WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 1 BASIC 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 32 REPORT OF THE BOARD OF DIRECTORS 38 REPORT OF THE BOARD OF DIRECTORS ON CORPORATE GOVERNANCE FOR THE YEAR 2011 52 REMUNERATION POLICY REPORT FOR THE YEAR 2011 60 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF HELLENIC BANK PUBLIC COMPANY LIMITED 62 CONSOLIDATED INCOME STATEMENT 63 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 64 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 65-66 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 67 CONSOLIDATED STATEMENT OF CASH FLOWS 68 INCOME STATEMENT 69 STATEMENT OF COMPREHENSIVE INCOME 70 STATEMENT OF FINANCIAL POSITION 71-72 STATEMENT OF CHANGES IN EQUITY 73 STATEMENT OF CASH FLOWS 74 NOTES TO THE FINANCIAL STATEMENTS 136 DECLARATION BY THE MEMBERS OF THE BOARD OF DIRECTORS AND THE COMPANY OFFICIALS RESPONSIBLE FOR THE DRAFTING OF THE FINANCIAL STATEMENTS 138 BOARD OF DIRECTORS OF THE GROUP’S MAIN SUBSIDIARY COMPANIES 139 OFFICES AND BRANCH NETWORK 144 SHAREHOLDER INFORMATION AND INVESTOR RELATIONS WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 BASIC FINANCIAL HIGHLIGHTS

2011 2010 2009 2008 2007

CUSTOMER DEPOSITS AND OTHER CUSTOMER ACCOUNTS

€ MILLION 7.106,5 6.853,5 6.574,0 6.146,5 5.860,5

LOANS AND ADVANCES

€ MILLION 5.631,7 5.422,8 5.029,6 5.012,9 4.093,1

BALANCE SHEET TOTAL

€ MILLION 8.279,0 8.236,7 8.294,7 7.826,8 7.357,3

CAPITAL RESOURCES

€ MILLION 431,6 532,0 519,9 440,4 525,0

GROUP OPERATING PROFIT BEFORE PROVISIONS FOR IMPAIRMENT OF LOANS AND ADVANCES

€ MILLION 55,6 90,0 99,4 84,3 165,3

HELLENIC BANK GROUP ANNUAL REPORT 2011 1WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the 38th Annual General Meeting of HELLENIC BANK PUBLIC COMPANY LIMITED will be held at the registered office of the Bank, corner Limassol Avenue & 200 Athalassa Avenue, Strovolos - , on Wednesday 23rd May 2012 at 5:30 p.m.

Agenda

1. To consider and approve the Directors’ Report for the year ended 31st December 2011.

2. To consider and approve the Accounts and the Auditors’ Report thereon for the year ended 31st December 2011.

3. To elect Directors in the place of those retiring.

4. To approve the Remuneration Policy Report and to fix the remuneration of the Directors.

5. To re-appoint the Auditors and fix their remuneration.

By order of the Board, CHARALAMBOS MOUSOULIDES Company Secretary

Nicosia, 30 March 2012

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 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.

Note: The Annual Report of Hellenic Bank Public Company Limited for the year 2011 is available, in electronic form, at the website of Hellenic Bank www.hellenicbank.com Copies of the Annual Report, either in electronic form or in printed form, are also available, free of charge, at the Shares & Bonds Registry Department, Corner Limassol Avenue & 200 Athalassa Avenue, 2025 Strovolos – Nicosia, (Telephones: 22500649/22500650, Fax: 22500065, E-Mail: [email protected] ) The Annual Report will also be available, in printed form, during the Annual General Meeting.

2 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 BOARD OF DIRECTORS AND GENERAL MANAGEMENT

BOARD OF DIRECTORS OF HELLENIC BANK PUBLIC COMPANY LTD Andreas P. Panayiotou, CHAIRMAN Andreas M. Moushouttas, VICE – CHAIRMAN Iacovos G. Iacovou Antonis I. Pierides (retired on 25.05.2011) Soteris Z. Kallis, Senior Independent Director Charalambos P. Panayiotou Ioannis Ch. Charilaou Georgios K. Pavlou Kyriakos E. Georgiou Makis Keravnos Kyriacos I. Droushiotis Glafkos G. Mavros (resigned on 31.12.2011) Stavros Kremmos Marios Clerides (appointed on 01.01.2012)

CHIEF EXECUTIVE OFFICER Makis Keravnos

GENERAL MANAGEMENT OF THE HELLENIC BANK GROUP Marios Clerides, Senior General Manager Glafkos G. Mavros, General Manager (retired on 31.12.2011) Antonis Rouvas, General Manager Eliodoros Eliodorou, General Manager Kyriacos Papadopoulos, General Manager (as from 01.01.2012) Ekaterini Shiakalli, General Manager Greece

GROUP CHIEF FINANCIAL OFFICER Antonis Rouvas

AUDITORS KPMG Limited

LEGAL ADVISERS Costas Ch. Velaris Alecos F. Markides

COMPANY SECRETARY Charalambos Mousoulides

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

HELLENIC BANK GROUP ANNUAL REPORT 2011 3WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 CHAIRMAN’S STATEMENT

In Greece, the ongoing financial crisis affected the retail sector, enterprises and the banking system as a whole very negatively. In this difficult environment, actions for reducing operational expenses, exploiting synergies and harmonisation with the Group continued and intensified. At the same time, emphasis was placed on the rational growth in healthy enterprises and on the creation of new competitive products. Dr Andreas P. Panayiotou Chairman The Group’s Subsidiary Bank, LLC CB ‘Hellenic Bank’, began providing banking services in Russia on 11 January 2011. The new Bank is centrally-located Dear Shareholders, in Moscow, in self-owned premises, and its primary objective is to serve the Group’s Russian customers, I communicate with you once again to inform you of as well as the Group’s Cypriot, Greek and international the Group’s results and activities for the year ended 31 customers operating in Russia. The Group is fully aware December 2011. of the challenges faced when operating in such a large market with a different legal and legislative framework 2011 was undoubtedly a very difficult year for both from that of the and plans its growth our Group and the Cypriot and European economy. with a series of cautious but steady steps, taking into However, with its financial results for 2011, the Hellenic account all information regarding the Russian market. Bank once again confirms its ability to realise recurring profits and maintain a satisfactory level of liquidity The Representative Offices continued to represent the and a strong statement of financial position, allowing Group abroad successfully, assisting its establishment for the effective management of the negative financial internationally. Their dynamic presence in Moscow, developments. Saint Petersburg, Kiev and Johannesburg expanded the network of associates, promoted the products and The profit of the Group before provisions (excluding the services of the Group and brought the Group closer cost of impairment of the Greek Government Bonds) to its international customers, thus bridging distances. amounted to €132,6 million, recording an increase of 47% compared to the corresponding prior year Our major and continuous effort is for constant period. profitability, the improvement of the quality of the loan portfolio and the utilisation of our human resources in Following the finalisation of the terms of agreement the best possible way. Moreover, highlighting quality between Greece and its private creditors (PSI+) and friendly service as the Group’s major competitive concerning the restructuring of Greek debt on 21st advantages, improving efficiency and productivity and February 2012, the Group proceeded with the additional offering new innovative products are among our basic impairment of the Greek Government Bonds it held. As priorities. a result, total impairment amounted to €77 million on

31st December 2011, representing 70% of the nominal The Hellenic Bank, in the context of its Corporate value of bonds held by the Bank. Social Responsibility, among other activities, encouraged cultural initiatives and supported Cypriot artists, Taking into account the impairment cost of the contributing to the promotion of the Arts and Culture. Greek Government Bonds, the Hellenic Bank Group Being a major supporter of Cypriot engraving, it showed losses before taxation for the year ended 31 continued its annual sponsorship of the 'Hambis December 2011 amounting to €86,9 million, compared Engraving School and Museum', sponsoring all of its to a profit of €15,3 million for the corresponding activities. At the same time, it continued to support 2010 period. two innovative museums: the Municipal Museum of

4 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 Palaeontology and the Tornaritis-Pierides Museum Members of the Committees of the Boards of Directors of Marine Life. The Head Office Building hosted an for their excellent work and impeccable and productive exhibition by Cypriot engravers entitled 'Possibilities in co-operation. Also, I warmly thank our shareholders, Printing Using Different Materials and Mixed Technique' associates and customers. Their constant trust and and an exhibition of engraving, painting and support give us the strength to face future challenges. I photography by 11 well-known artists on the subject also thank the Group's Legal Advisers Messrs C. Velaris of ‘Aphrodite’s Rock’. It continued its co-operation with and A. Markides and the Group’s Auditors Messrs the Papadopoulos and Schinis company, sponsoring KPMG for their valuable services. In closing, I would cultural events, the Diastasis Cultural Association and like to thank the Group’s Management and staff for their the Avantgarde Cultural Foundation, as well as its devotion, hard work and commitment to the objectives perennial collaboration with various cultural institutions, of the Group. such as the Rialto Theatre, the Mavrellis Foundation and the Pharos Trust. Within the framework of its support for cultural research, the Hellenic Bank sponsored another publication by Art Historian Dr. Rita Severis entitled 'The Castles and Forts of Cyprus' of the 'Monuments and Memories series'. It also funded reprinting of Hambis Tsangaris’s books 'The Fey Enchantress and The Prince of Venice'. In the Dr Andreas P. Panayiotou environmental sector, it continued the sponsorship Chairman of the Eco-Schools programme in collaboration with the environmental organisation CYMEPA. Nicosia, 30 March 2012

Dear Shareholders,

In a difficult financial environment, the Group’s ability to realise increasing recurring profits from ordinary operations and to maintain comfortable liquidity and a strong Statement of Financial Position allows us to feel optimistic. At the same time, we monitor risks closely and manage them effectively. We carefully evaluate emerging challenges and plan our future actions in detail and with gravity. Hellenic Bank employees have proved themselves capable to cope with difficulties and to exploit emerging opportunities.

We have a prudent strategy and a clear vision and we strive to maintain our robustness on a strong and healthy foundation, working systematically to face all the challenges of the difficult times in which we live.

In conclusion, I would like to express my sincere gratitude to the Chief Executive Officer, Mr. Makis Keravnos, to the Vice-Chairman of the Board of Directors, Mr. Andreas Moushouttas, to the Members of the Board of Directors of the Bank, to the Chairmen and Members of the Boards of Directors of its subsidiary companies, and to the Chairmen and

HELLENIC BANK GROUP ANNUAL REPORT 2011 5WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 CHIEF EXECUTIVE OFFICER’S REVIEW

In Russia, full banking operations commenced smoothly in January 2011.

The Group’s profit before provisions and exclud- ing the cost of impairment of Greek Government Bonds amounted to €132,6 million, recording an in- crease of 47% compared to the corresponding prior year period. The Group’s total net income (excluding Makis Keravnos the impairment cost of Greek Government Bonds) Chief Executive Officer increased by 12% and total expenses decreased by 6% compared to the corresponding prior year period. Dear Shareholders, When taking into account the impairment cost of the The Hellenic Bank Group, during a difficult period due to Greek Government Bonds, the Hellenic Bank Group the adverse financial conditions in the markets in which showed losses before taxation amounting to €86,9 it operates, managed to increase annual profits from million for the year ended 31 December 2011, ordinary operations before provisions and excluding compared to profits of €15,3 million for 2010. the cost of impairment of Greek Government Bonds. It simultaneously safeguarded its comfortable liquidity In 2011, the efficiency of the Group improved compared and strong statement of financial position. to 2010, with the cost to income ratio (excluding the impairment cost) reaching 56% compared to 67% FINANCIAL YEAR 2011 in 2010 due to the improvement of income and the During 2011, the prevailing economic conditions in reduction of expenses. Cyprus, Greece and the rest of Europe were difficult. The international environment remained unstable with The Group maintains comfortable liquidity, benefiting many challenges. Growth in Cyprus deteriorated and from its high stable deposit base and a ratio of net loans the rate of economic growth rate hovering around zero. to deposits reaching 70%. The absence of financing by The average rate of unemployment reached 7,7% and the European and the non dependence on inflation rose to 3,3%. the interbank market are indicative of the comfortable liquidity of the Group. Based on the prevailing conditions in the financial environment, the Group’s actions focused on the At 31 December 2011, total gross customer advances following: and deposits increased by 4% compared to December 2010. Total gross customer advances and deposits On a Group level, emphasis was placed on amounted to €5,6 billion and €7,1 billion, respectively. maintaining a healthy liquidity, safeguarding the capital adequacy ratios and the effective Taking the macroeconomic environment and the management of credit risk. deterioration of the loan portfolio (especially in Greece) into account, the Group raised the provisions for In Cyprus, given the limited economic growth, impairment of loans and advances to €142 million. emphasis was placed on the quality of the loan portfolio. Acting proactively and taking into account developments in various markets, the Hellenic Bank In Greece, the implementation of the strategic Group manages its investments prudently, turning plan continued, focusing on the quality of the loan to more short-term investments, senior bonds and portfolio and very selective growth in small to placements with other banks. medium sized businesses.

6 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 At 31 December 2011, the Group’s Capital Adequacy measures to face the difficult economic conditions and Ratio, based on the relevant Central the consequences of the ongoing financial crisis. At the Directive, reached 13%, Tier 1 Ratio reached 10% and same time, the Group’s strong indicators allow for the Core Tier 1 Ratio reached 7%. rational development of operations with the selective financing of new projects in Cyprus, Greece and The Group is already examining a Capital Enhancement Russia. Plan. Furthermore, it is taking all necessary actions to strengthen the capital adequacy ratios, including the Consistency, prudent management and healthy effective management of risk-weighted assets and liquidity, combined with the Hellenic Bank Group’s strengthening of the Group's capital base with profits, comprehensive strategy and hard work by all involved primarily aiming for all ratios to exceed the minimum – Administration, Management and Personnel – are required capital adequacy ratios. the guarantees for reaching the Group’s targets and confronting challenges. STRATEGIC TARGETS Based on the conditions prevailing in the financial In closing, I would like to express my deepest environment, the Group’s strategic targets remained gratitude to the Chairman and Members of the Board focused on the effective management of credit risk, of Directors for their co-operation and support. I the safeguarding and strengthening of the capital especially wish to thank our shareholders and adequacy ratios, the safeguarding of sound liquidity, customers for their continuous support and trust. and cautious and rational growth, with a permanent Finally, I sincerely thank the Group’s management and target of profitability. all personnel for their productive work, devotion and contribution towards the Group’s continuing development CHALLENGES AND PROSPECTS FOR 2012 and progress. The Hellenic Bank Group’s strong statement of financial position and increased recurring profits for 2011 confirm its ability to effectively manage the intense challenges presented by the financial environment. The Group maintained both satisfactory liquidity and capital base throughout the year, safeguards which enable it to absorb shocks caused by negative economic developments. Makis Keravnos Chief Executive Officer The Hellenic Bank estimates that the Cypriot economy will continue to face challenges throughout 2012, Nicosia, 30 March 2012 with the possibility of recession and subsequent low growth rates of credit expansion and consumption and continuing high unemployment rates. In Greece, the fiscal consolidation plan is expected to take longer than initially anticipated, resulting in continuing economic recession and high unemployment. The challenges posed by the negative economic environment in Greece may further aggravate the quality of the loan portfolio of the Branch Network in Greece and, consequently, the Group’s results.

The Group’s Administration and Management closely monitors and carefully evaluates developments in the markets in which it operates, taking all the necessary

HELLENIC BANK GROUP ANNUAL REPORT 2011 7WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 REVIEW OF GROUP OPERATIONS

FINANCIAL RESULTS 2011 on the quality of the loan portfolio of the Branch Network Excluding the cost of impairment of the Greek in Greece, the loss before taxation increased to €100,3 Government Bonds, the profit of the Group before million compared to a loss of €45,6 million for December provisions amounted to €132,6 million, recording an of 2010. increase of 47% compared to the corresponding prior year period. The total of the Group’s statement of financial position reached the amount of €8,3 billion compared to €8,2 Following the finalisation of the terms of agreement billion in December 2010, recording an increase of 1%, between Greece and its private creditors on 21 while total gross customer advances increased by 4% February 2012 concerning the repayment plan reaching the amount of €5,6 billion compared to €5,4 of the Greek debt, the Bank proceeded with an billion in December 2010. Customer deposits increased impairment of the Greek Government Bonds it held of by 4%, reaching the amount of €7,1 billion compared to €22 million additional to the impairment of €55 million €6,9 billion in December 2010. already included in the condensed consolidated income statement for the period ended 30 September 2011. The The Group maintains comfortable liquidity, benefiting total amount of the impairment amounts to €77 million from its high stable deposit base. Specifically, in and represents 70% of the nominal value of the €110 December 2011 the ratio of gross loans to deposits million bonds possessed by the Bank and classified as remained at the highly satisfactory level of 79,2% «Held to maturity». (December 2010: 79,1%), while the ratio of net loans to deposits was 70,2% (December 2010: 71,3%). The As a result, following the impairment cost of the Greek absence of financing by the Government Bonds, the Group showed losses before and the non dependence on the interbank market is taxation for the year ended 31 December 2011 indicative of the comfortable liquidity of the Group. amounting to €86,9 million compared to profits of €15,3 million for the corresponding period of 2010. The Group’s total investments amounted to €1,2 billion (December 2010: €1,7 billion), comprising mainly of Total net income of the Group, excluding the impairment Cyprus Government debt securities and bank debt cost of the Greek Government Bonds, increased securities of high credit rating listed on international by 12% compared to 2010. At the same time, total stock exchanges. 72% of the bonds held by the Group, expenses decreased by 6% reaching €168,6 million issued by financial institutions and out of which more compared to €178,7 million for the year 2010. As a than 99% consist of senior bonds, mature within the result, the cost to income ratio, excluding the next 12 months. impairment cost, is 56,0% and it is lower than the ratio of 66,5% for the corresponding last year period. Equity attributable to the owners of the Bank reached the amount of €431,6 million at 31 December 2011, Provisions for impairment of loans and advances compared to €531,9 million in December 2010. The in the income statement for the year ended 31 return on equity of the Group based on the results of the December 2011 amounted to €142,5 million and year 2011 was -20,9% (December 2010: 1,7%). increased by €67,8 million from the corresponding 2010 amount. Accumulated provisions for impairment The Group’s Capital Adequacy Ratio, based on the of loans and advances, which also include suspended relevant Central Bank of Cyprus Directive for the interest that is not recognised in the income statement, calculation of the capital requirements and large amounted to €644,9 million as at 31 December 2011 exposures (Basel II), was 13% (December 2010: (December 2010: €534,2 million) and represent 11,5% 15,0%), Tier 1 Ratio was 10% (December 2010: 12%) (December 2010: 9,9%) of total gross loans and and the Core Tier 1 Ratio was 7% (December 2010: 9%). advances. Based on the conditions prevailing in the financial In Greece, due to the continuing financial crisis and its environment, the strategic targets of the Group continue negative impact on the real economy and consequently to focus on the effective management of credit risk, the

10 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 safeguarding and enhancement of the capital adequacy management and have been re-housed in a new ratios, the safeguarding of sound liquidity and building in Larnaca in order to better service regional cautious and rational growth, with the permanent target customers’ needs. Moreover, and for the same reason, of profitability. the Paphos Corporate Centre has been housed under the Limassol centre. At the same time and with Group Management closely monitors and evaluates a view to continuing the more effective servicing of developments in the market of its operations and customers’ needs, the new Customer Financial takes all necessary measures to deal with the adverse Management Service was created under the economic conditions and the consequences of the management of the Corporate Banking Division in financial crisis. October 2011. Its mission is to closely monitor and cater to the day-to-day needs of large and complicated customer lending relationships. DOMESTIC OPERATIONS The Corporate Banking Division, in co-operation with CORPORATE BANKING DIVISION other Units/Departments of the Hellenic Bank Group, The Corporate Banking Division’s primary target is provides integrated solutions using the Group’s full to constantly provide upgraded and ever-improving range of products and services in order to comply with quality services to large and public companies which customers’ continually-changing financial needs. operate in Cyprus, as well as to semi-governmental organisations. The basic prerequisite for achieving this BUSINESS SERVICES DIVISION target remains the friendly and successful servicing of 2011 was another difficult year for the Cypriot economy customers’ needs, as well as offering advisory services and banking system. The deepening of the economic for their current and future needs, a factor which is crisis greatly affected almost all sectors of the especially important given the economic recession. economy, especially the Small and Medium size Particular emphasis is placed on studying and Enterprises (SME) sector which is the driving force of analysing the key factors which affect the operations the Cypriot economy. The Business Services Division, and cash flow of the companies in order to determine with a sense of duty and professionalism, continued to the risk of each financing. support SME's via its specialised products and services.

The Corporate Banking Division is comprised of three The Business Services Division is comprised of seven Corporate Centres in the Republic of Cyprus. These Βusiness Centers in Cyprus, two in Nicosia, two in are staffed by experienced, well trained and qualified Limassol, one in Larnaca, one in Paralimni and one in officers with the primary aim of offering prompt and Paphos. It is staffed by qualified, experienced and well effective customer service. The Famagusta and Larnaca trained officers who are able to support their customers district Centres have been merged under the same using the broad range of Hellenic Bank products € mln 532,0 € mln 525,0 € mln 519,9 € mln 165,3 € mln 8.279,0 € mln 8.294,7 € mln 8.236,7 € mln 7.106,5 € mln 5.631,7 € mln 440,4 € mln 431,6 € mln 6.853,5 € mln 5.422,8 € mln 6.574,0 € mln 5.029,6 € mln 5.012,9 € mln 6.146,5 € mln 5.860,5 € mln 7.826,8 € mln 4.093,1 € mln 99,4 € mln 90,0 € mln 84,3 € mln 7.357,3 € mln 55,6

07 08 09 10 11 07 08 09 10 11 07 08 09 10 11 07 08 09 10 11 07 08 09 10 11 CUSTOMER DEPOSITS LOANS AND ADVANCES BALANCE SHEET TOTAL CAPITAL RESOURCES GROUP OPERATING AND OTHER PROFIT BEFORE PROVISIONS CUSTOMER ACCOUNTS FOR IMPAIRMENT OF LOANS AND ADVANCES

HELLENIC BANK GROUP ANNUAL REPORT 2011 11WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 and services, as well as the continuously upgraded level of service and products to the entire client base and technologically-advanced systems. With their was achieved. professionalism, they assist customers in facing these unique circumstances, offering advice and providing Innovative sales campaigns increased the selling complete and preferential solutions, tailor-made to ratio in the entire range of the Bank's products. satisfy their banking needs. Targeted sales of insurance products continued successfully, both for general insurance, via Pancyprian The Division continued to offer modern and continually- Insurance, and life insurance, via Hellenic Alico Life. improved services and specialised products in order to fully meet and exceed the specialised banking needs of Emphasis was also placed on NetBanking products and SME customers operating in all sectors of the economy, services, as well as innovative technological services, as well as their directors and shareholders. One of the aiming for better and faster customer service and the primary targets is to create a long-term, professional significant reduction of operational expenses. and friendly relationship with customers via friendly and prompt service of a high quality. INTERNATIONAL BANKING DIVISION Despite the prolonged period of economic recession RETAIL DIVISION (CYPRUS) and uncertainty, as well as the ominous challenges The deterioration of the Cypriot economic environment presented, the International Banking Division in 2011 due to the global economic recession resulted managed to successfully respond to current demands, in the deceleration of growth and an increase in showing an increase in profitability compared to the unemployment. Furthermore, increases in fuel prices, corresponding period of the previous year, further new taxes and a generally higher cost of living led to a strengthening the Group’s financial position. substantial reduction in households' disposable income. This negative consequence also had a direct effect on 2011 marked another year of success and growth the Retail Banking Division's small business clients for the Division through a team-spirited collaborative which form the backbone of the Cypriot economy. effort, flexibility and adaptability to rapidly-changing conditions. The Division’s profitable course was The Division's staff and management, with a sense of possible due to the acquisition and consolidation of new responsibility and professionalism, were called upon clients and associates and the focus on servicing their to manage these new, negative developments which needs. directly affected their customers. They sought solutions and made efforts to mitigate the consequences on loan In 2011, the implementation of technological portfolios in co-operation with those clients. innovations and the further automation of operations and procedures continued. The existing competitive Improvement of the Branch Network and reduction of pricing policy was preserved and the relationship of operational expenses also continued throughout 2011. mutual trust between the Bank and its clients was Through continuous upgrading, both optimal customer further enhanced. Finally, the International Banking service throughout the entire range of banking Division reaffirmed its commitment towards providing operations and the offering of comprehensive product the highest degree of quality services through the proposals equally to individual customers and small- recertification of the three International Business to medium-sized businesses were reinforced. At the Centers to the ISO 9001:2008 standard. same time, efforts to limit expenses continued, with substantial results. DEVELOPMENT, SALES SUPPORT & RESEARCH DEPARTMENT Staff training, the technological upgrading of banking The Product Development, Sales Support & Research systems, the automation of operations and the Department closely monitors developments in the interchangeability of duties amongst staff had a Cypriot economy and explores customers' needs positive effect. The perennial target of offering a high through specialised market research surveys and an

12 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 analysis of customers' suggestions and complaints. The Within the framework of constantly upgrading the Department proceeded in the creation and redesign of Group's offered services, the 'Mystery Shopper' survey a number of the Group's products and services, while was conducted for the eleventh consecutive year. continuing to offer support to the Bank's Branches and This is one of the most important research tools for Business Centres. monitoring the quality of service offered. In addition, the fourth wave of the Retail Banking Customer During 2011, Hellenic Bank proceeded in developing Satisfaction survey was conducted, directed at the specialised car financing packages, where customers customers of each individual Bank branch pancyprian were able to purchase a vehicle from the importing wise. company within a predetermined timeframe and at a predetermined rate, thus giving them the opportunity to Regarding the evaluation of the quality of customer pay a lower installment. service offered by the Group's various departments, a significant number of internal surveys were also A new service named e-Statement was created, completed during 2011, facilitated by the use of a enabling customers to instantly and securely receive specialised software package for conducting surveys their account/ credit card statements in their email at through the internet. no additional cost. The e-Statement service protects the environment as it conserves natural resources and The Customers Suggestions and Complaints allows customers to save their statements in electronic Management Handling Department continued to form. process the Group's customers' complaints and suggestions in a professional manner. It successfully A database of the Bank's Branches and Automated responded within the required timeframes, informing Teller Machines (ATMs) was also created on Google customers on the issues they raised. Customers' Maps and GPS services, through which customers suggestions were forwarded and implemented for can use their mobile phones, tablets, GPS devices improved service. The Department is always at the or personal computers to locate the Bank's Branches disposal of all customers who wish to register their and ATMs on special maps. This facilitates customer opinions regarding the Group and its operation. access (especially in the case of tourists) to the Bank's Branches and ATMs for cash withdrawals or other TREASURY ACTIVITIES transactions. The Group’s Treasury Department is responsible for managing the Bank’s investment portfolio, as well as Based on the obligations resulting from the managing market and liquidity risk, always acting within implementation of the European Consumer Credit the policy framework and limits approved by the Assets Directive, an automated system was developed for the and Liability Management Committee (ALCO). importing and processing of data regarding consumer loans, as well as the printing of pre-contractual 2011 was a difficult year, with markets experiencing agreements via the Consumer Credit Act Calculators high volatility as a direct result of the ongoing programme. debt crisis dominating on a worldwide level. Greece and the restructuring of its government debt were the Customer satisfaction surveys regarding the Bank's epicentre of the crisis. The Treasury Department Business and International Divisions were conducted, monitored developments on a daily basis and actively while the Group participated in the EPSI Rating study participated in all internal actions taken for managing which attributes the causes and consequences of the and dealing with the ongoing crisis. The Department level of customer satisfaction and their correlation. This simultaneously proceeded with a sharp reduction in specific research indicated that Hellenic Bank is ranked the bonds portfolio, primarily through the redemption of first amongst the commercial banks in Cyprus, with existing bonds, as well as through the sale of selective respect to the level of customer satisfaction and bonds, thus reducing overall credit risk. customer loyalty.

HELLENIC BANK GROUP ANNUAL REPORT 2011 13WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 With regards to foreign exchange, the Department its levels of profitability and succeeded in expanding maintained a very satisfactory profitability through its client base. The majority of International Collective customer foreign exchange transactions, as well as Investment Schemes registered in Cyprus, as well as through own account trading. managed Pension Plans and Provident Funds, have entrusted the Hellenic Bank with the safekeeping of PRIVATE BANKING their investments. The Private Banking Unit is a specialised service which offers high-level banking and investment services to The Custodian Services Department was a pioneer high net worth customers in Cyprus and overseas. in establishing custodianship in Cyprus and acts as general liquidator and Custodian in the settlement The Unit is active in international markets, implementing and clearing systems of the Cyprus and Athens Stock a perennial strategy based on the three following Exchanges. By creating a carefully-selected network of guiding principles: (1) the correct evaluation and sub-custodians in most international markets, it has the satisfaction of its customers' investment needs, (2) the ability to fully serve the needs of its customers (local continuous training and development of the Unit’s staff, and foreign institutional and other investors), governed and (3) access to a plethora of international invest- by the same principles as overseas banking giants. ment options via flexible policy and broad co-operation with recognised overseas financial institutions - 'Open The products offered cover established custodian Architecture'. services, such as safekeeping, clearing of transactions, cash management, company transactions, revocation The Unit’s offered investment and banking services of taxes, and service information, as well as specialised include: services to foreign custodians, managers of collective investment schemes, escrow agent services and Mutual funds of leading overseas companies fiduciary deposits. The Hellenic Bank willingly provides Structured products, including capital-guaranteed its expertise to both managers of collective investment products schemes and all its clients, assisting in the safe Stock exchange transactions in shares and bonds management of their investments. traded in the major international markets Transactions in precious metals, including gold HELLENIC BANK (INVESTMENTS) LTD Deposit products including Fiduciary deposits The investment sector suffered yet another challenging Loans against portfolio year in 2011, characterised by high volatility in stock markets worldwide as a consequence of negative Despite the fact that 2011 was characterised by intense economic developments which persisted throughout insecurity and volatility as a result of the debt crisis the year. There was considerable variation in individual which began in the Eurozone in the spring of 2010 stock market returns depending on the geographical and which now threatens to spread to all developed region, with the US market being the exception markets, the Unit’s results are considered especially as it ended the year in neutral to positive territory. satisfactory as profitability remained at a high level and Unfortunately, developments in the Greek economy and funds under management increased. At the same time, the consequences of decisions taken in the Eurozone the Unit largely managed to safeguard the value of had a particularly negative impact on the stock markets portfolios under its management. of Cyprus and Greece, with both registering severe losses (-72,0% and -51,9%, respectively). At the same CUSTODIAN SERVICES time, bruised investor psychology resulted in reduced The Custodian Services Department has established trading activity. itself as the primary custodian in the Cypriot market. Once again, in 2011, the Department continued its In 2011, the company succeeded in achieving increased efforts to expand operations both locally and overseas. market share in both the (CSE) In spite of the sustained global economic crisis and and the Athens Stock Exchange (ASE). Simultaneously, continuing instability in stock markets, it maintained the Company’s gradual expansion in offering stock

14 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 market trading in international markets via ASE’s XNET The Bank’s new organisational structure and reporting network during the last quarter of the year had a positive lines are expected to act as a catalyst in meeting the effect. The team of seasoned brokers continued to targets of profitability, protection of procedures and provide superior levels of service with utmost improved portfolio quality. professionalism and integrity. Meanwhile, technological improvements and system upgrades in the company’s The Department is an active member of the International system progressed seamlessly with the ultimate Factors Group (IFG), enabling customer service in their objective of offering unparalleled services in the sector international import and export factoring transactions. of securities trading. The fully-qualified staff and accumulated expertise guarantee the quality of customer service. Regarding the Portfolio Management Division, it managed to expand its Provident/Pension Funds LEASING clientele, while the experienced and highly qualified After a lengthy consultation process with the related team of portfolio managers succeeded in producing Ministries and supervising authorities, the proposed satisfactory results in the portfolios under management Legislation governing Leasing was approved by the for yet another year. During 2011, all set targets were Council of Ministers and forwarded to the House of achieved, i.e. the significant limitation of exposure Representatives on 9 December 2011. of the portfolios under management to the domestic market (i.e. CSE and ASE), the reduction of exposure in Leasing is a specialised financial product aimed at equities and the creation of low risk portfolios. Particular businesses and professionals. In broad terms, the basic emphasis was placed on foreign investment, primarily advantages of Leasing are: in the major developed markets, where all transactions were made via ASE’s XNET network during the last Financing of assets without committing additional quarter of 2011, as well as the close monitoring and collaterals. management of the investment risk of portfolios. Maintaining own cash flow and liquidity which can be used for a company’s further development or The complete implementation of the project whereby, consolidation, crucial in the current economic since early 2012, all clients of the company without environment due to limited liquidity in the market. exception have the ability to execute transactions Improving companies’ capital structure and, in international markets, as well as the continuous consequently, their credit rating. technological advancement of the infrastructure that Releasing and activating of cash tied-up in assets supports it, are expected to contribute significantly to (in the cases of sale & leaseback of commercial the strengthening of the company’s client base. It should properties). be noted that trading in the CSE, ASE and international Allowing tax benefits as lease rentals are considered markets is now made simpler and easier through the operational costs. company’s existing online trading system (HBI eTrade), under a single unified portfolio and using the existing The Bank is studying the proposed Legislation with a trading accounts maintained at the Hellenic Bank. view to formulating its strategy and complying promptly once the framework for offering Leasing products is in FACTORING place. During 2011, the promotion of factoring products and services continued in co-operation with the Bank’s PANCYPRIAN INSURANCE LTD Business and Corporate Centres. During 2011, Pancyprian Insurance Ltd maintained its market share and profitability at the satisfactory Given the unstable financial environment, emphasis levels of 2010, despite the prevailing negative economic was placed on the active management of the credit conditions which negatively influenced almost all book, upgrading monitoring and control mechanisms sectors in which the Company is active (automotive relating both to credit and operations, as well as sales, construction, imports/exports, etc.) and the restraining costs. devastating consequences of the explosion at Mari, as

HELLENIC BANK GROUP ANNUAL REPORT 2011 15WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 well as intense market competition. The key factors considered when creating the company's products are customer needs and financial security for The Company’s approach is constantly customer- both them and their families in instances whereby an focused and it continues to create and offer unforeseen event may leave them exposed financially. comprehensive insurance solutions to its customers The company's products are split into two major with professionalism and contemporary methods, categories: Credit Life products and Other Products always within the frame of healthy insurance principles. (non-bank facility related).

In 2011, emphasis was given to the further improvement CARD SERVICES - PLASTIC MONEY of debtor management and the restructuring of the In spite of the difficult economic year, the Card Services Claims and Underwriting Departments. Furthermore, Department continued to contribute significantly to efforts to improve productivity were intensified through both the Group's turnover and revenue. Operating in the application of new procedures, automation and an especially competitive environment, it successfully technological upgrades in order to increase profitability acted in response to the challenges presented and the Company’s clientele. throughout 2011. The Department's very good results are the product of the provision of high levels of support Another Company objective for 2011 was the continuous and customer service via its technological infrastructure, and systematic training of Group employees in insurance the constant upgrading of products so that they fulfil matters. Emphasis was given to first-line personnel in customer wants, and the provision of incentives and order to develop their skills and knowledge so as to special offers to cardholders. offer a more efficient and effective response to customers’ demands. The Card Services Department, identifying an emerging global tendency whereby consumers appear to prefer The Company continues to maintain a very strong using debit and prepaid cards during periods of crisis, capital base which covers the needs which will arise reacted to the new conditions developing. It promoted from the implementation of the European Solvency II the advantages consumers may gain by replacing the Directive and is necessary for healthy and profitable use of cash with cards (better monitoring of expenses, growth. During 2011, special emphasis was given to greater security and ease of transactions, instant the preparation of the Company for adoption of the notification via SMS and participation in the more4U Solvency II Directive for both Pillar I and II needs. Discount Scheme) via an advertising campaign with an inventive slogan: 'The Smart Way to Shop With Cash… HELLENIC ALICO LIFE INSURANCE COMPANY LTD Without Cash!'. In spite of the difficult economic environment and the prevailing negative conditions, Hellenic Alico Life The new 'P Card+' prepaid card was presented - it Insurance Company Ltd continued on its upward course retains all the characteristics of a Hellenic Bank prepaid during 2011. Its annual results were, once again, card and is offered with a free 4GB USB Flash Drive. outstanding, both in the level of new customer The success of this product exceeded all expectations. penetration and profitability, resulting in its significant The Hellenic Bank's prepaid cards are anonymous and contribution to the Group's overall results. may be purchased instantaneously from any of the Bank's Branches without the need for a bank account. Over the years, the company has adopted a philosophy of offering products characterised by their simplicity In order to further enhance the prepaid card's recognisa- and ease of promotion to customers by its highly- bility and use (especially among younger age groups), trained staff, and it succeeds in achieving continuous the Department promoted the 'Super Goal Game' improvement in its results. The innovative nature of its competition via electronic media where internet users products is also an important factor, as is the way with were invited to play the game at www.pcardgame.com. which they are promoted. This gives the company a special place in the Cypriot insurance industry. During 2011, the Bank's Loyalty Card Schemes, more4U (Discount Scheme) and points4U (Points

16 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 Collection Scheme), continued to be offered free All of the above resulted in the significant increase in the of charge to all customers, at no additional cost or number of customers using the NetBanking service and subscription. A special website, www.cardschemes. the simultaneous increase in the number of transactions com, was also created and is accessible via both and other services processed by the Hellenic computer and mobile phone. Customers can now be NetBanking system, further resulting in an increase in informed, constantly and immediately regarding the business and the reduction of operational cost. available Credit Schemes via this website. Reference must also be made to the Customer Service Throughout 2011, there were a number of other Line which offers support and information to a large promotional activities and competitions (primarily number of customers, mainly outside the Bank's normal during the summer and Christmas periods) where a working hours. The success of this service is total of 105 lucky cardholders won significant sums of confirmed by the continuous increase in customers money. using it. Specifically, there is a constant increase in incoming calls, contributing to the attainment of ELECTRONIC BANKING the Bank's targets and especially to more effective In 2011, Hellenic NetBanking's primary aim continued customer service. to be the offering of safe and uninterrupted customer service of a high quality, at any time and from wherever in the world customers may be. OVERSEAS OPERATIONS

The number of subscribers/customers using the Net- OPERATIONS IN GREECE Banking service increased significantly and the number The prolonged economic crisis, political instability and of transactions, as well as the use of other services, uncertainty, as well as all the measures imposed on reached new high levels. It is worth noting that, during Greece during 2011, had a negative impact on individuals, 2011, a much-increased percentage of executed businesses and the entire banking system, resulting in banking transactions (with the exception of those the flow of deposits abroad. This affected significantly involving cash) were via NetBanking. the liquidity of the Greek market.

Upgrades completed during 2011 include: In this difficult environment, the primary target was the improvement of the Greek loan portfolio quality by The creation of a new website for the Group in liquidating problematic accounts, reducing limits Cyprus, www.hellenicbank.com, with a more provided to risky customers and to businesses with technologically-upgraded and user-friendly image. high exposure to the Greek Government, as well as The development of a new, modern and user- increasing the Bank's collaterals. Deposits were also friendly application created specially for mobile reduced in an effort to retain the cost of funds, taking phones, named Mobile Banking (m.hellenicbank. advantage of the Group’s overall liquidity. com). Mobile Banking is available in three languages (Greek, English and Russian) in order to better serve Despite this predicament, Hellenic Bank continues to the needs of the largest-possible number of customers support its customers providing high level of services who are now able to process a large range of through its branch network of 20 Branches throughout banking transactions via mobile phone. Greece: 13 in the Attica region, 3 in Thessaloniki, and The redesigning of the Hellenic NetBanking system one in each city of Patra, Ioannina, Larisa and Chania. for private banking in such a way as to satisfy the In addition, there are 4 Business Centres (3 in the Attica user's current needs while simultaneously being region and one in Thessaloniki), as well as Corporate consistent with advances in technology. The Centres in Athens and Thessaloniki which also offer upgraded Hellenic NetBanking has been enriched Leasing Services. by useful information and promotional material, thus promoting the Bank's products and services and At the same time, the Bank in Greece continued and responding to customer needs. intensified its efforts for further reduction of operational

HELLENIC BANK GROUP ANNUAL REPORT 2011 17WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 costs, optimisation of Group synergies, increased a range of loan products to provide credit facilities for harmonisation with the Group, retaining the cost of business purposes (working capital, commercial over- funds and increasing the interest rates of facilities. draft, trade finance and guarantees); facilities for the Emphasis was also placed on careful growth of the acquisition of premises, business development, as well Greek loan portfolio in healthy small and medium as services for payment processing both within and sized enterprises, the development of a range of new outside Russia. competitive products, the improvement of productivity of resources, and promotion of the Bank's Cypriot identity, Of particular note is the infrastructure capability which as well as of the activities carried out as part of its social has been developed to enable electronic transfers responsibility. between the Units of the Group in Russia, Cyprus and Greece within two hours and at a small predetermined The most significant achievement in 2011 concerned cost, thus significantly facilitating the operations of the the implementation of the Bank’s Retail Banking targeted group of customers. System (RBS), an internally developed banking system, the operation of which started successfully on the 1st Regarding deposit products and under the terms January 2012. The system’s use is expected to signifi- stipulated by the banking license of the Bank, non cantly reduce maintenance costs, improve the quality physical entities are offered very favourable terms for of information, increase productivity and enhance the deposits in all major currencies. quality of service to customers. At the same time, the creation at Group Head Office OPERATIONS IN RUSSIA of the Overseas Operations Division is anticipated Upon completion of preparatory work, LLC CB 'Hellenic to strengthen, co-ordinate and render more effective Bank', the Russian Subsidiary of the Group based in support actions for the new Bank. It will also enable Moscow, commenced the provision of banking services Management at Group level to exercise proper on 11 January 2011. supervision so as to take prompt action for the rational development of operations in Russia. The new Bank is housed in a building acquired by the Group, which is situated in a central location in Moscow, Following the successful completion of its first months at Rozhdestvenskiy Boulevard. The internal layout of of operations, the new Bank was officially inaugurated the building was modelled on the standards of Hellenic on 15 June 2011, at a ceremony held at the grounds Bank branches in Cyprus and Greece, taking into of its building. The inauguration was performed by account local conditions and regulations. Mr. Pyotr Kuprikov, Deputy Head of the Department of International Relations of the Moscow Government The internal layout, combined with the trained and and Vice Chairman of the Greece and Cyprus qualified staff recruited at the Subsidiary and the up to Friendship Association, in the presence of the Most date banking system which includes a fully-developed Reverend Metropolitan of Paphos Mr. Georgios and the Net Banking Service, enable the new Bank's customers Most Reverend Metropolitan of Kyrinis Mr. Athanasios, to enjoy the Group's characteristic friendly, personal as well as many distinguished guests, customers and service in a familiar, comfortable and functional friends of the Group in Russia. environment. With the Russian economy on a path of growth in spite The mission of the new Bank is to service the Russian of the negative global economic situation, prospects for customers of the Group, as well as Cypriot, Greek and the new Bank appear encouraging. However, the Group other business customers active in Russia. The Group's is fully aware of the operational challenges posed by International Business Centres and other Business a large market with a legal and legislative framework Units are instrumental in attracting customers to the that differs from that of the European Union. Thus, the new Bank. Group charts its course in the Russian market taking into account all information and plans its growth in a The Russian Banking Unit of the Group has developed series of careful but steady steps.

18 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 The creation and operation of a new Bank is, by its very Fiscal imbalance, the Cypriot banking system's nature, a difficult and complicated venture. The fact generally large exposure to Greece and especially that such a project was successfully completed, in an Greek Government Bonds, combined with the large unfamiliar environment, within the timeframe and size of the banking sector (where any problems in the budget set by the Group indicates the professionalism, sector would have had severely negative consequences infrastructure and high technical level which exist in the for public finance), as well as the more general issues Group. of the Cypriot economy's competitiveness which froze GDP growth rates (consequently affecting the projected REPRESENTATIVE OFFICES budget deficit or debt compared to GDP) were the The Representative Offices continued to successfully primary reasons for downgrading the Cypriot represent the Group overseas, assisting in its Government and Cypriot banks. establishment internationally. The Group is now closer to its international clients via a strong presence in These events (irrespective of the debate regarding the Russia with Offices in Moscow and Saint Petersburg, in accuracy or not of the evaluations) created a fragile Ukraine (Kiev) and South Africa (Johannesburg), thus banking environment, especially if one takes into bridging distances. account the Cypriot banking system's great dependence on the International Banking Sector. Representative Offices provide news, information and access to the entire range of the Group's services On the positive side, the loan agreement the Republic through their experienced and well-qualified staff. of Cyprus reached with the Russian Federation - Clients active overseas are thus able to benefit from amounting to €2,5 billion and with a five-year duration the high quality of service typical of the Representative - averted the immediate danger of refinancing Cypriot Offices and the Group in general. debt and gave some reprieve for implementation of economic retrenchment measures by the Government. The Bank's physical presence in key markets is At the same time, confirmation of the existence of large significant in that it facilitates monitoring of political, natural gas reserves, announced at the end of 2011, economic, legal and other developments, contributing greatly improved the long-term outlook for the Cypriot to the timely taking of measures for the protection of the economy and public finances. interests of the Group and its clients. During this period, the Group had to manage the following: HEAD OFFICE SUPPORT SERVICES i. The continuing deterioration of the loan portfolio. GROUP RISK MANAGEMENT ii. The deterioration of Greek and Cypriot Government The previous year was mainly characterised by multiple Bond valuations. credit rating downgradings of the Cypriot Government iii. The pressure exerted on the Group's liquidity by the and Cypriot banks, as well as the continuing crisis increased competition for customer deposits. in Greece and its subsequent expansion into the iv. The existence of increased interest basis risk with Eurozone, while July 2011 saw the notorious incident at deposit rates being driven upwards, while two 'base' the Evangelos Florakis Naval Base. The crisis continued lending rates (European Central Bank and Euribor to worsen and, in October 2011, it was agreed on a rates) decreased due to the continuing crisis in the European level that necessary impairment of Greek Eurozone which led to compression of margin rates, bonds would reach 50%, compared to the initial plan of and 21%. In December 2011, it became apparent that the v. Problems in smooth operations and continued above impairment may even surpass 70%. The other activity which were created due to the constant major event of the year - political unrest in various Arab electricity cuts following the explosion at Mari. countries - had no significant consequences for the Group.

HELLENIC BANK GROUP ANNUAL REPORT 2011 19WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 CREDIT RISK MANAGEMENT an effort to assist enterprises in confronting the adverse Currently, Credit Risk Management constitutes one of consequences of the global crisis but also to protect the the most important aspects in banks’ operating frame- interests of the Group. work and plays a vital role in their ongoing efforts to safeguard long-term financial solvency. In this respect, (b) Trading Book now more than ever before, the Group attaches great During 2011, the continuing global financial crisis led importance to the effective management (identification, to multiple downgradings of countries and financial calculation, monitoring and control) of credit risk, both institutions by international credit rating agencies. for the banking portfolio and the trading book. For this purpose, specific policies and procedures for the Through daily and ongoing monitoring of developments, handling of credit risk are in place, which are reviewed the Credit Risk Management Department proceeded often based on international economic developments with significant reductions or cancellations of the credit and the Group’s strategic objectives. limits of countries and financial institutions based on the reviews of international rating agencies as well as (a) Banking Portfolio the developments in each country’s local economy. The Credit Risk Management Department closely Particular emphasis was given to those European Union monitors the composition and quality of the Group’s countries facing serious fiscal problems, as well as portfolio and proceeds in taking preventative or politically-unstable Middle East countries. In addition, corrective measures when deemed necessary. In this a prudent policy was applied on a number of occasions, respect, it issues appropriate directions to the Business through which the Group’s available funds were Units, pinpointing the required actions to be taken transferred from high-risk countries and financial towards the improvement of portfolio quality and credit institutions to countries and financial institutions meeting risk mitigation. It reviews credit proposals which meet the minimum acceptable criteria for credit risk taking. predefined criteria, identifies and assesses the risks involved and recommends ways of managing them. During the year, the Credit Risk Management Department Also, the Department monitors high risk accounts on submitted a number of reports and recommendation an ongoing basis and formulates recommendations memos on the basis of which decisions were taken and for provisioning purposes as regards doubtful lending. measures were adopted towards the mitigation of Credit Risk. During the year under review, various stress tests were carried out, relating both to the possible deterioration of MARKET & LIQUIDITY RISK MANAGEMENT portfolio quality and the possible devaluation of specific During 2011, the Group’s Market & Liquidity Risk collaterals. The results of these tests were taken into Management Department focused primarily on the consideration in the formulation and introduction of recognition, evaluation, measurement, monitoring and preventative measures, including capital retention management of risks relating to liquidity. In this context, under Pillar 2 for covering possible losses. the Department continued its daily and detailed monitoring and evaluation of Group liquidity. During 2011, the Group’s Pricing Policy for business lending was reviewed, taking into account the prevailing Moreover, the Department also continuously monitors conditions in the banking system, the cost of funding market risks arising from positions in financial products and the emerging market and industry trends in the pric- and derivatives. Based on its strategy, the Group ing of loans and advances. significantly restricted trading and reduced positions which create market risk. In this context and in addition The prolonged global financial crisis caused an adverse to more traditional methods of measuring market impact on the liquidity of a considerable number of busi- risk, the Department also adopted the Value at Risk nesses, a development which resulted in a weakened methodology for calculating the maximum potential ability to meet their banking obligations. The Credit Risk loss the Group might incur within a specific time Management Department issued specific guidelines to period, as a result of the investment positions it holds in Business Units regarding the restructuring of loans in its portfolios.

20 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 Furthermore, one of the Department’s most important the Group’s Departments/Units. The implementation activities is the monitoring of risk. of the RCSA project helped in the identification of risks, Recognising the significance of interest basis risk in review of internal integrated controls and simultaneous particular, the Department proceeded with the establishment of the collection process for key risk evaluation of this risk in the Group’s statement of indicators (KRIs) which improve the monitoring and financial position and recommended solutions for its control of risks. mitigation and management. The Operational Risk Management Department gave For the effective management of liquidity risk and advice and opinions on nearly all new organisational market risks, stress tests were conducted during the circulars, new products and services and other issues year. For liquidity, these tests related to a potentially related to operational risk. serious deterioration in liquidity whilst for market risks they related to scenarios of interest rate movements, The Department also continued to study the Operational decreases in equity and bond prices and fluctuations Risk Data System (ORDS) recordings, key risk indicators, of foreign exchange rates that would cause significant internal audit reports, regulators’ reports and external losses or reduction in the economic value of the Bank. auditors’ reports with the aim of taking corrective The results of this evaluation were considered by Group actions. Risk Management in taking prudent measures and for the decision regarding required capital under Pillar 2. In co-operation with the various business lines, the Department identified and recorded possible risks During the year, the Department was also actively associated with either legal or systems risk. It also involved in the decision-making process and the recorded the measures taken for better management of implementation of actions taken by both the Assets these possible risks. and Liability Management Committee (ALCO) and the Investment Committee of the Group. The Department The Department continued to study and evaluate the presented reports, proposals and recommendations annual plans for operational risk management, as well on specific matters relating to market and liquidity as the self-assessments completed by the Group’s risks arising from the financial position of the Group various Departments/Units. to the two Committees. Furthermore, the Department informed the Committees about current issues relating As soon as the Group became aware of the incident to developments in the Eurozone, changes in the at Mari, the Business Continuity Plan was activated. regulatory and operational framework of the European Although problems were created due to the electricity Central Bank and the Central Bank of Cyprus and, in cuts, Branches and Units operated at a satisfactory general, developments in the global economy which level. Existing generators were used to provide electricity affect Group liquidity and market risk exposure. All of to the Group’s key Units and Departments. In addition, these facilitated the decision-making process by the two for the more effective response to such or similar bodies. The Department has now instituted the regular incidents, the Group acquired new generators which briefing of ALCO on matters relating to the management were installed wherever it was deemed necessary. of market and liquidity risks, as well as the monitoring of internal limits approved by ALCO or the Bank’s Board Finally, the Department monitors and promotes the of Directors. implementation and testing of the Business Continuity Plan throughout the Group. The aim is to gradually OPERATIONAL RISK MANAGEMENT cover all of the Group’s Departments and Units. During 2011, greater emphasis was placed on the implementation of the Risk Control Self-Assessment GROUP COMPLIANCE UNIT (RCSA) project. The project has been completed in 2011 was a difficult year for the Group Compliance Unit a number of Departments/Units of the Group, with due to the international financial crisis and the rapid priority given to those which are of vital importance. This increase in the Money Laundering risk. In an effort to is an ongoing process which will be implemented in all manage this serious risk, the Unit has strengthened

HELLENIC BANK GROUP ANNUAL REPORT 2011 21WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 existing internal controls and procedures even further, and many of which distinguish Hellenic Bank in terms with special emphasis placed on the following: of technology:

Examination and monitoring of financial transactions Completion of the Enterprise Reports Management Identification and reporting of suspicious transactions (ERM) system which enables reports to be kept Automated monitoring of incoming transfers (as is electronically and so all statements are not printed. the case for outgoing transfers) Introduction of the e-Statement system, whereby Compliance audits, and customer statements can be sent by email and which Targeted education and training of Group staff. has obvious environmental and operational benefits. Introduction of Mobile Banking. During this period, the Group Compliance Unit handled Upgrading of websites. a large number of unusual/suspicious transactions, as Merging of Clearing Departments and consequent well as a number of complex business relationships, saving of resources. originating mainly from Eastern European and Arab Re-engineering of many procedures and circulars. world countries, the latter of which faced social Simplification and automation of printed material and uprising and economic unrest. The Unit, in co-operation legal documents. with Compliance Liaisons, Unit and Branch Managers, played a vital role in ensuring compliance of the In 2011, there was a continuous effort for the Hellenic Bank Group’s services and products with simplification and further centralisation of the work of the institutional and regulatory framework. It worked various central departments, leading to a reduction closely with all the Compliance Liaisons, especially the in the number of staff working in these departments, Compliance Officers of Greece and Russia, in matters centralisation as far as space is concerned and which concerned the effectiveness of measures taken intra-town centralisation. At the same time, the high and the upgrading of the Group’s mechanisms and level of service was maintained and visits were made internal procedures. At the same time, it carried out a to the front line Units with a common goal of increasing number of sample compliance audits and reviews in the volume of payments and commercial transactions. order to evaluate the implementation of measures, as Incoming and outgoing payment systems were further well as the Group’s overall level of compliance. upgraded, especially where SEPA and straight-through -processing (STP) is concerned. Following a decision by Senior Management, the Anti-Money Laundering duties of Hellenic Bank The International Processing Systems Department (Investments) Ltd have been transferred to the Group contributed to the signing of additional agreements for Compliance Unit for better monitoring and more settlement of transactions (CLS, Continuous Linked effective risk management. In addition to the above, the Settlement and ISDA), safeguarding continuous Group Compliance Unit successfully handled a number operation with reduced operational risk regarding of cases which concerned the protection of personal international transactions. data for customers and staff. In 2011, the Staff Suggestions Scheme was GROUP OPERATIONS strengthened and the following was achieved: The implementation of the Bank’s main banking system (RBS) in the Greek Branch Network, as of the Increase in both the number of suggestions submitted 1st January 2012, was a great success. The project took and those implemented by 15%. approximately three years to complete and its imple- Integration (system and procedure-wise) of the mentation highlighted the ability for the management of corresponding Suggestions Scheme in Greece, big projects and the synergies that can be achieved at leading to synergies, harmonisation and strengthening Group level. Also in 2011, the following projects were of the Group’s corporate culture. implemented, most of which involved the Information Creation of a special logo / badge, which is provided Technology and Organisation & Methods Departments to employees whose suggestions are implemented,

22 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 thus distinguishing staff members who contribute to In Russia, full banking operations commenced innovation. smoothly in January 2011.

In 2011, the Group’s Technical Services completed the On a Group level, emphasis was placed on renovation of six branches, four other buildings and, maintaining healthy liquidity and the safeguarding of most significantly, completed the Bank’s new Larnaca capital adequacy ratios. building which hosts a Branch, the Business Services Division, the Corporate Banking Division and major The Group Strategic Development Department is also banking services. Two new software systems were responsible for co-ordinating the various Departments implemented in the Property Management Department, and Units of the Bank so that they can achieve their namely Property Evaluation (both in Cyprus and targets. It simultaneously reinforces relationships Greece) and Rental Management. between Units to ensure a smooth and fruitful co- operation, aligned with the strategy set by the Bank’s The importance which the Group had placed in recent Management. years on Business Continuity infrastructure was validated in 2011 due to the circumstances at Mari. Within this framework, the Annual Business Plans were The Business Continuity Plan was successfully put in prepared in collaboration with the Group's Business operation, facing the problems in electricity supply. This Units and were used by the Group’s Financial safeguarded the uninterrupted operation of the Group Management to prepare the 2012 budget. Also, in and, consequently, customer service. cooperation with the Human Resource Department, the Incentive Schemes programme was further developed. The Group continuously trains its staff in Business Continuity and Information Security, as well as Finally, the Group Strategic Development Department improving its related organisational circulars and continued to identify and promote, within the policies. Also, frequent exercises take place at the Group, projects of strategic importance, such as the Bank’s Business Continuity Centres which are now implementation of systems for better management present in all towns in Cyprus, as well as in Athens. of customer relationships which contribute to the continuous development of the Group and GROUP STRATEGIC DEVELOPMENT strengthening of customer relationships. Among the major responsibilities of the Group Strategic Development Department is the preparation of the HUMAN RESOURCES Group’s Annual Business Plans and the Three-Year At the end of 2011, the Group’s human resources Strategic Plan, as well as monitoring the progress made amounted to 1.976 persons, with 1.536 (77,7%) on the implementation of these plans. employed in Cyprus. Regarding their academic qualifications, 46% are university graduates, 21% of For 2011, the following priorities were set for markets in which have also completed post-graduate studies. An which the Group operates: additional 22% are graduates of various institutions of tertiary/ higher education and 23% have obtained In Cyprus, given the limited rate of economic growth, professional qualifications. emphasis was placed on the quality of the loan port- folio, the containment of expenses, support provided During 2011, in the context of continuously upgrading to customers and growth of the International Banking systems which aim to increase productivity and Division. efficiency of work, as well as reducing operating expenses, the Bank introduced a new online application In Greece, the implementation of the strategic plan for the management of employees’ leaves of absence. continued, focusing primarily on the quality of the Implemented in December 2011, the system was loan portfolio and very selective growth in small to specially designed and customised to the Organisation’s medium sized businesses. needs. The new, system-wide application has replaced

HELLENIC BANK GROUP ANNUAL REPORT 2011 23WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 the use of printed request forms with the electronic shareholders, suppliers and staff, and society at large. submission, approval and recording of such requests. The major areas of activity are those involving Society, During 2011, the Human Resources Department also Education, Culture, Health & Research, the Environment introduced the online submission of applications for and Sport. employment. This procedure uses technology to enable a direct response to potential candidates, automatically Aside from the support offered to various programmes recording their information and granting easy access to concerning health and education, the Hellenic Bank the candidates’ database. also assists cultural and research activities, whilst simultaneously contributing decisively to environmental 2011’s training programme for the Group’s staff was matters. completed with great success, contributing to the achievement of the Group’s strategic objectives and SOCIAL CONTRIBUTION the continuous improvement of employees’ personal development and knowledge of issues related to their The Hellenic Bank’s social contribution is significant, duties. Upon completion, staff members improved their mainly assisting vulnerable sections of the population skills and professional behaviour which are, for this year and children. In this context, it annually supports events also, inextricably linked with the vision and values of which encourage volunteerism and its employees the Group. The main topics of the training programme participate in blood drives co-organised with hospital were credit issues which have been incorporated into Blood Banks in all Cypriot towns and in Greece. It also the Credit Academy and the improvement of executives’ financially supports various organisations which offer skills in the fields of management and leadership, aid to vulnerable groups. customer service, negotiation, teamwork, and communication. HEALTH The Hellenic Bank Group is particularly sensitive to In 2011, the Hellenic Bank Group’s Management and matters which concern the protection, well-being and European Works Council met twice. During these health of citizens, particularly children. meetings, the Group’s financial results were presented and discussed, as well as the continuing global In 2011, it funded the National Programme for Hearing economic crisis and especially its consequences Loss Screening which is being developed by the on Cyprus and Greece. There was also a review of Otorhinolaryngological Clinic of the Nicosia General the Banking sector in Cyprus, the operations of the Hospital. This programme will contribute to the timely Bank’s Branch Network in Greece and the operations diagnosis of hearing loss in newborns, as well as of the Group’s subsidiary Limited Liability Company treatment and restoration. Commercial Bank ‘Hellenic Bank’ in Russia. In addition, future prospects for the economy were discussed It also subsidised the Paediatric Oncology Centre at the and ratings for the banks and Cypriot economy by Archbishop Makarios III Hospital in Nicosia, as well as international rating agencies Moody’s and Fitch were the Pan-Cyprian Antianaemia Society, and sponsored analysed. publication of The Secrets of Longevity, prepared by the Editorial Committee of the Medlook Doctors. CORPORATE SOCIAL RESPONSIBILITY For the Hellenic Bank, Corporate Social Responsibility In Greece, the Bank supported a charitable event (CSR) is a fundamental component of its philosophy entitled ‘Breast Cancer … Life After’. and culture. It reinforces viable growth and social solidarity, guaranteeing bonds of trust with the society at EDUCATION AND RESEARCH large and its employees via various initiatives, actions The Hellenic Bank targets the development of and practices implemented through its Corporate Social Education as it believes that children are the future’s Responsibility Programme. democratic, emancipated and politically- and socially- aware citizens. The Bank’s CSR activities benefit the Group’s

24 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 In 2011, it continued to support the University of 2011-2012’ campaign was sponsored, thus contributing Cyprus’s MBA Programme via the provision of a to teenagers’ experiential education in mobility scholarship for the professional MBA programme and issues which affect the operation of towns and the urban awarding of prizes to the top two students. It also environment. launched its co-operation with the Neapolis University in Paphos. As a first step, it enriched the University’s SPORT library through the donation of a number of publications The Hellenic Bank is perennially interested in sport and and also decided to award a financial prize to the best the encouragement of youth to participate in sporting student graduating from the degree programme in the activities. During 2011, it continued its support of the field of ‘Banking and Finance’. National U16 Junior Basketball Team. It also annually funds the Sports Journalists Union of Cyprus, In the context of its interest in education, the Bank sponsoring the organisation of its national awards supported the Rota Children’s Museum, founded in ceremony. 2010 and aiming to become an informal educational institution offering opportunities for creative activities to HELLENIC BANK CULTURAL CENTRE children, parents and educators. The Hellenic Bank has been a noteworthy participant In Greece, the Bank co-operated with the Union of in cultural events through its co-ordinated actions. In Cypriots in Greece in order to support the children of 2011, as it does every year, the Bank’s Cultural Centre Cypriots who were successful in their applications to encouraged cultural initiatives and supported artists, tertiary educational institutions in 2011. thus contributing to the promotion of the Arts and Culture. ENVIRONMENT The Hellenic Bank believes that all organisations and As a major supporter of Cypriot engraving, the Hellenic businesses have an obligation to intervene constructively Bank continued its annual sponsorship of the in order to protect the environment. 'Hambis Engraving School and Museum', funding all the Museum’s activities. The Bank’s environmental activities during 2011 consisted of: Within the framework of its cultural contribution, the Bank continued to fund two original Museums: the Delivery of 10.000 boxes for the recycling of paper to Municipal Museum of Palaeontology and the 350 Eco-Schools with a motto to ‘Think Green’. Tornaritis-Pierides Museum of Marine Life in Larnaca Co-organisation with the ‘Thalassa’ Municipal and Ayia Napa, respectively. It sponsored the new, Museum in Ayia Napa of an ecological seminar edited publication of the ‘Thalassa’ Municipal Museum especially for the Eco-Schools. in Ayia Napa which consists of information about Organisation of events which were simultaneously and photographs of the exhibits (paleontological and environmental and educational in all districts, during archaeological findings). which awards were given to all districts’ Eco-Schools. Within the framework of investing in electronic The Head Office Building hosted an exhibition by communication systems in order to limit the Cypriot engravers entitled 'Possibilities in Printing Using unrestrained use of paper, the Bank introduced the Different Materials and Mixed Technique'. The exhibition innovative e-Statement Service. Using this Service, was the result of a workshop over a few days, the Bank’s customers are able to receive detailed instructed by Professor Michael Arfaras, Director of the statements via e-mail. This allows for the Printmaking Department at the Athens School of Fine conservation of natural resources, aside from the Arts. speed, convenience and security in accessing account statements. It also funded a solo exhibition by engraver Eugenia Vasiloudi entitled 'Texts Embroidered Landscapes'. In the Greek towns of Larisa and Patra, the ‘Ecomobility Moreover, it hosted and co-organised an exhibition of

HELLENIC BANK GROUP ANNUAL REPORT 2011 25WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 engraving-painting-photography by well-known artists Education and Culture Minister Ms Claire Angelidou, on the subject of ‘Aphrodite’s Rock’, a joint effort of 11 entitled 'Code: Atalante'. different artistic individuals under one subject/symbol.

Artistic productions of a high quality are always in the CYPRUS ECONOMIC ENVIRONMENT Group’s priorities for the support of Culture. In 2011, ECONOMIC DEVELOPMENTS DURING 2011 activities of a more general cultural interest were In 2011, the Cypriot economy exhibited a marginally funded. The Bank continued its co-operation with the positive rate of growth at 0,5%, adjusted for inflation. Papadopoulos and Schinis company, funding a number A growth of 1,1% had been recorded in 2010. Thus of artistic events, such as the Kremlin Ballet Theatre, continued the sluggish economic recovery observed Eugene Onegin by the Kolobov New Opera of Moscow following 2009’s recession. According to the Statistical and the Viva Verdi Gala Concert. It simultaneously Service, positive rates of growth were recorded in the continued its co-operation with the Diastasis Cultural major sectors, including tourism, banking and services Association and the Avantgarde Cultural Foundation. (public administration, education, health and others). Negative growth rates were noted in secondary sectors, During 2011, it also maintained its long-term co- including construction, manufacturing and electricity, as operation with various cultural institutions, such as the well as retail and transportation. Rialto Theatre, the Mavrellis Foundation and the Pharos Arts Foundation. There were significant economic developments in 2011. There were negative repercussions as a result of Within the framework of its support for cultural research, crucially important events such as the explosion at the Hellenic Bank sponsored another publication by Dr. Mari and destruction of the Vasilikos Power Station, as Rita Severis, Art Historian and researcher of Cypriot well as the exclusion of the country from international history and tradition, entitled ‘The Castles and Forts of markets due to successive downgrades. A fiscal Cyprus’. The book forms part of the Monuments and consolidation budget for 2012 was approved towards Memories series sponsored by the Hellenic Bank over the end of the year, aiming to reduce the deficit from the past few years. 6,5% of GDP in 2011 to 2,5% in 2012.

It also funded reprinting of Hambis Tsangaris’s books At the same time, a loan agreement of 2,5 billion 'The Fey Enchantress' and 'The Prince of Venice'. It euros was reached with the Russian Federation sponsored a book by Ms Chrysothemis Hadjipanayi which will allow Cyprus to settle loans ending in 2012. entitled 'The Literary Work of Michalakis I. Maratheftis' Towards the end of 2011 and following relevant drilling, and, at the Head Office Building in Nicosia, presented initial estimates regarding the size of natural gas the latest book by well-known author and former deposits discovered in block 12 were announced. The

ANALYSIS OF SHAREHOLDERS 6% 31 December 2011

Category Number of Shares Percentage % Number of Shareholders 33% INSURANCE COMPANIES 19.706.263 6,4 21 21% CHURCH INSTITUTIONS 64.396.713 20,91 33 PROVIDENT FUNDS 9.068.783 2,94 124 STAFF 5.645.964 1,83 1.158 3% 109.047.461 35,4 23.893 PRIVATE INDIVIDUALS 2% COMPANIES 100.154.451 32,52 518

TOTAL NUMBER OF SHARES LISTED IN THE CYPRUS STOCK EXCHANGE 308.019.635 100% 25.747 35% Issued Capital 308.019.635

26 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 discovery of significant natural gas deposits in the to 68,5 billion euros in December 2011, while credit Exclusive Economic Zone of the Republic of Cyprus extended to residents increased by 7,2%. On the other thus gave a positive long-term outlook in the energy hand, deposits decreased slightly by 1,6%, reaching sector. 69,3 billion euros. Where interest rates are concerned, the European Central Bank (ECB) increased the euro’s Due to sluggish growth, unemployment increased base rate by a total of half a percentage point to 1,50%, significantly throughout the year. According to with increases in the second and third quarter of 2011. estimations by Eurostat, it climbed to 9,5% in December Subsequently, during the fourth quarter and under 2011, compared to 6,1% in December 2010. The the ECB’s new President Mario Draghi, the previous year’s average unemployment rate was 7,7% while the increases were reversed by two decreases, resulting in average number of registered unemployed persons the base rate ending the year at 1%. reached 28.000. The highest numbers of registered unemployed persons were recorded in the wholesale PROSPECTS OF THE CYPRIOT ECONOMY FOR and retail trade, construction and services related to the 2012 accommodation and food services sectors. Economic conditions are expected to remain difficult throughout 2012 due to efforts for fiscal consolidation In spite of the low growth rate, inflation climbed to a and the expected weak domestic demand due to relatively high 3,3% το 2011, compared to 2,4% το uncertainty in the job market, high private borrowing 2010. This relatively high inflation was a result of and increased taxation. GDP, adjusted for inflation, is the double-digit percentage increases in petroleum expected to shrink by 1%. Problematic sectors, such as products, domestic manufacturing and electricity. construction and industry, are not expected to recover. Sectors dependent on external demand – such as Regarding some of the most significant sectors of the tourism and the export of goods and services – are economy, income from tourism increased by 12,9% expected to fare better, assuming, of course, that during 2011. The retail sales volume index, as an the global economy will remain on its positive course indicator of consumption, decreased by 0,9%. In the throughout 2012 and that these sectors will remain secondary sector, the manufacturing index decreased competitive. by 7,4% and bulk sales of cement, as an indicator of activity in the construction sector, decreased by 13,6% Unemployment in the mid-term is trending towards for the year. Conversely, the performance of the further increase and may pass the 10% landmark services sector was positive. before stabilising. It is hoped that inflation will be limited to 2,5% as the difficult economic environment In financial sector developments, credit expansion for may deter an increase in prices, at least where the entire system reached 12%, with loans amounting domestic goods and services are concerned. Any 1.858 1.793 3,6 17.761,4 1.749 7,7 1.549 1.493 6,8 17.333,6 17.157,1 4,7 16.853,5 5,3 1,1 0,5 3,3 4,0 -1,9 -1,0 3,6 2,4 2,4 15.829,7 0,3

08 09 10 11 12(π) 1 2 3 4 5 07 08 09 10 11 07 08 09 10 11 07 08 09 10 11 GDP GROWTH INFLATION UNEMPLOYMENT INCOME FROM TOURISM GDP IN CURRENT PRICES (CONSTANT PRICES, (PERCENTAGE UNITS) (PERCENTAGE UNITS) (MILLION EUROS) (MILLION EUROS) PERCENTAGE UNITS)

HELLENIC BANK GROUP ANNUAL REPORT 2011 27WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 developments in the Eurozone debt crisis – and reaching a record high of 20,9% in November 2011. In especially Greece – are expected to have a significant the same month, the decrease in the volume of retail impact on the Cypriot economy and the banking sales, as an indicator of private consumption, was 8,9%, system. Finally, finalisation of plans for the exploitation year-on-year. Government expenditure also decreased of natural gas deposits may have a positive impact on due to austerity measures, while investments were the overall mood as it may provide positive long-term generally lower due to both the negative environment prospects for the country’s economy. and credit contractions. Specifically, total credit contraction in November 2011 reached 1,2%, year- GREEK ECONOMIC ENVIRONMENT - 2011 on-year. DEVELOPMENTS AND 2012 PROSPECTS 2011 was the worst year for the Greek economy The Greek economy faces many challenges in the since the crisis began in 2009 as, according to initial mid-term. Given the country’s failure to reach its fiscal estimates, GDP adjusted for inflation shrank by 6,8%. targets, the approval of a second, larger stimulus Prospects for 2012 remain bleak as GDP is estimated package from the special European Financial Stability to further decrease by approximately 3,5%. According Facility was necessary. External pressure on the to estimates made by economists, recovery will possibly country for the strict implementation of the provisions be delayed until 2013. set by the agreement for fiscal consolidation and structural changes are expected to intensify in the The increase in income from tourism, the increase in mid-term. Yet, at the same time, the political and exports and the decrease in imports were all factors social system has thus far displayed an inability to which contributed positively to prevent an even further faithfully implement the specific austerity plan and reduction in GDP. On the other hand, domestic private structural changes, creating an uncertain picture for the demand was seriously affected by the increases in future. taxation and high unemployment, with the latter

28 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 HELLENIC BANK PUBLIC COMPANY LIMITED REPORT OF THE BOARD OF DIRECTORS

The Board of Directors submits to the shareholders its compared to 2010. At the same time, total expenses annual report together with the audited financial statements decreased by 6% reaching €168,6 million compared to for the year ended 31 December 2011. €178,7 million for the year 2010. As a result, the cost to income ratio, excluding the impairment cost, is 56,0% and ACTIVITIES it is lower than the ratio of 66,5% for the corresponding last The principal activity of the Group during 2011 continued year period. to be the provision of a wide range of banking and financial services, including hire purchase and leasing, investment, Provisions for impairment of loans and advances in the insurance services, as well as trustee and factoring income statement for the year ended 31 December 2011 services. Certain developments during 2011 relating to amounted to €142,5 million and increased by €67,8 investments in subsidiary companies are described in million from the corresponding 2010 amount. Accumulated Note 21 to the financial statements. provisions for impairment of loans and advances, which also include suspended interest that is not recognised in BRANCH NETWORK the income statement, amounted to €644,9 million as at The Bank provides banking and financial services through 31 December 2011 (December 2010: €534,2 million) and its branches in Cyprus, Greece and Russia and maintains represent 11,5% (December 2010: 9,9%) of total gross Representative Offices in Moscow, Johannesburg, Saint loans and advances. Petersburg and Kiev. Total gross customer advances increased by 4% reaching RESULTS the amount of €5,6 billion compared to €5,4 billion in Excluding the cost of impairment of the Greek Government December 2010, while customer deposits increased by 4%, Bonds, the profit of the Group before provisions amounts to reaching the amount of €7,1 billion compared to €6,9 billion €132,6 million, recording an increase of 47% compared to in December 2010. the corresponding prior year period. In Greece, due to the continuing financial crisis and its At 31 December 2011, the Bank had in its posses- negative impact on the real economy and consequently on sion Greek Government Bonds with nominal value €110 the quality of the loan portfolio of the Branch Network in million, classified as “Held to maturity”. These bonds were Greece, the loss before taxation increased to €100,3 million eligible for the voluntary participation of private sector compared to a loss of €45,6 million for December of 2010. bondholders plan to restructure the Greek debt, issued on 21 July 2011 that proposed to holders of eligible Greek The Group maintains comfortable liquidity, benefiting from Goverment Bonds, the exchange of existing bonds with its high stable deposit base. Specifically, in December 2011 new ones. the ratio of gross loans to deposits remains at the highly satisfactory level of 79,2% (December 2010: 79,1%), while Following the finalisation of the terms of agreement (note the ratio of net loans to deposits is 70,2% (December 2010: 42) on 21 February 2012, the Group proceeded with an 71,3%). The absence of financing by the European Central additional impairment. At 31 December 2011 the total Bank and the non dependence on the interbank market is amount of the impairment amounted to €77 million and indicative of the comfortable liquidity of the Group. represented 70% of the nominal value of bonds. The stock prices of the new titles issued on 12 March 2012, were not Equity attributable to the owners of the Bank reached the taken into account for the calculation of the total amount amount of €431,6 million at 31 December 2011, compared of the impairment, as the Group considers that they do not to €531,9 million in December 2010. The return on equity represent their fair value. of the Group based on the results of the year 2011 was -20,9% (December 2010: 1,7%). As a result, following the impairment cost of the Greek Government Bonds, the Group shows losses before taxation The Group’s Capital Adequacy Ratio, based on the relevant for the year ended 31 December 2011 amounting to Central Bank of Cyprus Directive for the calculation of the €86,9 million compared to profits of €15,3 million for the capital requirements and large exposures (Basel II), was corresponding period of 2010. 12,9% (December 2010: 15,0%) and Tier 1 Ratio was 10,1% (December 2010: 11,9%), exceeding the minimum Total net income of the Group excluding the impairment limits of 11,5% and 9,5% respectively. The Core Tier 1 cost of the Greek Government Bonds increased by 12% Ratio was 7,1% (December 2010: 9,0%) and is below the

32 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 minimum 8% required by the Central Bank of Cyprus. LOAN CAPITAL Non Convertible Bonds 2011 The Group is already examining a Capital Strengthening Plan. Also it takes all necessary actions to enhance the Non Convertible Bonds 2011 had a maturity date of 28 April capital adequacy ratios, including the effective management 2011 and bore interest at the fixed rate of 5,75% per annum of risk weighted assets and the strengthening of the capital on their nominal value for the first six months. For subsequent base with profits, with main goal all ratios to exceed periods they bore interest at a floating rate equal to the minimum required capital adequacy ratios. base rate applicable at the beginning of each interest payment period plus 0,75%. DIVIDEND The Board of Directors of the Bank, acting promptly and On 28 April 2011 and in accordance with the terms of the recognizing the continuing challenges of the economic Prospectus dated 29 March 2004, the Bank announced environment, the strategic importance of the capital the maturity and repayment of the 2011 Bonds and the adequacy and taking into account the recommendations payment of interest for the period from 1 April 2011 until 28 of the Central Bank of Cyprus, has decided, as a further April 2011. measure of safeguarding the Group, not to propose the payment of dividend for the year 2011 at the shareholders’ The interest rate on the Bonds for the period from 1st January Annual General Meeting. 2011 to 28 April 2011 was set at 6% and the last date of trading of these Bonds on the Cyprus Stock Exchange was ANTICIPATED GROUP DEVELOPMENTS the 15th April 2011. Based on the conditions prevailing in the financial environment, the strategic targets of the Group continue to focus on the RISK MANAGEMENT effective management of credit risk, the safeguarding and The Group is exposed to a variety of risks, the most enhancement of the capital adequacy ratios, the safeguarding important of which are described and analysed in Note 43 to of sound liquidity and cautious and rational growth, with the the financial statements. The management and monitoring permanent target of profitability. of risks is centralised under a uniform unit which covers the entire range of the Group’s operations. Group Management closely monitors and evaluates developments in the market of its operations and takes all SHARE CAPITAL necessary measures to deal with the adverse economic At 31 December 2011 there were 308.019.635 fully paid conditions and the consequences of the financial crisis. shares in issue, with a nominal value of €0,43 each (2010: 308.004.277 shares with a nominal value €0,43 each). Hellenic Bank estimates that during 2012, the challenges for the Cyprus economy will continue, with the possibility of During the year, 15.358 shares were issued and granted for recession and subsequent low growth rates of consumption free to members of the Group’s personnel (2010: 10.460 and credit expansion and the maintenance of unemployment shares). at high rates. In Greece, it is expected that the deficit correction plan will take more time to materialize than the There are no restrictions on the transfer of the Company’s original expectations, resulting in the continuous recession ordinary shares other than the provisions of the Banking and the maintenance of high unemployment rates. The Law of Cyprus which requires Central Bank of Cyprus challenges of the negative economic environment in approval prior to acquiring shares of the Company in Greece may further aggravate the quality of the loan excess of certain thresholds and the requirements of the portfolio of the Branch Network in Greece and hence the Directive on Insider Dealing and Market Manipulation, Group's results. which relates to transactions with related parties.

The Group takes all necessary measures and addresses Shares of the Company held by the life insurance the challenges of the negative economic environment. subsidiary of the Group as part of its financial assets which Meanwhile, the Group’s strong indicators allow for the are invested for the benefit of insurance policyholders carry rational development of business with selective financing of no voting rights, pursuant to the Insurance Law. new projects in Cyprus, Greece and Russia. The Company does not have any shares in issue which carry special control rights.

HELLENIC BANK GROUP ANNUAL REPORT 2011 33WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 In the event of an unjustified early termination of the Shareholders holding more than 5% of the Share contract of the Executive Member of the Board of Directors Capital of the Company (that may take place anytime during its Shareholders holding more than 5% of the share capital course), variable compensation is payable up to two annual of the Company are presented in Note 39 to the financial salaries. If the remaining period at the time of termination statements. is less than two years, the said compensation will equal the remaining salaries payable until the expiry of the contract. Preparation of periodic reporting The Group has in place an effective internal audit system, CORPORATE GOVERNANCE STATEMENT the adequacy of which is evaluated at least annually by The Corporate Governance Code published by the the Board of Directors and in more frequent intervals by Cyprus Stock Exchange (3rd Edition – September 2009), the Board’s Audit Committee, in respect of financial and the «Code», was fully adopted by the Bank’s Board of operational systems as well as for compliance with any risk Directors. management regulations that may arise. The adequacy of the Internal Audit System secures the validity of The Board of Directors recognizes the importance of financial data and compliance with relevant legislation implementing sound Corporate Governance based on and aims to ensure the management of risks while the Code in combination with the mandate and practices providing reasonable assurance that no loss will incur. followed by the various Committees of the Board of Directors in order to achieve the target for maximization of The Group’s internal audit and risk management systems the shareholders’ investment. incorporate effective procedures aiming at the identification and prevention of errors, omissions or fraud that could The Corporate Governance Code is available on the result in material misstatements during the preparation Cyprus Stock Exchange (CSE) website www.cse.com.cy. of financial statements and relevant disclosures included in the periodic reporting provided by the Group based on Information on Members of the Board of Directors retiring Part II of the Transparency Law of Cyprus (Law Providing and being eligible for re-election, as well on the composition for Transparency Requirements in relation to Information and operation of the administrative, managerial and about Issuers whose Securities are admitted to trading on supervisory bodies of the Bank and its committees are set a Regulated Market) of 2007 and 2009. out in section B of the Report on Corporate Governance. BOARD OF DIRECTORS Any amendments to the Articles of Association of the The members of the Board of Directors at 31 December Company are only valid if approved by a Special Resolution 2011 were the following: at an Extraordinary General Meeting of the shareholders. Dr Andreas P. Panayiotou Details of restrictions in voting rights and special control Non Executive Chairman rights in relation to the shares of the Company are set out Andreas M. Moushouttas in the share capital section above. Non Executive Vice Chairman Iacovos G. Iacovou The Board of Directors may issue share capital if there is Non Executive Member of the Board sufficient authorized capital which has not been issued and Soteris Z. Kallis as long as the new shares to be issued are offered first Non Executive Member of the Board to the existing shareholders, pro-rata to their percentage Charalambos P. Panayiotou holding in the Company’s share capital. In the event Non Executive Member of the Board that a share capital increase requires an increase in the Ioannis Ch. Charilaou authorized share capital or if the new shares will not be Non Executive Member of the Board offered to existing shareholders, the approval of the share- Georgios K. Pavlou holders at a General Meeting must be obtained. The Board Non Executive Member of the Board of Directors may also propose to a General Meeting of the Kyriakos E. Georgiou shareholders a share buyback scheme. Non Executive Member of the Board Kyriacos I. Droushiotis Non Executive Member of the Board Stavros Kremmos Non Executive Member of the Board

34 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 Makis Keravnos Executive Member of the Board Glafkos G. Mavros Executive Member of the Board

All Directors were Members of the Board of Directors throughout the year 2011.

On 4 January 2012, the Bank appointed Dr Marios R. Clerides, Group Senior General Manager, as the new Executive Member of the Board as from 1st January 2012 in replacement of Mr. Glafkos G. Mavros that resigned on the 31st of December 2011.

Reference to Directors’ emoluments, fees and compensation is made in Note 38 to the financial statements.

In accordance with the Company’s Articles of Association, Messrs. Andreas M. Moushouttas, Soteris Z. Kallis, Dr Marios R. Clerides, Iacovos G. Iacovou and Kyriakos E. Georgiou will retire, and being eligible, will offer themselves for re-election. The vacancies so created will be filled by election.

DIRECTORS’ INTEREST IN THE SHARE CAPITAL OF THE COMPANY The percentage shareholdings in the Bank’s share capital owned by Members of the Board of Directors are shown in Note 37 to the financial statements.

INDEPENDENT AUDITORS The independent auditors KPMG Limited have expressed their willingness to continue in office as the Bank’s auditors. A resolution authorising the Board of Directors to fix their remuneration will be proposed at the Annual General Meeting.

On behalf of the Board of Directors,

Dr Andreas P. Panayiotou Chairman

Nicosia, 30 March 2012

HELLENIC BANK GROUP ANNUAL REPORT 2011 35WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 REPORT OF THE BOARD OF DIRECTORS ON CORPORATE GOVERNANCE FOR THE YEAR 2011

INTRODUCTION Executive Directors, all having the appropriate qualifi- The Bank’s Board of Directors fully adopted the Code cations and broad relevant experience. The Board of of Corporate Governance, which was published by the Directors’ composition as at 31 December 2011, as well Cyprus Stock Exchange (3rd revised edition - March 2011), as the changes in the composition and distribution of hereinafter referred to as ‘the Code’. In compliance responsibilities of the Board throughout the year and up with the provisions included in the Code’s introduction, to the date of the present Report, appear in the Directors’ the Board of Directors incorporates the present Report Report for the year 2011. on Corporate Governance in the Bank’s 2011 Annual Report. During 2011, the Board of Directors met sixteen times. In all instances, it is ensured that all Members of the PART A Board are correctly informed in writing of forthcoming The Bank states that the full implementation of the Board meetings and all necessary documentation Code’s principles constitutes the Bank’s policy and that related to the meeting is provided so that they have it had already taken the initiative of applying many of adequate time to review it. The Members of the Board these principles well before the establishment of the hold positions in the Boards of Directors of other Code. The Board of Directors believes that correct companies as shown in their curricula vitae, published corporate governance, based on the Code, in conjunction in the Corporate Governance Report for the year they with the terms of reference and the practices followed by offer themselves for re-election. Their participation in the various Board Committees, constitutes a fundamental other Boards allows them to devote the necessary time factor in achieving the corporate goal of maximising and attention to their duties as Members of the Board of shareholder value. The Board acknowledges that there Directors of the Bank. is an on-going process of formulating principles of corporate governance based both on international as The Company Secretary and the Executive Officer well as local conditions. As such, the Board continually responsible for ensuring compliance with the Code follows a policy of reviewing and readjusting the various of Corporate Governance provides information and aspects of corporate governance accordingly. advisory services to the Members of the Board of Directors related to Board procedures and the Code. PART B The Bank confirms that it has taken appropriate action (1) Independent Non-Executive Directors in 2011 in order to comply with the provisions of the Code as of Andreas P. Panayiotou, Chairman 1st January 2003. Specifically, bearing in mind its third (Independent from 1 March 2011) revised edition in March 2011, the Bank proceeded to Andreas M. Moushouttas, Vice Chairman inform all the Departments, Services and officers of Antonis I. Pierides (he retired on 25 May 2011 due to the Bank and also all Board Members of the Bank and attaining the age limit on the basis of the Directors’ Retirement affiliated, subsidiary and associated companies so as to Policy) ensure the broadest possible cooperation of all parties Soteris Z. Kallis, Senior Independent Director concerned in the full implementation of the principles Ioannis Ch. Charilaou and provisions of the Code. Georgios K. Pavlou Kyriakos E. Georgiou In light of the above, the following confirmations and Kyriacos I. Droushiotis reports are made: (2) Non-Executive Directors in 2011 THE BOARD OF DIRECTORS Andreas P. Panayiotou, Chairman The Bank is governed and controlled by the Board of (Non-Independent until 1 March 2011) Directors, which operates on the basis of the Code, Iacovos G. Iacovou the relevant Companies, Stock Exchange and Banking Charalambos P. Panayiotou Operations laws and of course the Bank’s Articles of Stavros Kremmos Association. On 31 December 2011, the Board was composed of ten non-Executive Directors and two

38 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 A relevant ‘Confirmation of Independence’ based on appointment of the above mentioned Member in the the minimum independence criteria in accordance with Board of Directors of the Bank took place after applying Provision A.2.3. of the Code has been signed by each in full the procedures of the Directives of the Central of the above mentioned Directors (in paragraphs 1 Bank of Cyprus on ‘The Fitness and Probity (Assessment and 2 above) and has been submitted to the Cyprus Criteria) of Directors and Managers of Banks of 2006 Stock Exchange together with the present Report on and 2007’. Dr. Clerides was appointed to the Risk Corporate Governance. Management Committee of the Board, also effective from 1 January 2012. (3) Executive Directors in 2011 Makis Keravnos, Director / Chief Executive Officer Mr. Antonis I. Pierides, an Independent Non-Executive Glafkos G. Mavros, Director / Group General Manager Director, retired on 25 May 2011, due to attaining the (he resigned on 31 December 2011 due to his retirement from age limit on the basis of the Directors’ Retirement the Group) Policy, which is included in the Terms of Reference of the Board of Directors in accordance with the relevant At least 50% of the Board of Directors (excluding the provision of the Code. Chairman) consists of Independent Non-Executive Directors. On 14 February 2011, there was a reshuffle of the Board Committees. Note Based on the independence criteria listed in the amending On the same day, the Group Compliance Policy was directive of the Central Bank of Cyprus ‘Framework of approved by the Board of Directors and in July 2011 Principles of Operation and Criteria of Assessment of the Group Outsourcing Policy was approved. At the Banks’ Organisational Structure, Internal Governance beginning of 2012 the revised Group Remuneration and Internal Control Systems’ (October 2009), which differ Policy was approved. The latter is consistent with from those in the Corporate Governance Code, Messrs. the Code of Corporate Governance published by the Ioannis Ch. Charilaou and Georgios K. Pavlou are not Cyprus Stock Exchange (3rd revised edition - March 2011). independent. Executive Management (4) Chief Executive Officer At the senior management level, within the framework Makis Keravnos of the Staff Succession Policy and in view of senior managers retiring in 2011, there was organisational (5) Application of best possible practices of restructuring and transfer of staff in Cyprus valid from 1 Corporate and Internal Governance in the Bank July 2011. Group Banking Services Development was during 2011 split into Overseas Division, Business Division (Cyprus) During 2011 and at the beginning of 2012, various and Retail Division (Cyprus) with their heads reporting actions were taken in compliance with the directives to the Group Chief Executive Officer. of the Central Bank of Cyprus on a ‘Framework of Principles of Operation and Criteria of Assessment of On the completion of the preparatory activities by Banks’ Organisational Structure, Internal Governance the Executive Management the start, on 11 January and Internal Control Systems of 2006 to 2012’, always 2011, of full banking operations in Russia through the taking into consideration the Code of Corporate subsidiary bank Limited Liability Company Commercial Governance published by the Cyprus Stock Exchange Bank ‘Hellenic Bank’ was announced. (3rd revised edition - March 2011). Other Matters Board of Directors Group Risk Management, the Board Risk Management Within the above mentioned framework, on 1 January Committee and the Board of Directors, in cooperation 2012 an Executive Director was appointed to the Board, with Executive Management, continued to actively Dr. Marios Clerides, replacing Mr. Glafkos G. Mavros pursue the evaluation and management of all related who retired from the Group on 31 December 2011. The risks, particularly in view of the global financial crisis.

HELLENIC BANK GROUP ANNUAL REPORT 2011 39WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 The Department of Corporate Governance / Compliance, In this context, all Group operational management units in co-operation with the Chairman, the Chief Executive are suitably staffed and committed to the introduction Officer and the Executive Officer responsible for and operation of appropriate control systems according ensuring compliance with the Code of Corporate to their respective business and responsibilities. Within Governance, confirms compliance with the relevant this framework, the above mentioned management laws, regulations and directives, the implementation units: of best possible practices of Corporate Governance within the Bank and the application of an adequate and Operate on the basis of a specific organisational transparent framework of internal governance. structure and allocation of responsibilities; Prepare and monitor the implementation of the (6) Remuneration Policy Report strategic and business plans and annual budgets; The Remuneration Policy Report was prepared by the Follow written procedures, receive and disseminate Board of Directors following a proposal by the Remu- information and advice through circulars and neration Committee in accordance with Appendix 1 of training programmes; the Code. It is presented in the Annual Report of the Adopt a policy of adequate segregation of duties in Company after the present Board of Directors’ Report on order to avoid a conflict of interests wherever this is Corporate Governance (page 52). The Remuneration considered necessary; Policy Report will be presented to the Annual General Apply, at branch level, performance evaluation and Meeting of Shareholders for approval. measurement models on the basis of specific targets; Information on the remuneration / fees of the Members Are supported by appropriate software and of the Board of Directors and the Chief Executive hardware systems and Officer for the year 2011 is disclosed in the notes to the Are subject to regular internal and external audits. Accounts contained in this Annual Report (Note 38) as well as in the Remuneration Policy Report itself. The adequacy of the internal control system safeguards the Group’s and its customers’ assets, as well as the (7) Going Concern validity of the financial data and compliance with The Board of Directors states that the Company intends existing laws in general. It aims towards the management to continue to operate on a going concern basis for the and not the complete removal of risks, providing next twelve months. reasonable but not absolute assurance that no major loss will be incurred. (8) Internal Control System The Board of Directors confirms that the Company has (9) Confirmation in Accordance with the Provision an effective internal control system, the adequacy of C.2.1. of the Code which is reviewed by the Board at least once a year. In relation to paragraph 8 above (Internal Control It is also reviewed on a more regular basis by the System), the Members of the Board of Directors confirm Audit Committee, both in respect of financial and that they have reviewed the adequacy of the Internal operational systems as well as of compliance systems Control Systems of the Company as well as the for the management of risks, which might occur procedures for verification of correctness, accuracy and and which fall within the competencies, duties and validity of information disseminated to investors. responsibilities of the Asset and Liability Management Committee and the Risk Management of the Group. The Board also confirms that, to its knowledge, no The Group Internal Audit reports directly to the Audit violation in the Stock Exchange Legislation and Committee and the Board of Directors itself. It consists Regulations has occurred, except in cases already of 37 persons and is headed by Mrs. Niki Nicolaidou reported to the relevant authorities (where this applies). – Hadjixenophontos (B.Sc. Honours in Financial Services, M.B.A., A.C.I.B., F.C.C.A.). All the Internal (10) External Auditors – Provision C.2.2. of the Code Audit functions are carried out in accordance with the In 2011, Messrs KPMG, external auditors of the Bank, Internal Audit Manual. No Internal Audit function has offered other services apart from auditing e.g. tax been outsourced during 2011.

40 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 services, training seminars, general advisory services, (a) Audit Committee review of various returns, etc. Their objectivity and Chairman: Kyriacos I. Droushiotis independence is ensured in the following ways: (Chairman from 25 February 2011, Member from 14 February 2011) (a) The non-auditing services are offered by different Antonis I. Pierides companies / departments of the KPMG Group in (resigned on 25 February 2011) accordance with the professional code of certified Members: Ioannis Ch. Charilaou accountants / auditors (‘Chinese Walls’). Georgios K. Pavlou Kyriakos E. Georgiou (b) The KPMG team that carries out the external audit of Soteris Z. Kallis the Bank does not participate in offering services apart from auditing. (b) Remuneration Committee Chairman: Soteris Z. Kallis (c) The offer of non-auditing services is carried out by a Members: Kyriakos E. Georgiou tendering process except where these are considered Iacovos G. Iacovou to be of minor importance. Kyriacos I. Droushiotis Stavros Kremmos Messrs KPMG have confirmed in writing to the Bank (from 14 February 2011) that the offering of the above mentioned services does not affect their independence and objectivity. The (c) Nominations / Internal Governance Committee external auditors do not offer internal audit services to Chairman: Dr Andreas P. Panayiotou the Bank. Members: Andreas M. Moushouttas Iacovos G. Iacovou (11) Credit Facilities to Directors Georgios K. Pavlou Information as to credit facilities provided to Company Soteris Z. Kallis Directors (and related parties) or to its subsidiary or Charalambos P. Panayiotou associated company Directors is to be found in the relevant notes to the Financial Statements contained (d) Risk Management Committee within the present Annual Report (Note 38). It is Chairman: Ioannis Ch. Charilaou confirmed that all such transactions were carried (Chairman from 14 February 2011) out within the normal course of the Bank’s business, Andreas M. Moushouttas under normal commercial and employment terms and (resigned on 14 February 2011) with transparency. Furthermore, it is confirmed that all Members: Charalambos P. Panayiotou relevant cases of Bank facilities to Company Directors Kyriacos I. Droushiotis and its subsidiary company Directors are forwarded for (until 14 February 2011) approval to the Board, after the relevant proposal of the Stavros Kremmos Board’s Audit Committee. During this procedure the (from 14 February 2011) interested Member of the Board neither participates nor Antonis I. Pierides is he present. (resigned on 25 May 2011) Glafkos G. Mavros (12) Code of Corporate Governance Compliance (resigned on 31 December 2011) Officer Marios Clerides The Bank has appointed Mrs. Maria Vovides-Iliescu, (from 1 January 2012) Manager Corporate Governance / Compliance, as Executive Officer responsible for ensuring compliance The terms of reference of the above Committees are with the Code of Corporate Governance. based both on the relevant provisions of the Code pertaining to them and the relevant guiding directives (13) Board Committees of the Central Bank of Cyprus. They are published in The following Board Committees operate within the paragraph 14 below while those of the Remuneration Bank:

HELLENIC BANK GROUP ANNUAL REPORT 2011 41WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 Committee are in the Remuneration Policy Report. where the Group is active, remuneration in other levels Within the framework of the provisions of the Code of the Group as well as non-financial criteria e.g. concerning relations with the Shareholders, the Chairmen compliance with applicable rules and procedures. The of these Committees are available to answer any Committee's aim is to attract and retain good quality questions at the Annual General Meeting in which officers at Executive and General Management levels, all shareholders are encouraged to participate. The in order to better serve the interests of the Group as well Chairmen and Members of the Committees periodically as its shareholders and other stakeholders. submit reports or proposals to the Board of Directors following the meetings of the corresponding Committees, Each year, the Remuneration Committee proposes to depending on the subjects being addressed. the Board of Directors the Annual Remuneration Policy Report, as part of the Annual Report of the Company, The Audit Committee meets on its own before the which is submitted to the shareholders’ Annual General announcement of the quarterly results to review the Meeting for approval. The Committee also reviews Financial Accounts and more specifically, the extent and and approves the Information disclosed on the Annual sufficiency of provisions for debts which may be doubtful Remuneration of the Members of the Board, which is of collection, as well as the adequacy of the Internal prepared by Group Financial Management for inclusion Control System. It then proceeds with the relevant in the notes to the annual accounts of the Company and suggestions to the Board. The Audit Committee also the Remuneration Policy Report itself. meets on its own (without the presence of members of the Executive Management) to review matters within its The Nominations / Internal Governance Committee responsibility. Additionally, it participates in meetings is engaged in selecting fit and proper individuals for with the Executive Management of the Bank and the appointment as Board Members of the Bank or its Internal Audit in Cyprus and in Greece, to review issues subsidiaries, either for positions extraordinarily vacated which arise either from the financial accounts or from or after the retirement of Board Directors, in accordance various special reports or investigations or from the with the Bank’s policy regarding retirement age. The Annual Report of the Internal Audit of the Bank and Committee then submits its suggestion to the Board of its subsidiary companies. The Committee makes Directors of the Company concerned for its decision. recommendations or suggestions to the Board of The decision applies for the period from the appointment Directors on issues related to its jurisdiction. The date of the new Member to the next shareholders’ Committee is assisted by the respective audit committees General Meeting, when the Directors so appointed, of the Bank’s subsidiary companies. During 2011, if eligible, may offer themselves for re-election. New the Audit Committee held a considerable number of Board Members are briefed by the Executive Officer meetings. The Committee’s Chairman has a university responsible for ensuring compliance with the Code degree and extensive experience in Finance and is a of Corporate Governance and by other high-ranking Business Consultant by profession. officers, regarding the provisions of the Code as well as on broad issues in relation to the organisational The Remuneration Committee meets whenever it is structure, procedures, strategic planning, the Company’s necessary to fix or review the remuneration of Executive practices in general and those of the Board and its and non-Executive Members of the Board of Directors Committees in particular. The Committee also has the and the Chief Executive Officer. After considering responsibility of implementing the Group’s policies all relevant parameters and data, it makes relevant on internal governance. The Nominations / Internal recommendations to the Board for taking decisions, in Governance Committee meets whenever issues arise the absence of the Executive Member of the Board or that are within its jurisdiction. other Officers involved. The Committee’s suggestions and the Group’s Remuneration Policy take into The Risk Management Committee assists the Bank’s consideration the relevant responsibilities, workload, Board of Directors in fulfilling its responsibilities and qualifications, know how, academic background, obligations concerning the recognition, measurement, experience, individual performance, remuneration of monitoring and effective management of all the Group's comparable positions in the market, especially in areas risks (credit, interest-rates, operational, market, liquidity,

42 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 foreign exchange, capital and other). Amongst its other 2. Composition and Term-in-Office of Members of duties, the Committee prepares and submits proposals the Audit Committee for approval to the Board. When applied, it evaluates the The Board appoints at least four and maximum six non- principles, the framework and policies of undertaking Executive Directors as members of the Committee. and managing all forms of risks and the use of The majority of the members of the Committee must capital that would correspond to the business objectives be independent non-Executive Members of the Board, of the Bank, the Group and / or each subsidiary company including the Chairman of the Committee. separately. It also recommends to the Board the assignment of approval authority (which concerns the The Chairman of the Committee should have undertaking of risks) to the Executive Management, experience in accounting and / or finance and will be General Management and other approving groups, as appointed by the Board of Directors. The Chairman well as the approval of new products or services that of the Group should not be a member of the Audit the Group intends to introduce. The Risk Management Committee. Committee meets whenever issues arise that are within its jurisdiction. The term-in-office of the members of the Committee is decided by the Board of Directors. (14) Terms of Reference of the Board of Directors’ Committees (except the Remuneration Committee) 3. Meetings of the Committee The Committee meets at regular intervals, at least six Terms of Reference of the Audit Committee times a year. The next integral number of one half of the 1. Establishment / Mission members comprises a quorum. The Audit Committee was established to ensure that the Bank complies with the directives published by the The Committee invites to its meetings any officers of 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 Committee should meet with the external auditors the achievement, in a reliable and effective manner, at least once a year to discuss matters arising from of the obligations imposed on the Bank by the above audits. mentioned directive, the compliance with the relevant provisions of the Code of Corporate Governance and The Committee keeps minutes of its meetings and its contribution in general to the strengthening of the decisions and submits its annual and periodical reports principles of sound management in the conduct of of proceedings to the Board, as it deems advisable. operations and 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, independent of the Executive Management and A. Financial Statements answerable to the Committee. Α1. It examines the contents of the quarterly, semi- annual, nine-monthly and annual financial statements The Committee has the approval of the Board of and of the other special periodic financial reports, Directors to obtain independent professional advice to be satisfied that they present a true and fair view whenever it deems this necessary. before they are submitted to the Board of Directors for approval.

HELLENIC BANK GROUP ANNUAL REPORT 2011 43WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 A2. It supervises the processes applied by the Group This table is submitted to the Board of Directors, along Chief Financial Officer with the technical supervision with the relevant comments of the Audit Committee. of the external auditors (where this is judged necessary) regarding the choice of accounting policies C. Internal Audit and accounting estimates for the preparation of the C1. It approves and evaluates the Internal Audit manual Group’s financial statements. that contains, among other things, the rules, the way the Committee works and the audit objectives and B. External Audit programmes. B1. It submits proposals to the Board regarding the appointment, termination and remuneration of the C2. The Group Internal Audit submits its annual audit Group’s auditors. plan and the Unit’s budget to the Audit Committee for approval. Any changes that are likely to be made to the B2. It monitors and ensures the independence and audit plan or the budget during the year must also be effectiveness of the auditors. approved by the Committee.

B3. It monitors the relationship between the Group and C3. It proposes to the Board the appointment and its auditors. replacement of the Head of Group Internal Audit.

B4. It evaluates the extent and effectiveness of the au- It evaluates his performance and also the work and dits and examines ways to better co-ordinate the au- effectiveness of Group Internal Audit. dit effort to ensure complete coverage, avoidance of overlapping work and the best use of available audit C4. It evaluates the adequacy and effectiveness of the resources (cost - effectiveness). Internal Control System of the Group.

B5. It evaluates the comments / proposals of the C5. It submits to the Board of Directors a report auditors with regard to the management of the Group, regarding: the preparation and presentation of its financial statements and the monitoring of their application. a. The adequacy of audits carried out, the conclusions and the proposals of Group Internal Audit. B6. It monitors the substantial volume, nature and extent of non-auditing services provided by the auditors b. Subjects that are related to the independence and at Group level, aiming to maintain the balance between smooth carrying out of audit work carried out by Group objectivity and the value added by the services offered. Internal Audit.

In the case where non-auditing services are offered to C6. It confirms that the Bank assigns the evaluation a subsidiary or affiliated company of the Bank and the of the adequacy of the Internal Control System, on an volume is such that it downgrades the objectiveness individual and consolidated base, to external auditors of their audits, then the Committee informs the who have the necessary experience. corresponding Committee (where it exists) of the subsidiary company or its Board of Directors. It evaluates the findings of the above audits and proposes corrective measures to the Board of Directors. The Committee is informed, at least once a year, by the Group’s Financial Management about the nature, extent D. Miscellaneous Issues and fees for non-auditing services or other advisory D1. It assigns to Group Internal Audit or, following duties of the auditors. authorisation of the Board of Directors, to independent experts, the investigation of any subjects which fall B7. It annually prepares a table in which the auditing within its mission and powers. and non-auditing services by category, time and fees paid are recorded.

44 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 D2. It requests information from the Management on D9. The Chairman of the Committee will be available the significant risks to which the Group is exposed; it for personal, telephone, electronic or written commu- evaluates the steps taken by the Board to minimise these nication, which shareholders of the Bank may request, risks, and submits proposals for their improvement. regarding issues concerning the work of the Committee. He will also be available to answer any D3. It investigates any other important elements, data questions during the Annual General Meeting or any or facts that concern and influence the efficiency and meeting for purposes of briefing all shareholders of the operation of the Bank or its compliance with the laws Bank. and regulations that govern it. Information concerning the structure and work of the D4. The Committee confirms, once a year, the Committee will also be given in the Annual Corporate compliance of the Bank with the laws and the Governance Report of the Board of Directors of institutional framework in which it is active. Hellenic Bank Public Company Limited.

D5. Following a decision of the Audit Committee, the 6. Validity and Modification of the Terms of Chairman convenes a joint meeting with the members Reference of the Audit Committee of any subsidiary company The terms of reference will be revised and appropriately to discuss and study any matters concerning that readjusted so as to reflect any new practices that company as may be deemed necessary. may be adopted by the Group. These might include organisational restructuring, directives of the Central D6. The Committee has the responsibility for examining Bank, changes in the relative legislation, new directives any significant transactions, in any form, carried out of the Securities and Exchange Commission or new by the Bank and / or its subsidiary companies, where regulations of the Cyprus Stock Exchange added to the any Member of the Board, Chief Executive Officer, Senior Code. Executive Officer, Secretary, Auditor or large shareholder (who directly or indirectly holds more than The Board has the responsibility for any addition to or 5% of the issued share capital of the Company or voting readjustment of the procedures related to the terms of rights) has, directly or indirectly, any significant interest. reference. It ensures that these transactions are carried out within the framework of the Bank’s normal commercial 7. Code of Corporate Governance practices (at arm's length). In observing all the above, it is understood that the Audit Committee will function strictly within the framework The above definition includes the Board Members of of the relevant provisions of the Code of Corporate subsidiary companies. Governance, as these are determined by Chapter C of the Code. D7. It draws up, with the assistance of the Executive Officer responsible for ensuring compliance with the Terms of Reference of the Risk Management Code of Corporate Governance, the Board of Directors’ Committee Report on Corporate Governance to be included in the 1. Terms of Reference of the Risk Management Group’s Annual Report. Committee The role of the Committee is to assist the Board of D8. It discusses with the Group’s Management the Directors of Hellenic Bank Public Company Limited (‘the policy for management and evaluation of business Company’) to fulfil its responsibilities and obligations risk, including the main Group financial risks, and the concerning the recognition, measurement, monitoring measures that are taken by the Board for their and effective management of all Group risks (credit, monitoring and containment. The external auditors and operational, market, liquidity, foreign currency and the Head of Group Internal Audit may also be invited to others). The Committee also has the responsibility of this meeting. monitoring compliance risk.

HELLENIC BANK GROUP ANNUAL REPORT 2011 45WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 2. Appointment of the Risk Management Committee each Company separately. Inter alia: The Committee will be appointed by the Board of Directors and will consist of three to six members (a) The Committee will shape the policy of the Group with sufficient knowledge and experience in the Risk with regard to the limits and pricing of undertaking Management sector. At least one member will be an Group risks. Executive and one an independent non-Executive (b) The Committee will ensure that the Group’s capital member. is maintained at levels that correspond to the risks One of the Committee’s non-Executive members will be undertaken. appointed by the Board as Chairman. (c) The Committee will confirm the sufficiency of the The term-of-office of the members of the Committee will acceptable limits of risk and the limits of interruption be decided by the Board. of loss-making activities or the undertaking of other The Board can, during the term-of-office of the Committee: corrective measures. (a) replace any member of the Committee including the Chairman, and (b) fill positions in the Committee which 4.3 The Committee will formulate and submit to the are, for any reason, vacated. Board of Directors of the Company proposals for the undertaking of corrective measures in cases where 3. Meetings of the Risk Management Committee it sees a weakness in the implementation of the risk The Committee will meet whenever necessary and management strategy. at least once every quarter. In emergency or crisis situations, the Committee may convene via teleconfer- 4.4 The Committee will recommend to the Board of encing for decision-taking. Directors the transfer to the Top Executive and General The majority of Committee members will comprise a Management and other approving groups of approval quorum. A majority of Committee members is considered rights (which concern the undertaking of risks) along to be the next integral number of one half of the with the restrictions and limits which govern these members. In the case of a tie, the Chairman will have rights. Specifically, it will propose to the Board approval the casting vote. limits for the Executive Loan Committee and the Assets The Committee will keep minutes of its meetings and and Liabilities Management Committee (ALCO). decisions. The Chairman of the Committee will inform the Members 4.5 The Committee will obtain satisfactory assurances of the Board of the Committee’s work. that the Top Executive Management fully understands The Committee may invite to any of its meetings any and applies the desired risk taking levels as they are person who may contribute to the effective conduct of prescribed by the Board of Directors. The Committee its business. will also obtain satisfactory assurances that all staff involved understands and applies risk appetite and 4. Duties, Responsibilities and Rights of the Risk management policy and that excessive risk appetite is Management Committee not encouraged. Sources of assurances are e.g. the 4.1 The Committee will prepare and submit to the Board Reports of the Head Office Departments responsible of Directors, for approval, the principles which should like Risk Management, Internal Audit, Credit Monitoring, govern risk management. Based on these principles, etc. as well as external Reports like those of the the Committee will cultivate an internal environment supervisory authorities, the auditors, the consultants, of risk management, which will govern the business etc. decision-making processes across the activities and / or units of the Group and its subsidiaries. 4.6 The Committee will receive and evaluate, on a quarterly basis, reports by the Head of Group Risk 4.2 Based on the approved principles, the Committee Management Unit with regard to the more important will shape and propose to the Board of Directors, for risks that were undertaken by the Group and will inform approval, the framework for undertaking all forms of the Board of Directors accordingly. risks and the use of capital that would correspond to the business objectives of the Company, Group and / or 4.7 The Committee will evaluate, annually, the adequacy

46 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 and effectiveness of the risk management policy, 4.13 The Risk Management Committee will work with including the appropriateness of limits, the adequacy the Audit Committee of the Board to ensure that a global of provisions and own funds in relation to the size and view is taken in the management of risk. form of risks undertaken. The evaluation will be carried out based on the annual report of the Head of the Risk 4.14 The Committee has the approval of the Board of Management Unit. Directors to obtain independent professional advice whenever it deems this necessary. The above mentioned report and evaluation, along with the relevant extracts of the minutes of the Board, 4.15. The Chairman of the Committee will be will be submitted to the Department of Regulation and available for personal, telephone, electronic or written Supervision of Banking Institutions of the Central Bank communication, which shareholders of the Company of Cyprus by 30 April each year. may request, regarding issues concerning the work of the Committee. He will also be available to answer 4.8 The Committee will refer to the Board of Directors, any questions during the Annual General Meeting or for approval, any new products or services that the any meeting for purposes of briefing all shareholders of Group intends to introduce which, in the opinion of the the Company. Information concerning the structure and Risk Management Unit, include new risks or require the work of the Committee will also be given in the Annual adoption of risk limits. It will also ensure that the various Corporate Governance Report of the Board of Directors risks contained in these products (credit, market, of Hellenic Bank Public Company Limited. liquidity, operational, etc.) are adequately monitored. Terms of Reference of the Nominations / Internal 4.9 The Committee will evaluate the risks that are Governance Committee related in the involvement of the Group in new markets, Principle of the Code of Corporate Governance new companies or business ventures and will submit a There should be a specified and transparent process recommendation to the Board of Directors. for the nomination of new Board Members to the Board of Directors. The Board should consist of individuals fit 4.10 The Committee will be informed of the relevant and proper to participate in the Board of Directors of the reports of the Central Bank of Cyprus and the Group Company. Internal Audit concerning risk management and will see to the undertaking of corrective measures where 1. Terms of Reference of the Nominations / Internal these are necessary, based on the observations and Governance Committee suggestions of these reports. The role of the Committee is to prepare proposals to the Board of Directors of Hellenic Bank Public Company The Committee will also be informed of the contents Limited ('the Company') for the selection of fit and of reports by the International Rating Agencies and, proper individuals for nomination as Members of its after evaluation, will proceed with proposals for any Board or the Boards of Subsidiary Companies of the necessary corrective measures concerning risk Group, either to fill extraordinarily vacated or vacant management. seats or after the retirement of a Member based on the retirement policy due to age. The Committee also 4.11 The Committee will propose to the Board the has the general responsibility for the implementation of nomination or replacement of the Head of the Risk policies of internal governance within the Group. Management Unit of the Group. 2. Appointment of the Nominations / Internal 4.12 Within the framework of its responsibilities, the Governance Committee Committee, in co-operation with the Audit Committee, The Committee is appointed by the Board of Directors will also be responsible, at Board level, for the and consists of three to six, in their majority non- implementation of the Second Basel Accord (Basel II) Executive Board Members with the participation of at and the Directives of the European Union (CAD 3). least one non-Executive and Independent Member. The Chairman of the Committee should be a non-Executive Board Member.

HELLENIC BANK GROUP ANNUAL REPORT 2011 47WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 The term-of-office of the members of the Committee is companies in which a candidate for Board membership decided by the Board of Directors. is not allowed to participate because of conflict of interests, as well as what information the candidate 3. Meetings of the Nominations / Internal should have at his / her disposal before being appointed Governance CommitteeΔιακυβέρνησης as a Member of the Board. The Committee will meet whenever necessary and at least three times a year. 4.3 The Committee will examine, on an annual basis, The majority of Committee members will comprise the structure, size, composition and the output / a quorum. A majority of Committee members is effectiveness of the Board of Directors of the Company considered to be the next integral number of one half of and those of the Group’s Subsidiary Companies and will the members, provided the Chairman of the Committee propose any changes that are judged necessary to the is present. Board of the Company. In the case of a tie, the Chairman will have the casting vote. 4.4 The Committee will evaluate, on an annual basis, The Committee will keep minutes of its meetings and the skills, knowledge and expertise of Members of the decisions and will submit copies to the Chairman and Board of Directors of the Company and those of the the Members of the Board of Directors of the Company. Group’s Subsidiary Companies, reporting accordingly The Committee has the approval of the Board of to the Board of the Company. Directors to obtain independent professional advice whenever it deems this necessary. 4.5 The Committee will have the responsibility of preparing plans for the succession of Board Members. 4. Duties and Responsibilities of the Nominations / Internal Governance Committee 4.6 The Committee will study and prepare a relevant 4.1 The Committee will propose to the Board the proposal to the Board of Directors in relation to the necessary qualifications that an individual should ‘Annual Evaluation of the independence of the non- possess in order to serve as a member of the Board Executive and Independent Members of the Board’ that, of any of the Group’s companies. The minimum as prescribed by the Directives of the Central Bank qualifications required are: of Cyprus on a ‘Framework of Principles of Operation and Criteria of Assessment of Banks’ Organisational (a) Knowledge, skills and experience. Structure, Internal Governance and Internal Control Systems 2006 and 2009’, is considered by the Board (b) Honesty and objective judgement. during February each year.

(c) Any special qualifications that may be required by The Committee will be responsible for the continuous laws that govern the operation of a particular company evaluation, during the year, of the independence of (including the Directives of the Central Bank on ‘The these Members and for the suggestion of the preparation Fitness and Probity (Assessment Criteria) of Directors of a supplementary Evaluation, if at any point in and Managers of Banks of 2006 and 2007’). time, due to changes or developments, persons that hold the position of non-executive and independent (d) Availability of time for the business of the Company. director no longer satisfy or seem to satisfy any of the independence criteria of the above-mentioned Directive. (e) Appropriate age. 4.7 The Committee will evaluate the extent of 4.2 The Committee will examine proposals for the compliance with the policies of internal governance as nomination of members to the Group Boards of these were approved by the Board of Directors of the Directors based on the required qualifications and will Company. submit the relevant report, with its opinion, to the Board of Directors of the Company, which will take the final 4.8 The Chairman of the Committee will be available decisions. The Committee will state in its report the for personal, telephone, electronic or written

48 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 communication, which shareholders of the Company Companies Law and the Code (at least every three may request, regarding issues concerning the work years). The retiring Directors, who are eligible and will of the Committee. He will also be available to answer offer themselves for re-election at the Annual General any questions during the Annual General Meeting or Meeting of the Bank on 23 May 2012, are the following any meeting for purposes of briefing all shareholders of (brief curriculum vitae included): the Company. Information concerning the structure and work of the Committee will also be given in the Annual (a) Andreas M. Moushouttas, Lawyer Corporate Governance Report of the Board of Directors Born on 29 April 1939. Graduated from the Pancyprian of Hellenic Bank Public Company Limited. Gymnasium of Nicosia and holds a Law Degree from the Faculty of Law of the National and Kapodistrian 5. Best Principles of Internal Governance University of Athens. A member of the Cyprus Bar As these are reported in the Directive of the Central Association. Was Minister of Labour and Social Bank of Cyprus - May 2006 and by the Basel Committee Insurance from 1985 until February 1988, from 1993 on Banking Supervision - February 2006. until 1997 and from 1998 until February 2003. Also served as Chairman of the Board of Directors of the 6. Code of Corporate Governance Electricity Authority of Cyprus from 1979 to 1984 and It is understood that the Nominations / Internal from 1988 to 1989 as well as in other boards of public Governance Committee will operate strictly within the and private companies. General Manager of the Cyprus framework of the relevant provisions of the Code of Builders’ Provident Fund. Corporate Governance as these are determined in Chapter A of the Code. Appointed as Member of the Board of Directors of Hellenic Bank on 2 July 2003 and elected as Vice (15) Part D of the Code which refers to the Relations Chairman on 19 March 2005. Member of the Board of the Company with its Shareholders of Directors of Limited Liability Company Commercial Hellenic Bank Group announces its financial results Bank «Hellenic Bank» (Russia) and Member of the every quarter. Nominations / Internal Governance Committee of the Bank’s Board of Directors. The Board of Directors of the Company utilises the occasions of the announcements of the quarterly or (b) Soteris Z. Kallis, Businessman interim results, as well as of the Annual General Born on 26 July 1945. Graduated from the Pancyprian Meeting of the Shareholders itself for organising Gymnasium of Nicosia. During his career received analytical presentations of the Financial Statements. extensive education in Business Administration and These are usually undertaken by the Group Chief Accounting. Was for many years Executive Director Financial Officer and the Company’s Executive and then Manager of the private company G. Kallis Management for the benefit of shareholders, financial (Manufacturers) Ltd, which together with other analysts, members of the Stock Exchange and subsidiary or associated companies are involved in representatives of the Mass Media. More specifically, industrial, trading and investment activities. Executive regarding the Annual General Meeting, there is Director of the property company G. Kallis (Estate) complete compliance with the relevant provisions of Ltd. Was Chairman of the Cyprus Clothing Industries the legislation, the Bank’s Articles of Association and Association from its establishment until 2007 and the Code. The shareholders also have the opportunity Member of the Labour Issues Advisory Body. Member to communicate, regarding matters that concern them, of the Executive Committee of the Board of Directors with the Secretariat of the Company and the Investor of the Cyprus Employers’ and Industrialists’ Federation Relations Officer, Antonis Rouvas (tel: 22500760). (O.E.V.). Was member of the Board of Directors of Universal Bank Public Limited (now USB Bank Plc) and (16) Rotating Directors eligible for Re-Election Universal Life Insurance Company Limited. Members of the Board retire on a rotating basis or retire according to the relative articles of the Bank’s Articles Elected Member of the Board of Directors of Hellenic of Association and the relevant provisions of the Bank on 1 June 2005. Chairman of the Remuneration

HELLENIC BANK GROUP ANNUAL REPORT 2011 49WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 Committee and Member of the Nominations / Internal and environmental studies. Mr. Georgiou’s duties Governance and Audit Committees of the Bank’s Board include, among other things, the administrative of Directors. coordination of national and European research projects, contribution in the submission of proposals (c) Iacovos G. Iacovou, Businessman and the execution of research projects. Also a Born on 7 March 1948. Graduated from the Commercial management lecturer, teaching postgraduate MBA Lyceum of Larnaca and studied Scientific Management courses in Organisational Behaviour, Leadership and at the Art & Science College. Chairman of the Board of Management of Change and overseeing dissertations Directors of Hermes Airports Ltd, Director of Omnistock of postgraduate students. Ltd and also sits on the Board of Directors of a number of Iacovou Brothers Group of Companies, Appointed Member of the Board of Directors of Hellenic including Iacovou Brothers (Constructions) Ltd, Iacovou Bank on 18 May 2006. Also Member of the Board of Brothers (Development) Ltd, Iacovou Brothers Quarries Directors of Hellenic Bank (Investments) Limited and Ltd, Unitrak Machinery Ltd, Skyra Lima Public Ltd, etc. Limited Liability Company Commercial Bank «Hellenic Also a Member of the Administrative Committee of the Bank» (Russia). Member of the Audit and Cyprus Builders’ Provident Fund. Remuneration Committees of the Bank’s Board of Directors. Appointed Member of the Board of Directors of Hellenic Bank on 13 March 1997. Member of the Nominations / (e) Marios Clerides, Economist / Group Senior Internal Governance and Remuneration Committees of General Manager, Hellenic Bank the Bank’s Board of Directors. Born on 7 March 1953. Graduated from the Pancyprian Gymnasium of Nicosia and studied Economics (B.Sc. / (d) Kyriakos E. Georgiou, Senior Administrator and M.Sc.) at the London School of Economics and Political Researcher Science. In 1982 awarded the Doctorate of Philosophy Born on 23 May 1960. Graduated from the Acropolis Ly- from the same University (Ph.D. in Labour Economics). ceum and studied Mechanical Engineering (B.S.M.E., 1986) and Business Administration (M.B.A., 1988) at In November 1982 employed by Hellenic Bank Limited the University οf Houston in Texas, U.S.A. Currently a as Assistant General Manager, in charge of Planning Doctor of Business Administration candidate (D.B.A.) at and Economic Research, Marketing, Cards, Retail, Kingston University, London, U.K. Has extensive expe- Treasury / International Transactions and Hellenic Bank rience in project management and is a certified Project (Investments) Limited. Involved in various projects such Manager (PRINCE II). as the introduction of ATMs in the Bank, research for the establishment of Group subsidiary companies as well as Member of the Cyprus Scientific and Technical Chamber in capital and bond issues of the Bank. Was a member (E.T.E.K.) in the area of Mechanical Engineering, of the two-party team responsible for the integration of the American Society of Mechanical Engineers, the Barclays Bank’s local operations after they were taken Cyprus Computer Society and the Cyprus Human over by Hellenic Bank. Was also in charge of the Bank’s Resource Management Association. Has extensive preparation for the deregulation of the Banking System. experience in business and the trade union movement, In July 2001, left Hellenic Bank and became Chairman where he worked as a senior manager and director of of the Cyprus Securities and Exchange Commission on various companies, including the Cyprus Development a five-year contract. After the end of his tenure of office, Bank (1995-2001). in July 2006, returned to the Bank as Group General Manager, Risk Management. Also assumed responsibility Currently works as a senior administrator and researcher for Group Strategic Development, Economic Studies at the Cyprus Centre for European and International and Corporate Governance & Compliance. As from 1 Affairs, a non-profit research organisation and think November 2011, holds the position of Group Senior tank, academically affiliated with the University of General Manager, Risk Management & Strategy. Nicosia, which carries out research in the areas of international relations, politics, economics, sociology

50 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 Teaches part-time, as Special Scientist, at the University of Cyprus to postgraduate students (M.Sc.), subject- matter on Cyprus Banking System and Cyprus Money and Capital Markets. Also, to postgraduate students (M.B.A.), subject-matter on Bank Financial Management. Member of the Board of Directors of the Cyprus Banking Association, Chairman of the Cyprus Economic Society, Member of the Board of Directors of the Cyprus Center for European and International Affairs and Member of the Council of Economic Experts of the Centre for Economic Research of the University of Cyprus.

Appointed Member of the Board of Directors of Hellenic Bank on 1 January 2012. Member of the Risk Management Committee of the Bank’s Board of Directors.

Nicosia, 30 March 2012

HELLENIC BANK GROUP ANNUAL REPORT 2011 51WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 REMUNERATION POLICY REPORT FOR THE YEAR 2011

INTRODUCTION Kyriacos I. Droushiotis The Board of Directors, in compliance with the Stavros Kremmos provisions in the Code of Corporate Governance, (from 14 February 2011) published by the Cyprus Stock Exchange (3rd revised edition - March 2011) and particularly Appendix 1 of the The terms of reference of the Remuneration Committee Code, incorporates the present Remuneration Policy are listed below: Report in the Bank’s 2011 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 and the Chief Executive Officer. After considering and for fixing the remuneration of each Board Member all relevant parameters and data, it makes relevant separately. recommendations to the Board for taking decisions, in the absence of the Executive Member of the Board or The level of remuneration should be sufficient to attract other Officers involved. The Committee’s suggestions and retain in the Company Board Members who and the Group’s Remuneration Policy take into strengthen the Group’s Management but the Companies consideration the relevant responsibilities, workload, should avoid paying more than is required in order qualifications, know how, academic background, to achieve this. It is recommended that part of the experience, individual performance, remuneration of remuneration of the Executive Members of the Board is comparable positions in the market, especially in areas determined in such a way that it relates remuneration to where the Group is active, remuneration in other levels the company and individual performance. of the Group as well as non-financial criteria e.g. compliance with applicable rules and procedures. The The Company’s Corporate Governance Report should Committee's aim is to attract and retain good quality include a statement of the Remuneration Policy and officers at Executive and General Management levels, relevant criteria, as well the total remuneration of the in order to better serve the interests of the Group as well Executive and non-Executive Members of the Board. as its shareholders 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 of Executive and non-Executive Members of the Board and approves the Information disclosed on the Annual of the Company as well as of the Chief Executive Remuneration of the Members of the Board, which is Officer and the Group General Managers. prepared by Group Financial Management for inclusion in the notes to the annual accounts of the Company and 2. Appointment of the Remuneration Committee the Remuneration Policy Report itself. The Board appoints at least three exclusively non- Executive Directors as members of the Committee. The Remuneration Committee consists of the following The majority of the members of the Committee must Board Members: be independent non-Executive Members of the Board, including the Chairman of the Committee. Chairman: Soteris Z. Kallis The Chairman of the Committee is appointed by the Member: Kyriakos E. Georgiou Board. Iacovos G. Iacovou The term-in-office of the members of the Committee is also decided by the Board.

52 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 3. Meetings of the Remuneration Committee (b) the performance-related systems: The Committee will meet whenever necessary and at - should not extend any benefits before the gains least twice a year. expected by the Company materialise in a satisfactory The majority of Committee members will comprise a degree quorum. A majority of Committee members is considered - should not include non-Executive Members of the to be the next integral number of one half of the Board among the beneficiaries members, provided that the Chairman is present. In the - should include targets and evaluation criteria so that case of a tie, the Chairman has the casting vote. the remuneration of the Company executives is properly The Committee will keep minutes of its meetings and aligned with the long term interests of the shareholders, decisions. the targets set by the Board of Directors and the risk The Committee has the approval of the Board of policy of the Company. Directors of the Company to obtain independent professional advice whenever it deems this necessary. 4.2 In relation to the level of remuneration of the non- The Committee may invite to any of its meetings any Executive Members of the Board, the Committee will person who may contribute to the better conduct of its take the following into consideration: business. a. The time that the Members have available to attend 4. Duties and Responsibilities of the Remuneration meetings. Committee b. The responsibilities assumed by each Member. 4.1 The Committee will submit to the Board of c. The non-correlation of remuneration to the Directors of the Company, within terms of reference profitability of the Company. agreed upon and without the presence of the party d. The non-participation in any insurance or pension interested in their evaluation, proposals concerning plan. the framework and level of remuneration (including fixed pay, performance-related pay, bonuses, pension 4.3 The Committee will submit to the Board of Directors rights and any compensation payments, share options, proposals for the determination of each readjustment etc.) of Executive and non-Executive Members of the of benefits of the Members of the Board and the Chief Board and the Chief Executive Officer. The Committee Executive Officer, being sensitive to the terms of will take into consideration factors such as the remuneration and conditions of employment at other relevant responsibilities, workload, qualifications, know levels of the Group. how, academic background, experience, individual performance, remuneration of comparable positions 4.4 The Remuneration Committee, during the preparation in the market, especially in areas where the Group is of its proposals, will provide the opportunity to the active, remuneration in other levels of the Group and Chairman and the Chief Executive Officer to express non-financial criteria e.g. compliance with applicable an opinion with regard to its proposals concerning the rules and procedures. It will also consider the need to salaries of other Executive Board Members. It should attract and retain the most suitable Directors (Executive also have access to professional advice both internal and non-Executive) / General Managers for the Company. and external.

During the formulation of the above-mentioned The Remuneration Committee shall, when using the proposals, the Committee should take care so that: services of a consultant to obtain information on market standards for remuneration systems, ensure that this (a) these proposals are consistent with Appendix 3 of consultant does not also give advice to the Human the directives of the Central Bank of Cyprus ‘Framework Resources Department or the Executive Members of of Principles of Operation and Criteria of Assessment of the Board of the Company. Banks’ Organisational Structure, Internal Governance and Internal Control Systems 2006 to 2012’ (attached) 4.5 The Committee will assist, through relevant studies / and proposals, the Board of Directors in fulfilling its duties in approving the principles that govern the Bank’s

HELLENIC BANK GROUP ANNUAL REPORT 2011 53WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 Remuneration Policy and in supervising their application. request, regarding issues concerning the work of the The implementation of the remuneration policy should Committee. He will also be available to answer any be subject to a central and independent review. In this questions during the Annual General Meeting or any process, the participation is essential, in a satisfactory meeting for purposes of briefing all shareholders of the degree, of (a) the control functions (like Internal Audit, Company. Information concerning the structure and Risk Management and Compliance), (b) the Human work of the Committee will also be given in the Annual Resources Department and (c) the shareholders, where Corporate Governance Report of the Board of Directors applicable. of Hellenic Bank Public Company Limited.

4.6 The Committee will prepare for submission to the 5. Code of Corporate Governance Board of Directors the Annual Remuneration Policy 5.1 It is understood that the Remuneration Committee Report, which will comprise part of, or be attached to, will act strictly within the framework of the relevant the Annual Report of the Company. It should also be provisions of the Code of Corporate Governance as presented to the Annual General Meeting of the share- determined in Chapter B of the Code. holders for approval and posted on the official website of the Company. Details of the content that needs to be DIRECTORS’ REMUNERATION POLICY published are described in Appendix 1 of the Code of The Remuneration Policy for the Directors of the Corporate Governance. Company remains the same as it was when approved in the Annual General Meeting of 25 May 2011, as The Committee also approves and suggests to the shown below. A related proposal will be submitted by Board of Directors the thorough and clear presentation the Board of Directors to the Annual General Meeting of the shareholders for approval. of the Bank Remuneration Policy, e.g. in the form of an extended Remuneration Policy Report, that will be The Chairman of the Board receives annual fees and made to the Central Bank at its request. hospitality expenses of €55.359, the Vice Chairman annual fees €25.629 and the Members €10.252. The 4.7 The Committee will review and approve the Annual remuneration for the Directors as Members of the Remuneration Statement, prepared by Group Financial Board was revised in 2007 to take into consideration Management for inclusion in the Company’s annual the services rendered by the Chairman, the Vice accounts or in the notes to the annual accounts, in Chairman and the Members of the Board, the time they accordance with Appendix 2 of the Code of Corporate devote, the fees received by corresponding officers of Governance. other comparable organisations, the responsibilities undertaken and in general their overall contribution to 4.8 The Committee will review and approve the content the Group’s best interests. of any resolutions submitted for approval at the General Meeting of the shareholders, which will be prepared by The Chairmen of the Audit and Risk Management the Secretariat in cooperation with the Group’s legal Committees receive annual fees of €6.834 and each advisers, in accordance with Appendix 3 of the Code of Member €5.126. The Chairmen of the Remuneration Corporate Governance, and concern possible plans for and Nominations / Internal Governance Committees the compensation of Members of the Board in the form receive annual fees of €2.563 and each Member of shares, share warrants or share options. €1.709. The remuneration for the Directors as Members of the Committees of the Board was revised in 2007 4.9 The Committee will review and approve, where this to take into consideration the services rendered by is considered necessary, the Job Descriptions (roles, the Members of Board, the time they devote, the fees responsibilities, main duties, powers, etc.) of Top and received by corresponding officers of other comparable Senior Executive Management. organisations and the responsibilities undertaken.

4.10 The Chairman of the Committee will be available REMUNERATION POLICY FOR THE EXECUTIVE for personal, telephone, electronic or written com- DIRECTORS / CHIEF EXECUTIVE OFFICER The Executive Director / Chief Executive Officer is munication, which shareholders of the Company may compensated with a remuneration package based

54 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 on a contract whose terms are compliant with the between the Cyprus Bankers Employers’ Association relevant provisions of the existing Code of Corporate and the Cyprus Union of Bank Employees. His Governance (paragraphs B.2.11. to B.2.14.) The employment, in relation to its duration, is governed by remuneration package includes a non-variable annual the retirement age applicable for the personnel of the salary payable monthly, which takes into consideration Bank. There is no specific stipulation for compensation the relevant responsibilities, workload, qualifications, in case of premature termination of the employment. know how, academic background, experience, performance and remuneration of comparable For the determination of the rewards of the Executive positions in the market, especially in areas where the Members of the Board, the Board, on the basis of the Group is active. It aims to attract and retain the most recommendations of the Remuneration Committee, suitable individuals. The term ‘performance’ encom- takes into account: passes the evaluation of the individual performance as well as that of the Group Results in relation to (a) The results of the Area of Responsibility of each the achievement of its targets and profitability. The Executive Member / of the Group for the Chief Executive remuneration package also includes hospitality Officer, on the basis of the economic / financial expenses, health, life and accident insurance cover, conditions of the market in which these results were the use of a company car (in accordance with the achieved and the risks assumed. It is also examined current regulations for the Group’s Managerial Staff) whether the results and the performance in the year and participation in a Provident Fund which is a under evaluation serve the long-term interests of the defined-benefit scheme. The changes in the cumulative Group. retirement benefits of the Executive Directors for the (b) The individual performance of the Executive. year are disclosed in Note 38 to the Accounts contained (c) Non-financial criteria e.g. compliance with applicable in this Annual Report. rules and procedures. (d) The basic principles regarding the Group The Executive Director / Chief Executive Officer’s Remuneration Policy as they have been published in contract has a five-year duration and can be renewed the Bank’s Website. six months before its expiry (with a Board of Directors’ decision following suggestions of the relevant The remuneration policy for the Members of the Board committees of the Board). In the case of early and / Chief Executive Officer, as described above, was unjustified termination of the contract (which can be codified for the first time in the Group Remuneration effected any time during its term), variable Policy which was approved by the Board of Directors compensation is paid up to a maximum amount following a proposal by the Remuneration Committee equal to two annual salaries. It is understood that the on 25 February 2010, on the basis of the provisions of compensation will be equal to the salaries attributed to the amending directive of the Central Bank ‘Framework the remaining period of the contract if the latter is of less of Principles of Operation and Criteria of Assessment of than two years’ duration. Banks’ Organisational Structure, Internal Governance and Internal Control Systems’ (October 2009). The Executive Director / Group General Manager, who retired from the Group and resigned from the The remuneration policy for the Members of the Board / Board on 31 December 2011, was compensated with a Chief Executive Officer, as shown above, was amended remuneration package governed by the Collective and incorporated in the Group Remuneration Policy, Agreements between the Cyprus Bankers Employers’ which was approved by the Board of Directors as Association and the Cyprus Union of Bank Employees. recommended by the Remuneration Committee on 28 His employment, in relation to its duration, was February 2012, based on the revision of the 3rd Edition governed by the retirement age applicable for the of the Corporate Governance Code as published by the personnel of the Bank. There was no specific Cyprus Stock Exchange in March 2011. stipulation for compensation in case of premature termination of the employment. The Group Remuneration Policy is reviewed annually by the Board of Directors, as recommended by the The Executive Director / Senior Group General Remuneration Committee, in order to ensure that it is Manager, who was appointed to the Board on 1 in line with the Group’s current strategic targets and January 2012, is compensated with a remunera- to prevent the introduction of incentives which lead to tion package governed by the Collective Agreements excessive risk assumption. The Policy is also evaluated

HELLENIC BANK GROUP ANNUAL REPORT 2011 55WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 in order to determine whether it corresponds to the The Board of Directors submits this Remuneration condition and data of both the market and the Group Policy Report to the Annual General Meeting of the and whether these justify the review conducted in shareholders and unanimously recommends its co-operation with audit operations such as Internal approval. Audit, Risk Management and Compliance Services and the Group’s Human Resources.

Nicosia, 30 March 2012 Related to the Remuneration Policy for the Members of the Board, the Chief Executive Officer and other Senior Managers for 2011 is the disclosure of information in the notes to the Accounts contained in this Annual Report (Note 38) as well as the analytical Disclosure of Information regarding the Remuneration of the Members of the Board for the year 2011 shown below.

DISCLOSURE OF INFORMATION REGARDING THE REMUNERATION OF DIRECTORS FOR THE YEAR 2011

Assessment of the value of Remuneration for Remuneration and the benefits participation in benefits from that are Remuneration Annual increase the Board of Total companies of the Remuneration in the considered and benefits in the total Remuneration for Directors and remuneration same Group of form of profit and/or to form Total remuneration Income Tax net of retirement services its Committees for services companies bonus distribution remuneration and benefits withheld Income Tax benefits

€ € € € € € € € € € Executive Directors Makis Keravnos 295.000 10.252 305.252 3.417 0 24.500 333.169 103.721 229.448 51.656 Glafkos G. Mavros 155.761 15.378 171.139 12.626 0 1.709 185.474 47.318 138.156 58.749 450.761 25.630 476.391 16.043 0 26.209 518.643 151.039 367.604 110.405 Non-Executive Directors Dr. Andreas P. Panayiotou 0 53.821 53.821 10.500 0 4.101 68.422 25.284 43.138 0 Andreas M. Moushouttas 0 28.162 28.162 7.500 0 0 35.662 9.857 25.805 0 Iacovos G. Iacovou 0 13.670 13.670 0 0 0 13.670 4.785 8.885 0 Antonis I. Pierides 0 7.096 7.096 2.415 0 0 9.511 2.853 6.658 0 Soteris Z. Kallis 0 19.650 19.650 0 0 0 19.650 6.878 12.772 0 Charalambos P. Panayiotou 0 17.087 17.087 3.417 0 0 20.504 7.176 13.328 0 Ioannis Ch. Charilaou 0 22.006 22.006 3.417 0 3.417 28.840 10.094 18.746 0 Georgios K. Pavlou 0 17.087 17.087 10.063 0 0 27.150 6.878 20.272 0 Kyriakos E. Georgiou 0 17.087 17.087 10.917 0 0 28.004 7.176 20.828 0 Kyriacos I. Droushiotis 0 18.538 18.538 0 0 0 18.538 6.488 12.050 0 Stavros Kremmos 0 16.263 16.263 506 0 0 16.769 5.869 10.900 0 230.467 230.467 48.735 0 7.518 286.720 93.338 193.382 0

Total 450.761 256.097 706.858 64.778 0 33.727 805.363 244.377 560.986 110.405

56 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 HELLENIC BANK GROUP INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF HELLENIC BANK PUBLIC COMPANY LIMITED AND FINANCIAL STATEMENTS

60 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF HELLENIC BANK PUBLIC COMPANY LIMITED 62 CONSOLIDATED INCOME STATEMENT 63 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 64 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 65-66 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 67 CONSOLIDATED STATEMENT OF CASH FLOWS 68 INCOME STATEMENT 69 STATEMENT OF COMPREHENSIVE INCOME 70 STATEMENT OF FINANCIAL POSITION 71-72 STATEMENT OF CHANGES IN EQUITY 73 STATEMENT OF CASH FLOWS 74 NOTES TO THE FINANCIAL STATEMENTS 136 DECLARATION BY THE MEMBERS OF THE BOARD OF DIRECTORS AND THE COMPANY OFFICIALS RESPONSIBLE FOR THE DRAFTING OF THE FINANCIAL STATEMENTS 138 BOARD OF DIRECTORS OF THE GROUP’S MAIN SUBSIDIARY COMPANIES 139 OFFICES AND BRANCH NETWORK 144 SHAREHOLDER INFORMATION AND INVESTOR RELATIONS WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 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 62 to 135, which comprise the statements of financial position of the Group and the Company as at 31 December 2011, and the income statements, statements of comprehensive income, changes in equity and cash flows of the Group and the Company for the year then ended, and a summary of significant accounting policies and other explanatory information.

Board of Directors’ Responsibility for the Financial Statements

The Board of Directors is responsible for the preparation of consolidated and Company’s separate financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union (EU) and the requirements of the Cyprus Companies Law, Cap. 113, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these 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 consolidated and separate financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of consolidated and separate financial statements that give a true and fair view 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 consolidated 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 at 31 December 2011, and of their financial performance and their cash flows 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 and Regulatory Requirements

Pursuant to the requirements of the Auditors and Statutory Audits of Annual and Consolidated Accounts Law of 2009, we report the following: We have obtained all the information and explanations we considered necessary for the purposes of our audit. In our opinion, proper books of account have been kept by the Company.

60 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 The consolidated and separate financial statements are in agreement with the books of account. In our opinion, and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Cyprus Companies Law, Cap. 113, in the manner so required. In our opinion, the information given in the Report of the Board of Directors on pages 32 to 35 is consistent with the consolidated and separate financial statements.

Pursuant to the requirements of the Directive DI190-2007-04 of the Cyprus Securities and Exchange Commission, we report that a corporate governance statement has been made for the information relating to paragraphs (a), (b), (c), (f) and (g) of article 5 of the said Directive, and it forms a special part of the Report of the Board of Directors.

Other Matter

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 Cyprus 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.

Constantinos Kallis Certified Public Accountant and Registered Auditor for and behalf of

KPMG Limited Chartered Accountants and Registered Auditors

Esperidon 14, 1087 Nicosia

Nicosia, 30 March 2012

HELLENIC BANK GROUP ANNUAL REPORT 2011 61WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 HELLENIC BANK GROUP CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2011

2011 2010 Note €΄000 €΄000 Interest income 380.415 342.411 Interest expense (165.871) (149.837) Net interest income 214.544 192.574

Fee and commission income 72.242 69.833 Fee and commission expense (7.812) (8.193) Net fee and commission income 64.430 61.640

Net losses on disposal and revaluation of foreign currencies and financial instruments (75.220) (4.793) Other income 20.430 19.265

Total net income 224.184 268.686

Staff costs (122.360) (124.354) Depreciation and amortisation (6.321) (7.192) Administrative and other expenses (39.940) (47.172)

Total expenses (168.621) (178.718)

Profit from ordinary operations before provisions 55.563 89.968 Provisions for impairment of loans and advances (142.484) (74.715)

(Loss)/profit before taxation (86.921) 15.253

Taxation (12.624) (6.063)

(Loss)/profit for the year (99.545) 9.190

(Loss)/profit attributable to: Owners of the parent company (100.658) 8.889 Non-controlling interests 1.113 301 (Loss)/profit for the year (99.545) 9.190

Basic (loss)/earnings per share (cent) (32,7) 2,9

The notes on pages 74 to 135 form an integral part of the financial statements.

62 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 HELLENIC BANK GROUP HELLENIC BANK GROUP CONSOLIDATED INCOME STATEMENT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December 2011 for the year ended 31 December 2011

2011 2010 Note €΄000 €΄000 (Loss)/profit for the year (99.545) 9.190 Other comprehensive income Deficit on revaluation of available for sale equity and debt securities (15.623) (12.908)

Amortisation of revaluation of reclassified debt securities available for sale 12.082 17.234

Write off of frozen reserves of reclassified Greek Government Bonds 838 - -

Transfer to the income statement on disposal of debt securities - - (765)

Transfer to the income statement on impairment of investments in equity and debt securities 5.236 6.741

(Deficit)/surplus on revaluation of land and buildings (515) 19.496

Transfer to the income statement on disposal of property (364) - -

Taxation relating to components of other comprehensive income 12 230 (1.221)

Other comprehensive income for the year net of taxation 1.884 28.577

Total comprehensive (expenses)/income for the year net of taxation (97.661) 37.767

Total comprehensive (expenses)/income for the year net of taxation attributable to: Owners of the parent company (98.513) 37.574 Non-controlling interests 852 193 (97.661) 37.767

The notes on pages 74 to 135 form an integral part of the financial statements.

HELLENIC BANK GROUP ANNUAL REPORT 2011 63WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 HELLENIC BANK GROUP CONSOLIDATED STATEMENT OF FINANCIAL POSITION at 31 December 2011

2011 2010 Note €΄000 €΄000 Assets Cash and balances with Central Banks 15 219.890 143.926 Placements with other banks 16 1.645.333 1.224.826 Loans and advances to customers 17 4.986.827 4.888.580 Debt securities 18 1.146.660 1.720.681 Equity securities 20 13.381 25.864 Property, plant and equipment 22 112.509 115.218 Intangible assets 23 20.593 21.340 Tax receivable 4.154 197 Deferred tax asset 24 22.751 19.771 Other assets 25 106.878 76.322 Total assets 8.278.976 8.236.725

Liabilities Deposits by banks 26 74.302 158.761 Customer deposits and other customer accounts 27 7.106.541 6.853.495 Tax payable 7.952 11.125 Deferred tax liability 28 33.359 21.708 Other liabilities 29 302.746 302.296 7.524.900 7.347.385 Loan capital 30 319.878 355.076

Equity Share capital 31 132.448 132.442 Reserves 299.151 399.506

Equity attributable to owners of the parent company 431.599 531.948

Non-controlling interest 2.599 2.316 Total equity 434.198 534.264 Total liabilities and equity 8.278.976 8.236.725

Contingent liabilities and commitments 33 1.192.092 1.431.755

The consolidated financial statements have been approved by the Board of Directors on 30 March 2012.

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

The notes on pages 74 to 135 form an integral part of the financial statements.

64 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 HELLENIC BANK GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2011

Attributable to owners of the parent company

Share Revaluation Non- Share premium Revenue Translation reserve controlling capital reserve reserve reserve (Note 32) Total interest Total

€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 Balance 1 January 2011 132.442 237.174 137.382 39 24.911 531.948 2.316 534.264 Total comprehensive (expenses)/income for the year net of taxation (Loss)/profit for the year - - - - (100.658) - - - - (100.658) 1.113 (99.545) Other comprehensive income ------2.145 2.145 (261) 1.884 Transfer of excess depreciation on revaluation surplus - - - - 449 - - (449) ------Absorption of operations of subsidiary company - - - - (163) - - - - (163) - - (163) Transactions with shareholders recognized in equity Dividend paid ------(569) (569) Issue of shares 6 ------6 - - 6 HELLENIC BANKGROUP Special defence contribution on deemed dividend distribution - - - - (1.679) - - - - (1.679) - - (1.679) Balance 31 December 2011 132.448 237.174 35.331 39 26.607 431.599 2.599 434.198

ANNUAL REPORT 2011 At 31 December 2011 the absorption of the operations of subsidiary company refers to Athena High Technology Incubator Ltd.

The notes on pages 74 to 135 form an integral part of the financial statements. 65 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 66 HELLENIC BANKGROUP HELLENIC BANK GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2010 ANNUAL REPORT 2011

Attributable to owners of the parent company

Share Revaluation Non- Share premium Revenue Treasury Translation reserve controlling capital reserve reserve shares reserve reserve (Note 32) Total interest Total

€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 Balance 1 January 2010 132.437 237.169 155.629 9.123 39 (14.512) 519.885 2.679 522.564 Total comprehensive income for the year net of taxation Profit for the year - - - - 8.889 ------8.889 301 9.190 Other comprehensive income ------28.685 28.685 (108) 28.577 Transfer of excess depreciation on revaluation surplus - - - - (719) - - - - 719 ------Absorption of operations of subsidiary company - - - - (896) (9.123) - - 10.019 ------Transactions with shareholders recognized in equity Dividend paid - - - - (15.400) ------(15.400) (556) (15.956) Issue of shares 5 5 ------10 - - 10 Special defence contribution on deemed dividend distribution - - - - (10.121) ------(10.121) - - (10.121) Balance 31 December 2010 132.442 237.174 137.382 - - 39 24.911 531.948 2.316 534.264

At 31 December 2010 the absorption of the operations of subsidiary company refers to Athena Cyprus Public Company Ltd.

The notes on pages 74 to 135 form an integral part of the financial statements.

WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 HELLENIC BANK GROUP CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 31 December 2011

2011 2010 Note €΄000 €΄000 Cash flow from operating activities Group (loss)/profit for the year (99.545) 9.190 Depreciation of property, plant and equipment and amortisation of intangible assets 6.321 7.192 Impairment of land and buildings - - 1.069 (Gain)/loss on disposal of property, plant and equipment (189) 311 Loss/(gain) on disposal and revaluation of investment in debt and equity securities 8.390 (4.970) Impairment of investment in debt and equity securities 85.074 5.317 Income from investment in debt and equity securities (45.393) (37.440) Interest expense on loan capital 17.770 13.180 Provisions for impairment of loans and advances 142.484 74.715 Issue of shares 6 10 Taxation 12.624 6.063 Operating profit before working capital changes 127.542 74.637 Increase in loans and advances to customers and other assets (269.245) (400.894) Increase/(decrease) in customer deposits and other customer accounts and other liabilities 252.169 (38.764) (Increase)/decrease in placements with other banks (10.184) 8.265 (Increase)/decrease in deposits with Central Banks (75.575) 12.238 Decrease in deposits by banks (84.459) (95.997) Net cash used in operating activities before taxation (59.752) (440.515) Tax paid (12.299) (9.484) Net cash flow used in operating activities (72.051) (449.999)

Cash flow from investing activities Income from investment in debt and equity securities 45.393 37.440 Net disposals/maturity of investment in debt and equity securities 495.190 222.844 Additions of property, plant and equipment (5.739) (7.421) Additions of intangible assets (898) (1.744) Proceeds from disposal of property, plant and equipment 345 91 Net cash flow from investing activities 534.291 251.210

Cash flow from financing activities (Repayment)/proceeds from issue of loan capital (33.857) 52.307 Dividend paid (570) (15.956) Interest paid on loan capital (17.770) (12.624) Net cash flow (used in)/from financing activities (52.197) 23.727

Net increase/(decrease) in cash and cash equivalents 410.043 (175.062) Effect of exchange rate fluctuations on cash and cash equivalents 672 (1.034) Cash and cash equivalents at the beginning of the year 1.237.399 1.413.495 Cash and cash equivalents at the end of the year 1.648.114 1.237.399

The notes on pages 74 to 135 form an integral part of the financial statements.

HELLENIC BANK GROUP ANNUAL REPORT 2011 67WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 HELLENIC BANK PUBLIC COMPANY LIMITED INCOME STATEMENT for the year ended 31 December 2011

2011 2010 Note €΄000 €΄000 Interest income 381.036 342.441 Interest expense (168.439) (152.127) Net interest income 212.597 190.314

Fee and commission income 70.494 67.230 Fee and commission expense (4.686) (4.691) Net fee and commission income 65.808 62.539

Net losses on disposal and revaluation of foreign currencies and financial instruments (73.911) (824) Other income 6.513 8.345

Total net income 211.007 260.374

Staff costs (112.670) (115.202) Depreciation and amortisation (5.899) (6.434) Administrative and other expenses (36.303) (42.787)

Total expenses (154.872) (164.423)

Profit from ordinary operations before provisions 56.135 95.951 Provisions for impairment of loans and advances (142.278) (74.477)

(Loss)/profit before taxation (86.143) 21.474

Taxation (12.770) (5.953)

(Loss)/profit for the year (98.913) 15.521

Basic (loss)/earnings per share (cent) (32,1) 5,0

The notes on pages 74 to 135 form an integral part of the financial statements.

68 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 HELLENIC BANK PUBLIC COMPANY LIMITED STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December 2011

2011 2010 Note €΄000 €΄000 (Loss)/profit for the year (98.913) 15.521 Other comprehensive income Deficit on revaluation of available for sale equity and debt securities (14.603) (11.149)

Amortisation of revaluation of reclassified debt securities available for sale 12.082 17.234

Write off of frozen reserves of reclassified Greek Government Bonds 838 - -

Transfer to the income statement on disposal of debt securities - - (765)

Transfer to the income statement on impairment of investments in equity and debt securities 5.215 1.843

(Deficit)/surplus on revaluation of land and buildings (515) 18.166

Transfer to the income statement on disposal of property (364) - -

Taxation relating to components of other comprehensive income 12 232 (1.221)

Other comprehensive income for the year net of taxation 2.885 24.108

Total comprehensive (expenses)/income for the year net of taxation (96.028) 39.629

The notes on pages 74 to 135 form an integral part of the financial statements.

HELLENIC BANK GROUP ANNUAL REPORT 2011 69WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 HELLENIC BANK PUBLIC COMPANY LIMITED STATEMENT OF FINANCIAL POSITION at 31 December 2011

2011 2010 Note €΄000 €΄000 Assets Cash and balances with Central Banks 15 218.803 143.533 Placements with other banks 16 1.611.322 1.218.486 Loans and advances to customers 17 4.985.031 4.888.580 Debt securities 18 1.154.755 1.716.345 Equity securities 20 13.252 24.713 Investments in subsidiary companies 21 91.241 91.241 Amounts due from subsidiary companies 5.731 7.808 Property, plant and equipment 22 91.839 93.985 Intangible assets 23 4.034 4.670 Tax receivable 3.955 - - Deferred tax asset 24 21.483 19.080 Other assets 25 73.876 42.392 Total assets 8.275.322 8.250.833

Liabilities Deposits by banks 26 74.302 158.761 Customer deposits and other customer accounts 27 7.103.985 6.853.656 Amounts due to subsidiary companies 48.336 66.507 Tax payable 7.669 10.253 Deferred tax liability 28 31.221 19.648 Other liabilities 29 244.439 243.701 7.509.952 7.352.526 Loan capital 30 321.502 356.700

Equity Share capital 31 132.448 132.442 Reserves 311.420 409.165 Total equity 443.868 541.607 Total liabilities and equity 8.275.322 8.250.833

Contingent liabilities and commitments 33 1.191.960 1.430.422

The financial statements have been approved by the Board of Directors on 30 March 2012.

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

The notes on pages 74 to 135 form an integral part of the financial statements.

70 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 HELLENIC BANK PUBLIC COMPANY LIMITED STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2011

Share Revaluation Share premium Revenue Translation reserve capital reserve reserve reserve (Note 32) Total

€'000 €'000 €'000 €'000 €'000 €'000 Balance 1 January 2011 132.442 237.174 149.978 67 21.946 541.607 Total comprehensive (expenses)/income for the year net of taxation Loss for the year - - - - (98.913) - - - - (98.913) Other comprehensive income ------2.885 2.885 Transfer of excess depreciation on revaluation surplus - - - - 420 - - (420) - - Absorption of operations of subsidiary company - - - - (185) - - - - (185) Transactions with shareholders recognised in equity Issue of shares 6 ------6 Special defence contribution on deemed dividend distribution - - - - (1.532) - - - - (1.532) HELLENIC BANKGROUP Balance 31 December 2011 132.448 237.174 49.768 67 24.411 443.868

At 31 December 2011 the absorption of the operations of subsidiary company refers to Athena High Technology Incubator Ltd. ANNUAL REPORT 2011

The notes on pages 74 to 135 form an integral part of the financial statements. 71 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 72

HELLENIC BANKGROUP HELLENIC BANK PUBLIC COMPANY LIMITED STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2010 ANNUAL REPORT 2011

Share Revaluation Share premium Revenue Translation reserve capital reserve reserve reserve (Note 32) Total

€'000 €'000 €'000 €'000 €'000 €'000 Balance 1 January 2010 132.437 237.169 155.931 67 (6.010) 519.594 Total comprehensive income for the year net of taxation Profit for the year - - - - 15.521 - - - - 15.521 Other comprehensive income ------24.108 24.108 Transfer of excess depreciation on revaluation surplus - - - - (747) - - 747 - - Absorption of operations of subsidiary company - - - - 4.648 - - 3.101 7.749 Transactions with shareholders recognised in equity Dividend paid - - - - (15.400) - - - - (15.400) Issue of shares 5 5 ------10 Special defence contribution on deemed dividend distribution - - - - (9.975) - - - - (9.975) Balance 31 December 2010 132.442 237.174 149.978 67 21.946 541.607

At 31 December 2010 the absorption of the operations of subsidiary company refers to Athena Cyprus Public Company Ltd.

The notes on pages 74 to 135 form an integral part of the financial statements.

WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 HELLENIC BANK PUBLIC COMPANY LIMITED STATEMENT OF CASH FLOWS for the year ended 31 December 2011

2011 2010 Note €΄000 €΄000 Cash flow from operating activities Bank (loss)/profit for the year (98.913) 15.521 Depreciation of property, plant and equipment and amortisation of intangible assets 22,23 5.899 6.434 (Gain)/loss on disposal of property, plant and equipment (189) 309 Loss/(gain) on disposal and revaluation of investment in debt and equity securities 8.396 (5.633) Impairment of investment in debt and equity securities 7 84.952 112 Income from investment in debt and equity securities (48.349) (38.986) Interest expense on loan capital 17.872 13.281 Provisions for impairment of loans and advances 142.278 74.477 Issue of shares 6 10 Taxation 12.770 5.953 Operating profit before working capital changes 124.722 71.478 Increase in loans and advances to customers and other assets (268.178) (395.874) Increase/(decrease) in customer deposits and other customer accounts and other liabilities 249.725 (20.683) Decrease in placements with other banks 517 7.908 (Increase)/decrease in deposits with Central Banks (75.478) 12.238 Decrease in deposits by banks (84.459) (102.798) Decrease/(increase) in amounts due from subsidiary companies 1.867 (2.277) (Decrease)/increase in amounts due to subsidiary companies (18.171) 10.752 Net cash used in operating activities before taxation (69.455) (419.256) Tax paid (11.438) (8.976) Net cash flow used in operating activities (80.893) (428.232)

Cash flow from investing activities Investment in subsidiary company 21 - - (24.000) Investment income from debt and equity securities 48.349 38.986 Net disposals/maturity of investment in debt and equity securities 483.299 221.772 Additions of property, plant and equipment 22 (5.346) (6.662) Additions of intangible assets 23 (878) (1.694) Proceeds from disposal of property, plant and equipment 344 89 Net cash flow from investing activities 525.768 228.491

Cash flow from financing activities (Repayment)/proceeds from issue of loan capital (33.857) 51.453 Dividend paid - - (15.400) Interest paid on loan capital (17.872) (12.725) Net cash flow (used in)/from financing activities (51.729) 23.328

Net increase/(decrease) in cash and cash equivalents 393.146 (176.413) Cash and cash equivalents at the beginning of the year 1.235.927 1.412.340 Cash and cash equivalents at the end of the year 36 1.629.073 1.235.927

The notes on pages 74 to 135 form an integral part of the financial statements.

HELLENIC BANK GROUP ANNUAL REPORT 2011 73WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 HELLENIC BANK GROUP NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2011

1. INCORPORATION AND PRINCIPAL ACTIVITY Hellenic Bank Public Company Ltd 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.

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, the Cyprus Stock Exchange Laws and Regulations and the Transparency Requirements (Securities Admitted to Trading on a Regulated Market) Law.

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

Property is measured at revalued amount.

The carrying amount of investments in debt securities that are hedged items in fair value hedges, that would otherwise be measured at amortised cost, is adjusted to reflect fair value changes attributable to the risks being hedged.

(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.

(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.

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

Specifically, information about significant estimates and judgments in applying accounting policies that have the most significant effect on amounts recognised in the financial statements, are included in the following notes:

74 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 2. SIGNIFICANT ACCOUNTING POLICIES (continued)

Note 9 - Cost of staff retirement benefits Note 17,18,20 - Impairment of Financial Assets Note 22 - Fair Value of land and buildings Note 23 - Impairment of Non-Financial Assets Note 24,28 - Recognition of deferred tax asset/liability Note 29 - Provisions for pending litigation or cases subject to arbitration proceedings

2.2. Adoption of new and revised International Financial Reporting Standards (IFRS) and interpretations During the current year, the Group adopted all the new and revised IFRS that are relevant to its operations and are effective for accounting periods beginning on the 1st of January 2011.

IAS 32 (Amendment): Classification of rights issues to existing shareholders The amendment addresses the accounting for rights issues to existing shareholders that are denominated in a currency other than the functional currency of the issuer. Previously such rights issues were accounted for as derivative liabilities. The amendment requires that, provided certain conditions are met, such right issues are classified as equity regardless of the currency in which the exercise price is denominated. The amendment had no impact on the Group’s financial statements.

Interpretation IFRIC 14 (Amendment): Prepayments of a minimum funding requirement The amendment applies in limited circumstances when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover those requirements. The amendment permits such an entity to treat the benefit of such an early payment as an asset. The amendment had no impact on the Group’s financial statements.

IAS24 (Revised): Related party disclosures The revised IAS 24 simplifies the disclosure requirements for government-related entities and clarifies the definition of a related party. The revision did not have a significant impact on the Group’s financial statements.

Interpretation IFRIC 19: Extinguishing financial liabilities with equity instruments The interpretation clarifies the requirements of IFRS when an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to accept the entity’s shares or other equity instruments to settle the financial liability fully or partially. The interpretation did not have a significant impact on the Group’s financial statements.

IFRS 3 (Revised): Business Combinations 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 the income statement at the time the service is received. This amendment had no significant impact on the Group’s financial statements.

IAS 27 (Amendment): Consolidated and separate financial statements 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 a 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 amendment had no significant impact on the Group’s financial statements.

HELLENIC BANK GROUP ANNUAL REPORT 2011 75WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 2. SIGNIFICANT ACCOUNTING POLICIES (continued)

IFRS 7 (Amendment): Financial Instruments - Disclosures The amendments of May 2010 include several clarifications regarding disclosures of financial instruments.

Interpretation IFRIC 17: Customer’s validity program The interpretation clarifies the meaning of the definition of fair value under the framework of measurement of rewarding of customer’s validity programs. The amendment did not have a significant impact on the Group’s financial statements.

Improvements to IFRSs The improvements concern the second group of amendments to IFRS published by the international Accounting Standards Board in May 2010 as part of its annual improvements project, according to which necessary but non-urgent amendments to IFRS, are made that will not be included as part of another major project. These improvements did not have a significant impact on the Group’s financial statements.

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 2011:

(i) Standards and interpretations adopted by the European Union IFRS 7 (Amendment): Financial Instruments: Disclosures –Transfer of financial assets (effective for annual periods beginning on or after 1st July 2011) The amendment includes a requirement to disclose by class of asset the nature, carrying amount and a description of the risks and rewards of financial assets that have been transferred to another party yet remaining onthe Group’s balance sheet or have been derecognised but the Group maintains an interest in relation to them. It also provides guidance for the application of the required disclosures. The Group is currently evaluating the impact of the standard on its financial statements.

IFRS 1 (Amendment): Representation of financial statements according to IFRS after the period in which the functional currency of the entity was associated with hyperinflation (effective for annual periods beginning on or after 1st July 2011) This amendment proposes guidance on how an entity should resume presenting financial statements in accordance with International Financial Reporting Standards after a period when the entity was unable to comply with IFRS because its functional currency was subject to severe hyperinflation. This amendment will not have any impact on the Group’s financial statements.

(ii) Standards and interpretations not yet adopted by the European Union IFRS 9: Financial Instruments (effective for annual periods beginning on or after the 1st January 2015) On 12 November 2009, the International Accounting Standards Board publishes the first phase of IFRS 9 which, upon completion, will replace IAS 39. The first phase of IFRS 9 requires the classification of financial assets based on how an entity manages these instruments and the contractual cash flow characteristics of the financial assets. The four categories of financial instruments are abolished and the financial assets are classified under one out of the two measurement categories available: amortized cost and fair value through profit or loss. The Group is currently evaluating the impact of the standard on its financial statements.

IFRS 10: Consolidated Financial Statements (effective for annual periods beginning on or after the 1st January 2013) IFRS 10 replaces the guidelines as a whole regarding control and consolidation that are provided in IAS 27 and in Interpretation 12. The new standard alters the definition of control as a determining factor under which a financial

76 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 2. SIGNIFICANT ACCOUNTING POLICIES (continued) entity should be consolidated. This standard provides extensive clarifications that dictate the different ways in which a financial entity (investor) may control another entity (investment). The revised definition of control focuses on the need of the right (or capability to direct operations that affect the returns significantly) and the variable returns (positive, negative or both) in order to presume control. The new standard also provides clarifications regarding the participating and protective rights as also the relationships between factoring and factroree. The Group is currently evaluating the impact of the standard on its financial statements.

IFRS 11: Joint Arrangements (effective for annual periods beginning on or after the 1st January 2013) IFRS 11 provides a more realistic treatment of joint arrangements by focusing on the rights and obligations, instead of their legal form. The types of joint arrangements are limited to two: either joint operations or joint ventures. The method of proportional consolidation is no longer acceptable. It is compulsory for the participants in joint ventures to apply the equity method. The financial entities that participate in joint operations apply the same accounting treatment as the current participants apply in joint controlled assets or in joint controlled activities. The standard also provides clarifications in relation to the participants in joint arrangements without the existence of joint control. The Group is currently evaluating the impact of the standard on its financial statements.

IFRS 12: Disclosure of interest in other entities (effective for annual periods beginning on or after the 1st January 2013) IFRS 12 addresses the required disclosures of a financial entity, including those of significant judgements and assumptions, which allow the readers of financial statements to evaluate the nature, the risks and the financial consequences that relate to the interest of a financial entity to subsidiaries, associates, joint arrangements and structured entities. A financial entity has the capability to apply some or all of the above disclosures without being obliged to apply IFRS 12 as a whole, or IFRS 10 or 11 or the amended IAS 27 or 28. The Group is currently evaluating the impact of the standard on its financial statements.

IFRS 13: Fair value measurement (effective for annual periods beginning on or after the 1st January 2013) IFRS 13 provides new guidelines related to fair value measurement and the required disclosures. The standard’s requirements do not extend the use of fair values but provide clarifications on their application in case their use is compulsorily imposed by other standards. IFRS 13 provides an accurate definition of fair value, as well as guidelines relating to the measurement of fair value and the required disclosures regardless of the standard in which fair values are used. Additionally, the required disclosures have been expanded and cover not only the financial but all assets and liabilities that are measured in fair value. The Group is currently evaluating the impact of the standard on its financial statements.

IAS 27 (Amendment): Separate Financial Statements (effective for annual periods beginning on or after the 1st January 2013) This standard was published at the same time with IFRS 10 and in combination, those two standards replace IAS 27 «Consolidated and Separate Financial Statements». The amended IAS 27 addresses the accounting treatment and the required disclosures relating to the interest in subsidiaries, joint ventures and associates when a financial entity prepares separate financial statements. At the same time, the Board transferred to IAS 27 the conditions of IAS 28 «Investment in associates» and of IAS 31 «Investments in Joint Ventures» which relate to separate financial statements. The Group is currently evaluating the impact of the standard on its financial statements.

IAS 28 (Amendment): Investments in associates and joint ventures (effective for annual periods beginning on or after the 1st January 2013) The amended IAS 28 «Investments in associates and Joint Ventures» replaces IAS 28 «Investments in Associates». The aim of this accounting standard is to define the accounting treatment relating to investments in associates and to quote the requirements for the application of net equity method according to the accounting of investments in associates and joint ventures, resulting from the publication of IFRS 11. The Group is currently evaluating the impact of the standard on its financial statements.

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IAS 12 (Amendment): Deferred Tax: Recovery of Underlying Assets (effective for annual periods beginning on or after 1st January 2012) IAS 12 requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be achieved through use or through sale when the asset is measured using the fair value model in IAS 40 «Investment properties». The amendment provides a practical solution to the problem by introducing a presumption that recovery will normally be, through sale. The Group is currently evaluating the impact of the standard on its financial statements.

IAS 19 (Amendment): Employee benefits (effective for annual periods beginning on or after the1st January 2013) This amendment introduces important changes to the recognition and measurement of defined benefit plans and post retirement benefits (elimination of the corridor method) as also to the disclosures of all employees’ benefits. The basic changes relate to the recognition of actuarial profits and losses, the recognition of the service cost/ curtailments to the measurement of pensions, the required disclosures for the treatment of expenses and taxes which relate to defined benefit plans and distinction between short and long term benefits. The Group is currently evaluating the impact of the standard on its financial statements.

IAS 1 (Amendment): Presentation of other comprehensive income (effective for annual periods beginning on or after 1st July 2012) This amendment requires financial entities to separate other total income into two groups, based on whether in the future may be transferred to profits and losses of the period or not. The Group is currently evaluating the impact of the standard on its financial statements.

IFRS 7 (Amendment): Offsetting of financial assets and liabilities - Disclosures (effective for annual periods beginning on or after the 1st January 2013) The required disclosures are expected to assist investors and other users of financial statements to better evaluate the impact or the potential consequences that relate to the offsetting of financial assets and liabilities in the statement of financial position of the entity. New disclosures should be applied to all recognised financial instruments that are used for the offsetting in the statement of financial position. Loans to and deposits from customers in the same organization and financial instruments that are subjected to only one guarantee agreement, do not come under the framework of disclosures, unless they are offset in the statement of financial position. The Group is currently evaluating the impact of the standard on its financial statements.

IAS 32 (Amendment): Offsetting of financial assets and liabilities (effective for annual periods beginning on or after the 1st January 2014) IAS 32 amendments clarify, in the possibility of offsetting financial assets and liabilities, the meaning of «for the time being there is a legal executable right of offsetting» and that certain gross settlement systems may be regarded as equal to net settlement. The Group is currently evaluating the impact of the standard 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 centofthe voting power of another entity. Associates are accounted for in the consolidated financial statements using the equity method.

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

Non-controlling 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 non-controlling interest are disclosed on the face of the income statement as allocation of the profit or loss for the period. Non-controlling interest is presented on the face of the statement of financial position, within equity, separately from equity attributable to owners of the parent.

2.5. Investments in subsidiaries and associates Investments in subsidiaries and associates are presented at cost in the Company’s statement of financial position 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 the Group’s presentation currency (Euro) at exchange rates at the statement of financial position 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, net gains or losses 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 loans and advances to customers that relates to the difference between the carrying amount of the loan which is impaired on an individual basis and the present value of estimated future cash flows discounted at the loan’s original effective interest rate, is suspended and is recognised in the income statement upon collection. This interest is transferred to a temporary income suspension account which is included in the total of provisions for impairment of loans and advances.

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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.

2.10. Dividend income 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 statement of financial position, net of unearned charges attributable to future instalments.

2.12. Employee retirement benefits The Group provides defined retirement benefits to its permanent employees.

The defined retirement benefits are 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 defined benefit 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.

For the defined contribution plans, the Group has no further obligations of payment once contributions are paid. The contributions are recognised as cost of staff benefits when benefits are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments exists.

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 statement of financial position 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.

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2.14. Special Levy According to the «Special Levy on Credit Institutions Law of 2011», passed on 14 April 2011, a special levy on credit institutions is imposed at the rate of 0,095% on qualifying deposits held by the credit institution at 31 December of the year preceding the year of taxation. The total amount of the Special Levy for both of the years 2011 and 2012 should not exceed 20% of the total taxable profits of the credit institution for both of the years 2011 and 2012, assessed by the Director of Inland Revenue. The provision is charged to the income statement.

2.15. 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.

(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, cancelled or expired.

(c) Offsetting Financial assets and liabilities are set off and the net amount presented in the statement of financial position 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 repayments, 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 as 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

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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, futures and options.

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 are recognised in the income statement under net gains/(losses) on disposal and revaluation of foreign currencies and financial instruments.

(h) Loans and receivables 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 debt and equity securities, under the following four categories. Investment securities are classified in these categories upon their initial recognition based on their char- acteristics and the purpose for which they were acquired.

(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.

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:

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

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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. Information about the group is provided internally on that basis to the Group’s key management personnel.

The fair value of financial instruments at fair value through profit or loss 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 saleor 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.

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.

(iv) Loans and receivables Investments classified as 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.

Investments classified as loans and receivables are subsequently measured at amortised cost using the effective interest method less provisions for impairment.

(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) Convertible bonds On issuance of compound financial instruments that contain both liability and equity elements, these are accounted for separately, as financial liabilities and equity respectively. When the initial carrying amount of a compound financial instrument is allocated to its equity and liability components, the equity component is assigned the residual amount after deducting from the fair value of the instrument, as a whole, the amount separately determined for the liability component. On initial recognition, the fair value of the liability component is the present value of the contractually determined stream of future cash flows discounted at the rate of interest applied at that time by the market to instruments of comparable credit status and providing substantially the same cash flows, on the same terms, but without the conversion option.

No gain or loss arises from initially recognising the components of the instrument separately. The liability component is subsequently measured at amortised cost using the effective interest rate method in order to amortise the difference between the nominal value and the carrying value at inception until it is extinguished on conversion or redemption. The equity component is not subsequently remeasured.

(l) 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.

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2.16. 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.

(ii) Held to maturity investments and investments classified as loans and receivables If there is objective evidence that an impairment loss on held to maturity investments and investments classified as loans and receivables 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 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 repayment 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

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(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.

2.17. 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 under- taken 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.

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.

2.18. 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.

2.19. 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

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amount of goodwill is reviewed for impairment at least on an annual basis.

Goodwill arose on the acquisition of Pancyprian Insurance Ltd and the acquisition of the Russian company Limited Liability Company “Format Invest”.

It also includes goodwill relating to the branch network in Greece 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.

2.20. Cash and cash equivalents Cash and cash equivalents include cash and balances with Central Banks, investment in debt securities, placements with and amounts due to other banks and repurchase agreements, with original maturities of less than three months.

Cash and cash equivalents are presented in the statement of financial position at amortised cost.

2.21. 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.

2.22. 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.

(b) Existence of documented risk management strategy according to which the hedge is expected to be highly effective in 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 value of the hedged item attributable to the hedged risk.

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.

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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. Several of the derivatives have been acquired with the intention of hedging interest rate 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.

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

2.24. Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is the person or group that is responsible for allocating resources to and assessing the performance of the operating segments of the Group.

For management purposes, the Group is organised into four operating segments, as follows: Cyprus banking and financial services, Cyprus insurance services, Greece, and other countries. The Group's activities in Russia are a separate unit for which information is provided to Management, however for disclosure purposes they have been aggregated under other countries.

Management monitors the operating results of the Group’s operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss before taxation which is measured in the same manner as in the consolidated financial statements.

For each reportable segment, interest income is reported net of interest expense, since the majority of the segments' revenues are from interest. Also, the chief operating decision-maker primarily relies on net interest revenue for assessing segments' performance and making decisions about resource allocation to segments.

Transfer prices between segments are on an arm's length basis in a manner similar to transactions with third parties. Balances and transactions between segments are eliminated on consolidation.

2.25. Investment properties The Group, in its normal course of business, acquires properties in debt satisfaction, which are held either directly or by entities set up and controlled by the Group for the sole purpose of managing these properties. These properties are recognised in the Group’s consolidated financial statements and are included in other assets, reflecting the substance of these transactions. Investment properties are measured at cost, including transaction costs.

HELLENIC BANK GROUP ANNUAL REPORT 2011 87WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 2. SIGNIFICANT ACCOUNTING POLICIES (continued)

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

3. INTEREST INCOME The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Interest income from cash and balances with Central Banks 1.905 1.361 1.905 1.361 Interest income from placements with other banks 10.302 4.254 9.289 4.398 Interest income from loans and advances to customers 324.297 290.449 325.376 290.443 Interest income from debt securities 35.762 39.093 36.317 38.985 Interest income from other financial instruments 8.149 7.254 8.149 7.254 380.415 342.411 381.036 342.441

4. INTEREST EXPENSE The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Interest expense on deposits by other banks 236 885 649 885 Interest expense on repurchase agreements 204 3.830 204 3.830 Interest expense on customer deposits and other customer accounts 136.392 120.596 138.445 122.785 Interest expense on loan capital 17.770 13.180 17.872 13.281 Interest expense on other financial instruments 11.269 11.346 11.269 11.346 165.871 149.837 168.439 152.127

5. FEE AND COMMISSION INCOME The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Banking fees and commissions 67.328 63.942 69.596 66.398 Commissions from insurance operations 2.754 3.816 - - - - Asset management fees 972 868 884 817 Other fees and commissions 1.188 1.207 14 15 72.242 69.833 70.494 67.230

6. FEE AND COMMISSION EXPENSE The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Banking fees and commissions 1.530 1.642 1.512 1.604 Commissions for insurance operations 3.234 3.399 - - - - Other fees and commissions 3.048 3.152 3.174 3.087 7.812 8.193 4.686 4.691

88 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 7. NET LOSSES ON DISPOSAL AND REVALUATION OF FOREIGN CURRENCIES AND FINANCIAL INSTRUMENTS The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Gain on disposal and revaluation of foreign currencies 20.287 16.076 21.480 14.177 Gain/(loss) on disposal of debt securities and other financial instruments: Instruments available for sale 315 (376) 315 (376) Instruments held for trading 189 (4.793) 189 (4.793) Instruments designated at fair value through profit or loss upon initial recognition (2.687) - - (2.687) - - Loss on disposal of hedging instruments - - (16.761) - - (16.761) Release of reserves due to discontinuance of hedge accounting - - 13.217 - - 13.217 Deficit on revaluation of debt securities and other financial instruments: Instruments held for trading (6.250) (2.226) (6.250) (2.226) Instruments designated at fair value through profit or loss upon initial recognition - - (3.869) - - (3.869) Gain/(loss) on disposal of equity securities: Instruments available for sale (546) (68) (586) (238) Instruments held for trading (1.412) (1.205) (1.316) (818) Instruments designated at fair value through profit or loss upon initial recognition 2 ------Surplus/(deficit) on revaluation of equity securities: Instruments designated at fair value through profit or loss upon initial recognition - - (27) - - - - Instruments held for trading 345 722 285 1.141 Change in fair value and disposal of financial instruments designated as fair value hedges: Hedged items (1.532) (1.215) (1.532) (1.215) Hedging instruments 1.143 1.049 1.143 1.049 Impairment loss on equity securities and debt securities: Instruments available for sale (8.074) (5.317) (7.952) (112) Instruments held to maturity (77.000) - - (77.000) - - (75.220) (4.793) (73.911) (824)

The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 (Impairment loss)/reversal of impairment on debt securities and (impairment loss) on equity securities: Listed investments (82.019) (5.337) (81.997) (439) Unlisted investments (3.055) 20 (2.955) 327 (85.074) (5.317) (84.952) (112)

The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 (Impairment loss)/reversal of impairment on debt securities and (impairment loss) on equity securities: Equity securities (6.099) (5.348) (5.977) (143) Debt securities (78.975) 31 (78.975) 31 (85.074) (5.317) (84.952) (112)

HELLENIC BANK GROUP ANNUAL REPORT 2011 89WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 8. OTHER INCOME The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Dividend income 779 4.243 3.562 6.185 Income from insurance operations 16.806 12.427 - - - - Gain on sale of assets held for sale 854 - - 854 - - Other income 1.991 2.595 2.097 2.160 20.430 19.265 6.513 8.345

9. STAFF COSTS The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Staff remuneration 102.881 101.429 94.002 93.427 Staff retirement benefits 19.479 22.925 18.668 21.775 122.360 124.354 112.670 115.202 The Group operates plans for the provision of staff retirement benefits. The basic plan operated by the Group, which covers 76% of staff, is a defined benefit plan for the permanent employees in Cyprus. This plan was terminated on 31 December 2011 and as of 1st January 2012 it was replaced by a defined contribution plan.

The staff of the Group in Greece (19% of Group staff) is covered by separate plans of defined benefit and defined contributions as determined by the Greek legislation.

The Group’s policy is to conduct an independent actuarial valuation of the liabilities with regards to the retirement benefit plans every two to three years. The most recent independent actuarial valuations for the plans in Cyprus and Greece were performed at 31 December 2011.

The number of staff employed by the Group at 31 December 2011 was 1.976 (2010: 1.997 employees) and of the Bank 1.817 (2010: 1.831 employees).

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

2011 2010 Discount rate 4,68% 4,90% Long term return on Plan assets 4,68% 5,25% Salary increases 5,10% 6,00%

During the year, an amount of €19.042 thousand (2010: €22.467 thousand) was charged to the income statement.

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

2011 2010 €΄000 €΄000 Service cost 9.652 10.647 Interest 9.390 9.215 Net actuarial losses recognised - - 2.605 19.042 22.467

90 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 9. STAFF COSTS (continued)

Movement in provisions for retirement benefit obligations as shown under other liabilities (Note 29):

2011 2010 €΄000 €΄000 1 January 180.731 163.847 Provision for the year 19.042 22.467 Payments to retired members (7.735) (4.921) Adjustments to Plan assets 362 (662) 31 December 192.400 180.731

At 31 December 2011, Plan assets include shares and immovable property with a total market value of €312 thousand (2010: €1.291 thousand) and €1.924 thousand (2010: €2.080 thousand) respectively. The return on Plan assets during 2011 was (6)% while the value of Plan assets decreased by 12%.

The actuarial position at 31 December is analysed as follows: 2011 2010 €΄000 €΄000 Present value of defined benefit obligation 189.787 200.845 Fair value of Plan assets (7.758) (8.594) 182.029 192.251 Actuarial surplus/(deficit) recognised over the remaining working lives of the employees 10.371 (11.520) Provision for defined benefit obligation in the statement of financial position 192.400 180.731

Under the new collective agreement between the Cyprus Bankers Employers’ Association and the Cyprus Union of Bank Employees, signed on 12 January 2012 with effect from 1st January 2012, the staff defined benefit retirement plan with lump sum payments was terminated on 31 December 2011 and all employees are entered into a provident fund. Under this change the employers' side will make monthly contributions to the provident fund at the rate of 14% of the employees’ salary and each employee will make monthly contributions at the rate of 3% -10% of salary.

10. (LOSS)/PROFIT BEFORE TAXATION (Loss)/profit before taxation is stated after charging the following: The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Amortisation of intangible assets (1.490) (1.757) (1.383) (1.636) Interest expense on loan capital (17.770) (13.180) (17.872) (13.281) Operating lease rentals for land and buildings (4.675) (5.606) (4.463) (5.384)

11. AUDITORS’ REMUNERATION The total remuneration for the auditors and other audit firms for services granted, charged to the income statement, are presented below: The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Audit of annual accounts (366) (380) (190) (191) Assurance services (15) (15) (12) (12) Tax advisory (31) (16) (30) (16) Other non-audit services (48) (137) (38) (43) (460) (548) (270) (262)

HELLENIC BANK GROUP ANNUAL REPORT 2011 91WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 12. TAXATION The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Corporation tax 2.152 6.693 1.376 6.116 Taxes withheld at source 41 89 3 14 Prior years’ taxes (571) 55 - - 16 Capital gains tax 128 - - 128 - - Special levy tax 1.858 - - 1.858 - - Deferred tax 9.016 (774) 9.405 (193) 12.624 6.063 12.770 5.953

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 of 1st January 2003, companies 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 following the end of the assessment to which the profits refer, will be deemed to have contributed this amount as dividend. Special contribution for defence is payable on such deemed dividends to the extent that the shareholders (individuals and companies), at the end of a period of two years from the end of the fiscal year to which the profits refer, are Cyprus tax residents. For the period from 1st January 2011 until 30 August 2011, the special defence contribution rate was 15%, while for the period from 1st September 2011 until 31 December 2011 increased to 17%. As of 1st January 2012 the rate increased to 20%.

The amount of deemed distribution is reduced by any actual dividends already distributed for the year to which the profits refer. This special contribution is paid by the company on behalf of shareholders.

On 14 April 2011 the House of Representatives passed the «Special Levy on Credit Institutions Law of 2011». This Law aims to impose a special levy on credit institutions for the years 2011 and 2012. The special levy will be imposed at the rate of 0,095% on qualifying deposits held by the credit institution at 31 December of the year preceding the year of taxation. The total amount of the Special Levy for both of the years 2011 and 2012 should not exceed 20% of the total taxable profits of the credit institution for both of the years 2011 and 2012, assessed by the Director of Inland Revenue. The provisions of the above legislation will cease to apply from 1st January 2013, when the «Establishment and Operation of Independent Financial Stability Facility Law of 2011» will come into effect. For the years 2011 and 2012 the 25/60 of the total amounts collected will be deposited to a special account that will be considered a part of the Financial Stability Fund.

On 14 December 2011 the «Establishment and Operation of Independent Financial Stability Facility Law of 2011» was passed, under which the Financial Stability Fund is established, aiming to improve the existing framework for managing and resolving financial crises, the safeguarding of financial stability and the reorganisation of the affected credit institutions. The remainder of the special account held pursuant to the Special Levy on Credit Institutions Law of 2011 will be deposited to this Fund. Additionally, as of 2013 henceforth, regular contributions will be made to the Fund by the covered financial institutions under Article 9 of the law.

92 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 12. TAXATION (continued)

Reconciliation of taxation based on taxable income and taxation based on accounting profits The Group 2011 2010 €΄000 €΄000 Group (loss)/profit before taxation (86.921) 15.253

Taxation based on applicable tax rates (8.692) 1.525 Differences in tax rates applicable in Cyprus and other countries 24.656 9.962 Expenses non tax deductible 11.613 31.401 Non taxable income (1.909) (25.859) Tax effect of losses from overseas operations (14.331) (11.021) Special levy tax 1.858 - - Prior years’ taxes (571) 55 Taxation for the year 12.624 6.063

The Bank 2011 2010 €΄000 €΄000 Bank (loss)/profit before taxation (86.143) 21.474

Taxation based on applicable tax rates (8.614) 2.147 Differences in tax rates applicable in Cyprus and other countries 24.038 11.232 Expenses non tax deductible 10.791 31.432 Non taxable income (1.281) (27.853) Tax effect of losses from overseas operations (14.022) (11.021) Special levy tax 1.858 - - Prior years’ taxes - - 16 Taxation for the year 12.770 5.953

Taxation recognised in other comprehensive income: The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Deferred taxation on property revaluation 230 (1.221) 232 (1.221)

13. DIVIDEND

2011 2010 €΄000 €΄000 Final dividend 2009 paid at 12% (€5 cent per share) - - 15.400

At the Annual General Meeting of the shareholders of the Bank on 19 May 2010, the payment of the final dividend to the shareholders for the year 2009 was decided, in the form of cash.

HELLENIC BANK GROUP ANNUAL REPORT 2011 93WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 14. BASIC (LOSS)/EARNINGS PER SHARE The Group The Bank Year ended Year ended 31 December 31 December 2011 2010 2011 2010

(Loss)/profit attributable to shareholders (€ thousand) (100.658) 8.889 (98.913) 15.521 Average number of shares in issue during the year (thousand) 308.020 308.004 308.020 308.004

Basic (loss)/earnings per share (cent €) (32,7) 2,9 (32,1) 5,0

15. CASH AND BALANCES WITH CENTRAL BANKS At 31 December 2011, balances with Central Banks include the deposits for the minimum liquidity requirements for the Group, amounting to €135.956 thousand (2010: €117.535 thousand) and to €135.859 thousand (2010: €117.532 thousand) for the Bank. On 30 December 2011, via a circular, the Central Bank of Cyprus has decided the reduction of the minimum reserves ratio from 2% to 1% as of the maintenance period starting on 18 January 2012, resulting in the release of liquidity for the Banks.

16. PLACEMENTS WITH OTHER BANKS The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Interbank accounts 87.809 113.419 87.014 113.273 Other deposits with banks 1.557.524 1.111.407 1.524.308 1.105.213 1.645.333 1.224.826 1.611.322 1.218.486 The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 On demand 136.181 166.707 135.036 165.625 Within three months 1.478.263 1.030.087 1.452.865 1.029.934 Between three months and one year 15.756 12.838 8.288 7.733 Between one year and five years 10.000 10.000 10.000 10.000 Over five years 5.133 5.194 5.133 5.194 1.645.333 1.224.826 1.611.322 1.218.486

On 31 December 2011, an amount of €26.182 thousand (2010: €8.784 thousand) is pledged as collateral on deposits with other banks, being common practice among financial institutions.

17. LOANS AND ADVANCES TO CUSTOMERS The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Manufacturing 380.164 301.791 379.573 301.791 Trade 949.222 840.433 949.222 840.433 Tourism 332.918 327.918 332.918 327.918 Construction 1.442.417 1.339.234 1.442.417 1.339.234 Personal and professional 1.849.950 1.857.051 1.847.824 1.855.128 Other sectors 677.055 756.388 675.849 756.388 5.631.726 5.422.815 5.627.803 5.420.892 Provisions for impairment (644.899) (534.235) (642.772) (532.312) 4.986.827 4.888.580 4.985.031 4.888.580

The Group The Bank

HELLENIC BANK GROUP ANNUAL REPORT 2011 2011 2010 2011 2010 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 94 €΄000 €΄000 €΄000 €΄000 On demand 1.337.536 1.081.800 1.335.409 1.079.877 Within three months 509.156 428.236 509.156 428.236 Between three months and one year 578.033 616.626 577.925 616.626 Between one year and five years 1.593.439 1.544.241 1.591.751 1.544.241 Over five years 1.613.562 1.751.912 1.613.562 1.751.912 5.631.726 5.422.815 5.627.803 5.420.892 Provisions for impairment (644.899) (534.235) (642.772) (532.312) 4.986.827 4.888.580 4.985.031 4.888.580 The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Manufacturing 380.164 301.791 379.573 301.791 Trade 949.222 840.433 949.222 840.433 Tourism 332.918 327.918 332.918 327.918 Construction 1.442.417 1.339.234 1.442.417 1.339.234 Personal and professional 1.849.950 1.857.051 1.847.824 1.855.128 Other sectors 677.055 756.388 675.849 756.388 5.631.726 5.422.815 5.627.803 5.420.892 Provisions for impairment (644.899) (534.235) (642.772) (532.312) 17. LOANS AND ADVANCES TO CUSTOMERS (continued) 4.986.827 4.888.580 4.985.031 4.888.580

The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 On demand 1.337.536 1.081.800 1.335.409 1.079.877 Within three months 509.156 428.236 509.156 428.236 Between three months and one year 578.033 616.626 577.925 616.626 Between one year and five years 1.593.439 1.544.241 1.591.751 1.544.241 Over five years 1.613.562 1.751.912 1.613.562 1.751.912 5.631.726 5.422.815 5.627.803 5.420.892 Provisions for impairment (644.899) (534.235) (642.772) (532.312) 4.986.827 4.888.580 4.985.031 4.888.580

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

The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Cyprus 4.682.268 4.427.373 4.678.345 4.425.450 Greece 949.458 995.442 949.458 995.442 5.631.726 5.422.815 5.627.803 5.420.892

Provisions for impairment of loans and advances

Income Provisions suspension for impairment account Total The Group €΄000 €΄000 €΄000 1 January 2011 379.564 154.671 534.235 Loans and advances written off (35.974) (28.805) (64.779) Suspended income for the year - - 32.010 32.010 Charge for the year 142.484 - - 142.484 Exchange difference 949 - - 949 31 December 2011 487.023 157.876 644.899

1 January 2010 326.678 141.425 468.103 Loans and advances written off (23.056) (11.447) (34.503) Suspended income for the year - - 24.693 24.693 Charge for the year 74.715 - - 74.715 Exchange difference 1.227 - - 1.227 31 December 2010 379.564 154.671 534.235

Income Provisions suspension for impairment account Total

The Bank €΄000 €΄000 €΄000 1 January 2011 377.639 154.673 532.312 Loans and advances written off (35.972) (28.805) (64.777) Suspended income for the year - - 32.010 32.010 Charge for the year 142.278 - - 142.278 Exchange difference 949 - - 949 31 December 2011 484.894 157.878 642.772

1 January 2010 302.221 131.651 433.872 Loans and advances written off (22.980) HELLENIC BANK(11.447) GROUP ANNUAL REPORT(34.427) 2011 95WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 Transfer within the Group 22.742 10.101 32.843 Suspended income for the year - - 24.368 24.368 Charge for the year 74.477 - - 74.477 Exchange difference 1.179 - - 1.179 31 December 2010 377.639 154.673 532.312

Income Provisions suspension for impairment account Total The Group €΄000 €΄000 €΄000 1 January 2011 379.564 154.671 534.235 Loans and advances written off (35.974) (28.805) (64.779) Suspended income for the year - - 32.010 32.010 Charge for the year 142.484 - - 142.484 Exchange difference 949 - - 949 31 December 2011 487.023 157.876 644.899

1 January 2010 326.678 141.425 468.103 Loans and advances written off (23.056) (11.447) (34.503) Suspended income for the year - - 24.693 24.693 Charge for the year 74.715 - - 74.715 Exchange difference 1.227 - - 1.227 3117. LOANSDecember AND ADVANCES2010 TO CUSTOMERS (continued) 379.564 154.671 534.235

Income Provisions suspension for impairment account Total

The Bank €΄000 €΄000 €΄000 1 January 2011 377.639 154.673 532.312 Loans and advances written off (35.972) (28.805) (64.777) Suspended income for the year - - 32.010 32.010 Charge for the year 142.278 - - 142.278 Exchange difference 949 - - 949 31 December 2011 484.894 157.878 642.772

1 January 2010 302.221 131.651 433.872 Loans and advances written off (22.980) (11.447) (34.427) Transfer within the Group 22.742 10.101 32.843 Suspended income for the year - - 24.368 24.368 Charge for the year 74.477 - - 74.477 Exchange difference 1.179 - - 1.179 31 December 2010 377.639 154.673 532.312

The amount of net non-performing loans, in accordance with the Central Bank of Cyprus Directive, amounts to €720.101 thousand (2010: €517.119 thousand) for the Group and the Bank.

The transfer within the Group relates to the absorption of the operations of Hellenic Bank (Finance) Ltd.

Issue of Special Government Bonds

During 2011 and specifically on 14 April 2011, the Bank proceeded with the repayment of a part of its participation in the Special Government Bonds amounting to €150 million. The total amount of the Bank’s participation in the Special Government Bonds at 31 December 2011 amounts to €218 million (2010: €368 million). These bonds can solely be used as collateral in the refinancing transactions or marginal lending facilities with the European Central Bank, and/or as collateral to obtain liquidity from other financial institutions in the interbank market. The credit institutions to which the bonds were allocated shall use the proceeds of the liquidity raised for the granting of housing loans and loans to small and medium-sized enterprises on competitive terms. For the full settlement of all the Bank’s obligations that emanate from the agreement and the safeguarding of the Government, as at 31 December 2011, loans and advances to customers of €296 million (2010: €484 million) have been assigned by the Bank in favour of the Government before the application of haircut factors, while loans and advances to customers after haircut factors, on 31 December 2011, amount to €237 million (2010: €394 million).

96 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 18. DEBT SECURITIES The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Securities held for trading 4.399 10.211 4.399 10.211 Securities at fair value through profit and loss - - 82.930 - - 82.930 Securities held to maturity 549.971 992.711 560.418 992.711 Securities classified as loans and receivables 445.954 377.925 445.954 377.925 Securities available for sale 146.336 256.904 143.984 252.568 1.146.660 1.720.681 1.154.755 1.716.345

Listed securities 1.139.117 1.713.263 1.136.765 1.708.927 Unlisted securities 7.543 7.418 17.990 7.418 1.146.660 1.720.681 1.154.755 1.716.345

The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Within three months 367.507 90.280 366.507 89.510 Between three months and one year 208.005 382.767 208.005 382.767 Between one year and five years 385.375 946.313 384.960 945.236 Over five years 185.773 301.321 195.283 298.832 1.146.660 1.720.681 1.154.755 1.716.345

On 31 December 2011 and on 31 December 2010, within the normal practices of treasury management, there were no investments in bonds pledged as collateral to third parties.

Greek Government Bonds

At 31 December 2011, the Bank had in its possession Greek Government Bonds (“GGBs”) with nominal value €110 million, classified as “Held to maturity”. These bonds were eligible for the voluntary participation of private sector bondholders plan to restructure the Greek debt, issued on 21 July 2011 ("plan") that proposed to holders of eligible GGBs, the exchange of existing bonds with new ones.

Following the finalisation of the terms of agreement (note 42) on 21 February 2012, the Group proceeded with an additional impairment. At 31 December 2011 the total amount of the impairment amounted to €77 million and represented 70% of the nominal value of bonds. The stock prices of the new titles issued on 12 March 2012, were not taken into account for the calculation of the total amount of the impairment, as the Group considers that they do not represent their fair value.

The Group and the Bank 2011 2011 2010 2010 €΄000 €΄000 €΄000 €΄000 Securities Securities Securities Securities held to available held to available maturity for sale maturity for sale Provisions for impairment Balance 1 January - - 5.091 - - 5.887 Reversal of provision - - (188) - - (1.731) Reversal due to maturity ------(765) Transfer to the income statement on sale - - (13) - - - - Provisions for impairment for the year 77.000 2.163 - - 1.700 Balance 31 December 77.000 7.053 - - 5.091

HELLENIC BANK GROUP ANNUAL REPORT 2011 97WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 19. RECLASSIFICATION OF DEBT SECURITIES On the 1st of January 2009, the Group proceeded with a review of its intension for the holding of debt securities and consequently of its policy for classifying them under the various categories. As a result of this review, a number of debt securities, which were included in the held for trading and available for sale categories, were reclassified to the held to maturity and loans and receivables categories.

Reclassification of investments held for trading

In accordance with the provisions of the amended IAS 39 and considering the rare circumstances arising as a result of the international financial crisis and its continuing effects on the global economy, the Group identified the investments in debt securities that it did not intend to trade in on the 1st of January 2009. These investments were reclassified from the held for trading to the held to maturity category.

On 31 December 2011, all Securities held for trading reclassified as held to maturity, had expired.

Reclassification of available for sale investments

In accordance with the provisions of the amended IAS 39, the Group has reclassified certain available for sale debt securities to loans and receivables, in view of the fact that there was no active market for these debt securities and the Group did not have the intention to sell these securities in the foreseeable future.

The carrying amount and fair value of the reclassified debt securities is presented below:

1 January 2009 31 December 2011 Carrying amount and Carrying amount Fair value fair value €΄000 €΄000 €΄000 Available for sale debt securities reclassified as loans and receivables 255.258 250.130 135.493

Had the Group not reclassified the available for sale debt securities to loans and receivables on the st1 of January 2009, the Group’s equity would have included losses from change in fair value of these debt securities of €119.765 thousand that would have been included in the revaluation reserve for available for sale investments.

In addition, on the 1st of January 2009, the Group reclassified certain available for sale debt securities, that it intends to hold to maturity, to the held to maturity category. The carrying amount of these debt securities transferred on the 1st of January 2009 amounted to €1.018.653 thousand. On 31 December 2011 the carrying value of these remaining bonds amounted to €333.510 thousand.

As a result of the above decision, for the year ended 31 December 2011, an amount €12.082 thousand (2010: €17.234 thousand), being amortization of revaluation of reclassified debt securities available for sale, was transferred from the investment revaluation reserve to the income statement.

98 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 20. EQUITY SECURITIES The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Securities held for trading Listed securities 1.118 3.857 1.116 3.820

Securities at fair value through profit or loss Listed securities - - 28 - - - -

Securities available for sale Listed securities 4.649 10.626 4.641 9.762 Unlisted securities 7.614 11.353 7.495 11.131 12.263 21.979 12.136 20.893 13.381 25.864 13.252 24.713

The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Provisions for impairment Balance 1 January 25.097 23.707 20.826 15.411 Provisions for impairment for the year 6.099 5.348 5.977 143 Additions from absorption of operations of subsidiary company ------9.185 Reversal due to disposal (13.404) (3.958) (9.830) (3.913) Balance 31 December 17.792 25.097 16.973 20.826

Unlisted securities available for sale include the Group’s and the Bank’s investment in JCC Payment Systems Ltd of €4.120 thousand (2010: €3.289 thousand).

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

The Bank Country of Number operation and Ownership of shares % 2011 2010 registration (thousands) €΄000 €'000 Hellenic Bank (Investments) Ltd Cyprus 100 3.750 6.407 6.407 Hellenic Bank Trust and Finance Corporation Ltd Cyprus 100 50 94 94 Pancyprian Insurance Ltd Cyprus 100 15.700 40.843 40.843 Hellenic Alico Life Insurance Company Ltd Cyprus 73 725 1.239 1.239 Hellenic Trust Holdings S.A. Greece 100 294 - - - - Hellenic Insurance Agency S.A. Greece 100 600 19 19 Hellenic Trade Services Limited Hong-Kong 100 2 2 2 Hellenic Insurance Agency Ltd Cyprus 100 50 85 85 Athena Real Estate Holdings Limited Cyprus 100 200 - - - - Limited Liability Company Commercial Bank “Hellenic Bank” Russia 100 - - 32.228 32.228 Borenham Holdings Limited Cyprus 100 5.000 10.324 10.324 91.241 91.241

HELLENIC BANK GROUP ANNUAL REPORT 2011 99WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 21. INVESTMENTS IN SUBSIDIARY COMPANIES (continued)

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

Borenham Holdings Limited owns 100% of the share capital of the Russian company Limited Liability Company “Format Invest ”, which is the owner of building facilities.

The subsidiary companies of Pancyprian Insurance Ltd are the following:

Owenership % Hellenic Pancyprian Insurance Agencies Ltd 100 MIA (Insurance Agencies) Ltd 100 Hellenic Pancyprian Insurance (Estate) Ltd 100 Yiannis Charalambides Ltd 99,98 Protection Insurance Agencies Brokers Ltd 99,97

The liquidation process for Hellenic Pancyprian Insurance (Estate) Ltd, Hellenic Pancyprian Insurance Agencies Ltd and MIA (Insurance Agencies) Ltd by Pancyprian Insurance Ltd will be completed in 2012 while Yiannis Charalambides Ltd and Protection Insurance Agencies Brokers Ltd are inactive and will be dissolved by voluntary liquidation.

Under the Reorganization and Merger Plan, during the years 2010 and 2011, the Bank absorbed the operations of the following subsidiaries, which were dissolved without liquidation, transferring all assets and obligations, as a going concern, to the Bank and their operations are thereafter performed by the Bank:

Hellenic Bank (Finance) Ltd 1 February 2010 Athena Holdings Ltd 8 May 2010 Athena Cyprus Company Ltd (ex Athena Cyprus Public Company Ltd) 29 June 2010 Athena High Technology Incubator Ltd 21 December 2011

On 10 May 2010, the Bank proceeded with the acquisition of Athena High Technology Incubator Ltd, which was fully owned subsidiary of Athena Cyprus Public Company Ltd, the operations of which were absorbed by the Bank as mentioned above.

Athena Real estate Holdings Limited is a 100% subsidiary of the Bank, has issued and unpaid (not asked for payment) 200.000 shares of nominal value €1,71 and has been bought by Athena Cyprus Company Ltd for €1 in May 2010.

On 14 December 2010, the Bank’s Board of Directors decided to increase the investment in the subsidiary company Limited Liability Company Commercial Bank "Hellenic Bank", with capital contribution of 990 million Roubles, from 375 million Roubles to 1.365 million Roubles. The Bank's participation in the company remains at 100%.

On 28 March 2011, the subsidiary company Limited Liability Company Commercial Bank "Hellenic Bank" entered into an agreement with the Bank for a 10-year subordinated loan agreement of 436 million Roubles.

On 23 September 2011, Hellenic Trade Services Limited ceased operations and entered on the same day into voluntary liquidation. The process will be completed in 2012.

100 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 22. PROPERTY, PLANT AND EQUIPMENT

Land and Plant and buildings equipment Total 2011 2011 2011 The Group €΄000 €΄000 €΄000 Cost or valuation 1 January 94.849 76.138 170.987 Additions 94 5.645 5.739 Disposals/transfers (461) (1.310) (1.771) Revaluation (515) - - (515) Transfer to investment property (2.085) - - (2.085) Exchange difference (644) (31) (675) 31 December 91.238 80.442 171.680

Depreciation 1 January 755 55.014 55.769 Charge for the year 895 3.936 4.831 Disposals/transfers (40) (1.301) (1.341) Transfer to investment property (52) - - (52) Exchange difference (26) (10) (36) 31 December 1.532 57.639 59.171

Net book value 31 December 89.706 22.803 112.509

Land and Plant and buildings equipment Total 2010 2010 2010 The Group €΄000 €΄000 €΄000 Cost or valuation 1 January 79.233 74.622 153.855 Revaluation 15.990 - - 15.990 Impairment (1.069) - - (1.069) Additions 500 6.921 7.421 Disposals/transfers - - (5.454) (5.454) Transfer to investment property (789) - - (789) Exchange difference 984 49 1.033 31 December 94.849 76.138 170.987

Depreciation 1 January 3.124 55.925 59.049 Revaluation (3.506) - - (3.506) Charge for the year 1.236 4.199 5.435 Disposals/transfers - - (5.110) (5.110) Transfer to investment property (123) - - (123) Exchange difference 24 - - 24 31 December 755 55.014 55.769

Net book value 31 December 94.094 21.124 115.218

HELLENIC BANK GROUP ANNUAL REPORT 2011 101WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 22. PROPERTY, PLANT AND EQUIPMENT (continued)

Land and Plant and buildings equipment Total 2011 2011 2011 The Bank €΄000 €΄000 €΄000 Cost or valuation 1 January 73.824 72.928 146.752 Additions - - 5.346 5.346 Additions from absorption of operations of subsidiary company - - 50 50 Revaluation (515) - - (515) Transfer to investment property (2.085) - - (2.085) Disposals/transfers (461) (1.298) (1.759) 31 December 70.763 77.026 147.789

Depreciation 1 January 38 52.729 52.767 Charge for the year 897 3.619 4.516 Transfer to investment property (52) - - (52) Additions from absorption of operations of subsidiary company -- 48 48 Disposals/transfers (40) (1.289) (1.329) 31 December 843 55.107 55.950

Net book value 31 December 69.920 21.919 91.839

Land and Plant and buildings equipment Total 2010 2010 2010 The Bank €΄000 €΄000 €΄000 Cost or valuation 1 January 58.899 70.562 129.461 Revaluation 14.925 - - 14.925 Additions - - 6.662 6.662 Additions from absorption of operations of subsidiary company - - 1.113 1.113 Disposals/transfers - - (5.409) (5.409) 31 December 73.824 72.928 146.752

Depreciation 1 January 2.407 53.044 55.451 Revaluation (3.241) - - (3.241) Charge for the year 872 3.926 4.798 Additions from absorption of operations of subsidiary company - - 857 857 Disposals/transfers - - (5.098) (5.098) 31 December 38 52.729 52.767

Net book value 31 December 73.786 20.199 93.985 Land and buildings were revalued at 31 December 2010 by independent qualified valuers on a market value basis

for their existing use. The surplus on revaluation of €19.496 thousand for the Group and €18.166 thousand for

the Bank was transferred to the property revaluation reserve. An amount of €1.069 thousand, which related to impairment in the value of the land and buildings of a subsidiary company of the Group, had been transferred to the consolidated income statement during 2010.

The cost and net book value on a historic cost basis of the freehold land and buildings stated at valuation at 31 December 2011 amounted to €41.252 thousand (2010: €40.004 thousand) and €36.616 thousand (2010: €34.438 thousand) respectively for the Group and to €36.226 thousand (2010: €36.226 thousand) and €31.632 thousand

102 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 22. PROPERTY, PLANT AND EQUIPMENT (continued)

(2010: €31.681 thousand) respectively for the Bank.

The cost of branches under renovation and the cost of buildings under construction, included under plant and equipment at 31 December 2011 amounted to €12.630 thousand (2010: €9.891 thousand) for the Group and the Bank.

At 31 December 2011 the value of the revalued freehold land not subject to depreciation amounted to €30.148 thousand (2010: €30.148 thousand) for the Group and €28.674 thousand (2010: €26.674 thousand) for the Bank.

On 31 December 2010 the absorption of the operations of subsidiary company refers to Hellenic Bank (Finance) Ltd while on 31 December 2011, the absorption of the operations of subsidiary company refers to Athena High Technology Incubator Ltd.

23. INTANGIBLE ASSETS Computer software Goodwill Total 2011 2011 2011 The Group €΄000 €΄000 €΄000 Cost 1 January 23.096 27.531 50.627 Additions 898 - - 898 Disposals (450) - - (450) Exchange difference (37) - - (37) 31 December 23.507 27.531 51.038

Amortisation 1 January 17.570 11.717 29.287 Charge for the year 1.478 12 1.490 Disposals (320) - - (320) Exchange difference (12) - - (12) 31 December 18.716 11.729 30.445

Net book value 31 December 4.791 15.802 20.593

Computer software Goodwill Total 2010 2010 2010 The Group €΄000 €΄000 €΄000 Cost 1 January 21.411 27.566 48.977 Additions 1.744 - - 1.744 Disposals (75) (35) (110) Exchange difference 16 - - 16 31 December 23.096 27.531 50.627

Amortisation 1 January 15.923 11.720 27.643 Charge for the year 1.725 32 1.757 Disposals (73) (35) (108) Exchange difference (5) - - (5) 31 December 17.570 11.717 29.287

Net book value 31 December 5.526 15.814 21.340

HELLENIC BANK GROUP ANNUAL REPORT 2011 103WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 23. INTANGIBLE ASSETS (continued)

Computer software Goodwill Total 2011 2011 2011 The Bank €΄000 €΄000 €΄000 Cost 1 January 21.713 1.448 23.161 Additions 878 - - 878 Disposals (450) - - (450) 31 December 22.141 1.448 23.589

Amortisation 1 January 17.080 1.411 18.491 Charge for the year 1.371 12 1.383 Disposals (319) - - (319) 31 December 18.132 1.423 19.555

Net book value 31 December 4.009 25 4.034

Computer software Goodwill Total 2010 2010 2010 The Bank €΄000 €΄000 €΄000 Cost 1 January 19.910 1.483 21.393 Additions 1.694 - - 1.694 Additions from absorption of operations of subsidiary company 184 - - 184 Disposals (75) (35) (110) 31 December 21.713 1.448 23.161

Amortisation 1 January 15.376 1.414 16.790 Charge for the year 1.604 32 1.636 Additions from absorption of operations of subsidiary company 173 - - 173 Disposals (73) (35) (108) 31 December 17.080 1.411 18.491

Net book value 31 December 4.633 37 4.670

Goodwill was tested for impairment at 31 December 2011 and no indication of impairment in its carrying amount was observed.

In the Group, goodwill arose on acquisition of Pancyprian Insurance Ltd as well as on the acquisition of the Russian company Limited Liability Company "Format Invest".

In the Bank, goodwill includes amount with a net book value of €25 thousand (2010: €37 thousand) relating to the branch network in Greece.

At 31 December 2010, the absorption of the operations of subsidiary company refers to Hellenic Bank (Finance) Ltd.

104 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 24. DEFERRED TAX ASSET Deferred taxation arises as follows: The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Property revaluation and differences between depreciation and capital allowances 682 710 682 708 Tax losses 1.237 689 - - - - Temporary differences in the estimation of provisions for impairment of loans and advances 20.313 17.838 20.313 17.838 Other temporary differences 519 534 488 534 22.751 19.771 21.483 19.080

25. OTHER ASSETS The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Prepaid expenses 1.531 1.564 1.449 1.530 Fair value of derivatives (Note 34) 26.044 6.846 26.053 6.846 Assets held to cover liabilities of unit linked funds 11.408 11.770 - - - - Debtors and other receivables 67.895 56.142 46.374 34.016 106.878 76.322 73.876 42.392

Group debtors and other receivables include assets held for sale as well as investment property amounting to €15.502 thousand (2010: €7.296 thousand) for the Group and €14.187 thousand (2010: €3.469 thousand) for the Bank.

Assets held to cover liabilities of unit linked funds comprise of: The Group 2011 2010 €΄000 €΄000 Deposits 1.601 4.448 Government bonds 1.737 3.384 Bank bonds 104 213 Equity securities 7.966 3.725 11.408 11.770

26. DEPOSITS BY BANKS The Group and the Bank 2011 2010 €΄000 €΄000 Interbank accounts 62.255 109.704 Other deposits by banks 12.047 49.057 74.302 158.761

The Group and the Bank 2011 2010 €΄000 €΄000 On demand 73.724 120.624 Within three months 102 9.929 Between three months and one year 476 100 Over five years - - 28.108 74.302 158.761

HELLENIC BANK GROUP ANNUAL REPORT 2011 105WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 26. DEPOSITS BY BANKS (continued)

On 31 December 2011, an amount of €12.250 thousand (2010: nil) is pledged as collateral on deposits by banks, being common practise among financial institutions.

27. CUSTOMER DEPOSITS AND OTHER CUSTOMER ACCOUNTS The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Demand deposits 2.813.533 2.436.069 2.811.037 2.436.230 Savings deposits 212.814 204.485 212.814 204.485 Notice deposits 261.597 289.777 261.597 289.777 Time deposits 3.818.597 3.923.164 3.818.537 3.923.164 7.106.541 6.853.495 7.103.985 6.853.656

The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 On demand 3.043.043 2.571.464 3.040.548 2.571.625 Within three months 2.742.658 2.935.789 2.742.597 2.935.789 Between three months and one year 1.293.962 1.232.489 1.293.962 1.232.489 Between one year and five years 26.878 113.753 26.878 113.753 7.106.541 6.853.495 7.103.985 6.853.656

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 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Cyprus 6.531.369 6.115.669 6.528.594 6.115.830 Greece 575.172 737.826 575.391 737.826 7.106.541 6.853.495 7.103.985 6.853.656

28. DEFERRED TAX LIABILITY Deferred taxation arises as follows: The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Losses from permanent establishment 25.302 15.286 25.302 15.286 Property revaluation and differences between depreciation and capital allowances 6.220 6.410 4.117 4.350 Other temporary differences 1.837 12 1.802 12 33.359 21.708 31.221 19.648

29. OTHER LIABILITIES The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Provident funds 193.902 181.995 193.902 181.995 Fair value of derivatives (Note 34) 20.636 34.407 20.636 34.407 Accrued expenses 8.353 8.564 8.088 8.174 Liabilities of unit linked funds 11.408 11.770 - - - - Other accounts payable 68.447 65.560 21.813 19.125 302.746 302.296 244.439 243.701

106 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 29. OTHER LIABILITIES (continued)

Other accounts payable for the Group and the Bank include provisions for pending litigation or cases subject to arbitration proceedings amounting to €1.254 thousand (2010: €3.250 thousand).

30. LOAN CAPITAL The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Tier 1 Capital Capital Securities 17.436 17.342 17.436 17.342 Non Cumulative Perpetual Capital Securities 139.759 140.245 141.383 141.869 157.195 157.587 158.819 159.211

Tier 2 Capital Non Convertible Bonds 2011 - - 34.119 - - 34.119 Non Convertible Bonds 2016 62.683 63.014 62.683 63.014 Non Convertible Bonds 2018 10.000 10.006 10.000 10.006 Non Convertible Bonds 2019 90.000 90.350 90.000 90.350 162.683 197.489 162.683 197.489

319.878 355.076 321.502 356.700

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

Capital Securities

The Capital Securities are perpetual securities with no maturity date. They could be redeemed as a 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 from 1 January 2011 to 17 July 2011, the interest rate was set at 6,45% per annum while for the period from 18 July 2011 to 17 January 2012, the interest rate was set at 6,95% per annum. The Capital Securities constitute direct, non secured subordinated liabilities of the Bank. The Capital Securities are listed on the Cyprus Stock Exchange.

During 2010, Securities amounting to €25.528 million had been converted to Non Cumulative Perpetual Capital Securities.

Non Cumulative Perpetual Capital Securities

At an Extraordinary General Meeting of the shareholders of the Bank which was held on Wednesday August 4 2010, the issue of up to €150 million of Non Cumulative Perpetual Capital Securities was approved. The Non Cumulative Perpetual Capital Securities were offered to the existing shareholders of the Bank at the ratio of €2 for every 5 shares of the Bank. Based on this, the Capital Securities were offered in priority up to €123.197.527 to the existing shareholders of the Bank. The remaining €26.802.473 were offered to the public without being offered to the existing shareholders of the Bank.

At the end of the period of registration on 22 October 2010, the Bank received applications from applicants of the amount of €141.383.013. The applications were from the existing shareholders of the Bank, as well as from holders

HELLENIC BANK GROUP ANNUAL REPORT 2011 107WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 30. LOAN CAPITAL (continued)

of Convertible Bonds 2016 and Capital Securities 2003 as well as from the general public and all applications were fully satisfied.

The Non Cumulative Perpetual Capital Securities were issued at par in securities of €1 and its multiples and bear fixed interest rate of 6,25% for the whole period of issue, payable on a quarterly basis at the end of each period of interest payment.

The Capital Securities are of indefinite duration without expiry date. The Bank, following a notification to the share- holders, may decide to acquire at par, together with any sum payable, the total, and not part, of the Non Cumulative Perpetual Capital Securities on 31 December 2015 or on any other day of interest rate payment after that.

According to the terms of the issue of the Securities, the shareholder has the right to convert the Securities to ordinary shares of Hellenic Bank during the conversion period. The first period of conversion has been set from 15 to 31 December 2012 and the last period of conversion from 15 to 30 December 2020. The conversion price will be determined on the basis of the average closing price of the Bank’s shares in the CSE at the closing of the last five (5) days of trading of the share prior to the conversion period, minus 20% with a minimum conversion price of €1,40.

The Non Cumulative Perpetual Capital Securities are listed in the Cyprus Stock Exchange. An amount of €1.624 thousand is eliminated on consolidation.

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.

Non Convertible Bonds 2011

Non Convertible Bonds 2011 had a maturity date of 28 April 2011 and bore interest at the fixed rate of 5,75% per annum on their nominal value for the first six months. For subsequent periods they bore interest at a floating rate equal to the base rate applicable at the beginning of each interest payment period plus 0,75%.

On 28 April 2011 and in accordance with the terms of the Prospectus dated 29 March 2004, the Bank announced the maturity and repayment of the 2011 Bonds and the payment of interest for the period from 1 April 2011 until 28 April 2011.

The interest rate on the Bonds for the period from 1st January 2011 to 28 April 2011 was set at 6% and the last date of trading of these Bonds on the Cyprus Stock Exchange was the 15th April 2011.

Non Convertible Bonds 2016

The 2016 Bonds were issued in three different series and will mature on the 1st of 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. The Bonds 2016 are listed on the Cyprus Stock Exchange.

Bonds 2016 bear interest at a floating rate reviewed at the beginning of each interest payment period and applicable to that specific period. According to the Bonds’ terms of issue, if there is a change of national currency, the interest rate will equal the 3-month Euribor plus 0,80% until the 1st of July 2011 and the 3-month Euribor plus 1,50% after the 1st of July 2011, if the Bonds are not redeemed by the Bank. Interest is payable quarterly in arrears in cash. For the period from the 1st of January 2011 to 31 March 2011 the interest rate was set at 1,81% per annum, for the period from the 1st of April 2011 to 30 June 2011 the interest rate was set at 2,03% per annum, for the period from the 1st

108 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 30. LOAN CAPITAL (continued) of July 2011 to 30 September 2011 the interest rate was set at 3,04% per annum, while for the period from the 1st of October 2011 to 31 December 2011 the interest rate was set at 3,05% per annum.

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

Bonds 2016 are not secured and in the event of the Bank’s liquidation their repayment follows in priority the claims of depositors and other creditors. They have, however, priority over shareholders and Capital Securities holders.

With the absorption of the operations of Athena Cyprus Company Ltd on 28 June 2010, an amount of €837 thousand, which related to an investment of Athena Cyprus Public Company Ltd in Bonds 2016, had been undertaken by the Bank.

During 2010, €64.609 million of Bonds 2016 had been converted to Non Cumulative Perpetual Capital Securities.

Non Convertible Bonds 2018

On the 1st of September 2008, the Bank proceeded with the issue of Bonds 2018 amounting to €10.000.000. The Bonds have a maturity date of 31 August 2018 and form part of the Bank’s Tier 2 Capital.

Interest on Bonds 2018 is payable in cash every three months, at the end of each interest period. Bonds 2018 bear interest at a floating rate equal to the 3-month Euribor rate applicable at the beginning of each interest period, plus 1,75%.

The Bonds 2018 are not secured and in the event of the Bank’s liquidation their repayment follows in priority the claims of depositors and other creditors. They have, however, priority over shareholders and Capital Securities holders. Bonds 2018 are not listed on the Cyprus Stock Exchange.

Non Convertible Bonds 2019

On 11 March 2009, the Bank proceeded with the issue of Bonds 2019 amounting to €90.000.000 with a 10-year duration and a nominal value of €100 each. The issue was placed with investors with a minimum amount of investment of €50.000, in accordance with the relevant provisions of the legislation, regulations and directives of the competent authorities.

The interest on the Bonds is payable quarterly in cash at the end of each period. The first interest payment covered the period from 11 March 2009 to 30 June 2009. The Bonds bore interest at the fixed rate of 7,50% 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%. For the period from the 1st of January 2011 to 31 March 2011 the interest rate was set at 5,61% per annum, for the period from the 1st of April 2011 to 30 June 2011 the interest rate was set at 5,83% per annum, for the period from the 1st of July 2011 to 30 September 2011 the interest rate was set at 6,14% per annum, while for the period from the 1st of October 2011 to 31 December 2011 the interest rate was set at 6,15% per annum.

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 the 11th of March 2014 and in the event of non redemption of Bonds 2019 by the Bank, will equal the applicable 3-month Euribor plus 6,60%.

HELLENIC BANK GROUP ANNUAL REPORT 2011 109WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 30. LOAN CAPITAL (continued) The Bank, following approval by the Central Bank of Cyprus and after giving notice to the Commissioner and the holders of Bonds 2019 of no less than 30 and no more 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 are listed on the Cyprus Stock Exchange.

31. SHARE CAPITAL

The Group and the Bank 31 December 2011 31 December 2010 No. of shares No. of shares €΄000 (thousand) €΄000 (thousand) Authorised 600 million shares of €0,43 each 258.000 600.000 258.000 600.000

The Group and the Bank

31 December 2011 31 December 2010 No. of shares No. of shares €΄000 (thousand) €΄000 (thousand) Issued Fully paid shares

1 January 132.442 308.004 132.437 307.994 Issue of shares 6 16 5 10 Total issued share capital 132.448 308.020 132.442 308.004

At 31 December 2011 there were 308.019.635 fully paid shares in issue, with a nominal value of €0,43 each (2010: 308.004.277 shares with a nominal value €0,43 each).

During the year, 15.358 shares were issued and granted for free to members of the Group’s personnel (2010: 10.460 shares).

110 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 32. REVALUATION RESERVES The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Property revaluation reserve 1 January 40.870 21.876 37.444 19.752 Revaluation of land and buildings (515) 19.496 (515) 18.166 Transfer to the income statement on disposal of property (364) - - (364) - - Deferred taxation on property revaluation 230 (1.221) 232 (1.221) Transfer to revenue reserve (449) 719 (420) 747 39.772 40.870 36.377 37.444

Revaluation reserve of available for sale securities 1 January (15.959) (36.388) (15.498) (25.762) Revaluation of equity securities (4.598) (9.344) (4.527) (7.976) Revaluation of debt securities (10.764) (3.456) (10.076) (3.173) Absorption of operations of subsidiary company - - 10.019 - - 3.101 Amortisation of revaluation of reclassified debt securities 12.082 17.234 12.082 17.234 Transfer to the income statement on impairment of debt securities 2.163 1.700 2.163 1.700 Transfer to the income statement on impairment of equity securities 3.073 5.041 3.052 143 Write off of frozen reserves of reclassified Greek Government Bonds 838 - - 838 - - Transfer to the income statement on disposal of debt securities - - (765) - - (765) (13.165) (15.959) (11.966) (15.498)

Total revaluation reserves 31 December 26.607 24.911 24.411 21.946

33. CONTINGENT LIABILITIES AND COMMITMENTS The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Contingent liabilities Acceptances and endorsements 914 1.211 914 1.211 Guarantees 414.341 479.344 414.341 478.011 415.255 480.555 415.255 479.222 Commitments Undrawn formal standby facilities 755.756 929.196 755.624 929.196 Other commitments 21.081 22.004 21.081 22.004 776.837 951.200 776.705 951.200

1.192.092 1.431.755 1.191.960 1.430.422

Capital Commitments At 31 December 2011, the Group’s and the Bank’s commitments for capital expenditure, not recognised in the consolidated financial statements, amounted to €6.738 thousand (2010: €6.982 thousand) and to €6.738 thousand (2010: €2.722 thousand) respectively.

HELLENIC BANK GROUP ANNUAL REPORT 2011 111WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 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.

Options: represent contracts for future purchase or sale, at a predetermined value, of a financial «product», offering the right, but not the obligation, to one of the two parties to request by the other party the fulfilment of the agreement during a certain period of time or on a specific date.

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.

The Group Nominal value Fair value

Other Other assets liabilities

€΄000 €΄000 €΄000 At 31 December 2011 Foreign currency forwards 623.979 17.862 457 Currency swaps 464 - - 38 Options 59.880 411 411 Interest rate swaps 228.486 7.771 19.730 912.809 26.044 20.636

The Bank Nominal value Fair value

Other Other assets liabilities

€΄000 €΄000 €΄000 At 31 December 2011 Foreign currency forwards 625.069 17.871 457 Currency swaps 464 - - 38 Options 59.880 411 411 Interest rate swaps 228.486 7.771 19.730 913.899 26.053 20.636

The Group and the Bank Nominal value Fair value

Other Other assets liabilities

€΄000 €΄000 €΄000 At 31 December 2010 Foreign currency forwards 19.754 646 369 Currency swaps 698.508 14 16.725 Options 52.761 148 - - Interest rate swaps 267.925 6.038 17.313 1.038.948 6.846 34.407

112 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 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 hedging instruments used for hedging interest rate risk is shown below: The Group and the Bank Nominal value Fair value

Other Other assets liabilities

€΄000 €΄000 €΄000 At 31 December 2011 Interest rate swaps with fixed interest rate payments 22.729 - - 2.764

At 31 December 2010 Interest rate swaps with fixed interest rate payments 56.484 - - 4.812

36. CASH AND CASH EQUIVALENTS The Group The Bank 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Cash and balances with Central Banks 42.149 41.757 41.159 41.367 Placements with other banks 1.605.965 1.195.642 1.587.914 1.194.560 1.648.114 1.237.399 1.629.073 1.235.927

37. DIRECTORS’ INTEREST IN THE SHARE CAPITAL OF THE BANK According to the Cyprus Securities and Stock Exchange Regulations and in accordance with the requirements of the Directive DI190/200/04 para. 4 of the Cyprus Securities and Exchange Commission, 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 and indirectly at least 20% of the voting rights, are as follows:

31 December 2011 23 March 2012 Direct Indirect Direct Indirect participation participation Total participation participation Total Dr A. P. Panayiotou 0,0134% 0,00004% 0,0134% 0,0134% 0,00004% 0,0134% A. M. Moushouttas 0,0138% - - 0,0138% 0,0138% - - 0,0138% I. G. Iacovou 0,0225% 0,1590% 0,1815% 0,0225% 0,1590% 0,1815% S. Z. Kallis 0,0003% - - 0,0003% 0,0003% - - 0,0003% Ch. P. Panayiotou ------I. Ch. Charilaou 0,0003% - - 0,0003% 0,0003% - - 0,0003% G. K. Pavlou 0,0028% - - 0,0028% 0,0028% - - 0,0028% K. E. Georgiou - - 0,0070% 0,0070% - - 0,0070% 0,0070% M. Keravnos 0,0023% - - 0,0023% 0,0023% - - 0,0023% K. I. Droushiotis ------G. G. Mavros 0,0021% - - 0,0021% ------S. Kremmos ------Dr M. R. Clerides ------

HELLENIC BANK GROUP ANNUAL REPORT 2011 113WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 38. RELATED PARTY TRANSACTIONS 2011 2010 2011 2010 Number of Directors €΄000 €΄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 17.306 11.849 Under 1% of the net assets of the Bank per Director 11 12 4.663 4.881 12 13 21.969 16.730

Loans and advances to key management personnel who are not members of the Board of Directors and their connected persons 1.216 589 Total 23.185 17.319

Tangible securities 34.360 21.549

Interest income 1.130 841

Deposits 10.717 10.215

Interest expense 219 374

Additionally, at 31 December 2011, 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 €16.969 thousand which exceeded 1% of the Bank’s net assets (2010: €15.506 thousand). There were also commitments to key management personnel who were not members of the Board of Directors and their connected persons amounting to €155 thousand (2010: €163 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 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 Emoluments of members of the Board of Directors: Emoluments and benefits in executive capacity 477 528 477 528 Employer’s contributions for social insurance, etc 22 23 22 23 Retirement benefits for the year 110 131 110 131 Total for Executive Directors 609 682 609 682

Fees for the year 328 322 260 269

114 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 38. RELATED PARTY TRANSACTIONS (continued)

The Group and the Bank 2011 2010 €΄000 €΄000 Emoluments of key management personnel who were not Directors: Salaries and other short term benefits 849 709 Employer’s contributions for social insurance, etc. 52 49 Retirement benefits for the year 161 176 Total emoluments and benefits of key management personnel who were not Directors 1.062 934

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.

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 includes a ground floor, a mezzanine and two underground parking spaces and is used for the operations of the Bank in Larnaca. The transaction was based on market values and amounted to a total of €5.205 thousand (excluding VAT). The plot was transferred to Hellenic Bank Public Company Ltd on 19 December 2007 and on 11 January 2008 the amount of €769 thousand was paid to Iacovou Brothers (Constructions) Ltd for the acquisition of the plot. During 2008 and 2011, an agreement for the execution of additional work was made for €1.541 thousand (excluding VAT). During the period January to December 2011 an amount of €1.176 thousand (excluding VAT) (January – December 2010: €864 thousand) was paid, as per the construction agreement and the agreement for additional work. The construction of the building has been completed.

Mr. Demetris J. Eliades, a member of the Bank’s Board of Directors until 1st March 2010, is a lawyer at the law office Demetris J. Eliades & Co LLC. 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 above law office. The total cost of these cases was charged to the relevant debtors/creditors and amounted to €13 thousand including expenses and VAT for the period January to February 2010.

39. SHAREHOLDERS HOLDING MORE THAN 5% OF THE SHARE CAPITAL According to the Cyprus Securities and Stock Exchange Regulations and pursuant to the requirements of the Directive DI190/2007/04 para. 4 of the Cyprus Securities and Exchange Commission, the following shareholders owned 5% or more of the nominal value of the Bank’s issued share capital at 31 December 2011:

Holy Archbishopric of Cyprus 13,72% Polys Polycarpou and related parties 5,42% Bank of Cyprus Group 5,05%

Pursuant to the requirements of the Directive DI190/2007/04 of the Cyprus Securities and Exchange Commission, the shareholders holding 5% or more of the nominal value of the Bank’s issued share capital, five (5) days before the date of approval of the financial statements by the Board of Directors are the following:

HELLENIC BANK GROUP ANNUAL REPORT 2011 115WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 39. SHAREHOLDERS HOLDING MORE THAN 5% OF THE SHARE CAPITAL (continued)

Holy Archbishopric of Cyprus 13,72% Credit Suisse AG 5,91% Polys Polycarpou and related parties 5,46% Bank of Cyprus Group 5,05%

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 statement of financial position after deducting the provisions for impairment of loans and advances.

41. SEGMENTAL ANALYSIS For management purposes, the Group is organised into four operating segments based on a combination of geographical areas and services, as follows:

Cyprus banking and financial services - principally providing banking and financial services in Cyprus, including hire purchase, leasing, investment services, as well as trustee and factoring services. Cyprus insurance services - principally providing life and general insurance services in Cyprus. Greece - principally providing banking services through the branch network in Greece. Other countries - principally includes operations in Russia.

The Group's activities in Russia are a separate unit for which information is provided to Management, however for disclosure purposes they have been aggregated under other countries.

Management monitors the operating results of its operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss before taxation which is measured in the same manner as in the consolidated financial statements.

For each reportable segment, interest income is reported net of interest expense, since the majority of the segments' revenues are from interest. Also, the chief operating decision-maker primarily relies on net interest revenue for assessing segments' performance and making decisions about resource allocation to segments.

Transfer prices between segments are on an arm's length basis in a manner similar to transactions with third parties.

The table below presents income, expense, provisions, profit/(loss) and certain asset and liability information regarding the Group's operating segments.

116 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 2010 9.165 €΄ 000 61.640 19.265 89.968 15.253 (4.793) (7.192) 426.716 192.574 (47.172) (74.715) (124.354) 8.236.725 7.702.461 Total 6.637 2011 € ΄ 000 64.430 20.430 55.563 (6.321) 397.867 214.544 (75.220) (39.940) (86.921) (122.360) (142.484) 8.278.976 7.844.778 ------(12) 2010 1.583 €΄ 000 (3.549) (1.978) (1.978) (17.104) (328.583) (392.075) /balances ------(9) 1.548 2011 € ΄ 000 (4.361) (2.822) (2.822) (24.501) (484.301) (519.240) Intersegment transactions - - (5) 606 199 165 (504) (556) 2010 7.576 €΄ 000 16.847 (1.167) (2.170) (4.237) (4.237) - 129 147 227 (113) Other countries (191) (240) 1.262 2011 € ΄ 000 54.037 21.042 (1.810) (1.189) (3.267) (3.267) 960 677 2010 5.590 1.707 €΄ 000 55.027 15.356 (1.049) (6.058) 906.616 (11.539) (17.083) (39.492) (45.550) 1.036.820 Greece 368 697 (951) 4.571 1.630 2011 € ΄ 000 14.112 55.889 (8.310) (3.586) 779.693 (96.466) (15.335) (100.052) 1.009.965 202 (32) (182) (145) 2010 3.698 3.553 1.777 €΄ 000 49.821 60.244 18.238 12.552 (6.695) (1.784) (1.938) (5) Insurance Services 183 (155) (206) 1.982 6.806 6.600 2011 € ΄ 000 59.211 21.717 51.699 16.876 (2.777) (6.988) (2.127) Cyprus 2010 7.680 8.555 €΄ 000 98.543 63.465 58.005 (5.405) (5.886) 370.356 175.945 (99.409) (33.262) (35.078) 7.592.024 6.989.896 5.859 6.398 2011 € ΄ 000 62.516 58.432 12.620 (4.975) 343.500 198.641 (76.059) (98.227) (29.862) (45.812) 7.877.848 7.273.800 Banking & Financial services Profit/(loss) from ordinary operations before provisions Provisions for impairment of loans and advances Profit/(loss) before taxation assets Total liabilities Total Capital expenditure on plant & equipment property, and intangibles Turnover Net interest income Net fees and commission income/(expense) Net (losses)/gains on disposal and revaluation of foreign currencies and financial instruments Other income costs Staff plant & Depreciation of property, equipment and amortisation of intangibles Administrative and other expenses 41. SEGMENTAL ANALYSIS (continued) ANALYSIS 41. SEGMENTAL

HELLENIC BANK GROUP ANNUAL REPORT 2011 117WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 42. EVENTS AFTER THE STATEMENT OF FINANCIAL POSITION DATE New collective agreement

Under the collective agreement between the Cyprus Bankers Employers' Association and the Cyprus Union of Bank Employees (ETYK), signed on 12 January 2012 and effective from 1st January 2012, the staff defined benefit retirement plan which was valid for all employees whose retirement benefits were governed by the provisions of collective contracts, was repealed on 31 December 2011. As of 1st January 2012, all the affected employees became part of a Provident Fund into which will contribute 3% - 10% of basic monthly salary plus the equivalent Cost of Living Allowance (COLA). The corresponding monthly employer's contribution will amount to 14%. The amount of retirement benefit for which a provision has been made by the Bank, referring to the service of each employee until 31 December 2011, as well as the net assets of the Provident Fund A’ of the employees of Hellenic Bank Public Company Limited will be deposited into this Provident Fund. In addition, the freezing, for a period of two years, of annual salary increments, scale increments and the COLA was agreed.

Special Contribution of Private Sector employees

In accordance with the provisions of the legislation on Special Contribution of Private Sector Employees, which has been implemented as of 1st January 2012 and will last for two years, the employer is required to make, shared equally with employees, a special contribution on total gross monthly earnings, based on predetermined rates. The special contribution shall be deposited to the Consolidated Fund of the Republic.

Voluntary Participation of private creditors (PSI+)

On 21 February 2012, the finance ministers of the eurozone countries, agreed for the granting of new support to Greece. In addition, the terms of the private sector involvement plan (PSI+) were finalized. According to the terms of the plan on 12 March 2012, creditors, including Hellenic Bank, received new Greek Government Bonds having a face value equal to 31,5% of the face value of the debt exchanged and notes issued by the European Financial Stability Facility (EFSF) maturing within 24 months, having a face value equal to 15% of the face value of the debt exchanged. Any accrued and unpaid interest on the existing Greek Bonds was paid with 6-month securities issued by the EFSF.

43. RISK MANAGEMENT Introduction and overview The Group has exposure to the following risks from its use of financial instruments: Credit risk Liquidity risk Market risks 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 management of Group´s capital.

Group Risk Management

The management and monitoring of all Group risks is centralized under a single Division to which the following specialized risk management Departments report: Group Credit Risk Management Group Market and Liquidity Risks Management Group Operational Risks Management

118 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 43. RISK MANAGEMENT (continued)

Compliance Services (until December 2010 when the reporting line of this department changed on the basis of the relative Directive of the Central Bank of Cyprus).

These Departments report to the Group Risk Management Division, 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 Departments 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 other counterparty to a financial instrument fail to meet their contractual obligations. This risk principally arises from lending, trade finance activities and treasury operations. 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 objectives 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 lines with these policies. Group Credit Risk Management also issues directions to the various business lines 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 additional credit risk.

To achieve continuous and systematic monitoring and management of credit risk, Group Credit Risk Management is responsible for the assessment of the quality and performance of the Group’s credit portfolio in the Retail, Commercial and Corporate Banking Sectors, in order to verify whether the embedded credit risks are recognised and dealt with in an effective and timely manner.

To achieve the above, the Group employs sophisticated systems to measure credit risk as well as evaluate borrowers´ creditworthiness based on quantitative and qualitative criteria: 1. For the Retail sector, 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 the Commercial and Corporate sectors, an internal credit rating system (Credit Rating) is applied which classifies companies into credit rating bands, thus assisting both in the assessment of the credit worthiness of a company and in the rationalisation of pricing requirements according to the risk undertaken, while taking into account each company’s financial position and various qualitative criteria relating to the company as well as the market in which it operates.

3. For Treasury, there is a 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

HELLENIC BANK GROUP ANNUAL REPORT 2011 119WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 43. RISK MANAGEMENT (continued)

of the country and counterparty as determined by international credit assessment institutions while also taking into account their international classification.

Group Credit Risk Management validates the predictive capabilities of credit risk assessment systems at regular time intervals.

Exposure to credit risk

Loans and Placements advances to with other Debt customers banks securities 2011 2010 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Carrying amount 4.986.827 4.888.580 1.645.333 1.224.826 1.146.660 1.720.681 Individually impaired: Grade 2 (medium risk) ------50.491 13.874 Grade 3 (high risk) 875.187 669.822 - - - - 77.000 - - Provisions for impairment (554.487) (448.950) - - - - (84.053) (5.091) Carrying amount 320.700 220.872 - - - - 43.438 8.783

Past due but not impaired: Grade 1 (low risk) 436.379 546.366 ------Grade 2 (medium risk) 449.300 340.101 ------Grade 3 (high risk) 50.946 69.380 ------Carrying amount 936.625 955.847 ------Past due comprises: 0-30 days 204.662 233.980 ------30-60 days 95.649 168.177 ------60-90 days 88.182 123.672 ------90 days + 548.132 430.018 ------Carrying amount 936.625 955.847 ------

Neither past due nor impaired: Grade 1 (low risk) 2.950.433 2.988.038 1.645.333 1.224.826 1.103.222 1.711.898 Grade 2 (medium risk) 814.287 785.454 ------Grade 3 (high risk) 55.194 23.655 ------Carrying amount 3.819.914 3.797.147 1.645.333 1.224.826 1.103.222 1.711.898

Balances after individual impairment 5.077.239 4.973.866 1.645.333 1.224.826 1.146.660 1.720.681 Collective impairment (90.412) (85.286) ------Total carrying amount 4.986.827 4.888.580 1.645.333 1.224.826 1.146.660 1.720.681

Impairment On each date of the statement of financial position, the Group assesses whether there is objective evidence that financial assets other than assets at fair value through profit or loss are impaired and perform predictions. The relevant accounting policies are disclosed in Note 2.16 above.

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.

120 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 43. RISK MANAGEMENT (continued)

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 is becoming probable thatthe 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.

Collateral On the basis of the Group’s policy, 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 financial effects of collateral held against loans and advances to customers which are individually impaired at 31 December 2011 amounts to €294.386 thousand (2010: €119.696 thousand) and is calculated according to the Group’s Loan Policy taking into account among others and the forfeit value of the collaterals. The financial effects of collateral held against loans and advances to customers which are past due but not impaired at 31 December 2011 amounts to €840.313 thousand (2010: €791.048 thousand).

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

Loans and advances to Placements with Debt customers other banks securities Concentration by sector: 2011 2010 2011 2010 2011 2010 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Carrying amount 4.986.827 4.888.580 1.645.333 1.224.826 1.146.660 1.720.681 Businesses 3.104.721 2.809.376 ------Personal and professional 1.849.950 1.857.051 ------Bank - - - - 1.645.333 1.224.826 602.003 986.627 Government ------572.021 644.887 Other 677.055 756.388 - - - - 56.689 94.258 5.631.726 5.422.815 1.645.333 1.224.826 1.230.713 1.725.772 Provisions for impairment (644.899) (534.235) - - - - (84.053) (5.091) 4.986.827 4.888.580 1.645.333 1.224.826 1.146.660 1.720.681

HELLENIC BANK GROUP ANNUAL REPORT 2011 121WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 43. RISK MANAGEMENT (continued)

Businesses in the above table include manufacturing, trade, tourism and construction businesses, as presented in Note 17.

Loans and advances to Placements with Debt customers other banks securities Concentration 2011 2010 2011 2010 2011 2010 by location: €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Carrying amount 4.986.827 4.888.580 1.645.333 1.224.826 1.146.660 1.720.681 Eurozone countries 5.631.726 5.422.815 625.152 506.904 899.937 1.102.745 Other European countries - - - - 872.154 597.643 205.722 411.377 America - - - - 53.094 48.592 91.872 122.309 Oceania - - - - 877 590 19.731 82.317 Asia - - - - 93.834 69.054 - - - - Middle East - - - - 194 1.979 13.451 7.024 Africa - - - - 28 64 - - - - 5.631.726 5.422.815 1.645.333 1.224.826 1.230.713 1.725.772 Provisions for impairment (644.899) (534.235) - - - - (84.053) (5.091) 4.986.827 4.888.580 1.645.333 1.224.826 1.146.660 1.720.681

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 risk country of the issuer of the security and the counterparty respectively.

At 31 December 2011, the analysis of debt securities by Moody’s credit rating is as follows:

Debt Securities 2011 2010 €΄000 €΄000 Aaa 52.123 52.308 Aa1 63.222 194.822 Aa2 67.338 175.737 Aa3 140.007 825.171 A1 124.196 86.000 A2 67.206 59.085 A3 8.614 45.171 Baa1 to B3 551.535 281.993 Ca 33.083 - - Caa1 & Caa2 30.604 41 Unrated 8.732 353 1.146.660 1.720.681

122 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 43. RISK MANAGEMENT (continued)

Market and Liquidity Risks

Group Market and Liquidity Risk 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 Risk Management is responsible for the monitoring and management of Group market and liquidity risks within the framework of risk policies and limits defined byALCO.

The Group’s approach towards market and liquidity risk 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. Group Risk Management is responsible for developing policies and procedures for managing the risks and for the daily monitoring of their implementation. These policies and procedures are reviewed 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 conditions, without the Group incurring any additional costs.

The Group currently has operations mainly in Cyprus, in Greece and in Russia. The management of the liquidity of the Group’s banking units (including compliance with regulatory limits), 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 funding sources. This is mainly achieved through the maintenance of good and long standing relationships of trust with customers and through competitive and transparent pricing 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 Group Market and Liquidity Risk Management. At Group level, the liquidity of the euro is being monitored separately, as well as the liquidity of all foreign currencies, lumped together. In Greece, the liquidity of all currencies is also being monitored. The Group monitors liquidity separately for Cyprus and Greece as well as on a consolidated basis.

In managing liquidity risk for the euro, the Group calculates and monitors, among other ratios, the liquid assets ratio required by the Central Bank Directive on Prudential Liquidity in Euro. According to the Directive, the liquid assets ratio should always be equal or greater than 20%. Liquid assets comprise of cash, inter bank deposits and bonds.

The liquid assets ratio for the euro was as follows: 2011 2010 % % At 31 December 24,32 32,33 Average for the year 27,10 31,05 Maximum percentage for the year 33,82 39,08 Minimum percentage for the year 22,68 23,63

HELLENIC BANK GROUP ANNUAL REPORT 2011 123WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 43. RISK MANAGEMENT (continued)

At Group level, the liquidity of all foreign currencies is being monitored on an aggregate basis. According to the relevant Directive of the Central Bank of Cyprus on Prudential Liquidity in foreign currency, the Bank needs to maintain 70% of its total foreign currency deposits in highly liquid assets.

The liquid assets ratio in foreign currency during 2011 and 2010 was as follows: 2011 2010 % % At 31 December 70,74 70,90 Average for the year 75,03 72,22 Maximum percentage for the year 80,25 73,87 Minimum percentage for the year 70,74 69,71

The ratio is calculated based on items expressed in all foreign currencies other than euro.

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

Analysis of financial liabilities based on their remaining contractual maturity at 31 December 2011

Between Gross three Between nominal Within months one and Over Carrying (inflow)/ On three and one five five amount outflow demand months year years years

€΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Financial liabilities Deposits by banks 74.302 75.454 73.736 1.211 507 - - - - Customer deposits and other customer accounts 7.106.541 7.139.636 3.313.662 2.245.928 1.354.723 154.746 70.577 Derivatives 20.636 Cash inflows (103.140) (21.286) (54.934) (26.920) - - - - Cash outflows 103.578 21.343 55.224 27.011 - - - - Taxation payable 7.952 7.952 7.952 ------Deferred taxation liability 33.359 33.359 ------360 32.999 Other liabilities 282.110 282.096 50.031 22.934 8.237 3.323 197.571 Loan capital 319.878 386.966 - - 4.248 12.216 97.157 273.345 7.844.778 7.925.901 3.445.438 2.274.611 1.375.774 255.586 574.492

124 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 43. RISK MANAGEMENT (continued)

Analysis of financial liabilities based on their remaining contractual maturity at 31 December 2010

Between Gross three Between nominal Within months one and Over Carrying (inflow)/ On three and one five five amount outflow demand months year years years

€΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Financial liabilities Deposits by banks 158.761 162.176 120.626 10.375 123 - - 31.052 Customer deposits and other customer accounts 6.853.495 6.884.528 3.187.252 2.467.537 1.114.951 114.788 - - Derivatives 34.407 Cash inflows (685.312) (83.860) (564.416) (37.036) - - - - Cash outflows 702.411 84.437 580.155 37.819 - - - - Taxation payable 11.125 11.125 11.125 ------Deferred taxation liability 21.708 21.708 ------15.294 6.414 Other liabilities 267.889 267.888 42.628 28.911 7.381 3.917 185.051 Loan capital 355.076 421.621 - - 4.202 45.317 33.849 338.253 7.702.461 7.786.145 3.362.208 2.526.764 1.168.555 167.848 560.770

Market Risks

Market risks are derived 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 of continuous monitoring for the control of market risk undertaking and the prudential management of these 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 Risk Management monitors 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 Value at Risk (VaR) limits. The regulatory 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 be incurred as a result of changes in market conditions, with a confidence level of 99% and over a one day period, based on the historical data of foreign exchange rate parities over a period of one year.

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

2011 2010 €’000 €’000 At 31 December 4 6 Average for the year 17 19 Maximum amount for the year 51 56 Minimum amount for the year 2 1

HELLENIC BANK GROUP ANNUAL REPORT 2011 125WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 43. RISK MANAGEMENT (continued)

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

Analysis of assets and liabilities by currency at 31 December 2011

British Other Euro US Dollar pound Ruble currencies Total

€΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Assets Cash and balances with Central Banks 215.386 2.080 1.124 1.087 213 219.890 Placements with other banks 76.759 1.238.576 79.714 153.826 96.458 1.645.333 Loans and advances to customers 4.232.254 278.922 4.636 24.256 446.759 4.986.827 Debt securities 962.895 111.965 71.800 - - - - 1.146.660 Equity securities 7.622 5.725 - - - - 34 13.381 Property, plant and equipment 99.895 - - - - 12.614 - - 112.509 Intangible assets 19.816 - - - - 777 - - 20.593 Taxation receivable 3.976 - - - - 178 - - 4.154 Deferred taxation asset 21.484 - - - - 1.267 - - 22.751 Other assets 74.918 29.860 17 829 1.254 106.878 Total assets 5.715.005 1.667.128 157.291 194.834 544.718 8.278.976

Liabilities Deposits by banks 41.004 15.700 11.726 9 5.863 74.302 Customer deposits and other customer accounts 4.472.223 2.217.138 143.084 198.739 75.357 7.106.541 Taxation payable 7.952 ------7.952 Deferred taxation liability 31.441 - - - - 1.918 - - 33.359 Other liabilities 282.980 18.802 3 238 723 302.746 4.835.600 2.251.640 154.813 200.904 81.943 7.524.900 Loan capital 319.878 ------319.878

Equity Share capital 132.448 ------132.448 Reserves 299.151 ------299.151 Total equity attributable to equity holders of the parent company 431.599 ------431.599 Minority interest 2.599 ------2.599 434.198 ------434.198 Total liabilities and equity 5.589.676 2.251.640 154.813 200.904 81.943 8.278.976

Total position 125.329 (584.512) 2.478 (6.070) 462.775 Nominal value of currency derivatives (123.136) 581.770 (2.993) 6.540 (462.181)

Net currency position 2.193 (2.742) (515) 470 594

126 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 43. RISK MANAGEMENT (continued)

Analysis of assets and liabilities by currency at 31 December 2010

British Other Euro US Dollar pound Ruble currencies Total

€΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Assets Cash and balances with Central Banks 138.995 2.630 1.654 393 254 143.926 Placements with other banks 75.575 964.103 31.171 108.572 45.405 1.224.826 Loans and advances to customers 4.224.508 199.401 4.450 3.367 456.854 4.888.580 Debt securities 1.357.018 231.398 132.265 - - - - 1.720.681 Equity securities 18.531 7.274 - - - - 59 25.864 Property, plant and equipment 102.037 - - - - 13.181 - - 115.218 Intangible assets 20.450 - - - - 890 - - 21.340 Taxation receivable 197 ------197 Deferred taxation asset 19.082 - - - - 689 - - 19.771 Other assets 65.801 9.351 - - 315 855 76.322 Total assets 6.022.194 1.414.157 169.540 127.407 503.427 8.236.725

Liabilities Deposits by banks 71.511 84.369 249 - - 2.632 158.761 Customer deposits and other customer accounts 4.511.421 1.987.154 169.061 125.490 60.369 6.853.495 Taxation payable 11.125 ------11.125 Deferred taxation liability 21.708 ------21.708 Other liabilities 271.037 14.797 13 1.890 14.559 302.296 4.886.802 2.086.320 169.323 127.380 77.560 7.347.385 Loan capital 355.076 ------355.076

Equity Share capital 132.442 ------132.442 Reserves 399.506 ------399.506 Total equity attributable to equity holders of the parent company 531.948 ------531.948 Minority interest 2.316 ------2.316 534.264 ------534.264 Total liabilities and equity 5.776.142 2.086.320 169.323 127.380 77.560 8.236.725

Total position 246.052 (672.163) 217 27 425.867 Nominal value of currency derivatives (245.673) 668.202 (253) 1.908 (424.184)

Net currency position 379 (3.961) (36) 1.935 1.683

HELLENIC BANK GROUP ANNUAL REPORT 2011 127WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 43. RISK MANAGEMENT (continued)

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 gaps by currency, by time interval and in total (gap analysis).

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

Analysis of assets and liabilities based on their contractual repricing or maturity dates at 31 December 2011

Between Between Between three one and Non interest Within one one and three months and five Over five bearing month months one year years years Total

€΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Assets Cash and balances with Central Banks 28.135 191.755 ------219.890 Placements with other banks 33.549 1.535.904 40.980 34.900 - - - - 1.645.333 Loans and advances to customers - - 3.439.168 889.311 506.316 146.935 5.097 4.986.827 Debt securities - - 307.406 418.569 18.172 273.405 129.108 1.146.660 Equity securities 13.381 ------13.381 Property, plant and equipment 112.509 ------112.509 Intangible assets 20.593 ------20.593 Taxation receivable 4.154 ------4.154 Deferred taxation asset 22.751 ------22.751 Other assets 106.878 ------106.878 Total assets 341.950 5.474.233 1.348.860 559.388 420.340 134.205 8.278.976

Liabilities Deposits by banks - - 74.102 100 100 - - - - 74.302 Customer deposits and other customer accounts - - 4.191.162 1.729.279 1.166.535 19.565 - - 7.106.541 Taxation payable 7.952 ------7.952 Deferred taxation liability 33.359 ------33.359 Other liabilities 302.746 ------302.746 344.057 4.265.264 1.729.379 1.166.635 19.565 - - 7.524.900 Loan capital - - 17.436 162.682 - - - - 139.760 319.878 Total liabilities 344.057 4.282.700 1.892.061 1.166.635 19.565 139.760 7.844.778

Total position (2.107) 1.191.533 (543.201) (607.247) 400.775 (5.555) 434.198 Nominal value of interest rate derivatives - - 81.306 25.139 39.755 (124.200) (22.000) - - Net position (2.107) 1.272.839 (518.062) (567.492) 276.575 (27.555) 434.198

128 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 43. RISK MANAGEMENT (continued)

Analysis of assets and liabilities based on their contractual repricing or maturity dates at 31 December 2010

Between Between Between three one and Non interest Within one one and three months and five Over five bearing month months one year years years Total

€΄000 €΄000 €΄000 €΄000 €΄000 €΄000 €΄000 Assets Cash and balances with Central Banks 20.807 123.119 ------143.926 Placements with other banks 34.383 1.172.646 7.692 10.105 - - - - 1.224.826 Loans and advances to customers - - 3.409.027 901.121 416.254 154.603 7.575 4.888.580 Debt securities - - 313.918 746.720 58.925 377.848 223.270 1.720.681 Equity securities 25.864 ------25.864 Property, plant and equipment 115.218 ------115.218 Intangible assets 21.340 ------21.340 Taxation receivable 197 ------197 Deferred taxation asset 19.771 ------19.771 Other assets 76.322 ------76.322 Total assets 313.902 5.018.710 1.655.533 485.284 532.451 230.845 8.236.725

Liabilities Deposits by banks - - 129.721 9.228 19.812 - - - - 158.761 Customer deposits and other customer accounts - - 4.085.032 1.610.599 1.125.873 31.991 - - 6.853.495 Taxation payable 11.125 ------11.125 Deferred taxation liability 21.708 ------21.708 Other liabilities 302.296 ------302.296 335.129 4.214.753 1.619.827 1.145.685 31.991 - - 7.347.385 Loan capital - - 17.121 197.534 - - - - 140.421 355.076 Total liabilities 335.129 4.231.874 1.817.361 1.145.685 31.991 140.421 7.702.461

Total position (21.227) 786.836 (161.828) (660.401) 500.460 90.424 534.264 Nominal value of interest rate derivatives - - 98.610 49.723 2.755 (118.849) (32.239) - - Net position (21.227) 885.446 (112.105) (657.646) 381.611 58.185 534.264

In addition to monitoring interest rate gaps, interest rate risk management is carried out mainly by monitoring the sensitivity of the Group’s economic value (assets and liabilities) and net interest income under various interest rate change scenarios. The ALCO Committee is regularly informed about the magnitude/extent of interest rate risk and makes decisions for the management of the risk based on this information. Scenario calculations for interest rate changes consider both parallel and non-parallel shifts of the yield curve. Additionally, analyses based on stress testing scenarios are also performed.

HELLENIC BANK GROUP ANNUAL REPORT 2011 129WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 43. RISK MANAGEMENT (continued)

The table below presents the impact on net interest income and economic value from reasonably possible changes in interest rates: Net Interest Net Present Income Value €’000 €’000 2011 +100 basis points 32.797 (2.462) -100 basis points (32.797) 2.462

Net Interest Net Present Income Value 2010 €’000 €’000 +100 basis points 27.325 (6.912) -100 basis points (27.325) 6.912

Price Risk

It is derived from the undertaking of an open position in equities, bonds or derivatives. 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 financial results (net profits) and own funds from reasonably possible changes in equity prices which are traded on exchanges:

2011 2010

Net profits Own Funds Net profits Own Funds €’000 €’000 €’000 €’000

+15% change in index 168 865 580 2.174 -15% change in index (168) (865) (580) (2.174)

Operational risk

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

The Group has adopted the principles and provisions set out in the guidelines of the Directives of the Central Bank of Cyprus, the European Union, Basel II and CEBS - Committee for European Banking Supervisors (CEBS).

The Group has developed a strong framework for the management of operational risks, taking into account the risk appetite and tolerance for operational risk. The annual insurance coverage held by the Group, which is regarded as an effective tool for mitigating operational risks, is also being considered.

The Operational Risk Management Department, together with the business lines, is responsible for the identification, measurement, assessment, monitoring, control, mitigation and reporting of risk exposures and potential risks, aiming for an effective management of risks and at the same time contributing towards the development of adequate business recovery plans.

130 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 43. RISK MANAGEMENT (continued)

The «Risk Control Self Assessment» project is being implemented where departments, with the cooperation of the Department of Operational Risk Management, identify and assess potential risks. Internal integrated controls and measures for monitoring risks are also assessed. After the assessment, collection of Key Risk Indicators is agreed for the monitoring of the identified risks. An internal system for the recording of operational risks and events related to operational risks has been developed. Events recorded are related to losses, errors, near misses and system failures or interruptions.

Generally, risk management is done by the various business lines of the Group in their day to day key risk indicators and the risk register. Internal controls and checks that are embedded in the day to day procedures of departments are also being carried out.

Fair value of financial instruments

The table below presents the analysis of financial instruments measured at fair value on the basis of the three-level hierarchy by reference to the source of inputs used to derive the fair values. The levels of hierarchy of fair value are as follows: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Inputs for the asset or liability that are not based on observable market data.

31 December 2011 Level 1 Level 2 Level 3 Total €΄000 €΄000 €΄000 €΄000 Financial Assets Derivatives Foreign currency forwards - - 17.862 - - 17.862 Options - - 411 - - 411 Interest rate swaps - - 7.771 - - 7.771 - - 26.044 - - 26.044 Other financial assets held for trading Debt securities Government 403 32 - - 435 Banks 959 222 - - 1.181 Other issuers 1.098 1.685 - - 2.783 Equity securities 1.118 - - - - 1.118 3.578 1.939 - - 5.517 Available for sale investments Debt securities Government 15.156 1.372 - - 16.528 Banks 101.389 7.543 - - 108.932 Other issuers 16.096 4.781 - - 20.877 Equity securities 4.649 - - 7.614 12.263 137.290 13.696 7.614 158.600 Total 140.868 41.679 7.614 190.161

HELLENIC BANK GROUP ANNUAL REPORT 2011 131WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 43. RISK MANAGEMENT (continued)

31 December 2011 Level 1 Level 2 Level 3 Total €΄000 €΄000 €΄000 €΄000 Financial liabilities Derivatives Foreign currency forwards - - 457 - - 457 Currency swaps - - 38 - - 38 Options - - 411 - - 411 Interest rate swaps - - 19.730 - - 19.730 - - 20.636 - - 20.636 Total - - 20.636 - - 20.636

31 December 2010 Level 1 Level 2 Level 3 Total €΄000 €΄000 €΄000 €΄000 Financial Assets Derivatives Foreign currency forwards - - 646 - - 646 Currency swaps - - 14 - - 14 Futures - - 6.038 - - 6.038 Interest rate swaps - - 148 - - 148 - - 6.846 - - 6.846 Other financial assets held for trading Debt securities Government 880 3.561 - - 4.441 Banks 4.403 124 - - 4.527 Other issuers 1.243 - - - - 1.243 Equity securities 3.857 - - - - 3.857 10.383 3.685 - - 14.068 Financial assets designated at fair value through profit or loss Debt securities Government - - 82.930 - - 82.930 Equity securities 28 - - - - 28 28 82.930 - - 82.958 Available for sale investments Debt securities Government 34.390 9.190 - - 43.580 Banks 170.882 7.162 - - 178.044 Other issuers 33.599 1.681 - - 35.280 Equity securities 10.626 -- 11.353 21.979 249.497 18.033 11.353 278.883 Total 259.908 111.494 11.353 382.755

31 December 2010 Level 1 Level 2 Level 3 Total €΄000 €΄000 €΄000 €΄000 Financial liabilities Derivatives Foreign currency forwards - - 369 - - 369 Currency swaps - - 16.725 - - 16.725 Interest rate swaps - - 17.313 - - 17.313 - - 34.407 - - 34.407 Total - - 34.407 - - 34.407

132 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 43. RISK MANAGEMENT (continued)

The table below presents the analysis of financial instruments categorized at level 3 hierarchy:

Level 3

2011 2010

€΄000 €΄000 Balance 1 January 11.353 14.537 Losses recognized in consolidated income statement in the category «Net losses on disposal and revaluation of foreign currencies and financial instruments» (2.853) (620) Losses recognized in consolidated statement of comprehensive income (886) (2.564) 31 December 7.614 11.353

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

Pillar 1 – Minimum capital requirements Pillar 1 sets forth the guidelines for calculating the minimum capital requirements to cover the credit risk, the market risk and the 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.

HELLENIC BANK GROUP ANNUAL REPORT 2011 133WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 43. RISK MANAGEMENT (continued)

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 applied the Minimum Capital Approach to determine 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.

Based on the Central Bank Directive, disclosures by banks include information relating to their risk management objectives and 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. The Group’s Core Tier 1 ratio is marginally lower than the minimum 8% required ratio set by the Central Bank of Cyprus while Tier 1 and Capital Adequacy Ratio are above the minimum required limits of 9,5% and 11,5% respectively. The Group is already examining a Capital Strengthening Plan. In addition it takes all necessary actions to enhance the capital adequacy ratios, including the effective management of risk weighted assets and the strengthening of the capital base with profits, with main goal all ratios to exceed minimum required capital adequacy ratios.

The Group’s regulatory capital based on the Directive is analysed as follows: Core Tier 1 capital, which includes the share capital, share premium reserve, revenue reserve less proposed dividends, translation reserve. The carrying amount of intangible assets and other regulatory adjustments are deducted in arriving at core tier 1 capital. Original own funds, which include Core Tier 1 capital, capital securities and non cumulative perpetual capital securities. Supplementary own funds, which include subordinated loan capital and revaluation reserves.

Investments in subsidiary companies, which operate in the insurance sector, Pancyprian Insurance Ltd, Hellenic Alico Life Insurance Company Ltd, Hellenic Insurance Agency S.A. and Hellenic Insurance Agency Ltd amounting to €42.186 thousand (2010: €42.186 thousand), are deducted from the total of original and supplementary own funds.

134 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 43. 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:

2011 2010 €΄000 €΄000 Own funds Core Tier 1 capital 384.690 481.884

Original own funds 543.261 641.271 Supplementary own funds 196.081 207.460

Total original and supplementary own funds 739.342 848.731 Less: Participation in insurance companies and other regulatory adjustments (43.133) (42.186) Total own funds 696.209 806.545

Risk weighted assets Credit risk 4.830.650 4.812.463 Market risk 40.113 51.875 Operational risk 529.900 514.275 5.400.663 5.378.613

Core Tier 1 ratio 7,1% 9,0%

Tier 1 ratio 10,1% 11,9%

Tier 2 ratio 3,6% 3,9%

Capital adequacy ratio 12,9% 15,0%

HELLENIC BANK GROUP ANNUAL REPORT 2011 135WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 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 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 2011, confirm that to the best of our knowledge:

(a) the annual financial statements presented in pages 62 to 135:

(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 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 Kyriakos E. Georgiou Non Executive Member of the Board Kyriacos I. Droushiotis Non Executive Member of the Board Stavros Kremmos Non Executive Member of the Board Makis Keravnos Executive Member of the Board Dr Marios R. Clerides Executive Member of the Board

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

Nicosia, 30 March 2012

136 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 HELLENIC BANK GROUP OTHER GROUP INFORMATION

138 BOARD OF DIRECTORS OF THE GROUP’S MAIN SUBSIDIARY COMPANIES 139 OFFICES AND BRANCH NETWORK 144 SHAREHOLDER INFORMATION AND INVESTOR RELATIONS WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 BOARD OF DIRECTORS OF THE GROUP’S MAIN SUBSIDIARY COMPANIES

HELLENIC BANK (INVESTMENTS) LTD HELLENIC ALICO LIFE INSURANCE COMPANY LTD Charalambos P. Panayiotou, Chairman Makis Keravnos, Chairman George Chr. Mavroudis Andreas E. Vasiliou, Vice-Chairman Kyriakos E. Georgiou Antonios I. Karpasitis Kyriacos M. Papadopoulos Georgios K. Pavlou George C. Koutsos Antonis I. Pierides Nicos S. Raftis (resigned on 30 June 2011) Eliodoros M. Eliodorou Glafkos G. Mavros Theognosia Apostolidou, Secretary (resigned on 31 December 2011) Stavros Kremmos (appointed on 21 October 2011) HELLENIC BANK TRUST & FINANCE Eliodoros M. Eliodorou CORPORATION LTD (appointed on 1 January 2012) Eliodoros M. Eliodorou, Maria H. Vovides, Secretary (Chairman from 1 January 2011) Charalambos G. Phokas (resigned on 11 October 2011) LLC CB 'HELLENIC BANK' (Russia) Marios P. Christoforides Andreas P. Panayiotou, Chairman (appointed on 5 January 2011) Andreas M. Moushouttas Kyriacos M. Papadopoulos Kyriakos E. Georgiou (appointed on 1 March 2012) Georgios K. Pavlou Christiana Konomou, Secretary Glafkos G. Mavros (resigned on 11 January 2012) Antonis Rouvas PANCYPRIAN INSURANCE LTD Petros Ioannides Ioannis Ch. Charilaou, Chairman (appointed on 6 February 2012) Thanos Michael Iacovos Aristidou Iacovos C. Constantinides Antonis I. Pierides (resigned on 2 May 2011) Glafkos G. Mavros (resigned on 31 December 2011) Andreas Panteli Eliodoros M. Eliodorou (appointed on 1 January 2012) George Iacovou (appointed on 1 January 2012) Petros Arsalides, Secretary

138 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 OFFICES AND BRANCH NETWORK

HEAD OFFICE AGLANTZIA BRANCH STAVROU BRANCH Corner Limassol Avenue 3 Aglantzias av. & Angelou 71 Stavrou Ave., & 200 Athalassa Avenue Vlachou, 2108 Nicosia 2035 Strovolos, Nicosia 2025 Strovolos, Tel: 22 501 622, Fax: 22 444 130 Tel: 22 501 501, Fax: 22 491 057 P.O. Box 24747,1394 Nicosia [email protected] [email protected] SWIFT/BIC: HEBA CY 2N [email protected] Tel: 22 500000, Fax: 22 500050 PLATY BRANCH KENNEDY BRANCH 100A Kyrenia Ave., Platy, Website: 30 Kennedy Ave. & 25th March, 2114 Aglantzia, Nicosia http://www.hellenicbank.com 1087 Nicosia Tel: 22 501 514, Fax: 22 331 504 Tel: 22 501 404, Fax: 22 875 307 [email protected] E-mail: [email protected] [email protected] TSERIOU BRANCH LATSIA BRANCH 93A Tseriou Ave., 2043 Nicosia Service Line: 8000 99 99 79A Arch. Makarios Ave., Tel: 22 501 521, Fax: 22 327 299 For calls from abroad: 2223 Latsia [email protected] ++357 22 743 843 Tel: 22 501413, Fax: 22 488345 [email protected] DHALI BRANCH 1a Arch. Makarios III Str., NICOSIA DISTRICT DIGHENIS AKRITAS 2540 Dhali, Nicosia MAIN BRANCH Tel: 22 501 532, Fax: 22 524 780 PERSONAL BANKING DIVISION 92 Dighenis Akritas Ave. & Kritis, [email protected] 1061 Nicosia ELEFTHERIAS SQUARE SWIFT/BIC: HEBA CY 2N NIC LAKATAMIA BRANCH BRANCH Tel: 22 500 500, Fax: 22 500 560 28 Arch. Makarios III Ave., 1 Evagorou Ave., Mitsis Building 1, [email protected] 2324 Kato Lakatamia, Nicosia Eleftherias Sq., 1065 Nicosia Tel: 22 501 541, Fax: 22 320 986 SWIFT/BIC: HEBA CY 2N NIC ACROPOLIS BRANCH [email protected] Tel: 22 501 000, Fax: 22 501 088 53 Acropolis Ave. & [email protected] Thermopylon St., PARISSINOS BRANCH 2012 Strovolos, Nicosia Archangelos Ave. & KOKKINOTRIMITHIA BRANCH Tel: 22 501 425, Fax: 22 319 112 7 Kalidonion Str., Archangelos, 8C Gr. Afxentiou, [email protected] 2410 Engomi, Nicosia 2660 Kokkinotrimithia Tel: 22 501 553, Fax: 22 354 630 Tel: 22 501 362, Fax: 22 835 428 AGIOS ANTONIOS BRANCH [email protected] [email protected] Corner 12A Evgenias & Antoniou Theodotou Str. ENGOMI BRANCH ANTHOUPOLIS BRANCH & Klimentos, 1061 Nicosia 3 Aheon & Agamemnonos, 64A St. George Street, Tel: 22 501 442, Fax: 22 433 490 2413 Engomi, Nicosia 2304 Nicosia [email protected] Tel: 22 501 563, Fax: 22 358 029 Tel: 22 501 381, Fax: 22 373 335 [email protected] [email protected] AGIOS DHOMETIOS BRANCH 79 Gregoriou Afxentiou Str., BUSINESS SERVICES DIVISION ATHALASSA BRANCH 2368 Nicosia 173 Athalassa Ave., Tel: 22 501 453, Fax: 22 771 354 DIGHENIS AKRITAS 2025 Strovolos, Nicosia [email protected] BUSINESS CENTER Tel: 22 501 800, Fax: 22 501 990 92 Dighenis Akritas Ave. & Kritis, [email protected] STROVOLOS AVE. BRANCH 1061 Nicosia, 56 Strovolos Ave. & Ay. Marinas, P.O. Box 24747, 1394 Nicosia DEMOSTHENIS SEVERIS 2018 Nicosia Tel: 22 500 500, Fax: 22 765 107 BRANCH Tel: 22 501 463, Fax: 22 316 153 [email protected] 15 Demosthenis Severis Ave., [email protected] 1080 Nicosia ATHALASSA AVE Tel: 22 501 332, Fax: 22 667 813 KAKOPETRIA BRANCH BUSINESS CENTER [email protected] 45 Arch. Makarios Ave., 173 Athalassas Ave., 2025 Nicosia, 2810 Kakopetria P.O. Box 24529, 1300 Nicosia KANTARAS BRANCH Tel: 22 501 472, Fax: 22 923 461 Tel: 22 501 813, Fax: 22 501 991 18 Kantara Ave., 1037 Nicosia [email protected] [email protected] Tel: 22 501 392, Fax: 22 435 500 [email protected] PRODROMOU BRANCH 25 Prodromou, 1095 Nicosia Tel: 22 501 487, Fax: 22 676 881 [email protected]

HELLENIC BANK GROUP ANNUAL REPORT 2011 139WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 CORPORATE BANKING DIVISION COURT SQUARE BRANCH P.O. Box 56588, 3308 Limassol Arch Makarios Ave. & Tel: 25 502 002, Fax: 25 502 081 NICOSIA CORPORATE CENTER Grivas Dhigenis, 3105 Limassol [email protected] 173 Athalassa Ave., Tel: 25 502 604, Fax: 25 376 288 2025 Strovolos, Nicosia [email protected] ARCH MAKARIOS Tel: 22 501 886, Fax: 22 501 996 BUSINESS CENTER [email protected] YERMASOYIA BRANCH 56 Arch. Makarios III Ave., 54 George A' Str., 3065 Limassol INTERNATIONAL BANKING Old Rd. Limassol - Nicosia, P.O. Box 51474, 3505 Limassol DIVISION 4047 Limassol Tel: 25 502 718, Fax: 25 502 780 Tel: 25 502 863, Fax: 25 326 121 [email protected] NICOSIA INTERNATIONAL [email protected] BUSINESS CENTER CORPORATE BANKING DIVISION 173 Athalassa Ave., MUNICIPAL MARKET BRANCH 2025 Strovolos, Nicosia 23 Georghiou Ghennadiou Str. LIMASSOL CORPORATE CENTER Tel: 22 501 832 / 501 833 / 501 835 & Hadjiloizi, 3041 Limassol Corner 52 Gladstonos & Fax: 22 501 993 Tel: 25 502 873, Fax: 25 373 121 Anaxagora Str., 3505 Limassol [email protected] [email protected] Tel: 25 502 006, Fax: 25 502 082 [email protected] THEMISTOKLI DERVI MESA YITONIA BRANCH INTERNATIONAL BUSINESS Arch. Makarios III Ave & INTERNATIONAL BANKING CENTRE 43E St. Lenas, 4003 Limassol DIVISION Corner Themistokli Dervi Ave. Tel: 25 502 881, Fax: 25 753 864 LIMASSOL INTERNATIONAL & 11 Florinis Str. ‘City Forum’ [email protected] BUSINESS CENTER Building 7th Floor, Suite 1 Corner 52 Gladstonos & 1065 Nicosia FRANKLIN ROUSVELT BRANCH Anaxagora Str., 3505 Limassol Tel: 8000 99 99, Fax 22 663 168 138 Franklin Rousvelt Str., Tel: 25 502 040, [email protected] 3011 Limassol Fax: 25 371 617 / 367 324 Tel: 25 502 895, Fax: 25 573 696 [email protected] LIMASSOL DISTRICT [email protected] LARNACA DISTRICT PERSONAL BANKING DIVISION ANEXARTISIAS & SP. ARAOUZOU BRANCH PERSONAL BANKING DIVISION ARCH MAKARIOS AVE. BRANCH 137 Sp. Araouzos Ave. 131 Arch Makarios Ave. & Anexartisias, 3036 Limassol ZENONOS KITIEOS BRANCH & Ioanni Polemi Str., 3021 Limassol Tel: 25 502 502, Fax: 25 359 032 2 Zenonos Kitieos Str., Tel: 25 502 300, Fax: 25 731 031 [email protected] P.O. Box 40170, 6023 Larnaca [email protected] SWIFT/BIC: HEBA CY 2N LAR AYIA PHYLA BRANCH Tel: 24 503 000, Fax: 24 654 366 AKROTIRI BRANCH 12 1st April St., Ayia Phyla, [email protected] RAF Station Shopping Centre, 3116 Limassol Princes St., 3771 Akrotiri, Tel: 25 502 511, Fax: 25 730 181 DHEKELIA BRANCH Limassol [email protected] Amenities Village, 6370 Dhekelia Tel: 25 502 810, Fax: 25 952 588 Tel: 24 503 351, Fax: 24 723 539 [email protected] KATO POLEMIDIA BRANCH [email protected] 105 Nicos Pattichis Ave., AYIOS GEORGIOS BRANCH Kato Polemidia, 4155 Limassol ARCH MAKARIOS III BRANCH 2 Promachon Eleftherias Ave., Tel: 25 502 523, Fax: 25 731 570 89 Arch. Makarios III Ave., 4103 Limassol [email protected] Filanda Court, 6017 Larnaca Tel: 25 502 801, Fax: 25 310 638 Tel: 24 503 306, Fax: 24 636 387 [email protected] ACADEMIAS BRANCH [email protected] 17 Spyrou Kyprianou Str., GLADSTONOS & ANAXAGORA Linopetra, 4043 Limassol NICOS PATTICHIS AVE. BRANCH BRANCH Tel: 25 502 837, Fax: 25 314 985 Corner Mystras & United Nations 52 Gladstonos Ave. & Anaxagora, [email protected] 6042 Larnaca P.O.Box 51474, 3505 Limassol Tel: 24 503 413, Fax: 24 655 141 Tel: 25 502 000, Fax: 25 367 324 BUSINESS SERVICES DIVISION [email protected] [email protected] GLADSTONOS & PHOTIS KO- SPYROS KYPRIANOU AVE. PAPHOS STR. BRANCH LAKIDES BUSINESS CENTER BRANCH 15 Paphos Str., 3052 Limassol Corner 52 Gladstonos Corner 2 Stratigou Timayia Tel: 25 502 844, Fax: 25 570 974 & Anaxagora Str., Corner 52 & Averof, 6052 Larnaca [email protected] Gladstonos & Photis Kolakides Str., Tel: 24 503 413, Fax: 24 669 590 [email protected]

140 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 DIONYSOU AVE. BRANCH FAMAGUSTA DISTRICT TOMBS OF THE KINGS BRANCH Dionysou & 1 Socratous Str., 28 Tombs of the Kings Ave., Pyla Tourist Area, 7081 Larnaca PERSONAL BANKING DIVISION Kato Paphos, 8046 Paphos Tel: 24 503 420, Fax: 24 644 323 Tel: 26 505 122, Fax: 26 946 920 [email protected] KAPPARIS BRANCH [email protected] 2 Kapparis Ave., LIVADIA BRANCH 5290 Paralimni, Famagusta PEYIA BRANCH 43B P. Kyprianou Str., Tel: 23 504 380, Fax: 23 740 228 Peyia Village Sq., 8560 Peyia 7060 Livadia, Larnaca [email protected] Tel: 26 505 131, Fax: 26 621 786 Tel: 24 503 441, Fax: 24 662 744 [email protected] [email protected] SOTIRA BRANCH 6 Heroon Str., 5390 Sotira, KATO PYRGOS BRANCH DROMOLAXIA BRANCH Famagusta 38A' Nikolaou Papageorgiou Str., 2 Eleftherias Ave., Tel: 23 504 391, Fax: 23 829 120 2940 Kato Pyrgos, Nicosia 7020 Dromolaxia [email protected] Tel: 26 505 140, Fax: 26 522 580 Tel: 24 503 452, Fax: 24 425 190 [email protected] [email protected] VRYSOULLES BRANCH 1-4 C. Elia Ave., Syn. Ay. Georgiou, LYCEUM KYKKOU BRANCH PHANEROMENI BRANCH 5522 Vrysoulles, Famagusta El. Venizelou & 33 N. Nicolaides 145A Phaneromenis Ave., Tel: 23 504 358, Fax: 23 962 878 Ave., 6031 Larnaca [email protected] 8021 Paphos Tel: 24 503 461, Fax: 24 654 740 Tel: 26 505 151, Fax: 26 949 677 [email protected] PARALIMNI BRANCH [email protected] 85, 1st April Avenue, ORMIDHIA BRANCH Paralimni, Famagusta DANAE AVE. BRANCH 15 Demokratias Str., Tel: 23 504 300, 5 Danae Ave., 8042 Paphos 7530 Ormidhia Fax: 23 827 045 / 820 780 Tel: 26 505 160, Fax: 26 964 262 Tel: 24 503 470, Fax: 24 722 782 [email protected] [email protected] [email protected] TEFKROU ANTHIA BRANCH APOSTOLOU PAVLOU BRANCH BUSINESS SERVICES DIVISION 7 Tefkrou Anthia Str., 27 Apostolos Pavlos Ave., P.O. Box 30091, P.O. Box 60074, 8046 Paphos LARNACA & FAMAGUSTA 5330 Ayia Napa, Famagusta Tel: 26 505 616, Fax: 26 945 483 BUSINESS CENTER Tel: 23 504 345, Fax: 23 722 636 [email protected] Corner Gr. Afxentiou & [email protected] Gladstonos Str., 6023 Larnaca, NICODEMOU MYLONA BRANCH P.O. Box 40434, 6304 Larnaca DHERYNIA BRANCH 6 Nicodemou Mylona Str., Tel: 24 503 000, Fax: 24 650 040 4 Demokratias Str., P.O. Box 60200, 8126 Paphos [email protected] 5380 Dherynia, Famagusta Tel: 26 505 010, Fax: 26 941 484 Tel: 23 504 355, Fax: 23 730 188 [email protected] CORPORATE BANKING DIVISION [email protected] POLIS CHRYSOCHOUS BRANCH LARNACA & FAMAGUSTA BUSINESS SERVICES DIVISION 2 Arch. Makarios III Ave., CORPORATE CENTER 8820 Polis Chrysochous Corner Gr. Afxentiou & FAMAGUSTA BUSINESS CENTER Tel: 26 505 191, Fax: 26 322 370 Gladstonos Str., 85, 1st April Ave., 5280 Paralimni, [email protected] P. O. Box 51474, 6023 Larnaca P.O.Box 33011, 5310 Paralimni, Tel: 24 503 000, Fax: 24 656 919 Famagusta YEROSKIPOU BRANCH [email protected] Tel: 23 504 300, Fax: 23 827 045 Yeroskipou Square, [email protected] 8201 Yeroskipou, Paphos INTERNATIONAL BUSINESS Tel: 26 505 220, Fax: 26 964 622 DIVISION PAPHOS DISTRICT [email protected]

LARNACA INTERNATIONAL PERSONAL BANKING DIVISION COURT AREA BRANCH BUSINESS CENTER 31 N. Nicolaides Ave., 3–7 Arch. Makarios III Ave., ELLADOS AVE BRANCH 8011 Paphos 6016 Larnaca Ellados Ave. & Xinaridou Rd., Tel: 26 505 231, Fax: 26 931 878 P.O. Box 40434, 6304 Larnaca 8020 Paphos [email protected] Tel: 24 503 480, Tel: 26 505 103, Fax: 26 953 077 Fax: 24 659 101, 24 625 187 [email protected] CHLORAKA BRANCH [email protected] 8 Eleftherias Ave., 8220 Chloraka Tel: 26 505 242, Fax: 26 271 757 [email protected]

HELLENIC BANK GROUP ANNUAL REPORT 2011 141WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 BUSINESS SERVICES DIVISION PERISTERI BRANCH THESSALONIKI 31 Ethnarhou Makariou Str., PAPHOS BUSINESS CENTER 121 31 Peristeri, Attica 3 Ionos Dragoumi 27 Apostolos Pavlos Ave., Tel: +30 210 5706000 546 24 Thessaloniki 8046 Paphos Fax: +30 210 5722618 Tel: +30 2310 592400 P.O. Box 60074, 8100 Paphos [email protected] Fax: +30 2310 488 133 Tel: 26 505 626, Fax: 26 942 228 [email protected] [email protected] GLYFADA BRANCH 6 G. Kondili Str., NEA EGNATIA BRANCH P.O. Box 30597, 162 Konstantinou Karamanli Ave. & GREECE BRANCH 166 75 Glyfada, Attica 40 Mavromichali Str., NETWORK Tel: +30 210 8986600 P.O. Box 10181, Fax: +30 210 8980359 562 24 Thessaloniki ATHENS [email protected] Tel: +30 2310 392100 Fax: +30 2310 320240 HEAD OFFICE NIKAIA BRANCH [email protected] 91 Michalakopoulou & 215 Petrou Ralli Ave., Kerasountos, 184 50 Nikaia, Attica EVOSMOS BRANCH P.O. Box 11528, Athens, Attica Tel: +30 210 4257020 5 Elatis Str & Ant Tritsi Str., Tel: +30 210 3384800 Fax: +30 210 4257052 562 24 Evosmos, Thessaloniki Fax: +30 210 3638163 [email protected] Tel: +30 2310 588510 http: //www.hellenicbank.gr Fax: +30 2310 588505 [email protected] NEA SMYRNI BRANCH evosmos@hellenicbank 53 Eleftheriou Venizelou Ave., KOLONAKI BRANCH 171 23 Nea Smyrni, Attica IOANNINA 11 Vas. Sofias Ave. & Merlin Str., Tel: +30 210 9374640 P.O. Box 30597, Fax: +30 210 9374552 IOANNINA BRANCH 106 71 Athens, Attica [email protected] 20 Averof Str., Tel: +30 210 3384830 452 21 Ioannina, Ioannina Fax: +30 210 3617802 PIRAEUS BRANCH Tel: +30 6510 69500 [email protected] 4 Heroon Polytechniou, Fax: +30 6510 22437 185 31 Piraeus, Attica [email protected] AGHIOS DEMETRIOS BRANCH Tel: +30 210 4115740 273 Vouliagmenis Ave., Fax: +30 210 4115730 LARISA P.O. Box 30597, [email protected] 172 36 Aghios Dimitrios, LARISA BRANCH Attica PANORMOU BRANCH 35 Great Alexander, Tel: +30 210 9793751 68 Panormou Str., 412 22 Larisa Fax: +30 210 9768378 P.O.BOX 30597 Tel: +30 2410 539450 [email protected] 115 23 Athens, Attica Fax: +30 2410 539446 Tel: +30 30 6930880 [email protected] HOLARGOS BRANCH Fax: +30 210 6982008 250 Mesogion Ave., [email protected] PATRA P.O. Box 30597, 155 61 Holargos, Attica KOROPI BRANCH PATRA BRANCH Tel: +30 210 6595900 84 Vassileos Constantinou Str., 45 Ay. Andreou & 3 Kolokotroni, Fax: +30 210 6522649 194 00 Koropi, Attica 262 21, Patra [email protected] Tel: +30 210 6621170 Tel: +30 2610 240370 Fax: +30 210 6621008 Fax: +30 2610 274091 IRAKLION ATTIKIS BRANCH [email protected] [email protected] Corner Andrianou & 352 Iraklion Ave., P.O. Box 30597, ASPROPYRGOS BRANCH CRETE 141 22 Iraklion Attikis 43 Dimokratias Ave., Tel: +30 210 2897700 193 00 Aspropyrgos, Attica CHANIA BRANCH Fax: +30 210 2850931 Tel: +30 210 5581055 34 E.Venizelou & Michelidaki, [email protected] Fax: +30 210 5573259 73132 Chania, Crete [email protected] Tel: +30 2821 026 100 19 KIFISSIA BRANCH Fax: +30 2821 040 575 3 Miltiades Str., [email protected] 145 62 Kifissia, Attica Tel: +30 210 6283300 Fax: +30 210 8082865 [email protected]

142 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 GREECE BUSINESS HELLENIC ALICO LIFE UKRAINE - KIEV

SERVICES DIVISION INSURANCE COMPANY LTD st 66 Grivas Dighenis Ave. 3rd Floor 8 Rybalska Street, 1 Floor, Kyiv, 01011, Ukraine KOLONAKI BUSINESS CENTRE 1080 Nicosia, Tel.: +380 44 288 7210 11 Vas. Sofias Ave. & Merlin Str. P.O. Box 20672, 1662 Nicosia Fax: +380 44 288 7209 106 71 Athens Tel: 22 501 581, Fax: 22 450 750 [email protected] Tel: +30 2103 384 810 [email protected] Fax: +30 2103 643 163 [email protected] HELLENIC BANK TRUST & FINANCE CORPORATION LTD HOLARGOS BUSINESS CENTRE Corner Limassol & 200 Athalassas 250 Mesogion Ave. Avenue, 2025 Strovolos, 155 61 Holargos P.O. Box 24747, 1394 Nicosia Tel: +30 2106 595 920 SWIFT: HEBA CY 2N Fax: +30 2106 537 567 Tel: 22 500 821 / 500 823, [email protected] Fax: 22 500 084 [email protected] NIKAIA BUSINESS CENTRE 215 Petros Rallis Ave. LLC CB HELLENIC BANK (Russia) 184 50 Nikaia, Attica 21 Rozhdestvenskiy Bulvard Tel: +30 2104257030 Building 1, Moscow 107045, Fax: +30 2104 257 537 Russian Federation [email protected] Tel: +74952870287 Fax: +74952870295 THESSALONIKI BUSINESS [email protected] CENTRE 3 Ionos Dragoumi Str. 546 25 Thessaloniki REPRESENTATIVE Tel: +30 2310 592 430 OFFICES Fax: +30 2310 554 314 [email protected] SOUTH AFRICA - JOHANNESBURG GREECE CORPORATE BUSINESS CENTRE Sandton Square, Corner Fifth & Maude Streets, CORPORATE BUSINESS CENTRE 4th Floor, West Tower, Sandton & LEASING 2146, South Africa P.O.BOX 91 Michalacopoulou & Kerasountos 783392 Sandton, JHB, 115 28 Athens 2146, South Africa Tel: +30 2103 277 800 Tel: +27 11 7830155/6, Fax: +30 2107 702 512 Fax: +27 11 7830157 [email protected] [email protected]

SUBSIDIARY COMPANIES RUSSIA - MOSCOW MAIN OFFICES 15 Savvinskaya Nab, Savvinskaya HELLENIC BANK Office Bldg - Japan House, (INVESTMENTS) LTD Moscow 119435, Russia 31 Kyriacos Matsis Ave., Τel.: +7 (495) 792 99 58 / 88 / 89 2nd Floor., 1082 Nicosia, Fax: +7 (495) 792 99 85 P.O. Box 24747, 1394 Nicosia [email protected] Orders: 22 500 140 / 500 145 [email protected] Tel: 22 500 100, Fax: 22 500 110 [email protected] ST. PETERSBURG PANCYPRIAN INSURANCE CO. LTD 23 Professora Popova Str., 66 Grivas Dhigenis Ave., Office 311, 197376 St. Petersburg, Pancyprian Bldg, 1080 Nicosia, Russia P.O. Box 24747, 1394 Nicosia Τel.: +7 (812) 313 0300 Tel: 22 743 743, Fax: 22 677 656 Fax: +7 (812) 313 0400 [email protected] [email protected]

HELLENIC BANK GROUP ANNUAL REPORT 2011 143WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 SHAREHOLDER INFORMATION

The shareholders may contact the Shares & Bonds Registry Department for matters relating to the Company's registered securities, certificates, interest on Bonds and Capital Securities.

SHARES & BONDS REGISTRY DEPARTMENT

Corner Limassol Avenue & 200 Athalassa Avenue 1st Floor 2025 Strovolos P.O.Box 24747, 1394 Nicosia, Cyprus Telephones: 22 500 649 - 50, Fax: 22 500 065 E-mail: [email protected]

INVESTOR RELATIONS

Institutional investors, brokers, investment houses and other investment analysts may direct their enquiries relating to the evaluation and the financial strength of the Group to the Investor Relations Department.

Corner Limassol Avenue & 200 Athalassa 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 Athalassa 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 tel: 8000 99 99

144 HELLENIC BANK GROUP ANNUAL REPORT 2011 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 DESIGN AND LAYOUT: AD & THE CITY PRINTING AND BINDING: CHR. NICOLAOU & SONS LTD WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502 WorldReginfo - 3f3350c6-a59d-4e55-8e77-d661691b4502