Report of Directors as per art. 13 par. 10 of c.l. 2190/1920 | Eurobank
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Report of Directors as per art. 13 par. 10 of c.l. 2190/1920

REPORT OF DIRECTORS OF EFG EUROBANK ERGASIAS S.A.

AS PER ART. 13 PAR. 10 OF C.L. 2190/1920

TO THE ANNUAL GENERAL MEETING OF SHAREHOLDERS

The Directors of EFG Eurobank Ergasias S.A. (the “Bank”) propose to the General Meeting of Shareholders of the Bank the amendment of the terms of the decision of the General Assembly of shareholders held on 30.6 2009 regarding the issuance of a callable convertible bond through private placement, foregoing pre-emption rights of existing shareholders.

This report has been prepared for submission to the Annual General Meeting of June 28th, 2011, or any adjournment thereof, as per art. 13 par. 10 of c.l. 2190/1920.

More specifically, the Directors would like to inform the Bank’s shareholders of the following issues:

A. Reasons for foregoing pre-emption rights

The Directors recommend foregoing pre-emption rights of existing shareholders to subscribe to the issue of the aforementioned convertible bond, which will be covered through private placement for the following reasons:

The issuance of the convertible bond will provide increased liquidity to the Bank, and, under conditions, will increase its regulatory capital. It is noted that convertible bonds have lower interest rate than plain (non convertible) bonds. The issuance of the aforementioned convertible bond will:

· Facilitate the further extension of credit to the Bank's customers and the Greek economy in general.

· Improve the Bank’s credit rating, thereby facilitating the raising of new capital at low cost.

· Enable the restructuring of the Bank’s own funds through repayment of other existing, higher cost instruments, when allowed by the economic conditions and subject to relevant approvals.

In current market conditions, the access of Greek Banks to international capital markets in order to raise capital is extremely limited or, at times, practically non-existent. The issuance of the securities through private placement, foregoing pre-emption rights of existing shareholders, simplifies the issuance process, provides the necessary flexibility to complete the placement within a short period of time and enables the Bank to exploit potentially favourable circumstances in the current, volatile market conditions.

Consequently, and given the conversion price proposed below, the foregoing of pre-emption rights is appropriate, necessary and consistent, aiming at the aforementioned benefits for the Bank while not affecting in substance the financial position of shareholders as:

· The economic rights of the existing shareholders in the Bank’s assets are not diluted as any conversion will effectively be performed at the market rates prevailing at the time of conversion, at which any shareholder can acquire the Bank’s shares; as opposed to a capital increase with significant discount, which leads to dilution by reducing the existing shareholders’ participation in the Bank’s net assets.

· There will be no significant impact on the share price from this issue, as opposed to a capital increase, which requires a significant discount to the share price in order to be successful, especially in the current economic environment.

B. Justification for the conversion ratio and issue price of new shares

With respect to the issue price of new ordinary shares of the Bank to be issued on conversion, the Directors propose the following:

The Board will decide on the final price or the conversion ratio prior to the issuance of the convertible bonds, in accordance with the prevailing market conditions at the time of the issuance.

In any case, the price can not be lower than the share market price during the period immediately preceding the conversion or, at the discretion of the Board, the issuance of the bonds, at a relatively small discount of up to 15% (for liquidity reasons), in order, as presented above, to ensure the success of the issue and to protect the economic rights of the existing shareholders.

Also the price will not be lower than the nominal value of the share or higher than €50.

Taking into consideration all the above, the Board of Directors believes that the benefits to the Bank and its shareholders from the issuance of the convertible bond justifies foregoing existing shareholders pre-emption rights and therefore, recommends the amendment of the terms as described above of the decision of the General Meeting held on 30.6.2009 regarding the issuance of a convertible bond through private placement, foregoing pre-emption rights of existing shareholders.

Athens, 6 June 2011

The Directors