ANNUAL REPORT 2007

Notes to the Financial Statements
For the year ended  31 December 2007

1. Incorporation and Principal Activities
CYPRUS TELECOMMUNICATIONS AUTHORITY (''CYTA'') is a Semi Governmental Organisation established by Law 67 of 1954 (Cap. 302), as amended by Laws 20/1960, 34/1962, 25/1963, 54/1977, 98/1988, 21/1989, 39(I)/1995, 20(I)1998, 159(I)/2000, 149(I)2001, 13(I)2002, 7(I)/2004, 164(I)2004, 51(I)/2006 and 117(I)/2006.

The principal activity of the Company, which is unchanged from last year, is the provision of electronic communication services.

2. Basis of Preparation
(a) Statement of compliance
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU).

(b) Basis of measurement
The financial statements have been prepared under the historical cost convention, except in the case of land, buildings and equipment, leases, and investments, which are shown at their fair value.

(c) Adoption of new and revised International Financial Reporting Standards
ÊAs from 1 January 2007, CYTA adopted all the IFRSs and International Accounting Standards (IAS), which are relevant to its operations. The adoption of these Standards did not have a material effect on the financial statements.

The following Standards, Amendments to Standards and Interpretations had been issued but are not yet effective for the year ended 31 December 2007:

Standards and Interpretations adopted by the EU
IFRS 8: "Operating Segments" (effective for annual periods beginning on or after 1 January 2009). The application of the standard is not expected to have an impact on the financial statements of the Company.
IFRIC 11: "IFRS 2: Group and Treasury Share Transactions" (effective for annual periods beginning on or after 1 March 2007). The application of the interpretation is not expected to have an impact on the financial statements of the Company.

Standards and Interpretations not adopted by the EU
IAS 1 (revised): "Presentation of Financial Statements: A Revised Presentation" (effective for annual periods beginning on or after 1 January 2009). The application of the standard is not expected to have an impact on the financial statements of the Company.
IAS 23 (revised): "Borrowing Costs" (effective for annual periods beginning on or after 1 January 2009). The application of the standard is not expected to have an impact on the financial statements of the Company.
IFRIC 12: "Service Concession Arrangements" (effective for annual periods beginning on or after 1 January 2008). The application of the interpretation is not expected to have an impact on the financial statements of the Company.
IFRIC 13: "Customer Loyalty Programmes" (effective for annual periods beginning on or after 1 July 2008). The application of the interpretation is not expected to have an impact on the financial statements of the Company.
IFRIC 14 IAS 19: "The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their interaction" (effective for annual periods on or after 1 January 2008). The application of the interpretation is not expected to have an impact on the financial statements of the Company.

(d) Use of estimates and judgements
The preparation of financial statements in accordance with IFRSs requires from Management the exercise of judgment, to make estimates and assumptions that influence the application of accounting principles and the related amounts of assets and liabilities, income and expenses. The estimates and underlying assumptions are based on historical experience and various other factors that are deemed to be reasonable based on knowledge available at that time. Actual results may deviate from such estimates.

The estimates and underlying assumptions are revised on a continuous basis. Revisions in accounting estimates are recognised in the period during which the estimate is revised, if the estimate affects only that period, or in the period of the revision and future periods, if the revision affects the present as well as future periods.

In particular, information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described below:

Provision for bad and doubtful debts
CYTA reviews its trade and other receivables for evidence of their recoverability. Such evidence includes the customer’s payment record and the customer’s overall financial position. If indications of irrecoverability exist, the recoverable amount is estimated and a respective provision for bad and doubtful debts is made. The amount of the provision is charged through the income statement. The review of credit risk is continuous and the methodology and assumptions used for estimating the provision are reviewed regularly and adjusted accordingly.

Provision for obsolete and slow moving inventory
CYTA reviews its inventory records for evidence regarding the saleability of inventory and its net realizable value on disposal. The provision for obsolete and slow moving inventory is based on management’s past experience, taking into consideration the value of inventory as well as the movement and the level of stock of each category of inventory.

The amount of provision is recognized in the income statement. The review of the net realisable value of the inventory is continuous and the methodology and assumptions used for estimating the provision for obsolete and slow moving inventory are reviewed regularly and adjusted accordingly.

Income taxes
Significant judgement is required in determining the provision for income taxes. There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. CYTA recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Impairment of available for sale financial assets
CYTA follows the guidance of IAS 39 on determining when an investment is other than temporarily impaired. This determination requires significant judgement. In making this judgement, CYTA evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost and the financial health and near term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.

Impairment of intangible asset
Intangible assets are initially recorded at acquisition cost and are amortized on a straight line basis over their useful economic life. Intangible assets that are acquired through a business combination are initially recorded at fair value at the date of acquisition. Intangible assets with indefinite useful life are reviewed for impairment at least once per year. The impairment test is performed using the discounted cash flows expected to be generated through the use of the intangible assets, using a discount rate that reflects the current market estimations and the risks associated with the asset. When it is impractical to estimate the recoverable amount of an asset, CYTA estimates the recoverable amount of the cash generating unit in which the asset belongs to.

Valuation of non listed investments
CYTA uses various valuation methods to value non listed investments. These methods are based on assumptions made by the Board of Directors which are based on market information at the balance sheet date.

Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units of CYTA on which the goodwill has been allocated. The value in use calculation requires CYTA to estimate the future cash flows expected to arise from the cash generating units using a suitable discount rate in order to calculate present value.

(e) Functional and presentation currency
The financial statements are presented in Cyprus Pounds (£´000) which is the functional currency of the Company.

3. Significant Accounting Policies
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all periods presented in these financial statements unless otherwise stated.

Subsidiary companies
Investments in subsidiary companies are stated at cost less provision for impairment in value, which is recognised as an expense in the period in which the impairment is identified.

Associates
Associate are those entities in which the Company has significant influence, but no control over the financial and operating policies. Investments in associates are initially recognised at cost and are accounted for by the equity method. Unrealised gains arising from transactions with associates are eliminated against the investment to the extent of the Company's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Revenue recognition
Revenue comprises the invoiced amount for the sale of goods and services net of Value Added Tax, rebates and discounts. Revenues earned by the Company are recognised on the following bases:

•	Operating revenue Operating revenue includes revenue from fixed telephony, mobile telephony and other services. Revenue generated from calls is recognised in the income statement in the period in which the calls are made from and to CYTA’s network. Annual rental income is recognised according to the time period that it covers. Receipts from sales are recognised according to the time of sale.
•	Dividend income Dividend income is recognised when the right to receive payment is established.

Employee retirement benefit scheme
CYTA operates a defined benefit scheme for its permanent employees. A lump sum amount is specified and is payable at the termination of employees’ services based on such factors as the length of the employees’ services, their age and salary as well as the investment return.

The cost of the defined benefit scheme is charged in the income statement over the period of the expected service lives of the employees and is estimated annually by independent actuaries, using the projected unit method, in order to create sufficient reserves.

Any surpluses or deficits that may arise from the difference between the expected and actual performance of actuarial assumptions are written off against revenue over a period of 5 years, from 2006 onwards, as opposed to previous years in which write off was over a period of 2 years.

The latest actuarial valuation was conducted on 31 December 2007, assuming annual average salary and pension increases of 3.5% and return on investment of 5%.

Finance income
Finance income includes interest income which is recognised based on an accrual basis.

Financing expenses
All borrowing costs are recognised in income statement in the period in which they are incurred.

Foreign currency transactions
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

Monetary assets and liabilities denominated in foreign currencies are translated into Cyprus Pounds using the rate of exchange ruling at the balance sheet date. The exchange differences that arise are transferred to the income statement, and are presented separately when considered material, except for exchange differences that arise from the exchange rate movement between foreign currencies and the Cyprus Pounds related to foreign currency loans made for the purpose of hedging the exchange risk in connection with revenues received in the same currency.

These exchange differences are recognised in accordance with IAS No. 39 ''Financial Instruments: Recognition and Measurement'' with the portion of exchange difference related to the effective hedging of foreign currency exchange risk being transferred to a special reserve, and the portion of exchange difference in relation to the ineffective hedging of foreign currency exchange risk being recognised in the income statement. The balance of the special reserve is adjusted in accordance with the foreign currency loan balances and the rates of exchange at the end of each year.

Tax
Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax liabilities and assets for the current and prior periods are measured at the amount expected to be paid to or recovered from the taxation authorities, using the tax rates and laws that apply to Semi Governmental Organisations in Cyprus and have been enacted, or substantively enacted, by the balance sheet date. Current tax includes any adjustments to tax payable in respect of previous periods.

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Currently enacted tax rates are used in the determination of deferred tax.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same fiscal authority.

Property, plant and equipment
Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses.

(a)	The cost comprises of the purchase price and any directly attributable costs incurred in bringing the asset to working condition for its intended use. Self constructed assets are valued individually and include material cost, direct labour and other appropriate costs. Borrowing costs relating to the acquisition of property, plant and equipment are written off as they arise. Expenditure on repairs and renewals is written off in the year it is incurred.
(b)	Depreciation on leased property is calculated by equal annual instalments over the period of the lease with a maximum of 33 years.
(c)	Depreciation on prefabricated buildings, which are set on private or leased land, is calculated based on the period of their usage, which is 5 years.

For the remaining fixed assets, depreciation is charged by CYTA to write off the cost less the estimated residual value of the assets by equal annual instalments over their estimated useful lives as follows:

Depreciation methods, useful lives and residual values are reassessed at the reporting date.

Where the carrying amount of an asset is greater than its estimated recoverable amount, the asset is written down immediately to its recoverable amount.

Expenditure for repairs and maintenance of property, plant and equipment is charged to the income statement of the year in which it is incurred. The cost of major renovations and other subsequent expenditure are included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Company. Major renovations are depreciated over the remaining useful life of the related asset.

Gains and losses on disposal of property, plant and equipment are determined by comparing proceeds with carrying amount and are included in the income statement.

A full year’s depreciation is charged in the year of acquisition and no depreciation is charged in the year of disposal.

Deferred income from government grants
Government grants for capital expenditure are presented in the balance sheet and are recognised when they are received. They are amortised on a systematic basis using the straight line method over the expected useful life of the respective assets. Government grants that relate to expenses are recognised in the income statement as revenue when they are received.

Mobile telephony license
Costs that are directly associated with mobile telephony licences that are controlled by CYTA and that will probably generate economic benefits exceeding costs beyond one year are recognised as intangible assets. Subsequently they are carried at cost less any accumulated amortisation and impairment losses.

The expected useful economic life of the mobile telephony licence is 20 years.

Computer software
Costs that are directly associated with identifiable and unique computer software products controlled by the Company and that will probably generate economic benefits exceeding costs beyond one year are recognised as intangible assets. Subsequently computer software is carried at cost less any accumulated amortisation and any accumulated impairment losses.

Costs that are directly associated with identifiable and unique computer software products controlled by the Company and that will probably generate economic benefits exceeding costs beyond one year are recognised as intangible assets. Subsequently computer software is carried at cost less any accumulated amortisation and any accumulated impairment losses. Expenditure which enhances or extends the performance of computer software programmes beyond their original specifications is recognised as a capital improvement and added to the original cost of the computer software. Costs associated with maintenance of computer software programmes are recognised as an expense when incurred. Computer software costs are amortised using the straight line method over their useful lives, not exceeding a period of three years. Amortisation commences when the computer software is available for use and is included within administrative expenses.

The expected useful economic life of computer software ranges from 3 to 5 years.

Financial instruments
Financial assets and financial liabilities are recognised when CYTA becomes a party to the contractual provisions of the instrument.

Trade receivables
Trade receivables are initially measured at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in income statement when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

Amounts receivable more than one year from the balance sheet date are classified as non current.

Bad debts are written off and a specific provision is made for receivables considered to be doubtful.

Investments
CYTA classifies its investments in equity and debt securities in the following categories: financial assets at fair value through profit or loss, held to maturity investments and available for sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of investments at initial recognition and re evaluates this designation at every balance sheet date.

Financial assets at fair value through profit or loss
Securities at fair value through profit and loss account consist of two categories:

Securities held for trading: these are securities acquired either with the intention of generating profit from short term fluctuations or included in a portfolio in which a pattern of short term profit generating exists. Fair value is considered to be the closing bid price at the balance sheet date. Any unrealised gains and losses arising are recognised in the income statement.

Securities that CYTA designated at fair value through the income statement. This category includes financial assets and financial liabilities managed together and their performance is evaluated on a fair value basis.

These securities are initially recognised at cost and subsequently re measured at fair value. Once a financial instrument is classified at fair value through profit and loss account category, it cannot be reclassified out of this category while it is held.

Held to maturity investments
Securities held to maturity are securities with fixed maturity dates for which CYTA has both the intention and the ability to hold to maturity. Held to maturity investments are carried at amortised cost using the effective yield method, less any provisions for impairment.

On disposal of such securities, the remaining balance is reclassified to the ‘Available for sale’ category during the current year and for the next two following accounting periods are stated at fair value.

The appropriate classification of investments under the above categories is made at the time of acquisition.

On disposal of an investment, the difference between the net proceeds and the carrying amount stated in the accounts is transferred to the income statement together with any remaining related balance in the revaluation reserves.

Available for sale financial assets
Securities available for sale are securities intended to be held for an undetermined period of time but may be sold in response to needs for liquidity or fluctuations in interest rates, exchange rates or security prices.

These investments are initially recognised at cost and subsequently re measured at fair value. The fair value of the quoted securities is considered the closing bid price at the balance sheet date. The fair value of unquoted securities is estimated using specialised methods adjusted to reflect the individual characteristics of the specific issuer. In cases where cost approximates the fair value then the cost is considered to be the fair value. Unrealised gains or losses arising from changes in the fair value of securities classified as available for sale are recognised in the revaluation reserves.

Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise cash at bank and in hand.

Borrowings
Borrowings are recorded initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any differences between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Trade payables
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

Impairment of assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

Inventories
Inventories are stated at the lower of cost and net realisable value.

The principal methods for determining cost are as follows:
(i) Additions are valued at weighted average cost, which includes purchase cost and other attributable expenses.
(ii) Recoveries of equipment are valued at original cost less accumulated depreciation.

Net realisable value is the estimated selling price in the ordinary course of business, less the costs to completion and selling expenses.

Items of capital nature are capitalised as property, plant and equipment.

Non current liabilities
Non current liabilities represent amounts that are due more than twelve months from the balance sheet date.

Comparatives
Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year.

4. Operating Revenue

	2007 £’000		2006 £’000
Fixed telephony Mobile telephony Other services	74.214 128.238 63.009		77.352 119.569 52.260
	265.461		249.181

5. Operating Expenses

	2007 £’000		2006 £’000
Maintenance costs Leased circuits rentals Outpayments to telecommunication organisations Staff costs Gratuities Other expenses Provision for doubtful debts Provision for obsolete materials Loss on disposal of property, plant and equipment Pension fund deficiencies (Note 7) Amortisation of intangible fixed assets Depreciation	15.349 1.563 36.626 73.445 1.239 37.710 394 675 - 3.975 8.776 37.086		16.489 1.475 37.815 66.792 1.106 33.813 1.172 419 753 4.026 11.771 40.824
Less: Costs that are capitalised or payable	216.838 (6.829)		216.455 (6.967)
	210.009		209.488

6. Other Income

	2007 £’000		2006 £’000
Sundry operating income Gain from sale of property, plant and equipment Income from investments	1.098 174 26		740 - 390
	1.298		1.130

 

7. Pension Scheme Deficiencies

	2007 £’000		2006 £’000
Superannuation fund deficiency Pension Scheme deficiency	33 3.942		83 3.943
Charge fro the year	3.975		4.026

CYTA operates two separate staff retirement benefit schemes, the Superannuation fund and the Pension scheme for permanent employees.

CYTA’s total liability for retirement benefits is as follows:

	2007 £’000		2006 £’000
Short-term	2.400		30.100

(a) Superannuation fund:
The fund was set up in order to provide pensions to monthly employees and for this reason, contributions were made by both CYTA and the employees. The fund, which had no active members as at 31 December 2007 operates independently of the finances of CYTA. According to the regulations of the fund, CYTA is liable to contribute to the fund for any deficits that might arise from periodic actuarial valuations. The last actuarial valuation which took place on 31 December 2001 by a professional actuary, showed an additional deficit of £432.226, and was written off in the income statement equally in the years 2001 and 2002.

CYTA is also liable to pay annual amounts, according to actuarial valuations, in order to finance the increases in pensions, after retirement. During 2007, the amount of £33.000 was paid.

(b) Pension Scheme:
The Scheme offers retirement benefits to monthly employees and their dependants. The scheme operates independently of the finances of CYTA. According to the regulations of the scheme, CYTA is liable to make contributions to the scheme which are determined by periodic actuarial valuations. The contributions represent a percentage of the pensionable salary of employees – members of the scheme. Additionally, CYTA is liable to contribute to the scheme for any deficits which may be indicated by the actuarial valuation, relating to past service cost. During 2007, the amount of £27.700.000.

According to the last actuarial valuation on 31 December 2007 no additional deficit occurred. During 2006 an additional deficit of £2.400.000 arose which will be written off in the income statement equally between the years 2006 and 2010 (whilst the balance of the 2005 deficit will be written off between the years 2006 and 2009). The unrecognised actuarial losses as at 31 December 2007, amounted to £8.365.000.

The amount which appears in the balance sheet regarding retirement benefits is as follows:
 

	2007 £’000		2006 £’000
Present value of the scheme and fund Fair value of scheme and fund assets	414.483 (414.483)		390.169 (387.769)
Current year actuarial loss Actuarial loss for previous years	- 2.400		2.400 27.700
Liability recognised on balance sheet	2.400		249.181

The pension scheme assets include shares, share options and bonds whose fair value amounted to £184.342.549 as at 31 December 2007(2006: £187.011.109).

Actuarial loss regarding pension fund not yet written off:

	2007 £’000		2006 £’000
Balance as at 1st January Current year loss Charge for the year	12.307 - (3.942)		13.850 2.400 (3.943)
Actuarial loss not yet written off	8.365		12.307

8. Operating Profit

	2007 £’000		2006 £’000
Operating profit before financing income/(expenses) is stated after charging the following items: Impairment of intangible fixed assets (Note 12) Depreciation of property, plant and equipment (Note 11)	8.592 37.270		11.768 40.827

9. Finance Income and Expenses

	2007 £’000		2006 £’000
Interest income Exchange profit Gain on revaluation of bonds	8.130 59 499		9.510 229 -
Finance income	8.688		9.739
Bank charges and other interest Loss on revaluation of bonds	207 -		246 169
Finance expenses	207		415
Net finance income	8.481		9.324

10. Taxation

	2007 £’000		2006 £’000
Corporation tax current for the year Corporation tax prior years Defence contribution current for the year Defence contribution prior years	15.190 - 2.490 -		13.045 120 2.400 (36)
Charge for the year	17.680		15.529

From 2005 onwards, the entire taxable income of CYTA is subject to corporation tax at 25%. In addition, CYTA is subject to special contribution for defence on its taxable income at a fixed rate of 3%.

Under certain conditions interest may be subject to defence contribution at the rate of 10%. In such cases 50% of the same interest will be exempt from corporation tax, thus having an effective tax rate burden of 15%. In certain cases, dividends received from abroad may be subject to defence contribution at the rate of 15%.

11. Property, Plant and Equipment

	Land and buildings £’000	Assets under construction £’000	Buildings on leasehold land £’000	Telecom-munication plant and equipment £’000	Motor vehicles and tools £’000	Furniture, fixtures and office equipment £’000	Computer hardware and systems £’000	Total £’000
Cost Balance at 1 January 2006 Additions Disposals Transfers	38.133 245 (15) 67	26.209 5.543 - -	1.371 48 - -	476.349 36.984 (12.790) (87)	9.026 133 (953) -	3.412 73 - (524)	20.421 1.092 (700) 524	574.921 441.118 (14.458) (20)
Balance at 31 December 2006	38.430	31.752	1.419	500.456	8.206	2.961	21.337	604.561
Balance at 1 January 2007 Additions Disposals Transfers	38.430 3.407 (321) -	31.752 3.857 - -	1.419 - - -	500.456 34.990 (9.104) (204)	8.206 342 (120) -	2.961 166 - -	21.337 1.331 (522) (70)	604.561 44.093 (10.067) (274)
Balance at 31 December 2007	41.516	35.609	1.419	526.138	8.428	3.127	22.076	638.313
Depreciation Balance at 1 January 2006 Depreciation for the year On disposals Transfers	11.716 980 (4) 61	- - - -	702 48 - -	308.678 36.449 (9.837) (63)	6.935 740 (953) -	2.796 139 - (385)	15.907 2.471 (700) 385	346.734 40.827 (11.494) (2)
Balance at 31 December 2006	12.753	-	750	335.227	6.722	2.550	18.063	376.065
Balance at 1 January 2007 Depreciation for the year On disposals Transfers	12.753 1.138 (214) -	- - - -	750 4 - -	335.227 33.360 (5.837) (208)	6.722 590 (111) -	2.550 142 - -	18.063 2.036 (521) (14)	376.065 37.270 (6.683) (222)
Balance at 31 December 2007	13.677	-	754	362.542	7.201	2.692	19.564	406.430
Carrying amounts
Balance at 31 December 2007	27.839	35.609	665	163.596	1,227	435	2.512	231.883
Balance at 31 December 2006	25.677	31.752	669	165.229	1.484	411	3.274	228.496

(a) Assets in occupied areas
Fixed assets include assets situated in areas currently occupied by the Turkish invasion forces which are not accessible by CYTA. CYTA is not in a position to ascertain the present state of these assets. Full provision has been made for assets situated in the occupied areas.

(b) Land
Certain plots of land amounting to £138.673 (2006: £94.282) included in the financial statements, were in the course of being registered in the name of CYTA at the year end.

12. Intangible Assets

	Mobile Telephony £’000		Computer Software £’000		Total £’000
Cost Balance at 1 January 2006 Additions Transfers	13.103 - -		77.787 9.856 19		90.890 9.856 19
Balance at 31 December 2006	13.103		87.662		100.765
Balance at 1 January 2007	13.103		87.662		100.765
Additions Transfers Disposals	- - -		4.801 275 (38)		4.801 275 (38)
Balance at 31 December 2007	13.103		92.700		105.803
Amortisation Balance at 1 January 2006 Amortisation for the year (Note 8) Transfers	1.510 755 -		65.256 11.013 2		66.766 11.768 2
Balance at 31 December 2006	2.265		76.271		78.536
Balance at 1 January 2007 On disposals Amortisation for the year (Note 8) Transfers	2.265 - 638 -		76.271 (38) 7.954 222		78.536 (38) 8.592 222
Balance at 31 December 2007	2.903		84.409		87.312
Carrying ammounts Balance at 31 December 2007	10.200		8.291		18.491
Balance at 31 December 2006	10.838		11.391		22.229

13. Investments in Subsidiaries

				2007 £’000		2006 £’000
Balance at 1 January				32.219		32.219
Balance at 31 December				32.219		32.219
The details of the subsidiaries are as follows:
Name	Country of incorporation	Holding (%)		2007 £’000		2006 £’000
Digimed Communications Ltd	Cyprus	100		32.219		32.219

Digimed Communications Ltd, a company registered in Cyprus, is a wholly owned subsidiary of CYTA. The principal activity of the company is the conduct of telecommunication projects.

CYTA holds 75.815 shares of nominal value 1 Euro each in Eutelsat Communications. The company Eutelsat Communications is listed in the Paris Stock Exchange Euronext. The total value of CYTA’s investment at 31 December 2007 was 1.542.834 Euro. ( £902.980).

The Company ICO Global Communications (Holdings) Limited was listed in the NASDAQ stock exchange on 13 September 2006. CYTA holds 150.909 shares of nominal value 0,01 US dollars each. The total value of CYTA’s investment at 31 December 2007 was 477.000 US dollars. ( £189.751).

Available for sale financial assets, comprising principally marketable equity securities, are fair valued annually at the close of business on 31 December.

Available for sale financial assets are classified as non current assets, unless they are expected to be realised within twelve months of the balance sheet date or unless they will need to be sold to raise operating capital.

Concentrations of credit risk with respect to trade receivables are limited due to the Company's large number of customers who have a variety of end markets in which they sell. CYTA's historical experience in collection of accounts receivable falls within the recorded allowances. Due to these factors, management believes that no additional credit risk beyond amounts provided for collections losses is inherent in the Company's trade receivables.

The fair values of trade and other receivables due within one year approximate to their carrying amounts as presented above.

The loans from foreign financial institutions are repayable between the years 2007 and 2015 and bear interest ranging from 2% to 11.62% per annum. The loans are secured with guarantees provided by the Cyprus Government.


 20. Deferred Tax

Deferred taxation liability arises as follows :
	2007 £’000		2006 £’000
Accelerated tax depreciation	11.032		11.032
	11.032		11.032

Deferred tax is calculated in full on all temporary differences under the liability method using the applicable tax rates (Note 10).

The fair values of trade and other payables due within one year approximate to their carrying amounts as presented above. 

25. Contribution to the Cyprus Government
The amount of the contribution, as well as the timing of the payment, are determined by the Board of Ministers, after a relevant decision by the Minister of Finance, which is taken after a discussion with CYTA's Board of Directors. For the year ended 31 December 2007, it was decided that no contribution will be paid.

The amount of £55.000.000 was contributed to the Cyprus Government Treasury, following the Council of Ministers (‘the Cabinet’) decision on 26 October 2006, according to the Telecommunication Services Law, Cap. 302, as amended with the Telecommunication Services Law of 2006 (section 117 (I)/2006).

The amount was set after taking into account the surplus for the financial year, the reserves at the end of the 2005 financial year, as well as the other provisions of the amended Telecommunications Services Law in relation to CYTA’s liquidity, its ability to pay the amount set, the safeguard of its future investments, its contractual and other commitments and the repayment of the pension scheme deficit.

The contribution of £55.000.000 was set off with the £20.000.000 owed by the Cyprus Government, relating to a penalty imposed, and subsequently cancelled, for infringement of the Law, which had been paid by CYTA on 31 December 2002.

26. Contractual Commitments  
Contractual Commitments in respect of capital expenditure as at 31 December 2007 not provided for in the financial statements, amounted to £17.640.018 (2006: 15.295.153) of which £8.229.464 (2006: £9.482.453) is payable in foreign currencies. Foreign currency amounts have been converted into Cyprus pounds at the rates of exchange prevailing at the end of the year.

The entire amount of contractual commitments at 31 December 2007 will be repaid on completion of the relevant projects within 2008.

27. Financial Risk Management
Financial risk factors
CYTA is exposed to the following risks from its use of financial instruments:
• Credit risk
• Liquidity risk
• Market price risk
• Operational risk
• Compliance risk
• Litigation risk

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework.

CYTA’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

(i)Credit risk
Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the balance sheet date. CYTA has no significant concentration of credit risk. CYTA has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history and monitors on a continuous basis the ageing profile of its receivables. Cash balances are held with high credit quality financial institutions and CYTA has policies to limit the amount of credit exposure to any financial institution.

Trade and other receivables
CYTA’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.

CYTA establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified.

Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

	2007 £’000		2006 £’000
Available for sale financial assets Held to maturity investments Trade and other receivables Receivables from related companies	1.093 60.229 59.136 804		936 73.371 63.336 262
	121.262		137.905

The fair value of financial instruments traded in active markets, such as publicly traded trading and available for sale financial assets is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Company is the current bid price. The appropriate quoted market price for financial liabilities is the current ask price.


29. Post Balance Sheet Events
With the introduction of the Euro as the official currency of the Republic of Cyprus as from 1 January 2008, the functional currency of the company has changed from Cyprus Pounds to Euro. As a result, the financial position of the company at 1 January 2008 has been converted into euro based on the definite fixing of the exchange rate €1 = £0,585274.