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AUDITORS’ REPORT AND FINANCIAL STATEMENTS

INDEPENDENT AUDITORS’ REPORT TO THE CYPRUS TELECOMMUNICATIONS AUTHORITY (CYTA)
Report on the Financial Statements
We have audited the financial statements of Cyprus Telecommunications Authority (CYTA), which comprise the balance sheet as at 31 December 2006, the income statement, statement of recognised income and expense and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.  This report is made solely to CYTA’s Board of Directors, as a body, to the Minister of Finance, to the House of Representatives and to the Auditor General in accordance with the Telecommunications Services Law, Cap. 302 and with the Public Corporate Bodies (Audited Accounts) Law of 1983 until 2007.

Board of Directors’ Responsibility for the Financial Statements
The Board of Directors is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (EU) and International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB) and the requirements of the Telecommunications Services Law, Cap. 302. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

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

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

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

Opinion
In our opinion, the financial statements give a true and fair view of the financial position of CYTA as of 31 December 2006, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU and International Financial Reporting Standards as issued by the IASB and the requirements of the Telecommunications Services Law, Cap. 302 and the Public Corporate Bodies (Audited Accounts) Law of 1983 until 2007.

Other Matter
This report, including the opinion, has been prepared for and only for the CYTA’s Board of Directors, as a body, the Minister of Finance, the House of Preventatives and the Auditor General in accordance with the Telecommunications Services Law, Cap. 302 and with the Public Corporate Bodies (Audited Accounts) Law of 1983 until 2007, and for no other purpose.  We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come to.

 KPMG
Chartered Accountants
Nicosia, 30 April 2007

REPORT OF THE AUDITOR GENERAL OF THE REPUBLIC TO THE CYPRUS TELECOMMUNICATIONS AUTHORITY (CYTA)
I have examined the foregoing report on the financial statements of the Cyprus Telecommunications Authority for the year ended 31 December 2006 submitted by the appointed auditor in accordance with section 3(1) of the Public Corporate Bodies (Audited Accounts) Law of 1983 until 2007 and I am satisfied that this is appropriate.

C. Giorgatzi
Auditor General of the Republic
Nicosia, 31 May 2007

INCOME STATEMENT
For the year ended 31 December 2006

	Note	2006 £’000	2005 £’000
Operating revenues Operating expenses	3 4	249.181 (209.488)	230.450 (212.241)
Operating surplus from services Other income	5	39.693 1.130	18.209 1.816
		40.823	20.025
Penalties imposed Profit from sale of investment	20	(392) -	(2.302) 840
		(392)	(1.462)
Finance income Finance cost		9.739 (415)	9.638 (792)
Net finance income	6	9.324	8.846
Surplus for the year before taxation Taxation	8	49.755 (15.529)	27.409 (9.100)
Surplus for the year transferred to reserves	15	34.226	18.309

The notes form an integral part of the financial statements.

STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the year ended 31 December 2006

	Note	2006 £’000	2005 £’000
Contribution to the Cyprus Government	21	(55.000)	-
Net expenses recognised directly in equity		(55.000)	-
Surplus for the year		34.226	18.309
Total recognised income and expense		(20.774)	18.309

The notes form an integral part of the financial statements.

BALANCE SHEET AS AT 31 DECEMBER 2006

	Note	2006 £’000	2005 £’000
ASSETS
NON-CURRENT ASSETS Property, plant and equipment Intangible assets Investment in subsidiary company Available for sale investments Held to maturity investments Trade and other receivables	9 10 11 12 13 14	228.494 22.229 32.219 936 47.312 790	228.185 24.124 32.219 527 59.494 766
		331.980	345.315
CURRENT ASSETS Inventories Taxation receivable		3.604 16.663	3.256 16.791
Held to maturity investments	13	26.059	15.504
Trade and other receivables Cash and cash equivalents	14	62.808 135.090	78.957 130.275
		244.224	244.783
Total Assets		576.204	590.098
RESERVE AND LIABILITIES
RESERVES	15	454.947	475.312
NON CURRENT LIABILITIES Loans Deferred tax	16 17	1.398  11.032	1.582  11.032
		12.430	12.614
SHORT-TERM LIABILITIES Loans Trade and other payables Taxation payables	16 18	204 102.109 6.514	203 101.969 -
		108.827	102.172
Total Reserves and Liabilities		576.204	590.098

The notes form an integral part of the financial statements.

CASH FLOW STATEMENT
For the year Ended 31 December 2006

	Note	2006 £’000	2005 £’000
Cash flow from operating activities
Surplus for the year before taxation Adjustments for:		49.755	27.409
Depreciation of property, plant and equipment Amortisation of intangible assets	9 10	40.827 11.768	40.603 11.963
Loss on disposal of fixed assets	9,10	2.964	3.750
Interest receivable Interest payable Investment income Profit from the sale of investments Profit from the revaluation of investments Losses surrender from subsidiary companies	6 6 5	(9.510) 246 (390) - - (160)	(9.128) 157 (814) (840) 413 (42)
Cash flow from operating activities before working capital changes		95.500	73.471
Increase in inventories Decrease/(increase) in trade and other receivables Decrease/(increase) in government bonds Increase in trade and other account payables Decrease in loans		(348) 16.125 1.627 140  -	(128) (9.476) (10.438) 23.077 (64)
Cash generated from operations Interest paid Taxation paid		113.044 (246) (8.726)	76.442 (157) (8.539)
Net cash from operating activities		104.072	67.746
Cash flow from investing activities
Interest received Proceeds from sale of investments		9.510 -	9.128 1.554
Payments for acquisition of property, plant and equipment	9	(44.118)	(47.759)
Payments for acquisition of intangible assets	10	(9.856)	(8.639)
Increase of available for sale investments Investments income	5	- 390	(526) 814
Net cash used in investing activities		(44.074)	(45.428)
Cash flow from financing activities Contribution to the Cyprus Government Repayment of loans	21	(55.000) (183)	(20.000) (208)
Net cash used in financing activities		(55.183)	(20.208)
Net increase in cash and cash equivalents		4.815	2.110
Cash and cash equivalents at the beginning of the year		130.275	128.165
Cash and cash equivalents at the end of the year		135.090	130.275

Cash and cash equivalents comprise cash in hand and cash at bank.

The notes form an integral part of the financial statements.

NOTES TO THE FINANCIAL STATEMENTS
Press to see the Notes.

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