 2005 - in issue - 57.291.675 - 85.938 - 71.418
57.291.675 common shares of
$0,0015 each
Shares cancelled as a result - (400.000) - (600) - (499)
of the repurchase at 28th July
2006
In issue at 30 September 2006 0 56.891.675 0 85.338 0 70.920
- fully paid
Authorized Shares Number Amounts in $
Common Shares of $ 0,0015 each 148.958.355 223.438
Preference Shares of $ 0,0001 each 2.500.000 250
Amounts in thousands $ €
Shares classified as liabilities at 30 September 2006 169 134
Shares classified in shareholders funds - Share Capital 85 71
Shares classified in shareholders funds - Warrants reserve 252.110 198.856
Total 252.365 199.061
The holders of common shares are entitled to receive dividends as declared from
time to time and are entitled to one vote per share on a poll at meetings of the
Company.
The Company is authorised to issue 2.500.000 shares of preferred stock with such
designations, voting and other rights and preferences as may be determined from
time to time by the Board of Directors.
20. Income Tax Expense
THE GROUP THE COMPANY
Amounts in thousands € 30/9/2006 30/9/2006
Current Income Tax 1.389 0
Deferred Tax 145 0
Total 1.534 0
According to the provisions of Tax Law 2992/2002, upon completion of the merger
with other companies, entities define their income tax for the first absorption
balance sheet, based on the tax rate in effect, reduced by ten (10) percentage
points; and on the taxable profits of the second balance sheet based on the tax
rate in effect reduced by five (5) percentage points.
According to the articles of the Tax Law 3470/2006, the tax benefit for the
companies which are entitled to a reduced tax ratio, based on the provisions of
Law 2992/2002, is allocated in equal sums in three consecutive accounting
periods, starting from the accounting period within which the change was
completed, and it concerns only cash management of the specific amount of tax.
The tax rate used to define the income tax as well as the deferred tax was 24%
(29% - 5%).
21. Earnings per Share
The calculation of basic and diluted earnings per share are calculated by
dividing the profit for the period attributable to shareholders by the weighted
average number of common shares outstanding during the period ended 30th
September 2006 of 57.199.482 shares.
Basic Earnings per share
THE GROUP THE COMPANY
Amounts in thousands € 01/01 - 30/09/06 01/07 - 30/09/06 01/01 - 30/09/06 01/07 - 30/09/06
Profit before income tax 15.886 9.628 7.141 884
Income Tax Expense (1.534) (1.534) 0 0
Profit for the Period (1) 14.351 8.094 7.141 884
Attributable to:
Equity holders of the parent (2) 9.941 3.684
Minority Interests 4.410 4.410
14.351 8.094
Weighted average number of shares (3) 57.199.482
Basic earnings per Share (in euro /share) (2)/(3): 0,17 (2)/(3): 0,06 (1)/(3): 0,12 (1)/(3): 0,02
THE GROUP THE COMPANY
Diluted Earnings per Share 01/01 - 30/09/06 01/07 - 30/09/06 01/01 - 30/09/06 01/07 - 30/09/06
Amounts in €
Profit for the period attributable to equity 9.941 3.684 7.141 884
holders of the parent (1)
Weighted average number of shares (2) 57.199.482
Plus: Shares with no consideration (from assumed 6.230.040
exercise of Warrants)
Dilutive potential ordinary shares (3) 63.429.522
Diluted earnings per Share (in euro /share) (1)/(3): 0,16 (1)/(3): 0,06 (1)/(3): 0,11 (1)/(3): 0,01
22. Contingent Assets
The rights on bonds issued by G.B.G Finance with a nominal value of 4 million
euros have been assigned to Hypo Real Estate Dublin for entering into an
Interest Rate Swap. The rights on bonds issued by Halcyon with a nominal value
of 2.5 million euros have been assigned to Hypo Real Estate Dublin as part of a
repurchase agreement. The above contingent liabilities of the Group represent
assets pledged by OMEGA BANK.
As a security for the Loan Facility (ref. par. 17) the Company authorized the
INVESTMENT BANK OF GREECE (the Agent) to execute a Shares Pledge Agreement on
behalf of the subsidiaries MIMOSA TRADING COMPANY and MYRTLE TRADING COMPANY, in
the case of an occurrence of a Default, to pledge such number of shares owned by
the above subsidiaries as the Agent shall deem appropriate in its sole
discretion and, in the plural, means all of them.
23. Contingent Liabilities & Commitments
23.1 Legal proceedings
There are some receivables and lawsuits outstanding against the Group on the
normal course of business. No provision in relation to these claims has been
recognized as the Group considers that it is unlikely that any significant
change in the consolidated total shareholder's equity will occur.
The Company had one outstanding claim. In particular, the Amaranth LLC, a
shareholder in the Company, issued proceedings against the Company alleging that
the Company failed to repurchase shares owned by Amaranth in the Company, in
accordance with the Company's bye-laws. On 23rd October 2006, the Supreme Court
of Bermuda ordered that the legal action previously instituted by Amaranth LLC
against the Company, be discontinued. No sums were paid by the Company to
Amaranth in connection with this order.
23.2 Unaudited fiscal years by tax authorities
Proton Group is subject to Greek tax legislation. Submitted tax returns are not
considered as final until tax authorities audit the companies books and records,
or until the statute of limitation expires.
In Greece, it is common for the tax authorities to audit an entity's books and
records before the expiration of the statute of limitation, which for income tax
and indirect taxes (i.e. withholding taxes and VAT) is generally five years
following the fiscal year in which the taxes should have been paid (although
this time limit may be extended following special law provisions).
The accounting years that have not been inspected yet by the tax authorities for
each of the Group's companies are as follows:
Company Country Years not
inspected by tax
authorities
PROTON BANK SA Greece 2005
PROTON ASSET MANAGEMENT SA Greece 2005
PROTON MUTUAL FUNDS MANAGEMENT CO SA Greece 2005
FIRST GLOBAL BROKERS SA Serbia 2005
OMEGA MUTUAL FUNDS MGT CO SA Greece -
OMEGA INSURANCE SERVICES SA Greece -
OMEGA INSURANCE SA Greece -
INTELLECTRON SYSTEMS Greece 2001-2005
OMEGA KAHN FINANCIAL SERVICES SA Switzerland 2004-2005
OMEGA SA FINANCIAL ADVISORS - INVESTMENTS & REAL ESTATE Greece 2005
MGT
OMEGA SECURITIES SA Greece 2005
As a result of the above the Group's respective tax obligations for periods
covering one to five accounting years and the period ended on 30th September
3006 have not been finalized. The outcome of the tax audit cannot be at this
stage reliably estimated.
23.3 Off balance sheet items
Amounts in thousands € THE GROUP THE COMPANY
30/9/2006 31/12/2005 30/9/2006 31/12/2005
Letters of Guarantee 75.458 0 0 0
Irrevocable letters of credit 1.891 0 0 0
Total 77.349 0 0 0
From the above balance, an amount of € 65.750 thousands represent contingent
liabilities transferred to PROTON BANK SA from OMEGA BANK SA.
24. Number of Employees
On 30 September 2006 the Group employed 635 employees, while the Company
employed just 1 employee for the period.
25. Related party transactions
THE GROUP THE COMPANY
BOD members and Associates BOD members and Subsidiaries Associates
Key management Key management
personnel personnel
Amounts in thousands € 30/09/06 30/09/06 30/09/06 30/09/06 30/09/06
Loans and advances to customers, 4.809 0 0 0 0
net
Deposits 20.946 3.076 0 0 0
Other Receivables 1.507 54 0 148.912 0
Total 27.262 3.130 0 148.912 0
Letters of guarantee 127 0
THE GROUP THE COMPANY
Amounts in thousands € BOD members and Associates BOD members and Subsidiaries Associates
Key management Key management
personnel personnel
30/09/06 30/09/06 30/09/06 30/09/06
Interest and similar income 74 0 0 0 0
Interest and similar charges 118 0 0 0 0
Other income 0 0 0 0 0
Other expenses 0 0 0 0 0
Salaries and other remuneration 354 130 0 0
Total 546 0 130 0 0
The Company financed its wholly owned subsidiaries, MYRTLE TRADING COMPANY and
MIMOSA TRADING SA, with the amount of € 148.912 thousands, in order to purchase
a number of shares in the BANK OF PIRAEUS SA ('Piraeus Bank'). The
abovementioned subsidiaries have undertaken the obligation to repay the parent
company any and all amounts from time to time lent to them by the parent
Company, on first demand.
Transactions with Key management personnel:
Directors of the Company and their immediate relatives control 15,69 per cent of
the voting shares of the Company.
Apart from the abovementioned, no salaries or loans were they paid to the
Directors of the Company for the period.
Other related party transactions
An affiliated company of the Mrs Angeliki Frangou, Chairman of the BoD of the
parent company, provided general and administrative services including office
space, utilities and secretarial support (for $10,000 per month). All sums due
in connection with such services ceased to be payable on the completion of the
business combination. During the period the expenses that have been recognized
to Income Statements amounts to € 56.756. This balance bears no interest. The
amount payable as at 30 September 2006 amounts to € 18.550.
26. Other Events - Additional Information
The accounts 'Other Assets' and 'Other Liabilities' include receivables of €41m
and liabilities €14m approximately by the customers of PROTON SECURITIES SA,
relating to brokerage transactions which were settled during the next three
days.
27. Changes in the supervisory board
According to his letter of resignation dated 6th July 2006, Andreas Vgenopoulos
Deputy Chairman and Company Secretary resigned and at the same date Sheldon
Goldman was elected to hold office with immediate effect as Deputy Chairman and
Alexander Meraclis as Secretary of the Company. Also, on September 29th 2006,
George Kintis Chief Executive Officer and Director of the company resigned and
Loukas Valetopoulos appointed to be a Director of the company and to act as
Chief Executive Officer of the company until the next annual General Meeting of
the Company.
Name Position
Angeliki Frangou Chairman, Non - Executive Director
Sheldon Goldman Deputy Chairman
Loukas Valetopoulos Chief Executive Officer, Director
Alexander Meraclis Secretary of the Company
John Karakadas Non - Executive Director
Dennis Malamatinas Non - Executive Director
28. Post - Balance Sheet events
a) On 11th November 2006 the subsidiaries of the Company, MIMOSA
TRADING COMPANY and MYRTLE TRADING COMPANY, disposed their entire holding of
approximately 8.5 million shares in Pireaus Bank in the open market and realized
a net gain on this investment of approximately € 12,8 million. The Group had
acquired its stake in Piraeus earlier this year for a total cash consideration
of approximately € 170 million. Part of this acquisition was funded by the
Company by means of a credit facility (ref. par.17). Following the disposal of
its interest in Pireaus Bank, and utilizing these sale proceeds, IRF has repaid
this credit facility in full on 21st November 2006. The remaining proceeds from
the sale will be retained by the Group for future acquisitions on investments.
b) The Company had one outstanding claim. In particular, the Amaranth
LLC, a shareholder in the Company, issued proceedings against the Company
alleging that the Company failed to repurchase shares owned by Amaranth in the
Company, in accordance with the Company's bye-laws. On 23rd October 2006, the
Supreme Court of Bermuda ordered that the legal action previously instituted by
Amaranth LLC against the Company, be discontinued. No sums were paid by the
Company to Amaranth in connection with this order.
Besides the above-mentioned events, there are no significant subsequent events
that should be disclosed under the provisions of IFRS.
Athens November 29th, 2006
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
