SFS GROUP PUBLIC COMPANY LIMITED

(Formerly SHARELINK FINANCIAL SERVICES LIMITED)

ANNUAL REPORT AND CONSOLIDATED

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2003

SFS GROUP PUBLIC COMPANY LIMITED (Formerly SHARELINK FINANCIAL SERVICES LIMITED) ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 Contents Page Board of Directors, Bankers and Other Professional Advisers 1 Report of the Board of Directors 2 – 3 Report of the Auditors 4 Consolidated Income Statement 5 Consolidated Balance Sheet 6 Consolidated Statement of Changes in Equity 7 – 8 Consolidated Cash Flow Statement 9 – 10 Notes to the Consolidated Financial Statements 11 – 47

SFS GROUP PUBLIC COMPANY LIMITED 1 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) BOARD OF DIRECTORS, BANKERS AND OTHER PROFESSIONAL ADVISERS FOR THE YEAR ENDED 31 DECEMBER 2003 Board of Directors Christodoulos Ellinas Chairman and CEO Philip X. Larkos Vice-Chairman and CFO Dr. John Pitsillos Executive Director Marios St. Ioannides Executive Director Neophytos Neophytou Director Loizos A. Loizou Director Charalambos Papanicolaou Alternate Director

(of Loizos A. Loizou) Secretary SFS Custodian & Trust Services Limited Bankers Bank of Cyprus Limited Alpha Bank Limited Hellenic Bank Limited Universal Bank Limited National Bank of Greece (Cyprus) Limited The Cyprus Popular Bank Limited HSH Nordbank AG Barclays Bank PLC Arab Bank Plc Auditors Deloitte & Touche Legal Advisors Georgiades & Pelides George A. Papaioannou George L. Savvides & Co L. Papaphilippou & Co LICA LAW PARTNERS Orphanides Pamborides & Associates Papacharalambous & Angelides Registered Office Ellinas House 6 Theotoki Street CY-1055 Nicosia Cyprus

SFS GROUP PUBLIC COMPANY LIMITED 2 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) REPORT OF THE BOARD OF DIRECTORS FOR THE YEAR ENDED 31 DECEMBER 2003 The Board of Directors present their report and audited financial statements for the year ended 31 December 2003. Financial Statements The consolidated financial statements for the year include the financial statements of SFS Group Public Company Limited (Formerly Sharelink Financial Services Limited) ("the Company") and all its subsidiaries. The names of the subsidiaries are shown in note 23 of the consolidated financial statements. The consolidated financial statements include the share of the Group in the profits or losses of associates. The names of the associates are shown in note 17 of the consolidated financial statements. Activities The principal activities of the Group are the provision of local and international financial services, investment banking, stockbroking, proprietary trading of securities, shipping, investment in immovable property and property development, commercial and other related activities. Results The consolidated income statement for the year is set out on page 5. Dividend The Board of Directors do not recommend the payment of dividend for the year ended 31 December 2003 since there are accumulated losses and as a result any dividend distribution is not allowed per the Companies Law, Cap. 113. The profit for the year is transferred to reserves. Share Capital 31.12.2003 31.12.2002 Number £ Number £ Authorised Ordinary shares of £0,10 (2002:£0,20) each 1.739.579.710 173.957.971 1.000.000.000 200.000.000 Issued and fully paid Ordinary shares of £0,10 (2002:£0,20) each 260.420.290 26.042.029 260.420.290 52.084.058 Following an ordinary resolution at an Extraordinary General Meeting of the Company held on 26 November 2003, the authorised share capital of the Company decreased from £200.000.000 divided into 1.000.000.000 ordinary shares of £0,20 each to £173.957.971 divided into 1.739.579.710 ordinary shares of £0,10 each. In addition the issued share capital of the Company decreased from £52.084.058 divided into 260.240.290 ordinary shares of nominal value £0,20 each to £26.042.029 divided into 260.240.290 ordinary shares of nominal value £0,10 each. The decrease in share capital was endorsed by the Nicosia District Court on 30 January 2004 and was filed with the Companies Registrar on 12 February 2004. In addition at the Extraordinary General Meeting it was decided that after the court approval for the decrease in the share capital of the Company, the authorised share capital of the Company will be increased to £200.000.000 by the creation of 260.240.290 shares of £0,10 each, which will have the same rights as the existing shares. Corporate Governance Code The Board of Directors has not adopted the provisions of the corporate governance code.

SFS GROUP PUBLIC COMPANY LIMITED 3 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) REPORT OF THE BOARD OF DIRECTORS FOR THE YEAR ENDED 31 DECEMBER 2003 (Continued) Board of Directors The members of the Board of Directors and the changes in its composition in the year are shown on page 1 of the financial statements.

The responsibilities of the Executive Directors are stated below:

Name Responsibilities

Christodoulos Ellinas Chief Executive Officer Philip X. Larkos Chief Financial Officer Dr John Pitsillos Head of Research Department Marios St. Ioannides Managing Director of Sharelink Securities and Financial Services Limited

The Non-Executive Directors do not have any executive responsibilities in the Group.

In accordance with the Articles of Association of the Company, the directors Dr John Pitsillos and Mr Loizos Loizou are retiring, and being eligible offer themselves for re-election. Directors’ Remuneration The total remuneration of the Board of Directors for 2003, amounts to £277.611 (2002:£329.663). Directors’ Interest in the Share Capital of the Company The interests of the Board of Directors and their related persons in the share capital of the Company at 31 December 2003 και 19 March 2004 were as follows: Percentage of share capital 19.3.2004 31.12.2003 % % Christodoulos Ellinas 16,66 16,66 Philip X. Larkos 8,02 8,02 Neophytos Neophytou 4,81 4,76 Dr John Pitsillos 3,80 3,80 Loizos A. Loizou 2,30 2,30 Charalambos Papanicolaou 1,18 1,18 Marios St. Ioannides 0,18 0,18 Substantial Shareholding The following shareholders held over 5% of the Company’s issued share capital at 31 December 2003 and 19 March 2004: Percentage of share capital 19.3.2004 31.12.2003 % % Christodoulos Ellinas 16,66 16,66 Demetra Investment Company Ltd 9,80 9,80 Philip X. Larkos 8,02 8,02 Elma Holdings Ltd 5,24 5,40 Auditors The directors will place a resolution before the annual general meeting to re-appoint Deloitte & Touche as auditors and determine their remuneration for the ensuing year. BY ORDER OF THE BOARD SFS Custodian & Trust Services Limited Secretary Nicosia, 7 April 2004

4 AUDITORS’ REPORT TO THE MEMBERS OF SFS GROUP PUBLIC COMPANY LIMITED (Formerly SHARELINK FINANCIAL SERVICES LIMITED) Report on the financial statements 1 We have audited the consolidated financial statements of SFS Group Public Company Limited (the Company) and its subsidiaries (the Group) on pages 5 to 47, which comprise the consolidated balance sheet as at 31 December 2003 and the consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, and the related notes. These financial statements are the responsibility of the Company’s Board of Directors. Our responsibility is to express an opinion on these financial statements based on our audit. This report is made solely to the Company’s members, as a body, in accordance with Section 156 of the Companies Law, Cap. 113. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. 2 We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Board of Directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3 In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as of 31 December 2003 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Cyprus Companies Law, Cap. 113. Report on other legal requirements 4 Pursuant to the requirements of the Companies Law, Cap. 113, 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. • The Company’s 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 consolidated financial statements give the information required by the 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 2 and 3 is consistent with the financial statements.

Deloitte & Touche Nicosia, 7 April 2004

SFS GROUP PUBLIC COMPANY LIMITED 5 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2003 Note 2003 2002 £ £ Total revenues 4 22.792.932 20.628.844 Gross profit from commercial and shipping activities 7.612.288 5.874.187 Net revenue from the provision of financial services 2.647.202 2.894.681 Total net revenues 10.259.490 8.768.868 Other income 1.037.664 496.512 Loss on disposal and revaluation of investments held for trading (792.099) (6.218.502)Profit on revaluation of investment property 4, 15 4.692.476 672.520 Profit on disposal of investment property 4 6.000 196.000 Total contribution from operations 15.203.531 3.915.398 Expenses Selling and distribution costs (2.069.765) (2.224.024)Administrative expenses (7.141.360) (7.752.598)Amortisation and impairment loss of goodwill (1.148.069) (1.346.337)Financial expenses (4.021.882) (4.520.385)Profit/(loss) from operations 3 822.455 (11.927.946) Share of profit/(loss) of associates 17 223.789 (2.297.941)Net profit from decrease in share of associates 17 51.035 - Loss on disposal of investment in subsidiary - (252.993)Impairment loss on investment in subsidiary 18(β) - (117.966)Decrease/(increase) in provision for doubtful debts, contingent liabilities and impairment loss of non-current assets

6

2.094.169 (9.801.805)

Profit/(loss) for the year before taxation 3.191.448 (24.398.651)Taxation 7 (723.877) 325.738 Profit/(loss) for the year after taxation 2.467.571 (24.072.913) Minority interest 33 (1.965.790) 3.108.434 Net profit/(loss) attributable to the members of the holding company

501.781 (20.964.479)

Profit/(loss) per share (cent) 8 0,19 (8,2)

Diluted profit/(loss) per share (cent) Not applicable See accompanying notes to the consolidated financial statements.

SFS GROUP PUBLIC COMPANY LIMITED 6 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2003 Note 2003 2002 £ £ ASSETS Current assets Cash and cash equivalents 9 3.123.686 3.809.020 Clients’ money accounts 2.620.670 4.101.089 Investments held for trading 10 5.668.619 6.909.410 Trade and other receivables 11 8.683.549 8.874.759 Short-term loans receivable 12 55.127 695.414 Current portion of long-term loans receivable 13 276.364 1.000.000 Inventories 14 9.080.532 5.491.048 Total current assets 29.508.547 30.880.740 Non-current assets Investment property 15 33.988.011 33.219.000 Property, plant and equipment-net 16 42.037.423 39.518.296 Deferred taxation 27 60.437 35.730 Long-term loans receivable 13 4.257.952 4.257.952 Investment in associates 17 15.587.193 16.469.076 Other non-current assets 18 422.105 383.689 Goodwill 19 6.054.943 6.855.047 Negative goodwill 20 (377.151) (431.030)Long-term receivables 21 2.654.525 - Intangible assets 22 148.368 159.817 Total non-current assets 104.833.806 100.467.577 Total assets 134.342.353 131.348.317

LIABILITIES AND EQUITY Current liabilities Bank overdrafts 9 7.769.519 12.027.197 Trade and other payables 24 8.664.657 10.145.611 Taxation 613.641 693.666 Provisions 26 - 2.831.766 Convertible bonds 29 1.454.120 - Current portion of long-term loans 25 2.350.329 3.141.303 Total current liabilities 20.852.266 28.839.543 Non-current liabilities Deferred taxation 27 914.545 434.925 Long-term loans 25 55.503.903 39.888.913 Cash contribution from shareholder of subsidiary 28 5.654.839 6.648.666 Convertible bonds 29 - 1.454.120 Total non-current liabilities 62.073.287 48.426.624 Equity Share capital 30 26.042.029 52.084.058 Reserves 31 (3.078.189) (26.207.287)Total equity before the deduction of own shares 22.963.840 25.876.771 Own shares 32 (1.144.929) (3.269.330)Own shares held by associates (1.517.961) (1.856.028)Total equity 20.300.950 20.751.413 Minority interest 33 31.115.850 33.330.737 Total liabilities and equity 134.342.353 131.348.317

Signed on behalf of the Board of Directors on 7 April 2004 Christodoulos Ellinas Philip X. Larkos Antonis Mitilineos Chairman and CEO Vice-Chairman and CFO Group Chief Accountant

See accompanying notes to the consolidated financial statements.

SFS GROUP PUBLIC COMPANY LIMITED 7 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2003

Surplus/

Surplus/ (Deficit) from (Accumulated

(Deficit) revaluation of losses)/ Foreign

Buyback Own shares from own investments Profit exchange

Share Of own held by shares held Share available and Loss difference

capital associatesshares by associates premium for sale reserve reserve Total

£ £ £ £ £ £ £ £ £

Balance at 1 January 2002 52.084.058 (5.815.611) (3.212.672) (9.794.502) 19.489.460 (894.914) (11.014.354) 204.801 41.046.266

Increase in the share of own shares held by

subsidiaries

-

(32.763)

-

-

-

-

-

-

(32.763)

Sale of own shares - 2.579.044 - - - - (1.717.330) - 861.714

Share of loss on revaluation of investments available

for sale held by associates

-

-

-

-

-

(14.995)

-

-

(14.995)

Share of impairment loss of investments available

for sale held by associates

-

-

-

-

-

917.477

71.910

-

989.387

Foreign exchange difference on conversion of balances

of subsidiaries and associates

-

-

-

-

-

-

-

(1.136.296)

(1.136.296)

Share of share issue costs of subsidiaries - - - - - - (654) - (654)

Decrease in the share of own shares held by associates - - 1.356.644 - - - - - 1.356.644

Share of net loss on revaluation and disposal of own

shares held by associates

-

-

-

(1.353.411)

-

-

-

-

(1.353.411)

Loss for the year - - - - - - (20.964.479) - (20.964.479)

Balance at 31 December 2002 52.084.058 (3.269.330) (1.856.028) (11.147.913) 19.489.460 7.568 (33.624.907) (931.495) 20.751.413

See accompanying notes to the consolidated financial statements.

SFS GROUP PUBLIC COMPANY LIMITED 8 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2003 (Continued)

Surplus/

Surplus/ (Deficit) from (Accumulated

(Deficit) revaluation of losses)/ Foreign

Buyback Own shares from own investments Profit exchange

Share Of own held by shares held Share available and Loss difference

capital associatesshares by associates premium for sale reserve reserve Total

£ £ £ £ £ £ £ £ £

Balance at 1 January 2003 52.084.058 (3.269.330) (1.856.028) (11.147.913) 19.489.460 7.568 (33.624.907) (931.495) 20.751.413

Increase in the share of own shares held by

subsidiaries

-

(86.105)

-

-

-

-

-

-

(86.105)

Sale of own shares - 2.210.506 - - - - (1.988.830) - 221.676

Share of loss on revaluation of investments available

for sale held by associates

-

-

-

-

-

(168.344)

-

-

(168.344)

Foreign exchange difference on conversion of balances

of subsidiaries and associates

-

-

-

-

-

-

-

(1.084.691)

(1.084.691)

Share of share issue costs of subsidiaries - - - - - - (244) - (244)

Decrease in the share of own shares held by associates - - 338.067 - - - - - 338.067

Share of net loss on revaluation and disposal of own

shares held by associates

-

-

-

(172.603)

-

-

-

-

(172.603)

Profit for the year - - - - - - 501.781 - 501.781

Decrease in share capital (26.042.029) - - - - - 26.042.029 - -

Balance at 31 December 2003 26.042.029 (1.144.929) (1.517.961) (11.320.516) 19.489.460 (160.776) (9.070.171) (2.016.186) 20.300.950

See accompanying notes to the consolidated financial statements.

SFS GROUP PUBLIC COMPANY LIMITED 9 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2003 Note 2003 2002 £ £Cash flow from operating activities Profit/(loss) before taxation 3.191.448 (24.398.651)Adjustments for: Depreciation of property, plant and equipment 1.966.635 1.670.635 Amortisation and impairment loss of intangible assets 94.670 287.681 (Profit)/loss on revaluation of investments held for trading (1.388.230) 3.814.103 (Profit)/loss on disposal of property, plant and equipment (26.732) 63.803 Interest receivable (660.276) (1.146.419) Dividends receivable (79.002) (155.194) Interest expense 3.630.143 4.232.369 Amortisation of negative goodwill (53.879) (53.879) Negative goodwill recognised as income for the year - (2.192) Amortisation and impairment loss of goodwill 1.148.069 1.346.337 Loss on disposal of investment in subsidiary - 252.993 Impairment loss on investment in subsidiary - 117.966 Net profit from decrease in share of associates (51.035) - Share of (profit)/loss of associates (223.789) 2.297.941 Foreign exchange difference on conversion of balances of subsidiaries (394.199) (172.357) Profit on revaluation of investment property (4.672.476) (672.520) Profit on disposal of investment property (6.000) (196.000) (Decrease)/increase in provision for doubtful debts, contingent liabilities and impairment loss of non-current assets

(2.094.169) 9.801.805

(Profit)/loss on revaluation of other assets (53.798) 3.798Cash provided/(used) before working capital changes 327.380 (2.907.781)Decrease in investments held for trading – net 2.496.221 1.031.088Decrease/(increase) in trade and other receivables and clients’ money accounts 1.027.217 (352.604)Decrease in short-term loans receivable - 1.790.776Decrease in trade and other payables (1.461.926) (1.596.611)Decrease/(increase) in inventories 299.841 (486.609)Cash flow provided by/(used in) operations 2.688.733 (2.521.741)Interest received 97.983 1.146.419Dividends received 79.002 155.194Interest paid (3.630.143) (4.232.369)Taxation paid (284.575) (208.621)Net cash used in operating activities (1.049.000) (5.661.118)

See accompanying notes to the consolidated financial statements.

SFS GROUP PUBLIC COMPANY LIMITED 10 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) CONSOLIDATED CASH FLOW STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 (Continued) Note 2003 2002 £ £Cash flow from investing activities Purchase of associates - (127.625)Decrease in share of associates 433.785 -Proceeds from disposal of property, plant and equipment 99.908 271.135Proceeds from disposal of subsidiary 23 - 223.874Purchase of property, plant and equipment (11.018.997) (16.041.946)Purchase of intangible assets (83.221) (103.927)Disposal of other non-current assets 2.323 79.324Disposal of investment property 51.000 947.750Purchase of investment property (414.860) (656.480)Dividend received from associates 117.247 109.202Purchase of subsidiaries 23 - (92.701)Purchase of share in subsidiaries (270.000) (42.000)Increase in long-term loans receivable - (416)Goodwill from acquisition of business/operations (74.882) (35.539)Net cash used in investing activities (11.157.697) (15.469.349)Cash flow before financing (12.206.697) (21.130.467)Cash flow from financing activities New loans – net 16.470.979 22.288.393Cash contribution from shareholder of a subsidiary company (19.574) 1.522.011Share issue costs of subsidiaries (244) (654)Dividend paid to minority shareholders of subsidiaries (601.962) -Net cash flow from financing activities 15.849.199 23.809.750Net increase in cash and cash equivalents 3.642.502 2.679.283Cash and cash equivalents at the beginning of the year (8.218.177) (10.802.694)Foreign exchange difference on cash and cash equivalents at the beginning of the year

(70.158) (94.766)

Cash and cash equivalents at the end of the year 9 (4.645.833) (8.218.177)

See accompanying notes to the consolidated financial statements.

SFS GROUP PUBLIC COMPANY LIMITED 11 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 1. General

Incorporation and Ultimate Holding Company SFS Group Public Company Limited (formerly Sharelink Financial Services Ltd), ("the Company"), was incorporated in Cyprus on 12 February 1998 as a private, limited liability company, under the Cyprus Companies Law, Cap. 113. The Company is the holding company of the SFS Group Public Company Group ("the Group"). On 5 April 1999, the Company was converted to a public company for the purposes of the Companies Law, Cap. 113, by a change in the Articles of Association of the Company and its securities were listed on the Cyprus Stock Exchange on 2 July 1999. The registered office of the Company is located at 6, Theotoki Street, Ellinas House, P.O. Box 22379, 1521 Nicosia. By order of a special resolution dated 10 December 2003 the Company changed its name to SFS Group Public Company Limited.

Activities The principal activities of the Group are the provision of local and international financial services and investment banking, stockbroking, proprietary trading of securities, shipping, investment in immovable property and property development, commercial and other related activities.

2. Accounting Policies General The principal accounting policies, all of which have been applied consistently in relation to items which are

considered material to the determination of the result for the year and to the presentation of the financial affairs of the Group are set out below.

Basis of Accounting

The financial statements are prepared under the historical cost convention, as modified for the revaluation of investments and investment property, and in accordance with International Financial Reporting Standards, the provisions of the Cyprus Stock Exchange Laws and Regulations and the requirements of the Cyprus Companies Law, Cap. 113. All amounts in the financial statements are expressed in Cyprus pounds (£).

Principles of Consolidation The consolidated financial statements of the Group for the year ended 31 December 2003 include SFS

Group Public Company Limited (formerly Sharelink Financial Services Limited) and the companies which it controls as listed in note 23.

This control is normally evidenced when the Group owns, either directly or indirectly, more than 50% of the voting rights of a company’s share capital. The equity and net income or loss attributable to minority shareholders’ interests are shown separately in the consolidated balance sheet and consolidated income statement, respectively.

The acquisition method of accounting is used for acquired entities and businesses. Companies acquired

or disposed of during the accounting year are included in the consolidated financial statements from the date of acquisition or up to the date of disposal.

Intercompany balances and transactions, including unrealised profits and losses and intercompany profits,

are eliminated. A subsidiary is not consolidated in case the investment of the Group in the subsidiary is considered to be

temporary and has been acquired with a view of its subsequent disposal. Investment in Associates Investment in associates (normally evidenced by ownership of between 20% to 50% in a company’s

equity) where a significant influence is exercised by the Group are accounted for using the equity method. The associates of the Group are listed in note 17.

Revenue Recognition Revenue is recognised in the income statement when delivery of goods has taken place or on provision of

services to clients. Underwriting revenues and fees for investment banking and advisory services are recorded when services for the transaction are substantially completed. Commission income is recorded on a trade-date basis in the income statement. Income from services provided on a contract basis is recognised upon realisation of the terms of the contract. Interest receivable is recognised on an accruals basis.

SFS GROUP PUBLIC COMPANY LIMITED 12 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 2. Accounting Policies (Continued) Accounting for Revenue from Shipping Activities Income from time-charter hire is recognised on an accruals basis in the income statement of the year. Rental Income Recognition Rent receivable is recognised on an accruals basis in the income statement of the year.

Revenue Revenue is earned from activities in Cyprus and abroad. It represents mainly income from the provision of stockbroking services and other commissions, financial services, asset management and private equity, interest and dividends receivable, as well as sales of goods during the year after the deduction of returns and trade discounts. Revenue from sales of goods is stated net of Value Added Tax.

Clients’ Money Accounts Amounts due to brokerage clients, in respect of deposits (net of withdrawals) and brokerage transactions

are kept in segregated bank accounts by the Group on behalf of those clients. The bank balances are presented in the balance sheet as a current asset (clients’ money accounts) with corresponding amounts in current liabilities.

Property, Plant and Equipment Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is

computed on a straight-line basis over the estimated useful lives to write-off the cost to the estimated residual value of each asset. The annual depreciation rates used are:

Buildings and building improvements 3 - 4% Plant and machinery 10% Furniture, fittings and office equipment 10% Computer hardware 20% Motor vehicles 20% Vessels 8 ⅓% No depreciation is provided on land and buildings under construction. Maintenance repairs are charged to the income statement as incurred. The costs of major renovations

and improvements are capitalised to the extent that are expected to generate future economic benefits. Depreciation is provided from the date that the construction of assets has been completed and the asset

has been brought in operation. When property, plant and equipment is disposed, the difference between the disposal proceeds and the

net book value is debited or credited in the income statement of the year. Cost of Vessels Vessels are stated at cost, which consists of the contract price and any material expenses incurred upon

acquisition. The value of vessels included in the balance sheet represents the cost of construction in the shipyard as at the balance sheet date. Subsequent expenditure for conversions and major improvements are also capitalised when they extend the life, increase the earning capacity or improve the safety of the vessels, otherwise are charged to expenses as incurred.

Intangible Assets Intangible assets are carried at cost less accumulated amortisation and any accumulated impairment

losses. Amortisation is computed on a straight-line basis over the estimated useful lives to write-off the cost to the estimated residual value of each asset. The annual amortisation rates used are:

Computer software 33% Amortisation is accounted for from the date when economic benefits are derived from the asset. The unamortised balance is reviewed at each balance sheet date to assess the probability of continuing

future benefits.

SFS GROUP PUBLIC COMPANY LIMITED 13 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 2. Accounting Policies (Continued) Financial Instruments Investments held for trading Investments held for trading are those acquired with the intention of generating profits from short-term

fluctuations in price or are part of a portfolio for which there is evidence of a recent actual pattern of short-term profit taking. The effective date of purchase or sale of investments is regarded to be the date when the order is executed (trade date).

Investments in securities which have been classified by the Group as investments held for trading are

valued at their estimated fair value. The fair value of listed investments is based on the bid price at the balance sheet date, as per the daily official listing of the Cyprus Stock Exchange and foreign stock exchanges. Any unlisted investments, the fair value of which cannot be measured reliably, are included in the balance sheet at cost less any impairment loss. The profit or loss from re-measurement to fair value of investments held for trading and the profit or loss from their disposal are included in the income statement for the year. At the balance sheet date unlisted investments are reviewed for impairment. Any impairment loss is charged to the income statement for the year.

Available-for-sale investments Available-for-sale investments are those acquired and held for an unspecified period of time and may be

sold to cover cash flow deficiencies, fluctuations in interest rates, exchange rates or other changes in security values.

Investments in securities which have been classified by the Group as available for sale are valued at their

estimated fair value. The fair value of listed investments is based on the bid price at the balance sheet date, as per the daily official listing of the Cyprus Stock Exchange and foreign stock exchanges. Any unlisted investments, the fair value of which cannot be measured reliably, are included in the balance sheet at cost less any impairment loss. The profit or loss from re-measurement to fair value of investments available for sale is recognised in the revaluation of investments available for sale reserve. On disposal of these investments, the cumulative profit or loss recognised previously in equity is included in the income statement for the year.

At the balance sheet date, available for sale investments are reviewed for impairment. Any impairment

loss is charged to the income statement for the year. Loans Loans payable or receivable are valued based on their amortised cost, minus any principal repayments

and minus any unamortised prepayments using the effective interest method. Foreign Exchange The accounting records of the companies in the Group are kept in Cyprus pounds except from the records of the subsidiary SFS International Securities Limited which are kept in Pounds Sterling, the records of USFS Overseas Services Limited which are kept in United States Dollars and the records of the subsidiaries with shipping activities which are also kept in United States Dollars. Transactions in foreign currencies are translated at the rate of exchange at the date of each transaction. Monetary assets and liabilities denominated in foreign currencies are translated in Cyprus pounds at the exchange rate prevailing at the end of the accounting year. The resulting gains or losses are included in the income statement. On consolidation, the financial statements of foreign subsidiaries are translated in Cyprus pounds as follows: • The assets and liabilities are translated at the exchange rate prevailing at the end of the accounting

year. • The income statement is translated using the average exchange rate for the accounting year.

The resulting foreign exchange difference is transferred to reserves.

SFS GROUP PUBLIC COMPANY LIMITED 14 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 2. Accounting Policies (Continued)

Foreign Exchange (Continued) The share of the Group in the net assets of associates which keep accounting records in foreign currency,

is translated at the exchange rate prevailing at the end of the accounting year. The share of the Group in the profits or losses of associates, which keep accounting records in foreign currency, is translated using the average exchange rate for the accounting year. The resulting profits or losses are included in reserves.

Goodwill arising on acquisition of share in foreign subsidiaries or associates is reported using the

exchange rate at the date of the transaction.

Dividend Income Dividend income is recognised when the Group becomes entitled to receive such dividends. According to the new Income Tax Legislation of 2002, effective from 1 January 2003, the Group will not suffer any withhold taxation on dividend income.

Borrowing Costs Borrowing costs are expensed on an accruals basis. Convertible Bonds Convertible bonds issued by the Company are stated in the balance sheet at the value of the proceeds at

the date of issue. At the balance sheet date the convertible bonds are valued based on their amortised cost, minus principal repayments and minus any unamortised prepayments using the effective interest method.

The financial liability and equity instrument elements of the convertible bonds are separately classified in

the balance sheet. The carrying value of the financial liability is determined by discounting the stream of future payments of interest and principal, at the prevailing market rate for a similar liability that does not have an associated equity component. The carrying amount of the equity instrument, represented by the option to convert the bonds into ordinary shares, is determined by deduction of the amount of the financial liability from the amount of the bond as a whole.

Interest on convertible bonds is recognised at the end of every accounting year on an accruals basis. Goodwill The amount of goodwill which arises from the acquisition of subsidiaries and associates represents the

excess of the purchase price over the fair value of the share of net identifiable assets acquired and is recorded as goodwill in the balance sheet. Goodwill is amortised to the income statement on a straight-line basis over its expected useful life. The amortisation period is determined to be 10 years. The unamortised balance is reviewed at each balance sheet date to assess the probability of continuing future benefits.

Negative Goodwill The amount of negative goodwill arising from the acquisition of subsidiaries and associates represents the

excess of the fair value of the share of net identifiable assets acquired over the purchase price, and is recognised in the income statement as follows: (a) to the extent that negative goodwill relates to expected future losses and expenses that are

identified in the company’s plan for the acquisition and can be measured reliably but which cannot be accrued for the date of acquisition, that portion of negative goodwill is recognised as income when the future losses and expenses are recognised.

(b) the amount of negative goodwill not exceeding the fair values of acquired identifiable non-

monetary assets is recognised as income on a systematic basis over the remaining weighted average useful life of the identifiable acquired depreciable/amortisable assets.

(c) the amount of negative goodwill in excess of the fair value of acquired identifiable non-monetary

assets is recognised as income immediately.

Negative goodwill is presented as a deduction from non-current assets in the consolidated balance sheet.

SFS GROUP PUBLIC COMPANY LIMITED 15 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 2. Accounting Policies (Continued) Income Taxes The provision for current taxation is based on the profit for the year and the appropriate tax rates in

force. The Group adopts the liability method of tax effect accounting to recognise the effect of all temporary

differences between the tax base of assets and liabilities and their financial reporting amounts. Any debit balances on deductible temporary differences are recognised only to the extent that it is probable that taxable profits will be available against which the deductible temporary differences can be utilised.

Operating Leases Leases of property where the lessor retains all the risks and rewards incident to ownership of the asset,

are accounted for as operating leases. Lease receipts/(payments) under an operating lease are recognised as an income/(expense) in the income statement on a straight line basis over the lease term.

Cash and Cash Equivalents Cash and cash equivalents consist of cash in hand and balances with banks. The Group considers all

short term highly liquid instruments with maturities of three months or less to be cash equivalents. Share Issue Costs Costs directly attributable to the issue of share capital of the Group, including underwriting and selling

commissions, are written off in share premium in the accounting year that they are incurred, or in profit and loss reserve in case when the amount of share issue costs exceed the balance in share premium.

Employee Retirement Benefit Scheme The annual cost of fixed contribution plans is recognised in the income statement for the year to which it

relates. Investment Property Investment property consists of investments in land and buildings that are held to earn rentals or for

capital appreciation, rather than for use in the supply of services or for administrative purposes or for resale. Investment property is initially recognised at cost, which includes transaction costs relating to the acquisition, and is subsequently carried at fair value.

The fair value of the investment property is based on valuations performed by independent professional

valuers before the deduction of transaction costs that the Group will incur on its sale. The profit or loss on the disposal of investment property included in the income statement for the year,

represents the net proceeds less the carrying amount of such property. The profit or loss on the revaluation of investment property included in the income statement for the

year, represents the difference between the market value at the end of the year and the market value at the beginning of the year or the cost of the investment property acquired during the year.

Impairment of Non-current Assets The recoverable amount of an asset should be estimated whenever there is an indication that the asset

has been impaired. It also requires that an impairment loss is recognised when the net book value of the asset exceeds its recoverable amount. Recoverable amount is defined as the higher of an asset’s net selling price and value in use.

Accordingly, net selling price is the amount obtainable from the sale of an asset in an arm’s length

transaction between knowledgeable, willing parties, less the costs of disposal, whereas value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.

SFS GROUP PUBLIC COMPANY LIMITED 16 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 2. Accounting Policies (Continued) Provisions The Group recognises a provision for legal or contingent liabilities as a result of past events when there is

a present obligation that is likely to result in the outflow of cash or other resources, provided that the obligation can be estimated reliably.

Inventories Inventories, including work in progress, are valued at the lower of cost (weighted average cost) or

average cost of production and net realisable value. Cost of production includes materials, direct labour and production overheads. Net realisable value is the selling price in the ordinary course of business less the costs of completion, marketing and distribution. All obsolete or slow moving stocks are provided for.

Debtors Trade and other receivables are presented after the deduction of provision for bad debts in the ordinary

course of business. Provision for bad debts is recognised only for debts with doubtful recoverability. Own Shares

Own shares are presented in the balance sheet as a deduction from equity. Any profit or loss resulting from the disposal, issue or cancellation of own shares held by the Group and

the share of own shares held by subsidiaries and associates is not recognised in the Consolidated Income Statement for the year.

At the balance sheet date, the share of the Group in own shares held by subsidiaries and associates is

presented as a deduction from equity rather than as an asset in the consolidated balance sheet. Share Option Scheme Ordinary shares issued from the exercise of share options are recognised in the balance sheet at the date

of exercise at the amount of net proceeds. The difference between the exercise price and the nominal value of the ordinary shares issued is credited to share premium.

Segmental Analysis For management purposes, the Group is organised in six major operating segments – Financial Services,

Proprietary Trading, Management and Development of Land, Shipping Segment, Commercial Segment and Other Activities. The division of segments is based on the reporting of information to the Board of Directors. The Group has determined that business segments are the primary reportable segments.

Segment revenue and expense: All revenue is allocated to the business segments as described above.

Expenses that are directly related to the business segments are recorded as such. In the cases where expenses are not directly related to one of the above segments then they are allocated on a reasonable basis to the segments.

Segment assets and liabilities: Segment assets include all operating assets used by a segment and

consist principally of operating cash, investments, receivables, property, plant and equipment. When the assets are directly attributed to a segment, they are allocated as such. In cases where an asset is used jointly by two or more segments, it is allocated to the segments on a reasonable basis. Segment liabilities include all operating liabilities and consist principally of payables.

Inter segmental sales and charges are made on an arms length basis.

SFS GROUP PUBLIC COMPANY LIMITED 17 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 2. Accounting Policies (Continued) Segmental Analysis (Continued)

The Group also reports information by geographical segment as follows:

(a) Analysis of group revenue by geographical area based on the geographical location of its customers, for each geographical segment where revenue from sales to external customers is 10% or more of total group revenue.

(b) Analysis of the total carrying amount of the assets of the group based on the geographical location

of the assets, for each geographical segment where segment assets are 10% or more of the total assets of all geographical segments.

(c) Analysis of the total costs incurred during the period to acquire segment non-current assets

(property, plant, equipment and intangible assets) by geographical location of assets, for each geographical segment where segment assets are 10% or more of the total assets of the Group.

Comparative Amounts Where it was considered appropriate the comparative amounts were restated in order to conform with the

changes in presentation in the current year. 3. Profit/(Loss) from Operations 2003 2002 £ £ The profit/(loss) from operations is stated after charging: Directors’ emoluments 277.611 329.663 Auditors’ remuneration 118.878 143.633 Depreciation of property, plant and equipment 1.966.635 1.670.635 Amortisation and impairment loss of intangible assets 94.670 287.681 Amortisation and impairment loss of goodwill 1.148.069 1.346.337 Staff costs 4.577.035 5.118.634 Rent payable 271.471 254.817 Unrealised loss on revaluation of investments held for trading - 3.814.103 Interest payable 3.630.143 4.232.369 Foreign exchange loss 6.845 147.665 Loss on disposal of investments held for trading 2.180.329 2.404.399 Direct operating expenses for investment properties

under rental during the year

15.944

3.790 Loss on revaluation of other non-current assets - 3.798 Loss on disposal of property, plant and equipment - 63.803 Provision for doubtful debts and contingent liabilities - 9.801.805 and after crediting: Negative goodwill recognised as income for the year - 2.192 Amortisation of negative goodwill 53.879 53.879 Profit on disposal of investment property 6.000 196.000 Interest receivable 660.276 1.146.419 Foreign exchange gain 416.906 208.697 Dividend receivable 79.002 155.194 Profit on revaluation of investment property 4.692.476 672.250 Rent receivable from rental of investment property 145.134 131.065 Profit on disposal of property, plant and equipment 26.732 - Unrealised profit on revaluation of investments held for trading 1.388.230 - Profit on revaluation of other non-current assets 53.798 - Decrease in provision for doubtful debts, contingent liabilities

and impairment loss of non-current assets

2.094.169

-

SFS GROUP PUBLIC COMPANY LIMITED 18 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 4. Segmental Analysis 2003 2002 £ £ Revenue Financial services 2.693.958 2.063.373 Management and development of land 4.841.910 1.023.928 Shipping segment 3.585.154 1.692.563 Commercial segment 15.005.615 15.025.965 Other activities 1.364.771 1.691.535 27.491.408 21.497.364 Result Financial services (991.115) (1.713.645) Proprietary trading (792.099) (6.218.502) Management and development of land 4.384.782 450.575 Shipping segment 2.556.262 944.855 Commercial segment 574.200 (3.304.909) Other activities 591.336 (5.717.238) 6.323.366 (15.558.864) Unallocated corporate expenses (542.860) (492.502) Financial expenses (4.021.882) (4.520.385) Share of profit/(loss) of associates 223.789 (2.297.941) Unallocated decrease/(increase) in provisions for contingent liabilities 1.158.000 (1.158.000) Loss on disposal of investment in subsidiary - (252.993) Impairment loss of investment in subsidiary - (117.966) Net profit from decrease in share of associates 51.035 - Taxation (723.877) 325.738 Profit/(Loss) for the year after taxation 2.467.571 (24.072.913)

Segment Assets Financial services 5.490.116 8.018.520 Proprietary trading 5.668.619 6.909.410 Management and development of land 51.732.360 40.675.189 Shipping segment 38.271.214 25.593.089 Commercial segment 25.235.856 25.456.647 Other activities 21.652.126 22.923.619 Eliminations among segments (29.105.990) (15.122.031) 118.944.301 114.454.443 Unallocated investment in associates 12.336.840 13.542.983 Unallocated corporate assets 3.061.212 3.350.891 134.342.353 131.348.317

Segment Liabilities Financial services 4.789.446 6.319.825 Management and development of land 14.157.163 6.057.724 Shipping segment 32.970.997 20.805.424 Commercial segment 23.578.869 22.023.526 Other activities 4.163.290 8.830.212 Eliminations among segments (29.105.990) (15.122.031) 50.553.775 48.914.680 Unallocated corporate liabilities 32.371.778 28.351.487 82.925.553 77.266.167

SFS GROUP PUBLIC COMPANY LIMITED 19 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 4. Segmental Analysis (Continued) 2003 2002 £ £ Additions of property, plant and equipment Financial services 66.004 44.527 Management and development of land 5.018 163.080 Shipping segment 9.935.967 15.112.348 Commercial segment 1.012.008 721.991 11.018.997 16.041.946 Additions of intangible assets Financial services 82.186 88.797 Commercial segment 1.035 15.130 83.221 103.927 Depreciation of property, plant and equipment Financial services 183.902 199.594 Shipping segment 903.520 467.148 Commercial segment 877.852 1.003.893 Management and development of land 1.361 - 1.966.635 1.670.635 Amortisation of intangible assets Financial services 84.786 182.727 Commercial segment 9.884 11.163 94.670 193.890 Amortisation of positive goodwill Commercial segment 290.109 308.056 Development of land 184.111 183.593 Entertaining segment 39.639 39.639 Unallocated amortisation of positive goodwill 465.222 448.658 979.081 979.946 Unallocated amortisation of negative goodwill (53.879) (53.879) Business segments For management purposes, the Group is organised in six major business segments – Financial Services,

Proprietary Trading, Management and Development of Land, Shipping Segment, Commercial Segment, and Other Activities. The division of segments is based on the reporting of information to the Board of Directors. The Board of Directors have determined that business segments are the primary reportable segments.

The Financial Services Segment provides a broad range of financial services to corporations and

individuals. These services include corporate finance, financial and management advisory assignments, IPO and underwriting services (which include public offerings and private placements of equity and debt securities), broking services, capital management and private equity management.

The Proprietary Trading Segment generates income from own trading mainly in shares and debentures. The Management and Development of Land Segment includes the management of a portfolio of

immovable property in Cyprus. The portfolio includes land and buildings in the cities and district of Nicosia, Larnaca, Paphos and Limassol. The purpose of these investments is their tourist, commercial, industrial and residential development as well as their capital appreciation and revenue return to the Group.

The Shipping Segment includes the activities of the Group in managing four new vessels owned by

subsidiaries of the Group. The Commercial Segment includes revenue from the production and distribution of products such as

tools, raw materials, nuts and dairy as well as the operation of restaurants.

SFS GROUP PUBLIC COMPANY LIMITED 20 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 4. Segmental Analysis (Continued)

Business segments (Continued) The Other Activities Segment includes dividends, interest receivable and other income. Segment revenue and expenses: All revenue is allocated to the business segments as described above.

Expenses that are directly related to the business segments are recorded as such. In the cases where expenses are not directly related to one of the above segments they are allocated on a reasonable basis to the segments.

Inter segmental sales and charges are made on an arms-length basis.

Segment assets and liabilities: Segment assets include all operating assets used by a segment and consist principally of cash, investments, receivables and non-current assets. When the assets are directly attributed to a segment, they are allocated as such. In cases where an asset is used jointly by two or more segments, it is allocated to the segments on a reasonable basis. Segment liabilities include all operating liabilities and consist principally of payables.

Investment in associates: as per note 17 of the financial statements, the Group has significant influence

over a number of companies. The investments are accounted for by the equity method. The Group’s share of the net assets and of the net profits or losses resulting from the associates are excluded from segment assets and segment revenue respectively.

Geographical segments The Group’s revenue based on the geographical location of its customers are analysed as follows:

2003 2002 £ £ Cyprus 17.334.368 17.952.511 America 3.585.154 1.692.563 United Kingdom 1.873.410 983.770 Total 22.792.932 20.628.844

The carrying amount of the segment assets and additions to property, plant and equipment and intangible assets of the Group are analysed based on the geographical location of the assets as follows:

Additions to property, plant and equipment A s s e t s and intangible assets 2003

£ 2002

£ 2003

£ 2002

£ Cyprus 102.746.798 105.087.243 1.155.126 1.029.034 America 27.727.272 16.512.342 9.935.967 10.641.992 Asia 2.800.467 8.576.539 - 4.470.356 United Kingdom 1.067.816 1.172.193 11.125 4.491 134.342.353 131.348.317 11.102.218 16.145.873 5. Personnel Expenses and Number of Employees 2003 2002 £ £ Wages and salaries 4.016.540 4.553.466 Employee benefit scheme contribution 96.547 99.019 Other contributions 463.948 466.149 Total 4.577.035 5.118.634 The number of employees of the Group at 31 December 2003 was 357 (2002:431). The average number

of employees of the Group for the year was 373 (2002:480).

SFS GROUP PUBLIC COMPANY LIMITED 21 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 6. Provision for Doubtful Debts, Contingent Liabilities and

Impairment Loss of Non-current Assets 2003 2002 £ £ Increase in provision for doubtful loans and other receivables 125.307 7.813.805 (Decrease)/increase in provision for contingent liabilities (Note 26) (2.831.766) 1.988.000 Impairment loss of property, plant and equipment 612.290 - Total (2.094.169) 9.801.805 7. Taxation 2003 2002 £ £ Tax Expense/(Income) Corporation tax charge (10%, 2002:20%/25%) 58.179 165.777 Special contribution for defence (3%/10%) 21.921 82.602 Share of taxation of associates 64.414 (83.876) Write off of withholding tax on dividends 53.718 - Deferred taxation relating to temporary differences 454.913 (490.241) Provision for capital gains tax 70.732 - 723.877 (325.738) Tax rates

In accordance with the Income Tax Law of 2002 which came into effect on 1 January 2003 the Companies of the Group are subject to corporation tax at a rate of 10% on its total taxable profits. An additional tax of 5% is imposed on taxable profits exceeding £1 million for the tax years 2003 and 2004.

In case of taxable losses, the Companies of the Group have the right to carry forward indefinitely these losses and offset against profits of subsequent years.

From 1 January 2003, the Group, which for tax purposes consists of the Company and all the subsidiaries where the company controls, directly or indirectly, at least 75% of the issued share capital would be entitled to transfer losses and offset them against profits among the companies of the group, where the surrendering company and the claimant company are members of the same group for the whole of the tax year (Group Relief).

In addition, in accordance with the new Special Contribution for Defence Law of 2002, effective from 1 January 2003, the Group is subject to special contribution at a rate of 15% on dividends received from abroad, on interest income at a rate of 10% and on rental income at a rate of 3%.

In accordance with the same law, a company resident in the Republic is deemed to have made a distribution of 70% of its profit after tax, in the form of dividends, at the end of the two year period from the end of the tax year to which the profits relate, and must account for 15% special contribution thereon.

The amount of the deemed dividends is reduced with any actual dividend distributed during the two year period from the end of the tax year to which the profits relate. In case of payment of actual dividend after the two year period, any deemed distribution made, reduces the actual dividend on which the special contribution is withheld. The deemed distribution provisions do not apply to profits which relate to non resident shareholders.

SFS GROUP PUBLIC COMPANY LIMITED 22 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 7. Taxation (Continued) 2003 2002 £ £ Reconciliation between the tax expense/(income) and the

product of accounting profit/(loss):

Profit/(loss) before taxation 3.191.448 (24.398.651) Corporation tax on profit/(loss) for the year at the applicable rate of 10%

(2002:20%/25%)

319.145 (4.879.730) Special contribution for defence - (731.960) - Tax effect of expenses that are not deductible in determining

taxable profit/(loss)

846.333

2.913.994 - Tax effect of share of (profit)/loss in associates (22.379) 528.526 - Effect of taxable losses 217.288 3.135.517 - Tax effect of allowable deductions and income not taxable in

determining taxable profit/(loss)

(828.530) (724.699) - Tax effect of reduced tax rates in subsequent years - (562.407) - Additional tax - 8.651 - Other tax effects 11.906 35.410 - Taxation in respect of prior years (8.750) 34.836 - Share of taxation of associates 64.414 (83.876) - Write off of withholding tax on dividends 53.718 - - Capital gains tax 70.732 - Tax expense/(income) 723.877 (325.738) 8. Profit/(Loss) per Share 2003 2002 £ £ Numerator for basic and diluted profit/(loss) per share: - Profit/(Loss) for the year after taxation and minority interest 501.781 (20.964.479) 2003

Number 2002

Number Denominator for the calculation of profit/(loss) per share: - Weighted average number of ordinary shares during the year 260.420.194 255.220.194 Denominator for diluted profit/(loss) per share 260.420.194 255.220.194 2003

cent 2002 cent

Profit/(Loss) per share 0,19 (8,2)

Diluted profit/(loss) per share Not applicable No dilution of profit/(loss) per share arises from the conversion of the convertible bonds of the Group that were in issue at the end of the year.

9. Cash and Cash Equivalents 2003 2002 £ £ Cash in hand and at bank 3.123.686 3.809.020 Bank overdrafts (7.769.519) (12.027.197) (4.645.833) (8.218.177)

The bank balances are subject to the current bank deposit interest rate. The securities of the bank overdrafts are presented in note 25.

SFS GROUP PUBLIC COMPANY LIMITED 23 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 10. Investments held for trading 2003 2002 £ £ At the beginning of the year 6.909.410 11.754.601 Disposals, net (2.629.021) (1.031.088) Unrealised profit/(loss) on revaluation 1.388.230 (3.814.103) At the end of the year 5.668.619 6.909.410 The investments held for trading are analysed as follows: 2003 2002 £ £ Listed investments on the Cyprus Stock Exchange 5.003.862 5.941.586 Unlisted investments 486.429 512.078 Investments listed on foreign stock exchanges 178.328 455.746 5.668.619 6.909.410 During the year ended 31 December 2003, an impairment loss amounting to £43.750 (2002 : £188.000)

has been recognised on unlisted investments. In the opinion of the Board of Directors, there is no indication of impairment loss for the remaining unlisted shares.

The fair value of listed investments is based on the bid price at the balance sheet date, as per the daily

official listing of the Cyprus Stock Exchange and foreign stock exchanges. 11. Trade and Other Receivables 2003 2002 £ £ Trade debtors 5.807.937 5.288.412 Fees receivable 562.072 869.265 Amounts due from brokers and clearing organisations 46.747 - Withholding tax recoverable - 55.370 Prepayments 651.406 244.894 Other debtors 1.615.387 2.416.818 8.683.549 8.874.759 The above amounts are receivable within one year. 12. Short-term Loan Receivable 2003 2002 £ £ Interest bearing loans 55.127 695.414 During the year ended 31 December 2003, a short-term loan with balance as of 31 December 2002

£640.287 plus interest £154.463 was repaid in exchange for 2.890.000 shares of the subsidiary company White Knight Holdings Limited. The fair value of the share of net assets acquired by the Group was equal to the amount of the consideration given and therefore no goodwill has arisen from the acquisition.

A short-term loan of £55.127 (2002:£55.127) is secured by shares of a related unlisted public company.

No interest income was recognised on the loan during the year ended 31 December 2003 (2002 : £Nil). During the year ended 31 December 2002, a provision for doubtful short-term loans amounting to

£449.616 was made in the financial statements.

SFS GROUP PUBLIC COMPANY LIMITED 24 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 13. Long-term Loans Receivable 2003 2002 £ £ Interest bearing loans 11.750.122 12.473.758 Provision for doubtful amounts (7.215.806) (7.215.806) 4.534.316 5.257.952 Current portion of long-term loans (276.364) (1.000.000) 4.257.952 4.257.952

The loans are repayable as follows: 2003 2002 £ £ Within one year 276.364 1.000.000 Between two to five years 4.257.952 4.257.952 4.534.316 5.257.952 Long-term loans amounting to £11.750.122 (2002:£12.473.758), are partly secured by shares of unlisted

public companies. During the year ended 31 December 2002, a provision for doubtful amounts of £6.715.844 was included in the financial statements due to the reduction in the value of securities. No additional provision for doubtful amounts was made in 2003. Loans amounting to £7.492.170 bear interest at the basic rate plus 0,5% - 1% annually while the remaining loans of £4.257.952 bear annual interest at 6.5% on the original loan amount of £3.796.000. The interest income recognised on these loans during the year ended 31 December 2003 amounted to £407.829 (2002:£500.416).

The above amounts include long term loans amounting to £4.257.952 which are repayable on 31

December 2005. The loans are secured by shares of the unlisted public company Lemissoler Shipping Co. Limited, with nominal value £2.920.000. The subsidiary company White Knight Holdings Limited has the option to request repayment of the balance of the loans and the interest within the period from the date the loans were granted up to 31 December 2005 for £2.920.000 ordinary shares of £1 each of Lemissoler Shipping Co. Limited. In case the loans were repaid on 31 December 2003, the goodwill that would have arisen for the Group is estimated at £2.360.983, based on the audited financial statements of Lemissoler Shipping Co. Limited, or £2.347.952 based on the management accounts of the company as of 31 December 2003.

14. Inventories 2003 2002 £ £ At cost Land and buildings under construction 4.106.240 - Finished goods 4.584.627 4.699.683 Work in progress - 37.829 Raw materials 389.665 753.536 9.080.532 5.491.048 The securities on land and buildings under construction are presented in note 25. 15. Investment property 2003 2002 £ £ Balance at the beginning of the year 33.219.000 32.641.750 Transfers to inventories (3.889.325) - Transfers to property, plant and equipment (404.000) - Additions 414.860 656.480 Disposals (45.000) (751.750) Profit on revaluation of investment property 4.692.476 672.520 Balance at the end of the year 33.988.011 33.219.000 The revaluation of investment property is based on the valuation undertaken by independent professional

valuers. The valuation was carried out using the Comparison Method of valuation and the Cost of Construction Method (for certain buildings) on the basis of the open market value of the investment property. The market value was estimated in accordance with market evidence, the physical and legal characteristics, the investment potential of the properties under review as well as the trend of the property market and the economy in general. The securities on investment property are presented in note 25.

SFS GROUP PUBLIC COMPANY LIMITED 25 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 16. Property, Plant and Equipment, Net Furniture,

Land, buildings Buildings fittings

and buildings under and office Plant and Computer Motor

improvements construction equipment machinery hardware vehicles Vessels Total

£ £ £ £ £ £ £ £

Cost

Balance 1.1.2003 9.175.215 1.352.788 2.459.916 5.161.023 828.496 1.671.329 25.508.066 46.156.833

Foreign exchange

difference on conversion

of balances of

subsidiaries

(573)

-

(4.461)

-

-

-

(3.737.790)

(3.742.824)

Transfer from investment

property

404.000

-

-

-

-

-

-

404.000

Transfer to long-term

receivables

(1.443.000) (1.211.525)

-

-

-

-

-

(2.654.525)

Additions 76.806 694.808 89.799 49.698 32.924 138.995 9.935.967 11.018.997

Transfer of buildings

under construction

completed

836.071

(836.071)

-

-

-

-

-

-

Disposals - - (14.145) (47.698) (6.782) (107.722) - (176.347)

Balance 31.12.2003 9.048.519 - 2.531.109 5.163.023 854.638 1.702.602 31.706.243 51.006.134

Depreciation

Balance 1.1.2003 640.191 - 939.643 3.054.886 504.653 1.079.979 419.185 6.638.537

Foreign exchange

difference on conversion

of balances of

subsidiaries

(46)

-

(1.335)

-

-

-

(144.199)

(145.580)

Charge for the year 159.158 - 221.976 320.022 125.878 236.083 903.518 1.966.635

On disposals - - (1.818) (21.036) (5.645) (74.672) - (103.171)

Impairment loss - - 19.169 591.480 1.641 - - 612.290

Balance 31.12.2003 799.303 - 1.177.635 3.945.352 626.527 1.241.390 1.178.504 8.968.711

Net book value

31 December 2003 8.249.216 - 1.353.474 1.217.671 228.111 461.212 30.527.739 42.037.423

31 December 2002 8.535.024 1.352.788 1.520.273 2.106.137 323.843 591.350 25.088.881 39.518.296

Land not depreciated amounted to £3.669.363 at 31 December 2003 (2002:£4.837.242). The securities on property, plant and equipment are presented in note 25. No interest has been capitalised during the year ended 31 December 2003 (2002:£nil). At 31 December 2003, the Group did not have any capital commitments for building improvements (2002:£1.110.000). The vessels of the Group are depreciated over a period of 12 years with an estimated residual value of US$9.000.000

(£4.196.000) for each vessel. On 31 December 2003, the cost of the vessels of the Group under construction was £2.800.467 (2002:£8.576.539).

SFS GROUP PUBLIC COMPANY LIMITED 26 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 17. Investment in Associates 2003 2002 £ £ Share of net assets at the beginning of the year 16.469.076 18.345.033 Increase in share of associates - 127.625 Goodwill - (26.466) Decrease in share of associates (382.750) - Foreign exchange difference on conversion of balances of associates

that maintain accounting records in foreign currency

(538.381)

(628.866) Share of revaluation of investments available for sale of associates (168.344) (14.995) Share of impairment loss of investments available for sale

held by associates

-

917.477 Restatement of the investments available for sale reserve - 71.910 Dividend received from associates (117.247) (109.202) Share of profit/(loss) after dividends receivable for the year/period

from acquisition to 31 December

223.789 (2.297.941) Share of taxation for the year/period from acquisition to 31 December (64.414) 83.876 Decrease in the share of own shares held by associates 338.067 1.356.644 Share of net loss on revaluation and disposal of own shares

held by associates

(172.603) (1.353.411) Transfer to investment in subsidiaries - (2.608) Share of net assets at the end of the year 15.587.193 16.469.076

SFS GROUP PUBLIC COMPANY LIMITED 27 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 17. Investment in Associates (Continued) The associates are the following: £ £

County of Percentage of ownership Percentage of voting rights Nominal value of

Name Principal activity incorporation Direct Indirect Direct Indirect issued share capital2003 2002 2003 2002 2003 2002 2003 2002 2003 2002

CyVenture Capital Limited Venture capital Cyprus 26,94% 26,94% 3,93% 3,41% 26,94% 26,94% 4,21% 4,02% 3.460.772 3.460.772

Triena Investments Limited Approved investment company Cyprus 27,34% 27,34% - - 27,34% 27,34% - - 3.396.083 3.396.083

Leda Investment Co. Limited Investment company Cyprus 27,30% 27,30% - - 27,30% 27,30% - - 2.759.716 2.759.716

TFI Public Company Limited Forfeiting and trade finance Cyprus 29,98% 29,98% 2,33% 2,01% 29,98% 29,98% 2,50% 2,38% 8.808.587 8.808.587

Unifast Finance and Investments Limited

Investment company Cyprus 27,17% 27,17% - - 27,17% 27,17% - - 1.022.068 1.022.068

Ellinas Finance Limited Provision of margin accounts and other financing activities

Cyprus 26,91% 26,91% - - 26,91% 26,91% - - 8.000.000 8.000.000

Athena Cyprus Investment Fund Limited

Investment company Cyprus 20,53% 20,53% - - 20,53% 20,53% - - 24.622.942 24.622.942

Dot.Cy Developments Limited Information technology specialising in interest development and electronic commerce

Cyprus 26,72% 26,72% - - 26,72% 26,72% - - 2.500 2.500

Stockflow Financial Services Limited Broking services Cyprus 20,00% 20,00% - - 20,00% 20,00% - - 100.000 100.000

Roche & Paarl Financial Services Limited

Broking services Cyprus 20,00% 20,00% - - 20,00% 20,00% - - 10.000 10.000

Rapiton Trading Limited Entertainment sector Cyprus - - 22,52% 19,53% - - 24,10% 23,02% 20.000 20.000

Tricyp Limited Dormant Cyprus - - 15,01% 13,02% - - 16,07% 15,35% 100.000 100.000

Dalland Animalia Farm Limited Farming Cyprus - - 12,51% 10,85% - - 13,39% 12,79% 1.140.000 1.140.000

Investwise J.E. Limited Investment in immovable property Cyprus - - 20,01% 17,36% - - 21,42% 20,46% 3.301.000 3.301.000 The share capital of TFI Public Company Limited is denominated in United States Dollars US$16.125.000 (2002:US$16.125.000).

The foreign exchange differences arising from investment in associates are included in reserves.

SFS GROUP PUBLIC COMPANY LIMITED 28 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 17. Investment in Associates (Continued)

Principal acquisitions of associates

TFI Public Company Limited During the year ended 31 December 2002, the Group acquired 117.000 ordinary shares of US$1 each of TFI Limited increasing the Company’s share in the issued share capital of the associate from 29,26% to 29,98%. The cost of acquiring the additional share in the share capital of TFI Public Company Limited amounted to £88.125. The fair value of the share of net assets acquired by the Company was £72.636 and the goodwill that has arisen from the acquisition amounted to £15.489.

Net profit from decrease in share of associates

Actibond Growth Fund Limited During the year ended 31 December 2003, the associate company Actibond Growth Fund Limited issued

42.429.542 new shares to Mercator Strategic Opportunities Limited. As a result of the above issue, the share of the Group in Actibond Growth Fund Limited decreased from 37.21% to 10.19% and the value of the investment was transferred to investments held for trading.

The net profit from the decrease in the share of the Group in Actibond Growth Fund Limited amounts to

£51.035 and it is included in the consolidated income statement for the year ended 31 December 2003. 18. Other Non-Current Assets Note 2003 2002 £ £ Biological assets 350.900 316.578 Investments available for sale (α) 71.205 67.111 422.105 383.689 (a) Investments available for sale Investments available for sale consist of non listed securities and are valued at cost. (b) Investment in subsidiaries Percentage of Percentage of ownership voting power Cost of Company Principal activities Direct Indirect Direct Indirect investment £ A. Philippou Catering Limited Administration and

management of restaurant - 45,03% - 48,24% 130.000

The financial statements of the above subsidiary have not been consolidated in the financial statements of the Group since the company was acquired and held exclusively with view to its subsequent disposal in the near future.

During the year ended 31 December 2002, the value of the investment and the balance of £117.966 due

from A. Philippou Catering Limited were written off as these amounts are not expected to be recovered.

SFS GROUP PUBLIC COMPANY LIMITED 29 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 19. Goodwill 2003 2002 £ £ Cost At the beginning of the year 9.569.241 10.024.360 Additions from the acquisition of associates - 26.466 Additions from the acquisition of share in subsidiaries 273.083 345.784 Additions from the acquisition of businesses/operations 74.882 35.539 Impairment loss of goodwill (226.203) (453.846) Disposal of share in subsidiary - (409.062) At the end of the year 9.691.003 9.569.241 Accumulated amortisation At the beginning of the year 2.714.194 1.903.315 Amortisation for the year 979.081 979.946 Impairment loss of goodwill (57.215) (87.455) Disposal of share in subsidiary - (81.612) At the end of the year 3.636.060 2.714.194 Net book value 6.054.943 6.855.047 The impairment loss on goodwill recognised by the Group for the year ended 31 December 2003, related to

impairment loss of £168.988 for the unamortised amount of goodwill arising from the acquisition of business/operations of companies and share of subsidiaries, in order to reduce the carrying amount of the assets to their recoverable amount.

The impairment loss of goodwill recognised by the Group during the year ended 31 December 2002, related

mainly to impairment loss of £322.548 for the unamortised amount of goodwill arising from the acquisition of subsidiaries, in order to reduce the carrying amount of the assets to their recoverable amount.

The Board of Directors has determined the useful life of goodwill to be 10 years. It has been considered

that this period represents the useful life of goodwill taking into account the cost of investments, the estimated profitability and the time period when the Group will derive economic benefits.

20. Negative Goodwill 2003 2002 £ £ Cost At the beginning of the year 538.788 538.788 Additions from the acquisition of subsidiaries - 2.192 Negative goodwill recognised as income for the year - (2.192) At the end of the year 538.788 538.788 Accumulated amortisation At the beginning of the year 107.758 53.879 Amortisation for the year 53.879 53.879 At the end of the year 161.637 107.758 Net book value 377.151 431.030

SFS GROUP PUBLIC COMPANY LIMITED 30 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 21. Long Term Receivables The amount of £2.654.525 has been paid by a subsidiary company of the Group during 2000 and 2001 for

the acquisition of immovable property based on a contract which has been cancelled. On 31 December 2003 there was a pending litigation filed by the Group against the other contracted party for the amount of £2.612.130 plus interest and expenses. The Board of Directors after assessing the situation and considering relevant legal advice, is of the opinion that the amount of £2.654.525 is fully recoverable.

The defendant in the above case has filed a counter claim against the Group for the amount of £1.541.325.

This amount is included in the total amount of the legal claims against the Group presented in note 37, Contingent Liabilities.

22. Intangible Assets Computer Software £ Cost Balance 1.1.2003 708.934 Additions 83.221 Balance 31.12.2003 792.155 Accumulated amortisation Balance 1.1.2003 549.117 Charge for the year 94.670 Balance 31.12.2003 643.787 Net book value 31 December 2003 148.368 31 December 2002 159.817

SFS GROUP PUBLIC COMPANY LIMITED 31 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 23. Investment in Subsidiaries The major subsidiaries of the Group are:

County of Percentage of ownership Percentage of voting rights Nominal value of

Name Main Activities incorporation Direct Indirect Direct Indirect issued share capital2003 2002 2003 2002 2003 2002 2003 2002 2003 2002

£ £ Sharelink Securities and Financial Services

Limited Stockbroking services to corporations and individuals, portfolio management and investment consultancy

Cyprus 95,50% 100,00% - - 95,50% 100,00% - - 760.000 751.200

Sharelink Administration Management Limited Administration services to corporations

Cyprus 100,00% 100,00% - - 100,00% 100,00% - - 1.000 1.000

CyPensions Limited Insurance and pension scheme agents

Cyprus 80,00% 80,00% - - 80,00% 80,00% - - 10.000 10.000

SFS Custodian & Trust Services Limited Custodian and share registry services

Cyprus 100,00% 100,00% - - 100,00% 100,00% - - 1.000 1.000

SFS Corporate Management Limited Corporate management services Cyprus 100,00% 100,00% - - 100,00% 100,00% - - 1.000 1.000

First Elements Ventures Limited Corporate analysis services Cyprus 100,00% 100,00% - - 100,00% 100,00% - - 2.000 1.000 SFS International Securities Limited Stockbroking and investment

services United

Kingdom77,36% 77,36% - - 77,36% 77,36% - - 731.882 731.882

CapitalAsset Link Limited Dormant Cyprus 100,00% 75,00% - - 100,00% 75,00% - - 100.000 100.000

USFS Overseas Services Limited Provision of international services Jersey 100,00% 100,00% - - 100,00% 100,00% - - 923 923

AAA United Stockbrokers Limited Dormant Cyprus 100,00% 100,00% - - 100,00% 100,00% - - 950.000 950.000

Intelinvest Financial Services Limited Dormant Cyprus 100,00% 100,00% - - 100,00% 100,00% - - 500.000 500.000

White Knight Holdings Limited Investment and financial management and company restructuring

Cyprus 50,04% 43,41% - - 53,56% 51,15% - - 108.343.334 108.343.334

SFS GROUP PUBLIC COMPANY LIMITED 32 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 23. Investment in Subsidiaries (Continued) The major subsidiaries of the Group are: (Continued)

County of Percentage of ownership Percentage of voting rights Nominal value of

Name Main Activities incorporation Direct Indirect Direct Indirect issued share capital2003 2002 2003 2002 2003 2002 2003 2002 2003 2002

£ £ Worldpremier Entertainment Limited Entertainment sector Cyprus - - 45,03% 39,07% - - 48,24% 46,04% 10.000 10.000

Carmount Limited Import and sale of tools Cyprus - - 50,04% 43,41% - - 53,56% 51,15% 1.970.000 1.970.000

Ocean Challenge Limited Investments in shipping industry Cyprus - - 50,04% 43,41% - - 53,56% 51,15% 5.000.000 5.000.000

Kiteos Farm Limited Farming sector Cyprus - - 43,53% 37,77% - - 46,60% 44,50% 101.000 101.000

Vastuat Limited Farming sector Cyprus - - 50,04% 43,41% - - 53,56% 51,15% 701.000 701.000

White Knight Properties Ltd Acquisition, management sale and rental of immovable property

Cyprus - - 50,04% 43,41% - - 53,56% 51,15% 30.000.000 30.000.000

Regis Milk Industries Limited Import, production and distribution of dairy products

Cyprus - - 25,52% 22,14% - - 27,32% 26,09% 843.138 843.138

Coyio Limited Production and processing of nuts Cyprus - - 35,02% 30,39% - - 37,49% 35,81% 800.000 800.000

Chrikar Trading Company Limited Import and distribution of food processing materials

Cyprus - - 35,02% 30,39% - - 37,49% 35,81% 720.000 720.000

M. Kalimera Dairies Limited Dormant at 31 December 2003 Cyprus - - 45,03% 30,39% - - 48,24% 35,81% 1.428.571 1.428.571

Vastuat Farm Limited Farming Sector Cyprus - - 34,40% - - - 36,82% - 20.000 - All the above subsidiaries are private limited liability companies except for White Knight Holdings Limited which is a public

limited liability company.

The share capital of SFS International Securities Limited is denominated in Pounds Sterling of Stg£795.000 (2002:Stg£795.000).

The share capital of USFS Overseas Services Limited is denominated in Pounds Sterling of US$1.000 (2002:US$1.000).

SFS GROUP PUBLIC COMPANY LIMITED 33 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 23. Investments in Subsidiaries (Continued) Principal acquisitions of subsidiaries White Knight Holdings Limited

On 30 September 2001, the Group acquired control of the voting rights of White Knight Holdings Limited. As a result, the Group considers White Knight Holdings Limited to be a subsidiary as of that date and therefore the financial results of White Knight Holdings Limited have been included in the consolidated accounts of the Group, in accordance with the International Accounting Standard 27 (Consolidated Financial Statements and Accounting for Investments in Subsidiaries). In addition, as at 31 December 2003 and 2002, the Group is considered to exercise control over White Knight Holdings Limited as the percentage of voting rights of the Group in the Board of Directors of White Knight Holdings Limited exceeds 50%. During the year ended 31 December 2002, the Group acquired 2.971.428 ordinary shares of £0,50 each of White Knight Holdings Limited increasing the Group’s share in the share capital of the subsidiary by 1,37% (from 42,04% to 43,41%). For the acquisition of these shares the Group disposed 5.200.000 own shares it held at a cost of £2.579.044 while the fair value of the share of net assets acquired was £861.714. The goodwill of £1.717.330 that has arisen from the acquisition was recognised in the profit and loss reserve. On 31 December 2002, the Group had control of 51.15% of the voting rights of White Knight Holdings Limited (43.41% through direct ownership in the issued share capital plus 7.74% through voting rights). During the year ended 31 December 2003, the Group increased its percentage ownership in the issued share capital of White Knight Holdings Limited by 6.63% (from 43.41% to 50.04%) through the acquisition of 14.362.560 shares. The acquisition cost of the 8.362.560 shares was £2.389.858, while the fair value of the share of net assets acquired was £2.214.412. As a consideration for the acquisition of these shares an equivalent amount of loans receivables and other receivable amounts due to the Group were repaid. The goodwill that has arisen as a result of the above transactions amounts to £175.446. The remaining 6.000.000 shares of White Knight Holdings Limited were acquired by the Group through the execution of the agreement with Demetra Investment Company Limited, as presented in note 26. On 31 December 2003 the Group had control of 53.56% of the voting rights of the shareholders of White Knight Holdings Limited (50.04% through direct ownership in the issued share capital plus 3.52% through voting rights). The voting rights controlled by the Group as of 31 December 2003 for 3.52% of the total voting rights of White Knight Holdings Limited shares expire from 31 March to 30 July 2004.

SFS GROUP PUBLIC COMPANY LIMITED 34 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 23. Investment in Subsidiaries (Continued) Principal acquisitions of subsidiaries (Continued) Sharelink Securities and Financial Services Limited and CapitalAsset Link Limited

During the year ended 31 December 2002 Sharelink Securities and Financial Services Limited issued to SFS Group Public Company Limited 1.200 new shares of nominal value £1 each for £600.000.

During the year ended 31 December 2003 Sharelink Securities and Financial Services Limited issued to SFS Group Public Company Limited 8.800 new shares of nominal value £1 each for £1.116.081. In addition during the year ended 31 December 2003, the Company acquired 25% of the ordinary share capital of CapitalAsset Link Limited held by Mr Marios Ioannides, one of the Executive Directors of the Company. As a result, the shareholding of the Company in CapitalAsset Link Limited has increased to 100%. In exchange Mr Marios Ioannides received £35.000 in cash and a 4,5% share in the increased share capital of Share Link Securities and Financial Services Limited. According to the agreement, the Company has a call option on the shares of Share Link Securities and Financial Services Limited which may be exercised at any time after 31 December 2006. Furthermore, the agreement gives Mr Marios Ioannides a put option on the shares of Share Link Securities and Financial Services Limited which may be exercised any time after 31 December 2007. Both the call and put options expire on 19 November 2012. The goodwill that has arisen from the above transaction amounts to £77.637. As a result of the above transaction the percentage shareholding of the Company to the subsidiary company Sharelink Securities and Financial Services Limited decreased from 100% to 95.5%.

First Elements Ventures Limited During the year ended 31 December 2003, First Elements Ventures Limited issued to the Company 1.000

new shares of nominal value £1 each for £187.5 per share. The Company’s percentage shareholding in the issued share capital of First Elements Ventures Limited remained constant at 100% and as a result no goodwill has arisen on the acquisition.

SFS International Securities Limited

On 30 June 2002, the Company increased its holding in the ordinary share capital of SFS International Securities Limited from 60% to 74,29% by acquiring 250.000 ordinary shares of Stg£1 each for Stg£250.000 (£230.708) in cash. The fair value of the share of net assets acquired by the Company was Stg£181.862 (£162.959) and the goodwill that has arisen amounted to Stg£68.138 (£67.749). On 30 September 2002, the Company increased its holding in the ordinary share capital of SFS International Securities Limited by an additional 3,07% from the acquisition of 95.000 ordinary shares of Stg£1 each for Stg£95.000 (£86.695) in cash. The fair value of the share of net assets acquired by the Company was Stg£78.518 (£71.653) and the goodwill that has arisen amounted to Stg£16.482 (£15.041). On 31 December 2003, the Company’s holding in the issued share capital of SFS International Securities Limited was 77,36% (2002:77,36%). The Group has granted to two directors of the subsidiary company SFS International Securities Limited call options for the acquisition of 138.000 ordinary shares of SFS International Securities Limited, of which 100.000 are exercisable on any date between 1 July 2002 and 30 June 2005. The other 38.000 shares are exercisable any time between 1 October 2002 and 30 September 2005 at the price of Stg£1 per share plus accrued interest at the rate of the Cyprus basic rate plus 1.5%.

SFS GROUP PUBLIC COMPANY LIMITED 35 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 23. Investment in Subsidiaries (Continued) Principal acquisitions of subsidiaries (Continued) White Knight Properties Limited

On 8 September 2002, the subsidiary company White Knight Holdings Limited acquired 300.000 ordinary shares of £1 each which represents 1% of the ordinary share capital of White Knight Properties Limited for £300.000 in cash. With this acquisition the percentage of the holding of White Knight Holdings Limited in the ordinary share capital of White Knight Properties Limited has risen to 100%. The goodwill that has arisen from this transaction amounted to £2.722.

Loss on disposal of investment in subsidiary On 8 September 2002, the subsidiary company White Knight Holdings Limited disposed 350.700 ordinary

shares of £1 each in D.A. Nicolaides & Sons Limited, representing 70% of the issued share capital of the company for £752.000. The loss that has arisen from the disposal amounted to £252.993. During the year ended 31 December 2003 the Group did not acquire any new subsidiaries.

The contribution of subsidiaries acquired by the Group during the year to the loss attributable to the

members of the Company for the year ended 31 December 2002 was a loss of £369.

The fair value of assets and liabilities assumed as a result of acquisitions of subsidiaries was as follows: 2003 2002 £ £ Cash in hand and at bank - 21.899 Trade and other receivables - 6.206 Property, plant and equipment – net - 20.659 Intangible assets – net - 527 Trade and other payables - (14.197) Goodwill - 222.114 Total cost of acquisition - 257.208 Satisfied by: Deferred consideration - 140.000 Investment in associates - 2.608 Cash paid - 114.600 - 257.208 Cash flow on acquisition of subsidiaries: Cash paid - (114.600) Cash acquired - 21.899 - (92.701) The fair value of assets and liabilities disposed of by the Group, was as follows: 2003

£ 2002

£ Cash in hand and at bank – net - 16.126 Trade and other receivables - 113.930 Property, plant and equipment – net - 848.818 Inventories - 359.002 Deferred taxation - (83.300) Trade and other payables - (268.856) Taxation - (16.597) Goodwill - 327.450 Minority interest - (291.580) Loss on disposal - (252.993) Disposal proceeds - 752.000

SFS GROUP PUBLIC COMPANY LIMITED 36 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 23. Investments in Subsidiaries (Continued) The fair value of assets and liabilities disposed of by the Group, was as follows: (Continued) 2003

£ 2002

£ Satisfied by: Cash - 240.000 Amount offset with increase of share in subsidiary - 300.000 Amount included in receivables - 212.000 - 752.000 Cash flow from disposal of subsidiaries: Cash acquired - 240.000 Cash paid - (16.126) - 223.874 24. Trade and Other Payables 2003 2002 £ £ Trade creditors 2.021.627 1.600.464 Amounts due to brokerage clients 2.635.790 3.759.243 Amounts due to brokers and clearing organisations - 358.400 Amounts received by irrecoverable applications for shares of subsidiary - 509.389 Accruals 749.247 544.766 Other creditors 3.257.993 3.373.349 8.664.657 10.145.611 The above amounts are payable within one year. The amount of £509.389 at 31 December 2002, relates to irrecoverable applications for the purchase of

shares in White Knight Holdings Limited given to the shareholders of Kyknos Portfolio Investments Company Limited, that was repaid during 2003.

25. Long-term loans 2003 2002 £ £ Secured Bank loans 57.852.241 43.003.046 Hire purchase obligations 1.991 27.170 57.854.232 43.030.216 Less: Current portion of long-term loans (2.348.338) (3.116.124) Current portion of hire purchase obligations (1.991) (25.179) 55.503.903 39.888.913 The long-term loans are payable as follows: 2003 2002 £ £ Within one year 2.350.329 3.141.303 Between two and five years 28.703.649 18.568.751 More than five years 26.800.254 21.320.162 57.854.232 43.030.216 The hire purchase obligations bear interest at 6.5% and they are secured by personal guarantees of

directors of subsidiaries and corporate guarantees of the Group.

SFS GROUP PUBLIC COMPANY LIMITED 37 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 25. Long-term loans (Continued)

The repayment terms of the principal loans are as follows: (i) Loan of initial amount of £11.000.000 (with balance on 31 December 2003 of £9.283.246) is

repayable by monthly instalments of £141.260 from December 2005 until December 2012. Up to 2005, the Group will pay monthly, only the interest arising on the loan.

(ii) Loan with balance on 31 December 2003 of £4.000.000 which is repayable by 28 quarterly

instalments of £177.480 as from 31 December 2005. Up to 31 December 2005, the Group will pay quarterly, only the interest arising on the loan.

(iii) Loans in foreign currency (with multi currency option) of initial amount of £11.910.235 are

repayable by 28 quarterly instalments from December 2005 to September 2012. Up to December 2005, the Group will pay quarterly, only the interest arising on the loans.

(iv) Loan in two equal portions of initial amount of US$10.850.000 (£5.058.510) each, is repayable by

24 quarterly instalments of US$225.000 (£104.900) and one final instalment after the completion of the 24 instalments of US$5.450.000 (£2.540.911) for each of the two portions, in 2008.

(v) Loan in two equal portions of initial amount of US$10.850.000 (£5.058.510) each, is repayable by

24 quarterly instalments of US$225.000 (£104.900) and one final instalment after the completion of the 24 instalments of US$5.450.000 (£2.540.911) for each of the two portions, in 2009.

(vi) Floating loan facility of amount up to £2.000.000 (with balance at 31 December 2003 of

£1.698.503) is repayable by 120 monthly instalments of £23.300. (vii) Loan of initial amount of £1.500.000 (with balance at 31 December 2003 of £1.500.000) is

repayable by 85 monthly instalments of £23.160 from March 2006 until April 2013. Up to 2006, the Group will pay monthly, only the interest arising on the loan.

(viii) Loan of initial amount of US$2.444.762 (£1.139.802), with balance at 31 December 2003

US$2.444.762, is repayable in April 2005. (ix) Loans of initial amount of £7.405.000. Up to December 2005 the Group will repay only the

interest arising on these loans, followed by monthly instalments of £114.466 up to December 2012.

(x) Loan of initial amount of £490.000 (with balance on 31 December 2003 of £267.297) is repayable

by monthly instalments of £6.800 until 2007. (xi) Loan of initial amount of £650.000 (with balance on 31 December 2003 of £398.209) is repayable

by monthly instalments of £13.316 until 2006. (xii) Loan of initial amount of £620.000 (with balance on 31 December 2003 of £397.225) is repayable

by monthly instalments of £12.000 until 2007. The loans bear interest 1,25% to 3% in excess of the base interest rate or the three-month Libor rate plus 1,75% to 2%.

SFS GROUP PUBLIC COMPANY LIMITED 38 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 25. Long-term loans (Continued)

Securities

For the provision of bank facilities and loans to the Group at 31 December 2003, immovable property

included in the investment property and inventories was mortgaged for £28.050.000 plus interest (2002:£14.300.000), vessels of the Group were mortgaged with net book value at 31 December 2003 of £30.527.737 (2002:£25.088.881) and immovable property included in the property, plant and equipment of the Group was mortgaged for £4.359.000 at 31 December 2003 (2002:£4.359.000). Included in the amount of £4.359.000, are mortgages of £1.000.000 that bear additional interest (2002:£1.000.000).

In addition, there were floating charges on the assets of the Group for the amount of £10.365.000

(2002:£10.265.000), fixed charges on the assets of the Group for the amount of £1.050.000 (2002:£1.050.000), corporate guarantees by companies of the Group for the amount of £16.970.000 (2002:£4.350.000), a corporate guarantee by the Company for an amount up to US$2.000.000 (£932.444) and personal guarantees by a director of the subsidiary company Waverland Investments Limited, for the amount up to US$2.000.000 (£932.444). Bank deposits of £52.365 were blocked at 31 December 2003 (2002:£6.593) and there was a government guarantee of £135.000 (2002:£135.000) in favour of the Company. The shares held by Waverland Investments Limited in the two ship-owner companies were pledged and the insurance policies of the vessels under construction as well as their charting agreements were also assigned to the bank. Moreover, shares held by the Group in companies listed on the Cyprus Stock Exchange with a market value on 31 December 2003 of £4.712.721 (2002:£4.708.391) and 90.000.000 (2002:56.666.667) shares held by the Company in White Knight Holdings Limited of a nominal value of £0,50 each, were pledged. Furthermore, (unlimited) corporate guarantees and written commitments have been given by subsidiaries of the Group in relation to the repayment of balances among companies of the Group, as well as other personal guarantees of directors and minority interest shareholders of subsidiaries.

26. Provisions 2003 2002 £ £ Balance 1 January 2.831.766 843.766 (Decrease)/increase in provisions for the year (2.831.766) 1.988.000 Balance 31 December - 2.831.766 (a) During the year 2003 the Group reached an agreement with Demetra Investments Company Limited for a

complete and final settlement of their obligations, as they originated from prior agreements between the two contracted parties in relation to the disposal of shares of the subsidiary company White Knight Holdings Limted. The new agreement provided for the transfer of 23.000.000 own shares of SFS Group Public Company Limited, in exchange of the transfer of 5.000.000 shares of the subsidiary White Knight Holdings Limited to the Company.

For the execution of the agreement the Company paid the amount of £1.920.578 to White Knight

Holdings Limited, for the transfer to Demetra Investments Company Limited of 20.216.609 shares of SFS Group Public Company Limited. In addition the Company transferred cash and shares of listed companies of £375.000 in total to the associate CyVenture Capital Limited in exchange of the transfer of 2.783.391 SFS Group Public Company Limited shares to Demetra Investments Company Limited, and the transfer of 1.000.000 White Knight Holdings Limited shares to the Company. Finally, Demetra Investments Company Limited transferred to the Company 5.000.000 shares of the subsidiary White Knight Holdings Limited.

The loss to the Group from the above transactions amounted to £1.988.830 and was debited to the profit

and loss reserve in accordance with the provisions of the Standing Interpretations Committee (SIC) 16 (Share Capital – Reacquired Equity Instruments).

As a result of the settlement of any potential claims of Demetra Investments Company Limited against

the Group in relation with the agreements described above, the provision of £1.158.000 recorded in 2002, was reversed during the year ended 31 December 2003 in the consolidated financial statements of the group.

SFS GROUP PUBLIC COMPANY LIMITED 39 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 26. Provisions (Continued) (b) A provision of £1.673.766 as of 31 December 2002 related to the balance owed by a subsidiary company

to White Knight Holdings Limited, since as a result of the possible strategic actions of the Group, the recoverability of the balance of £1.673.766 by the Company was considered unlikely.

During the year ended 31 December 2003, the above provision has decreased due to change of the strategic plans of the Group for the subsidiary company and due to the increase of the value of the net assets of the subsidiary company.

27. Deferred Taxation The deferred taxation balance is analysed as follows: 2003 2002 £ £ Deferred tax liability 914.545 434.925 Deferred tax asset (60.437) (35.730) Net deferred tax liability 854.108 399.195 The deferred taxation shown in the balance sheet consists of: 2003 2002 £ £ Accelerated depreciation for tax purposes 92.432 100.493 Unrealised profit on revaluation of investment property 794.630 325.789 Other temporary differences 13.320 13.320 Losses for tax purposes (46.274) (40.407) Net deferred tax liability 854.108 399.195 The amount of deductible temporary differences for which no deferred tax asset is recognised in the

balance sheet is as follows: 2003 2002 £ £ Losses for tax purposes carried forward 27.804.114 24.409.432 The losses for taxation purposes are carried forward indefinitely for offset against future taxable profits.

No deferred tax asset has been recognised in the balance sheet for deductible temporary differences arising from losses for tax purposes, on the basis of the prudence principle.

28. Cash Contribution from Shareholder of Subsidiary

The cash contributed by a shareholder of a subsidiary company with balance at 31 December 2003 of

£5.654.839 (2002:£6.648.666) represents an unsecured interest free loan received from the minority shareholders of Waverland Investments Limited, a subsidiary company, for the financing of the construction of vessels of its six subsidiaries.

SFS GROUP PUBLIC COMPANY LIMITED 40 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 29. Convertible Bonds On 31 March 1999, the Company issued 1.500.000 convertible bonds at nominal value of £1 each. The

bonds bear annual interest of 1,75% in excess of the average yield of the 52-week Treasury Bills. The bonds are repayable on 31 December 2004. The Company had the option to repurchase the whole or part of the loan at £1,05 per convertible bond of £1 each, on 31 December 2003 with at least 30 days irrevocable notice. The Company has not exercised this option.

The bonds are convertible to ordinary shares of the Company of nominal value £0,10 each (or any other

nominal value as provided in the terms of the issue of the bonds) at a 10% discount on the average share price of the Company between 10 November and 15 December 2004.

The total value of the convertible bonds at 31 December 2003 has been classified as current liability as,

based on the terms of the bonds and the current economic conditions, the equity instrument of the convertible bonds at 31 December 2003 is of no value.

Interest payable for the year in respect of the convertible bonds was £82.200 (2002:£95.100). 30. Share Capital 2003 2002 Number £ Number £ Authorised Ordinary shares of £0,10 (2002:£0,20) each 1.739.579.710 173.957.971 1.000.000.000 200.000.000 Following an ordinary resolution at an Extraordinary General Meeting of the Company held on 26 April

2002, the authorised share capital of the Company was increased from £80.000.000 divided into 400.000.000 ordinary shares of £0,20 each to £200.000.000 divided into 1.000.000.000 ordinary shares of £0,20 each, by creating 600.000.000 new shares of a nominal value of £0,20 each.

Following an ordinary resolution at an Extraordinary General Meeting of the Company held on 26 November

2003, the authorised share capital decreased from £200.000.000 divided into 1.000.000.000 ordinary shares of £0,20 each to £173.957.971 divided into 1.739.579.710 ordinary shares of £0,10 each. In addition the issued share capital of the Company decreased from £52.084.058 divided into 260.240.290 ordinary shares of nominal value £0,20 each to £26.042.029 divided into 260.240.290 ordinary shares of nominal value £0,10 each.

The decrease in share capital was endorsed by the Nicosia District Court on 30 January 2004 and was filed

with the Companies Registrar on 12 February 2004. In addition at the Extraordinary General Meeting it was decided that immediately after the court approval

for the decrease of the share capital of the Company, the authorised share capital of the Company will be increased to £200.000.000 by the creation of 260.240.290 shares of £0,10 each, which have the same rights as the existing shares.

2003 2002 Number £ Number £ Issued and fully paid Ordinary shares of £0,10 (2002:£0,20) each 260.420.290 26.042.029 260.420.290 52.084.058

SFS GROUP PUBLIC COMPANY LIMITED 41 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 31. Reserves The share premium reserve, the surplus/(deficit) from revaluation of investments available for sale and

foreign exchange difference reserves are not available for distribution. As per the Companies Law, Cap. 113, the Company is not allowed to distribute any dividend if the net asset

value of the Company as it appears in the financial statements of the last financial year, or as it would result after the dividend distribution, is lower than the sum of the issued share capital and the undistributable reserves.

32. Own Shares

During the year ended 31 December 2003 and 31 December 2002 the following transactions were carried out by the Group:

2003 2002 Number of Number of shares of a shares of a nominal value nominal value of £0,10 of £0,20 each £ each £ Balance 1 January 96 48 5.200.096 2.579.092 Disposal of own shares - - (5.200.000) (2.579.044) Balance 31 December 96 48 96 48 Share of own shares held by

subsidiaries

Balance 1 January 13.004.260 3.269.282 12.594.722 3.236.519 Increase of percentage holding in

subsidiary 1.318.158 86.105

409.538

32.763 Disposal of own shares (9.435.510) (2.210.506) - - Balance 31 December 4.886.908 1.144.881 13.004.260 3.269.282 Total own shares at 31 December 4.887.004 1.144.929 13.004.356 3.269.330 During the year ended 31 December 2003 the Company acquired 14.362.560 shares of the subsidiary

company White Knight Holdings Limited of nominal value £0,50 each. As a result of the above transactions, the share of own shares held by subsidiaries increased by 1.318.158 shares of total cost of £86.105.

In addition, during the year 2003 the Group signed an agreement with Demetra Investments Company

Limited for complete and final settlement of their obligations as they originated from prior agreements between the two contracted parties (Note 26). Based on this new agreement the subsidiary company White Knight Holdings Limited transferred 20.216.609 shares of SFS Group Public Company Limited to Demetra Investments Company Limited. As a result of the above transaction the share of own shares held by subsidiaries decreased by 9.435.510 shares of total cost of £2.210.506. The loss to the Group from the above transaction amounted to £1.988.830 and was debited to the profit and loss reserve.

During the year ended 31 December 2002, the Company exchanged 5.200.000 own shares of a nominal

value of £0,20 each, with 2.971.428 shares of £0,50 each of the subsidiary company White Knight Holdings Limited. The fair value of the share of net assets acquired amounted to £861.714 and the loss from the transaction to £1.717.330. This loss was debited to the profit and loss reserve in accordance with the provisions of the Standing Interpretations Committee (SIC) 16 (Share Capital – Reacquired Equity Instruments). As a result of the above transaction, the Company’s share of own shares held by subsidiaries increased by 409.538 shares of a total cost of £32.763.

The own shares disposed by the Company during the year ended 31 December 2002, represent 2% of the

issued share capital of the Company at 31 December 2002.

SFS GROUP PUBLIC COMPANY LIMITED 42 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 32. Own Shares (Continued) At 31 December 2003, the own shares held by the Company, its subsidiaries and associates were as

follows: 2003 2002 Percentage Percentage

capital capital

of issued of issued Number share Number share of shares of shares Own shares held by the Company 96 0,00% 96 0,00% Own shares held by subsidiaries

4,48% 9.766.939 3,75% 30.025.777 11,53%

Own shares held by associates 6.026.800 2,31% 11.671.896

£ Balance 1 January 38.492.225

33. Minority Interest 2003 2002 £ 33.330.737

- 31.115.850

Increase of share in subsidiaries (3.844.929) (1.082.253) Profit/(loss) for the year 1.965.790 (3.108.434) Foreign exchange loss (897.266) (711.984) Dividends paid to minority shareholders of subsidiaries (601.962) - Increase in share of own shares held by subsidiaries 86.105 32.763 Decrease in share of subsidiaries 54.051 (291.580)

Disposal of own shares held by subsidiaries 1.023.324 Balance 31 December 33.330.737 34. Post Balance Sheet Events

35. Fair values

The following methods and assumptions are used to estimate the fair value of each class of financial instruments:

No significant events occurred for the Group between the balance sheet date and the date of this report.

Fair value represents the amount at which an asset can be recovered or a liability settled in the ordinary

course of business.

Cash and cash equivalents, investments held for trading and other current assets The carrying amount of cash and other financial assets approximates their fair value because of the short

period to maturity of those instruments or because the assets are presented at market value. Short-term loans The carrying amount approximates fair value because of the short period to maturity of those

instruments. The fair value of all other assets and liabilities of the Group is not materially different to the amounts at

which they are presented in the financial statements.

SFS GROUP PUBLIC COMPANY LIMITED 43 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003

(iii) Foreign Exchange Risk

The following contingent liabilities, capital commitments and other financial guarantees for which no

provision has been made in the financial statements and which arise from the written joint venture agreement among the subsidiary of the Group Bezoar Investments Limited, Superbird Enterprises Limited and the subsidiary of the Group Waverland Investments Limited, existed on 31 December 2003:

36. Financial Instruments The main financial assets of the Group are cash in hand and at bank and debtors. The main financial

liabilities of the Group are bank overdrafts, bank loans and creditors. (i) Interest Rate Risk The interest rates and the loan repayment terms of the Group are set in note 25. (ii) Credit Risk Credit risk arises from the inability to repay loans receivable and other trade debtors. A report on

the credit exposure of the Group in relation to approved credit limits is prepared on a daily basis and distributed to the Chief Executive Officer and Chief Financial Officer.

The Group foresees the possibility of foreign exchange risk and has adopted a policy for management of such risks.

37. Contingent Liabilities

Contingent liabilities from shipping activities

a) In the case of any claims by third parties against Bezoar Investments Limited or Superbird

Enterprises Limited, or both companies in their capacity as shareholders of the subsidiary of the Group Waverland Investments Limited, the claim will be borne by the two corporate shareholders in proportion of their shareholding in Waverland Investment Limited. If any of the two shareholders bears a higher proportional liability, then the other shareholder will compensate the former accordingly.

b) Bezoar Investments Limited undertakes the obligation to contribute to its subsidiary Waverland

Investments Limited, the necessary funds for the construction of the vessels of the subsidiaries of Waverland Investments Limited, in proportion of its shareholding in Waverland Investments Limited.

c) Superbird Enterprises Limited, one of the parties to the joint venture agreement, has guaranteed

the compliance to the clauses of the charter agreement between one of its related companies and the subsidiaries of Waverland Investments Limited, by the pledge of its shareholding in Waverland Investments Limited in favour of Bezoar Investments Limited. Superbird Enterprises Limited owns 15% of the issued share capital of Waverland Investments Limited.

d) Superbird Enterprises Limited, one of the parties to the joint venture agreement, has committed to

the acquisition of all the vessels of the subsidiaries of Waverland Investments Limited at US$9.000.000 (£4.196.000) for each vessel at the end of the period of 12 years from the date of delivery of the vessel. Instead of the acquisition of the vessels, Superbird Enterprises Limited has the option to acquire at the same date from Bezoar Investments Limited, 51% of the issued share capital of the subsidiaries of Waverland Investments Limited at US$4.590.000 (£2.139.960) for each subsidiary. This obligation is secured by the pledge of shares owned by Superbird Enterprises Limited in Waverland Investments Limited, in favour of Bezoar Investments Limited.

e) According to the written joint venture agreement between Waverland Investments Limited and its two corporate shareholders, Waverland Investments Limited undertakes the obligation to provide its subsidiaries, in the form of an interest free loan, with the necessary funds for the construction of vessels amounting to US$15.500.000 (£7.226.444) per vessel. The above amount will be provided in accordance with the same agreement, to Waverland Investments Limited by its shareholders in the form of loans.

SFS GROUP PUBLIC COMPANY LIMITED 44 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 37. Contingent Liabilities (Continued)

Contingent liabilities from shipping activities (Continued)

In addition, a number of other lawsuits has been filed against the White Knight Holdings Limited Group for an amount of £1.857.890 (31.12.2003:£1.857.890) which does not relate to refund of money to shareholders.

As of the date of this report, there was a pending legal case with number 6308/02, raised by George Lordos and other shareholders of White Knight Holdings Limited against the Company, White Knight Holdings Limited and members of their boards of directors. The claim amounts to £13.111.593 plus interest, expenses and general/punitive compensations. This legal case has been registered by the plaintiffs as a derivative action and in substance the real "plaintiff" is White Knight Holdings Limited, which will be entitled to receive any amount awarded by the court and suffered by the other defendants. All defendants have filed for defence.

As of the date of this report, the subsidiary company White Knight Holdings Limited has received claims

for refund of cash from its shareholders amounting to £17.148.003 in accordance with laws 42(I)/2000, 141(I)/2000, 9(I)2001 and 168(I)/2002.

The Board of Directors after assessing the situation and considering relevant legal advice, is of the opinion that there are no reasons for which any provision should be made in the consolidated financial statements in respect of the above legal actions. Up to the date of this report there were no other legal claims against the companies of the Group.

2003 2002

f) Waverland Investments Limited, in accordance with the written joint venture agreement, has agreed with its ship-owning subsidiaries to bear any claims by the inspectors for the construction of the vessels or their representatives in their performance of duties outlined in the inspection and construction agreements of the vessels. Moreover, Waverland Investments Limited has commonly undertaken with the ship-owning subsidiaries, to compensate the inspectors for any claims by third parties against them as a result of their actions in the performance of their duties.

Litigation and claims

As of the date of this report, legal cases against the companies of the Group with the exception of White Knight Holdings Limited group of companies amounted to £3.678.875 (31.12.2003:£3.359.532) in accordance with the claims of plaintiffs. The companies of the Group have disputed the lawsuits and have filed for defence, depending on the circumstances of each case.

With relation to White Knight Holdings Limited, there were criminal legal cases and civil legal cases against the company as of the date of this report, for a refund of cash to shareholders based on the various laws for "the refund of money to investors". The total amount of these criminal legal cases was £2.471.807 plus interest and expenses (31.12.2003:£2.156.307). The civil legal cases with the exception of the derivative action mentioned below, of a total amount of £1.893.567 plus interest and expenses (31.12.2003:£942.367) relate to claims for the refund of cash to investors.

In addition as of the date of this report there was a pending civil appeal with number 11558 that relates to the derivative action with number 7700/2002 raised by Andreas Lordos and other shareholders of White Knight Holdings Limited against the Company, White Knight Holdings Limited and members of the board of directors. The claim of the derivative action was for the amount of £13.111.593 plus interest, expenses, and general/punitive compensations. The Nicosia District Court through an interim ruling dated 13 December 2002 ruled that the above legal suit was cancelled as it was considered to be abusing judicial procedures. On 27 December 2002 all plaintiffs filed for appeal against the above court decision.

Other contingent liabilities At 31 December 2003, the Group had the following contingent liabilities for which no provision has been

made in the financial statements:

£ £ Current taxation for special contribution for defence

on profit on disposal of listed investments

293.687

293.687 Repurchase of convertible bonds at a premium - 72.706 293.687 366.393

SFS GROUP PUBLIC COMPANY LIMITED 45 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003

Within one year

37. Contingent Liabilities (Continued) Other contingent liabilities (Continued) The contingent liabilities from current taxation for special contribution for defence on profit on disposal of

investments held for trading at 31 December 2003 and 2002 are affected by the decision of the Inland Revenue to impose a charge for special contribution for defence on profit on disposal of investments listed on the Cyprus Stock Exchange for the year 2000 onwards.

The contingent liability from the repurchase of convertible bonds at a premium at 31 December 2002 was

affected by the decision of the Company to exercise its option to repurchase the issued convertible bonds on 31 December 2003.

The Company has guaranteed its subsidiary company White Knight Holdings Limited for the amount of

£800.000 in relation to a short term-loan granted by the associate company Ellinas Finance Limited and which is repayable on 24 April 2004.

38. Commitments The minimum future operating lease payments for which no provision has been made in the financial

statements are as follows: 2003 2002 £ £ 166.630 131.162

97.968 370.139

Between two to five years 142.937 212.509 Over five years 60.572 441.639 39. Related Party Transactions

In the normal course of business, the Group undertakes on an arms-length basis transactions with associates which consist of the following:

2003 2002 £ £ Brokerage, selling and underwriting commissions 46.486 29.636 Asset management fees 147.637 257.722 Private equity fees 118.716 153.428 Other fees 46.866 97.133 359.705 537.919

During the year ended 31 December 2003 the Group paid to associates an amount of £138 (2002:£7.740) for the provision of brokerage services and £9.204 (2002 : £15.610) interest payable.

The balance sheet includes the following amounts resulting from transactions with associates:

2003 2002 £ £ Trade and other receivables 263.940 214.675 Trade and other payables (1.118.458) (1.027.188) (854.518) (812.513)

A credit balance of £800.000 is due by the subsidiary company White Knight Holdings Limited to the associate Ellinas Finance Limited and it is repayable on 24 April 2004. The Company has guaranteed of this balance for the amount of £800.000. No interest was charged on this balance during the year 2003.

A credit balance of £28.544 (2002:£787.188) is due by the subsidiary White Knight Holdings Limited to

the associate Triena Investments Limited. The balance which resulted from the acquisition of shares of a public unlisted associate, bears interest at 1% plus the six months deposit rate. During the year ended 31 December 2003 the interest charged on the loan amounted to £28.544 (2002:£37.188). The balance is secured by the shares acquired in the public unlisted associate.

SFS GROUP PUBLIC COMPANY LIMITED 46 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003 39. Related Party Transactions (Continued)

Number of

9.453

The transactions of the Group with members of the Board of Directors during the year were as follows:

2003 2002 Number of Directors £ directors £ Brokerage commissions payable by the Group 1 1.278 2 Directors’ remuneration 5 277.611 5 329.663 Pension scheme, provident fund and other

contributions by the Group 875

5 77.191 5 86.839

Rental of offices - - 1 On 31 December 2003, a debit balance of £63.499 (2002:£90.196) which is included in other debtors and a

debit balance of £17.522 (2002:£16.679) which is included in amounts due to brokerage clients were owed by Executive Directors.

Other related parties of the Group, being related persons of the Board of Directors of the Company, the

nature and volume of the transactions between these parties and the Group, which are carried out on an arms-length basis, and the balances with these parties are as follows:

Number of Name

E. A. Ellinas & Co Limited (53.393)

Debit/ (Credit)

Income/(Expenses) Balance Nature of transaction directors 2003 2002 2003 2002

£ £ £ £

Rental of premises 1 (45.575) - -

Lemissoler Shipping Co. Limited - -

-

Rental of premises 2 (3.000) - -

Provision of financial services

- - 364.470

Interest bearing loan - 107.170 - The related persons comprise spouses, minor children and companies in which the Director owns, directly or

indirectly, at least 20% of the voting rights at a general meeting.

The Executive Directors have five-year employment contracts starting from 1 January 1999 for Messrs Christodoulos Ellinas, Philip X. Larkos, Neophytos Neophytou and Dr. John Pitsillos and from 14 April 2000 for Mr Marios St. Ioannides. According to the terms of the contract the increase in remuneration will be on an annual basis.

Directors’ Employment Contracts

The Directors are bound by the contract not to compete against the Group during their employment and for

at least five years after the cessation of their employment. Compensation will be rendered to the Directors on termination of the contract. In particular, the compensation will amount to the total salary and bonus in respect of the period remaining to the termination of the contract. The bonus payable will be calculated on the profits of the previous or the current year (whichever is the largest amount). Moreover, a cash compensation will be rendered which would be equal to the monetary value of the directors’ share options as calculated in the year prior to termination, corresponding to the period remaining to the termination of the contract. The monetary value of the share options is the difference between the exercise price and the market price at the date of exercise.

The employment contracts of Messrs Christodoulos Ellinas, Philip X. Larkos, Neophytos Neophytou and Dr. John Pitsillos expired on 31 December 2003.

SFS GROUP PUBLIC COMPANY LIMITED 47 (Formerly SHARELINK FINANCIAL SERVICES LIMITED) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2003

Following a resolution of the General Meeting of the Company dated 13 January 1999 and a resolution of the Board of Directors dated 31 March 1999, the Company created a Share Option Scheme for its employees, the Directors of the Group, the directors and employees of any other companies that may in the future belong to the Group and for the Company’s associates. Under the Scheme, the above parties may be granted share options between 1999 and 2003.

40. Employee Benefit Scheme The Group operates an approved defined contribution employees’ provident fund in which the employees

of the Company and some of the employees of the subsidiary companies participate. The contribution of the employees to the fund ranges from 5% to 10% and of the employer is 5%. The fund operates independently and submits separate financial statements. The Group’s contribution was £49.031 (2002:£62.543).

Some of the subsidiary companies of the Group which do not participate in the above Employee Benefit

Scheme, have their own defined contribution employees’ provident funds. 41. Share Option Scheme

The number of shares that may be granted under the Share Option Scheme is equal to 10% of the issued

share capital of the Company at 31 December of the previous year from the date of granting of the options. For the year 2003 and 2002, no share options were granted. The Board of Directors of the Company will grant the share options under the aforementioned Share Option Scheme at their own discretion. The price for every subsequent exercise of the share options will be at least 15% higher than the closing mid-market price (last purchase and sale price) of the ordinary shares of the Company during the month of December of the previous year from the date of granting the share options. The exercise price may also vary according to other terms and conditions that the Board of Directors may approve at their own discretion. The total of any outstanding share options and any outstanding warrants will not at any time, exceed 20% of the issued share capital of the Company.

The share options are not transferable and can be exercised partly or wholly between the 15 December and 31 December of the year. All share options that are not exercised during the above period will lapse. All ordinary shares issued from the exercise of share options will rank pari passu with the existing ordinary shares in issue and will have the same right to any dividend distribution following their exercise.

The share option scheme has expired on 31 December 2003 and none of the share options was

exercised. 42. Staff and Management Bonus Following a resolution of the General Meeting on 13 January 1999, the Company has set up a bonus

scheme for employees and management, whereby up to 25% of the profits for the year before taxation and bonus of the Group may be distributed, at the discretion of the Board of Directors of the Company. For the years ended 31 December 2003 and 2002 no bonus was paid.