WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 1 GROUP FINANCIAL HIGHLIGHTS 2 NOTICE OF ANNUAL GENERAL MEETING 3 BOARD OF DIRECTORS AND GENERAL MANAGEMENT 4 CHAIRMAN’S STATEMENT 6 CHIEF EXECUTIVE OFFICER’S REVIEW 10 REVIEW OF GROUP OPERATIONS 30 REPORT OF THE BOARD OF DIRECTORS 36 BOARD OF DIRECTORS’ REPORT ON CORPORATE GOVERNANCE FOR THE YEAR 2008 50 REMUNERATION POLICY REPORT FOR THE YEAR 2008 56 AUDITORS’ REPORT TO THE MEMBERS OF HELLENIC BANK PUBLIC COMPANY LIMITED 58 CONSOLIDATED INCOME STATEMENT 59 CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE 60 CONSOLIDATED BALANCE SHEET 61 CONSOLIDATED CASH FLOW STATEMENT 62 INCOME STATEMENT 63 STATEMENT OF RECOGNISED INCOME AND EXPENSE 64 BALANCE SHEET 65 CASH FLOW STATEMENT 66 NOTES TO THE FINANCIAL STATEMENTS 127 DECLARATION BY THE MEMBERS OF THE BOARD OF DIRECTORS AND THE COMPANY OFFICIALS RESPONSIBLE FOR THE DRAFTING OF THE FINANCIAL STATEMENTS 130 BOARD OF DIRECTORS OF THE GROUP’S MAIN SUBSIDIARY COMPANIES 131 OFFICES AND BRANCHES 136 SHAREHOLDER INFORMATION AND INVESTOR RELATIONS WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

GROUP FINANCIAL HIGHLIGHTS HELLENIC BANK GROUP

2008 2007 2006 2005 2004

CUSTOMER DEPOSITS AND OTHER CUSTOMER ACCOUNTS

ú million 6.146,5 5.860,5 5.314,7 4.276,3 3.561,9

LOANS AND ADVANCES

ú million 5.012,9 4.093,1 3.330,4 2.848,1 2.780,9

BALANCE SHEET TOTAL

ú million 7.826,8 7.357,3 6.488,6 5.263,5 4.588,9

CAPITAL RESOURCES

ú million 440,4 525,0 363,1 282,4 241,0

GROUP OPERATING PROFIT BEFORE PROVISIONS FOR IMPAIRMENT OF LOANS AND ADVANCES

ú million 84,3 165,3 109,6 55,3 50,4

1 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the 35th Annual General Meeting of the HELLENIC BANK PUBLIC COMPANY LIMITED will be held at the registered office of the Bank, corner Limassol Avenue & 200 Athalassa Avenue, Strovolos - , on Wednesday 20th May 2009 at 5:30 p.m.

Agenda 1 To consider and approve the Directors’ Report for the year ended 31st December 2008. 2 To consider and approve the Accounts and the Auditors’ Report thereon for the year ended 31st December 2008. 3 To declare the final dividend for the year 2008. 4 To elect Directors in the place of those retiring. 5 To approve the Remuneration Policy Report and to fix the remuneration of the Directors. 6 To re-appoint the Auditors and fix their remuneration.

By order of the Board, PIERIS TH. THEODOROU Company Secretary

Nicosia, 27 March, 2009

Every shareholder having the right to be present and vote at the above Meeting is entitled to appoint a Proxy, whether shareholder or not, to be present at the meeting and vote on his/her behalf. The relative instrument of proxy must be drawn in accordance with the provisions of Article 83 of the Articles of Association of the Hellenic Bank Public Company Ltd and must be deposited at the registered office of the Bank, corner Limassol Avenue & 200 Athalassa Avenue, 2025 Strovolos - Nicosia, not later than 48 hours before the time fixed for the Meeting. The proxy so appointed does not have to be a shareholder of the Bank in his/her own right.

At its meeting on 26th February 2009, the Board of Directors of the Company decided to propose for approval Wednesday, 27 May 2009 as the ex-dividend date. Consequently, transactions that take place until Tuesday, 26 May 2009 (inclusive), will be eligible to receive the dividend. The dividend, will be paid to eligible shareholders on Monday, 29 June 2009, provided that it is approved by the Annual General Meeting. 2 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

BOARD OF DIRECTORS AND GENERAL MANAGEMENT

BOARD OF DIRECTORS OF HELLENIC BANK PUBLIC COMPANY LTD HELLENIC BANK GROUP Andreas P. Panayiotou, CHAIRMAN Andreas M. Moushouttas, VICE-CHAIRMAN Iacovos G. Iacovou Antonis I. Pierides Demetris J. Eliades Soteris Z. Kallis, Senior Independent Director Charalambos P. Panayiotou Ioannis Ch. Charilaou Georgios K. Pavlou Kyriakos E. Georgiou Makis Keravnos Pieris Th. Theodorou Kyriacos I. Droushiotis (appointed on 08.01.2008)

CHIEF EXECUTIVE OFFICER Makis Keravnos

GENERAL MANAGEMENT OF THE HELLENIC BANK GROUP Pieris Th. Theodorou, General Manager Marios Clerides, General Manager Glafkos G. Mavros, General Manager (as from 01.01.2008) Thomas P. Stylianou, General Manager (as from 01.01.2008) Nearchos Marangos, General Manager Greece

GROUP CHIEF FINANCIAL OFFICER Antonis Rouvas (as from 01.03.2008)

AUDITORS KPMG

LEGAL ADVISERS Costas Ch. Velaris Alecos F. Markides

SECRETARY Pieris Th. Theodorou

REGISTERED OFFICE Corner Limassol Avenue & 200 Athalassa Avenue, 2025 Strovolos, P. O. Box 24747, 1394 Nicosia,

3 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 CHAIRMAN’S STATEMENT

year 2008. The final dividend of ú0,02 (two cent) along with the interim dividend of ú0,05 (five cent) paid in October, raise the total dividend for the year 2008 to the amount of ú0,07 (seven cent) per share.

The Group maintains comfortable liquidity, benefiting from its high and stable deposit base. Specifically, the Gross Loans to Deposits ratio remained at the highly Dr Andreas P. Panayiotou satisfactory level of 81,6% in December 2008. Chairman

Furthermore, the Group maintains a strong capital base. Dear Shareholders, At 31 December 2008 the Group’s Capital Adequacy I communicate with you once again to inform you of Ratio, based on the relevant of Cyprus the Group’s performance and activities for the year ended Directive for the calculation of the capital requirements 31 December 2008. and large exposures (Basel II), was 10,8%, while the requirement of the Supervisory Authority is 8%. For further During the course of the second half of 2008, significant strengthening of its capital base, the Bank has recently deterioration was observed in the conditions prevailing proceeded with the issue of Bonds 2019 amounting to in the international financial environment. This had a ú90 million. The Bonds 2019 will be listed in the Cyprus negative impact on the results of the Hellenic Bank Group Securities and Exchange Commission (CSE) as soon as and as a result profit before taxation for the year ended the necessary approvals are secured from the competent 31 December 2008 amounted to ú44,6 million compared authorities. to ú152,6 million for the year 2007. In Greece, despite the increase in customer advances The results of the Group reflect the important increase by 24% since December 2007, the pressure on interest of the cost of funds arising mainly from the sharp rate margins and the crisis in international financial increase of deposit interest rates as well as the successive markets had a negative impact on the results of the year. decreases of the basic of the European Greece showed a loss of ú29,2 million compared to a Central Bank which led to the corresponding decrease loss of ú5,1 million for 2007. The Group continues the of the Bank’s lending interest rates that were linked to restructuring of the Branch Network in Greece as one of the basic interest rate of the its core strategic targets concentrating on basic banking and were granted before 1st January 2008, date of the operations. Cyprus’ accession to the . At the same time, the results of the Group reflect the important reduction The operations of the Group abroad expanded signifi- in the value of the bonds held by the Group for liquidity cantly during 2008. Specifically, the Representative purposes that created revaluation losses, the investment Offices in Kiev, Ukraine and Saint Petersburg commenced in Athena Cyprus Company Ltd and the losses from the operations. Furthermore, in February 2009 the Central revaluation of its investment portfolio due to the drop Bank of Russia registered the subsidiary Limited Liability in the Cyprus Stock market price index and the losses Company Commercial Bank “Hellenic Bank” in the Russian recorded by the Branch Network in Greece that were Registry of companies and in March 2009 the Bank paid not budgeted. the capital amounting to 375.000.000 Ruble (approx- imately ú8,2 million). The commencement of the Bank’s The Board of Directors, taking into account the current operations will be determined following the completion market conditions, the interim dividend already paid of the necessary preliminary actions and after evalua- and the annual results, decided to propose to the Annual ting the financial conditions, the developments in the General Meeting of the shareholders, the payment of global financial crisis and its consequences on the Russian the final dividend of ú0,02 (two cent) per share for the market. 4 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

Social, cultural and charitable contribution is inextricably In conclusion, I would like to express my sincere thanks HELLENIC BANK GROUP linked with the Group. The anthropocentric nature of to the Chief Executive Officer, Mr. Makis Keravnos, to the Bank and its core values focus on its contribution the Members of the Board of the Bank and its subsidiary to society with the support of many important groups companies and to the Members of the Committees of so as to reinforce the social, cultural and charitable activity the Board for the excellent and productive cooperation. of the island. As far as culture and arts are concerned, I thank our shareholders and customers for their trust the Group’s activity was successful and intense. In this in the Group and I assure them that the Board of framework, in 2008, the first Engraving Museum in Directors and the Management of the Group will Cyprus was opened, the “Hambis Printmaking School continue their hard work to achieve the goals of the Museum” with the consistent financial support of the Group. I also thank the Legal Advisers and the Auditors Group. At the same time we organized and presented of the Group for their valuable services. Finally, I would exhibitions of known and worthy artists while we like to thank once again the Management and staff of continued to sponsor Ecological Schools. The Cultural the Group for the quality of their hard work and their Centre of the Bank, continuing its tradition, also encou- commitment on achieving the targets of the Group. raged efforts related to research on culture. It sponsored with great pleasure the sixth edition of the series “Monuments and Memories” which refers to the history of Larnaca. Dr Andreas P. Panayiotou Dear Shareholders, Chairman

In closing, I would like to refer to the developments in Nicosia, 27 March, 2009 the global economy. 2008 was an unprecedented year marked by the creation of a global financial crisis. The major characteristics of the crisis is the creation of panic and pessimism which in their turn started to create a global financial recession that also affected Cyprus. Banking institutions needed government support to avoid bank- ruptcy, the stock markets had dramatic losses, the prices of raw materials (oil, metals, wheat etc) collapsed, the international construction sector and the prices of real estate fell while interest rates were reduced drastically by Central Banks internationally in an effort to support global economy.

Hellenic Bank Group, within the context of facing global crisis, is considering a series of measures to support its customers and to rekindle the Cyprus economy, monitoring daily both international developments and the risks exposed to the Bank. The Group is manag- ing risks effectively with various mechanisms and adapts its actions always having in mind the interests of the Group. I am convinced that with the proper strategic planning, the diligence, zeal, dedication and commit- ment that characterises the people of Hellenic Bank, the targets we have set will be achieved and profitability will continue. 5 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 CHIEF EXECUTIVE OFFICER’S REVIEW

the Group in February 2008. Its first priority was to safe- guard its shareholders, depositors, customers and partners. The second priority was the quality of the portfolio, recognising that profitability can not be the first objective when in the throes of an unprecedented crisis.

Despite severe distortions, the neutralisation of the international interbank market and all the negative Makis Keravnos consequences of the crisis, Hellenic Bank Group registered Chief Executive Officer a profit before tax for the year ended 31 December 2008 amounting to ú44,6 million compared to ú152,6 Dear Shareholders, million for 2007. FINANCIAL YEAR 2008 We are all watching with great concern and anguish Total net income decreased by 24% mainly due to the the dramatic impact of the unprecedented economic decrease in non-interest income reaching ú243,2 million and financial crisis on the global economy which first compared to ú320,5 million in 2007. At the same time, appeared in 2007. the increase in expenses was limited to 1%, reflecting the systematic effort made by the Group towards The crisis spread rapidly around the world in 2008 as a restraining expenses. result of globalisation, starting from the banking system of America, and passing through Europe, China and The consequences of the crisis in the international Russia. Financial giants collapsed, thousands of workers financial markets are mainly reflected in the net gains/ were made unemployed, thousands of investors, share- losses on disposal and revaluation of foreign currencies holders and depositors lost their fortunes and savings, and financial instruments, included in total net income. while governments scrambled to nationalise and support They were decreased from gains of ú29,2 million for major banks and insurance organisations. the year 2007 to losses of ú30,4 million for the year 2008. These mainly include losses arising from the negative The Cyprus economy, as an open economy and full member impact on the value of financial instruments, caused of the integrated European economy, could not be left by the crisis in international financial markets and the unaffected by this unprecedented economic disaster. significant drop in the (CSE) and Fortunately, the strict and rational supervisory system the Athens Exchange (AE) price indices. Losses amounting of Cyprus protected the Cypriot banks to the maximum to ú12 million arise from the subsidiary company Athena extent possible, while the economic crisis has begun Cyprus Public Company Ltd (“Athena”) and they mainly belatedly to affect the real economy. relate to the revaluation of equity instruments.

The distortions that prevailed in the Cypriot banking Total customer advances increased by 22% reaching the market, namely the obligatory link between the pricing amount of ú5,0 billion compared to ú4,1 billion in of a significant part of their portfolio to the base rate December 2007, while customer deposits increased by of the European Central Bank and the rise in interest 5%, reaching the amount of ú6,1 billion compared to rates to unprecedented heights, led to the high cost of ú5,9 billion in December 2007. money with all the negative consequences that brought on businesses, households, the economy and by extension In Greece, despite the increase in loans to customers by the banks. 24% since December 2007, pressure on interest rate margins and the crisis in international financial markets Hellenic Bank identified the oncoming crisis at a very had an adverse affect on the year's results, which showed early stage, analysing its impact and publishing its loss before tax of ú29,2 million compared with a loss concern along with the revised financial estimates of of ú5,1 million for 2007. The Group continues with the 6 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

reorganisation and restructuring of the Branch Network and a cautious approach to the economic crisis will play HELLENIC BANK GROUP in Greece adopting targeted strategies. In this context, an important role. It is expected that 2009 will be a the Board has recently approved a new Strategic Plan particularly difficult year with reduced growth rates both for the Greek Branch Network. The above measures, for the economy and credit expansion at levels much along with other measures taken or expected to be worse than in 2008. taken will have a medium-term positive impact on the Branch Network of Greece. Sound management, maintaining liquidity, strong capital adequacy and good risk management will safeguard Hellenic Bank Group, due to the precautionary and the Group from the financial crisis so as to achieve, meticulous policy it has followed, measures taken and under the circumstances, the best possible results in the quality of its portfolio, will continue within its means 2009. In the housing loans sector, the cautious lending to support the productive sectors of the economy, policy adopted by Hellenic Bank was proved correct by Cypriot businesses and households. today's facts, thereby ensuring the financial soundness of the Bank. I am optimistic that the Group, by making Hellenic Bank has adopted a number of measures to use of its strong points, its friendliness, strong support the backbone of our economy, small and medium- technological infrastructure and well-trained staff, will sized enterprises, such as applying for funding from Euro- respond well to the new conditions. pean financial institutions allowing for the provision of loans to these businesses on favourable terms. In closing, I would like to express my deep gratitude to the Chairman and the Members of the Board of Directors STRATEGIC TARGETS for their excellent cooperation and support. Special In a deep economic crisis, where the conditions are thanks go to our shareholders and customers for their changing every day worldwide, and with the realisation constant support and confidence which encourages us that the crisis will have an even more negative effect to intensify our efforts and hard work. Finally, I thank on the real economy in Cyprus in the following period, the management and all personnel of the Group for there is little choice but to set the strategic targets and their dedication and systematic work. estimations within these parameters, limiting them to very short-term objectives.

In these circumstances, the strategic priorities for 2009 focus primarily on maintaining the quality of the loan Makis Keravnos portfolio, on a careful and limited expansion and on Chief Executive Officer supporting existing customers. In relation to the Branch Network of Greece, the Group continues with its re- Nicosia, 27 March, 2009 organisation in the light of recent decisions and is proceeding with the creation of suitable and more effective structure. In parallel, the technological systems and procedures are being aligned with those of the Group in Cyprus, creating synergies and economies of scale, while transferring control and significant com- petences to the Head Office.

CHALLENGES AND PROSPECTS FOR 2009 The main challenges the Group has to face in 2009 relate to the timely and proper management of the impact of the financial crisis. To summarise, 2009 will be a year where the monitoring of market conditions 7 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 OF GROUP REVIEW OPERATIONS

HELLENIC BANK GROUP ANNUAL REPORT 2008 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 REVIEW OF GROUP OPERATIONS

FINANCIAL RESULTS 2008 million) and represent 8,0% (December 2007: 9,0%) of During the course of the second half of 2008, significant total loans. Provisions include cumulative provisions for deterioration was observed in the conditions prevailing collective impairment of loans and advances representing in the international financial environment. This had a ne- 1,4% of total loans (December 2007: 1,4%). gative impact on the results of the Hellenic Bank Group and as a result profit before taxation for the year ended Total customer advances increased by 22% reaching the 31 December 2008 amounted to ú44,6 million compar- amount of ú5,0 billion compared to ú4,1 billion in December ed to ú152,6 million for the year 2007. 2007, while customer deposits increased by 5%, reaching the amount of ú6,1 billion compared to ú5,9 billion in Total net income decreased by 24%, mainly due to the December 2007. decrease in non interest income, reaching the amount of ú243,2 million compared to ú320,5 million for 2007. In Greece, despite the increase in customer advances At the same time, the increase in total expenses was by 24% since December 2007, the pressure on interest limited to 1%, reflecting the Group’s systematic efforts rate margins and the crisis in international financial markets towards restraining expenses. As a result, the cost to had a negative impact on the results of the year. Greece income ratio is 65,3% and is higher than the level of shows a loss before taxation for the year of ú29,2 million, 48,9% for 2007. compared to a loss of ú5,1 million for 2007. The Group continues with the reorganisation and expansion of the Net gains/losses on disposal and revaluation of foreign Branch Network in Greece, as one of its major strategic currencies and financial instruments, included in total targets, focusing on core banking operations. net income, decreased from gains of ú29,2 million for the year 2007 to losses of ú30,4 million for the year The process for the acquisition of the operating license 2008. These mainly include losses arising from the from the Russian authorities in respect of the subsidiary negative impact on the value of financial instruments, bank in Moscow was recently successfully completed. caused by the crisis in international financial markets The Russian Central Bank has already proceeded with the and the significant drop in the Cyprus Stock Exchange registration of the subsidiary in the Russian register of (CSE) and Athens Exchange (AE) price indices. companies. The commencement of the bank’s opera- tions will be determined following the completion of the More specifically, losses amounting to ú15,9 million necessary preliminary actions and after evaluating the arise from the disposal and revaluation of foreign curren- financial conditions, the developments in the global finan- cies and financial instruments of the subsidiary company cial crisis and its consequences on the Russian market. Athena Cyprus Public Company Ltd (“Athena”), and mainly relate to the revaluation of equity instruments. The Group maintains comfortable liquidity, benefiting During the year 2007 the company was accounted for from its high stable deposit base. More specifically, the as an associate from January to May and as a subsidiary ratio of gross loans to deposits remains at the highly for the months of June to December, with a contribution satisfactory level of 81,6% in December 2008 (December to the year’s total profits of ú13,7 million. The total ne- 2007: 69,8%). gative contribution of Athena (as a subsidiary of Hellenic Bank, with a percentage of 77,84%) to the Group’s Equity attributable to the shareholders of the Bank profits for 2008, amounted to losses of ú12,0 million. reached the amount of ú440,4 million at 31 December 2008, compared to ú525,0 million in December 2007. Provisions for impairment of loans and advances in the Amounts of ú32,0 million and ú14,8 million relating to Income Statement amounted to ú39,7 million and increas- the final dividend for 2007 and the interim dividend for ed by ú26,9 million from the corresponding 2007 2008 respectively, were deducted from equity at 31 amount. Total provisions for impairment of loans and December 2008. The return on equity of the Group, advances at the end of December 2008 reached the based on the results of the year, was 7,04% (December amount of ú403,5 million (December 2007: ú368,0 2007: 30,0%). 10 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

At 31 December 2008, the Group’s Capital Adequacy needs. In addition, the Division aims to continually HELLENIC BANK GROUP Ratio, based on the relevant Central enhance its business relations with large corporations, Directive for the calculation of the capital requirements public companies and semi-government organisations. and large exposures (Basel II), was 10,8% (31 December 2007: 13,7%), while the requirement of the Supervising Given the global economic crisis and the general condi- Authority is 8%. tions of recession in which the Cyprus economy will move in 2009, the Corporate Banking Division aims for Taking into consideration the market conditions, the continued success in maintaining the profitability and interim dividend already paid and the results for the year, the quality of its lending portfolio at high levels. It also the Bank’s Board of Directors proposes to the Annual aims to increase its deposits while continuing to provide General Meeting of the shareholders the payment of a the best possible service to customers. final dividend for the year 2008 of ú0,02 (two cent) per share. The final dividend of ú0,02 (two cent) together with BUSINESS SERVICES DIVISION the interim dividend of ú0,05 (five cent) paid in October The Business Services Division commenced operations 2008, raise the total dividend for 2008 to ú0,07 (seven in 2002 with the primary aim of offering competitive cent) per share. and continuously upgraded services to fully satisfy its customers' banking requirements in a fast moving DOMESTIC OPERATIONS economic environment. The Division offers a wide range of services and specialised products to small and medium- CORPORATE BANKING DIVISION sized businesses that are active in all sectors of the The year 2008 was another successful year for the Corpo- economy and to their directors and shareholders. It is rate Banking Division, a key feature of which was the high staffed with qualified, experienced and specially trained growth of the loan portfolio and the significant increase Officers within the seven Business Centres covering the in interest income. Despite the economic crisis and the free areas of Cyprus. intensely competitive environment, the Division managed to achieve its main targets set for 2008. Despite the economic crisis and the intensely competitive environment, the Business Services Division in 2008 The Corporate Banking Division consists of four Centres achieved its targets of profitability, qualitative growth, across Cyprus while a fifth Centre was recently opened improved quality of the loan portfolio, an increase in in the free areas of Famagusta. The Centres are staffed interest income and retaining and attracting deposits. with experienced and qualified officers and are primarily The Business Services Division aims to continue its success- aimed at providing prompt and efficient service to custom- ful course in 2009, maintaining high profitability and ers, offering integrated solutions to meet their banking high quality of its loan portfolio. ú million 7.826,8 ú million 7.357,3 ú million 6.488,6 ú million 6.146,5 ú million 5.860,5 ú million 5.314,7 ú million 5.263,5 ú million 5.012,9 ú million 4.588,9 ú million 4.276,3 ú million 4.093,1 ú million 3.561,9 ú million 3.330,4 ú million 2.848,1 ú million 2.780,9 ú million 525,0 ú million 440,4 ú million 363,1 ú million 282,4 ú million 241,0 ú million 165,3 ú million 109,6 ú million 84,3 ú million 55,3 ú million 50,4

04 05 06 07 08 04 05 06 07 08 04 05 06 07 08 04 05 06 07 08 04 05 06 07 08 CUSTOMER DEPOSITS LOANS BALANCE SHEET CAPITAL GROUP OPERATING PROFIT AND OTHER AND ADVANCES TOTAL RESOURCES BEFORE PROVISIONS FOR CUSTOMER ACCOUNTS IMPAIRMENT OF LOANS 11 AND ADVANCES WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 INTERNATIONAL BUSINESS DIVISION The restructuring of the International Business Division 2008 was another successful year for the International and the creation of Due Diligence Units and Loan Depart- Business Division of Hellenic Bank. The rapid and conti- ments has proved vital in the successful growth of the nuous growth of the Division has led to the increase of Division in 2008. In addition, the Bank's two new Repre- profitability and contributed towards the surpassing of sentative Offices in Saint Petersburg and Kiev, which targets set. More specifically, the International Business commenced operations in 2008, along with the existing Division was able to exceed its strategic targets and Offices in Moscow and South Africa, have contributed distinguish itself in terms of business growth, profitability to the further growth of the Division. Also, Larnaca and quality of service. International Business Centre has relocated to new spacious and comfortable premises. Cyprus, as a member of the , has adopted the Euro in January 2008. Avoidance of double taxation Despite the global economic crisis, the International Busi- treaties with foreign countries, favourable corporate tax ness Division targets a sustained growth through its treatment, and the exceptionally good level of banking, quality services and continuous investment in techno- legal and accounting services provided on the island have logy and by using the strong customer relationship it contributed to the rapid growth of international business enjoys. in Cyprus. Hellenic Bank, through the supply of comprehen- sive and consistent services and its quality dominance has PERSONAL BANKING DIVISION benefited from the international business sector growth. 2008 was a year of major economic developments and challenges for the Personal Banking Division. The intro- The culture of quality service in International Business duction of the euro at the year's start was perhaps the Centres has helped in the construction of trust and friend- biggest challenge for the Cyprus economy and the banking liness among the International Business Centres and their institutions in recent years. The Personal Banking Division clients and associates. Limassol International Business had the primary role in handling the process of the Centre reaffirmed its certification by the ISO Quality Assur- conversion to euro and responded to this challenge with ance Agency by ratifying the revised standard of ISO complete success. 9001:2008. The Nicosia and Larnaca International Business Centres will also pursue the ratification proce- The most important characteristic of the year was the dures for the ISO quality certification. phenomenal growth in competition, particularly in terms of the ability to attract customers and deposits by Hellenic Bank’s International Business Centres have the offering preferential rates. This competition is expected ability to offer quality services in various languages such to intensify further as the banks try to further establish as: English, Russian, French, German, Polish and Turkish. themselves by building a portfolio or maintaining and Furthermore, the trilingual Electronic Banking System increasing their market share. constitutes an excellent, safe and user-friendly tool for the immediate satisfaction of the needs of customers Despite the unfavourable circumstances, the Personal and businesses. Banking Division utilised the opportunities and possibi- lities offered by the existing network of branches and The Division's superiority in quality could not be possible their large clientèle, thereby increasing its size and contri- without technological innovation. Within this framework, buting substantially to the results of the Group. an automated system for outgoing transfers has been developed. In addition, a new outstanding software has With the main aim of creating a culture of sales, the been installed in the systems of our associates for the Division focused on the involvement of all staff in the opening of new accounts. The Bank's goal was and selling process to increase cross-selling by targeting remains the provision of prompt, accurate and direct specific customer groups and through specialised consumer services to customers and associates of International loans and deposit products. Monthly campaigns were Business Centres. established for the promotion of products by the whole 12 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

branch network, including awards. The decision was also between the Department and all front line divisions of HELLENIC BANK GROUP taken to make better use of customers of the Bank's sub- the Bank that serve customers particularly the Personal sidiaries as a source of new sales. Banking Division.

The Personal Banking Division relies on sales of a broad In this context, emphasis has been given to the housing range of consumer products designed separately to needs of households, which constitutes one of the great- cover every need of the individual customer. Particular est if not the greatest need for loans. The Bank's housing emphasis was given to developing the personal relation- schemes offer integrated and flexible lending solutions ship between the branch and the customer, and to the at very favourable interest rates, with long repayment systematic training of staff on products and interest periods and instalments tailored to the repayment abilities rate matters. In this context, the fifth national meeting of each client. of the Division's staff was organised in October 2008 with great success, focusing solely on the key words: The “Education” scheme, concerning the financing of “Initiative - Approach - Promotion - Sales”. studies was further upgraded, offering parents solutions for all the educational needs of their children. Additionally, The Division's branch network is constantly being restruc- the “Student Card” was also promoted, offering special tured to ensure full geographic coverage, with the privileges to its users. ultimate goal always being to create well-staffed branches with sound structure and offering full range of banking In 2008, a new product was developed “Dream Holidays” products and services. Further, the Division has under- to meet customers' need to live and experience their taken a partial restructuring of the branch network dream holiday without burdening the family budget. while studying the possibility of opening new branches. This loan scheme was very well received by customers.

In late 2008, Hellenic Bank Public Company Ltd comple- A number of other products are available to Hellenic ted the takeover of operations of Pancyprian Finance Bank customers such as the “Autoloan” for car purchases and its integration into the branch network of the and the “One Loan, One Bank” scheme for individuals Personal Banking Division. The process was completed who wish to improve their cash flow liquidity and achieve successfully and all former customers of the Pancyprian better control of their loans. The “Energy” scheme is also Finance now enjoy the service of Hellenic Bank and easy available, through which the Bank demonstrates its access to its products through the branch network of contribution towards the protection of the environment the Division. in Cyprus. It’s a scheme that offers the financing ability to acquire and apply alternative sources of energy. The Division's main strengths are its timely planning, well-trained staff, wide range of products, friendly and Alongside loan products, Hellenic Bank also offers deposit high level of service, innovative technology, and its focus solutions with favourable terms and savings schemes on sales and on developing its portfolio. With all this, for its younger friends like the “Winners Team” scheme the Division has all it needs for a successful future. with privileges such as draws, prizes and discounts.

PRODUCT DEVELOPMENT AND SALES SUPPORT Keeping in mind market needs but also wanting to offer The Bank's products are based wholly on the principle more to its clients, Hellenic Bank will continue to upgrade that customers should have choices and that the products its range of products and services through its market offered are tailored to their needs. To further enhance driven approach. Hellenic Bank aim is through its products this principle, Hellenic Bank proceeded in changing the to respond to the modern/differentiated needs of its reportability line of the Product Development and Sales customers and further strengthen their trust. Support Department so as to have direct reportability to the Group General Manager Banking Services Develop- TREASURY ACTIVITIES ment. By doing this, there is a continuous relationship The Treasury Department is responsible for the manage- 13 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ment of the investment portfolio and the market and It is worth mentioning, that recently the Private Banking liquidity risks of the Group. It acts within the policy and Unit was awarded an International Recognition by the limits set by the Assets and Liabilities Management Commit- specialist financial magazine Euromoney for offering the tee (ALCO). “Best Private Banking Services Overall” among both Cypriot and foreign banks operating in Cyprus. Each 2008 was a very difficult year for the international financial year, Euromoney researches approximately five hundred markets and the Treasury Department focused primarily financial institutions and organisations that determine, on managing the existing portfolios with the purpose of separately in each country, who will be rewarded. The minimising the negative impact. As a result, considerable award confirms in the best possible way the hard work time was devoted to monitoring the markets and their done and the successful strategy implemented by the rapid developments, analysing the effects on the Bank's Unit for the provision of high quality products and portfolios and taking corrective measures. services to its customers.

In the foreign exchange market, the Department managed Within 2008, the restructuring of the Unit, which to increase its profitability arising from its own account commenced in 2007, was successfully completed and trading as well as from customer transactions. At the additional experienced and qualified Private Bankers were same time, it played a decisive role in determining and recruited from Cyprus and abroad. The Unit expanded implementing the Bank's interest rate policy. also, within the year, its operations successfully with the launching of its Limassol Desk. At the end of 2008, following the Bank’s policy, the Group Treasury was created by merging the Treasury The prospects of the Unit are excellent and the purpose Departments of Cyprus and Greece. As a result, the is to further strengthen it through the restructuring of new Unit is located in Cyprus along with its investment its organisational structure, further recruitment of ex- portfolios. perienced staff and the creation of Private Banking Units in other cities of Cyprus to provide a comprehensive PRIVATE BANKING service to its Cypriot and foreign customers. The Private Banking Unit is a specialised unit having as its primary objective servicing the needs of High Net CUSTODIAN SERVICES Worth customers in Cyprus, Greece and abroad. Apart Year 2008 proved to be very difficult not only for the from the wide range of traditional Private Banking products, domestic but for all foreign stock markets. This inevitably the Unit provides access to a wealth of international invest- had a negative effect on the Bank's custodian services. ment possibilities, amongst them the following: Despite the notably negative climate, the Custodian Services Unit managed to maintain levels of profitability, ñ Mutual funds of leading foreign banks while significantly expanding its customer base. ñ Structured products, including capital guaranteed ones The establishment of Hellenic Bank as the leading Custo- ñ Brokerage transactions for shares and bonds traded dian in the Cypriot market helped towards the major on major Global Stock Exchanges expansion of the Unit's customer base, particularly among ñ Trade in precious metals, including gold local institutional investors. The majority of regulated ñ Deposits Pension Plans and Provident Funds that use Custodians ñ Lending have put their trust in Hellenic Bank. Also, Hellenic Bank acts as Custodian for 75% of International Collective Despite the continuing and escalating global economic Investment Schemes registered in Cyprus. crisis, 2008 was an exceptional year for the Private Banking Unit. This is illustrated by its profits, organic growth The Custodian Services Unit, which played a leading in Cyprus and abroad and the significant international role in the establishment of Custodians in the Cyprus distinction received. market, actively participates in the clearing and settlement 14 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

systems of the Cyprus and Athens Stock Exchanges, rapidly around the world. The global financial crisis HELLENIC BANK GROUP providing its customers, local and foreign institutional inevitably affected stock markets worldwide and dealt investors, with the possibility of eliminating all operational a serious blow to investment sentiment. In this extremely and other risks arising from their dealing with financial negative environment, Hellenic Bank (Investments) Ltd instruments in both Cyprus and Greece. could not remain unaffected. Nonetheless, the Company's financial results for 2008 and its profitability are consi- The modernisation of Cyprus legislation on collective dered satisfactory, under the circumstances, and had a investments has given the Custodian Services Unit the positive contribution to overall Group results. opportunity for rapid growth in the Cyprus market. Hellenic Bank willingly provides its expertise to managers of collective The most significant contribution to the Company's fin- investment, helping to safely manage their investments. ancial results was made by the Brokerage Division and the Funds Management Department. Despite the huge In October 2007, the Custodian Services Unit expanded losses registered by the two stock markets in which the its operations to the Greek market, creating a service Company is mainly active, the Cyprus Stock Exchange station in Athens. Within a very short space of time, the (CSE) and the Athens Exchange (AE), and despite the Greece Custodian Services managed to create a wide difficult period of divestment that characterised the range of customers, including institutional investors and larger part of 2008, the Brokerage Division managed mutual funds. to significantly increase the Company's market share in the AE (more than double) while maintaining its share Supporting the theory that crises create opportunities, in the CSE almost unchanged. However, the reduction technology systems were strengthened and products in trading volumes led to lower brokerage commissions upgraded in an effort to take advantage of these oppor- for the Company compared to the previous year. tunities. Through the creation of a carefully selected network of partners in most markets along with a physical The Funds Management Department, on the other presence in markets of Cyprus and Greece, the Unit leads hand, underwent a restructuring and a reorganisation the way, offering a full range of custodian services, addressed during 2008 with a view to have a more active role in to both the Cyprus and Greek markets as well as interna- the management of client portfolios and to incorporate tional markets, at the standards of the biggest Global into the management process as efficiently as possible, Custodians. Services offered cover, apart from core custodian projections of future market trends. As a result, losses services such as transaction settlement, safekeeping, suffered by the local equity portfolios of customers were cash management, corporate actions, tax reclamation limited at lower levels compared to the corresponding and reporting services, also specialised services to Global losses of the General Indices of CSE and AE, which recor- Custodians, managers of collective investment schemes, ded considerable losses of 77,2% and 65,5%, respectively. escrow agency services and fiduciary deposits. Additionally, during the year, there was a significant in- crease in the portfolio managers’ engagement in foreign For a third consecutive year, the Custodian Services Unit stock markets beyond the Athens Exchange. participated in the annual evaluation of Custodians con- ducted by the esteemed magazine “Global Custodian”. Towards this end, significant steps have been taken and In 2008, most Custodians operating in the Cyprus market will continue to be taken to improve the expertise and either with a local presence or remotely were evaluated. infrastructure within the Company, which will, in turn, The Custodian Services Unit of Hellenic Bank was once enhance considerably the level of service provided to again awarded the highest possible distinction of “Top customers. This remains, after all, one of the fundamental Rated”. key objectives pursued by the Company, over the years.

HELLENIC BANK (INVESTMENTS) LTD ATHENA CYPRUS PUBLIC COMPANY LTD 2008 was marked by the unprecedented international The year 2008 was the first year during which “Athena's” financial crisis that first erupted in the U.S. and expanded new investment policy was implemented. At the same 15 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 time, the Company's executive body underwent a sub- A market survey on financing was carried out which is stantial restructuring, thus contributing to a more efficient being carefully evaluated while measures are being running of the Company and a more effective implemen- prepared for the more effective and efficient operation tation of the guidelines set by the Board of Directors. of the Company.

The main pillars of the new investment policy included Hellenic Bank (Finance) Ltd has fully qualified staff and the reduction of the investment portfolio exposure to the necessary technological support systems to continue equities traded on the Cyprus Stock Exchange as well its successful course in the future, contributing substan- as the expansion of investment activities across different tially to the Group's financial results. asset classes. Within this context and, taking into account the unprecedented financial crisis experienced in 2008 FACTORING SERVICES as well as the widespread negative investment sentiment, In 2008, efforts to promote factoring products and a partial restructuring of the equity portfolio was carried services continued in collaboration with the Business out to achieve a better dispersion of investment risk, both Centres and Corporate Banking Centres. Both sales and geographically and across different sectors. Portfolio results in general reached very satisfactory levels compared diversification into foreign markets increased significantly, with previous years, creating better prospects for the particularly in the Athens Exchange, while particular empha- future. The highly-trained staff, the knowledge acquired sis was placed on highly liquid equities and across sectors and the strong organisational infrastructure are expected that are less prone to fluctuations in the economic cycle. to increase further factoring operations.

The cornerstone of the investment strategy during 2008 Furthermore, the Department continued upgrading the was the maintenance of a high percentage of the port- mechanisms for monitoring and controlling operations folio in cash, which partially “protected” portfolio returns. by further utilising its electronic systems, while safe- This strategy was also implemented through the liqui- guarding the continued provision of high quality service dation of selected equity positions. to customers.

The depth and duration of the economic crisis experienced The Factoring Department is an active member of the during 2008 and the negative investment sentiment International Factors Group (IFG) through which interna- that ensued, also affected negatively the performance tional factoring exchanges are carried out (import and of “Athena’s” portfolio. However, the measures outlined export). above contributed substantially towards mitigating the losses recorded, especially when compared to the respective PANCYPRIAN INSURANCE LTD losses of the Cyprus and Athens Stock Exchanges. Through its long course, the Company has established itself in the general insurance industry, offering contem- HELLENIC BANK (FINANCE) LTD porary and upgraded products and quality services meeting In an intensely competitive and continuously changing the insurance needs of its customers. environment, Hellenic Bank (Finance) Ltd continued its activities in 2008, offering flexible and low cost finance In 2008, the Company increased its market share, increasing schemes. During the year, the Company achieved very both profitability and sales volume. The results were a satisfactory results with new sales increasing substantially consequence of increased penetration of Hellenic Bank's the size of its portfolio. customer base, systematic monitoring and efficient hand- ling of claims as well as a successful underwriting policy, In parallel, particular importance was given to the evalua- in both pricing and selection of risks. tion and effective control of credit risk with increased attention on the recovery of debt, placing responsibility During 2008, great effort was made to improve product- for problematic accounts with the Bank's Service Line ivity through the application of new procedures and to utilise synergies. upgrading of its technological infrastructure, seeking 16 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

to increase the Company's profitability and customer Within the year, two new business segments were created HELLENIC BANK GROUP base. Within the framework of strategic planning for and began developing their business, namely Retail Banking the year, the range of products available was extended, and Leasing. New products were designed and introduced aiming to increase sales through the provision of integra- in these two areas while staff received considerable train- ted insurance solutions for the needs of customers. At ing on relevant products and sales techniques. In addition, the same time, efforts were intensified to improve cross- a specialised small business loans unit was created, selling from the customer base of the Company and which also introduced new products. Hellenic Bank. In addition, special attention was given to the classes of insurance business offering increased The 2008 financial results of the Greek Branch Network margins of growth and profitability. were negatively affected by the following:

One of the objectives for 2008 was the systematic train- ñ The tight liquidity which led to increased cost of funds ing of the Group's personnel in insurance matters. Particular ñ Sharp decline in the value of the investment portfolio emphasis was given to front line staff members to develop resulting in increased losses their knowledge and skills so they can respond effectively ñ Full implementation of the Group's policy on the and efficiently to the needs and requirements of customers handling of provisions of impairment of loans which with a view to further improving the Company's strategic resulted in increased provisions position in the insurance industry. Following the 2007 success of the Branch Network of HELLENIC ALICO LIFE INSURANCE COMPANY LTD north Greece, which won the European distinction “Com- During 2008, Hellenic Alico Life continued its upward mitted to Excellence”, the Attica Branch Network won course in its eighth year in operation. The Company showed the same award in 2008. Hellenic Bank is the first Bank excellent results once again, both in sales penetration in Greece to achieve this distinction. of new customers as well as in its profitability. The targeted expansion in branch network continued The continued improvement of the results of the Company with the opening of two new branches in Patra in February is due to its innovative products and the way in which 2008 and Chania in December 2008. these products are being promoted. The philosophy behind these products is their simplicity and the ease In the context of further automation and introduction of with which they are promoted by the well-trained staff new systems, the Bank implemented new systems for of the Bank. This gives the Company a distinguished trade finance, incoming transfers and anti-money launder- place in the Cyprus insurance industry. ing. Work also continued on the implementation of the Bank's main banking system RBS and the transfer of the These products were created primarily to meet customer management of cards and ATMs to Cyprus, which are needs and the financial security needs of both the expected to be completed in 2010 and 2009 respectively. customers and their families. The aim is to provide the necessary cover for customers in those cases where an The Human Resources Department continued recruiting unforeseen event may leave them and their families experienced and qualified staff, while at the same time financially exposed. implementing the training programme for the year, with emphasis on achieving certification for personnel who OPERATIONS ABROAD passed the relevant exams in insurance and investment products. Significant training was also provided in the OPERATIONS IN GREECE institutional framework and regulatory compliance as The Branch Network in Greece continued its growth in well as on systems and internal procedures. lending in 2008. Deposits showed a decline, affected by the environment of the economic crisis, competition Regarding promotional activities of the network, a series and interest rates. of advertising campaigns (mainly for retail products) took 17 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 place as well as other brand awareness actions such as 4. Harmonisation with the systems, procedures outdoor advertising and signs in sports stadiums. Also, and structure of the Bank in Cyprus a new website was developed based on the Group’s ñ Centralisation of Departments standards. ñ Continue development of the Bank's main banking system RBS and its application in Greece as well as In pursuance of synergies and harmonization of policies fall over of other systems to the relevant systems and procedures at Group level, the centralisation of Risk in Cyprus (cards and ATM, transfers etc.) Management, Internal Audit and Treasury Departments was completed. REPRESENTATIVE OFFICES The Bank has managed to expand its physical presence Prospects and Goals for 2009 via Representative Offices and also has taken full advantage The Greek Branch Network's strategy was revised so as of the synergies that occurred from that expansion to to take into account the economic environment, new strengthen and further accelerate the spread of its network challenges and competition. Within the framework of of associates and promote its products and services. The this review and the new structure, the following actions Group currently operates four Representative Offices. Two and strategic goals have been recorded in line with the are located in Russia (Moscow and Saint Petersburg), one overall objectives of the Group: in Ukraine (Kiev) and one in South Africa (Johanneburg).

1. Monitor and improve portfolio quality The current developments in international markets and and risk management pressure on the international financial system need to ñ Manage credit risk through single line reporting and be monitored and continuously evaluated while taking adopting risk monitoring models at Group level. the necessary measures to protect the interests of the ñ Increase customer base so as to reduce concentration Bank and its customers. The role of Representative Offices risk. is particularly important in this process. Economic, ñ Implement specialised training programmes and political and other developments in countries where the certification of insurance and investment advisers. Representative Offices reside and operate are closely monitored while the necessary references are made for 2. Increase business related to small and medium-sized assessment and timely decision-making. enterprises ñ Alignment with the structure of the Bank in Cyprus The Representative Offices in Moscow and Saint Petersburg through creation of business centres targeting medium- aim to promote the Bank in the wider region, covering sized businesses while branches focus on small the neighbouring countries of the Russian Federation businesses. and Eastern Europe. Through this effort, the Bank is consi- ñ Retail Banking segment, in support of the above effort, dering the expansion of the network of Representative will pursue cross-selling, offering product packa- Offices in other countries and in other major cities of ges to employees of our corporate customers. In the Russian Federation. The Representative Offices in addition, a targeted marketing campaign will aim Russia and particularly the one in Moscow will make to improve brand awareness by participating in local use of its wide network and expertise gained throughout and sectoral industry events and sponsorships. its operation and will play an important role in enhancing and promoting further the Group’s growth in Russia. 3. Improve Profitability ñ Enhance alternative sources of revenue In February 2008, the Representative Office in South ñ Repricing of advances Africa celebrated ten years in operation, having made ñ Reduce costs a significant contribution to the results of the Bank by ñ Improve liquidity management at Group level through taking advantage of the opportunities within the local the centralized Treasury Department thriving Greek community. The Office evaluates the banking ñ Review and improve loan and deposit products needs of the Greek and Cypriot migrants in South Africa 18 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

and refers them to the Bank's broader network of branches (e) Daily liaison with the Treasury Department regard- HELLENIC BANK GROUP and services for the satisfaction of their needs. The obje- ing the Bank’s deposits in financial institutions. ctive remains the continuous cultivation and strength- ening of relationships among the Office and the native Review of the lending policy and authority financial institutions for mutual benefit. The Group Credit Risk proposal for the revision of HEAD OFFICE SUPPORT SERVICES the Lending Authority and Limits was approved by the Board of Directors. The main provisions of the GROUP RISK MANAGEMENT proposal included the association of the limits and 2008 was marked by an unprecedented global banking lending authority with the customers’ credit rating crisis, which might surpass that of 1929 in size and and the collateral offered whilst the maximum limits duration. Seen in this light, the results of the Group are for lending authorities, including the Executive Loan deemed to be satisfactory. Committee, were determined. Additionally, the role of the Risk Management Unit in the approval of During 2008 the Asset and Liability Management Commit- large or problematic loans or loans in specialised tee (ALCO) of the Group took a series of steps designed sectors was set, while its role in determining the to protect the Bank’s portfolio from the effects of the pricing of credit products was also established. forthcoming crisis. As a result, limits were set on large exposures, on financing construction and on financing (a) Banking Book house purchases by non residents. In addition there was As a result of the credit crisis, guidelines, were, an increase on credit spreads. amongst other issues, provided for lending and con- centration in sectors of the economy and large ñ Group Credit Risk Management exposures. During the period of the credit crisis, Group Credit Risk took the following steps for addressing and (b) Trading Book managing it: In April 2008, a recommendation was put before the ALCO Committee for the revision of the Group (a) Reduction of credit limits of the Group Treasury Country Limits in order to become in line with the Department, and the Incoming Payments and Trade new directives of the Central Bank of Cyprus for Finance Department for financial institutions and coun- Capital Adequacy and Country Risk. tries, so as to act in the best interests of the Group. The Country Limit model is the basis of the revised (b) Daily monitoring of downgrades in the credit Financial Institutions Limits framework which has ratings of financial institutions by Moody's and been prepared and will be put before the ALCO reduction of their limits. Committee in mid 2009. The main element of both frameworks is the association of the limits with the (c) Daily monitoring of developments in the financial counterparties’ credit rating and, as a result, the markets and subsequent briefing of the relevant regulatory capital required for the usage of these departments where necessary. limits. At the same time, the procedure for applying these frameworks is being determined and the role (d) Categorisation of the financial institutions based of the Risk Management Unit is being specified. on their credit risk. The financial institutions were classified into “High”, “Medium” and “Low” credit Framework for Credit Risk Management risk categories and this has been communicated to Concentrations the relevant Departments in order to avoid investing in high risk financial institutions. The classification In 2008 the Department created a Framework for was revised on a daily basis. Credit Risk Management Concentrations, which is 19 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 expected to be finalised within 2009 and will be into force immediately after the upgrade of the submitted to the ALCO Committee for consider- Treasury System “Fkit”. Also, the Bank's interest ation. The Framework sets out methods for mea- rate report was discussed and particularly the basis suring and managing concentration risk in the bank- risk, which came up because of the crisis and the ing book and is line with the provisions of the Central distortions in the money market. A detailed note was Bank of Cyprus for the Internal Capital Adequacy submitted to the ALCO Committee on the basis risk, Assessment Process (ICAAP). its origin, impact and possible ways of minimising/ hedging relative risks. ñ Market and Liquidity Risk Management In 2008, the Market and Liquidity Risk Department ñ Operational Risk Management took the following steps: During 2008, the “OpRisk Data System” was imple- mented in all branches in Cyprus. The system records (a) Continued, in collaboration with the company events concerning operational risks that the Group RiskMetrics the efforts to adopt a Value at Risk model may be facing. The implementation process is expected for calculating the maximum potential loss the Group to be completed by the end of March 2009, with may incur from the positions held in its portfolios. the implementation of the system at a small number of remaining Head Office Departments. In Greece, (b) Contributed greatly to the implementation of the system was implemented in five branches and the decision to merge the Treasury Departments of seven Head Office Departments, and is also expected Cyprus and Greece. to be completed in March 2009.

(c) The Department undertook the task of upgrading In parallel, tables with Key Risk Indicators were pre- the Treasury System “Fkit” and commenced the pared and implemented at the Information Technology relevant procedures. It took on the role of admini- Services and Treasury Departments. strator of the system with all its attendant respon- sibilities and work. ñ Compliance Services During the period under review, the Group Com- (d) Actively participated in the process of making pliance Department was mainly involved in imple- and implementing decisions of the ALCO Committee, menting the provisions of the new directive of Central presenting proposals and concerns within the realm Bank of Cyprus regarding regulatory compliance and of its competences. Some of the proposals related in applying effective measures and controls against to issues such as basis risk, internal liquidity ratios, money laundering. It dealt to a lesser extent with consolidated liquidity, impact and response to the customer complaints and issues of personal data. financial crisis and prudential liquidity ratios. The Department handled a large number of unusual/ (f) Made a series of ad-hoc presentations to the suspicious transactions and took appropriate action ALCO Committee, the Risk Management Commit- whenever necessary including reporting to the Unit tee of the Board and the Board of Directors of the for Combating Money Laundering (MOKAS) and to Bank regarding the crisis and its impact on the Senior Management, as well as making recommen- Group. The presentations concerned the liquidity dations and suggestions for improving anti money of the Bank, the interest rate risk and the impact laundering systems and procedures. of the crisis on the Group. Furthermore, the Group Compliance Department In addition, the decision was taken to set-up a sepa- made the necessary arrangements so that the Com- rate “Middle Office” within the Market and Liquidity pliance Department in Greece is reportable directly Risk Management Department to improve its org- to the Group Compliance Department for better anisation and productivity. This decision will come coordination and control. However the creation of 20 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

a common database is still pending due to restrictions RBS for the Greek Branch Network, which has been opera- HELLENIC BANK GROUP emanating from the Personal Data Act as well as the ting successfully in Cyprus since 1998. Major benefits of documentation of the relevant procedure. this implementation are:

DEBT RECOVERY UNIT ñ Elimination of maintenance and other costs of the The Debt Recovery Unit (DRU) is staffed with experienced existing banking system in Greece Officers and comes under the management of the Legal ñ More effective introduction of improvements and Services and Human Resources of the Group. Compared other changes to the system to 2007 a lower number of new accounts was received ñ Better service to the Greek Branch Network through by the DRU in 2008 but with greater balances. advanced functionality not provided by the existing system in Greece The determination of the DRU to achieve its targets has ñ Flexibility in promoting new products and services resulted in the Unit's total collections of problematic to customers by the Branch Network in Greece. debts in 2008 far outweighing the total balances of new cases received by the Unit, contributing in this way (2) Implementation of common platform for ATMs and to the Group's profitability for the relevant year. It is Card Systems in Greece and Cyprus. Upon completion also worth mentioning that a very significant proportion of the transfer, the Greek Branch Network will be able of total collections was made in 2008, related to accounts to create innovative products for cardholders, such as which have been fully settled and closed. the prepaid cards (P-Cards), single-use cards for purchases on the Internet (Net Secure Cards), (SMS Alerts Services), The automated system (DRS) which allows easier access introduction of smart-cards technology and points award to information and which is used by all staff also contribu- schemes. ted to the effectiveness of the Unit. The programme is used successfully, enabling better time management (3) Implementation of a system for SWIFT incoming transfers and has a positive impact on the productivity and the for Greece in order to automate and promptly update results of the Unit. customer accounts.

Through the close cooperation of the DRU and the In 2008, Hellenic Bank’s ATM network was successfully Credit Risk Management Unit, which aims to minimise certified by MasterCard International as having the the credit and legal risk, better results are expected. The necessary technology to acquire smart cards. In this way, same objective was served by the delivery of three in a possible case of fraud at an ATM, responsibility specialised seminars from Officers of the Unit to Officers lies with the card issuing bank and not the Hellenic of the Group dealing with credit matters. Bank.

INFORMATION TECHNOLOGY A series of improvements to the Electronic Banking During 2008, the Information Technology (IT) Services systems were also made, such as a real time connection focused on implementing the strategy of establishing with the Card Systems, a real time connection with the centralised information systems, improving quality Central Outgoing Payments System to enable Straight customer service in all areas, using of innovative techno- Through Processing (STP) of transactions and the ability logies thus creating business opportunities, reducing to display images on customer PCs for SWIFT payments operating costs and complying with regulatory frameworks. executed and for all cheques paid. In addition, all security mechanisms of the Net Banking were improved. The following projects were initiated as part of the Bank's strategy for the integration of Information Techno- In an effort to improve the Bank's loan portfolio in retail logy Systems on the same technological platform: lending, a specialised information system was introduced that allows the Bank to monitor the behaviour and (1) Implementation of the Bank's core banking system effectiveness of existing credit scorecards, which are 21 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 used as a tool for taking decisions on loan applications. 24-hour basis, and at the same time reducing the Bank’s Additionally, an information technology system was operating costs and where possible reducing charges developed for recording certain events which are likely to customers. to cause operational risks (ORDS), enabling the Opera- tional Risk Management Department to evaluate and CARD SERVICES - PLASTIC MONEY - AUTOMATED take corrective measures to avoid and minimise future TELLER MACHINES risks. The system was implemented in branches and Card Services continued its substantial contribution to service departments throughout the Bank through in the turnover and income of the Group. This success is Cyprus and in Greece. due to a series of factors and actions, in particular, the provision of high level support and service using the In 2008, a plan for the introduction of specialised policies most advanced card management systems as well as and procedures that meet legal, regulatory and statutory the development of innovative products and promotion frameworks, such as ISO 2700:2005 and the Directive of attractive incentives and offers to its cardholders. on Information Security of the Central Bank of Cyprus, was prepared. During 2008, Hellenic Bank successfully replaced all magnetic cards of the Bank (both debit and credit) with ELECTRONIC BANKING advanced chip technology. The new method of card In 2008, the Bank continued to upgrade and enhance transactions using the chip technology is known as “PIN its Hellenic Net Banking products and services, resulting & PAY”. This technology facilitates transactions and in the provision of uninterrupted electronic banking reduces waiting time. The use of the card in conjunction services available to the Bank's customers on a 24-hour with the PIN ensures that the consumer who uses the card basis. The number of customers using Hellenic Net Banking is the original owner. The chip cards are more difficult to has increased significantly. The number of transactions copy and along with the use of the PIN they help to prevent and use of other services rose sharply, surpassing all their use by anyone other than the original owner. expectations with an increase in operations and the reduction in operating costs. The promotion of card products and services of the Bank continued in 2008 with very good results. The “Card During 2008 a number of upgrades were implemented, Alerts” service, the leading prepaid “P card”, the “Money including: Transfer Card” and the “Student Card” were all promoted.

ñ Upgrade of the composition of electronic payroll The incentive scheme “Everybody Wins”, which offers files and multiple payments for faster processing, a combination of points, cash and gifts continued its which was adopted by a large number of companies operation from January to May 2008, giving away a car due to the direct processing of their orders. in a prize draw each month. On top of that, in March ñ Improvements to transaction security that gave 2008 a prize draw was held for two package deals for more confidence to customers with the further use the opening game of UEFA EURO 2008. Additionally, of Digipass devices. from June until the end of 2008, monthly draws were ñ Enablement to customers to view and print images conducted offering great gifts like laptops, printers and of Paid Cheques and SWIFT outgoing payments. Home Theatre sets. ñ Ability to change the card status by the customer if his card is stolen or lost. During the period June - August 2008, an offer was ñ Ability to prepare and execute payments through made to all cardholders for free tickets provided by the SEPA system. Aegean Airlines through simple procedures without having to take part in any draw or collect points or The main objective of Net Banking is to continuously miles. Also, during November - December 2008, 500 enhance its services and stay protagonist in providing tickets from Aegean Airlines were drawn for flights to quality, safe and reliable services to its customers on a London, Paris, Rome, Athens and Milan. 22 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

Regarding the Automated Teller Machine (ATM) network, Personal Banking Division, which constitute the core of HELLENIC BANK GROUP the transition of all ATMs for the introduction of the the Survey’s sample, the study was further enriched Euro currency was successfully completed in 2008. All with the inclusion of a number of Departments and ATMs were upgraded to provide full services in the Euro Services of the Bank, thus widening the areas where currency. The number of ATM machines increased to there is systematic monitoring of the quality of service. 81, expanding the 24-hour service provided to customers. Furthermore, a Customer Satisfaction Survey, also known as the Mirror Mystery Customer Survey, was launched, HUMAN RESOURCES aiming at customers of each branch and comparing The Group's human resources totalled to 2.063 employees these results with those deriving from the Mystery at the end of 2008, showing an increase of 7,7% in Customer Survey. With regards to the Group's human comparison to 2007. This increase is related to the resources, the second phase of the Personnel Survey expansion of the Group's turnover. During the year, the was conducted. The Survey aims to explore the relation- Human Resources Department announced new vacancies ship between personnel and the Group and more specifi- for the positions of clerical personnel and holders of cally the Service/Department/Branch where they are postgraduate qualifications. In addition to the written posted, so as to measure the degree of their commitment examination for all candidates, the holders of postgra- and also identify areas and opportunities for improvement. duate qualifications that obtained the highest marks were requested to participate in Assessment Centres. GROUP STRATEGIC DEVELOPMENT Among the major responsibilities of the Group Strategic The 2008 training programme was successfully imple- Development Team is the preparation of the Group's mented, highlighting the Group's efforts towards Annual Business Plans and the Three-Year Strategic Plan, continuous vocational training and human resource as well as monitoring the progress made by the various development. The aim of the programme was to respond Units of the Group in achieving their targets. and incorporate developments in the banking sector, while providing employees with the opportunity to In 2008, the Annual Business Plans for the year were participate in programmes related to their competence prepared in collaboration with the Group's Business areas which would improve their knowledge and further Units and Financial Management and were used in the develop their skills. The training programmes focused preparation of the 2009 budget. Special emphasis was on key topics such as management and leadership, develop- given to the proper management and maintenance of ment of personal skills, quality of service, banking practice, liquidity, to monitoring the quality of the loan portfolio credit facilities, lessons in the Russian language, informa- and to the selective growth in operations of the front- tion and technology courses, and specialised banking line Units. Also, in collaboration with the Human Resources and finance related issues. Department, the development of team Incentive Schemes continued. During 2008, Hellenic Bank's European Works Council (EWC) convened twice. The Council consists of employee The rational restructuring of the branch network conti- representatives of the Group in Cyprus and Greece. The nued in 2008. Indicatively, the Bank agreed in 2009 to European Works Council is used as a body of information, purchase a property for a branch in the Stavrou area of consultation and social dialogue, through which the Nicosia, which is one of the most rapidly developing Management and employee representatives seek to commercial areas of the city. Finally, branches were ensure the efficiency of the Group's business activities closed such as those at the Bases of St. Nicholas and at whilst considering the interests of employees. Larnaca Airport.

In 2008, for the seventh consecutive year, the “Mystery The Strategic Development Team, in collaboration with Customer Survey” continued proving to be one of the other Departments, followed closely the developments most important research tools for monitoring the quality in the economy and during the second half of the year of service provided. Apart from the branches of the turned the attention of the Business Units to the need 23 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 to maintain high liquidity through appropriate targeting and analysed extensively. During the event, the Greek and continuous updating. This effort was successful, Deputy Minister of Sports, Mr Yiannis Ioannides and the with the loan to deposit ratio at 82% by the end of great benefactor of Cyprus, the late George Paraskevaides 2008. were honoured for their contribution to sports and society respectively. The long-standing associates of the Bank Another major strategic objective of the Group, that of were also awarded with honorary plaques. expanding its operations abroad, progressed considerably during 2008. Specifically, Representative Offices commen- SOCIAL CONTRIBUTION ced operations in Kiev, Ukraine and St Petersburg in Social contribution is inextricably linked with the Group. Russia. Moreover, the application for a license to conduct The anthropocentric nature of the Bank and its core values banking operations in Russia reached the final stage focus on its contribution to society. Like every year, in 2008, while the Group proceeded to staff the subsidiary company Hellenic Bank supported groups and organisations who established, and purchase bank systems and premises seek to help and alleviate the suffering of vulnerable in Moscow. groups such as children with serious health problems.

In 2009, the Group faces challenges mainly related to Since 2004, the Bank has continued to support the the correct management of the impact of the financial annual event, Charity Bazaar in Larnaca, to assist the work crisis. To summarise, 2009 will be a year where the moni- of the “Saint George” Foundation which supports children toring of market conditions and a cautious approach with severe mental illnesses. to the economic crisis will play an important role. 2009 is forecast to be a relatively difficult year with reduced VOLUNTEERING growth rates both for the economy and credit expansion. Volunteering is an expression of selfless giving and a sign of culture and education. For this reason, the staff The main objective of the Group for 2009 is the quality of Hellenic Bank continues to participate with great expansion of business in both Cyprus and Greece to pleasure in blood donation events organised in cooper- achieve more efficient management of liquidity. Further- ation with the Blood Bank. more, the aim is to create a flexible structure for the Branch Network in Greece, aligning the technology systems Furthermore, the Group responds to and sponsors events and processes with those of Cyprus. that encourage and support volunteering, such as the “Balls and Hats” event organised by the Young Volunteers CORPORATE SOCIAL RESPONSIBILITY in cooperation with the Leventis Municipal Museum in Nicosia. The proceeds from the event were used for the Hellenic Bank Group maximises its operational activity purchase of another mobile Mentor Unit. when flourishing in a healthy and dynamic social environ- ment. For this reason, the Group incorporates Corporate SUPPORTING EDUCATION Social Responsibility initiatives into its action plans, which One of the main pillars of the Group's policies and prio- it considers a “strategic investment” and not a cost. rities is the support of Education and Training. The Group created a new publication entitled “I care for the environ- Within this context, the main pillars of Corporate Social ment”, which was offered free to the Ministry of Education Responsibility focus on issues related to environment for distribution to schools, in an attempt to raise aware- management and protection programmes, spreading ness among children in the last three classes of primary environmental awareness, support and promotion of school on environmental issues. The Group also continued cultural events, sports, scientific research and improving its support of the MBA programme at the University of education. Cyprus, granting a scholarship for the MBA course and awarding two top students. During 2008, a major event took place where the Corpo- rate Social Responsibility of the Group was presented Additionally, the Group inaugurated the series of sci- 24 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

entific lectures of the Open University of Cyprus entitled HELLENIC BANK CULTURAL CENTRE HELLENIC BANK GROUP “The Telegony”, part of the University's commitment to promoting lifelong learning and Greek Culture. CULTURAL ACTIVITY OF THE GROUP Hellenic Bank, a mainstay of cultural events, confirms SUPPORTING RESEARCH its contribution in this area through its support of the Being aware of the important role a financial institution arts and culture. Within this framework, in 2008, the first has to play in support of research, Hellenic Bank continued Engraving Museum in Cyprus was opened, the “Hambis its financial support of the Physiology and Biomedical Printmaking School Museum” with the consistent support Imaging Laboratory “Hippocrates” of the Department of the Group. This was the product of a long-standing of Mechanical and Manufacturing Engineering at the effort by the artist to project the Art of Printmaking. University of Cyprus. It also continued to subsidise the “PNEUMOKYP” Research Programme which studies CULTURAL EVENTS infections of pneumonococcus in Cyprus. The programme Quality artistic productions are always included among is conducted by the Infections Research Laboratory of the Group's cultural choices. In 2008, the Group suppor- the Makarios Hospital. ted the latest quality work of the famous tenor Marios Frangoulis for his new album, PASSIONE, a unique musical ENVIRONMENTAL SENSITIVITY journey to the Italy of Mario Lanza. Hellenic Bank Group has developed a multifarious environ- mental policy, taking actions towards environmental re- Also, the Group sponsored the album of composer sponsibility while addressing the whole issue as an invest- Vasos Argyrides entitled “On the exact country...” with ment. In 2008, the Bank took the following notable steps: Moscow's “21st Century” Symphony Orchestra. The album includes ten orchestrical arrangements on the piano. In ñ Created a wall calendar for 2009 dedicated to the addition, the Group continued for the tenth consecutive environment while developing a series of activities year its sponsorship of the competition for Young Pianists titled “Think Green” to raise awareness among the in cooperation with the Cultural Organisation Avantgarde. general public in Cyprus. ñ Focusing on the objectives of its environmental EXHIBITIONS policy, the Bank continued to support and subsidise Hellenic Bank through its Cultural Centre has successfully the Ecological Schools programme, the product of supported various exhibitions of known and worthy an enduring partnership with the environmental artists. organisation CYMEPA. ñ Sponsored an innovative exhibition titled: “Cry of In 2008, the Bank hosted and sponsored the exemplary anguish for the environment” organised by an Ecolo- jewellery exhibition entitled “Contemporary German gical School in Nicosia and hosted in Athens. Pupils Jewellery Art”, in cooperation with the German Cultural of a Primary School in Cyprus painted 22 mouflon, Centre, Goethe-Zentrum Nicosia. The exhibition presented sending through each one their own ecological the latest trends in contemporary German jewellery art. message. The Bank's Cultural Centre hosted numerous events at SPORTS the Head Office building from various organisations, The Bank consistently seeks to enhance sports and the contributing to the cultural life of the country. sporting ethos. During the period under review, the Group sponsored the contest for the nomination of a PUBLICATIONS Fair Play Team in football, as it has been doing since 1998. In keeping with tradition and to encourage efforts in The Team is chosen through the competition of the research on culture, the Cultural Centre of the Bank newspaper “Sunday Sports” under strict criteria of FIFA. sponsored another edition of the series “Monuments The Bank also continued its sponsorship of the Cyprus and Memories” by Dr Rita Severi. The fifth edition of Basketball Federation and the National Basketball Team. the series refers to the history of Paphos. 25 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 In recent years, Hellenic Bank Group has undertaken fell by 3,5%. The negative impact of the internatio- more and more action to ensure social, cultural and environ- nal financial crisis was felt more directly in that sector. mental issues are incorporated into its business activities. It is distinguished by its social, cultural and environmental Meanwhile, the construction industry was not particularly sensitivities and consistently works towards promoting adversely affected during the year. The sales of cement programmes that build a better future. rose by 8,4% in volume terms in 2008 compared to 2007 while building permits by area rose by 2,1%. CYPRUS ECONOMIC ENVIRONMENT In other indicators, there was a continued increase of 2008 ECONOMIC REVIEW credit expansion at very high rates. The annual lending The year 2008 was satisfactory enough given the problems growth rate by financial institutions to non-financial faced by the international financial system and the inter- institutions was 33,38% in December 2008 compared national economy. The preliminary estimate for growth to 30,56% in the corresponding month of 2007. Lending rate is 3,7% (excluding inflation) compared to 4,4% the to other financial businesses increased even faster previous year. Consumption and services made a positive (+68.27%) and to non-financial companies (+42.83%) contribution to economic activity while a slowdown while loans to households increased by 21,76%. Total began to occur in the construction, financial services deposits grew by only 6,65%. and tourism sectors. Regarding , with Cyprus' accession to Inflation recorded a significant increase, rising to 4,7% the Eurozone in early 2008, the island had to follow compared to 2,4% the year before. Domestic products, the base rate of the European Central Bank (ECB). The fuel prices and services helped push inflation higher base rate of the euro began in 2008 at 4,00% and in while a slight decrease was observed in the prices of July 2008, the ECB raised the rate to 4,25%. Due to imported products. Unemployment rose from 3,8% at the escalating financial crisis, however, the ECB began the end of 2007 to 4,2% at the end of 2008. lowering the base rate in October 2008, reducing it each month until it reached 2,50% by the end of the year (1,5% In the key sectors of the economy, consumption rose in March 2009). It's worth noting that the adoption of with the volume of retail trade turnover increasing by the euro in Cyprus to some extent protected the island 6,6% (preliminary estimate) for 2008. from the financial crisis, since other countries that joined the European Union together with Cyprus but remained Negative trends were observed in the tourism sector. outside the Eurozone suffered more serious negative Tourist arrivals fell by 0,5% while revenues from tourism impacts on their economies.

ANALYSIS OF SHAREHOLDERS 31 December 2008

Percentage Number of Category of Shareholders Number of Shares % Shareholders 6,70% INSURANCE COMPANIES 19.922.683 6,70 25 19,83%

CHURCH INSTITUTIONS 62.798.280 21,12 33 21,12% PROVIDENT FUNDS 13.517.556 4,55 138 STAFF 6.405.382 2,15 1.231 PRIVATE INDIVIDUALS 135.710.036 45,65 22.190 COMPANIES 58.957.878 19,83 510 4,55% TOTAL NUMBER OF SHARES 2,15% LISTED IN THE CYPRUS STOCK EXCHANGE 297.311.815 100% 24.127 45,65% Issued Capital 297.311.815 26 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

PROSPECTS OF THE CYPRUS ECONOMY FOR 2009 worldwide to rekindle the economy through expansionary HELLENIC BANK GROUP The prospects for 2009 do not appear encouraging. The fiscal and monetary policy and support schemes for the economic growth rate is expected to fall to about 1%, banking system will start to bear fruit. showing a significant slowdown compared to the 2008 growth rate. Inflation is estimated to decline to around GREECE ECONOMIC ENVIRONMENT - 2,2%, but unemployment is likely to slightly exceed 5%. 2008 REVIEW AND 2009 PROSPECTS

Certain important sectors such as tourism, construction The results of the Greek economy in 2008 were positive and real estate are expected to be affected by the finan- despite the substantial decline of economic indicators cial crisis to a substantially negative degree. Uncertainty in the second half of the year. The Gross Domestic Product, prevails regarding the prospects of the two largest at constant prices, was estimated to grow by around 3% sectors of private consumption and services. In particular, in 2008 but for 2009 a significant slowdown is forecasted it is estimated that private consumption will be affected at a rate of between 0,2% - 1,1%. The large sectors by the decrease in lending though its course will be that significantly contributed to the growth of the Greek more affected by the increase in unemployment. If the economy in previous years, such as tourism and shipping, increase in unemployment is low, private consumption took a serious hit by the international crisis. Private con- is unlikely to be particularly affected. But, if unemploy- sumption is forecast to record lower growth rates due ment increases significantly, consumption will take a to the limitations on new credit and increasing unemploy- serious blow. In relation to services, fluctuations in the ment. Inflation for 2009 is expected to fall to around sector during the economic cycle, traditionally, are not 2,5% compared to 4,2% in 2008, while unemployment as intense, but due to the slowing world economy, demand is likely to reach 9% in 2009 compared with 8% in 2008. for services abroad is expected to be affected. Finally, the capability of the Greek government to combat the crisis with fiscal measures is limited due to the high In general, Cyprus will inevitably be affected negatively public debt and the need to keep the budget deficit by this crisis in the international economy. Furthermore, within the limits set by the Stability and Growth Pact. there is a prevailing impression that Cyprus will be affected to a lesser extent than the large developed economies The conversions from Cyprus pounds to euro mentioned abroad. Additionally, there are hopes that at some stage above were made based on the fixed exchange rate of the vigorous efforts of governments and central banks ú1=Cí0,585274. 16,4% 13,3% 4,7% 4,4% 4,2% 4,0% 3,9% 3,7% 2.470 thousands 2.416 thousands 2.404 thousands 2.401 thousands 2.349 thousands 2,6% 2,5% 2,4% ú million 1.858 2,3% ú million 1.793 ú million 1.755 ú million 1.718 ú million 1.678 3,0% 2,6% 2,1%

04 05 06 07 08 04 05 06 07 08 04 05 06 07 08 04 05 06 07 08 04 05 06 07 08 GDP GROWTH RATE TOURIST ARRIVALS INFLATION AREA OF BUILDING INCOME (at constant prices/ (thousands) (percentage points) PERMITS IN THOUSAND FROM TOURISM percentage points) SQUARE METRES (million euro) 27 (percentage annual

change) WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 REPORT OF THEBOARD DIRECTORS

HELLENIC BANK GROUP ANNUAL REPORT 2008 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 HELLENIC BANK PUBLIC COMPANY LIMITED REPORT OF THE BOARD OF DIRECTORS

The Board of Directors submits to the shareholders its Total customer advances increased by 22% reaching the annual report together with the audited consolidated amount of ú5,0 billion compared to ú4,1 billion in financial statements for the year ended 31 December 2008. December 2007, while customer deposits increased by 5%, reaching the amount of ú6,1 billion compared to RESULTS ú5,9 billion in December 2007. During the course of the second half of 2008, significant deterioration was observed in the conditions prevailing The Group maintains comfortable liquidity, benefiting in the international financial environment. This had a from its high stable deposit base. More specifically, the negative impact on the results of the Hellenic Bank ratio of gross loans to deposits remains at the highly Group and as a result profit before taxation for the year satisfactory level of 81,6% in December 2008 (December ended 31 December 2008 amounted to ú44,6 million 2007: 69,8%). compared to ú152,6 million for the year 2007. Equity attributable to the shareholders of the Bank Total net income decreased by 24%, mainly due to the reached the amount of ú440,4 million at 31 December decrease in non interest income, reaching the amount of 2008, compared to ú525,0 million in December 2007. ú243,2 million compared to ú320,5 million for 2007. At Amounts of ú32,0 million and ú14,8 million relating to the same time, the increase in total expenses was limited the final dividend for 2007 and the interim dividend for to 1%, reflecting the Group’s systematic efforts towards 2008 respectively, were deducted from equity at 31 restraining expenses. As a result, the cost to income ratio December 2008. The return on equity of the Group, is 65,3% and is higher than the level of 48,9% for 2007. based on the results of the year, was 7,04% (December 2007: 30,0%). Net gains/losses on disposal and revaluation of foreign currencies and financial instruments, included in total At 31 December 2008, the Group’s Capital Adequacy net income, decreased from gains of ú29,2 million for Ratio, based on the relevant Central Bank of Cyprus the year 2007 to losses of ú30,4 million for the year Directive for the calculation of the capital requirements 2008. These mainly include losses arising from the and large exposures (Basel II), was 10,8% (31 December negative impact on the value of financial instruments, 2007: 13,7%), while the requirement of the Supervising caused by the crisis in international financial markets Authority is 8%. According to the relevant Directive of and the significant drop in the Cyprus Stock Exchange the Central Bank of Cyprus, the final proposed dividend (CSE) and Athens Stock Exchange (AE) price indices. for 2008 was deducted in the calculation of the Ratio.

Provisions for impairment of loans and advances in the ACTIVITIES Income Statement amounted to ú39,7 million, showing The principal activity of the Group during 2008 continued an increase of ú26,9 million from the corresponding to be the provision of a wide range of banking and 2007 amount. Total provisions for impairment of loans financial services, including hire purchase and leasing, and advances at the end of December 2008 reached investment, insurance services, as well as trustee and the amount of ú403,5 million (December 2007: ú368,0 factoring services. Certain developments during 2008 million) and represent 8,0% (December 2007: 9,0%) of relating to investments in subsidiary companies are total loans. Provisions include cumulative provisions for described in Note 21 to the Financial Statements. collective impairment of loans and advances representing 1,4% of total loans (December 2007: 1,4%). Further ACQUISITION OF SUBSIDIARY COMPANIES details regarding provisions are presented in Note 18 to AND RECENT DEVELOPMENTS the Financial Statements. On 14 April 2008, the Bank acquired 100% of the share capital of Borenham Holdings Limited for a total con- The Group’s Balance Sheet total reached the amount sideration of ú1 thousand. At the date of acquisition the of ú7,8 billion compared to ú7,4 billion in December company had no assets or liabilities. Subsequently the 2007, showing an increase of 6%. bank increased its investment to ú10.324 thousand. 30 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

This amount was used for the acquisition of the Russian Conversion and increase of the issued share capital of HELLENIC BANK GROUP company Format Invest Limited. the Bank from Cí72.735.747,50 (ú124.276.403,02) to ú125.105.485,70, divided into 290.942.990 shares with More specifically, on 12 August 2008, the subsidiary a nominal value of ú0,43 each. This increase to be company Borenham Holdings Limited proceeded with achieved by the capitalisation of part of the share the acquisition of 100% of the share capital of the premium reserve, in order for the number of the Bank’s Russian company Format Invest Limited, which is the issued shares immediately prior to the execution of the owner of the building facilities in Moscow where the provisions of the resolution to equal the number of the Bank’s head office and first branch in Russia will be Bank’s issued shares immediately following the execution based, at a total consideration of ú10.324 thousand. of the provisions of the resolution.

In February 2009 the registered During the year 43.518 shares were issued and granted the subsidiary company LLC CB Hellenic Bank in the Russian for free to Group’s personnel. In addition, on 7 July register of companies and in March 2009 the Bank paid 2008, 4.975.266 shares were granted to shareholders the capital amounting to 375.000.000 Ruble (approx- who reinvested the total or part of the net amount of imately ú8,2 million). The commencement of the bank’s the final 2007 dividend in Hellenic Bank shares and on operations will be determined following the completion 20 October 2008, 1.346.709 shares were granted to of the necessary preliminary actions and after evaluating shareholders who reinvested the total or part of the net the financial conditions, the developments in the global amount of the interim 2008 dividend in Hellenic Bank financial crisis and its consequences on the Russian market. shares. Additionally, on 24 October 2008, 3.332 shares were issued to the remaining shareholders of Pancyprian BRANCH NETWORK Finance Public Company Ltd, following the transfer to The Bank provides banking and financial services through the Bank of 22.339.291 shares (99,72% of Pancyprian its branches in Cyprus and Greece and maintains Finance Public Company Ltd) held by Pancyprian Insurance Representative Offices in Moscow, Johannesburg, Saint Ltd, in the course of the Group’s internal reorganisation Petersburg and Kiev. and achievement of synergies.

SHARE CAPITAL LOAN CAPITAL At 31 December 2008, there were 297.311.815 issued Non Convertible Bonds 2018 shares with a nominal value of ú0,43 each (2007: On 1st September 2008 the Bank proceeded with the 290.942.990 shares with a nominal value of Cí0,25 each). issue of Bonds 2018 amounting to ú10.000.000. The Bonds have a maturity date of 31 August 2018 and form At the Extraordinary General Meeting of the Shareholders part of the Bank’s Tier 2 Capital. of the Bank on 26 March 2008, the following were approved for the purposes of compliance with the Adoption Interest on Bonds 2018 is payable quarterly in cash at of the Euro Law of 2007 (N.33(I)/2007): the end of each period. Bonds 2018 bear interest at a floating rate equal to the 3-month Euribor applicable at 1. Conversion of the share capital of the Bank from the beginning of each interest payment period, plus Cyprus Pounds to Euro. 1,75%. 2. Conversion and increase of the nominal value of the Bank’s shares, following the upwards rounding, from Bonds 2018 are not listed on the Cyprus Stock Exchange. Cí0,25 per share to ú0,43 per share. 3. Conversion of the authorised share capital of the Non Convertible Bonds 2019 Bank from Cí150.000.000 (ú256.290.216,21) divided On 11 March 2009, the Bank proceeded with the issue into 600.000.000 shares with a nominal value of Cí0,25 of Bonds 2019 amounting to ú90.000.000 with a nominal each to ú258.000.000 divided into 600.000.000 shares value of ú100 each. The issue was placed with investors with a nominal value of ú0,43 each. with a minimum amount of investment of ú50.000, in 31 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 accordance with the relevant provisions of the legislation, dividend in additional ordinary shares of the Bank, rather regulations and directives of the competent authorities. than paying the final dividend in cash. The basis for the reinvestment will be the average buy/sell price of the The Bonds were issued on 11 March 2009 and have 10- Bank’s share in the Cyprus Stock Exchange at the close year duration. The interest on the Bonds is payable of the first five (5) working days from the ex-final dividend quarterly in cash at each period end. The first interest date (that is, from 27 May to 2 June 2009), less a discount payment will cover the period from 11 March 2009 to of 15%. 30 June 2009. The Bonds bear interest at the fixed rate of 7,5% for the first year and floating rate for the RISK MANAGEMENT remaining periods until the end of the fifth year, equal The Group is exposed to a variety of risks, the most to the 3-month Euribor applicable at the beginning of important of which are described and analysed in Note each interest period, plus 4,60%. 44 to the Financial Statements. The management and monitoring of risks is centralised under a uniform unit Subsequent to 11 March 2014, Bonds 2019, if not which covers the entire range of the Group’s operations. redeemed by the Bank, will bear an additional interest rate of 2%. Consequently, the interest rate applicable ANTICIPATED GROUP DEVELOPMENTS subsequent to 11 March 2014 and in the event of non Continuously monitoring the strategic plans of the redemption of Bonds 2019 will equal the 3-month Euribor, Group and after evaluating local and international plus 6,60%. financial conditions, Group Management will announce the strategic targets of the Group around the beginning The Bank, following approval by the Central Bank of of April 2009. Cyprus and a notice to the Commissioner and the holders of Bonds 2019 of no less than 30 and not greater than BOARD OF DIRECTORS 60 days, may redeem Bonds 2019 on the first interest The members of the Board of Directors at 31 December payment date subsequent to the 11th of March 2014 2008 were the following: and on any other subsequent interest payment date. Dr Andreas P. Panayiotou Bonds 2019 will be listed on the Cyprus Stock Exchange, Non Executive Chairman as soon as the necessary approval from the competent Andreas M. Moushouttas authorities is obtained. Non Executive Vice Chairman

DIVIDEND Iacovos G. Iacovou The Board of Directors proposes the payment of a final Non Executive Member of the Board dividend for the year 2008 of ú0,02 (two) per share Antonis I. Pierides (total amount of proposed final dividend approximately Non Executive Member of the Board ú6 million), in addition to the interim dividend of ú0,05 Demetris J. Eliades (five) per share paid in October 2008. The proposed final Non Executive Member of the Board dividend for the year 2008 is subject to approval at the Annual General Meeting and will be paid on 29 June Soteris Z. Kallis 2009 to the registered shareholders at 29 May 2009. Non Executive Member of the Board The ex-dividend date will be the 27th of May 2009. Based Charalambos P. Panayiotou on this date, all share transactions until Tuesday 26 May Non Executive Member of the Board 2009 (inclusive) are entitled to final dividend distribution. Ioannis Ch. Charilaou Non Executive Member of the Board The Board of Directors will also provide to the share- holders, with a written notification, the option to reinvest Georgios K. Pavlou in part or in full the net amount of the proposed final Non Executive Member of the Board 32 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

Kyriakos E. Georgiou Pierides and Kyriakos E. Georgiou will retire, and being HELLENIC BANK GROUP Non Executive Member of the Board eligible, will offer themselves for re-election. The vacancies will be filled by election. Kyriacos I. Droushiotis Non Executive Member of the Board INDEPENDENT AUDITORS Makis Keravnos Messrs KPMG have expressed their willingness to continue Executive Member of the Board in office as the Bank’s auditors. A resolution authorising Pieris Th. Theodorou the Board of Directors to fix their remuneration will be Executive Member of the Board proposed at the Annual General Meeting.

All Directors were members of the Board of Directors throughout the year, except for Mr. Kyriacos I. Droushiotis On behalf of the Board of Directors who was appointed as a new Member of the Board of Dr Andreas P. Panayiotou Directors on 8 January 2008. Chairman

Reference to Directors’ emoluments, fees and compen- Nicosia, 27 March, 2009 sation is made in Note 38 to the Financial Statements.

According to the Bank’s Articles of Association, Dr Andreas P. Panayiotou and Messrs Iacovos G. Iacovou, Antonis I.

33 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 OF DIRECTOR’S BOARD FOR THEYEAR2008 REPORT ON CORPORATE GOVERNANCE

HELLENIC BANK GROUP ANNUAL REPORT 2008 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 BOARD OF DIRECTORS’ REPORT ON CORPORATE GOVERNANCE FOR THE YEAR 2008

INTRODUCTION On 31st December 2008, the Board was composed The Bank’s Board of Directors fully adopted the Code of eleven non-Executive Directors and two Executive of Corporate Governance, which was published by the Directors, all having the appropriate qualifications and Cyprus Stock Exchange (2nd revised edition - January broad relevant experience. The Board of Directors’ 2007), hereinafter referred to as “the Code”. In com- composition as at 31 December 2008, as well as the pliance with the provisions included in the Code’s intro- changes in the composition and distribution of responsi- duction, the Board of Directors incorporates the present bilities of the Board throughout the year and up to the Report on Corporate Governance in the Bank’s 2008 date of the present Report, appear in the Directors’ Annual Report. Report for the year 2008.

PART A During 2008, the Board of Directors met twenty five The Bank states that the full implementation of the times. In all instances, it is ensured that all Members of Code’s principles constitutes the Bank’s policy and that the Board are correctly informed in writing of forthcoming it had already taken the initiative of applying many Board meetings and all necessary documentation related of these principles well before the establishment of the to the meeting is provided so that they have adequate Code. The Board of Directors believes that correct time to review it. The Members of the Board hold positions corporate governance, based on the Code, in conjunction in the Boards of Directors of other companies as shown with the terms of reference and the practices followed in their curricula vitae, published in the Corporate Gover- by the various Board Committees, constitutes a fun- nance Report for the year they offer themselves for re- damental factor in achieving the corporate goal of election. Their participation in other Boards allows them maximising shareholder value. The Board acknowledges to devote the necessary time and attention to their that there is an on-going process of formulating principles duties as Members of the Board of Directors of the Bank. of corporate governance based both on international as well as local conditions. As such, the Board continually The Company Secretary / Executive Officer responsible follows a policy of reviewing and readjusting the various for ensuring compliance with the Code of Corporate aspects of corporate governance accordingly. Governance provides information and advisory services to the Members of the Board of Directors related to PART B Board procedures and the Code. The Bank confirms that it has taken appropriate action in order to comply with the provisions of the Code as 1. Independent non-Executive Directors in 2008 of 1st January 2003. Specifically, bearing in mind its ñ Andreas M. Moushouttas, Vice Chairman second revised edition in January 2007, the Bank procee- ñ Antonis I. Pierides ded to inform all the Departments, Services and officers ñ Demetris J. Eliades of the Bank and also all Board Members of the Bank ñ Soteris Z. Kallis, Senior Independent Director and affiliated, subsidiary and associated companies so ñ Ioannis Ch. Charilaou as to ensure the broadest possible cooperation of all ñ Charalambos P. Panayiotou parties concerned in the full implementation of the ñ Georgios K. Pavlou principles and provisions of the Code. ñ Kyriakos E. Georgiou ñ Kyriacos I. Droushiotis (from 8 January 2008) In light of the above, the following confirmations and reports are made: 2. Non-Executive Directors in 2008 ñ Andreas P. Panayiotou, Chairman The Board of Directors ñ Iacovos G. Iacovou The Bank is governed and controlled by the Board of Directors, which operates on the basis of the Code, the A relevant “Confirmation of Independence” based on relevant Companies, Stock Exchange and Banking Opera- the minimum independence criteria in accordance with tions laws and of course the Bank’s Articles of Association. Provision A.2.3. of the Code has been signed by each 36 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

of the above mentioned Directors (in paragraphs 1 and applying in full the procedures of the directive of the HELLENIC BANK GROUP 2 above) and has been submitted to the Cyprus Stock Central Bank of Cyprus “About the Ability and Suitability Exchange together with the present Report on Corporate (Evaluation Criteria) of the Bank Directors and Managers Governance. of 2006 and 2007”. At the senior management level, there were two appointments on 1st January 2008, 3. Executive Directors in 2008 those of Mr. Glafkos Mavros as Group General Manager, ñ Makis Keravnos, Director / Chief Executive Officer Banking Services Development, and of Mr. Thomas ñ Pieris Th. Theodorou, Director / Group General Mana- Stylianou as Group General Manager, Operations, replacing ger / Company Secretary Messrs. Yiannis Epaminondou and George Papadopoulos respectively, who retired on 31 December 2007. On the At least 50% of the Board of Directors (excluding the same date, the Chief Financial Officer Mr. George Appios Chairman) consists of independent non-Executive Directors. left the Group. Mr. Antonis Rouvas was appointed as the new Group Chief Financial Officer, assuming his duties 4. Chief Executive Officer on 1st March 2008. ñ Makis Keravnos During 2008, Group Credit Risk reviewed and revised 5. Application of best possible practices the Group Credit Process and Limits, in cooperation of Corporate and Internal Governance in the Bank with Group Credit Administration. After being approved during 2008 by the Board, following a proposal by the Board Risk During 2008, various actions were taken in compliance Management Committee, the revised Group Credit with the following directives: Process and Limits were implemented in pilot testing until the end of the year. Δhere followed further changes (a) The directive of the Central Bank of Cyprus, “Frame- and final approval was given by the Board at the begin- work of Principles of Operation and Criteria for Evalua- ning of 2009. tion of Banks’ Organisational Structure, Internal Governance and Internal Control Systems” (May 2006) Group Risk Management, the Board Risk Management Committee and the Board of Directors, in cooperation (b) The directive of the Central Bank of Cyprus, “Direc- with Executive Management, actively pursued the evalua- tive to the Banks for the Calculation of Capital Re- tion and management of all related risks, particularly in quirements and Large Exposures” (December 2006), view of the global financial crisis. and the corresponding framework of the Second Basel Accord The Department of Corporate Governance / Compliance, in co-operation with the Chairman, the Chief Executive always taking into consideration, Officer and the Executive Officer responsible for ensuring compliance with the Code of Corporate Governance / (c) The Code of Corporate Governance published by Company Secretary, confirms compliance with the relevant the Cyprus Stock Exchange (2nd revised edition - laws, regulations and directives, the implementation of January 2007). best possible practices of Corporate Governance within the Bank and the application of an adequate and Within the above mentioned framework, on 8 January transparent framework of internal governance. 2008 another independent non-Executive Director was appointed to the Board, Mr. Kyriacos I. Droushiotis and 6. Remuneration Policy Report on 10 September 2008, there was a reshuffle of the The Remuneration Policy Report was prepared by the Board Committees. Board of Directors following a proposal by the Remunera- tion Committee in accordance with Appendix 1 of the The appointment of the above mentioned Member in Code. It is presented in the Annual Report of the Company the Board of Directors of the Bank took place after after the present Board of Directors’ Report on Corporate 37 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 Governance (page 50). The Remuneration Policy Report ñ Adopt a policy of adequate segregation of duties will be presented to the Annual General Meeting of in order to avoid a conflict of interests wherever Shareholders for approval. this is considered necessary; ñ Apply, at branch level, performance evaluation and Information on the remuneration / fees of the Members measurement models on the basis of specific targets; of the Board of Directors and the Chief Executive Officer ñ Are supported by appropriate software and hard- for the year 2008 is disclosed in the notes to the Accounts ware systems, and contained in this Annual Report (Note 38). ñ Are subject to regular internal and external audits.

7. Going Concern The adequacy of the internal control system safeguards The Board of Directors states that the Company intends the Group’s and its customers’ assets, as well as the to continue to operate on a going concern basis for the validity of the financial data and compliance with existing next twelve months. laws in general. It aims towards the management and not the complete removal of risks, providing reasonable 8. Internal Control System but not absolute assurance that no major loss will be The Board of Directors confirms that the Company has incurred. an effective internal control system, the adequacy of which is reviewed by the Board at least once a year. It 9. Confirmation in Accordance with the Provision is also reviewed on a more regular basis by the Audit C.2.1. of the Code Committee, both in respect of financial and operational In relation to paragraph 8 above (Internal Control Sys- systems as well as of compliance systems for the manage- tem), the Members of the Board of Directors confirm ment of risks, which might occur and which fall within that they have reviewed the adequacy of the internal the competencies, duties and responsibilities of the control system of the Company as well as the procedures Asset and Liability Management Committee and the for verification of correctness, accuracy and validity of Risk Management of the Group. The Group Internal information disseminated to investors. Audit reports directly to the Audit Committee and the Board of Directors itself. It consists of 35 persons and The Board also confirms that, to its knowledge, no is headed by Mrs. Niki Nicolaidou - Hadjixenophontos violation in the Stock Exchange Legislation and Regula- (B.Sc. Honours in Financial Services, M.B.A., A.C.I.B., tions has occurred, except in cases already reported to F.C.C.A.). All the Internal Audit functions are carried out the relevant authorities (where this applies). in accordance with the Internal Audit Manual. No Internal Audit function has been outsourced during 2008. 10. External Auditors - Provision C.2.2. of the Code In 2008, Messrs KPMG, external auditors of the Bank, In this context, all Group operational management units offered other services apart from auditing e.g. tax are suitably staffed and committed to the introduction services, training seminars, advisory services, compliance and operation of appropriate control systems according to the provisions of the Second Basel Accord, etc. Their to their respective business and responsibilities. Within objectivity and independence is ensured in the following this framework, the above mentioned management ways: units: a. The non-auditing services are offered by different ñ Operate on the basis of a specific organisational companies / departments of the KPMG Group in structure and allocation of responsibilities; accordance with the professional code of certified ñ Prepare and monitor the implementation of the accountants / auditors (“Chinese Walls”). strategic and business plans and annual budgets; ñ Follow written procedures, receive and disseminate b. The KPMG team that carries out the external audit information and advice through circulars and training of the Bank does not participate in offering services programmes; apart from auditing. 38 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

c. The offer of non-auditing services is carried out by Kyriacos I. Droushiotis HELLENIC BANK GROUP a tendering process except where these are consi- (from 10 September 2008) dered to be of minor importance. c. Nominations / Internal Governance Committee Messrs KPMG have confirmed in writing to the Bank Chairman: Dr Andreas P. Panayiotou that the offering of the above mentioned services does Members: Andreas M. Moushouttas not affect their independence and objectivity. The external Iacovos G. Iacovou auditors do not offer internal audit services to the Bank. Georgios K. Pavlou Soteris Z. Kallis 11. Credit Facilities to Directors Charalambos P. Panayiotou Information as to credit facilities provided to Company (from 10 September 2008) Directors (and related parties) or to its subsidiary or associated company Directors is to be found in the rele- d. Risk Management Committee vant notes to the Financial Statements contained within Chairman: Andreas M. Moushouttas the present Annual Report (Note 38). It is confirmed Members: Antonis I. Pierides that all such transactions were carried out within the Ioannis Ch. Charilaou normal course of the Bank’s business, under normal com- Charalambos P. Panayiotou mercial and employment terms and with transparency. Pieris Th. Theodorou Furthermore, it is confirmed that all relevant cases of Kyriacos I. Droushiotis Bank facilities to Company Directors and its subsidiary (from 10 September 2008) company Directors are forwarded for approval to the Board, after the relevant proposal of the Board’s Audit The terms of reference of the above Committees are Committee. During this procedure the interested Member based both on the relevant provisions of the Code of the Board neither participates nor is he present. pertaining to them and the relevant guiding directives of the Central Bank of Cyprus. They are published in 12. Code of Corporate Governance paragraph 14 below while those of the Remuneration Compliance Officer Committee are in the Remuneration Policy Report. The Bank has appointed Mr. Pieris Th. Theodorou, Group Within the framework of the provisions of the Code General Manager / Company Secretary, as Executive concerning relations with the Shareholders, the Chairmen Officer responsible for ensuring compliance with the Code of these Committees are available to answer any of Corporate Governance. questions at the Annual General Meeting in which all shareholders are encouraged to participate. The Chairmen 13. Board Committees and Members of the Committees periodically submit The following Board Committees operate within the Bank: reports or proposals to the Board of Directors following the meetings of the corresponding Committees, depen- a. Audit Committee ding on the subjects being addressed. Chairman: Antonis I. Pierides Members: Ioannis Ch. Charilaou The Audit Committee meets on its own before the Georgios K. Pavlou announcement of the quarterly results to review the Kyriakos E. Georgiou Financial Accounts and more specifically, the extent and Soteris Z. Kallis sufficiency of provisions for debts which may be doubtful of collection, as well as the adequacy of the internal b. Remuneration Committee control system. It then proceeds with the relevant Chairman: Demetris J. Eliades suggestions to the Board. The Audit Committee also Members: Soteris Z. Kallis meets on its own (without the presence of members of Kyriakos E. Georgiou the Executive Management) to review matters within Iacovos G. Iacovou its responsibility. Additionally, it participates in meetings 39 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 with the Executive Management of the Bank and the subsidiaries, either for positions extraordinarily vacated Internal Audit in Cyprus and in Greece, to review issues or after the retirement of Board Directors, in accordance which arise either from the financial accounts or from with the Bank’s policy regarding retirement age. The various special reports or investigations or from the Committee then submits its suggestion to the Board of Annual Report of the Internal Audit of the Bank and its Directors of the company concerned for its decision. subsidiary companies. The Committee makes recom- The decision applies for the period from the appointment mendations or suggestions to the Board of Directors on date of the new Member to the next shareholders’ issues related to its jurisdiction. The Committee is assisted General Meeting, when the Directors so appointed, if by the respective audit committees of the Bank’s subsidiary eligible, may offer themselves for re-election. New Board companies. During 2008, the Audit Committee held Members are briefed by the Executive Officer responsible a considerable number of meetings. The Committee’s for ensuring compliance with the Code of Corporate Chairman has a university degree and extensive experience Governance and by other high-ranking officers, regarding in Finance and is a Business Consultant by profession. the provisions of the Code as well as on broad issues in relation to the organisational structure, procedures, The Remuneration Committee meets whenever it is strategic planning, the Company’s practices in general necessary to fix or review the remuneration of Executive and those of the Board and its Committees in particular. and non-Executive Members of the Board of Directors, The Committee also has the responsibility of implemen- the Chief Executive Officer and the General Managers ting the Group’s policies on internal governance. The of the Group (if the remuneration of the General Mana- Nominations / Internal Governance Committee meets gers is not within the remuneration scales of the collective whenever issues arise that are within its jurisdiction. agreements). After considering all relevant parameters and data, it makes relevant recommendations to the Board The Risk Management Committee assists the Bank’s for taking decisions, in the absence of the Executive Mem- Board of Directors in fulfilling its responsibilities and ber of the Board or other Officers involved. The Committee’s obligations concerning the recognition, measurement, suggestions and the Group’s remuneration policy take monitoring and effective management of all the Group's into consideration the relevant responsibilities, workload, risks (credit, interest-rates, operational, market, liquidity, qualifications, experience, performance, remuneration foreign exchange, capital and other). Amongst its other of comparable positions in the market, especially in areas duties, the Committee prepares and submits proposals where the Group is active, as well as salaries in other levels for approval to the Board. When applied, it evaluates of the Group. The Committee aims to attract and retain the principles, the framework and policies of undertaking good quality officers at Executive and General Manage- and managing all forms of risks and the use of capital ment levels, in order to better serve the interests of the that would correspond to the business objectives of the Group as well as its shareholders and other stakeholders. Bank, the Group and / or each subsidiary company sepa- rately. It also recommends to the Board the assignment Each year, the Remuneration Committee proposes to of approval authority (which concerns the undertaking the Board of Directors the Annual Remuneration Policy of risks) to the Executive Management, General Manage- Report, as part of the Annual Report of the Company, ment and other approving groups, as well as the approval which is submitted to the shareholders’ Annual General of new products or services that the Group intends to Meeting for approval. The Committee also reviews and introduce. The Risk Management Committee meets approves the information disclosed on the annual whenever issues arise that are within its jurisdiction. remuneration of the Members of the Board, which is prepared by Group Financial Management for inclusion 14. Terms of Reference of the Board of Directors’ in the notes to the annual accounts of the Company. Committees (except the Remuneration Committee)

The Nominations / Internal Governance Committee Terms of Reference of the Audit Committee is engaged in selecting fit and proper individuals for 1. Establishment / Mission appointment as Board Members of the Bank or its The Audit Committee was established to ensure that 40 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

the Bank complies with the directives published by the The Committee invites to its meetings any officers of HELLENIC BANK GROUP Central Bank of Cyprus in accordance with the provisions the Group whose opinion it considers necessary for the of article 41 of the Banking Business Law of 1997. best conduct of its duties.

The primary mission of the Committee is to ensure the The Committee should meet with the external audi- achievement, in a reliable and effective manner, of the tors at least once a year to discuss matters arising from obligations imposed on the Bank by the above mentioned audits. directive, the compliance with the relevant provisions of the Code of Corporate Governance and its contribu- The Committee keeps minutes of its meetings and tion in general to the strengthening of the principles of decisions and submits its annual and periodical reports sound management in the conduct of operations and of proceedings to the Board, as it deems advisable. activities of the Bank. 4. Decision-making Process The Audit Committee is responsible for helping the In case of disagreement, the decisions of the Committee Board of Directors in the effective monitoring of the are taken by voting. In the case of a tie, the Chairman activities and operations of the Group. has the casting vote.

In order to accomplish its mission, the Committee has 5. Duties and Responsibilities under its direct monitoring and control the Group Internal The duties and responsibilities of the Committee are: Audit, which is, as required by the Central Bank, indepen- dent of the Executive Management and answerable to A. Financial Statements the Committee. A1. It examines the contents of the quarterly, semi- annual, nine-monthly and annual financial statements The Committee has the approval of the Board of Directors and of the other special periodic financial reports, to be to obtain independent professional advice whenever it satisfied that they present a true and fair view before deems this necessary. they are submitted to the Board of Directors for approval.

2. Composition and Term-in-Office of Members A2. It supervises the processes applied by the Group of the Audit Committee Financial Officer with the technical supervision of the The Board appoints at least three and maximum six external auditors (where this is judged necessary) regard- non-Executive Directors as members of the Committee. ing the choice of accounting policies and accounting The majority of the members of the Committee estimates for the preparation of the Group’s financial must be independent non-Executive Members of the statements. Board. B. External Audit The Chairman of the Committee should have experience B1. It submits proposals to the Board regarding the in accounting and / or finance and will be appointed by appointment, termination and remuneration of the the Board of Directors. The Chairman of the Group should Group’s auditors. not be a member of the Audit Committee. B2. It monitors and ensures the independence and The term-in-office of the members of the Committee effectiveness of the auditors. is decided by the Board of Directors. B3. It monitors the relationship between the Group and 3. Meetings of the Committee its auditors. The Committee meets at regular intervals, at least six times a year. The next integral number of one half of B4. It evaluates the extent and effectiveness of the audits the members comprises a quorum. and examines ways to better co-ordinate the audit effort 41 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 to ensure complete coverage, avoidance of overlapping It evaluates his performance and also the work and effect- work and the best use of available audit resources (cost iveness of Group Internal Audit. - effectiveness). C4. It evaluates the adequacy and effectiveness of the B5. It evaluates the comments / proposals of the auditors Internal Control System of the Group. with regard to the management of the Group, the preparation and presentation of its financial statements C5. It submits to the Board of Directors a report regarding: and the monitoring of their application. a. The adequacy of audits carried out, the conclusions B6. It monitors the substantial volume, nature and and the proposals of Group Internal Audit. extent of non-auditing services provided by the auditors at Group level, aiming to maintain the balance between b. Subjects that are related to the independence and objectivity and the value added by the services offered. smooth carrying out of audit work carried out by Group Internal Audit. In the case where non-auditing services are offered to a subsidiary or affiliated company of the Bank and the C6. It confirms that the Bank assigns the evaluation volume is such that it downgrades the objectiveness of of the adequacy of the Internal Control System, on an their audits, then the Committee informs the correspon- individual and consolidated base, to external auditors ding Committee (where it exists) of the subsidiary who have the necessary experience. company or its Board of Directors. It evaluates the findings of the above audits and proposes The Committee is informed, at least once a year, by the corrective measures to the Board of Directors. Group’s Financial Management about the nature, extent and fees for non-auditing services or other advisory D. Miscellaneous Issues duties of the auditors. D1. It assigns to Group Internal Audit or, following autho- risation of the Board of Directors, to independent experts, B7. It annually prepares a table in which the auditing the investigation of any subjects which fall within its and non-auditing services by category, time and fees mission and powers. paid are recorded. D2. It requests information from the Management This table is submitted to the Board of Directors, along on the significant risks to which the Group is expos- with the relevant comments of the Audit Committee. ed; it evaluates the steps taken by the Board to mini- mise these risks, and submits proposals for their improve- C. Internal Audit ment. C1. It approves and evaluates the Internal Audit manual that contains, among other things, the rules, the way D3. It investigates any other important elements, data the Committee works and the audit objectives and or facts that concern and influence the efficiency and programmes. operation of the Bank or its compliance with the laws and regulations that govern it. C2. The Group Internal Audit submits its annual audit plan and the Unit’s budget to the Audit Committee for D4. The Committee confirms, once a year, the compliance approval. Any changes that are likely to be made to the of the Bank with the laws and the institutional framework audit plan or the budget during the year must also be in which it is active. approved by the Committee. D5. Following a decision of the Audit Committee, the C3. It proposes to the Board the appointment and Chairman convenes a joint meeting with the members replacement of the Head of Group Internal Audit. of the audit committee of any subsidiary company to 42 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

discuss and study any matters concerning that company readjusted so as to reflect any new practices that may HELLENIC BANK GROUP as may be deemed necessary. be adopted by the Group. These might include organisa- tional restructuring, directives of the Central Bank, changes D6. The Committee has the responsibility for examining in the relative legislation, new directives of the Securities any significant transactions, in any form, carried out by Commission or new regulations of the Cyprus Stock the Bank and / or its subsidiary companies, where any Exchange added to the Code. Member of the Board, Chief Executive Officer, Senior Exe- cutive Officer, Secretary, Auditor or large shareholder The Board has the responsibility for any addition to or (who directly or indirectly holds more than 5% of the readjustment of the procedures related to the terms of issued share capital of the Company or voting rights) has, reference. directly or indirectly, any significant interest. It ensures that these transactions are carried out within the frame- 7. Code of Corporate Governance work of the Bank’s normal commercial practices (at In observing all the above, it is understood that the arm's length). Audit Committee will function strictly within the frame- work of the relevant provisions of the Code of Corporate The above definition includes the Board Members of Governance, as these are determined by Chapter C of subsidiary companies. the Code.

D7. It draws up, with the assistance of the Executive Terms of Reference of the Risk Management Officer responsible for ensuring compliance with the Committee Code of Corporate Governance, the Board of Directors’ 1. Terms of Reference of the Risk Management Report on Corporate Governance to be included in the Committee Group’s Annual Report. The role of the Committee is to assist the Board of Directors of Hellenic Bank Public Company Limited (“the D8. It discusses with the Group’s Management the Company”) to fulfil its responsibilities and obligations policy for management and evaluation of business risk, concerning the recognition, measurement, monitoring including the main Group financial risks, and the measures and effective management of all Group risks (credit, that are taken by the Board for their monitoring and operational, market, liquidity, foreign currency and others). containment. The external auditors and the Head of The Committee also has the responsibility of monitoring Group Internal Audit may also be invited to this meeting. compliance risk.

D9. The Chairman of the Committee will be available 2. Appointment of the Risk Management for personal, telephone, electronic or written communica- Committee tion, which shareholders of the Bank may request, The Committee will be appointed by the Board of regarding issues concerning the work of the Committee. Directors and will consist of three to six members with He will also be available to answer any questions during sufficient knowledge and experience in the Risk Manage- the Annual General Meeting or any meeting for purposes ment sector. of briefing all shareholders of the Bank. At least one member will be an Executive and one an independent non-Executive member. Information concerning the structure and work of the One of the Committee’s non-Executive members will Committee will also be given in the Annual Corporate be appointed by the Board as Chairman. Governance Report of the Board of Directors of Hellenic The term-of-office of the members of the Committee Bank Public Company Limited. will be decided by the Board. The Board can, during the term-of-office of the Com- 6. Validity and Modification of the Terms mittee: (a) replace any member of the Committee of Reference including the Chairman, and (b) fill positions in the Com- The terms of reference will be revised and appropriately mittee which are, for any reason, vacated. 43 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 3. Meetings of the Risk Management Committee undertaking of corrective measures in cases where it The Committee will meet whenever necessary and at sees a weakness in the implementation of the risk least once every quarter. management strategy. The majority of Committee members will comprise a quorum. A majority of Committee members is considered 4.4 The Committee will recommend to the Board of to be the next integral number of one half of the members. Directors the transfer to the Top Executive and General In the case of a tie, the Chairman will have the casting vote. Management and other approving groups of approval The Committee will keep minutes of its meetings and rights (which concern the undertaking of risks) along decisions. with the restrictions and limits which govern these rights. The Chairman of the Committee will inform the Members Specifically, it will propose to the Board approval limits of the Board of the Committee’s work. for the Executive Loan Committee and the Assets and The Committee may invite to any of its meetings any Liabilities Management Committee (ALCO). person who may contribute to the effective conduct of its business. 4.5 The Committee will receive and evaluate, on a quar- terly basis, reports by the Head of Group Risk Manage- 4. Duties, Responsibilities and Rights of the Risk ment Unit with regard to the more important risks that Management Committee were undertaken by the Group and will inform the Board 4.1 The Committee will prepare and submit to the Board of Directors accordingly. of Directors, for approval, the principles which should govern risk management. Based on these principles, the 4.6 The Committee will evaluate, annually, the adequacy Committee will cultivate an internal environment of risk and effectiveness of the risk management policy, including management, which will govern the business decision- the appropriateness of limits, the adequacy of provisions making processes across the activities and / or units of and own funds in relation to the size and form of risks the Group and its subsidiaries. undertaken. The evaluation will be carried out based on the annual report of the Head of the Risk Manage- 4.2 Based on the approved principles, the Committee ment Unit. will shape and propose to the Board of Directors, for approval, the framework for undertaking all forms of The above mentioned report and evaluation, along with risks and the use of capital that would correspond to the relevant extracts of the minutes of the Board, will the business objectives of the Company, Group and / be submitted to the Department of Regulation and or each Company separately. Inter alia: Supervision of Banking Institutions of the Central Bank of Cyprus by 30 April each year. (a) The Committee will shape the policy of the Group with regard to the limits and pricing of undertaking 4.7 The Committee will refer to the Board of Directors, Group risks for approval, any new products or services that the Group intends to introduce which, in the opinion of the (b) The Committee will ensure that the Group’s capital Risk Management Unit, include new risks or require the is maintained at levels that correspond to the risks adoption of risk limits. It will also ensure that the various undertaken risks contained in these products (credit, market, liqui- dity, operational, etc.) are adequately monitored. (c) The Committee will confirm the sufficiency of the acceptable limits of risk and the limits of interrup- 4.8 The Committee will evaluate the risks that are related tion of loss-making activities or the undertaking of in the involvement of the Group in new markets, new other corrective measures. companies or business ventures and will submit a recom- mendation to the Board of Directors. 4.3 The Committee will formulate and submit to the Board of Directors of the Company proposals for the 4.9 The Committee will be informed of the relevant 44 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

reports of the Central Bank of Cyprus and the Group of Directors. The Board should consist of individuals fit HELLENIC BANK GROUP Internal Audit concerning risk management and will see and proper to participate in the Board of Directors of to the undertaking of corrective measures where these the Company. are necessary, based on the observations and suggestions of these reports. 1. Terms of Reference of the Nominations / Internal Governance Committee The Committee will also be informed of the con- The role of the Committee is to prepare proposals to tents of reports by the International Rating Agencies the Board of Directors of Hellenic Bank Public Company and, after evaluation, will proceed with proposals for Limited (“the Company”) for the selection of fit and any necessary corrective measures concerning risk proper individuals for nomination as Members of its management. Board or the Boards of Subsidiary Companies of the Group, either to fill extraordinarily vacated or vacant 4.10 The Committee will propose to the Board the seats or after the retirement of a Member based on the nomination or replacement of the Head of the Risk retirement policy due to age. The Committee also has Management Unit of the Group. the general responsibility for the implementation of policies of internal governance within the Group. 4.11 Within the framework of its responsibilities, the Committee, in co-operation with the Audit Committee, 2. Appointment of the Nominations / Internal will also be responsible, at Board level, for the implemen- Governance Committee tation of the Second Basel Accord (Basel II) and the The Board of Directors decided that the Committee Directives of the European Union (CAD 3). would consist of three to six non-Executive Board Members. The term-of-office of the members of the Committee 4.12 The Risk Management Committee will work with is decided by the Board of Directors. the Audit Committee of the Board to ensure that a global view is taken in the management of risk. 3. Meetings of the Nominations / Internal Governance Committee 4.13 The Committee has the approval of the Board of The Committee will meet whenever necessary and at Directors to obtain independent professional advice least three times a year. whenever it deems this necessary. The majority of Committee members will comprise a quorum. A majority of Committee members is considered 4.14 The Chairman of the Committee will be available to be the next integral number of one half of the mem- for personal, telephone, electronic or written communica- bers, provided the Chairman of the Committee is present. tion, which shareholders of the Company may request, In the case of a tie, the Chairman will have the casting vote. regarding issues concerning the work of the Committee. The Committee will keep minutes of its meetings and He will also be available to answer any questions during decisions and will submit copies to the Chairman and the Annual General Meeting or any meeting for purposes the Members of the Board of Directors of the Company. of briefing all shareholders of the Company. Information The Committee has the approval of the Board of Directors concerning the structure and work of the Committee to obtain independent professional advice whenever it will also be given in the Annual Corporate Governance deems this necessary. Report of the Board of Directors of Hellenic Bank Public Company Limited. 4. Duties and Responsibilities of the Nominations / Internal Governance Committee Terms of Reference of the Nominations / 4.1 The Committee will propose to the Board the Internal Governance Committee necessary qualifications that an individual should possess Principle of the Code of Corporate Governance in order to serve as a member of the Board of any of There should be a specified and transparent process for the Group’s companies. The minimum qualifications the nomination of new Board Members to the Board required are: 45 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 (a) Knowledge, skills and experience. for personal, telephone, electronic or written communica- tion, which shareholders of the Company may request, (b) Honesty and objective judgement. regarding issues concerning the work of the Committee. He will also be available to answer any questions during (c) Any special qualifications that may be required by the Annual General Meeting or any meeting for purposes laws that govern the operation of a particular of briefing all shareholders of the Company. Information company (including the Directive of the Central concerning the structure and work of the Committee Bank “Concerning the Ability and Suitability [Criteria will also be given in the Annual Corporate Governance of Evaluation] of Board Members and Executives Report of the Board of Directors of Hellenic Bank Public of Banks Directive of 2006 and 2007”). Company Limited.

(d) Availability of time for the business of the Company. 5. Best Principles of Internal Governance As these are reported in the Directive of the Central (e) Appropriate age. Bank of Cyprus - May 2006 and by the Basel Committee on Banking Supervision - February 2006. 4.2 The Committee will examine proposals for the nomination of members to the Group Boards of Directors 6. Code of Corporate Governance based on the required qualifications and will submit the It is understood that the Nominations / Internal Governance relevant report, with its opinion, to the Board of Directors Committee will operate strictly within the framework of of the Company, which will take the final decisions. The the relevant provisions of the Code of Corporate Gover- Committee will state in its report the companies in which nance as these are determined in Chapter A of the Code. a candidate for Board membership is not allowed to parti- cipate because of conflict of interests, as well as what 15. Part D of the Code which refers to the Relations information the candidate should have at his / her disposal of the Company with its Shareholders before being appointed as a Member of the Board. Hellenic Bank Group announces its financial results every quarter. 4.3 The Committee will examine, on an annual basis, the structure, size, composition and the output / effective- The Board of Directors of the Company utilises the ness of the Board of Directors of the Company and those occasions of the announcements of the quarterly or of the Group’s Subsidiary Companies and will propose interim results, as well as of the Annual General Meeting any changes that are judged necessary to the Board of of the Shareholders itself for organising analytical pre- the Company. sentations of the Financial Statements. These are usually undertaken by the Group Chief Financial Officer and 4.4 The Committee will evaluate, on an annual basis, the Company’s Executive Management for the benefit the skills, knowledge and expertise of Members of the of shareholders, financial analysts, members of the Stock Board of Directors of the Company and those of the Exchange and representatives of the Mass Media. More Group’s Subsidiary Companies, reporting accordingly to specifically, regarding the Annual General Meeting, there the Board of the Company. is complete compliance with the relevant provisions of the legislation, the Bank’s Articles of Association and 4.5 The Committee will have the responsibility of pre- the Code. The shareholders also have the opportunity paring plans for the succession of Board Members. to communicate, regarding matters that concern them, with the Secretariat of the Company and the Investor 4.6 The Committee will evaluate the extent of compliance Relations Officer, Antonis Rouvas (tel: 22500760). with the policies of internal governance as these were approved by the Board of Directors of the Company. 16. Rotating Directors eligible for Re-Election Members of the Board retire on a rotating basis or retire 4.7 The Chairman of the Committee will be available according to the relative articles of the Bank’s Articles 46 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

of Association and the relevant provisions of the Com- Director of Hermes Airports Ltd and Omnistock Ltd HELLENIC BANK GROUP panies Law and the Code (at least every three years). and also sits on the Board of Directors of a number The retiring Directors, who are eligible and will offer of Iacovou Brothers Group of Companies, including themselves for re-election at the Annual General Meeting Iacovou Brothers (Constructions) Ltd, Iacovou Bro- of the Bank on 20 May 2009, are the following (brief thers (Development) Ltd, Iacovou Brothers Quarries curriculum vitae included): Ltd, Unitrak Machinery Ltd, Skyra Lima Public Ltd, etc. (a) Dr Andreas P. Panayiotou, Chairman of the Board of Directors, Hellenic Bank Appointed Member of the Board of Directors of Born on 3 January 1940. Graduated from the Pan- Hellenic Bank on 13 March 1997. Chairman of the cyprian Gymnasium in Nicosia and studied Natural Board of Directors of Athena Cyprus Public Company Sciences and Geography at the University of Athens Limited and Member of the Nominations / Internal (Top Honours) and Geology / Economic Geology at Governance and Remuneration Committees of the the Universities of London (Imperial College of Bank’s Board of Directors. Science and Technology) (M.Sc.) and New Brunswick in Canada (Ph.D.). (c) Antonis I. Pierides, Business Consultant Born on 18 February 1936. Graduated from the Pan- Worked as a Geologist / Senior Geological Officer cyprian Gymnasium in Nicosia and studied Economics in the Department of Geological Review from 1964 and Accounting at the School of Economic and to 1993 and from 1993 until 1998 in the Ministry Commercial Sciences of the University of Athens. of Agriculture, Natural Resources and Environment In the course of professional career, received train- in the Sector of Natural Resources. Served as Director ing in General Management, Industrial Relations, of Administration of the Ministry of Agriculture, Management and Human Resource Development Natural Resources and Environment, Permanent Systems, Economic and Social Policy issues. Secretary of the Ministry of Justice and Public Order and of the Ministry of the Interior, as well as first Held senior and top positions for many years in the Chairman of the Board of Planning Deviations. Served private / business and public sector in Cyprus and as Minister of the Interior between May 2002 and in international organisations: February 2003 and then as Chairman of Hellenic Tzilalis (Cyprus) Ltd until 2007. In 1998, appointed Director General of the Cyprus Employers’ and by the Council of Ministers as Chairman of the Industrialists’ Federation (O.E.V.) from 1978 to June Board of Management of the English School, a 2002, Minister of Commerce, Industry and Tourism position held until 2008. From 2005 to 2008, served (1976-1978), Director of Labour and Public Relations as Executive Chairman of Vassiliko Cement Public of the Cyprus Mines Corporation (1961-1974), Company Limited and Chairman of the Board of Member of the Board of Directors of the Electricity Directors of Hellenic Bank (Investments) Limited. Authority of Cyprus, the Cyprus Phasouri Plantations and the Human Resource Development Authority, Appointed Member of the Board of Directors of Member of the Board of the International Labour Hellenic Bank on 19 March 2005 and elected Chair- Office, the Executive Committee of Industrial and man of the Board on 1 June 2005. Chairman of the Employers’ Organisations and the Executive Com- Nominations / Internal Governance Committee of mittee of the International Employers’ Organisation. the Bank’s Board of Directors. Chaired a number of local and international con- (b) Iacovos G. Iacovou, Businessman ferences in Cyprus and abroad. Co-authored with Born on 7 March 1948. Graduated from the Com- Professor Shlomo Maital the book “Reinventing mercial Lyceum of Larnaca and studied Scientific Cyprus” (December 2003), on the role of entre- Management at the Art & Science College. preneurship and innovation in promoting the eco- 47 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 nomic development of Cyprus on the eve of its Euro- Resource Management Association. Has extensive pean Union accession. experience in business and the trade union move- ment, where he worked as a senior manager and Currently engaged in providing business support director of various companies, including the Cyprus services in General Management and Executive Development Bank (1995-2001). Training through the private company Antonis Pierides & Associates Limited. Currently works as a senior administrator and re- searcher at the Cyprus Centre for European and Appointed Member of the Board of Directors of International Affairs, a non-profit research organi- Hellenic Bank on 11 June 2002 and also Member sation and think tank, academically affiliated with of the Board of Directors of Pancyprian Insurance the University of Nicosia, which carries out research Limited and Hellenic Alico Life Insurance Company in the areas of international relations, politics, eco- Limited. Chairman of the Audit Committee and Mem- nomics, sociology and environmental studies. Mr. ber of the Risk Management Committee of the Georgiou’s duties include, among other things, the Bank’s Board of Directors. administrative coordination of national and European research projects, contribution in the submission of (d) Kyriakos E. Georgiou, Senior Administrator proposals and the execution of research projects. and Researcher Also a management lecturer, teaching courses in Born on 23 May 1960. Graduated from the Acropolis organisational behaviour, leadership and manage- Lyceum and studied Mechanical Engineering (B.S.M.E., ment of change. 1986) and Business Administration (M.B.A., 1988) at the University of Houston in Texas, U.S.A. Currently Appointed Member of the Board of Directors of is a Doctor of Business Administration candidate Hellenic Bank on 18 May 2006. Also Member of the (D.B.A.) at Kingston University, London, U.K. Has Audit and Remuneration Committees of the Bank’s extensive experience in project management and is Board of Directors. a certified Project Manager (PRINCE II). Nicosia, 27 March, 2009 Member of the Cyprus Scientific and Technical Cham- ber (E.T.E.K.) in the area of Mechanical Engineering, the American Society of Mechanical Engineers, the Cyprus Computer Society and the Cyprus Human

48 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

HELLENIC BANK GROUP

49 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 REMUNERATION POLICY REPORT FOR THE YEAR 2008

INTRODUCTION Iacovos G. Iacovou The Board of Directors, in compliance with the provisions Kyriacos I. Droushiotis in the Code of Corporate Governance, published by the (from 10 September 2008) Cyprus Stock Exchange (2nd revised edition - January 2007) and particularly Appendix 1 of the Code, incorpo- The terms of reference of the Remuneration Committee rates the present Remuneration Policy Report in the are listed below: Bank’s 2008 Annual Report. The latest has been published in the Bank’s Website. Terms of Reference of the Remuneration Committee REMUNERATION COMMITTEE Principles of the Code of Corporate Governance The Remuneration Committee meets whenever it is The companies should introduce official and transparent necessary to fix or review the remuneration of Executive procedures for the development of policies concerning and non-Executive Members of the Board of Directors, the remuneration of Executive Members of the Board the Chief Executive Officer and the General Managers and for fixing the remuneration of each Board Member of the Group (if the remuneration of the General Managers separately. is not within the remuneration scales of the collective agreements). After considering all relevant parameters The level of remuneration should be sufficient to attract and data, it makes relevant recommendations to the and retain in the Company Board Members who strengthen Board for taking decisions, in the absence of the Executive the Group’s Management but the Companies should Member of the Board or other Officers involved. The avoid paying more than is required in order to achieve Committee’s suggestions and the Group’s remuneration this. It is recommended that part of the remuneration policy take into consideration the relevant responsibilities, of the Executive Members of the Board is determined workload, qualifications, experience, performance, remu- in such a way that it relates remuneration to the company neration of comparable positions in the market, especially and individual performance. in areas where the Group is active, as well as salaries in other levels of the Group. The Committee's aim is to The Company’s Corporate Governance Report should attract and retain good quality officers at Executive and include a statement of the Remuneration Policy and General Management levels, in order to better serve relevant criteria, as well the total remuneration of the the interests of the Group as well as its shareholders Executive and non-Executive Members of the Board. and other stakeholders. 1. Terms of Reference of the Remuneration Each year, the Remuneration Committee proposes to Committee the Board of Directors the Annual Remuneration Policy The role of the Committee is to prepare suggestions to Report, as part of the Annual Report of the Company, the Board of Directors of Hellenic Bank Public Company which is submitted to the shareholders’ Annual General Limited (“the Company”) for the remuneration packages Meeting for approval. The Committee also reviews and of Executive and non-Executive Members of the Board approves the information disclosed on the annual of the Company as well as of the Chief Executive Officer remuneration of the Members of the Board, which is and the Group General Managers. prepared by Group Financial Management for inclusion in the notes to the annual accounts of the Company. 2. Appointment of the Remuneration Committee The Committee is appointed by the Company’s Board of The Remuneration Committee consists of the following Directors and consists of three to five non-Executive Board Board Members: Members, the majority of whom must be independent. The Chairman of the Committee is appointed by the Chairman: Demetris J. Eliades Board. Members: Soteris Z. Kallis The term-in-office of the members of the Committee Kyriakos E. Georgiou is also decided by the Board. 50 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

3. Meetings of the Remuneration Committee b. The non-correlation of remuneration to the profit- HELLENIC BANK GROUP The Committee will meet whenever necessary and at ability of the Company. least twice a year. The majority of Committee members will comprise a c. The non-participation in any insurance or pension plan. quorum. A majority of Committee members is considered to be the next integral number of one half of the members, 4.3 The Committee will submit to the Board of Directors provided that the Chairman is present. In the case of a proposals for the determination of each readjustment tie, the Chairman has the casting vote. of benefits of the Members of the Board, the Chief The Committee will keep minutes of its meetings and Executive Officer and the General Managers, being decisions. sensitive to the terms of remuneration and conditions The Committee has the approval of the Board of Directors of employment at other levels of the Group. of the Company to obtain independent professional advice whenever it deems this necessary. 4.4 The Remuneration Committee, during the prepara- The Committee may invite to any of its meetings any tion of its proposals, will provide the opportunity to the person who may contribute to the better conduct of Chairman and the Chief Executive Officer to express an its business. opinion with regard to its proposals concerning the salaries of other Executive Board Members and General 4. Duties and Responsibilities of the Remuneration Managers. It should also have access to professional Committee advice both internal and external. 4.1 The Committee will submit to the Board of Directors of the Company, within terms of reference agreed upon 4.5 The Committee will prepare for submission to the and without the presence of the party interested in Board of Directors the Annual Remuneration Policy their evaluation, proposals concerning the framework Report, which will comprise part of, or be attached to, and level of remuneration (including pension rights and the Annual Report of the Company. It should also be any compensation payments, share options, etc.) of presented to the Annual General Meeting of the share- Executive and non-Executive Members of the Board, holders for approval and posted on the official website the Chief Executive Officer and the General Managers of the Company. Details of the content that needs to of the Group. The Committee will take into consideration be published are described in Appendix 1 of the Code factors such as responsibilities, workload, qualifications of Corporate Governance. (academic qualifications, know-how and experience in the sectors where the Group is active), performance 4.6 The Committee will review and approve the Annual and the remuneration offered by other Cypriot companies Remuneration Statement, prepared by Group Financial / groups that are similar in size and range of activities. Management for inclusion in the Company’s annual It will also consider the need to attract and retain the accounts or in the notes to the annual accounts, in most suitable Directors (Executive and non-Executive) accordance with Appendix 2 of the Code of Corporate / General Managers for the Company. The possibility Governance. of relating the remuneration of the Chief Executive Officer, both to the performance of the Company and 4.7 The Committee will review and approve the content to the promotion of its shareholders’ interests, will also of any resolutions submitted for approval at the General be examined. Meeting of the shareholders, which will be prepared by the Secretariat in cooperation with the Group’s legal 4.2 In relation to the level of remuneration of the non- advisers, in accordance with Appendix 3 of the Code Executive Members of the Board, the Committee will of Corporate Governance, and concern possible plans take the following into consideration: for the compensation of Members of the Board in the form of shares, share warrants or share options. a. The time that the Members have available to attend meetings. 4.8 The Committee will review and approve, where this 51 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 is considered necessary, the Job Descriptions (roles, of the Board was revised in 2007 to take into consideration responsibilities, main duties, powers, etc.) of Top and the services rendered by the Members of Board, the Senior Executive Management. time they devote, the fees received by corresponding officers of other comparable organisations and the 4.9 The Chairman of the Committee will be available responsibilities undertaken. for personal, telephone, electronic or written communica- tion, which shareholders of the Company may request, REMUNERATION POLICY FOR THE EXECUTIVE regarding issues concerning the work of the Committee. DIRECTORS / CHIEF EXECUTIVE OFFICER He will also be available to answer any questions during The Executive Directors are compensated with a remu- the Annual General Meeting or any meeting for purposes neration package based on a contract whose terms are of briefing all shareholders of the Company. Information compliant with the relevant provisions of the existing concerning the structure and work of the Committee Code of Corporate Governance (paragraphs B.2.7., B.2.8. will also be given in the Annual Corporate Governance and B.2.9.). Report of the Board of Directors of Hellenic Bank Public Company Limited. The remuneration package includes a non-variable annual salary payable monthly, which takes into consideration 5. Code of Corporate Governance the relevant responsibilities, workload, qualifications, 5.1 It is understood that the Remuneration Committee experience, performance, remuneration of comparable will act strictly within the framework of the relevant pro- positions in the market, especially in the scope of activities visions of the Code of Corporate Governance as deter- of the Group, and remuneration within other Group mined in Chapter B of the Code. companies. It aims to attract and retain the most suitable individuals. The term “performance” encompasses the DIRECTORS’ REMUNERATION POLICY evaluation of the individual performance as well as that The Remuneration Policy for the Directors of the Company of the Group Results in relation to the achievement of remains the same as it was when approved in the Annual its targets and profitability. The remuneration package General Meeting of 30 May 2007, as shown below. also includes hospitality expenses, health, life and accident A related proposal will be submitted by the Board of insurance cover, the use of a company car (in accordance Directors to the Annual General Meeting of the share- with the current regulations for the Group’s Managerial holders for approval. Staff) and participation in the Company’s Employees Provident Fund, which is offered to Group personnel in The Chairman of the Board receives annual fees and Cyprus. The above mentioned Provident Fund is a defined- hospitality expenses of ú51.258, the Vice Chairman benefit scheme. The changes in the cumulative retire- annual fees ú25.629 and the Members ú10.252. The ment benefits of the Executive Directors for the year remuneration for the Directors as Members of the Board are disclosed in Note 38 to the Accounts contained in was revised in 2007 to take into consideration the services this Annual Report. rendered by the Chairman, the Vice Chairman and the Members of the Board, the time they devote, the fees The Executive Director / Chief Executive Officer’s contract received by corresponding officers of other comparable has a five-year duration and can be renewed six months organisations, the responsibilities undertaken and in general before its expiry (with a Board of Directors’ decision their overall contribution to the Group’s best interests. following suggestions of the relevant committees of the Board). In the case of early and unjustified termination The Chairmen of the Audit and Risk Management Com- of the contract (which can be effected any time during mittees receive annual fees of ú6.834 and each Member its term), variable compensation is paid up to a maximum ú5.126. The Chairmen of the Remuneration and Nomina- amount equal to two annual salaries. It is understood tions / Internal Governance Committees receive annual that the compensation will be equal to the salaries fees of ú2.563 and each Member ú1.709. The remu- attributed to the remaining period of the contract if the neration for the Directors as Members of the Committees latter is of less than two years’ duration. 52 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

The employment of the Executive Director / Group General The Board of Directors submits this Remuneration Policy HELLENIC BANK GROUP Manager, in relation to its duration, is governed by the Report to the Annual General Meeting of the share- retirement age applicable for the personnel of the Bank. holders and unanimously recommends its approval. There is no specific stipulation for compensation in case of premature termination of the employment. Nicosia, 27 March, 2009

There has been no change to the remuneration policy for the Executive Directors / Chief Executive Officer since 2006.

Related to the Remuneration Policy for the Members of the Board, the Chief Executive Officer and other Senior Managers for 2008 is the disclosure of information in the notes to the Accounts contained in this Annual Report (Note 38).

53 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 AUDITORS’ REPORT ANDFINANCIALSTATEMENTSAUDITORS’ HELLENIC BANKGROUP 136 131 130 127 62 61 60 59 58 56 66 65 64 63 SHAREHOLDER INFORMATION AND INVESTORRELATIONS OFFICES ANDBRANCHES BOARD OFDIRECTORSTHEGROUP’S MAINSUBSIDIARY COMPANIES RESPONSIBLE FORTHEDRAFTING OFTHEFINANCIALSTATEMENTS DECLARATION BYTHEMEMBERS OFTHEBOARDDIRECTORSANDCOMPANY OFFICIALS NOTES TOTHEFINANCIALSTATEMENTS CASH FLOWSTATEMENT BALANCE SHEET STATEMENT OFRECOGNISEDINCOMEANDEXPENSE INCOME STATEMENT CONSOLIDATED CASHFLOWSTATEMENT CONSOLIDATED BALANCESHEET CONSOLIDATED STATEMENT OFRECOGNISEDINCOMEANDEXPENSE CONSOLIDATED INCOMESTATEMENT AUDITORS’ REPORT TOTHEMEMBERSOFHELLENICBANKPUBLICCOMPANY LIMITED

HELLENIC BANK GROUP ANNUAL REPORT 2008 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF HELLENIC BANK PUBLIC COMPANY LIMITED

Report on the Consolidated and Company’s Separate Financial Statements We have audited the consolidated financial statements of HELLENIC BANK PUBLIC COMPANY LIMITED (the “Company”) and its subsidiaries (the “Group”) and the Company’s separate financial statements on pages 58 to 126, which comprise the balance sheets of the Group and the Company as at 31 December 2008, and the income statements, statements of recognised income and expense and cash flow statements of the Group and the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Board of Directors’ Responsibility for the Financial Statements The Company’s Board of Directors is responsible for the preparation and fair presentation of these consolidated and Company’s separate financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (EU) and the requirements of the Cyprus Companies Law, Cap. 113. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated and Company’s separate financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

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

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

Opinion In our opinion, the consolidated and the Company’s separate financial statements give a true and fair view of the financial position of the Group and the Company as of 31 December 2008, and of the financial performance and the cash flows of the Group and the Company for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU and the requirements of the Cyprus Companies Law, Cap. 113.

Report on Other Legal Requirements Pursuant to the requirements of the Companies Law, Cap. 113, we report the following: ñ We have obtained all the information and explanations we considered necessary for the purposes of our audit. ñ In our opinion, proper books of account have been kept by the Company. ñ The Company’s financial statements are in agreement with the books of account. ñ In our opinion and to the best of the information available to us and according to the explanations given to us, the financial statements of the Group and the Company give the information required by the Companies Law, Cap. 113, in the manner so required. ñ In our opinion, the information given in the report of the Board of Directors on pages 30 to 33 is consistent with the consolidated and Company’s separate financial statements. 56 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

Other Matter HELLENIC BANK GROUP This report, including the opinion, has been prepared for and only for the Company’s members as a body in accordance with Section 156 of the Companies Law, Cap.113 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come to.

KPMG Chartered Accountants

Nicosia, 27 March, 2009

57 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 HELLENIC BANK GROUP CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2008

2008 2007 Note ú'000 ú'000 Interest income 3 446.581 448.510 Interest expense 4 (251.111) (238.716) Net interest income 195.470 209.794

Fee and commission income 5 64.266 62.424 Fee and commission expense 6 (5.686) (4.876) Net fee and commission income 58.580 57.548

Net (losses)/gains on disposal and revaluation of foreign currencies and financial instruments 7 (30.414) 29.185 Other income 8 19.576 23.989

Total net income 243.212 320.516

Staff costs 9 (104.490) (106.131)

Depreciation 23 (6.148) (6.500)

Administrative and other expenses (48.274) (44.096)

Total expenses (158.912) (156.727) Share of results of associate company 10 -- 1.548

Profit from ordinary operations before provisions 84.300 165.337 Provisions for impairment of loans and advances 18 (39.682) (12.736)

Profit before taxation 11 44.618 152.601

Taxation 12 (13.294) (17.701)

Profit for the year 31.324 134.900

Profit/(loss) attributable to: Equity holders of the parent company 31 33.973 133.068 Minority interest 32 (2.649) 1.832 Profit for the year 31.324 134.900

Basic and fully diluted earnings per share (cent) 14 11,6 48,0

58 The notes on pages 66 to 126 form an integral part of the financial statements. WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 HELLENIC BANK GROUP 2008 ANNUAL REPORT

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE for the year ended 31 December 2008

2008 2007 HELLENIC BANK GROUP Note ú'000 ú'000 Investments available for sale: (Deficit) /surplus on revaluation of equity securities (28.099) 2.330 Deficit on revaluation of debt securities (53.869) (20.830) Share of results of associate company -- 1.199 Transfer to income statement on impairment of debt securities 4.031 1.456 Transfer to income statement on impairment of equity securities 956 -- Transfer to income statement on disposal of debt securities (9.799) 425 Transfer to income statement on disposal of equity securities (1.307) (4.162) Deferred taxation on revaluation of property 21 50 Foreign exchange (loss)/gain (60) 36

Net income and expense not recognised in the consolidated income statement (88.126) (19.496) Profit for the year 31.324 134.900 Total recognised income and expense (56.802) 115.404

Total recognised income and expense attributable to: Equity holders of the parent company (51.607) 113.839 Minority interest 32 (5.195) 1.565 Total recognised income and expense (56.802) 115.404

The notes on pages 66 to 126 form an integral part of the financial statements. 59 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 HELLENIC BANK GROUP CONSOLIDATED BALANCE SHEET at 31 December 2008

2008 2007 Note ú'000 ú'000 Assets Cash and balances with Central Banks 15 189.133 235.669 Government securities and other eligible bills 16 1.188.762 547.279 Placements with other banks 17 1.032.495 1.260.493 Loans and advances to customers 18 4.609.328 3.725.059 Debt securities 19 565.417 1.318.258 Equity securities 20 40.490 89.249 Property, plant and equipment 23 91.713 81.030 Intangible assets 24 20.217 20.613 Other assets 25 89.236 79.686 Total assets 7.826.791 7.357.336

Liabilities Deposits by banks 26 195.196 492.074 Repurchase agreements 469.669 -- Customer deposits and other customer accounts 27 6.146.521 5.860.462 Other liabilities 28 325.486 233.884 7.136.872 6.586.420

Loan capital 29 236.889 225.995

Equity Share capital 30 127.844 124.277 Reserves 31 312.593 400.682

Equity attributable to equity holders of the parent company 440.437 524.959

Minority interest 32 12.593 19.962 Total equity 453.030 544.921 Total liabilities and equity 7.826.791 7.357.336

Contingent liabilities and commitments 33 1.600.636 1.483.562

The consolidated financial statements have been approved by the Board of Directors on 27 March 2009.

Dr A. P. Panayiotou A. M. Moushouttas M. Keravnos A. Rouvas Chairman Vice Chairman Chief Executive Officer Group Chief Financial Officer

60 The notes on pages 66 to 126 form an integral part of the financial statements. WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

HELLENIC BANK GROUP CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2008

2008 2007 HELLENIC BANK GROUP Note ú'000 ú'000 Cash flow from operating activities Group profit for the year 31.324 134.900 Issue of shares 118 261 Depreciation of property, plant and equipment 23 6.148 6.500 Amortisation of intangible assets 24 1.646 1.731 Impairment loss on goodwill 24 -- 3.209 Share of results of associate company -- (1.548) Negative goodwill 8 (860) (6.749) Gain on disposal of property, plant and equipment (83) (7) Gain on disposal of subsidiary company 8 -- (202) Net losses on disposal and revaluation of financial instruments 17.733 2.865 Investment income from debt and equity securities (93.470) (101.356) Interest expense on loan capital 12.887 11.504 Provisions for impairment of loans and advances 39.682 12.736 Taxation 13.294 17.701 Operating profit before working capital changes 28.419 81.545 Increase in loans and advances to customers and other assets (935.442) (770.106) Increase in customer deposits and other customer accounts and other liabilities 378.581 554.964 Increase in placements with other banks (3.707) (5.550) (Decrease)/increase in deposits by banks (28.173) 54.600 Net cash used in operating activities before taxation (560.322) (84.547) Taxation paid (13.128) (18.697)

Net cash flow used in operating activities (573.450) (103.244) Cash flow from investing activities Acquisition of subsidiary company 22 (10.324) (24.291) Disposal of subsidiary company -- 2.187 Takeover of operations of subsidiary company 21 565 -- Investment income from debt and equity securities 93.470 101.356 Net disposals of debt and equity securities 15.951 8.083 Additions of property, plant and equipment 23 (5.405) (6.052) Additions of intangible assets 24 (1.250) (3.468) Proceeds from disposal of property, plant and equipment 412 750 Net cash flow from investing activities 93.419 78.565 Cash flow from financing activities Proceeds from issue of share capital 14.138 79.144 Proceeds from issue of loan capital 10.894 20.115 Dividend paid (48.972) (40.557) Interest paid on loan capital (12.887) (11.504) Net cash flow (used in)/from financing activities (36.827) 47.198 Net (decrease)/increase in cash and cash equivalents (516.858) 22.519 Effect of exchange rate fluctuations on cash and cash equivalents 1.648 (1.924) Cash and cash equivalents at the beginning of the year 1.093.096 1.072.501 Cash and cash equivalents at the end of the year 36 577.886 1.093.096

The notes on pages 66 to 126 form an integral part of the financial statements. 61 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 HELLENIC BANK PUBLIC COMPANY LIMITED INCOME STATEMENT for the year ended 31 December 2008

2008 2007 Note ú'000 ú'000 Interest income 3 436.631 437.204 Interest expense 4 (252.544) (238.437) Net interest income 184.087 198.767

Fee and commission income 5 60.570 56.709 Fee and commission expense 6 (2.033) (1.743) Net fee and commission income 58.537 54.966

Net (losses)/gains on disposal and revaluation of foreign currencies and financial instruments 7 (13.213) 27.219 Other income 8 14.763 6.923

Total net income 244.174 287.875

Staff costs 9 (95.007) (95.945)

Depreciation 23 (5.722) (6.234)

Administrative and other expenses (46.179) (37.991)

Total expenses (146.908) (140.170)

Profit from ordinary operations before provisions 97.266 147.705 Provisions for impairment of loans and advances 18 (36.482) (13.705)

Profit before taxation 11 60.784 134.000

Taxation 12 (12.043) (16.125)

Profit for the year 31 48.741 117.875

Basic and fully diluted earnings per share (cent) 14 16,6 42,5

62 The notes on pages 66 to 126 form an integral part of the financial statements. WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

HELLENIC BANK PUBLIC COMPANY LIMITED STATEMENT OF RECOGNISED INCOME AND EXPENSE for the year ended 31 December 2008

2008 2007 HELLENIC BANK GROUP Note ú'000 ú'000 Investments available for sale: (Deficit)/surplus on revaluation of equity securities (14.426) 3.453 Deficit on revaluation of debt securities (54.074) (20.729) Transfer to income statement on impairment of debt securities 4.031 1.456 Transfer to income statement on disposal of debt securities (9.799) 425 Transfer to income statement on disposal of equity securities (818) 1.714 Deferred taxation on revaluation of property 23 41 Foreign exchange gain -- 29

Net income and expense not recognised in the income statement (75.063) (13.611) Profit for the year 31 48.741 117.875 Total recognised income and expense (26.322) 104.264

The notes on pages 66 to 126 form an integral part of the financial statements. 63 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 HELLENIC BANK PUBLIC COMPANY LIMITED BALANCE SHEET at 31 December 2008

2008 2007 Note ú'000 ú'000 Assets Cash and balances with Central Banks 15 189.133 233.887 Government securities and other eligible bills 16 1.182.366 540.116 Placements with other banks 17 1.027.080 1.248.072 Loans and advances to customers 18 4.504.589 3.615.173 Debt securities 19 565.110 1.317.393 Equity securities 20 19.472 35.828 Investments in subsidiary companies 21 125.688 113.193 Amounts due from subsidiary companies 93.428 77.699 Property, plant and equipment 23 72.397 72.298 Intangible assets 24 5.357 5.714 Other assets 25 65.323 57.963 Total assets 7.849.943 7.317.336

Liabilities Deposits by banks 26 195.196 492.074 Repurchase agreements 469.669 -- Customer deposits and other customer accounts 27 6.147.863 5.825.436 Amounts due to subsidiary companies 62.251 62.742 Other liabilities 28 273.384 187.507 7.148.363 6.567.759 Loan capital 29 239.883 228.987

Equity Share capital 30 127.844 124.277 Reserves 31 333.853 396.313 Total equity 461.697 520.590 Total liabilities and equity 7.849.943 7.317.336

Contingent liabilities and commitments 33 1.596.297 1.503.087

The financial statements have been approved by the Board of Directors on 27 March 2009.

Dr A. P. Panayiotou A. M. Moushouttas M. Keravnos A. Rouvas Chairman Vice Chairman Chief Executive Officer Group Chief Financial Officer

64 The notes on pages 66 to 126 form an integral part of the financial statements. WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

HELLENIC BANK PUBLIC COMPANY LIMITED CASH FLOW STATEMENT for the year ended 31 December 2008

2008 2007 HELLENIC BANK GROUP Note ú'000 ú'000 Cash flow from operating activities Bank profit after taxation 48.741 117.875 Issue of shares 118 261 Depreciation of property, plant and equipment 23 5.722 6.234 Amortisation of intangible assets 24 1.599 1.669 Gain on disposal of property, plant and equipment (25) (17) Loss on disposal of subsidiary company -- 610 Net losses on disposal and revaluation of financial instruments 568 4.475 Investment income from debt and equity securities (98.691) (105.170) Interest expense on loan capital 13.048 11.638 Provisions for impairment of loans and advances 36.482 13.705 Taxation 12.043 16.125 Operating profit before working capital changes 19.605 67.405 Increase in loans and advances to customers and other assets (935.838) (767.586) Increase in customer deposits and other customer accounts and other liabilities 411.926 555.412 (Increase)/decrease in placements with other banks (10.366) 85 (Decrease)/increase in deposits by banks (28.172) 54.600 Increase in amounts due from subsidiary companies (15.729) (601) Increase in amounts due to subsidiary companies 1.680 36.002 Net cash flow used in operating activities before taxation (556.894) (54.683) Taxation paid (12.253) (17.387)

Net cash flow used in operating activities (569.147) (72.070) Cash flow from investing activities Acquisition of subsidiary company 22 (12.495) (32.873) Disposal of subsidiary company -- 2.187 Takeover of operations of subsidiary company 21 (784) (2.126) Investment income from debt and equity securities 98.691 103.746 Net disposals/(additions) of debt and equity securities 11.944 (11.981) Additions of property, plant and equipment 23 (5.296) (5.872) Additions of intangible assets 24 (1.233) (3.453) Proceeds from disposal of property, plant and equipment 62 554 Net cash flow from investing activities 90.889 50.182 Cash flow from financing activities Proceeds from issue of share capital 14.138 79.144 Proceeds from issue of loan capital 10.896 20.970 Dividend paid (46.807) (40.989) Interest paid on loan capital (13.048) (11.638) Net cash flow (used in)/ from financing activities (34.821) 47.487 Net (decrease)/increase in cash and cash equivalents (513.079) 25.599 Effect of exchange rate fluctuations on cash and cash equivalents -- (1.268) Cash and cash equivalents at the beginning of the year 1.090.138 1.065.807 Cash and cash equivalents at the end of the year 36 577.059 1.090.138

The notes on pages 66 to 126 form an integral part of the financial statements. 65 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 HELLENIC BANK GROUP NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2008

1. INCORPORATION AND PRINCIPAL ACTIVITY Hellenic Bank Public Company Ltd (the “Company”) was incorporated in Cyprus and is a public company in accordance with the provisions of the Companies Law Cap. 113, the Cyprus Stock Exchange Laws and Regulations and the Income Tax Laws. The Company’s registered office is located at 200, Corner of Limassol and Athalassa Avenues, 2025 Strovolos, P. O. Box 24747, 1394 Nicosia.

At the shareholders’ Extraordinary General Meeting on 1st June 2005 it was decided to change the Company’s name from Hellenic Bank Limited to Hellenic Bank Public Company Limited. The change was filed with the Companies’ Registrar on 6 June 2005.

The principal activity of the Group is the provision of a wide range of banking and financial services, including hire purchase, leasing, investment and insurance services, as well as trustee and factoring services.

2. SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied consistently by Group companies.

2.1. Basis of preparation (a) Statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. In addition, the financial statements have been prepared in accordance with the requirements of the Cyprus Companies Law, Cap.113 and the Cyprus Stock Exchange Laws and Regulations.

(b) Basis of measurement The financial statements have been prepared on the historical cost basis except for the following which are measured at fair value: ñ financial assets available for sale ñ financial instruments at fair value through profit or loss ñ derivative financial instruments

Property is measured at revalued amount.

(c) Functional and presentation currency The financial statements are presented in euro which is the main functional currency that most faithfully represents the economic effects of the underlying transactions and activities of the Group entities.

With the introduction of the euro as the official currency of the Republic of Cyprus as from 1st January 2008, the functional currency of the Bank and its subsidiaries in Cyprus has changed from Cyprus pounds to euro. As a result, the financial position of the Group on 1st January 2008 has been converted to euro based on the fixed conversion rate of ú1=í0,585274. The fixed conversion rate has also been used for the conversion of all comparative amounts presented in these financial statements.

(d) Use of estimates and judgments The preparation of financial statements requires management to make use of judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable in the circumstances and the results of which form the basis of making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. 66 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised HELLENIC BANK GROUP in the period in which the estimate is revised and in any future periods affected.

2.2. Adoption of new and revised International Financial Reporting Standards (IFRSs) and interpretations During the current year, the Group adopted all the new and revised IFRSs that are relevant to its operations and are effective for accounting periods beginning on the 1st of January 2008. This adoption did not have a material effect on the accounting policies of the Group.

All IFRSs issued by the International Accounting Standards Board (IASB) and effective for the year ended 31 December 2008 have been adopted by the European Union (EU), with the exception of Interpretation IFRIC 12: Service concession arrangements and certain provisions of IAS 39: Financial instruments: Recognition and measurement relating to portfolio hedge accounting.

2.3. Standards and interpretations that are not yet effective Up to the date of approval of the financial statements the following new and revised standards, interpretations and amendments to existing standards have been issued by the International Accounting Standards Board, and have not been applied in preparing these financial statements, as they are not effective for the year ended 31 December 2008:

(i) Standards and interpretations adopted by the European Union (a) IFRS 8: Operating segments (effective for annual periods beginning on or after the 1st of January 2009) IFRS 8 replaces IAS 14 “Segment reporting” and uses a management approach in the provision of segmental information. IFRS 8 requires changes in the presentation and disclosure of information, based on internal reports regularly reviewed by management for evaluating segment performance and deciding how to allocate resources to segments. This standard will have no effect on the Group’s total profit or equity. The Group is currently in the process of assessing the impact of this standard on its financial statements.

(b) IAS 1 (Amendment): Presentation of financial statements: A revised presentation (effective for annual periods beginning on or after the 1st of January 2009) The amended IAS 1 introduces the term total comprehensive income, which represents changes in equity during a period other than those changes resulting from transactions with owners in their capacity as owners. Total comprehensive income may be presented in either a single statement of comprehensive income (effectively combining both the income statement with all non-owner changes in equity) or in an income statement and a separate statement of comprehensive income. The Group is assessing the consequences of the amended IAS 1 on its financial statements and will apply its provisions from 1 January 2009.

(c) IAS 23 (Amendment): Borrowing costs (effective for annual periods beginning on or after the 1st of January 2009) The amendment to IAS 23 removes the option to expense borrowing costs and requires the capitalisation of borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. The Group is assessing the consequences of the amended IAS 23 and expects that these amendments will have no significant impact on its financial statements.

(d) IFRS 2 (Amendment): Share-based payment: Vesting conditions and cancellations (effective for annual periods beginning on or after the 1st of January 2009) The amendment clarifies that vesting conditions are service conditions and performance conditions only. It also specifies that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The Group expects that this amendment will have no impact on its financial statements.

(e) IAS 32 and IAS 1 (Amendments): Puttable financial instruments and obligations arising on liquidation (effective for annual periods beginning on or after the 1st of January 2009) The amendment to IAS 32 requires entities to classify certain types of financial instruments as equity, provided they have 67 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 2. SIGNIFICANT ACCOUNTING POLICIES (continued)

particular features and meet specific conditions. The amendment to IAS 1 requires additional disclosures about the instruments affected by the amendments. The Group expects that these amendments will have no impact on its financial statements.

(f) Improvements to IFRSs (effective for annual periods beginning on or after the 1st of January 2009, except for the improvements to IFRS 5 which are effective for annual periods beginning on or after the 1st of July 2009) The improvements concern a group of amendments to IFRSs published by the International Accounting Standards Board as part of its annual improvements project, according to which necessary but non-urgent amendments to IFRSs are made that will not be included as part of another major project. The amendments are presented in two parts: (i) accounting changes for presentation, recognition or measurement purposes, and (ii) terminology or editorial changes with minimum effect on accounting. The Group does not expect these amendments to have any significant impact on its financial statements.

(g) IFRS 1 and IAS 27 (Amendments): Cost of an investment in subsidiary, jointly controlled entity or associate (effective for annual periods beginning on or after the 1st of January 2009) The amendments allow first-time adopters of IFRSs to use a deemed cost of either fair value or the carrying amount under previous accounting practice to measure the initial cost of investments in subsidiaries, jointly controlled entities and associates in the separate financial statements. These amendments will have no impact on the Group’s financial statements.

(h) IFRIC 13: Customer loyalty programmes (effective for annual periods beginning on or after the 1st of July 2008) The interpretation addresses the accounting by entities that grant loyalty award credits to customers who buy their products or services. The interpretation requires entities to allocate some of the proceeds of the initial sale to the award credits and recognise these proceeds as revenue only when they have fulfilled their obligations by supplying the relevant awards. The Group expects that this interpretation will have no impact on its financial statements.

(ii) Standards and interpretations not adopted by the European Union (a) IAS 27 (Amendment): Consolidated and separate financial statements (effective for annual periods beginning on or after the 1st of July 2009) The amended IAS 27 requires that changes in the ownership interest of a parent in a subsidiary, that do not result in loss of control, will be accounted for as an equity transaction and will have no impact on goodwill nor will they give rise to a gain or loss. The amendments also specify the accounting treatment upon loss of control of a subsidiary and the information that should be disclosed by an entity to allow the users of the financial statements to evaluate the nature of the entity’s relationship with its subsidiaries. The Group is currently assessing the impact of the amended standard on its financial statements and will apply the relevant amendments from the date they become effective.

(b) IAS 39 (Amendment): Financial instruments: Recognition and measurement: Eligible hedged items (effective for annual periods beginning on or after the 1st of July 2009) The amendment clarifies how the existing principles underlying hedge accounting should be applied in two particular situations, in the designation of: (i) a one-sided risk in a hedged item, and (ii) inflation in a financial hedged item. The Group expects that this amendment will not have an impact on its financial statements.

(c) IFRS 3 (Revised): Business combinations (effective for annual periods beginning on or after the 1st of July 2009) The revised IFRS 3 introduces a number of significant changes in accounting for acquisitions and transactions with non- controlling interest. According to the changes, entities have a choice to measure non-controlling interest in the acquiree either at its fair value or at its proportionate interest in the acquiree’s net assets. Additionally, contingent consideration is measured at fair value at the date of acquisition and subsequent changes will no longer result in a change to goodwill. Also, acquisition-related costs will be expensed through profit or loss at the time the services are received. The Group is currently evaluating the impact of the revised standard on its financial statements and will apply the said changes as from the date on which they become effective. 68 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(d) IFRS 1 (Revised): First-time adoption of IFRSs (effective for annual periods beginning on or after the 1st of January HELLENIC BANK GROUP 2009) The revised version of IFRS 1 has an improved structure but does not contain any technical changes. Since it was originally issued, IFRS 1 has been amended many times and as a result its text was becoming increasingly complex. With this revision, the standard was restructured to make it easier for readers to understand and to allow it to accommodate more easily any future changes that might be considered necessary. The revised IFRS 1 will have no impact on the Group’s financial statements.

(e) Interpretation IFRIC 15: Agreements for the construction of real estate (effective for annual periods beginning on or after the 1st of January 2009) Interpretation 15 standardises the accounting practice for the recognition of revenue from the sale of units, such as apartments or houses, before construction is complete. The interpretation provides guidance on how to determine whether an agreement for the construction of real estate is within the scope of IAS 11 “Construction contracts” or IAS 18 “Revenue” and when revenue from the construction should be recognised. The Group expects that this interpretation will not have an impact on its financial statements.

(f) Interpretation IFRIC 16: Hedges of a net investment in a foreign operation (effective for annual periods beginning on or after the 1st of October 2008) IFRIC 16 provides guidance on accounting for the hedge of a net investment in a foreign operation. The main change is the elimination of the possibility of an entity applying hedge accounting for a hedge of the foreign exchange differences between the functional currency of a foreign operation and the presentation currency of the parent’s consolidated financial statements. The Group expects that this interpretation will have no impact on its financial statements.

(g) Interpretation IFRIC 17: Distributions of non-cash assets to owners (effective for annual periods beginning on or after the 1st of July 2009) The interpretation clarifies that an entity should measure dividends payable at the fair value of the net assets to be distributed and recognise the difference between the dividend paid and the carrying amount of the net assets distributed in profit or loss. The Group expects that this interpretation will have no impact on its financial statements.

(h) Interpretation IFRIC 18: Transfers of assets from customers (effective for annual periods beginning on or after the 1st of July 2009) The interpretation clarifies the requirements of IFRSs for agreements in which an entity receives from a customer an item of property, plant and equipment that the entity must then use either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services (such as a supply of electricity, gas or water). The Group expects that this interpretation will have no impact on its financial statements.

2.4. Basis of consolidation Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Business combinations are accounted for by applying the acquisition method. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Associates are entities in which the Group has significant influence, but not control, over their financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 per cent of the voting power of another entity. Associates are accounted for in the consolidated financial statements using the equity method.

The investment in Athena Cyprus Public Company Ltd was included in the financial statements as an associate until 29 May 2007. Following the acquisition of additional shares in the company by the Bank, Athena Cyprus Public Company Ltd is accounted for as a subsidiary company. 69 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Intra-group balances, and income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

Minority interest relates to that portion of the profit or loss and net assets of a subsidiary, attributable to equity interests that are not owned directly or indirectly by the Group. The profits or losses attributable to minority interest are disclosed on the face of the income statement as allocation of the profit or loss for the period. Minority interest is presented on the face of the balance sheet, within equity, separately from equity attributable to shareholders of the parent.

2.5. Investments in subsidiaries and associates Investments in subsidiaries and associates are presented at cost in the Company’s balance sheet less provision for impairment, where applicable.

2.6. Foreign currency (a) Foreign currency transactions Transactions in foreign currencies are translated into the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated into the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated into the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of a financial liability designated as the hedging instrument in a hedge of the net investment in a foreign operation or in a qualifying cash flows hedge, which are recognised directly in equity.

(b) Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into euro at exchange rates at the balance sheet date. The income and expenses of foreign operations are translated into euro at the average exchange rates for the year. Foreign currency differences on translation of foreign operations are recognised directly in the translation reserve within equity. When a foreign operation is disposed of, the cumulative amount of the exchange differences recognised in equity and relating to that foreign operation is reclassified to profit or loss when the gain or loss on disposal is recognised.

2.7. Turnover Group turnover includes interest income, fee and commission income, gains on disposal and revaluation of foreign currencies and financial instruments and other income.

2.8. Interest income and expense Interest income and expense are recognised in the income statement using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability to the net carrying amount of the financial asset or liability. The effective interest rate is established on initial recognition of the financial instrument and is not revised subsequently.

Interest income on non-performing loans is suspended and is recognised in the income statement upon collection. This interest income is transferred to a temporary income suspension account which is included in the total of provisions for impairment of loans and advances.

2.9. Fee and commission income and expense Fee and commission income and expense is recognised in the income statement on an accruals basis, as the related services are performed. 70 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

2.10. Dividend income HELLENIC BANK GROUP Dividend income is recognised when the Group’s right to receive payment is established.

2.11. Income from hire purchase and leasing activities Income from hire purchase and leasing activities recognised in the income statement is calculated in a systematic manner on the basis of instalments falling due, in order to produce a constant periodic rate of return on the net investment outstanding.

Hire purchase and leasing debtors are included in loans and advances to customers in the consolidated balance sheet, net of unearned charges attributable to future instalments.

2.12. Employee retirement benefits The Group provides defined retirement benefits to its permanent employees in Cyprus in the form of lump sum payments estimated by reference to the employee’s salary and length of service on retirement. The cost of providing retirement benefits is borne exclusively by the Group and is estimated annually using the actuarial Projected Unit Credit Method.

In respect of actuarial gains and losses that arise in calculating the Group’s obligation in respect of the plan, to the extent that any cumulative unrecognised actuarial gains or losses at the end of the previous reporting period exceed the greater of 10% of the present value of the defined benefit obligation and 10% of the fair value of the plan assets at that date, that portion is recognised in the income statement over the expected average remaining working lives of the employees participating in the plan.

The Group also provides other defined contribution pension benefits to its employees in Greece and to employees of its general insurance companies. The cost in respect of the defined contribution plans is recognised in the income statement on an accruals basis.

2.13. Income tax Income tax expense comprises current and deferred tax.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority which permits the entity to make or receive a single net payment, and the Group intends either to settle taxes on a net basis or to realise the asset and settle the obligation simultaneously.

2.14. Financial instruments (a) Recognition The Group initially recognises loans and advances to customers, customer deposits and loan capital issued on the date at which they are originated. All other financial assets and liabilities are initially recognised on the trade date at which the Group becomes a party to the contractual provisions of the instrument. 71 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(b) Derecognition The Group derecognises a financial asset when the contractual rights to the cash flows expire, or when it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest or obligation in transferred assets that is created or retained by the Group is recognised as a separate asset or liability.

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.

(c) Offsetting Financial assets and liabilities are set off and the net amount presented in the balance sheet only when the Group has a legal right to set off the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis only when permitted by the accounting standards, or for gains and losses arising from a group of similar transactions.

(d) Initial measurement A financial asset or financial liability is initially measured at fair value plus (for an item not subsequently measured at fair value through profit or loss) transaction costs that are directly attributable to its acquisition or issue.

(e) Amortised cost measurement The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal prepayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.

(f) Fair value measurement Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction on the measurement date.

When available, the Group measures the fair value of an instrument using quoted prices in an active market for that instrument. A market is regarded active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm’s length basis.

If a market for a financial instrument is not active, the Group establishes fair value using a valuation technique. Valuation techniques include using recent arm’s length transactions between knowledgeable, willing parties, reference to the current fair value of another instrument that is substantially the same and discounted cash flow analyses. The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to the Group, incorporates all factors that market participants would consider in setting a price, and is consistent with accepted economic methodologies for pricing financial instruments. Inputs to valuation techniques represent market expectations and measures of the risk- return factors inherent in the financial instrument.

(g) Derivatives Derivatives mainly include forward contracts, interest rate and currency swaps, credit default swaps and futures.

Derivatives are initially recognised and subsequently measured at fair value. When their fair value is positive derivatives are included in other assets and when their fair value is negative they are included in other liabilities. Changes in the fair value of derivatives held for trading are recognised in the income statement under net gains on disposal and revaluation of foreign currencies and financial instruments. 72 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(h) Loans and receivables HELLENIC BANK GROUP Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and that the Group does not intend to sell immediately or in the near term. Loans and receivables include loans and advances to customers.

Loans and receivables are subsequently measured at amortised cost using the effective interest method less provisions for impairment.

(i) Investment securities The Group has classified its financial assets that comprise of government securities and other eligible bills, debt securities and equity securities, under the following three categories. Investment securities are classified in these categories upon their initial recognition.

(i) Held to maturity Held to maturity investments are non-derivative assets with fixed or determinable payments and fixed maturity that the Group has the positive intent and ability to hold to maturity.

After initial measurement, held to maturity investments are measured at amortised cost using the effective interest method less provisions for impairment.

Any sale or reclassification of a more than insignificant amount of held to maturity investments not close to their maturity, will result in the reclassification of all held to maturity investments as available for sale, and prevent the Group from classifying investment securities as held to maturity for the current and the following two financial years.

(ii) At fair value through profit or loss Financial instruments at fair value through profit or loss are analysed in two categories:

Instruments held for trading: include financial instruments acquired or incurred principally for the purpose of selling or repurchasing them in the near term or which are part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking.

Instruments designated as at fair value through profit or loss upon initial recognition: include financial instruments initially designated in this category when this designation results in more relevant information, because either: ñ it eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases; or ñ a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the Group’s key management personnel.

Financial instruments at fair value through profit or loss are measured at their fair value and fair value changes are recognised in profit or loss.

(iii) Available for sale Available for sale investments are non-derivative financial assets that are designated as available for sale or are not classified under another category of financial assets. Available for sale investments may be held for an undetermined period of time or may be sold in response to changes in market risks or liquidity requirements.

73 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Subsequent to initial recognition, available for sale investments are measured at fair value and changes therein, other than impairment losses, are recognised directly in equity. When an investment is sold or impaired, the cumulative gain or loss previously recognised in equity is recognised in profit or loss.

(j) Loan capital Loan capital is initially measured at the fair value of the consideration received minus transaction costs that are directly attributable to the issue of the loan capital. Subsequently it is measured at amortised cost using the effective interest method, in order to amortise the difference between the cost and the redemption value, over the period to the earliest date that the Bank has the right to redeem the loan capital.

(k) Customer deposits and other customer accounts Subsequent to initial recognition, customer deposits and other customer accounts are measured at amortised cost using the effective interest method, except for certain deposits linked to derivatives that the Group has elected to classify as financial liabilities at fair value through profit or loss. Any changes in fair value in respect of deposits designated as at fair value through profit or loss are recognised in the income statement.

2.15. Impairment (a) Financial assets At the end of each reporting period the Group assesses whether there is any objective evidence that financial assets not carried at fair value through profit or loss are impaired. Financial assets are impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset, and that loss event has an impact on the future cash flows of the asset that can be estimated reliably.

Objective evidence that financial assets are impaired can include default or delinquency by a borrower, restructuring of a loan or advance by the Group on terms that the Group would not otherwise consider, indications that the borrower or issuer will enter bankruptcy, the disappearance of an active market for a security, or other observable data relating to a group of assets such as adverse changes in the payment status of borrowers or issuers in the group, or economic conditions that correlate with defaults in the group. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

(i) Loans and advances to customers The Group considers evidence of impairment in its loan portfolio at both a specific and collective level. All individually significant loans are assessed for specific impairment. All individually significant loans found not to be specifically impaired as well as loans that are not individually significant are then collectively assessed for any impairment by grouping together loans with similar risk characteristics. Any collective impairment loss on these groups is not charged to specific loans. In assessing collective impairment the Group uses historical trends of the probability of default demonstrated by the relevant groups with similar risk characteristics.

Impairment loss on loans and advances to customers is measured as the difference between the carrying amount of the asset and the present value of estimated future cash flows discounted at the loan’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against loans and advances.

When a subsequent event causes the amount of the impairment loss to decrease or amounts are collected from impaired loans, the decrease in impairment loss is reversed through profit or loss.

74 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(ii) Held to maturity investments HELLENIC BANK GROUP If there is objective evidence that an impairment loss on held to maturity investments carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the investment’s carrying amount and the present value of estimated future cash flows discounted at the investment’s original effective interest rate. The amount of the loss is recognised in profit or loss and the carrying amount of held to maturity investments is reduced.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed in profit or loss.

(iii) Available for sale investments When there is objective evidence that an available for sale investment is impaired, the cumulative loss that had been recognised in equity is reclassified from equity to profit or loss. The amount of the cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost (net of any principal prepayment and amortisation) and current fair value, less any impairment loss on that investment previously recognised in profit or loss.

If, in a subsequent period, the fair value of an impaired available for sale debt security increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss will be reversed, with the amount of the reversal recognised in profit or loss. Impairment losses recognised in profit or loss for impaired available for sale equity securities are not reversed through profit or loss.

(b) Non-financial assets The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

2.16. Property, plant and equipment Land and buildings are initially recognised at cost and are subsequently measured at fair value less subsequent accumulated depreciation and impairment losses. Fair value is determined from market-based valuations undertaken by professionally qualified valuers. Plant and equipment is measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes all expenditure that is directly attributable to the acquisition of the asset.

Depreciation for property, plant and equipment is recognised in profit or loss on a straight line basis over the estimated useful lives of the assets. Land is not depreciated.

The depreciation rates used are as follows:

Buildings 2% Leasehold improvements 20% Plant and equipment 10% to 25%

Depreciation methods, useful lives and residual values are reassessed at each reporting date. 75 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Gains and losses on disposal of property, plant and equipment, that are determined as the difference between the net disposal proceeds and the carrying amount of the asset, are included in profit or loss when the item is derecognised.

2.17. Property revaluation reserve Any surplus arising on the revaluation of land and buildings is credited to the property revaluation reserve that is included in equity. The depreciation charge attributable to the revaluation, net of deferred taxation, is transferred annually from the property revaluation reserve to revenue reserves. Upon disposal of revalued property, any relevant accumulated revaluation surplus which remains in the property revaluation reserve is also transferred to revenue reserves.

2.18. Intangible assets Goodwill Goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquired entities at the date of acquisition. When the excess is negative (negative goodwill), it is recognised immediately in profit or loss.

Subsequent to initial recognition, goodwill is measured at cost less accumulated impairment losses. The carrying amount of goodwill is reviewed for impairment at least on an annual basis.

Goodwill arose on the acquisition of the onshore operations of Barclays Bank PLC in Cyprus, the acquisition of Pancyprian Insurance Ltd and Athena Cyprus Public Company Ltd, as well as the acquisition of the Russian company Format Invest Limited.

It also includes goodwill relating to the branch network that is amortised through the income statement on a straight-line basis over the lease term.

Computer software Computer software is measured at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful life of the software, estimated at five years.

2.19. Cash and cash equivalents Cash and cash equivalents include cash and balances with Central Banks, government securities and other eligible bills, placements with and amounts due to other banks and repurchase agreements, with original maturities of less than three months.

Cash and cash equivalents is presented in the balance sheet at amortised cost.

2.20. Share capital The difference between the issue price of share capital and its nominal value is recognised in the share premium reserve.

When subsidiaries of the Group acquire shares of the parent company, the fair value of these treasury shares is shown in revenue reserves included in equity. Any gain or loss on disposal of these shares is recognised in equity.

2.21. Derivatives and hedge accounting The Group designates certain derivatives held for risk management purposes as hedging instruments in qualifying hedging relationships. Hedging relationships are classified as fair value hedges or cash flow hedges. A hedging relationship qualifies for hedge accounting if the following conditions are met:

(a) Existence of formal documentation describing the derivative and the hedging objectives, as well as the specific hedged item. 76 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(b) Existence of documented risk management strategy according to which the hedge is expected to be highly effective in HELLENIC BANK GROUP achieving offsetting changes in fair value or cash flows attributable to the hedged risk throughout the financial reporting periods for which the hedge was designated.

(c) Maintenance of reliable monitoring systems and verification of the high effectiveness of the hedging derivative on an ongoing basis.

For fair value hedges, changes in the fair value of the derivative are recognised in profit or loss together with changes in the fair value of the hedged item.

For cash flow hedges, the effective portion of changes in the fair value of the derivative is recognised directly in equity. The amount recognised in equity is removed and included in profit or loss in the same period as the hedged cash flows affect profit or loss under the same income statement line as the hedged item. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss.

If the hedge no longer meets the criteria for hedge accounting the relevant adjusting entries are made and hedge accounting is discontinued.

For the remaining derivatives where the criteria are not satisfied in order to qualify for hedge accounting or which are held for trading, the accounting policies for financial instruments held for trading are applied. Many of the derivatives have been acquired with the intention of hedging interest rate risks or foreign currency risks. Certain derivative transactions, while providing effective economic hedges under risk management, do not qualify for the use of hedge accounting. These derivatives are included under other assets or liabilities, with any changes in their fair value recognised in the income statement for the year. These include derivatives held for offsetting interest rate or other risks, in relation to other assets and liabilities that are selectively designated as at fair value through profit or loss and which do not qualify for the use of hedge accounting.

The Group also hedges the foreign currency risk that derives from the translation to euro of the net position of its foreign subsidiaries by maintaining an open foreign exchange position. All exchange differences resulting from the translation of the open foreign exchange position are recognised in the translation reserve.

2.22. Repurchase agreements Repurchase agreements represent agreements with Central Banks. Cash received under the agreements, including accrued interest, is recognised as a liability on the balance sheet. The relevant debt securities disposed to be repurchased at a future date are not derecognised from the balance sheet. The difference between the sales price and repurchase price is recognised as interest expense over the duration of the agreement using the effective interest rate method.

2.23. Segment reporting A segment is a distinguishable component of the Group that is engaged either in providing related products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. Segment reporting is presented in respect of the Group’s business and geographical segments.

The Group analyses its financial position and performance as follows:

Primary segment: The financial position and performance are presented based on their geographical organisation. The Group carries out its operations in Cyprus and abroad.

77 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Secondary Segment: The financial position and performance are presented based on the following business segments:

ñ Banking and financial services ñ Insurance services

2.24. Comparatives Comparatives presented in the financial statements are restated, where considered necessary, to comply with changes in the presentation of the current year.

3. INTEREST INCOME The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Interest income from cash and balances with Central Banks 5.089 11.976 5.079 11.976 Interest income from government securities and other eligible bills 16.587 19.938 16.282 19.719 Interest income from placements with other banks 30.780 50.327 30.116 53.802 Interest income from loans and advances to customers 285.807 252.111 276.747 237.699 Interest income from debt securities 69.195 79.296 69.284 79.151 Interest income from other financial instruments 39.123 34.862 39.123 34.857 446.581 448.510 436.631 437.204

4. INTEREST EXPENSE The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Interest expense on deposits by banks 14.402 16.246 14.325 17.554 Interest expense on repurchase agreements 2.676 -- 2.676 -- Interest expense on customer deposits and other customer accounts 186.990 183.659 188.365 181.939 Loan capital interest expense 12.887 11.504 13.048 11.638 Interest expense on other financial instruments 34.156 27.307 34.130 27.306 251.111 238.716 252.544 238.437

5. FEE AND COMMISSION INCOME The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Banking fees and commissions 56.759 53.860 59.030 54.646 Commissions from insurance operations 3.030 3.281 -- -- Asset management fees 1.334 2.284 461 1.480 Other fees and commissions 3.143 2.999 1.079 583 64.266 62.424 60.570 56.709

6. FEE AND COMMISSION EXPENSE The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Banking fees and commissions 1.445 1.177 1.334 1.177 Commissions for insurance operations 3.115 2.956 -- -- Other fees and commissions 1.126 743 699 566 5.686 4.876 2.033 1.743 78 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

7. NET (LOSSES)/GAINS ON DISPOSAL AND REVALUATION OF FOREIGN CURRENCIES HELLENIC BANK GROUP AND FINANCIAL INSTRUMENTS The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Gain on disposal and revaluation of foreign currencies 21.495 24.415 22.804 24.060 Gain/(loss) on disposal of debt securities, government securities and other eligible bills and other financial instruments: Instruments available for sale 11.526 (1.193) 11.526 (1.193) Instruments at fair value through profit or loss (4.945) (506) (4.945) (506) (Deficit)/surplus on revaluation of debt securities, government securities and other eligible bills and other financial instruments: Instruments at fair value through profit or loss (32.624) 4.005 (32.624) 4.005 Gain/(loss) on disposal of equity securities: Instruments available for sale 1.260 6.464 1.128 4.072 Instruments at fair value through profit or loss (5.417) 3.791 (930) 3.697 (Deficit)/surplus on revaluation of equity securities: Instruments at fair value through profit or loss (11.656) (101) (1.306) 767 Impairment loss on equity securities, debt securities and government securities and other eligible bills: Instruments available for sale (5.218) (3.880) (4.031) (3.873) Instruments held to maturity (4.835) (3.810) (4.835) (3.810) (30.414) 29.185 (13.213) 27.219

The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Impairment loss on equity securities, debt securities and government securities and other eligible bills: Listed investments (9.517) (7.690) (8.866) (7.683) Unlisted investments (536) ------(10.053) (7.690) (8.866) (7.683)

The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Impairment loss on equity securities, debt securities and government securities and other eligible bills: Equity securities (1.187) (7) -- -- Debt securities (6.427) (6.844) (6.427) (6.844) Government securities and other eligible bills (2.439) (839) (2.439) (839) (10.053) (7.690) (8.866) (7.683)

79 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 8. OTHER INCOME The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Dividend income 2.263 2.122 12.211 4.432 Gain/(loss) on disposal of subsidiary company -- 202 -- (610) Income from insurance operations 13.213 11.405 -- -- Negative goodwill on the acquisition of subsidiary company 860 6.749 -- -- Other income 3.240 3.511 2.552 3.101 19.576 23.989 14.763 6.923

9. STAFF COSTS The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Staff remuneration 86.423 89.489 78.606 80.921 Staff retirement benefits 18.067 16.642 16.401 15.024 104.490 106.131 95.007 95.945

The Group provides retirement benefits to its employees in Cyprus, which cover 73% of the Group’s total number of employees, in the form of lump sum payments based on a defined benefit retirement plan. The Group’s policy is to carry out an independent actuarial valuation of the liabilities with regard to the retirement benefit plan every two to three years. The most recent independent actuarial valuation was performed at 31 December 2008. The Group provides a specific pension plan to its employees in Greece and other retirement benefit plans to the rest of its employees in Cyprus.

The number of employees of the Group at 31 December 2008 was 2.063 (2007:1.916 employees) and of the Bank 1.872 (2007:1.723 employees).

The main actuarial assumptions used in the actuarial valuations of the defined benefit retirement plan are as follows:

2008 2007 Discount rate 5,75% 5,25% Long term return on Plan assets 7,60% 6,00% Salary increases 6,50% 6,50%

During the year an amount of ú17.420 thousand (2007: ú16.116 thousand) was charged to the income statement.

The amount recognised in the income statement is analysed as follows:

2008 2007 ú'000 ú'000 Service cost 8.604 8.728 Interest 8.816 7.388 17.420 16.116

80 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

9. STAFF COSTS (continued)

Movement in provisions for retirement benefit obligations as shown under other liabilities (Note 28): HELLENIC BANK GROUP

2008 2007 ú'000 ú'000 1 January 134.294 123.084 Provision for the year 17.420 16.116 Payments to retired members (1.972) (4.906) 31 December 149.742 134.294

At 31 December 2008, Plan assets include shares and warrants, with a total market value of ú5.868 thousand (2007: ú25.052 thousand). The return on Plan assets during 2008 was negative and reached 102% while the value of Plan assets decreased to 70%.

The actuarial position at 31 December is analysed as follows:

2008 2007 ú'000 ú'000 Present value of defined benefit obligation 169.830 167.925 Fair value of Plan assets (7.893) (23.967) 161.937 143.958 Actuarial deficits recognised over the remaining working lives of the employees (12.195) (9.664) Provision for defined benefit obligation in the balance sheet 149.742 134.294

10. SHARE OF RESULTS OF ASSOCIATE COMPANY The share of results of associate company at 31 December 2006 represented 29,43% of the profit for the year of Athena Cyprus Public Company Ltd, a company listed on the Cyprus Stock Exchange which carries out its operations mainly in Cyprus. The principal activity of the associate company is the investment in securities listed on the Cyprus Stock Exchange as well as in securities of private companies that intend to, and are eligible to, be listed on the Cyprus Stock Exchange or in other companies with high profitability prospects.

The investment in Athena Cyprus Public Company Ltd was included in the financial statements as an associate company until 29 May 2007. Following the acquisition of additional shares of the company by the Bank, Athena Cyprus Public Company Ltd is accounted for as a subsidiary in accordance with the provisions of International Financial Reporting Standards.

11. PROFIT BEFORE TAXATION Profit before taxation is stated after charging the following:

The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Amortisation of intangible assets (1.646) (1.731) (1.599) (1.669) Impairment loss on goodwill -- (3.209) -- -- Interest expense on loan capital (12.887) (11.504) (13.048) (11.638) Operating lease rentals for land and buildings (6.474) (5.772) (6.206) (5.510) Auditors' remuneration (316) (301) (180) (154)

81 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 12. TAXATION The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Corporation tax 10.512 16.522 9.447 15.122 Special contribution for defence 158 46 4 -- Prior years’ taxes 52 1.946 -- 1.905 Deferred tax 2.572 (830) 2.592 (919) Capital gains tax -- 17 -- 17 13.294 17.701 12.043 16.125

According to the Income Tax Law 118(I)/02 as implemented from the 1st of January 2003, the Bank’s profit and that of its subsidiaries in Cyprus is subject to corporation tax at the rate of 10%. In addition, taxable profits are no longer subject to defence fund contribution.

In accordance with article 13 of the Income Tax Law 118(I)/02, any tax losses of the Group companies in Cyprus which are not offset against taxable profits of other Group companies in Cyprus, are carried forward and offset against future taxable profits.

Profits earned abroad are subject to taxation at the rates applicable in the country in which the operations are carried out.

As from the 1st of January 2003, companies which do not distribute 70% of their profits after tax, as defined by the Special Contribution for the Defence of the Republic Law ,during the two years after the end of the year of assessment to which profits refer, will be deemed to have distributed this amount as dividend. Special contribution for defence at 15% will be payable on such deemed dividend to the extent that shareholders (individuals and companies) at the end of the period of two years from the end of the year of assessment to which the profits refer are Cyprus tax residents. The amount of this deemed dividend distribution is reduced by any actual dividend paid out of the profits of the relevant year at any time. This special contribution for defence is paid by the company on account of the shareholders.

82 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

12. TAXATION (continued)

Reconciliation of taxation based on taxable income and taxation based on accounting profits: HELLENIC BANK GROUP

The Group 2008 2007 ú'000 ú'000 Group profit before taxation 44.618 152.601

Taxation based on applicable tax rates 7.394 15.384 Differences in tax rates applicable in Cyprus and other countries 4.355 791 Expenses non tax deductible 6.503 3.736 Non taxable income (3.845) (2.643) Prior years’ tax losses -- (232) Tax effect of losses from overseas operations (1.165) (1.281) Prior years’ taxes 52 1.946 Taxation for the year 13.294 17.701

The Bank 2008 2007 ú'000 ú'000 Bank profit before taxation 60.784 134.000

Taxation based on applicable tax rates 8.873 13.523 Differences in tax rates applicable in Cyprus and other countries 4.383 768 Expenses non tax deductible 4.077 3.641 Non taxable income (4.080) (2.431) Tax effect of losses from overseas operations (1.210) (1.281) Prior years’ taxes -- 1.905 Taxation for the year 12.043 16.125

13. DIVIDEND 2008 2007 ú'000 ú'000 Final dividend 2006 paid at 16% (Cí4 cent per share) -- 17.862 Interim dividend 2007 paid at 20% (Cí5 cent per share) -- 23.128 Final dividend 2007 paid at 26% (ú11 cent per share) 32.009 -- Interim dividend 2008 paid at 12% (ú5 cent per share) 14.798 --

A percentage of 72,49% of the net final dividend 2006 was reinvested in shares. The number of shares arising from the reinvestment of dividend amounted to 3.760.850.

A percentage of 79,71% of the net interim dividend 2007 was reinvested in shares. The number of shares arsing from the reinvestment of dividend amounted to 4.096.671.

A percentage of 40,04% of the net final dividend 2007 was reinvested in shares. The number of shares arising from the reinvestment of dividend amounted to 4.975.266.

A percentage of 17,02% of the net interim dividend 2008 was reinvested in shares. The number of shares arising from the reinvestment of dividend amounted to 1.346.709.

83 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 13. DIVIDEND (continued)

The Board of Directors proposes the payment of a final dividend for 2008 of ú0,02 per share (total amount of proposed final dividend is approximately ú6 million) in addition to the interim dividend of ú0,05 per share paid in October 2008. The proposed final dividend for the year 2008 is subject to approval at the Annual General Meeting and will be paid on 29 June 2009 to the registered shareholders at 29 May 2009. The ex-dividend date will be the 27th of May 2009. Based on this date, all share transactions until Tuesday 26 May 2009 (inclusive) are entitled to final dividend distribution.

The Board of Directors will also provide to the shareholders, with a written notification, the option to reinvest in part or in full the net amount of the proposed final dividend in additional ordinary shares of the Bank, rather than paying the final dividend in cash. The basis for the reinvestment will be the average buy/sell price of the Bank’s share in the Cyprus Stock Exchange at the close of the first five (5) business days from the ex-final dividend date (that is, from 27 May to 2 June 2009), less a discount of 15%.

14. EARNINGS PER SHARE The Group The Bank Year ended Year ended 31 December 31 December 2008 2007 2008 2007 Basic and fully diluted earnings per share Profit attributable to shareholders (ú thousand) 33.973 133.068 48.741 117.875

Average number of shares in issue during the year (thousand) 293.346 277.589 293.346 277.589

Basic and fully diluted earnings per share (cent ú) 11,6 48,0 16,6 42,5

At 31 December 2008 and 31 December 2007 there was no effect on the fully diluted earnings per share due to the expiry of the exercise period of Share Warrants on 30 November 2007.

15. CASH AND BALANCES WITH CENTRAL BANKS At 31 December 2008, balances with Central Banks include the deposits for the minimum liquidity requirements amounting to ú140.626 thousand (2007: ú58.260 thousand) for the Group and ú140.626 thousand (2007: ú56.479 thousand) for the Bank.

16. GOVERNMENT SECURITIES AND OTHER ELIGIBLE BILLS The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Securities held for trading 45.678 34.997 44.410 33.798 Securities at fair value through profit or loss 89.249 -- 89.249 -- Securities available for sale 1.053.835 512.282 1.048.707 506.318 1.188.762 547.279 1.182.366 540.116

Listed securities 1.188.762 539.539 1.182.366 532.376 Unlisted securities -- 7.740 -- 7.740 1.188.762 547.279 1.182.366 540.116

Within three months 16.418 52.423 16.418 52.423 Between three months and one year 69.374 29.052 68.827 27.977 Between one year and five years 669.500 90.961 666.465 87.487 Over five years 433.470 374.843 430.656 372.229 1.188.762 547.279 1.182.366 540.116 84 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

16. GOVERNMENT SECURITIES AND OTHER ELIGIBLE BILLS (continued)

The Group The Bank HELLENIC BANK GROUP 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Provisions for impairment Balance 1 January 839 -- 839 -- Provision for impairment for the year 2.439 839 2.439 839 Balance 31 December 3.278 839 3.278 839

Government securities and other eligible bills are acceptable for refinancing by Central Banks.

17. PLACEMENTS WITH OTHER BANKS The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Interbank accounts 31.157 52.979 30.714 52.979 Other deposits with banks 1.001.338 1.207.514 996.366 1.195.093 1.032.495 1.260.493 1.027.080 1.248.072

Δhe Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 On demand 83.508 109.352 83.008 108.811 Within three months 911.883 1.117.745 911.556 1.117.110 Between three months and one year 15.354 11.245 10.766 -- Between one year and five years 6.881 6.881 6.881 6.881 Over five years 14.869 15.270 14.869 15.270 1.032.495 1.260.493 1.027.080 1.248.072

18. LOANS AND ADVANCES TO CUSTOMERS The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Manufacturing 278.925 225.591 278.925 225.591 Trade 856.317 723.497 809.226 719.205 Tourism 317.556 306.082 317.556 306.082 Construction 1.195.663 895.058 1.195.663 895.058 Personal and professional 1.596.475 1.307.761 1.505.844 1.156.898 Other sectors 767.921 635.084 767.921 635.087 5.012.857 4.093.073 4.875.135 3.937.921

Provisions for impairment (403.529) (368.014) (370.546) (322.748)

4.609.328 3.725.059 4.504.589 3.615.173

85 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 18. LOANS AND ADVANCES TO CUSTOMERS (continued)

The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 On demand 886.051 780.697 853.199 738.328 Within three months 569.558 440.865 568.555 434.015 Between three months and one year 520.000 452.229 512.988 443.351 Between one year and five years 1.262.715 1.101.981 1.188.514 1.019.909 Over five years 1.774.533 1.317.301 1.751.879 1.302.318 5.012.857 4.093.073 4.875.135 3.937.921 Provisions for impairment (403.529) (368.014) (370.546) (322.748) 4.609.328 3.725.059 4.504.589 3.615.173

The geographical analysis of the Group’s and the Bank’s total loans and advances to customers is as follows:

The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Cyprus 3.911.768 3.205.232 3.774.046 3.050.080 Greece 1.101.089 887.841 1.101.089 887.841 5.012.857 4.093.073 4.875.135 3.937.921

Provisions for impairment of loans and advances

Provisions Income for suspension impairment account Total ú'000 ú'000 ú'000 The Group 1 January 2008 253.130 114.884 368.014 Loans and advances written off (18.939) (2.325) (21.264) Suspended income for the year -- 17.097 17.097 Charge for the year 39.682 -- 39.682 31 December 2008 273.873 129.656 403.529

1 January 2007 256.099 106.622 362.721 Loans and advances written off (16.286) (1.159) (17.445) Exchange difference 581 152 733 Suspended income for the year -- 9.269 9.269 Charge for the year 12.736 -- 12.736 31 December 2007 253.130 114.884 368.014

86 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

18. LOANS AND ADVANCES TO CUSTOMERS (continued)

Provisions Income HELLENIC BANK GROUP for suspension impairment account Total ú'000 ú'000 ú'000 The Bank 1 January 2008 220.408 102.340 322.748 Loans and advances written off (17.647) (2.325) (19.972) Takeover of operations of subsidiary company 10.445 4.282 14.727 Suspended income for the year -- 16.561 16.561 Charge for the year 36.482 -- 36.482 31 December 2008 249.688 120.858 370.546

1 January 2007 221.542 94.202 315.744 Loans and advances written off (15.420) (1.017) (16.437) Exchange difference 581 152 733 Suspended income for the year -- 9.003 9.003 Charge for the year 13.705 -- 13.705 31 December 2007 220.408 102.340 322.748

The total amount of net loans and advances to customers, for which no interest has been credited to the income statement and has been transferred to the income suspension account, amounts to ú337.207 thousand (2007: ú324.142 thousand) for the Group and to ú304.424 thousand (2007: ú277.995 thousand) for the Bank.

19. DEBT SECURITIES The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Securities at fair value through profit or loss Government 1.268 388 1.268 388 Banks 2.491 11.010 2.296 11.010 Other issuers 4.505 9.472 4.505 9.472 8.264 20.870 8.069 20.870

Securities available for sale Government 20.481 89.977 20.481 89.977 Banks 529.111 1.190.335 529.079 1.189.660 Other issuers 7.105 11.750 7.025 11.560 556.697 1.292.062 556.585 1.291.197

Securities held to maturity Other issuers 456 5.326 456 5.326 565.417 1.318.258 565.110 1.317.393

87 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 19. DEBT SECURITIES (continued)

The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 On demand -- 694 -- 694 Within three months 26.935 22.769 26.935 22.769 Between three months and one year 113.467 89.686 113.435 89.686 Between one year and five years 389.724 1.067.322 389.448 1.066.946 Over five years 35.291 137.787 35.292 137.298 565.417 1.318.258 565.110 1.317.393

Listed securities 557.475 1.303.209 557.168 1.302.363 Unlisted securities 7.942 15.049 7.942 15.030 565.417 1.318.258 565.110 1.317.393

The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Provisions for impairment Balance 1 January 6.844 -- 6.844 -- Reversal due to disposal (2.146) -- (2.146) -- Provision for impairment for the year 6.427 6.844 6.427 6.844 Balance 31 December 11.125 6.844 11.125 6.844

Debt securities include securities of ú430.000 thousand (2007: ú54.373 thousand) pledged as collateral to third parties, within the normal practices of the treasury department.

20. EQUITY SECURITIES The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Securities held for trading Listed securities 6.705 34.208 197 745 Unlisted securities -- 155 -- -- 6.705 34.363 197 745

Securities at fair value through profit or loss Listed securities 39 166 -- -- 39 166 -- --

Securities available for sale Listed securities 18.945 39.593 11.010 24.811 Unlisted securities 14.801 15.127 8.265 10.272 33.746 54.720 19.275 35.083 40.490 89.249 19.472 35.828

88 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

20. EQUITY SECURITIES (continued)

The Group The Bank HELLENIC BANK GROUP 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Provisions for impairment Balance 1 January 17.406 27.777 13.794 24.336 Reversal due to disposal (140) (10.378) (140) (10.542) Provision for impairment for the year 1.187 7 -- -- Balance 31 December 18.453 17.406 13.654 13.794

Unlisted securities include the Group’s and the Bank’s investment in mutual funds of ú2.312 thousand (2007: ú4.080 thousand), the Bank’s investment in JCC Payment Systems Ltd of ú5.383 thousand (2007: ú5.529 thousand), as well as other investments in unlisted securities.

21. INVESTMENTS IN SUBSIDIARY COMPANIES Investments in subsidiary companies represent the cost of acquisition of shares in the following subsidiary companies:

Percentage Number of The Bank of ownership shares 2008 2007 % (thousands) ú'000 ú'000 Hellenic Bank (Finance) Ltd 100 2.800 4.784 4.784 Hellenic Bank (Investments) Ltd 100 3.750 6.407 6.407 Hellenic Bank Trust and Finance Corporation Ltd 100 50 94 94 Pancyprian Insurance Ltd 99,99 15.700 40.843 38.672 Hellenic Alico Life Insurance Company Ltd 72,50 725 1.239 1.239 Hellenic Trust Holdings S.A. 99,99 293,5 2.884 2.884 Hellenic Insurance Agency S.A. 99,50 600 19 19 Hellenic Trust Mutual Funds Management S.A. 100 1.175 1.037 1.037 Hellenic Trade Services Limited 99,99 1,9 2 2 Hellenic Insurance Agency Ltd 100 50 85 85 Athena Cyprus Public Company Ltd 77,84 84.573 57.970 57.970 Borenham Holdings Limited 100 5.000 10.324 -- 125.688 113.193

All subsidiary companies are incorporated and carry out their principal activities in Cyprus, with the exception of Hellenic Trust Holdings S.A., Hellenic Trust Mutual Funds Management S.A. and Hellenic Insurance Agency S.A., which are incorporated and carry out their principal activities in Greece. Hellenic Trade Services Ltd was incorporated and carries out its principal activities in Hong-Kong.

Hellenic Bank (Investments) Ltd owns 0,01% of the share capital of Hellenic Trade Services Ltd. In combination with the Bank’s direct holding in the share capital of Hellenic Trade Services Ltd, the company is a wholly owned subsidiary of the Group.

Athena Cyprus Public Company Ltd owns 100% of the share capital of Athena High Technology Incubator Ltd.

89 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 21. INVESTMENTS IN SUBSIDIARY COMPANIES (continued)

The subsidiary companies of Pancyprian Insurance Ltd are the following:

% Pancyprian Finance Public Company Ltd (until 23 May 2008) 99,72 Hellenic Pancyprian Insurance Agencies Ltd 100 MIA (Insurance Agencies) Ltd 100 Hellenic Pancyprian Insurance (Estate) Ltd 100

During 2005 the Bank‘s Management decided to discontinue the operations of its subsidiary company Hellenic Trust Investment Services S.A. operating in Greece as an investment company and alter its articles of association. This decision is part of the Group’s redefinition of its business activities in Greece. On 21 November 2005, Hellenic Trust Investment Services S.A. was renamed to Hellenic Trust Holdings S.A. On 22 June 2006 the Annual General Meeting of Hellenic Trust Holdings S.A. decided on the dissolution of the company and the appointment of liquidators as from the same date.

In October 2006 the Bank proceeded with the extension of its existing cooperation with American Life Insurance Co. (ALICO AIG Life) in the area of Mutual Funds. According to the agreement signed by the two parties, Hellenic Trust Mutual Funds Management S.A. assigned the management of its mutual funds to ALICO AIG Mutual Funds. At the same time, the Bank is engaged as sales representative of the mutual funds of ALICO AIG Mutual Funds and as investment consultant for two mutual funds through its subsidiary Hellenic Bank (Investments) Ltd.

In view of the above, and following the approval of the Greek Securities and Exchange Commission, on 20 December 2006 the Extraordinary General Meeting of Hellenic Trust Mutual Funds Management S.A., approved the dissolution of the company and the appointment of liquidators as from 1 January 2007.

On 27 November 2006 the Board of Directors of Hellenic Bank (Factors) Ltd agreed to the transfer of all its assets and liabilities and its entire operations to Hellenic Bank Public Company Ltd, according to the restructuring plan, and the implementation of measures for the dissolution of the company upon completion of the transfer. The relevant resolutions were approved at the Extraordinary General Meeting of Hellenic Bank (Factors) Ltd on 27 November 2006. The transfer agreement in view of the restructuring was signed by the parties involved on the 1st of December 2006 and was approved by the Nicosia District Court on 20 December 2006. The transfer of operations was effected on 27 December 2006. As a result of the transfer, factoring invoices amounting to ú42,7 million (Cí25 million) at 31 December 2006, were transferred to Hellenic Bank Public Company Ltd.

During 2007, the Board of Directors of Hellenic Bank decided to proceed with the takeover of the operations of Pancyprian Finance Public Company Ltd by the Bank. This would result in overall benefits to the Group, taking advantage of synergies available and improving the Group’s efficiency. The agreement will be effected gradually in order to ensure smooth and even customer service.

To effect the takeover decision, on 23 May 2008 Pancyprian Insurance Ltd transferred to the Bank 22.339.291 shares (99,72%) held in Pancyprian Finance Public Company Ltd. The Bank has proceeded with the take over of the operations of Pancyprian Finance Public Company Ltd, as part of its reorganisation and consolidation plan in line with the requirements of the Companies Law, Cap. 113, and the relevant Court petition. As a result of the takeover, all assets and liabilities of Pancyprian Finance Public Company Ltd have been transferred to the Bank and the company has been dissolved without liquidation.

During 2007, the Board of Directors of Hellenic Bank decided to proceed with the discontinuance of the operations of its subsidiaries Hellenic Pancyprian Insurance Agencies Ltd, MIA (Insurance Agencies) Ltd and Hellenic Pancyprian Insurance (Estate) Ltd. The process is anticipated to be completed within 2009.

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21. INVESTMENTS IN SUBSIDIARY COMPANIES (continued)

On 12 February 2007, Hellenic Bank Public Company Ltd disposed of all the shares held in the subsidiary company Ledra Insurance HELLENIC BANK GROUP Ltd. Ledra Insurance Ltd had been acquired by Hellenic Bank in July 1999 and its insurance activities were gradually transferred to Pancyprian Insurance, which continues to be the main route for the development of the Group’s general insurance business.

On 29 May 2007, the Hellenic Bank Group increased its share in Athena Cyprus Public Company Ltd to 50,36%, following the acquisition of 21.465.911 shares held by the company SFS Group Public Co Ltd for a cash consideration of Cí7.757 thousand (ú13.254 thousand). The offer for the sale of shares was equivalent to the Public Offer of the Bank to all shareholders of Athena Cyprus Public Company Ltd for the acquisition of up to 100% of the share capital of Athena Cyprus Public Company Ltd announced on 3 May 2007. Furthermore, in June 2007, following the reinvestment of dividend of Cí833 thousand (ú1.423 thousand) in additional shares of the company, the Group increased its shareholding to 50,75%.

On 30 July 2007, the Public Offer of Hellenic Bank Public Company Ltd to the shareholders of Athena Cyprus Public Company Ltd for the acquisition of up to 100% of its share capital was completed with the transfer of 29.502.532 shares. The Public Offer acceptance percentage following the reinvestment of dividend amounted to 27,15%. As a result, the final percentage of ownership of Hellenic Bank Group to the share capital of Athena Cyprus Public Company Ltd increased to 77,84%.

On 14 April 2008, the Bank acquired 100% of the share capital of Borenham Holdings Limited for a total consideration of ú1 thousand. At the date of acquisition the company had no assets or liabilities. Subsequently, the bank increased its investment to ú10.324 thousand. This amount was used for the acquisition of the Russian company Format Invest Limited.

On 12 August 2008, the subsidiary company Borenham Holdings Limited proceeded with the acquisition of 100% of the share capital of the Russian company Format Invest Limited, which is the owner of building facilities.

22. ACQUISITION OF SUBSIDIARY COMPANIES On 14 April 2008, the Bank acquired 100% of the share capital of Borenham Holdings Limited for a total consideration of ú1 thousand. At the date of acquisition the company had no assets or liabilities. Subsequently, the bank increased its investment to ú10.324 thousand. This amount was used for the acquisition of the Russian company Format Invest Limited.

More specifically, on 12 August 2008 the subsidiary company Borenham Holdings Limited proceeded with the acquisition of 100% of the share capital of the Russian company Format Invest Limited, which is the owner of building facilities in Moscow where the Bank’s head office and first branch in Russia will be based, for a total consideration of ú10.324 thousand.

The assets and liabilities acquired at the acquisition date were as follows:

ú'000 Other assets 509 Property, plant and equipment 13.386 Loans (2.547) Other Liabilities (164) Net fair value of identifiable net assets acquired 11.184 Total cost of acquisition (10.324) Excess of the Group’s share in the net fair value of net assets acquired (negative goodwill) 860

On 29 May 2007, the Hellenic Bank Group increased its share in Athena Cyprus Public Company Ltd to 50,36%, following the acquisition of 21.465.911 shares held by the company SFS Group Public Co Ltd for a cash consideration of Cí7.757 thousand (ú13.254 thousand). The offer for the sale of shares was equivalent to the Public Offer of the Bank to all shareholders for the acquisition of up to 100% of the share capital of Athena Cyprus Public Company Ltd announced on 3 May 2007. 91 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 22. ACQUISITION OF SUBSIDIARY COMPANIES (continued)

The assets and liabilities acquired at the acquisition date were as follows:

ú'000 Financial assets at fair value through profit or loss 34.211 Financial assets available for sale 25.569 Debtors and other receivables 1.533 Other taxation receivable 34 Balances with banks 18.207 Tangible fixed assets 14 Intangible assets 2 Creditors (6.161) 73.409 Share in net fair value of identifiable net assets acquired 15.364 Total cost of acquisition (13.254) Excess of the Group’s share in the net fair value of net assets acquired (negative goodwill) 2.110

Additionally, in June 2007, following the reinvestment of dividend of Cí833 thousand (ú1.423 thousand) in additional shares of the company, the Group increased its share to 50,75%. As a result additional negative goodwill arose.

ú'000 Share in net fair value of identifiable net assets acquired 1.551 Cost of acquisition (1.423) Excess of the Group’s share in the net fair value of net assets acquired (negative goodwill) 128

On 30 July 2007, the Public Offer of Hellenic Bank Public Company Ltd to the shareholders of Athena Cyprus Public Company Ltd for the acquisition of up to 100% of its share capital was completed with the transfer of 29.502.532 shares.

The Public Offer acceptance percentage, following the dividend reinvestment, amounted to 27,15%. The assets and liabilities acquired at the acquisition date were as follows:

ú'000 Financial assets at fair value through profit or loss 36.984 Financial assets available for sale 30.366 Debtors and other receivables 331 Other taxation receivable 43 Balances with banks 17.363 Tangible fixed assets 12 Intangible assets 2 Creditors (1.298) 83.803

Share in net fair value of identifiable net assets acquired 22.708 Total cost of acquisition (18.197) Excess of the Group’s share in the net fair value of net assets acquired (negative goodwill) 4.511

The total negative goodwill of ú860 thousand (2007: ú6.749 thousand) has been credited in the consolidated income statement, under other income.

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23. PROPERTY, PLANT AND EQUIPMENT HELLENIC BANK GROUP The Group Land and Plant and buildings equipment Total 2008 2008 2008 ú'000 ú'000 ú'000 Cost or Valuation 1 January 61.214 69.086 130.300 Acquisition of subsidiary company 13.370 15 13.385 Additions 2.922 2.483 5.405 Disposals/transfers (265) (1.067) (1.332) Exchange difference (1.644) (4) (1.648) 31 December 75.597 70.513 146.110

Depreciation 1 January 998 48.272 49.270 Charge for the year 1.013 5.135 6.148 Disposals/transfers (7) (1.002) (1.009) Exchange difference (11) (1) (12) 31 December 1.993 52.404 54.397 Net book value 31 December 73.604 18.109 91.713

The Group Land and Plant and buildings equipment Total 2007 2007 2007 ú'000 ú'000 ú'000 Cost or Valuation 1 January 61.845 63.644 125.489 Acquisition of subsidiary company -- 46 46 Additions 63 5.989 6.052 Disposals/transfers (694) (820) (1.514) Exchange difference -- 227 227 31 December 61.214 69.086 130.300

Depreciation 1 January 125 43.216 43.341 Revaluation -- 34 34 Charge for the year 894 5.606 6.500 Disposals/transfers (21) (765) (786) Exchange difference -- 181 181 31 December 998 48.272 49.270 Net book value 31 December 60.216 20.814 81.030

93 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 23. PROPERTY, PLANT AND EQUIPMENT (continued)

The Bank Land and Plant and buildings equipment Total 2008 2008 2008 ú'000 ú'000 ú'000 Cost or Valuation 1 January 52.879 65.426 118.305 Additions 3.037 2.259 5.296 Takeover of operations of subsidiary company 538 333 871 Disposals/transfers -- (838) (838) 31 December 56.454 67.180 123.634

Depreciation 1 January 774 45.233 46.007 Charge for the year 792 4.930 5.722 Takeover of operations of subsidiary company 13 295 308 Disposals/transfers -- (800) (800) 31 December 1.579 49.658 51.237 Net book value 31 December 54.875 17.522 72.397

The Bank Land and Plant and buildings equipment Total 2007 2007 2007 ú'000 ú'000 ú'000 Cost or Valuation 1 January 53.380 59.986 113.366 Additions -- 5.872 5.872 Disposals/transfers (501) (663) (1.164) Exchange difference -- 231 231 31 December 52.879 65.426 118.305

Depreciation 1 January -- 40.239 40.239 Charge for the year 779 5.455 6.234 Disposals/transfers (5) (641) (646) Exchange difference -- 180 180 31 December 774 45.233 46.007 Net book value 31 December 52.105 20.193 72.298

Land and buildings were revalued at 31 December 2006 by independent qualified valuers on the basis of their market value for their existing use. The surplus on revaluation of ú15.876 thousand for the Group and ú14.197 thousand for the Bank, was transferred to the property revaluation reserve.

The cost and net book value on a historic cost basis of the freehold land and buildings stated at valuation at 31 December 2008 amount to ú38.209 thousand (2007: ú35.187 thousand) and ú34.198 thousand (2007: ú31.859 thousand) respectively for the Group and to ú33.782 thousand (2007: ú30.206 thousand) and ú30.668 thousand (2007: ú27.780 thousand) respectively for the Bank.

The cost of buildings under construction, included under plant and equipment at 31 December 2008 amount to ú6.928 thousand (2007: ú7.955 thousand) for the Group and the Bank.

At 31 December 2008 the value of freehold land not subject to depreciation amounts to ú18.830 thousand (2007: ú18.077 thousand) for the Group and ú15.280 thousand (2007: ú14.258 thousand) for the Bank. 94 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

24. INTANGIBLE ASSETS HELLENIC BANK GROUP The Group Computer software Goodwill Total 2008 2008 2008 ú'000 ú'000 ú'000 Cost 1 January 18.361 26.613 44.974 Additions 1.250 -- 1.250 31 December 19.611 26.613 46.224

Amortisation and impairment losses 1 January 12.673 11.688 24.361 Charge for the year 1.630 16 1.646 31 December 14.303 11.704 26.007 Net book value 31 December 5.308 14.909 20.217

The Group Computer software Goodwill Total 2007 2007 2007 ú'000 ú'000 ú'000 Cost 1 January 15.005 26.611 41.616 Additions 3.468 -- 3.468 Disposals (162) -- (162) Exchange difference 50 2 52 31 December 18.361 26.613 44.974

Amortisation and impairment losses 1 January 11.049 8.461 19.510 Charge for the year 1.714 17 1.731 Impairment losses -- 3.209 3.209 Disposals (128) -- (128) Exchange difference 38 1 39 31 December 12.673 11.688 24.361 Net book value 31 December 5.688 14.925 20.613

95 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 24. INTANGIBLE ASSETS (continued)

The Bank Computer software Goodwill Total 2008 2008 2008 ú'000 ú'000 ú'000

Cost 1 January 17.790 1.483 19.273 Takeover of operations of subsidiary company 26 -- 26 Additions 1.233 -- 1.233 31 December 19.049 1.483 20.532

Amortisation and impairment losses 1 January 12.179 1.380 13.559 Takeover of operations of subsidiary company 17 -- 17 Charge for the year 1.582 17 1.599 31 December 13.778 1.397 15.175 Net book value 31 December 5.271 86 5.357

The Bank Computer software Goodwill Total 2007 2007 2007 ú'000 ú'000 ú'000 Cost 1 January 14.327 1.481 15.808 Additions 3.453 -- 3.453 Disposals (38) -- (38) Exchange difference 48 2 50 31 December 17.790 1.483 19.273

Amortisation and impairment losses 1 January 10.492 1.362 11.854 Charge for the year 1.652 17 1.669 Disposals (3) -- (3) Exchange difference 38 1 39 31 December 12.179 1.380 13.559 Net book value 31 December 5.611 103 5.714

Goodwill was tested for impairment at 31 December 2008. No indication of impairment in its carrying amount was observed.

At 31 December 2007, impairment losses of ú3.209 thousand in respect of the goodwill relating to Pancyprian Finance Public Company Ltd were charged to the Group’s income statement.

Goodwill included in the Group’s and the Bank’s intangible assets with a net book value of ú86 thousand (2007: ú103 thousand) relates to the branch network in Greece.

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25. OTHER ASSETS HELLENIC BANK GROUP The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Deferred taxation 8.307 10.933 8.234 10.904 Taxation receivable 2.719 2.763 1.932 1.915 Prepaid expenses 1.266 1.876 964 1.647 Fair value of derivatives (Note 34) 13.290 20.136 13.290 20.136 Assets held to cover liabilities of unit linked funds 8.072 7.099 -- -- Debtors and other receivables 55.582 36.879 40.903 23.361 89.236 79.686 65.323 57.963

Deferred taxation arises from:

The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Differences between depreciation and capital allowances 902 905 892 885 Tax losses -- 5.126 -- 5.126 Other temporary differences 7.405 4.902 7.342 4.893 8.307 10.933 8.234 10.904

Assets held to cover liabilities of unit linked funds comprise of:

The Group 2008 2007 ú'000 ú'000 Deposits 2.992 904 Government bonds 3.875 3.959 Bank bonds 215 353 Equity securities 990 1.883 8.072 7.099

26. DEPOSITS BY BANKS Δhe Group and the Bank 2008 2007 ú'000 ú'000 Interbank accounts 48.238 239.999 Other deposits by banks 146.958 252.075 195.196 492.074

Δhe Group and the Bank 2008 2007 ú'000 ú'000 On demand 64.077 117.316 Within three months 89.310 304.777 Between three months and one year 41.809 69.981 195.196 492.074

97 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 27. CUSTOMER DEPOSITS AND OTHER CUSTOMER ACCOUNTS The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000

Demand deposits 1.643.934 1.358.835 1.645.276 1.358.835 Savings deposits 173.508 194.347 173.508 194.347 Notice deposits 369.169 598.754 369.169 598.754 Time deposits 3.959.910 3.708.526 3.959.910 3.673.500 6.146.521 5.860.462 6.147.863 5.825.436

The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 On demand 1.830.587 1.600.674 1.831.929 1.599.974 Within three months 2.893.896 3.087.074 2.893.896 3.077.598 Between three months and one year 1.303.055 961.630 1.303.055 938.012 Between one year and five years 118.983 211.084 118.983 209.852 6.146.521 5.860.462 6.147.863 5.825.436

The geographical analysis of the Group’s and the Bank’s total customer deposits and other customer accounts is as follows:

The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Cyprus 5.231.341 4.874.267 5.232.683 4.839.241 Greece 915.180 986.195 915.180 986.195 6.146.521 5.860.462 6.147.863 5.825.436

Customer deposits include deposits amounting to ú838 thousand (2007: ú2.190 thousand) which are classified as at fair value through profit or loss, as they are managed together with assets classified under the same category.

28. OTHER LIABILITIES The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Deferred taxation 8.062 7.468 7.864 7.260 Taxation payable 910 5.122 -- 4.222 Provident funds 151.108 135.381 151.108 135.381 Fair value of derivatives (Note 34) 74.739 11.685 74.739 11.685 Accrued expenses 10.198 16.083 10.007 14.909 Liabilities of unit linked funds 8.072 7.099 -- -- Other accounts payable 72.397 51.046 29.666 14.050 325.486 233.884 273.384 187.507

98 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

28. OTHER LIABILITIES (continued)

Deferred taxation arises from: HELLENIC BANK GROUP

The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Losses from permanent establishment 4.322 2.139 4.322 2.139 Surplus on revaluation of property and differences between depreciation and capital allowances 3.344 3.506 3.152 3.298 Other temporary differences 396 1.823 390 1.823 8.062 7.468 7.864 7.260

Other accounts payable include provisions for pending litigation or cases subject to arbitration proceedings amounting to ú2.597 thousand (2007: ú2.776 thousand).

29. LOAN CAPITAL The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Tier 1 Capital Capital Securities 42.007 41.939 43.289 43.222

Tier 2 Capital Non Convertible Bonds 2004/2009 25.113 25.116 25.629 25.629 Non Convertible Bonds 2011 32.819 31.990 32.819 31.990 Non Convertible Bonds 2016 126.950 126.950 128.146 128.146 Non Convertible Bonds 2018 10.000 -- 10.000 -- 194.882 184.056 196.594 185.765

236.889 225.995 239.883 228.987

Tier 1 Capital The Capital Securities, as well as the share capital, are considered as Tier 1 Capital by the Central Bank of Cyprus for the purposes of the calculation of the capital base.

The Capital Securities are perpetual securities with no maturity date. They may be redeemed in whole, at the option of the Bank, subject to the prior consent of the Central Bank of Cyprus, at their nominal value together with any accrued interest on 18 April 2008 or on any subsequent interest payment date and under the condition that they will be replaced with Tier 1 Capital, unless the Central Bank of Cyprus is satisfied with the Bank’s capital adequacy. The Capital Securities bear interest at floating rate reviewed at the beginning of each interest payment period and applicable to that period. The interest rate is equal to the base rate applicable at the beginning of each interest payment period plus 1,20%. For the period 1 January 2008 to 18 January 2008 the interest rate was set at 5,70% per annum. For the period 19 January 2008 to 18 July 2008 the interest rate was set at 5,20% per annum. For the period 19 July 2008 to 31 December 2008 the interest rate was set at 6,45% per annum. An amount of ú1.282 thousand is eliminated on consolidation. The Capital Securities are non secured subordinated liabilities of the Bank. The Capital Securities are listed on the Cyprus Stock Exchange.

Tier 2 Capital The following bonds are considered as Tier 2 Capital by the Central Bank of Cyprus, for the purposes of the calculation of the Bank’s capital base.

99 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 29. LOAN CAPITAL (continued)

Non Convertible Bonds 2004/2009

Non Convertible Bonds 2004/2009 have a duration of 10 years and bear interest at the rate of 7,30% for the first year and at a floating rate of interest for subsequent years. Interest is payable every six months. For the period 1 January 2008 to 30 June 2008 the interest rate was set at 4,17% per annum and for the period 1 July 2008 to 31 December 2008 the interest rate was set at 5,47% per annum. An amount of ú516 thousand is eliminated on consolidation. Repayment of the subordinated Non Convertible Bonds 2004/2009 follows in priority the claims of depositors and other creditors. The Bonds are listed on the Cyprus Stock Exchange.

Non Convertible Bonds 2011

Non Convertible Bonds 2011 have a maturity date of 28 April 2011 and bear interest at the fixed rate of 5,75% per annum on their nominal value for the first six months. For subsequent periods they bear interest at a floating rate equal to the base rate applicable at the beginning of each interest payment period plus 0,75%. For the period 1 January 2008 to 30 June 2008 the interest rate was set at 4,75% per annum. For the period 1 July 2008 to 30 September 2008 the interest rate was set at 5,75% per annum, while for the period 1 October 2008 to 31 December 2008 the interest rate was set at 6,00% per annum. The Bonds provide the right of reinvestment of the interest payable in additional Bonds with the same terms. The Bonds are listed on the Cyprus Stock Exchange. During the year an amount of ú829 thousand was reinvested in additional Bonds with the same terms.

Non Convertible Bonds 2016

On 1st July 2006 the Bank proceeded with the issue of new Tier 2 Capital in the form of bonds (Bonds 2016) with a maturity date in 2016, according to the Prospectus dated 11 May 2006. The 2016 Bonds were issued in one to four different series and will mature on 1st July 2016, irrespective of the date of issue. The Bank has the right to redeem the Bonds 2016 on any interest payment date after the 1st of July 2011.

Bonds 2016 bear interest at a floating rate reviewed at the beginning of each interest payment period and applicable to that specific period. The floating interest rate is equal to the basic interest rate applicable at the beginning of each interest period, plus 0,80%. Subsequent to the 1st of July 2011, if the Bonds are not redeemed by the Bank, they will bear an additional interest rate of 0,70%. Therefore, the interest rate will be equal to the basic interest rate plus 1,50%. Interest is payable quarterly in arrears in cash. For the period from 1 January 2008 to 31 March 2008 the interest rate was set at 5,49% per annum. For the period from 1 April 2008 to 30 June 2008 the interest rate was set at 5,53% per annum, for the period from 1 July 2008 to 30 September 2008 the interest rate was set at 5,75% per annum, while for the period from 1 October 2008 to 31 December 2008 the interest rate was set at 6,04% per annum.

Up to 30 September 2006, Series A’ Bonds were issued and listed on the Cyprus Stock Exchange, while on 22 November 2006 the Bank proceeded with the issue of Series B’ Bonds in accordance with the Second Supplementary Prospectus. On 27 April 2007 the Bank proceeded with the issue of Series C’ Bonds. With the issue of the Series C’ Bonds, the issue of Bonds 2016 was completed according to the Prospectus dated 11 May 2006. The Bonds are listed on the Cyprus Stock Exchange.

Bonds 2016 are not secured and in the event of liquidation their repayment follows in priority the claims of depositors and other creditors. They have, however, priority over shareholders and Capital Securities holders. An amount of ú1.196 thousand is eliminated on consolidation.

Non Convertible Bonds 2018

On the 1st of September 2008, the Bank proceeded with the issue of Bonds 2018 amounting to ú10.000.000. The Bonds have a maturity date of 31 August 2018 and form part of the Bank’s Tier 2 Capital. 100 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

29. LOAN CAPITAL (continued)

Interest on Bonds 2018 is payable every three months, at the end of each interest period. Bonds 2018 bear interest at a floating HELLENIC BANK GROUP rate equal to the three month Euribor rate applicable at the beginning of each interest period, plus 1,75%.

Bonds 2018 are not listed on the Cyprus Stock Exchange.

30. SHARE CAPITAL The Group and the Bank 31 December Number of 31 December Number of 2008 shares 2007 shares ú'000 (thousands) ú'000 (thousands) Authorised 600 million shares of Cí0,25 each -- -- 256.290 600.000 600 million shares of ú0,43 each 258.000 600.000 -- --

The Group and the Bank 31 December Number of 31 December Number of 2008 shares 2007 shares ú'000 (thousands) ú'000 (thousands) Issued Fully paid shares (2008: ú0,43 each) (2007: Cí0,25 each) 1 January 124.277 290.943 103.338 241.925 Exercise of Share Warrants -- -- 17.560 41.108 Reinvestment of dividend 2.718 6.322 3.357 7.858 Transfer from share premium reserve due to euro conversion 829 ------Issue of shares 19 44 22 52 Issue of shares for the acquisition of subsidiary company 13-- -- Total issued share capital 127.844 297.312 124.277 290.943

At 31 December 2008 there were 297.311.815 fully paid shares with a nominal value of ú0,43 each, while at 31 December 2007 there were 290.942.990 shares with a nominal value Cí0,25 each.

At the Extraordinary General Meeting of the Bank’s Shareholders on 26 March 2008, the following were approved for the purposes of compliance with the Adoption of the Euro Law of 2007 (N.33(I)/2007):

1. Conversion of the share capital of the Bank from Cyprus pounds to euro. 2. Conversion and increase of the nominal value of the Bank’s shares, following the upwards rounding, from Cí0,25 per share to ú0,43 per share. 3. Conversion of the authorised share capital of the Bank from Cí150.000.000 (ú256.290.216,21) divided into 600.000.000 shares with a nominal value of Cí0,25 each to ú258.000.000 divided into 600.000.000 shares with a nominal value of ú0,43 each. 4. Conversion and increase of the issued share capital of the Bank from Cí72.735.747,50 (ú124.276.403,02) to ú125.105.485,70, divided into 290.942.990 shares with a nominal value of ú0,43 each. This increase to be achieved by the capitalisation of part of the share premium reserve, in order for the number of the Bank’s issued shares immediately prior to the execution of the provisions of the resolution to equal the number of the Bank’s issued shares immediately following the execution of the provisions of the resolution.

As a result of the rounding up, according to the resolution for the conversion of the nominal value of shares to euro, an amount of ú829 thousand was transferred from the share premium reserve to share capital. 101 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 30. SHARE CAPITAL (continued)

During the year 43.518 shares were granted for free to members of the Group’s personnel. In addition, on 7 July 2008, 4.975.266 shares were granted to shareholders who reinvested the total or part of the net amount of the final 2007 dividend in Hellenic Bank shares and on 20 October 2008, 1.346.709 shares were granted to shareholders who reinvested the total or part of the net amount of the interim 2008 dividend in Hellenic Bank shares. Additionally, on 24 October 2008, 3.332 shares were issued to the remaining shareholders of Pancyprian Finance Public Company Ltd, following the transfer of 22.339.291 shares (99,72%) of Pancyprian Finance Public Company Ltd by Pancyprian Insurance Ltd to the Bank, in the course of the internal reorganisation and achievement of group synergies.

During the Extraordinary General Meeting of the Bank’s shareholders that took place on 28 May 2008, following the Annual General Meeting of the shareholders, the Special Resolution, approved during the Extraordinary General Meeting that took place on 30 May 2007, was resubmitted for approval and approved with effect from 28 May 2008 to 28 May 2009. This Special Resolution is associated with the strategic plans of the Group for the reinforcement of its position through acquisitions, strategic alliances and other actions and it aims to provide flexibility to the Board of Directors to take immediate advantage of the opportunities that may arise from time to time. The Special Resolution grants authority to the Bank’s Board of Directors for a period of twelve months to issue up to 20 million new shares of Hellenic Bank at a maximum discount of 10% to the market value of the shares.

At 31 December 2007 there were no Share Warrants, since on 30 November 2007 their exercise period expired. The unexercised 2.402.453 warrants are no longer valid according to the Prospectus filed with the Cyprus Stock Exchange.

102 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

31. RESERVES HELLENIC BANK GROUP The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Revenue reserve 1 January 153.848 52.242 146.606 72.142 Profit attributable to shareholders 33.973 133.068 48.741 117.875 Profit on disposal of treasury shares -- 9.124 -- -- Takeover of operations of subsidiary company 565 -- (219) (2.637) Dividend paid (46.807) (40.557) (46.807) (40.989) Special Defense Contribution on deemed dividend distribution (22) -- (22) -- Transfer from revaluation reserves 634 (29) 516 215 31 December 142.191 153.848 148.815 146.606

Share premium reserve 1 January 218.039 159.573 218.039 159.573 Transfer to share capital (829) -- (829) -- Reinvestment of dividend 11.420 26.620 11.420 26.620 Exercise of Share Warrants -- 31.607 -- 31.607 Issue of shares 99 239 99 239 31 December 228.729 218.039 228.729 218.039

Translation reserve 1 January 99 63 67 38 Exchange difference for the year (60) 36 -- 29 31 December 39 99 67 67

Revaluation reserves 1 January 28.696 47.931 31.601 45.456 Revaluation of equity securities (25.497) 2.570 (14.426) 3.453 Revaluation of debt securities (53.925) (20.802) (54.074) (20.729) Takeover of operations of subsidiary company (908) -- 220 -- Transfer to income statement on impairment of debt securities 4.031 1.456 4.031 1.456 Transfer to income statement on impairment of equity securities 956 ------Transfer to income statement on disposal of debt securities (9.799) 425 (9.799) 425 Transfer to income statement on disposal of equity securities (1.307) (4.162) (818) 1.714 Share of results of associate company -- 1.199 -- -- Transfer to revenue reserve (634) 29 (516) (215) Deferred taxation on revaluation of property 21 50 23 41 31 December (58.366) 28.696 (43.758) 31.601

Total reserves 31 December 312.593 400.682 333.853 396.313

The profit on disposal of treasury shares in 2007 arose from the disposal of 2.898.632 shares of Hellenic Bank Public Company Ltd held by the subsidiary company Athena Cyprus Public Company Ltd.

On 31 December 2007 the takeover of operations of subsidiary company refers to Hellenic Bank (Factors) Ltd, while on 31 December 2008 the takeover refers to Pancyprian Finance Public Company Ltd. 103 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 32. MINORITY INTEREST The Group 2008 2007 ú'000 ú'000 1 January 19.962 1.396 (Loss)/profit attributable to minority interest (2.649) 1.832 Dividend paid (2.165) (247) Acquisition of subsidiary company -- 14.653 Takeover of operations of subsidiary company (9) -- Share of profit on disposal of treasury shares -- 2.595 Share of revaluation of debt and equity securities (2.546) (267) 31 December 12.593 19.962

33. CONTINGENT LIABILITIES AND COMMITMENTS The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Contingent liabilities Acceptances and endorsements 1.358 1.821 1.358 1.821 Guarantees 436.917 384.842 432.578 404.371 438.275 386.663 433.936 406.192

Commitments Undrawn formal standby facilities 1.134.553 1.070.306 1.134.553 1.070.302 Other commitments 27.808 26.593 27.808 26.593 1.162.361 1.096.899 1.162.361 1.096.895 1.600.636 1.483.562 1.596.297 1.503.087

Capital Commitments At 31 December 2008, the Group’s and the Bank’s commitments for capital expenditure, not recognised in the consolidated financial statements, amounted to ú5.053 thousand (2007: ú8.328 thousand).

34. DERIVATIVES The Group uses the following derivative instruments:

Foreign currency forwards: represent agreements for the purchase or sale of foreign currencies settled at a future date.

Currency swaps: represent agreements for the exchange of cash flows of different currencies.

Futures: represent agreements for the future purchase or sale of a financial instrument at a fixed price.

Interest rate swaps: represent agreements where one stream of future interest payments is exchanged for another based on a predetermined notional amount and time periods.

Credit default swaps: represent agreements for the transfer of credit risk of a reporting entity from the buyer of the agreement to the seller at a price.

104 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

34. DERIVATIVES(continued)

The Group and the Bank HELLENIC BANK GROUP Nominal Fair value value Other Other Assets Liabilities ú'000 ú'000 ú'000 At 31 December 2008 Foreign currency forwards 9.689 436 374 Currency swaps 529.203 374 36.625 Futures 10 -- -- Interest rate swaps 625.681 9.337 37.740 Credit default swaps 14.283 3.143 -- 1.178.866 13.290 74.739

The Group and the Bank Nominal Fair value value Other Other Assets Liabilities ú'000 ú'000 ú'000 At 31 December 2007 Foreign currency forwards 83.742 2.459 1.044 Currency swaps 435.789 2.115 4.965 Futures 26.389 559 -- Interest rate swaps 503.580 15.003 5.621 Credit default swaps 16.396 -- 55 1.065.896 20.136 11.685

35. HEDGE ACCOUNTING The Group’s policy is to hedge the risks arising from its exposure to fluctuations of interest rates, credit ratings and foreign exchange rates.

Fair value hedging Interest rate swaps, where the Group exchanges fixed rate with floating rate of interest, are used as fair value hedges for fixed interest rate debt securities classified as available for sale.

The fair value of interest rate swaps used as hedging instruments is shown below:

The Group and the Bank Nominal Fair value value Other Other Assets Liabilities ú'000 ú'000 ú'000 At 31 December 2008 Interest rate swaps with fixed interest rate payments 66.102 -- 6.446

At 31 December 2007 Interest rate swaps with fixed interest rate payments 50.658 26 1.895

105 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 36. CASH AND CASH EQUIVALENTS The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Cash and balances with Central Banks 189.133 235.669 189.133 233.887 Government securities and other eligible bills (Note 16) 16.418 52.423 16.418 52.423 Placements with other banks (Note 17) 995.391 1.227.097 994.564 1.225.921 Deposits by banks (Note 26) (153.387) (422.093) (153.387) (422.093) Repurchase agreements (469.669) -- (469.669) -- 577.886 1.093.096 577.059 1.090.138

37. DIRECTORS’ INTEREST IN THE SHARE CAPITAL OF THE BANK According to the Cyprus Stock Exchange Regulations, the percentage shareholdings in the Bank’s share capital owned by members of the Board of Directors, their spouses, minor children and companies in which they control directly or indirectly at least 20% of the voting rights, are as follows:

31 December 2008 26 February 2009 A. P. Panayiotou 0,0080% 0,0097% A. M. Moushouttas 0,0141% 0,0141% I. G. Iacovou 0,1849% 0,1849% A. I. Pierides -- -- D. J. Eliades 0,0045% 0,0045% S. Z. Kallis 0,0003% 0,0003% Ch. P. Panayiotou -- -- I. Ch. Charilaou 0,0003% 0,0003% G. K. Pavlou 0,0028% 0,0028% K. E. Georgiou 0,0071% 0,0071% M. Keravnos 0,0013% 0,0013% P. Th. Theodorou 0,0433% 0,0433% K. I. Droushiotis -- --

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38. RELATED PARTY TRANSACTIONS HELLENIC BANK GROUP 2008 2007 2008 2007 Number of Directors ú'000 ú'000 Loans and other advances Members of the Board of Directors and connected persons: Over 1% of the net assets of the Bank per Director 1 1 13.940 11.359 Under 1% of the net assets of the Bank per Director 12 11 1.252 622 13 12 15.192 11.981

Loans and advances to key management personnel that are not Members of the Board of Directors and to connected persons 1.156 1.015 Total 16.348 12.996

Tangible securities 15.011 14.795

Interest income 795 605

Deposits 8.099 8.883

Interest expense 301 183

Additionally, at 31 December 2008, there were contingent liabilities and commitments in respect of members of the Board of Directors and their connected persons in the form of documentary credits, guarantees and unused limits amounting to ú17.543 thousand which exceeded 1% of the Bank’s net assets (2007: ú11.606 thousand). There were also commitments to key manage- ment personnel who were not members of the Board of Directors and their connected persons amounting to ú148 thousand (2007: ú383 thousand).

Connected persons include spouses, minor children and companies in which the Directors or key management personnel who are not Directors hold directly or indirectly at least 20% of the voting rights at a general meeting.

All transactions with members of the Board of Directors and their connected persons are made on normal business terms. A number of credit facilities have been extended to key management personnel with terms similar to those which apply to the rest of the Group’s personnel.

Emoluments of members of the Board of Directors and key management personnel

The Group The Bank 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 Emoluments of members of the Board of Directors: Emoluments and benefits in executive capacity 549 249 549 249 Retirement benefits for the year 103 32 103 32 Total for Executive Directors 652 281 652 281 Fees for the year 326 284 269 240 Pensions 23 31 23 31

In accordance with the provisions of the Code of Corporate Governance it is disclosed that, one Executive Director of the Bank has received remuneration for the duration of his participation in the Board of Directors between ú256.290 and ú341.720 and one Executive Director of the Bank received remuneration between ú341.720 and ú427.150. 107 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 38. RELATED PARTY TRANSACTIONS (continued)

The Group and the Bank 2008 2007 ú'000 ú'000 Emoluments of key management personnel who were not Directors: Salaries and other short term benefits 701 873 Employer’s contributions for social insurance, etc. 38 55 Retirement benefits for the year 189 210 Total emoluments and benefits of key management personnel who were not Directors 928 1.138

Key management personnel include the General Managers of the Bank who were not Directors. The emoluments of key management personnel refer to the period of the year during which they were not Directors.

Other transactions with related parties Mr. Iacovos G. Iacovou, a member of the Bank’s Board of Directors, holds an indirect interest in the companies Iacovou Brothers (Constructions) Ltd and Iacovou Brothers Technical Constructions (Hellas) S.A. During 2005 the company Iacovou Brothers (Constructions) Ltd undertook the extension of the Bank’s information technology premises following tender procedures. The contract amounts to ú1.816 thousand (excluding VAT). During 2008 an amount of ú184 thousand (including VAT) (2007: ú644 thousand) was paid for work completed and the relevant final account with the contractor was settled. Also in 2008 no payments were made for other projects relating to branch renovations (2007: ú2 thousand including VAT).

On 13 July 2007 a sale contract was signed between the company Iacovou Brothers (Constructions) Ltd and Hellenic Bank Public Company Limited for the acquisition of a plot in Larnaca. On the same date an agreement was signed with the same company for the construction of a five-storey building on the above-mentioned plot. The building will include a ground floor, a mezzanine and two underground parking spaces and will be used for the operations of the Bank in Larnaca. The transaction was based on market values and amounted to a total of ú3,6 million (excluding VAT). During 2008 no payments were made under the building construction contract (2007: ú324 thousand including VAT). The plot was transferred to Hellenic Bank Public Company Ltd on 19 December 2007 and on 11 January 2008 the amount of ú769 thousand was paid to Iacovou Brothers (Constructions) Ltd in respect of the acquisition of the relevant plot.

Mr. Demetris J. Eliades, a member of the Bank’s Board of Directors, is a lawyer at Demetris Eliades Law Office. In the course of normal business, court cases and legal proceedings against debtors/creditors of the Group are handled by external law offices. A number of such cases have been assigned to the law office of Mr. Eliades. The total cost of these cases is charged to the relevant debtors/creditors and amounts to ú43 thousand including expenses and VAT in 2008 (2007: ú55 thousand).

Mr. Antonis I. Pierides, a member of the Bank’s Board of Directors, is the main shareholder of the company Antonis Pierides and Associates Limited. During 2008 there were individual participations by members of the Group’s staff to seminars organised by his company and for which the total cost of participation amounted to ú2,2 thousand including VAT of ú0,6 thousand (2007: ú1,8 thousand, including VAT of ú0,7 thousand).

39. SHAREHOLDERS HOLDING MORE THAN 5% OF THE SHARE CAPITAL According to the Cyprus Stock Exchange Regulations at 31 December 2008, the following shareholders owned 5% or more of the nominal value of the Bank’s issued share capital:

Holy Archbishopric of Cyprus 13,73% Polys Polykarpou and related parties 5,15% Universal Life Insurance Public Company Ltd Group 5,03%

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39. SHAREHOLDERS HOLDING MORE THAN 5% OF THE SHARE CAPITAL (continued)

During the period between 31 December 2008 and 30 days prior to the date of the notice convening the Annual General HELLENIC BANK GROUP Meeting, the percentage holdings of shareholders owning 5% or more of the nominal value of the Bank’s issued share capital were as follows:

Holy Archbishopric of Cyprus 13,73% Polys Polykarpou and related parties 5,10% Bank of Cyprus Group 5,10% Universal Life Insurance Public Company Ltd Group 5,03%

40. FAIR VALUE Fair value represents the amount for which an asset could be exchanged for or a liability settled in an arm’s length transaction. The fair value of the Group’s and the Bank’s financial assets and liabilities, not measured at fair value, approximates their carrying amount.

The fair value of loans and advances to customers equals the amount shown in the balance sheet after deducting the provisions for impairment of loans and advances.

41. SEGMENTAL ANALYSIS The financial position and performance of the Group are analysed as follows:

Primary Segment: The financial position and performance are presented based on their geographical organisation. The Group carries out its operations in Cyprus and abroad.

Secondary Segment: The financial position and performance are analysed under the following business segments:

ñ Banking and financial services ñ Insurance services

109 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 41. SEGMENTAL ANALYSIS (continued)

ANALYSIS BY GEOGRAPHIC SEGMENT The Group Cyprus Other Countries Total 2008 2007 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 ú'000 ú'000 Turnover 429.717 489.232 74.226 75.412 503.943 564.644 Inter - segment transactions (2.553) (338) (1.381) (198) (3.934) (536) 427.164 488.894 72.845 75.214 500.009 564.108

Profit/(loss) before share of results of associate company 99.715 163.136 (15.415) 653 84.300 163.789 Share of results of associate company -- 1.548 ------1.548 Profit/(loss) before provisions 99.715 164.684 (15.415) 653 84.300 165.337 Provisions for impairment of loans and advances (26.745) (6.778) (12.937) (5.958) (39.682) (12.736) Profit/(loss) before taxation 72.970 157.906 (28.352) (5.305) 44.618 152.601

Assets 6.938.921 6.256.475 1.301.364 1.124.858 8.240.285 7.381.333 Inter - segment balances (225.463) -- (188.031) (23.997) (413.494) (23.997) 6.713.458 6.256.475 1.113.333 1.100.861 7.826.791 7.357.336

Liabilities 6.460.143 5.711.893 1.327.112 1.124.519 7.787.255 6.836.412 Inter - segment balances (188.032) (23.997) (225.462) -- (413.494) (23.997) 6.272.111 5.687.896 1.101.650 1.124.519 7.373.761 6.812.415

Additions of property, plant and equipment and computer software 5.935 7.948 14.105 1.618 20.040 9.566 Depreciation of property, plant and equipment and amortisation of computer software 5.504 5.842 2.274 2.372 7.778 8.214 Amortisation and impairment losses of goodwill -- 3.209 16 17 16 3.226 Impairment of investment securities 8.589 6.241 1.464 1.449 10.053 7.690

ANALYSIS BY BUSINESS SEGMENT The Group Banking and Insurance financial services services Total 2008 2007 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 ú'000 ú'000 Turnover 486.847 550.391 18.358 16.727 505.205 567.118 Inter - segment transactions (4.193) (1.107) (1.003) (1.903) (5.196) (3.010) 482.654 549.284 17.355 14.824 500.009 564.108

Assets 7.786.972 7.321.927 60.940 50.214 7.847.912 7.372.141 Inter - segment balances (937) (2.722) (20.184) (12.083) (21.121) (14.805) 7.786.035 7.319.205 40.756 38.131 7.826.791 7.357.336

Additions of property, plant and equipment and computer software 19.793 9.421 247 145 20.040 9.566

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42. APPEAL ON COURT DECISION ON STAMP DUTY LEGISLATION ISSUE HELLENIC BANK GROUP The Bank filed an appeal, which is still pending, to the Full Bench of the Supreme Court against the first instance Court judgment that was issued on 31 May 2005, according to which the first instance Court had confirmed the Stamp Duty Registrar’s decision for the imposition of stamp duties of ú1.281 thousand (Cí750 thousand) and an extra fine of ú256 thousand (Cí150 thousand) in relation to the Bank’s issue of ú25,6 million (Cí15 million) Non Convertible Bonds 2004/2009. The Bank’s position is that according to the Stamp Duty Legislation, it is only required to pay one tenth of the above mentioned amounts. The Bank has raised at first instance as well as in its appeal, a series of legal arguments and points that were not raised by third parties in cases of a similar nature in the past, on which the Full Bench of the Supreme Court will decide.

In the meantime, the Bank has applied for the suspension of the payment of the above mentioned amounts, pending its appeal, but the first instance Court with its judgment issued on 31 October 2005 decided that there were no grounds for such a suspension. As a result, the Bank paid the above amount. If the appeal is ruled in the Bank’s favour, the Stamp Duty Registrar will refund to the Bank the additional amounts paid.

43. POST BALANCE SHEET EVENTS Issue of Loan Capital On 11 March 2009, the Bank proceeded with the issue of Bonds 2019 amounting to ú90.000.000 with a nominal value of ú100 each. The issue was placed with investors with a minimum amount of investment of ú50.000, in accordance with the relevant provisions of the legislation, regulations and directives of the competent authorities.

The Bonds were issued on 11 March 2009 and have 10-year duration. The interest on the Bonds is payable quarterly in cash at each period end. The first interest payment will cover the period from 11 March 2009 to 30 June 2009. The Bonds bear interest at the fixed rate of 7,5% for the first year and floating rate for the remaining periods until the end of the fifth year, equal to the 3-month Euribor applicable at the beginning of each interest period, plus 4,60%.

Subsequent to 11 March 2014, Bonds 2019, if not redeemed by the Bank, will bear an additional interest rate of 2%. Consequently, the interest rate applicable subsequent to 11 March 2014 and in the event of non redemption of Bonds 2019 will equal the 3- month Euribor, plus 6,60%. The Bank, following approval by the Central Bank of Cyprus and a notice to the Commissioner and the holders of Bonds 2019 of no less than 30 and not greater than 60 days, may redeem Bonds 2019 on the first interest payment date subsequent to the 11th of March 2014 and on any other subsequent interest payment date. Bonds 2019 will be listed on the Cyprus Stock Exchange, as soon as the necessary approval from the competent authorities is obtained.

Subsidiary company in Russia In February 2009 the Central Bank of Russia registered the subsidiary company LLC CB Hellenic Bank in the Russian register of companies and in March 2009 the Bank paid the capital amounting to 375.000.000 Ruble (approximately ú8,2 million). The commencement of the bank’s operations will be determined following the completion of the necessary preliminary actions and after evaluating the financial conditions, the developments in the global financial crisis and its consequences on the Russian market.

111 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 44. RISK MANAGEMENT Introduction and overview The Group has exposure to the following risks from its use of financial instruments:

ñ Credit risk ñ Liquidity risk ñ Market risks ñ Operational risks

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital.

Group Risk Management The management and monitoring of all Group risks is centralised under a uniform unit to which the following specialised risk management divisions report:

ñ Group Credit Risk Management ñ Group Market and Liquidity Risks Management ñ Group Operational Risks Management ñ Compliance Services

These divisions report to the Group Risk Management, which is administratively independent from other units with executive authority and reports to the Board of Directors, through the Risk Management Committee, as well as to the Chief Executive Officer.

The divisions cover all risk aspects across the Group’s operations and are intensively working towards the Bank fully conforming to the provisions of the Second Basel Accord and the Directives of the regulatory authorities. The basic aim of Management is the adoption of sophisticated methods and systems for the evaluation and management of risks undertaken by the Group.

Credit risk Credit risk is the risk of financial loss to the Group if a customer and/or counterparty to a financial instrument fail to meet their contractual obligations. This risk principally arises from the granting of loans and advances, trading transactions and treasury management. It may also arise from the downgrading in the credit rating of issuers of debenture loans resulting in a decrease in the value of the Group’s assets.

Group Credit Risk Management Group Credit Risk Management is responsible for formulating the appropriate policies and procedures for detecting, evaluating and measuring credit risk, based on the strategic pursuits of the Group as defined by the Board of Directors.

To ensure the effectiveness of credit risk management, there is a continuous assessment of the Group’s credit policies and monitoring of the compliance of the relevant business units with these policies. Group Credit Risk Management also issues directions to the various business units based on the Group’s risk appetite for specific market segments, operations, as well as specific banking products and, whenever considered necessary, limits are set regarding the undertaking of new banking activities.

Regarding the continuous and systematic monitoring and management of credit risk, Group Credit Risk Management, in cooperation with Group Credit Control, are responsible for the assessment of the quality and performance of the Bank’s credit portfolio in the Retail, Commercial and Corporate Banking Sectors, in order to verify whether the impending credit risks are recognised and dealt with in an effective and timely manner. 112 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

44. RISK MANAGEMENT (continued)

To achieve the above, the Group uses sophisticated systems to measure credit risk as well as evaluate customers based on HELLENIC BANK GROUP quantitative and qualitative criteria:

1. For Retail products, a credit risk assessment system is applied for the evaluation of the creditworthiness of individuals and the measurement of credit risk (Credit Scoring). This system covers credit cards and other retail lending products. 2. For Commercial and Corporate lending, an internal credit rating system (Credit Rating) is used, whereby companies are rated on the basis of financial data and a range of qualitative criteria such as management, competition, etc. This system contributes significantly to the Group’s effort for fair pricing of lending on the basis of risks undertaken. 3. For Treasury, there is centralised management of exposures to countries, financial institutions and other counterparties. Limits are defined based on the Credit Limits Model, which is primarily based on the credit standing of the country and counterparty as determined by international credit assessment institutions while also taking into account their international classification.

Exposure to credit risk Government securities Loans and advances Placement and other eligible bills to customers with other banks and debt securities 2008 2007 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 ú'000 ú'000 Carrying amount 4.609.328 3.725.059 1.032.495 1.260.493 1.754.179 1.865.537 Individually impaired: Grade 2 (medium risk) ------24.608 27.691 Grade 3 (high risk) 485.576 427.899 ------Provision for impairment (326.815) (308.232) -- -- (14.403) (7.683) Carrying amount 158.761 119.667 -- -- 10.205 20.008

Past due but not impaired: Grade 1 (low risk) 412.171 305.197 ------Grade 2 (medium risk) 134.823 126.431 ------Grade 3 (high risk) 65.749 10.018 ------Carrying amount 612.743 441.646 ------

Past due comprises: 0-30 days 243.021 227.325 ------30-60 days 172.560 52.464 ------60-90 days 52.133 27.580 ------90 days + 145.029 134.277 ------Carrying amount 612.743 441.646 ------

Neither past due nor impaired: Grade 1 (low risk) 3.391.057 2.848.494 1.032.495 1.260.493 1.743.974 1.845.529 Grade 2 (medium risk) 490.161 330.081 ------Grade 3 (high risk) 33.320 44.953 ------Carrying amount 3.914.538 3.223.528 1.032.495 1.260.493 1.743.974 1.845.529

Balances after individual impairment 4.686.042 3.784.841 1.032.495 1.260.493 1.754.179 1.865.537 Collective impairment (76.714) (59.782) ------Total carrying amount 4.609.328 3.725.059 1.032.495 1.260.493 1.754.179 1.865.537

113 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 44. RISK MANAGEMENT (continued)

Impaired loans and investment securities Represent loans for which the Group determines that it is probable that it will be unable to collect all principal and interest due, according to the contractual terms of the loan or relevant agreement. These loans are classified under grade 3 according to the Group’s internal credit risk grading system.

They also represent investments in debt securities for which there is objective evidence of impairment as a result of one or more events occurring since the initial recognition of the investment. These events include significant financial difficulty of the issuer, default in interest or principal payments and it becoming probable that the borrower will enter bankruptcy or other financial reorganisation.

Past due but not impaired loans Represent loans where contractual interest or principal payments are past due but the Group believes that impairment is not appropriate on the basis of the level of security and/or stage of collection of amounts owed to the Group.

Loans with renegotiated terms Represent loans that have been restructured due to deterioration in the borrower’s financial position and in respect of which the Group has made concessions that it would not otherwise consider. The accounts with renegotiated terms at 31 December 2008 amounted to ú38.531 thousand (2007: ú42.901 thousand).

Provisions for impairment The Group establishes a provision for impairment losses that represents its estimate of incurred losses in its loan portfolio. The main components of this provision are a specific loss component that relates to individually significant exposures, and a collective loan loss provision established for groups of homogeneous assets in respect of losses that have been incurred but have not been identified on loans subject to individual assessment for impairment.

Provision is also established for impairment in the value of investments held to maturity and financial assets available for sale if there is objective evidence that they have been impaired during the Group’s assessment at each balance sheet date.

Write-off policy The Group writes off loans and investment securities balances when it determines that they are uncollectible. This determination is reached after considering information such as the occurrence of significant changes in the borrower/issuer’s financial position such that the borrower/issuer can no longer pay the obligation, or when proceeds from collateral will not be sufficient to pay back the entire exposure.

Collateral The Group’s policy is that the amount of credit facilities granted should not exceed the repayment capacity of the relevant counterparties. For this purpose policies are applied for the hedging and mitigation of credit risk through the holding of collateral. These policies define the types of collateral held and the methods for estimating its fair value.

The main collateral held by the Group includes mortgage interests over property, charges over business assets, government and bank guarantees as well as personal and corporate guarantees.

The fair value of collateral held against loans and advances to customers which are individually impaired at 31 December 2008 amounts to ú162.827 thousand (2007: ú155.208 thousand). The fair value of collateral held against loans and advances to customers which are past due but not impaired at 31 December 2008 amounts to ú405.998 thousand.

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44. RISK MANAGEMENT (continued)

The Group monitors concentrations of credit risk by sector and by geographic location. An analysis of concentrations of credit HELLENIC BANK GROUP risk at the reporting date is shown below:

Government securities Loans and advances Placement and other eligible bills to customers with other banks and debt securities 2008 2007 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 ú'000 ú'000 Concentration by sector: Carrying amount 4.609.328 3.725.059 1.032.495 1.260.493 1.754.179 1.865.537 Businesses 2.648.461 2.150.228 ------Personal and professional 1.596.475 1.307.761 ------Banks -- -- 1.032.495 1.260.493 1.197.675 1.230.987 Government ------532.146 608.914 Other 767.921 635.084 -- -- 38.761 33.319 5.012.857 4.093.073 1.032.495 1.260.493 1.768.582 1.873.220 Provisions for impairment (403.529) (368.014) -- -- (14.403) (7.683) 4.609.328 3.725.059 1.032.495 1.260.493 1.754.179 1.865.537

Businesses in the above table include manufacturing, trade, tourism and construction businesses, as presented in Note 18.

Government securities Loans and advances Placement and other eligible bills to customers with other banks and debt securities 2008 2007 2008 2007 2008 2007 ú'000 ú'000 ú'000 ú'000 ú'000 ú'000 Concentration by location: Carrying amount 4.609.328 3.725.059 1.032.495 1.260.493 1.754.179 1.865.537 European Union 5.012.857 4.093.073 832.306 1.059.572 1.316.837 1.448.081 Other European countries -- -- 133.319 148.966 132.892 82.368 America -- -- 988 15.138 187.196 197.902 Oceania -- -- 145 323 120.318 132.563 Asia -- -- 64.714 34.374 5.887 542 Middle East -- -- 45 2.050 5.452 11.764 Africa -- -- 978 70 -- -- 5.012.857 4.093.073 1.032.495 1.260.493 1.768.582 1.873.220 Provisions for impairment (403.529) (368.014) -- -- (14.403) (7.683) 4.609.328 3.725.059 1.032.495 1.260.493 1.754.179 1.865.537

Concentration by location for loans and advances to customers is measured based on the location of the Group entity holding the asset, which has a high correlation with the location of the borrower. Concentration by location for investment securities and placements with other banks is measured based on the location of the issuer of the security and the counterparty respectively.

Market and liquidity risks

Group Market and Liquidity Risks Management The Assets and Liabilities Management Committee (ALCO) is responsible for implementing the policy of the Bank’s Board of Directors towards the risks and profitability arising from the Group’s assets and liabilities. Group Market and Liquidity Risks Management is responsible for monitoring group market and liquidity risks within the framework of risk policies and limits defined by ALCO. 115 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 44. RISK MANAGEMENT (continued)

The Group’s approach towards market and liquidity risks management is to concentrate these risks for all Group business units under the Group Treasury Department. Group Treasury Department manages risks, using a framework of activities and limits approved by ALCO. It is noted that the Group Treasury departments in Cyprus and Greece were consolidated in one Group Treasury Department since November 2008. Group Risk Management is responsible for developing policies and procedures for managing the risks and for the daily monitoring of their application. These policies and procedures are re-examined at regular time intervals and are approved by ALCO.

Liquidity risk Liquidity risk is the risk of decrease in profits or capital, arising from a weakness of the Bank to meet its immediate obligations, without incurring additional costs. The Group’s approach in managing liquidity risk is to ensure, to the extent possible (considering that the main role of the Bank as an intermediary is to accept short term deposits and grant long term loans), that there is adequate liquidity in order to satisfy its obligations, when they arise, under “normal” circumstances as well as under stress testing conditions, without the Group bearing any additional costs.

The Group currently has operations in Cyprus and in Greece. The management of the liquidity of the Group’s banking units (including the observance of limits imposed by regulators), is undertaken by the Group Treasury Department and is locally effected depending on the conditions prevailing in the various markets.

The Group places emphasis on the maintenance of stable customer deposits, as they represent one of its basic sources of financing. This is mainly achieved through the maintenance of good and long standing relationships of trust with customers and through competitive and transparent invoicing strategies.

Regular stress testing scenarios are performed to simulate extreme conditions and the appropriate measures are taken whenever necessary.

The liquidity risk of banking units is monitored daily by the Group Market and Liquidity Risks Management. In Cyprus, the liquidity of the euro is being monitored, as well as the liquidity of all foreign currencies as a whole. In Greece, the liquidity of all currencies is being monitored as a whole.

In managing liquidity risk for the euro, the Group calculates and monitors, among other ratios, the ratio of liquid assets over the liabilities required by the Central Bank Directive on Prudential Liquidity. According to the Directive, the Bank is required to maintain this ratio at a minimum of 20%. Liquid assets comprise of cash, interbank deposits and bonds. The ratio presented for 2007 includes items in Cyprus pounds and is calculated based on internal specifications.

The ratio of liquid assets for the euro was as follows:

2008 2007 % % At 31 December 24,76 18,80 Average for the year 26,06 25,08 Maximum percentage for the year 29,98 33,20 Minimum percentage for the year 22,08 18,80

In Cyprus, the liquidity of all foreign currencies is being monitored as a whole. According to a Directive of the Central Bank of Cyprus, the Bank needs to maintain 70% (75% until 3 October 2008) of its total foreign currency deposits in highly liquid assets.

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44. RISK MANAGEMENT (continued)

The ratio of highly liquid assets to total foreign currency deposits during 2008 and 2007 was as follows: HELLENIC BANK GROUP

2008 2007 % % At 31 December 77,68 77,38 Average for the year 78,21 77,02 Maximum percentage for the year 83,85 79,88 Minimum percentage for the year 73,07 74,10

The ratio is calculated based on items expressed in foreign currencies other than euro for 2008 and other than Cyprus pounds for 2007.

The tables below present the undiscounted cash flows of the Group’s liabilities based on the remaining contractual maturity dates.

Analysis of financial liabilities based on their remaining contractual maturity at 31 December 2008

Gross Between nominal Within three Between Carrying (inflow)/ On three months and one and Over amount outflow demand months one year five years five years ú'000 ú'000 ú'000 ú'000 ú'000 ú'000 ú'000 Financial liabilities Deposits by banks 195.196 199.327 64.077 92.204 43.046 -- -- Repurchase agreements 469.669 470.232 330.160 140.072 ------Customer deposits and other customer accounts 6.146.521 6.186.685 2.639.339 1.510.302 1.644.983 386.235 5.826 Derivatives 74.739 - Cash inflows (400.744) (28.445) (341.183) (31.116) -- -- - Cash outflows 437.567 31.779 372.575 33.213 -- -- Other liabilities 250.747 250.747 14.569 33.347 34.289 6.287 162.255 Loan capital 236.889 237.025 -- -- 25.113 32.819 179.093 7.373.761 7.380.839 3.051.479 1.807.317 1.749.528 425.341 347.174

Analysis of financial liabilities based on their remaining contractual maturity at 31 December 2007

Gross Between nominal Within three Between Carrying (inflow)/ On three months and one and Over amount outflow demand months one year five years five years ú'000 ú'000 ú'000 ú'000 ú'000 ú'000 ú'000 Financial liabilities Deposits by banks 492.074 492.485 117.316 305.144 70.025 -- -- Customer deposits and other customer accounts 5.860.462 5.885.118 2.880.611 1.436.920 995.067 566.694 5.826 Derivatives 11.685 - Cash inflows (264.616) (36.373) (181.238) (47.005) -- -- - Cash outflows 270.709 36.482 185.583 48.644 -- -- Other liabilities 222.199 222.199 11.019 28.899 30.049 6.918 145.314 Loan capital 225.995 226.112 ------57.107 169.005 6.812.415 6.832.007 3.009.055 1.775.308 1.096.780 630.719 320.145

117 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 44. RISK MANAGEMENT (continued)

Market risks Market risks derive from the change in the value of the Group’s assets and liabilities and the uncertainty in the stream of future earnings, resulting from changes in market conditions (volatility in foreign exchange, interest rates and stock exchange prices).

The Group has defined its strategy and methods for the continuous monitoring and control of the undertaking and prudent management of market risks. More specifically this is achieved mainly through the implementation of open position and stop loss limits.

Foreign exchange risk It arises from the undertaking of an open position in one or more foreign currencies. Group Market and Liquidity Risks Management observes foreign currency positions on an ongoing basis within the risk management framework and limits set by the Assets and Liabilities Management Committee (ALCO) and the regulatory authority. Within this framework there are nominal limits (by currency, in total, during the day, end of day), gain/loss limits and limits for Value at Risk (VaR). The limits for open positions during working hours exceed the limits for open positions during non-working hours.

VaR methodology is an important tool for the monitoring of foreign exchange risk. With this methodology, the Group calculates the maximum possible loss that may occur, as a result of changes in market conditions, using a confidence level of 99% and for a one-day period, based on the historical foreign exchange rates applicable over the past year.

The table below presents the VaR for the Group’s foreign exchange risk:

2008 2007 ú'000 ú'000 At 31 December 8 15 Average for the year 6 7 Maximum amount for the year 53 38 Minimum amount for the year 2 2

The limitations of the VaR methodology derive mainly from the fact that the historical data used in the calculation may not be indicative of future events.

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44. RISK MANAGEMENT (continued)

Analysis of assets and liabilities by currency at 31 December 2008 HELLENIC BANK GROUP

British Other Euro US Dollar pound Ruble currencies Total ú'000 ú'000 ú'000 ú'000 ú'000 ú'000 Assets Cash and balances with Central Banks 185.254 2.652 997 -- 230 189.133 Government securities and other eligible bills 1.188.762 ------1.188.762 Placements with other banks 56.622 832.509 57.313 29.064 56.987 1.032.495 Loans and advances to customers 4.092.365 86.507 5.818 2.748 421.890 4.609.328 Debt securities 25.245 379.533 160.639 -- -- 565.417 Equity securities 39.538 921 31 -- -- 40.490 Property, plant and equipment 91.713 ------91.713 Intangible assets 20.217 ------20.217 Other assets 71.312 15.294 2.368 38 224 89.236 Total assets 5.771.028 1.317.416 227.166 31.850 479.331 7.826.791

Liabilities Deposits by banks 130.838 44.572 12.206 1.831 5.749 195.196 Repurchase agreements 469.669 ------469.669 Customer deposits and other customer accounts 4.085.082 1.747.552 230.002 39.100 44.785 6.146.521 Other liabilities 273.212 21.346 14 94 30.820 325.486 4.958.801 1.813.470 242.222 41.025 81.354 7.136.872

Loan capital 236.889 ------236.889

Equity Share capital 127.844 ------127.844 Reserves 312.593 ------312.593 Total equity attributable to equity holders of the parent company 440.437 ------440.437 Minority interest 12.593 ------12.593 453.030 ------453.030 Total liabilities and equity 5.648.720 1.813.470 242.222 41.025 81.354 7.826.791

Total position 122.308 (496.054) (15.056) (9.175) 397.977 Nominal value of currency derivatives (80.125) 474.379 8.929 -- (403.183)

Net currency position 42.183 (21.675) (6.127) (9.175) (5.206)

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Analysis of assets and liabilities by currency at 31 December 2007

Cyprus British Other Pound Euro US Dollar pound Ruble currencies Total ú'000 ú'000 ú'000 ú'000 ú'000 ú'000 ú'000 Assets Cash and balances with Central Banks 191.774 41.041 1.864 865 -- 125 235.669 Government securities and other eligible bills 434.807 112.472 ------547.279 Placements with other banks 86.839 236.141 783.039 45.708 13.528 95.238 1.260.493 Loans and advances to customers 2.278.420 1.036.610 79.088 10.691 -- 320.250 3.725.059 Debt securities 8.540 654.238 411.131 244.349 -- -- 1.318.258 Equity securities 11.951 70.085 6.359 854 -- -- 89.249 Property, plant and equipment 77.034 3.996 ------81.030 Intangible assets 19.449 1.164 ------20.613 Other assets 33.347 42.632 3.200 191 -- 316 79.686 Total assets 3.142.161 2.198.379 1.284.681 302.658 13.528 415.929 7.357.336

Liabilities Deposits by banks 250.914 167.843 57.869 1.039 3.254 11.155 492.074 Customer deposits and other customer accounts 1.957.370 1.959.747 1.550.433 329.070 10.153 53.689 5.860.462 Other liabilities 211.881 7.530 11.020 75 57 3.321 233.884 2.420.165 2.135.120 1.619.322 330.184 13.464 68.165 6.586.420

Loan capital 225.995 ------225.995

Equity Share capital 124.277 ------124.277 Reserves 387.360 13.322 ------400.682 Total equity attributable to equity holders of the parent company 511.637 13.322 ------524.959 Minority interest 19.962 ------19.962 531.599 13.322 ------544.921 Total liabilities and equity 3.177.759 2.148.442 1.619.322 330.184 13.464 68.165 7.357.336

Total position (35.598) 49.937 (334.641) (27.526) 64 347.764 Nominal value of currency derivatives 5.830 (10.465) 337.066 19.319 -- (351.750)

Net currency position (29.768) 39.472 2.425 (8.207) 64 (3.986)

Interest rate risk It arises as a result of timing differences on the interest rate repricing of assets and liabilities.

Interest rate risk is initially managed through the monitoring of the interest rate gap by currency, by time interval and in total.

Group Market and Liquidity Risks Management observes interest rate positions on a continuous basis, within the risk management framework and limits set by the Assets and Liabilities Management Committee (ALCO).

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44. RISK MANAGEMENT (continued)

Analysis of assets and liabilities based on their contractual repricing or maturity dates at 31 December 2008 HELLENIC BANK GROUP

Between Between one and three Between Non interest Within one three months and one and Over bearing month months one year five years five years Total ú'000 ú'000 ú'000 ú'000 ú'000 ú'000 ú'000 Assets Cash and balances with Central Banks 53.665 135.468 ------189.133 Government securities and other eligible bills -- 175.339 492.569 51.433 103.386 366.035 1.188.762 Placements with other banks 38.475 961.178 12.488 15.354 -- 5.000 1.032.495 Loans and advances to customers -- 3.489.650 830.817 157.794 117.856 13.211 4.609.328 Debt securities -- 154.609 381.068 8.692 7.054 13.994 565.417 Equity securities 40.490 ------40.490 Property, plant and equipment 91.713 ------91.713 Intangible assets 20.217 ------20.217 Other assets 89.236 ------89.236 Total assets 333.796 4.916.244 1.716.942 233.273 228.296 398.240 7.826.791

Liabilities Deposits by banks -- 114.291 50.000 30.905 -- -- 195.196 Repurchase agreements -- 451.669 18.000 ------469.669 Customer deposits and other customer accounts -- 4.041.840 943.664 1.134.307 26.710 -- 6.146.521 Other liabilities 325.486 ------325.486 325.486 4.607.800 1.011.664 1.165.212 26.710 -- 7.136.872

Loan capital -- 42.007 169.769 25.113 -- -- 236.889

Total liabilities 325.486 4.649.807 1.181.433 1.190.325 26.710 -- 7.373.761

Total position 8.310 266.437 535.509 (957.052) 201.586 398.240 453.030 Nominal value of interest rate derivatives -- 150.198 219.774 133.860 (122.558) (381.274) --

Net position 8.310 416.635 755.283 (823.192) 79.028 16.966 453.030

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Analysis of assets and liabilities based on their contractual repricing or maturity dates at 31 December 2007

Between Between one and three Between Non interest Within one three months and one and Over bearing month months one year five years five years Total ú'000 ú'000 ú'000 ú'000 ú'000 ú'000 ú'000 Assets Cash and balances with Central Banks 42.236 193.433 ------235.669 Government securities and other eligible bills -- 57.822 25.856 63.415 53.983 346.203 547.279 Placements with other banks 61.521 1.160.500 27.467 6.004 5.001 -- 1.260.493 Loans and advances to customers -- 3.052.823 318.697 268.577 84.962 -- 3.725.059 Debt securities -- 337.200 871.698 59.926 33.812 15.622 1.318.258 Equity securities 89.249 ------89.249 Property, plant and equipment 81.030 ------81.030 Intangible assets 20.613 ------20.613 Other assets 79.686 ------79.686 Total assets 374.335 4.801.778 1.243.718 397.922 177.758 361.825 7.357.336

Liabilities Deposits by banks -- 487.017 5.057 ------492.074 Customer deposits and other customer accounts -- 3.944.598 1.160.814 647.198 107.852 -- 5.860.462 Other liabilities 233.884 ------233.884 233.884 4.431.615 1.165.871 647.198 107.852 -- 6.586.420

Loan capital -- 41.939 158.940 25.116 -- -- 225.995

Total liabilities 233.884 4.473.554 1.324.811 672.314 107.852 -- 6.812.415

Total position 140.451 328.224 (81.093) (274.392) 69.906 361.825 544.921 Nominal value of interest rate derivatives -- 97.544 67.811 186.080 (53.214) (298.221) --

Net position 140.451 425.768 (13.282) (88.312) 16.692 63.604 544.921

In addition to monitoring interest gaps, interest rate risk is managed through monitoring of the sensitivity in the value of Group assets and liabilities and net interest income under various interest rate change scenarios. The ALCO Committee has defined limits, which are revised depending on market conditions, regarding the sensitivity in the value of Group assets and liabilities by currency and geographic location. ALCO has also defined reference ratios for the sensitivity of assets and liabilities over the Group’s fundamentals (e.g. capital base). Responsibility for the monitoring of these limits and ratios lies with the underlying units of Group Risk Management. The interest rate change scenarios include both parallel and non-parallel changes in the interest rate curve. Stress testing analyses are also performed.

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44. RISK MANAGEMENT (continued)

The table below presents the impact on net interest income and net present value from reasonably possible changes in interest HELLENIC BANK GROUP rates:

Net interest Net present income value ú'000 ú'000 2008 +100 basis points 23.083 2.205 -100 basis points (23.083) (2.205)

Net interest Net present income value ú'000 ú'000 2007 +50 basis points 8.141 (2.703) -50 basis points (8.141) 2.703

Price risk It derives from the undertaking of an open position in equities. The Group manages this risk through policies and procedures of setting and monitoring open position limits, stop loss limits on trading positions, as well as concentration limits by issuer.

The table below presents the impact on results and equity from reasonably possible changes in equity prices:

2008 2007 Net profits Equity Net profits Equity ú'000 ú'000 ú'000 ú'000 +15% change in index 1.012 3.853 5.157 11.096 -15% change in index (1.012) (3.853) (5.157) (11.096)

Operational risks Operational risks are the risks of direct or indirect loss arising from a wide range of factors relating to procedures, staff, technology and infrastructure as well as external factors, such as those arising from legal claims and compliance with laws and regulations.

The Group has adopted the principles and provisions included in the relevant guidelines of the Directives of the Central Bank of Cyprus, the European Union, the Second Basel Accord and the Committee of European Banking Supervisors (CEBS).

The Group has developed a strong framework for the management of operational risks, considering its risk-taking attitude and its tolerance to operational risk. The annual insurance cover available to the Group is also taken into consideration, as this is regarded as an effective tool for the mitigation of operational risk.

Group Operational Risks Management is responsible for the recognition, detection, measurement, assessment, monitoring, control, mitigation and reporting of risks undertaken or likely to be undertaken by the Group, in order to manage operational risks effectively and contribute in creating sufficient business continuity plans.

Generally, the management of operational risk is performed by various lines of reporting during the normal course of the Group’s operations, through workshops, control lists, internal and external audit reports, basic risk indicators and the register for recording and monitoring the relevant risks. Internal audits are also performed which are incorporated in the daily procedures executed by staff within various departments.

123 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 44. RISK MANAGEMENT (continued)

Capital management The lead regulator that sets and monitors capital requirements for the Group is the Central Bank of Cyprus. The Central Bank of Cyprus is guided in its supervisory role by the recommendations of the Basel Committee and the European Union Directives on banking issues.

In December 2006 the Central Bank of Cyprus issued a Directive for the Calculation of the Capital Requirements and Large Exposures of Banks (Basel II) for the purposes of harmonisation with the European Union Directives. The Group elected to comply with Basel II as from January 2007.

Basel II comprises of three Pillars:

ñ Pillar 1 – Minimum capital requirements ñ Pillar 2 – Supervisory review process ñ Pillar 3 – Market discipline

Pillar 1 - Minimum capital requirements Pillar 1 sets forth the guidelines for calculating the minimum capital required for each risk component of the Bank, including credit risk, market risk and operational risk.

The Group has at first adopted the Standardised Approach for the calculation of the minimum capital against credit risk. Under this approach, exposures are classified in specified classes and are weighed using specific weights, depending on the class the exposures belong to and their credit rating. Also, Basel II suggests two methods for the recognition of collateral, the Simple Approach and the Comprehensive Approach. The Group has applied the Comprehensive Approach, as this enables the fairer recognition and more accurate estimation of the Group’s collateral.

Regarding market risk, the Group has adopted the Standardised Approach, according to which the minimum is estimated by adding together the interest rate, equity and debt securities position, foreign exchange and price risk on derivatives using predefined models.

The Group uses the Basic Indicator Approach for the calculation of the capital requirements for operational risk. According to the Basic Indicator Approach, the operational risk capital requirement is estimated using a specific percentage on the average sum of gross income on a three year basis.

Pillar 2 - Supervisory review process Pillar 2 includes rules to ensure that adequate capital is in place to support any risk exposures of the Group and requires appropriate risk management, reporting and governance policies. The Group has determined the additional capital required to cover credit risks which are not sufficiently covered by Pillar 1 requirements, such as Residual Risk, as well as risks not recognised by Pillar 1, such as Credit Concentration Risk, Interest Rate Risk in the Banking Book, Business and Strategy Risk and any external factors affecting the Group.

Banks are assessing their capital needs relative to their risks with their Internal Capital Adequacy Assessment Process (ICAAP), while at the same time maintaining communication with supervisors on a continuous basis.

Pillar 3 - Market discipline Pillar 3 sets out required disclosures to allow market participants to assess key pieces of information relevant to the capital structure, risk exposures, risk assessment processes and hence the capital adequacy of the Group.

124 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

44. RISK MANAGEMENT (continued)

Based on the Central Bank Directive, disclosures by banks include information relating to their risk management objectives and HELLENIC BANK GROUP policies, the composition of own funds and original and supplementary funds, their compliance with minimum capital requirements and the Internal Capital Adequacy Assessment Process.

The Group’s policy is to maintain a strong capital base, in order to maintain investor, creditor and market confidence and support the future development of the Group’s operations.

The Central Bank of Cyprus requires the maintenance of a specific total capital ratio in relation to the risks undertaken by the Bank. At 31 December 2008 the Minimum Capital Adequacy Ratio as defined by the relevant Central Bank Directive was 8% (2007: 8%).

The Group has fully complied with all capital adequacy requirements as imposed by the regulatory authorities for the years 2008 and 2007.

The Group’s regulatory capital based on the Directive is analysed as follows:

ñ Original own funds, which include the share capital, share premium reserve, revenue reserve less proposed dividends, translation reserve and capital securities. The carrying amount of intangible assets and other regulatory adjustments are deducted in arriving at original own funds. ñ Supplementary own funds, which include subordinated loan capital and revaluation reserves.

At 31 December 2008 the participation in the subsidiary company Athena Cyprus Public Company Ltd amounting to ú57.970 thousand (2007: ú57.970 thousand) is deducted equally from original own funds and supplementary own funds, for the purposes of calculating the amount of permissible capital. The investments in insurance companies Pancyprian Insurance Ltd, Hellenic Alico Life Insurance Company Ltd, Hellenic Insurance Agency S.A. and Hellenic Insurance Agency Ltd, amounting to ú42.186 thousand (2007: ú40.015 thousand) are deducted from the total of original and supplementary own funds.

125 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 44. RISK MANAGEMENT (continued)

The table below presents the position of the Group’s regulatory capital, in accordance with the principles of Basel II, at 31 December:

2008 2007 ú'000 ú'000 Own funds Original own funds 473.774 492.744 Less: Participation in Athena Cyprus Public Company Ltd (28.985) (28.985) Total original own funds 444.789 463.759

Supplementary own funds 180.925 200.602 Less: Participation in Athena Cyprus Public Company Ltd (28.985) (28.985) Total supplementary own funds 151.940 171.617

Total original and supplementary own funds 596.729 635.376 Less: Participation in insurance companies (42.186) (40.015) Total own funds 554.543 595.361

Risk weighed assets Credit risk 4.406.888 3.718.067 Market risk 216.625 174.001 Operational risk 500.470 448.337 5.123.983 4.340.405

Tier 1 ratio 8,7% 10,7%

Tier 2 ratio 3,0% 4,0%

Capital adequacy ratio 10,8% 13,7%

126 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

DECLARATION BY THE MEMBERS OF THE BOARD OF DIRECTORS AND THE COMPANY OFFICIALS RESPONSIBLE FOR THE DRAFTING OF THE FINANCIAL STATEMENTS

In accordance with article 9(3)(c) and (7) of the 2007 Law on Transparency Requirements (Securities Listed for Trading on a HELLENIC BANK GROUP Regulated Market), we the members of the Board of Directors and the Company officials responsible for the drafting of the financial statements of Hellenic Bank Public Company Ltd (the “Company”) for the year ended 31 December 2008, confirm that to the best of our knowledge:

(a) The annual financial statements presented in pages 58 to 126:

(i) Have been prepared in accordance with International Financial Reporting Standards and the provisions of article (4), and

(ii) Give a true and fair view of the assets and liabilities, the financial position and the profits or losses of Hellenic Bank Public Company Ltd (and of the entities included in the consolidated financial statements, as a whole) and

(b) The Report of the Board of Directors provides a fair review of the developments and performance of the business as well as the position of Hellenic Bank Public Company Ltd (and of the entities included in the consolidated financial statements, as a whole), together with a description of the major risks and uncertainties that they face.

Members of the Board of Directors Dr Andreas P. Panayiotou Non Executive Chairman Andreas M. Moushouttas Non Executive Vice Chairman Iacovos G. Iacovou Non Executive Member of the Board Antonis I. Pierides Non Executive Member of the Board Demetris J. Eliades Non Executive Member of the Board Soteris Z. Kallis Non Executive Member of the Board Charalambos P. Panayiotou Non Executive Member of the Board Ioannis Ch. Charilaou Non Executive Member of the Board Georgios K. Pavlou Non Executive Member of the Board Kyriacos E. Georgiou Non Executive Member of the Board Kyriacos I. Droushiotis Non Executive Member of the Board Makis Keravnos Executive Member of the Board Pieris Th. Theodorou Executive Member of the Board

Company official responsible for the drafting of the financial statements Antonis Rouvas, Group Chief Financial Officer

Nicosia, 27 March, 2009

127 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 136 131 130 OTHER GROUPINFORMATION HELLENIC BANKGROUP SHAREHOLDER INFORMATION AND INVESTORRELATIONS OFFICES ANDBRANCHES BOARD OFDIRECTORSTHEGROUP’S MAINSUBSIDIARY COMPANIES

HELLENIC BANK GROUP ANNUAL REPORT 2008 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 BOARD OF DIRECTORS OF THE GROUP’S MAIN SUBSIDIARY COMPANIES

HELLENIC BANK (FINANCE) LTD HELLENIC ALICO LIFE INSURANCE COMPANY LTD Andreas M. Moushouttas, Chairman Makis Keravnos, Chairman (appointed on 29.05.2008) George Chr. Mavroudis Avraam L. Louca, (Chairman, resigned on 29.05.2008) Iacovos C. Constantinides Andreas E. Vasiliou, Vice-Chairman Soteris I. Sergides (resigned on 31.12.2008) Pieris Th. Theodorou Georgios K. Pavlou Antonis I. Karpasitis Ioannis Ch. Charilaou Georgios K. Pavlou Soteris Z. Kallis Antonis I. Pierides Glafkos G. Mavros (appointed on 22.01.2008) Maria H. Vovides, Secretary Pieris Th. Theodorou, Secretary ATHINA CYPRUS PUBLIC COMPANY LTD HELLENIC BANK (INVESTMENTS) LTD Iacovos G. Iacovou, Chairman Charalambos P. Panayiotou, Chairman (as from 20.05.2008, appointed on 15.02.2008) (as from 08.05.2008, Vice-Chairman until 08.05.2008) Dr Iacovos Aristidou (Chairman until 20.05.2008) Andreas P. Panayiotou (Chairman, resigned on 08.05.2008) Soteris Z. Kallis (appointed on 15.02.2008) Pieris Th. Theodorou Kyriacos I. Droushiotis (appointed on 15.02.2008) George Chr. Mavroudis Othon Pavli (appointed on 15.02.2008) Yiannis Telonis (resigned on 17.11.2008) Marios Christoforides (appointed on 15.02.2008) Pieris Th. Theodorou, Secretary Yiannis Ioannou (appointed on 15.02.2008) Stavros A. Stavrou (appointed on 29.12.2008) HELLENIC BANK TRUST & FINANCE CORPORATION LTD Yiannis Telonis (resigned on 17.11.2008) Pieris Th. Theodorou, Chairman (as from 10.01.2008) Panayiotis Hadjipantelis (resigned on 30.01.2008) Charalambos G. Phokas Hellenic Bank (Investments) Ltd, Secretary Thomas P. Stylianou (appointed on 22.01.2008) Charalambos M. Mousoulides, Secretary LLC CB HELLENIC BANK (Russia) Andreas P. Panayiotou, Chairman PANCYPRIAN INSURANCE LTD Andreas M. Moushouttas Ioannis Ch. Charilaou, Chairman (as from 06.05.2008) Demetris J. Eliades Zenios Demetriou (Chairman until 06.05.2008) Kyriakos E. Georgiou Thanos Michael Georgios K. Pavlou Dr Iacovos Aristidou Glafkos G. Mavros Iacovos C. Constantinides Antonis Rouvas Antonis I. Pierides Glafkos G. Mavros (appointed on 10.01.2008) (appointed on 18.07.2008) Petros Arsalides, Secretary

130 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

HELLENIC BANK GROUP OFFICES AND BRANCHES

HEAD OFFICE KENNEDY BRANCH TSERIOU BRANCH HELLENIC BANK GROUP Corner Limassol Avenue 30 Kennedy Ave. & 25th March, 93A Tseriou Ave., 2043 Nicosia & 200 Athalassas Avenue, 1087 Nicosia Tel: 22 501 521, Fax: 22 327 299 2025 Strovolos, Tel: 22 501 404, Fax: 22 875 307 [email protected] P. O. Box 24747, 1394 Nicosia [email protected] SWIFT: HEBACY2N DHALI BRANCH Δel.: 22 500 000, Fax: 22 500 050 LATSIA BRANCH 1a Arch. Makarios III Str., 79A Arch. Makarios Ave., 2223 Latsia 2540 Dhali, Nicosia Website: Tel: 22 501413, Fax: 22 488345 Tel: 22 501 532, Fax: 22 524 780 http: //www.hellenicbank.com [email protected] [email protected]

E-mail: DIGHENIS AKRITAS MAIN BRANCH LAKATAMIA BRANCH [email protected] 92 Dighenis Akritas Ave. & Kritis, 28 Arch. Makarios III Ave., 1061 Nicosia 2324 Kato Lakatamia, Nicosia Service Line: SWIFT/BIC: HEBA CY 2N NIC Tel: 22 501 541, Fax: 22 320 986 8000 99 99 Tel: 22 500 500, Fax: 22 500 560 [email protected] [email protected] For calls from abroad: PARISSINOS BRANCH +357 22 743 843 ACROPOLIS BRANCH Archangelos Ave. & 7 Kalidonion Str., 53 Acropolis Ave. & Thermopylon Str., Archangelos, Engomi, 2410 Nicosia NICOSIA DISTRICT Strovolos, 2012 Nicosia Tel: 22 501 553, Fax: 22 354 630 Tel: 22 501 425, Fax: 22 319 112 [email protected] PERSONAL BANKING DIVISION [email protected] LEDRA BRANCH ELEFTHERIAS SQUARE BRANCH AGIOS ANTONIOS BRANCH 3 Aheon & Agamemnonos, 1 Evagorou Ave., Mitsis Building 1, Corner 12A Evgenias & Antoniou 2413 Engomi, Nicosia Eleftherias Sq., 1065 Nicosia Theodotou Str. & Klimentos, 1061 Nicosia Tel: 22 501 563, Fax: 22 358 029 SWIFT/BIC: HEBA CY 2N NIC Tel: 22 501 442, Fax: 22 433 490 [email protected] Tel: 22 501 000, Fax: 22 501 088 [email protected] [email protected] BUSINESS SERVICES DIVISION AGIOS DHOMETIOS BRANCH KOKKINOTRIMITHIA BRANCH 79 Gregoriou Afxentiou Str., 2368 Nicosia DIGHENIS AKRITAS BUSINESS CENTER 8C Gr. Afxentiou, 2660 Kokkinotrimithia Tel: 22 501 453, Fax: 22 771 354 92 Dighenis Akritas Ave. & Kritis, Tel: 22 501 362, Fax: 22 835 428 [email protected] 1061 Nicosia, P. O. Box 24747, [email protected] 1394 Nicosia STROVOLOS AVE BRANCH Tel: 22 500 500, Fax: 22 765 107 AYIOS DHOMETIOS BRANCH 137A Strovolos Ave., 2042 Nicosia [email protected] (AIRPORT ROAD) Tel: 22 501 463, Fax: 22 316 153 22 Aristides Str., 2370 Nicosia [email protected] ATHALASSAS AVE BUSINESS CENTER Tel: 22 501 374, Fax: 22 354 870 173 Athalassas Ave., 2025 Nicosia, [email protected] KAKOPETRIA BRANCH P. O. Box 24529, 1300 Nicosia 45 Arch. Makarios Ave., 2810 Kakopetria Tel: 22 501 813, Fax: 22 501 991 ANTHOUPOLIS BRANCH Tel: 22 501 472, Fax: 22 923 461 [email protected] 64A St. George Str., 2304 Nicosia [email protected] Tel: 22 501 381, Fax: 22 373 335 CORPORATE BANKING DIVISION [email protected] PRODROMOU BRANCH 25 Prodromou, 1095 Nicosia NICOSIA CORPORATE CENTER ATHALASSAS BRANCH Tel: 22 501 487, Fax: 22 676 881 173 Athalassas Ave., 2025 Nicosia 173 Athalassas Ave., Strovolos, [email protected] Tel: 22 501 886, Fax: 22 501 996 2025 Nicosia [email protected] Tel: 22 501 800, Fax: 22 501 990 STAVROU BRANCH [email protected] Corner 37 Stavrou Ave. INTERNATIONAL BUSINESS DIVISION & 2 Yiannitson Str., DEMOSTHENIS SEVERIS BRANCH 2027 Strovolos, Nicosia NICOSIA INTERNATIONAL 15 Demosthenis Severis Ave., Tel: 22 501 501, Fax: 22 491 057 BUSINESS CENTER 1080 Nicosia [email protected] 173 Athalassas Ave., 2025 Nicosia Tel: 22 501 332, Fax: 22 667 813 Tel: 22 501 832 / 501 833 / 501 835 [email protected] PLATY BRANCH Fax: 22 501 993 100A Kyrenia Ave., [email protected] KANTARAS BRANCH Platy 2114 Aglantzia, Nicosia 18 Kantaras Ave., 1037 Nicosia Tel: 22 501 514, Fax: 22 331 504 Tel: 22 501 392, Fax: 22 435 500 [email protected] [email protected] 131 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 LIMASSOL DISTRICT FRANKLIN ROUSVELT BRANCH LARNACA DISTRICT 138 Franklin Rousvelt Str., 3011 Limassol PERSONAL BANKING DIVISION Tel: 25 502 895, Fax: 25 573 696 PERSONAL BANKING DIVISION [email protected] ARCH MAKARIOS AVE. BRANCH ZENONOS KITIEOS BRANCH 131 Arch Makarios Ave. ANEXARTISIAS & SP. ARAOUZOU 2 Zenonos Kitieos Str., & Ioanni Polemi Str., 3021 Limassol BRANCH P. O. Box 40170, 6023 Larnaca Tel: 25 502 300, Fax: 25 731 031 137 Sp. Araouzos Ave. & Anexartisias, SWIFT/BIC: HEBA CY 2N LAR [email protected] 3036 Limassol Tel: 24 503 000, Fax: 24 654 366 Tel: 25 502 502, Fax: 25 359 032 [email protected] AKROTIRI BRANCH [email protected] RAF Station Shopping Centre, DHEKELIA BRANCH Princes Str., 3771 Akrotiri AYIA PHYLA BRANCH Amenities Village, 6370 Dhekelia Tel: 25 502 810, Fax: 25 952 588 12 1st April Str., Ayia Phyla, Tel: 24 503 351, Fax: 24 723 539 [email protected] 3116 Limassol [email protected] Tel: 25 502 511, Fax: 25 730 181 EPISKOPI BRANCH [email protected] DROSIA BRANCH Episkopi Garrison BFPO 59, 3370 Episkopi 9 Gr. Dighenis Ave. & Thessalonikis, Tel: 25 502 824, Fax: 25 211 311 KATO POLEMIDIA BRANCH 6035 Larnaca [email protected] 105 Nicos Pattichis Ave., Kato Polemidia, Tel: 24 503 373, Fax: 24 655 141 4155 Limassol [email protected] AYIOS GEORGIOS BRANCH Tel: 25 502 523, Fax: 25 731 570 2 Promachon Eleftherias Ave., [email protected] ARCH MAKARIOS III BRANCH 4103 Limassol 89 Arch. Makarios III Ave., Filanda Court, Tel: 25 502 801, Fax: 25 310 638 ACADEMIAS BRANCH 6017 Larnaca [email protected] 17 Spyrou Kyprianou Str., Linopetra, Tel: 24 503 306, Fax: 24 636 387 4043 Limassol [email protected] GLADSTONOS & ANAXAGORA BRANCH Tel: 25 502 837, Fax: 25 314 985 52 Gladstonos Ave. & Anaxagora, [email protected] HERMOU BRANCH P. O. Box 51474, 3505 Limassol Hermou Str. & N.Rossou Str., 6022 Larnaca Tel: 25 502 000, Fax: 25 367 324 BUSINESS SERVICES DIVISION Tel: 24 503 393, Fax:24 652 575 [email protected] [email protected] GLADSTONOS & ANAXAGORA PAPHOS STR. BRANCH BUSINESS CENTER SPYROS KYPRIANOU AVE. BRANCH 15 Paphos Str., 3052 Limassol Corner 52 Gladstonos & Anaxagora Str., Corner 2 Stratigou Timayia & Averof, Tel: 25 502 844, Fax: 25 570 974 P. O. Box 51474, 3505 Limassol 6052 Larnaca [email protected] Tel: 25 502 002, Fax: 25 502 081 Tel: 24 503 413, Fax: 24 669 590 [email protected] [email protected] COURT SQUARE BRANCH Arch Makarios Ave. & Grivas Dhigenis, ARCH MAKARIOS BUSINESS CENTER DIONYSOU AVE. BRANCH 3105 Limassol 56 Arch. Makarios III Ave., 3065 Limassol Dionysou & 1 Socratous Str., Tel: 25 502 604, Fax: 25 376 288 P. O. Box 51474, 3505 Limassol Pyla Tourist Area, 7081 Larnaca [email protected] Tel: 25 502 718, Fax: 25 502 780 Tel: 24 503 420, Fax: 24 644 323 [email protected] [email protected] YERMASOYIA BRANCH 54 George A' Str., CORPORATE BANKING DIVISION LIVADIA BRANCH Old Rd. Lssol - Nsia, 4047 Limassol 43B P. Kyprianou Str., 7060 Livadia, Tel: 25 502 863, Fax: 25 326 121 LIMASSOL CORPORATE CENTER Larnaca [email protected] Corner 52 Gladstonos & Anaxagora Str., Tel: 24 503 441, Fax: 24 662 744 3505 Limassol [email protected] MUNICIPAL MARKET BRANCH Tel: 25 502 006, Fax: 25 502 082 10A Georghiou Ghennadiou Str., [email protected] DROMOLAXIA BRANCH 3041 Limassol 2 Eleftherias Ave., 7020 Dromolaxia Tel: 25 502 873, Fax: 25 373 121 INTERNATIONAL BUSINESS DIVISION Tel: 24 503 452, Fax: 24 425 190 [email protected] [email protected] LIMASSOL INTERNATIONAL BUSINESS MESA YITONIA BRANCH CENTER PHANEROMENI BRANCH Arch. Makarios III Ave & 43E St. Lenas, Corner 52 Gladstonos & Anaxagora Str., 145A Phaneromenis Ave., 6031 Larnaca 4003 Limassol 3505 Limassol Tel: 24 503 461, Fax: 24 654 740 Tel: 25 502 881, Fax: 25 753 864 Tel: 25 502 040, [email protected] [email protected] Fax: 25 371 617 / 367 324 [email protected] 132 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

ORMIDHIA BRANCH TEFKROU ANTHIA BRANCH KATO PYRGOS BRANCH HELLENIC BANK GROUP 15 Demokratias Str., 7530 Ormidhia 7 Tefkrou Anthia Str., P.O. Box 30091, 38A' Nikolaou Papageorgiou Str., Tel: 24 503 470, Fax: 24 722 782 5330 Ayia Napa, Famagusta 2940 Kato Pyrgos, Nicosia [email protected] Tel: 23 504 345, Fax: 23 722 636 Tel: 26 505 140, Fax: 26 522 580 [email protected] [email protected] BUSINESS SERVICES DIVISION DHERYNIA BRANCH ELEFTHERIOU VENIZELOU BRANCH LARNACA BUSINESS CENTER 4 Demokratias Str., 5380 Dherynia, El. Venizelou & 33 N. Nicolaides Ave., Corner Gr. Afxentiou & Gladstonos Str., Famagusta 8021 Paphos 6023 Larnaca, P. O. Box 40434, Tel: 23 504 355, Fax: 23 730 188 Tel: 26 505 151, Fax: 26 949 677 6304 Larnaca [email protected] [email protected] Tel: 24 503 000, Fax: 24 650 040 [email protected] PROTARAS AREA BRANCH (Tourist) DANAE AVE. BRANCH 22 Protaras Str., 5296 Protaras, (Opposite SODAP) CORPORATE BANKING DIVISION (Opposite Vrissiana Hotel) 5 Danae Ave., 8042 Paphos Tel: 23 504 370, Fax: 23 832 539 Tel: 26 505 160, Fax: 26 964 262 LARNACA CORPORATE CENTER [email protected] [email protected] Corner Gr. Afxentiou & Gladstonos Str., P. O. Box 51474, 6023 Larnaca MONASTIRAKI AREA BRANCH APOSTOLOU PAVLOU BRANCH Tel: 24 503 000, Fax: 24 656 919 Arch. Makarios III Ave. & Mishaouli 27 Apostolos Pavlos Ave., [email protected] & Kavazoglou, 5330 Ayia Napa P. O. Box 60074, 8046 Paphos Tel: 23 504 375, Fax: 23 723 406 Tel: 26 505 616, Fax: 26 945 483 INTERNATIONAL BUSINESS DIVISION [email protected] [email protected]

LARNACA INTERNATIONAL BUSINESS SERVICES DIVISION KENNEDY SQUARE BRANCH BUSINESS CENTER Kennedy Square, 8047 Paphos 3-7 Arch. Makarios III Ave., 6016 Larnaca FAMAGUSTA BUSINESS CENTER Tel: 26 505 172, Fax: 26 937 636 P. O. Box 40434, 6304 Larnaca 85, 1st April Ave., 5280 Paralimni, [email protected] Tel: 24 503 480 P. O. Box 33011, 5310 Paralimni, Fax: 24 659 101, 24 625 187 Famagusta POSEIDONOS BRANCH [email protected] Tel: 23 504 300, Fax: 23 827 045 90 Poseidonos Ave., 8042 Paphos [email protected] Tel: 26 505 180, Fax: 26 951 638 FAMAGUSTA DISTRICT [email protected] CORPORATE DIVISION PERSONAL BANKING DIVISION NICODEMOU MYLONA BRANCH FAMAGUSTA CORPORATE CENTRE 6 Nicodemou Mylona Str., KAPPARIS BRANCH 85, 1st April Ave., 5280 Paralimni, P. O. Box 60200, 8126 Paphos 2 Kapparis Ave., 5290 Paralimni, P. O. Box 33011, 5310 Paralimni, Tel: 26 505 010, Fax: 26 941 484 Famagusta Famagusta [email protected] Tel: 23 504 380, Fax: 23 740 228 Tel: 23 504 285, Fax: 23 504 180 [email protected] [email protected] POLIS CHRYSOCHOUS BRANCH 2 Arch. Makarios III Ave., SOTIRA BRANCH PAFOS DISTRICT 8820 Polis Chrysochous 6 Heroon Str., 5390 Sotira, Famagusta Tel: 26 505 191, Fax: 26 322 370 Tel: 23 504 391, Fax: 23 829 120 PERSONAL BANKING DIVISION [email protected] [email protected] ELLADOS AVE BRANCH KATO PAFOS BRANCH VRYSOULLES BRANCH Ellados Ave. & Xinaridou Rd., (Opposite Paphos Beach Hotel) 1-4 C. Elia Ave., Syn. Ay. Georgiou, 8020 Paphos Poseidonos Ave. & Ay. Antonios Str., 5522 Vrysoulles, Famagusta Tel: 26 505 103, Fax: 26 953 077 8041 Paphos Tel: 23 504 358, Fax: 23 962 878 [email protected] Tel: 26 505 202, Fax: 26 947 456 [email protected] [email protected] TOMBS OF THE KINGS BRANCH PARALIMNI BRANCH 8 Tombs of the Kings Ave., PERVOLA BRANCH 85, 1st April Ave., Paralimni, Famagusta Kato Paphos, 8046 Paphos Pafsaniou and Leonidou Strs., Tel: 23 504 300 Tel: 26 505 122, Fax: 26 946 920 8010 Paphos Fax: 23 827 045 / 820 780 [email protected] Tel: 26 505 213, Fax: 26 939 733 [email protected] [email protected] PEYIA BRANCH Peyia Village Square, 8560 Peyia YEROSKIPOU BRANCH Tel: 26 505 131, Fax: 26 621 786 Yeroskipou Square, 8201 Yeroskipou [email protected] Tel: 26 505 220, Fax: 26 964 622 [email protected] 133 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 COURT AREA BRANCH HOLARGOS BRANCH PANORMOU BRANCH 31 N. Nicolaides Ave., 8011 Paphos 250 Mesogion Ave., P. O. Box 30597, 68 Panormou Str., 115 23 Athens, Attica Tel: 26 505 231, Fax: 26 931 878 155 61 Holargos Tel: +30 30 69 30 871 [email protected] Tel: +30 210 65 95 900 Fax: +30 210 69 82 008 Fax: +30 210 65 22 649 [email protected] CHLORAKA BRANCH [email protected] 8 Eleftherias Ave., 8220 Chloraka MONASTIRAKI BRANCH Tel: 26 505 242, Fax: 26 271 757 IRAKLION BRANCH 95 Ermou Str., 105 55 Athens [email protected] 374 Iraklion Ave., P. O. Box 30597, Tel: +30 210 32 58 940 141 22 Iraklion Attikis Fax: +30 210 33 12 487 BUSINESS SERVICES DIVISION Tel: +30 210 28 97 700 [email protected] Fax: +30 210 28 50 931 PAFOS BUSINESS CENTER [email protected] EGALEO BRANCH 27 Apostolos Pavlos Ave., 8046 Paphos 214 Iera Odos, 122 42 Egaleo, Attica P. O. Box 60074, 8100 Paphos KIFISSIA BRANCH Tel: +30 210 53 19 200 Tel: 26 505 626, Fax: 26 942 228 3 Miltiadou Str., 145 62 Kifissia, Attica Fax: +30 210 59 84 795 [email protected] Tel: +30 210 62 83 300 [email protected] Fax: +30 210 80 82 865 CORPORATE DIVISION [email protected] KALLITHEA BRANCH 195 Eleftheriou Venizelou, PAFOS CORPORATE CENTER PERISTERI BRANCH 176 73 Kallithea, Attica 27 Apostolos Pavlos Ave., 8046 Paphos 31 Ethnarhou Makariou Str., Tel: +30 210 95 38 320 P. O. Box 60074, 8100 Paphos 121 31 Peristeri, Attica Fax: +30 210 95 77 104 Tel: 26 505 601, Fax: 26 221 503 Tel: +30 210 57 06 000 [email protected] [email protected] Fax: +30 210 57 22 618 [email protected] KOROPI BRANCH GREECE BRANCH NETWORK 84 Vassileos Constantinou Str., GLYFADA BRANCH 194 00 Koropi, Attica ATHENS 6 Kondili Str., P. O. Box 30597, Tel: +30 210 66 21 170 166 75 Glyfada, Attica Fax: +30 210 66 21 008 MAIN OFFICE Tel: +30 210 89 86 600, [email protected] 11 Vasilissis Sofias & Merlin Str., Fax: +30 210 89 80 359 P. O. Box 30597, 106 71, Athens [email protected] ILION ROAD BRANCH Tel: +30 210 33 84 800 4 Ilion Str., 131 22 Ilion, Athens, Attica Fax: +30 210 36 38 163 NIKAIA BRANCH Tel: +30 210 26 94 000 http: //www.hellenicbank.gr 215 Petrou Ralli Ave., 184 50 Nikaia, Attica Fax: +30 210 26 10 371 [email protected] Tel: +30 210 42 57 020 [email protected] Fax: +30 210 42 57 052 KOLONAKI BRANCH [email protected] ASPROPYRGOS BRANCH 11 Vas. Sofias Ave. & Merlin Str., 43 Demokratias Ave., P. O. Box 30597, 106 71 Athens NEA KIFISSIA BRANCH 193 00 Aspropyrgos, Attica Tel: +30 210 33 84 830 21 Ilission Str., 145 64 Kifissia, Attica Tel: +30 210 58 81 040 Fax: +30 210 36 17 802 Tel: +30 210 62 06 070 Fax: +30 210 55 73 259 [email protected] Fax: +30 210 62 06 271 [email protected] [email protected] PANEPISTIMIOU BRANCH SYNGROU BRANCH 39 Panepistimiou Str., P. O. Box 30597, NEA SMYRNI BRANCH 66 Syngrou Ave. & Diliados Str., 105 64 Athens 53 Eleftheriou Venizelou Ave., 117 42 Syngrou, Athens, Attica Tel: +30 210 37 10 700 171 23 Nea Smyrni, Attica Tel: +30 210 92 00 970 Fax: +30 210 32 27 428 Tel: +30 210 93 74 640 Fax: +30 210 92 17 875 [email protected] Fax: +30 210 93 74 552 [email protected] [email protected] AGHIOS DIMITRIOS BRANCH THESSALONIKI 273 Vouliagmenis Ave., P. O. Box 30597, PIRAEUS BRANCH 172 36 Aghios Dimitrios 4 Iroon Polytechniou, ELEFTHERIA SQ. BRANCH Tel: +30 210 97 93 751 185 31 Piraeus, Attica 6 El. Venizelou & Kalapothaki, Fax: +30 210 97 68 378 Tel: +30 210 41 38 840 P. O. Box 10181, 546 24 Thessaloniki [email protected] Fax: +30 210 41 15 730 Tel: +30 2310 374 500 [email protected] Fax: +30 2310 244 438 [email protected] 134 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 ANNUAL REPORT 2008 ANNUAL REPORT

YIANNITSON RD. BRANCH SUBSIDIARY COMPANIES RUSSIA - MOSCOW HELLENIC BANK GROUP Balkan Centre, 31 Giannitson 15 Savvinskaya Nab, Savvinskaya & Patriarchou Kyrilou Str., HELLENIC BANK (FINANCE) LTD Office Bldg - Japan House, P. O. Box 10181, 546 27 Thessaloniki 15 D. Severis Ave., 1080 Nicosia, Moscow 119435, Russia Tel: +30 2310 561 600 P. O. Box 24747, 1394 Nicosia Tel: +7 (495) 792 99 58/88/89 Fax: +30 2310 553 469 Tel: 22 501 300, Fax: 22 374 044 Fax: +7 (495) 792 99 85 [email protected] [email protected] [email protected] [email protected] NEA EGNATIA BRANCH HELLENIC BANK (NVESTMENTS) LTD 162 Con.Karamanli Ave. 31 Kyriacos Matsis Ave., 2nd Fl., RUSSIA - ST. PETERSBURG & 40 Mavromichali Str., 1082 Nicosia, 23 Professora Popova Str., P. O. Box 10181, 542 48 Thessaloniki P. O. Box 24747, 1394 Nicosia Office 311, 197376 St. Petersburg, Russia Tel: +30 2310 392 100 Orders: 22 500 140 / 500 145 Tel: +7 812 313 0300 Fax: +30 2310 320 240 Tel: 22 500 100, Fax: 22 500 110 Fax: +7 812 313 0400 [email protected] [email protected] [email protected] a. [email protected] EVOSMOS BRANCH ATHENA CYPRUS PUBLIC COMPANY LTD 5 Elatis & Ant. Tritsi Str., 31 Kyriacos Matsis Ave., 2nd Fl., UKRAINE - KIEV 562 24 Evosmos, Thessaloniki 1082 Nicosia, P. O. Box 24747, 8 Rybalska Str., 1st Fl., Kyiv 01011, Tel: +30 2310 588 510 1394 Nicosia Ukraine Fax: +30 2310 588 505 Tel: 22 500 100, Fax: 22 500 110 Tel: +38 044 288 7210 evosmos@hellenicbank [email protected] Fax: +38 044 288 7209 [email protected] ANTHEON BRANCH PANCYPRIAN INSURANCE LTD [email protected] 54 Georgiou Papandreou, 66 Grivas Dhigenis Ave., 546 55 Thessaloniki Pancyprian Bldg, 1080 Nicosia, Tel: +30 2310 404 000 P. O. Box 24747, 1394 Nicosia Fax: +30 2310 418 952 Tel: 22 743 743, Fax: 22 677 656 [email protected] [email protected]

IOANNINA HELLENIC ALICO LIFE INSURANCE COMPANY LTD IOANNINA BRANCH 38 Kennedy Ave., 1087 Nicosia, 20 Averof Str., 452 21 Ioannina P. O. Box 20672, 1662 Nicosia Tel: +30 2651 069 500 Tel: 22 450 650, Fax: 22 450 750 Fax: +30 2651 022 437 [email protected] [email protected] HELLENIC BANK TRUST LARISA & FINANCE CORPORATION LTD Corner Limassol & 200 Athalassas Ave., LARISA BRANCH 2025 Strovolos, P. O. Box 24747, 35 Great Alexander, 412 22 Larisa 1394 Nicosia Tel: +30 2410 539 450 SWIFT: HEBA CY 2N Fax: +30 2410 539 446 Tel: 22 500 821 / 500 823 [email protected] Fax: 22 500 084 [email protected] PATRA REPRESENTATIVE OFFICES PATRA BRANCH 45 Ay. Andreou & 3 Kolokotroni, SOUTH AFRICA - JOHANNESBURG 262 21 Patra 4th Floor, West Tower, Sandton Square, Tel: +30 2610 240 370 Corner Fifth & Maude Strs., Fax: +30 2610 274 091 Sandton 2146, South Africa [email protected] P. O. Box 783392 Sandton, JHB, 2146, South Africa CRETE Tel: +27 11 783 0155/6, Fax: +27 11 783 0157 CHANIA BRANCH [email protected] 34 Eleftherios Venizelos & Michelidaki 731 32 Chania, Crete Tel.: +30 2821 026 100 - 19 Fax: +30 2821 040 575 [email protected] 135 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552 SHAREHOLDER INFORMATION

The shareholders may apply to the Shares & Bonds Registry with any queries concerning dividends and interest on securities and bonds.

SHARES & BONDS REGISTRY Corner Limassol Avenue & 200 Athalassas Avenue, 1st Floor 2025 Strovolos P.O. Box 24747, 1394 Nicosia, Cyprus Telephone: 22 500 647 - 51, Fax: 22 500 065 E-mail: [email protected]

INVESTOR RELATIONS

Institutional investors, brokers and stock analysts may apply to the Investor Relations Service for information regarding the Company’s financial achievements and prospects. They can also apply for copies of the Group’s annual reports in Greek and English.

Corner Limassol Avenue & 200 Athalassas Avenue, 5th Floor 2025 Strovolos P.O. Box 24747, 1394 Nicosia, Cyprus Telephone: 22 500 794, Fax: 22 500 077 E-mail: [email protected]

HEAD OFFICE Corner Limassol Avenue & 200 Athalassas Avenue 2025 Strovolos P.O. Box 24747, 1394 Nicosia, Cyprus Telephone: 22 500 000, Fax: 22 500 050

Website www.hellenicbank.com

E-mail Address [email protected]

Service Line 8000 99 99

136 WorldReginfo - 35604285-a70d-4bc6-89a2-9194428d7552