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					     Societatea de Finantare Rurala LAM IFN SA
            Preliminary Financial Statements
                  as at 31 December 2008

Prepared in accordance with International Financial Reporting
                         Standards
SOCIETATEA DE FINANTARE RURALA LAM IFN
SA




Contents
Independent Auditors’ Report


Preliminary Income Statement                      3

Balance Sheet                                     4

Preliminary Cash Flow Statement                   5

Preliminary Statement of changes in equity        6

Notes to the preliminary financial statements   7-51




                                                       1
  SOCIETATEA DE FINANTARE RURALA LAM IFN
  SA


  Preliminary Income Statement
  For the year ended 31 December 2008
                                                                        Note                     2008

   Interest income                                                        6                 2,571,364
   Interest expense                                                                         (868,085)
                                                                                            1,703,280
   Net interest income



   Net fees and commissions income                                        7                  (14,328)
   Other operating income                                                                      33,182
   Operating income                                                                            18,855



   Net impairment loss on financial asset                                  8                 (391,471)
   Personnel expenses                                                      9                 (396,898)
   Other operating expenses                                               10                 (527,354)
   Net foreign exchange gain/loss                                                            (170,902)
   Operating expenses                                                                      (1,486,625)

   Profit before income tax                                                                   235,509

   Income tax expense                                                     11                 (39,392)

   Net Profit for the period                                                                  196,118



  The financial statements were approved by the Board of Directors on 15 May 2009 and were signed
  on its behalf by:




  Chief Executive Director                                              Chief Accountant




The accompanying notes on pages 7 to 51 form an integral part of these preliminary financial statements

                                                                                                         1
  SOCIETATEA DE FINANTARE RURALA LAM IFN
  SA


  Balance Sheet
  As at 31 December 2008
                                                                        31 December        31 December
                                                                Note           2008               2007

   Assets

   Cash and cash equivalents                                     12         1,656,051         1,575,475
   Loans and advances to customers                               13        15,948,472        10,980,233
   Property and equipment                                        14           137,621           107,262
   Intangible assets                                             15             8,494            13,129
   Deferred tax asset                                                               -                 -
   Other assets                                                  16            49,906            14,810

   Total Assets                                                            17,800,544        12,690,909




   Liabilities

   Loans from banks and other financial institutions             17        14,264,762         9,708,642
   Deferred tax liabilities                                                     1,746            10,785
   Other liabilities                                             18           151,383           109,892
   Total liabilities                                                       14,417,891         9,829,319

   Equity

   Share capital                                                 19         2,674,845         2,349,900
   Reserves                                                      20            48,734            29,437
   Retained earnings                                                          659,074           482,253

   Total equity                                                             3,382,653         2,861,590

   Total liabilities and equity                                            17,800,544        12,690,909
  The financial statements were approved by the Board of Directors on 15 May 2009 and were signed on
  its behalf by:

  Chief Executive Director                                              Chief Accountant




The accompanying notes on pages 7 to 51 form an integral part of these preliminary financial statements

                                                                                                      2
  SOCIETATEA DE FINANTARE RURALA LAM IFN
  SA


  Preliminary Cash Flow Statement
  For the year ended 31 December 2008

   In RON                                                                Note                     2008

   Cash flows from operating activities
   Profit for the period                                                                       196,118
   Adjustments for:
   Depreciation and amortization                                         14,15                   42,488
   Provision for impairment losses                                         8                    391,471
   Interest income                                                         6                (2,571,364)
   Interest expense                                                                             868,085
   Income tax expense                                                     11                     39,392

   Increase in loans to customers                                                           (5,544,688)
   Increase in other assets                                                                    (19,884)
   Increase in other payables                                                                    41,491



   Interest received                                                                         2,756,343
   Interest paid                                                                             (938,718)
   Income tax paid                                                                            (63,643)

   Net cash from operating activities                                                       (4,802,910)

   Cash flows from investing activities
   Acquisition of property and equipment                                   14,15               (68,212)

   Net cash used in investing activities                                                       (68,212)

   Cash flows from financing activities
   Increase in share capital                                                                   324,945
   Net proceeds from loans and borrowings                                                    4,626,753

   Net cash from financing activities                                                        4,951,698

   Net increase/(decrease) in cash and cash equivalents                                         80,575
   Cash and cash equivalents at 1 January 2008                                               1,575,475

   Cash and cash equivalents at 31 December 2008                          12                 1,656,051




The accompanying notes on pages 7 to 51 form an integral part of these preliminary financial statements

                                                                                                      3
  SOCIETATEA DE FINANTARE RURALA LAM IFN
  SA


  Preliminary Statement of changes in equity
  For the year ended 31 December 2008

                                                          Share Reserves      Retained         Total
                                                         capital              earnings

   Balance at 31 December 2007                        2,349,900      29,437    482,253     2,861,590
                                                                                                   -
   Issue of share capital                               261,000           -           -      261,000
   Share premium                                         63,945           -           -       63,945
   Net profit for the year                                    -           -    196,118       196,118
   Transfer to legal reserves                                 -      19,297    (19,297)            -
                                                                                                   -
   Balance at 31 December 2008                        2,674,845      48,734    659,074     3,382,653


  The financial statements were approved by the Board of Directors on 15 May 2009 and were signed on
  its behalf by:

  Chief Executive Director                                     Chief Accountant




The accompanying notes on pages 7 to 51 form an integral part of these preliminary financial statements

                                                                                                       4
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

1.    Reporting entity
Societatea de Finantare Rurala LAM IFN SA (the “Company”) was established during 2005 as a
Romanian micro financing institution. The Company continues the activity of granting loans to small
regional entities performed previously by Fundatia LAM, a not for profit Romanian organization,
currently the main shareholder of the Company.

Starting 1 March 2007 the Company was registered with the National Bank of Romania (“NBR”)
General Registry with number RG-PJR-15-030082.

As at 31 December 2008 the Company operates through its 5 branches and its headquarter. The
company employs a staff of 10 people.


2.    Basis of preparation

a)    Statement of compliance
These preliminary International Financial Reporting Standards (“IFRS”) financial statements have been
prepared following the requirements of IFRS 1, First-time Adoption of International Financial
Reporting Standards, as part of the Company’s preparation for the future adoption of IFRS. The
calculation of financial instruments’ amortized cost is performed using the internal methodology as
presented in Note 3.c.v which represents management’s best estimate for the value of the corresponding
amortization. In estimating impairment losses for loans and receivables the Company has applied the
internal methodology described in Note 3.g.vii to assess impairment for loans and advances to
customers.

These preliminary IFRS Financial Statements comprise the IFRS Balance Sheet as of 31 December
2008 and the Preliminary Income Statement, Preliminary Statement of Changes in Equity and
Preliminary Cash Flow Statement for the year ended 31 December 2008 and related notes.

The Company will prepare its first complete set of IFRS financial statements for the year ending
31 December 2009 and they will be prepared in accordance with the Standards and Interpretations in
effect as at that date.

Accordingly, these preliminary IFRS financial statements, which are intended to form the comparative
information in the Company’s first complete set of financial statements, have been prepared by
management using its best knowledge of the Standards and Interpretations expected to be in effect at
31 December 2008, and the accounting policies expected to be applied in the Company’s first complete
set of IFRS financial statements. Any changes to such Standards, Interpretations or accounting policies
may require adjustment to these preliminary IFRS financial statements before they comprise such
comparative information when the Company prepares its first complete set of IFRS financial
statements.

The possibility exists that the preliminary IFRS Financial Statements may require adjustments before
constituting the final IFRS financial statements as at the preliminary IFRS balance sheet date when the
company prepares its first complete set of IFRS financial statements.

The preliminary IFRS financial statements do not include comparative financial information for the
prior period. An explanation of how the transition to IFRS has affected the reported financial position
of the Company is provided in Note 23.


                                                                                                  5
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements
2. Basis of preparation (continued)
Differences between IFRS and statutory accounts

The accounts of the Company are maintained in historical RON in accordance with Romanian
accounting law and National Bank of Romania regulations (“statutory accounts”).

These accounts have been restated to reflect the differences between the statutory accounts and IFRS.
Accordingly, such adjustments have been made to the statutory accounts as have been considered
necessary to bring the financial statements into line, in all material respects, with IFRS.

The major changes from the statutory financial statements prepared under domestic law are:
         Grouping of numerous detailed items into broader captions;
         Fair value and impairment adjustments required in accordance with IAS 39 “Financial
          Instruments: Recognition and Measurement”;
         Provision for deferred taxation, where appropriate; and
         The necessary IFRS disclosure requirements.

b)    Basis of measurement
The financial statements of the Company are prepared on a fair value basis for derivative financial
instruments, financial assets and liabilities held at fair value through profit and loss and available-for-
sale instruments, except those for which a reliable measure of fair value is not available.

Other financial assets and liabilities and non-financial assets and liabilities are stated at amortized cost,
revalued amount or historical cost. Non-current assets held for sale are stated at the lower of carrying
amount and fair value less cost to sell.

c)    Functional and presentational currency
The financial statements are prepared and presented in Romanian Lei (“RON”), which is the
Company’s functional and presentation currency, rounded to the nearest RON.

d)    Use of estimates and judgments
The preparation of financial statements in accordance with IFRS requires management to make
judgments, estimates and assumptions that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based
on historical experience and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgments about carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from
these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised if the revision affects only that
period or in the period of the revision and future periods if the revision affects both current and future
periods.

The management judgments in applying accounting policies which have a significant impact on the
financial statements and estimates highly uncertain are disclosed in Notes 4 and 5.



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SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements
2. Basis of preparation (continued)

d) Use of estimates and judgments (continued)
The significant accounting policies set out below have been applied consistently to all periods
presented in these financial statements, unless otherwise stated.

3. Significant accounting policies

a)    Foreign currency transactions
Transactions in foreign currencies are translated to the functional currency of the Company at exchange
rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies
at the balance sheet date are translated to RON at the foreign exchange rate at that date.

The foreign currency gain or loss on monetary items is the difference between amortised cost in the
functional currency at the beginning of the period, adjusted for effective interest and payments during
the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the
period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair
value are retranslated to the functional currency at the exchange rate at the date that the fair value was
determined. Foreign currency differences arising on retranslation are recognised in profit or loss,
except for differences arising on the retranslation of available-for-sale equity instruments, which are
included in the fair value adjustment reserve.

The exchange rates of major foreign currencies were:

 Currencies                                          31 December 2008               31 December 2007
 Euro (EUR)                                              1: RON 3.9852                  1: RON 3.6102
 US Dollar (USD)                                         1: RON 2.8342                  1: RON 2.4564

b) Interest income
Interest income is recognized in the income statement using the effective interest rate method.

The effective interest rate method is used to determine the amortized cost of a financial asset and
apportion the interest income over a relevant period of time. The effective interest rate is the rate that
exactly discounts the estimated future cash receipts through the expected life of the financial asset (or,
where appropriate, a shorter period) to the carrying amount of the financial asset. For the effective
interest rate computation method, the Company estimates the future cash flows by taking into account
the contractual terms of each financial instrument, however it does not account for future credit losses.




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SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

3. Significant accounting policies (continued)

b) Interest income
The calculation of the effective interest rate includes all fees and commissions received, transaction
costs and discounts or premiums that are an integral part of the effective interest rate. Transaction costs
are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial
asset or liability.

Interest income presented in the income statement includes interest on financial assets at amortised cost
on an effective interest rate basis.

c) Interest expense
Interest expense include the interest charge on borrowings, calculated using the effective interest
method, bank charges, interest income on deposits placed and foreign exchange gains and losses on
transactions that are recognized in the income statement.

d) Fees and commission
Fees and commission income and expenses that are integral to the effective interest rate on a financial
asset or liability are included in the measurement of the effective interest rate.

Other fees and commission income, including acceptance of early reimbursements on the loans and
other modifications requested by the customers to the loan agreements are recognized as the related
services are performed on an accrual basis and accounted for under fees and commission income.

Other fees and commission expense relates mainly to transaction and service fees, which are expensed
as the services are received and accounted for under net financing cost.

e) Net gain/loss from financial instruments carried at fair value
Net gain/loss from financial instruments at fair value relates to non-qualifying derivatives held for risk
management purposes designated at fair value through profit or loss, and includes all realized and
unrealized fair value changes, interest, dividends and foreign exchange differences.

Derivative financial instruments are initially recognized at fair value. After their initial recognition,
derivatives are subsequently measured at their fair values without any deduction for transactions costs
to be incurred on sale or disposal.

The best evidence of the fair value of a financial instrument at initial recognition is the transaction price
(i.e. the fair value of the consideration given or received) unless the fair value of that instrument is
evidenced by comparison with other observable current market transactions in the same instrument (i.e.
without modification or repackaging) or based on a valuation technique whose variables include only
data from observable markets.

 As at 31 December 2008 and 31 December 2007 the Company does not hold any financial instruments
carried at fair value.




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SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

3.    Significant accounting policies (continued)

f) Lease payments made
Payments made under operating leases are recognized in the income statement on a straight-line basis
over the term of the lease. Lease incentives received are recognized in the income statement as an
integral part of the total lease expense. Operating lease expense is reflected as a component of
administrative expenses.

Minimum lease payments made under financial lease shall be apportioned between the finance charge
and the reduction of the outstanding liability. The finance charge shall be allocated to each period
during the lease term so as to produce a constant periodic rate of interest on the remaining balance of
the liability. Contingent lease payments are accounted for by revising the minimum lease payments
over the remaining term of the lease when the lease adjustment is confirmed.

g) Financial assets and liabilities
 i.   Classification

      The Company classifies its financial instruments in the following categories:

Financial assets or financial liabilities at fair value through profit or loss. This category has three sub-
categories: financial assets or financial liabilities held for trading, derivatives (unless accounted for as
hedges) and those designated at fair value through profit or loss at inception. A financial instrument is
classified in this category if acquired principally for the purpose selling or repurchasing it in the near
term or if so designated by management. As at 31 December 2008, the Company classified in this
category the derivative financial intruments for risk management. As at 31 December 2007, the
Company had no financial instruments classified at fair value through profit and loss.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market, other than those that the Company intends to sell immediately or in the
near term, those that the Company, upon initial recognition, designates as at fair value through profit
and loss, those that the Company, upon initial recognition, designates as available for sale or those for
which the holder may not recover substantially all of its initial investment, other than because of credit
deterioration. Loans and receivables comprise loans and advances to customers.

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments
and fixed maturities that the Company’s management has the positive intention and ability to hold to
maturity. As at 31 December 2008 and 31 December 2007, the Company had no financial instruments
classified as held-to-maturity investments.

Available-for-sale financial assets are those financial assets that are designated as available for sale or
are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value
through profit or loss. As at 31 December 2008 and 31 December 2007 the Company had no available-
for-sale financial assets.




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SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

3. Significant accounting policies (continued)

g) Financial assets and liabilities ( continued)
 ii.   Recognition

The Company initially recognises loans, deposits, debt securities issued and subordinated liabilities on
the date that they are originated. All other financial assets and liabilities (including assets and liabilities
designated at fair value through profit or loss) are initially recognised on the trade date at which the
Company becomes a party to the contractual provisions of the instrument.

iii.   Derecognition
The Company derecognizes a financial asset when the contractual rights to the cash flows from the
asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a
transaction in which substantially all the risks and rewards of ownership of the financial asset are
transferred. Any interest in transferred financial assets that is created or retained by the Company is
recognised as a separate asset or liability.

The Company derecognises a financial liability when its contractual obligations are discharged or
cancelled or expire.

iv.    Offsetting

Financial assets and liabilities are set off and the net amount presented in the balance sheet when, and
only when, the Company has a legal right to set off the amounts and intends either to settle on a net
basis or to realise the asset and settle the liability simultaneously.
Income and expenses are presented on a net basis only when permitted by the accounting standards, or
for gains and losses arising from a group of similar transactions such as in the Company’s trading
activity.

 v.    Amortised cost measurement
The amortised cost of a financial asset or liability is the amount at which the financial asset or liability
is measured subsequent to the initial recognition, minus principal repayments, plus or minus the
cumulative amortisation using the effective interest method of any difference between the initial
amount recognised and the maturity amount, minus any reduction for impairment.

vi.    Fair value measurement

The determination of fair values of financial assets and financial liabilities is based on quoted market
prices or dealer price quotations for financial instruments traded in active markets. For all other
financial instruments fair value is determined by using valuation techniques. Valuation techniques
include net present value techniques, the discounted cash flow method, comparison to similar
instruments for which market observable prices exist, and valuation models (please refer to Note 5).
Where a fair value cannot be reliably estimated, unquoted equity instruments that do not have a quoted
market price in an active market are measured at cost and periodically tested for impairment.




                                                                                                          10
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


 Notes to the financial statements

 3.    Significant accounting policies (continued)

 h)     Financial assets and liabilities (continued)
vii.   Identification and measurement of impairment (continued)

 Assets carried at amortized cost

 The Company assesses at each balance sheet date whether there is any objective evidence that a
 financial asset or group of financial assets are impaired. A financial asset or a group of financial assets
 are impaired and impairment losses are incurred if, and only if, there is objective evidence of
 impairment as a result of one or more events that occurred after the initial recognition of the asset (a
 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the
 financial asset or group of financial assets that can be reliably estimated. It may be difficult to identify
 a single event that caused the impairment. Rather the combined effect of several events may have
 caused the impairment. Losses expected as a result of future events, no matter how likely, are not
 recognized.

 If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity
 investments carried at amortized cost has been incurred, the amount of the loss is measured as the
 difference between the asset's carrying amount and the present value of estimated future cash flows
 discounted at the financial asset's original effective interest rate (i.e. the effective interest rate computed
 at initial recognition). If a loan, receivable or held-to-maturity investment has a variable interest rate,
 the discount rate for measuring any impairment loss is the current effective interest rate determined
 under the contract. The carrying amount of the asset shall be reduced either directly or through use of
 an allowance account. The amount of the loss shall be recognized in profit or loss. If, in a subsequent
 period, the amount of the impairment loss decreases and the decrease is related objectively to an event
 occurring after the impairment was recognized, the previously recognized impairment loss is reversed
 either directly or by adjusting an allowance account. The amount of the reversal is recognized in profit
 or loss.

 Loans and advances to customers

 In 2008 financial year, the Company continued to refine its methodology for assessment of loan loss
 allowances in accordance with the provision of IAS 39, “Financial Instruments: Recognition and
 Measurement”.

 The Company considers evidence of impairment at both a specific asset and collective level. The
 Company, based on its internal impairment assessment methodology, has included observable data on
 the following loss events that come to its attention as objective evidence that loans and advances to
 customers or groups of loans to customers are impaired:

          a breach of contract, such as a default or delinquency in interest or principal payments of the
           borrowers, triggered by a number of days of delay over 60;

          it becoming probable that the borrower will enter bankruptcy or other financial
           reorganization;

          initiation of legal action against the borrower by the Company or by other parties.



                                                                                                          11
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


 Notes to the financial statements
 3.    Significant accounting policies (continued)

 g)    Financial assets and liabilities (continued)

vii.   Identification and measurement of impairment (continued)

 If this is the case, these assets will be subject to allowance calculation based on individually determined
 future cash flows related to the transaction. The calculation of the present value of the estimated future
 cash flows of a collateralized loan reflects the cash flows that may result from foreclosure less costs for
 obtaining and selling the collateral, whether or not foreclosure is probable.

 If the Company determines that no objective evidence of impairment exists for individually assessed
 loans and advances to customers, whether significant or not, it includes the loans and advances to
 customers in a group of loans with similar credit risk characteristics and collectively assesses them for
 impairment. Loans and advances to customers that are individually assessed for impairment and for
 which an impairment loss is or continues to be recognized are not included in a collective assessment
 of impairment.

 For the purpose of a collective evaluation of impairment, loans and advances to customers are grouped
 on the basis of similar credit risk characteristics that are indicative of the debtors' ability to pay all
 amounts due according to the contractual terms (for example, on the basis of number of days of delay
 and loan product type).

 Management considers that these characteristics chosen are the best estimate of similar credit risk
 characteristics relevant to the estimation of future cash flows for groups of such loans by being
 indicative of the debtors' ability to pay all amounts due according to the contractual terms of the assets
 being evaluated.

 Future cash flows in a group of loans to customers that are collectively evaluated for impairment are
 estimated on the basis of historical loss experience for loans with credit risk characteristics similar to
 those in the group. Historical loss experience is adjusted on the basis of current observable data to
 reflect the effects of current conditions that did not affect the period on which the historical loss
 experience is based and to remove the effects of conditions in the historical period that do not exist
 currently.

 Because of the inherent limitations related to the historical experience in obtaining local information
 for individually impaired loans, incurred loss information, complexity of methodologies applied and
 the significant uncertainties on the international and local markets regarding asset valuation mentioned
 in note 4 e3), the loan impairment estimate as described above may differ significantly from the value
 that would have been obtained had the Company obtained sufficient historical experience on obtaining
 reliable local information on incurred losses, timing and amounts of the expected future cash flows.

 The Company regularly reviews the methodology and assumptions used for estimating future cash
 flows in order to reduce any differences between loss estimates and actual loss experience.




                                                                                                       12
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

3.     Significant accounting policies (continued)

g)     Financial assets and liabilities (continued)


vii.     Identification and measurement of impairment (continued)

Available for sale financial assets

For financial assets classified as available-for-sale, when a decline in the fair value of an available-for-
sale financial asset has been recognized directly in equity and there is objective evidence that the asset
is impaired, the cumulative loss that had been recognized directly in equity shall be removed from
equity and recognized in profit or loss even though the financial asset has not been derecognized. The
amount of the cumulative loss that is removed from equity and recognized in profit or loss shall be the
difference between the acquisition cost (net of any principal repayment and amortization) and current
fair value, less any impairment loss on that financial asset previously recognized in profit or loss.

Impairment losses recognized in profit or loss for an investment in an equity instrument classified as
available for sale shall not be reversed through profit or loss. If, in a subsequent period, the fair value of
a debt instrument classified as available for sale increases and the increase can be objectively related to
an event occurring after the impairment loss was recognized in profit or loss, the impairment loss shall
be reversed, with the amount of the reversal recognized in profit or loss.

Financial assets carried at cost

If there is objective evidence that an impairment loss has been incurred on an unquoted equity
instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a
derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument,
the amount of the impairment loss is measured as the difference between the carrying amount of the
respective financial asset and the present value of estimated future cash flows discounted at the current
market rate of return for a similar financial asset. Such impairment losses are not reversed in the profit
and loss account.

h) Cash and cash equivalents


Cash and cash equivalents comprise cash balances on hand, cash balances and placements with banks
and other financial assets with a high degree of liquidity –less than 3 months- and without a significant
risk of change in fair value.

For the purposes of the cash flow statements, cash and cash equivalents comprise: cash balances on
hand and cash balances and placements with banks with less than 90 days original maturity.

i) Income tax

Income tax comprises current and deferred tax. Income tax is recognized in the income statement
except to the extent that it relates to items recognized directly in equity, in which case it is recognized
in equity.



                                                                                                         13
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

3.      Significant accounting policies (continued)

i)       Income tax ( continued)

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of
previous years.

Deferred tax is provided using the balance sheet method, providing for temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for
taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial
recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a
business combination and that affects neither accounting nor taxable profit, and differences relating to
investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future.
Deferred tax is measured at the tax rates, which expect to be applied

to the temporary differences when they reverse, based on the laws that have been enacted or
substantively enacted by the reporting date.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be
available against which the asset can be used. Deferred tax assets are reviewed at each reporting date
and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.


For the year ended 31 December 2008 the current and deferred profit tax rate was 16% (31 December
2007: 16%).

Additional income taxes that arise from the distribution of dividends are recognised at the same time as
the liability to pay the related dividend is recognised.

j)    Property and equipment

i)    Own assets

Items of property and equipment are stated at cost as deemed cost less accumulated depreciation (see
below) and impairment losses (refer to Note 3.m). The cost of self-constructed assets includes the cost
of materials, direct labor, the initial estimate, where relevant, of the costs of dismantling and removing
the items and restoring the site on which they are located, and an appropriate proportion of production
overheads.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted
for as separate items of property, plant and equipment.
ii)   Subsequent expenditure

Expenditure incurred to replace a component of an item of fixed assets that is accounted for separately
is capitalized with the carrying amount of the component being written off. Other subsequent
expenditure is capitalized only when it increases




                                                                                                        14
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

3.      Significant accounting policies (continued)

j)      Property and equipment

ii)     Subsequent expenditure ( continud)

the future economic benefits embodied in the item of fixed assets. All other costs are recognized in the
income statement as an expense as incurred.
iii)    Depreciation
Depreciation is provided to write off the cost less the estimated residual value by equal installments
over the estimated useful lives of items of fixed assets, and major components that are accounted for
separately. Land and fixed assets under construction are not depreciated.
The estimated useful lives are as follows:
         Vehicles                                                    5 years
         Furniture, fixtures and other equipments                2 - 3 years
Increases in the carrying amount arising on revaluation of land and buildings are credited to other
reserves in equity. Decreases that offset previous increases of the same asset are charged against other
reserves directly in equity; all other decreases are charged to the income statement.

k)      Intangible assets

Software products acquired by the Company are stated at cost less accumulated amortization and
impairment losses (refer to Note 3.m).
i)      Software

Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and
bring to use the specific software.
ii)     Subsequent expenditure

Subsequent expenditure on capitalized intangible assets is capitalized only when it increases the future
economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed
as incurred.

Costs associated with maintaining computer software programs are recognized as an expense as
incurred.
iii)    Amortization
Amortization is charged to the income statement on a straight-line basis over the estimated useful lives
of intangible assets. Intangible assets are amortized from the date they are available for use.
The estimated useful lives are as follows:

         Software                                               1 - 3 years




                                                                                                   15
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

3.     Significant accounting policies (continued)

l)      Impairment of non-financial assets


The carrying amounts of the Company’s non-financial assets, other than deferred tax assets, are
reviewed at each reporting date to determine whether there is any objective evidence of impairment. If
any such evidence exists, then the asset’s recoverable amount is estimated.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceed
its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates
cash flows that largely are independent from other assets and groups. Impairment losses are recognised
in profit or loss.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair
value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications
that the loss has decreased or no longer exists. An impairment loss is

reversed if there has been a change in the estimates used to determine the recoverable amount. An
impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net of depreciation or amortisation, if no
impairment loss had been recognised.

m) Employee benefits

Short-term employee benefits
Short-term employee benefits include wages, salaries and social security contributions. Short-term
employee benefits are recognized as expense when services are rendered. The Company includes in
short-term benefits the bonuses payable to its employees within twelve months after the end of the
reporting period.
Pension obligations

The Company, in the normal course of business makes payments to the Romanian State funds on
behalf of its Romanian employees for pension, health care and unemployment benefit. All employees
of the Company are members and are also legally obliged to make defined contributions (included in
the social security contributions) to the Romanian State pension plan (a State defined contribution
plan). All relevant contributions to the Romanian State pension plan are recognized as an expense in
the income statement as incurred. The Company does not have any further obligations.

The Company does not operate any independent pension scheme and, consequently, has no obligation
in respect of pensions. The Company does not operate any other




                                                                                                       16
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

3. Significant accounting policies (continued)

m) Employee benefits ( continued)

 Pension obligations (continued)

defined benefit plan or post retirement benefit plan. The Company has no obligation to provide further
services to current or former employees.
 Other long-term benefits

The Company has no obligation in granting any other benefits to its employees at the retirement date.

n)   Related parties

Parties are considered related when one party, either through ownership, contractual rights, family
relationship or otherwise, has the ability to directly control or significantly influence the other party.

o) Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be
required to settle the obligation. Provisions are determined by discounting the expected future cash
flows at a pre-tax rate that reflects current market assessments of the time value of money and, where
appropriate, the risks specific to the liability.

p) Dividends

Dividends are treated as an appropriation of profit in the period they are declared and approved by the
General Assembly of Shareholders. The only profit available for distribution is the profit for the year
recorded in the Romanian statutory accounts, which differs from the profit in these financial
statements, prepared in accordance with IFRS, due to the differences between the applicable Romanian
Accounting Regulations and IFRS.

q) Standards, interpretations and amendments to published International Financial Reporting
Standards that are not yet effective


Certain new standards, amendments and interpretations to existing standards have been published and
are mandatory for the Company’s accounting periods beginning on or after 1 January 2009 or later
periods and were not early adopted by the Company. Management considered the following new
standards, amendments and interpretations to existing standards:




                                                                                                     17
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

3. Significant accounting policies (continued)

q) Standards, interpretations and amendments to published International Financial Reporting
Standards that are not yet effective ( continued)

         Amendment to IFRS 2 “Share-based Payment” (effective from 1 January 2009). The
amendments to the Standard clarify the definition of vesting conditions and introduce the concept of
non-vesting conditions. Non-vesting conditions are to be reflected in grant-date fair value and failure
to meet non-vesting conditions will generally result in treatment as a cancellation. The amendments to
IFRS 2 are not relevant to the Company’s operations as the Company does not have any share-based
compensation plans.

         Revised IFRS 3 “Business Combinations” (effective for annual periods beginning on or after
1 July 2009). The scope of the revised Standard has been amended and the definition of a business has
been expanded. The revised Standard also includes

         a number of other potentially significant changes including: a) all items of consideration
transferred by the acquirer are recognized and measured at fair value as of the acquisition date,
including contingent consideration; b) subsequent change in contingent consideration will be
recognized in profit or loss; c) transaction costs, other than share and debt issuance costs, will be
expensed as incurred; d) the acquirer can elect to measure any non-controlling interest at fair value at
the acquisition date (full goodwill), or at its proportionate interest in the fair value of the identifiable
assets and liabilities of the acquire, on a transaction-by-transaction basis. As the revised Standard
should not be applied to business combinations prior to the date of adoption, the revised Standard is
expected to have no impact on the financial statements with respect to business combinations that occur
before the date of adoption of the revised Standard.

          IAS 23 (Amendment), “Borrowing costs” (effective from 1 January 2009). The revised
Standard removes the option to expense borrowing costs and requires the capitalization of borrowing
costs that relate to qualifying assets (those that take a substantial period of time to get ready for use or
sale). Currently this is not applicable to the Company as there are no qualifying assets.

          IFRS 8, “Operating segments” (effective from 1 January 2009). The Standard introduce the
“management approach” to segment reporting and requires segment disclosure based on the
components of the entity that management monitors in making decisions about operating matters.
Operating segments are components of an entity about which separate financial information is available
that is evaluated regularly by the Company’s management in deciding how to allocate resources and in
assessing performance. This standard is not applicable to the Company.

         Revised IAS 1 “Presentation of Financial Statements” (effective from 1 January 2009). The
revised Standard requires information in financial statements to be aggregated on the basis of shared
characteristics and introduces a statement of comprehensive income. Items of income and expense and
components of other comprehensive income may be presented either in a single statement of




                                                                                                       18
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

3. Significant accounting policies (continued)

q) Standards, interpretations and amendments to published International Financial Reporting
Standards that are not yet effective (continued)

         comprehensive income (effectively combining the income statement and all non-owner
changes in equity in a single statement), or in two separate statements (a separate income statement
followed by a statement of comprehensive income). The Company is currently evaluating whether to
present a single statement of comprehensive income, or two separate statements

         Amendments to IAS 27, Consolidated and Separate Financial Statements (effective for
annual periods beginning on or after 1 January 2009). The amendments remove the definition of “cost
method” currently set out in IAS 27, and instead require all dividends from a subsidiary, jointly
controlled entity or associate to be recognized

         as income in the separate financial statements of the investor when the right to receive the
dividend is established. In addition, the amendments provide guidance when the receipt of dividend
income is deemed to be an indicator of impairment. The standard is not applicable to the Company.

          Revised IAS 27 Consolidated and Separate Financial Statements (effective for annual periods
beginning on or after 1 July 2009). In the revised Standard the term minority interest has been replaced
by non-controlling interest, and is defined as "the equity in a subsidiary not attributable, directly or
indirectly, to a parent". The revised Standard also amends the accounting for non-controlling interest,
the loss of control of a subsidiary, and the allocation of profit or loss and other comprehensive income
between the controlling and non-controlling interest. The standard is not applicable to the Company.

         Amendments to IAS 32 Financial Instruments: Presentation, and IAS 1, Presentation of
Financial Statements (effective for annual periods beginning on or after 1 January 2009). The
amendments introduce an exemption to the principle otherwise applied in IAS 32 for the classification
of instruments as equity; the amendments allow certain puttable instruments issued by an entity that
would normally be classified as liabilities to be classified as equity if, and only if, they meet certain
conditions. The Company is currently evaluating the impact of applying the amendment.

          Amendment to IAS 39, Financial Instruments: Recognition and Measurement (effective for
annual periods beginning on or after 1 July 2009). The amended Standard clarifies the application of
existing principles that determine whether specific risks or portions of cash flows are eligible for
designation in a hedging relationship. In designating a hedging relationship the risks or portions must
be separately identifiable and reliably measurable; however inflation cannot be designated, except in
limited circumstances. The Company is currently evaluating the potential future impact of applying this
amendment.




                                                                                                    19
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

3. Significant accounting policies (continued)

q) Standards, interpretations and amendments to published International Financial Reporting
Standards that are not yet effective (continued)

         IAS 40, Investment Property (effective for annual periods beginning on or after 1 January
2009). IAS 40 is amended to include property under construction or development for future use as
investment property in its definition of “investment property”. This results in such property being
within the scope of IAS 40; previously it was within the scope of IAS 16. The Company is currently
evaluating the potential future impact of applying this standard.

          IFRIC 13 Customer Loyalty Programmes (effective for annual periods beginning on or after
1 July 2008). The Interpretation explains how entities that grant loyalty award credits to customers who
buy other goods or services should account for their obligations to provide free or discounted goods or
services (‘awards’) to customers who redeem those award credits. Such entities are required to allocate
some of the proceeds of the initial sale to the award credits and recognize these proceeds as revenue
only when they have fulfilled their obligations. The Company does not expect the Interpretation to have
any impact on the financial statements.

          IFRIC 15 Agreements for the Construction of Real Estate (effective for annual periods
beginning on or after 1 January 2009). IFRIC 15 clarifies that revenue arising from agreements for the
construction of real estate is recognized by reference to the stage of completion of the contract activity
in the following cases:

(1) The agreement meets the definition of a construction contract in accordance with IAS 11.3;

(2) The agreement is only for the rendering of services in accordance with IAS 18 (e.g., the entity is not
required to supply construction materials); and

(3) The agreement is for the sale of goods but the revenue recognition criteria of IAS 18.14 are met
continuously as construction progresses.

In all other cases, revenue is recognized when all of the revenue recognition criteria of IAS 18.14 are
satisfied (e.g., upon completion of construction or upon delivery). IFRIC 15 is not relevant to the
Company’s operations as the Company does not provide real estate construction services or develop
real estate for sale.




                                                                                                     20
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

3.      Significant accounting policies (continued)

q) Standards, interpretations and amendments to published International Financial Reporting
Standards that are not yet effective (continued)

          IFRIC 16 Hedges of a Net Investment in a Foreign Operation (effective for annual periods
beginning on or after 1 October 2008). The Interpretation explains the type of exposure that may be
hedged, where in the Company the hedged item may be held, whether the method of consolidation
affects hedge effectiveness, the form the hedged instrument may take and which amounts are
reclassified from equity to profit or loss on disposal of the foreign operation. The Standard is not
applicable to the Company.

           IFRIC 17 Distributions of Non-cash Assets to Owners (effective prospectively for annual
periods beginning on or after 15 July 2009). The Interpretation applies to non-reciprocal distributions
of non-cash assets to owners acting in their capacity as owners. In accordance with the Interpretation a
liability to pay a dividend shall be recognized when the dividend is appropriately authorized and is no
longer at the discretion of the entity and shall be measured at the fair value of the assets to be
distributed. The carrying amount of the dividend payable shall be remeasured at each reporting date,
with any changes in the carrying amount recognized in equity as adjustments to the amount of the
distribution. When the dividend payable is settled the difference, if any, between the carrying amount
of the assets distributed and the carrying amount of the dividend payable shall be recognized in profit
or loss. As the interpretation is applicable only from the date of application, it will not impact on the
financial statements for periods prior to the date of adoption of the interpretation.




                                                                                                    21
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

4.      Risk management policies

a)    Introduction and overview
This note presents information about the Company's objectives, policies and processes for managing
and measuring risk. The Company has exposure to the following risks from its use of financial
instruments:
         Credit risk,
         Liquidity risk,
         Market risk, and
         Operational risk.

Market risk includes currency risk and interest rate risk.

Risk management framework

The responsibility for the implementation and effectiveness of risk management rests with the
Company’s Chief Executive Officer (“CEO”). Responsibility for identifying risk and the day to day
management of risk lies with line management.

All members of staff have a responsibility for the effective management of risk and report
appropriately through their line management any known breakdowns in control or any potential
exposures that may result in financial or reputation loss.

The CEO ensures that key risk indicators are regularly reviewed and updated to remain current. All
strategic and operational change initiatives activate risk assessments at the inception stage, business
case stage and as the project develop.

The Risk Manager ensures that an effective “fit for purpose” Incident and Crisis Management
Capability, or Business Continuity Management capability exists to manage the impacts of major
incidents and crises, allowing critical business processes to be maintained at acceptable levels until the
situation is returned to a state of normality.

Objective of risk management process

The objective of the risk reporting process is to ensure that any risk identification and assessment is
monitored appropriately and reviewed by the Company’s executive management. This is outlined in the
process flow below;
             Line managers review their business operations and identify potential risk scenarios;
             Risk scenarios are assessed and reported to the CEO;
             Incidents are reported to the CEO by line management as they occur and this data is also
              collated into the central risk database by the CEO;
             Line management monitor approved Key Risk Indicators (KRI’s) and report to the CEO
              on a regular basis as outlined in the procedures below;
             The CEO collates, analysis and monitors all risk data provided by line managers;




                                                                                                     22
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

4.      Risk management policies (continued)

a)      Introduction and overview (continued)

Objective of risk management process (continued)

             The CEO reports to the Board of Directors using the summary tools available to provide
              a realistic overview of the Company’s risk profile;
             CEO’s report to the Company’s executives on the risk profile which is categorized by the
              pre-determined, approved KRI’s results;
             Exceptions and recommendations are also reported. Senior Management Committee
              review and amend risk policy if required;
             Senior Management Committee reports to the Board with decisions and requests for
              approval or ratification from Board;
             New or revised policy is implemented once approval obtained.

b)    Credit risk
Credit risk is defined as the possibility of a negative impact on the capital and financial results through
the failure of debtors to fulfill their obligation to the Company.

The Company is exposed to credit risk through its lending activities. The amount of credit exposure in
this regard is represented by the carrying amounts of the assets on the balance sheet. In addition, the
Group is exposed to off balance sheet credit risk through commitments to extend credit (see Note 23.c).

The management of credit risk is based on the Company’s overall business strategy and reviewed on a
regular basis to ensure that it meets current requirements. The Board of Directors also determines the
credit risk appetite of the Company.

Accountability rests with the Senior Management Committee, the chair of which is the Chief Executive
Officer for the adherence to the policy and implementation of credit risk procedures. All members of
staff operating within the provision of credit function are fully aware of the policies and procedures
covering their area of responsibility.

The CEO maintains the credit policies and procedures as a part of overall credit risk management
framework and where appropriate seeks Board approval for amendments to existing policy and the
introduction of new credit policy. The CEO is also responsible for the credit operation and staff
adherence to policy and procedures but it is the responsibility of the Business Development Manager
(BDM), supported by Branch Managers (BM’s) for the credit operation and day to day staff adherence
to those policies and procedures. The Contracted Internal Auditor (IA) also independently audits and
assesses the credit operation and adherence to policies and procedures.

As part of the overall credit risk management framework credit policies are detailed in the Credit
Policy Manual (CPM) and credit procedures are documented separately.




                                                                                                      23
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

4. Risk management policies (continued)
b)   Credit risk ( continued)
In order to minimize this risk, procedures are in place to screen the customers before granting the loans
and to monitor their ability to repay the principal and interest during the duration of the loans and
establishment of exposure limits.

Cash is deposited with banks and other financial institutions, which are considered at time of deposit to
have a minimal risk of default.

Exposure to credit risk
                                                                          Loans and         Loans and
                                                                         advances to       advances to
                                                                           customers         customers
                                                                        31 December       31 December
                                                                                2008              2007

 Individually impaired
 Grade 5                                                                     185,327              7,072
 Gross amount                                                                 185,327             7,072
 Allowance for impairment                                                   (185,327)            (7,072)
 Carrying amount                                                                     -                   -


 Past due but not individually impaired
 Grade 1                                                                    2,443,046           782,701
 Grade 2                                                                      997,417           506,849
 Grade 3                                                                      258,206            19,163
 Grade 4                                                                      369,812            76,856
 Gross amount                                                               4,068,481         1,385,569
 Allowance for impairment                                                    (76,078)            (4,955)
 Carrying amount                                                            3,992,403         1,380,614


 Neither past due nor individually impaired
 Grade 1                                                                   5,846,742          4,053,229
 Grade 2                                                                   5,500,086          4,968,493
 Grade 3                                                                     276,374            276,140
 Grade 4                                                                     511,385            341,408
 Gross amount                                                             12,134,587          9,639,270
 Allowance for impairment                                                  (178,519)           (39,651)
 Carrying amount                                                          11,956,068          9,599,619


 Total carrying amount                                                    16,388,395         11,031,911
 Total net carrying amount                                                15,948,472         10,980,233




                                                                                                    24
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements
4.    Risk management policies (continued)

b)    Credit risk (continued)
The loans are graded based on the type of loan and legal status.
   Grade 5 represents loans and advances to customers for which the legal procedures were initiated.
   Grade 4 represents Consum LAM loans
   Grade 3 represents Start-up LAM loans
   Grade 2 represents loans and advances to agriculture customers
   Grade 1 represents all the other loans and advances to customers which are not included in one of
the above grades
Impaired loans and securities

Impaired loans and securities are loans and securities for which the Company determines that it is
probable that it will be unable to collect all principal and interest due according to the contractual terms
of the loan / securities agreement(s).

Past due but not impaired loans

Loans and securities where contractual interest or principal payments are past due but the Company
believes that impairment is not appropriate on the basis of the level of security / collateral available and
/ or the stage of collection of amounts owed to the Company.

Neither past due nor impaired

This category includes all exposures not classified in the above categories.

Allowances for impairment

The Company establishes an allowance for impairment losses that represents its estimate of incurred
losses in its loan portfolio. The main components of this allowance are a specific loss component that
relates to individually impaired exposures, and a collective loan loss allowance established for groups
of homogeneous assets in respect of losses that have been incurred but have not been identified on
loans subject to individual assessment for impairment.

Write-off policy

The Company writes off a loan / security balance (and any related allowances for impairment losses)
when Company’s Risk Committee/ Board of Directors determines that the loans / securities are
uncollectible. This determination is reached after considering information such as the occurrence of
significant changes in the borrower / issuer’s financial position such that the borrower / issuer can no
longer pay the obligation, or that proceeds from collateral will not be sufficient to pay back the entire
exposure. For smaller balance standardized loans, charge off decisions generally are based on a product
specific past due status.




                                                                                                       25
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

4.    Risk management policies (continued)

b)    Credit risk (continued)
The Company holds collaterals against loans to customers in the form of mortgage interest over
property, other registered securities over assets and guarantees. Estimates of value are based on the
value of the collateral assessed at the time of borrowing and generally are not updated except when a
loan is assessed as impaired.

Collateral generally is not held over cash deposited with banks and other financial institutions.

An estimate of the value of collateral and other security enhancements held against loans and advances
to customers is shown below:
                                                                     Loans and advances to customers
 In RON                                                               31 December      31 December
                                                                             2008               2007

 Against individually impaired                                              257,440                 42,313
 Property                                                                   103,691                 37,313
 Other                                                                      153,749                  5,000

 Against past due but not impaired                                        8,561,704            3,371,467
 Property                                                                 7,149,814            2,996,430
 Other                                                                    1,411,890              375,037

 Against neither past due nor impaired                                   29,230,944           21,870,068
 Property                                                                25,944,216           19,713,981
 Other                                                                    3,286,728            2,156,087

 Total                                                                   38,050,088           25,283,848
The Company monitors concentrations of credit risk by sector and geographic location. An analysis of
concentrations of credit risk at the reporting date in shown below:
 In RON
                                                                     31 December           31 December
                                                                            2008                  2007

 Agriculture                                                             7,231,608             5,830,135
 Alimentary industry                                                       237,696               231,284
 Small industry                                                          2,953,646               737,906
 Commerce and tourism                                                    1,536,653             1,453,785
 Transports                                                                360,290               396,487
 Consumer and other                                                      3,628,580             2,330,636

 Total loans and advances to customers                                  15,948,472            10,980,233




                                                                                                      26
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

4.    Risk management policies (continued)

c)     Liquidity risk
Liquidity risk arises in the general funding of the Company’s activities and in the management of the
asset positions. It includes both the risk of being unable to fund assets at appropriate maturities and
rates and the risk of being unable to liquidate an asset at a reasonable price and in an appropriate time
frame.

Responsibility for the effective monitoring and control of the Company’s Liquidity rests with the
Senior Management Committee. The CEO is a member of this committee. The Contracted Internal
Auditor audits and assesses the process.

The Company has access to a diverse funding base. Funds are raised using a broad range of instruments
including borrowings and share capital. This enhances funding flexibility, limits dependence on any
one source of funds and generally lowers the cost of funds. The Company strives to maintain a balance
between continuity of funding and flexibility through the use of borrowings with a range of maturities.
The Company assesses liquidity risk by identifying and monitoring changes in funding, and
diversifying the funding base.

The residual maturity analysis (adjusted accordingly for any loan covenants breach) of the financial
assets and liabilities of the Company as at 31 December 2008 is presented below:
 In RON                         Up to 3       3 Months       1 Year to 5
                                Month         to1 Year         Years           Over 5 years    Total
 Financial assets

 Cash and cash equivalents      1,656,051                -                 -               -    1,656,051
 Loans and advances to
 customers (i)                  1,688,697      4,834,902       7,886,388          2,163,710    16,573,697


 Total financial assets         3,344,748      4,834,902       7,886,388          2,163,710    18,229,748

 Financial liabilities
 Loans from banks and
 other financial institutions     223,824      1,091,618       8,217,309          4,732,011    14,264,762


 Total financial liabilities      223,824      1,091,618       8,217,309          4,732,011    14,264,762


 Maturity surplus/
 (shortfall)                    3,120,924      3,743,284       (330,921)         (2,568,301)    3,964,986




                                                                                                       27
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

4.    Risk management policies (continued)

c)    Liquidity risk (continued)
 (i) Loans and advances to customers do not include non-monetary assets such as loan loass provision
and deferred commission income amounting to RON 625,225.

As at 31 December 2008, the Company’s liquidity gap analysis shows a significant liquidity shortfall
on the “over 5 years” maturity interval.

The residual maturity analysis of the financial assets and liabilities of the Company as at 31 December
2007 is presented below:
 In RON                            Up to 3   3 Months to    1 Year to 5   Over 5 years           Total
                                   Month         1 Year          Years

 Financial assets

 Cash and cash equivalents      1,575,475              -              -              -       1,575,475
 Loans and advances to
 customers (i)                 11,140,213      3,289,522     6,444,131         320,000      11,140,213

 Total financial assets
                               12,715,688      3,289,522     6,444,131         320,000      12,715,688

 Financial liabilities
 Interest bearing loans and
 borrowings                        155,604      742,575      3,271,613       5,538,850       9,708,642

 Total financial liabilities
                                   155,604      742,575      3,271,613       5,538,850       9,708,642

 Maturity surplus/
 (shortfall)                   12,560,084      2,546,947     3,172,518     (5,218,850)       3,007,046

(i) Loans and advances to customers do not include non-monetary assets such as loan loass provision
and deferred commission income amounting to RON 159,980.




                                                                                                  28
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

4.    Risk management policies (continued)

d)    Operational risk
Operational Risk is the risk caused by failures in operational processes or the systems that support
them. This includes errors, omissions, systems breakdown, natural disasters, terrorist attack and
fraudulent activity, causing an impact in terms of unavailability of services, financial loss, increased
costs, loss of reputation or failure to make anticipated income or profit.

The objective of the operational risk management is to balance cost and risk within the constraints of
the risk appetite of the Company but be consistent with the prudent management required of a financial
institution.

Accountability rests with the Senior Management Committee, the chair or president of which is the
Chief Executive Officer. Responsibility for implementation and effectiveness of Operational Risk
Management rests with the CEO. Responsibility for identifying and managing Operational Risk lies
with line management.

The Contracted Internal Audit firm is responsible for the completion of an agreed audit program
covering all departments and branches, identifying risk and non adherence to procedures, completing
special investigations and reporting to the CEO and Audit Committee. The Contracted Internal audit
firm also audits the risk assessment process and reports on an annual basis to the Board of Directors.

Line managers will follow a pre determined program of risk performance reporting outlined as follows:

         Regular Operation Risk Key Risk Indicator (KRI) performance reporting in line with defined
          and published process;

         Risk Incident reporting as required detailing specific risk events as they occur or when
          discovered;

         Following specific risk assessment of business areas the preparation and submission of
          potential risk event reports outlining mitigating actions and controls put in place to reduce the
          likelihood of an event occurring.

Key Risk Indicators are an effective tool to monitor, manage and mitigate risk. They can be used as
activators for the identification of potential increase in risk affecting one or more business areas within
an organization. They support the main risk assessment of impact/severity and likelihood and changes
to KRI’s may result in a re-evaluation of the main risk assessment.




                                                                                                      29
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

4.    Risk management policies (continued)

e)    Market risk
Market risk is defined as external influences, generally outside of the control of the organization’s
executive management, but which can be identified, assessed and mitigating actions put in place to
reduce any adverse impact.

The Company has identified the following market risks:

         Interest rate risk

         Currency risk

         Operational environment risk

         Taxation risk

e1)   Interest rate risk
The Company incurs interest rate risk principally in the form of exposure to adverse changes in the
market interest rates to the extent that interest-earning assets and interest-earning liabilities mature or
re-price at different times or in differing amounts.

Simple maturity/re-pricing schedules or gap analysis is used to generate simple indicators of the
interest rate risk sensitivity of both earnings and economic value to changing interest rates. A gap
analysis is completed periodically. These figures are monitored on a monthly basis in line with the
above by the Finance and Accounts Department which is then reported to the CEO.

The Company grants loans at fixed interest rates, for the entire duration of the loan contract.

The Company contracts borrowings both at fixed interest rates (the majority of loans contracted before
31 December 2006 bare fixed interest rates) and at variable interest rates (the loans contacted in 2007
and 2008 bear an interest rate of 6M BUBOR + a margin of 4.%).

A summary of the Company’s interest rate gap position as at 31 December 2008 is as follows:
                                               RON                       EUR                      CHF
                                               Range                     Range                    Range
Assets                                Min          Max         Min            Max          Min         Max
Loans and advances to
customers                                17%         26%          11%             25%             15        22
Liabilities
Loans from banks and other
financial institutions                    7%      12.25%           0%           9.13%             4%      8.%




                                                                                                       30
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

4.    Risk management policies (continued)

e)    Market risk (continued)

e1)   Interest rate risk (continued)
A summary of the Company’s interest rate gap position as at 31 December 2007 is as follows:
                                              RON                    EUR                  CHF
                                              Range                  Range                Range
Assets                              Min         Max         Min          Max          Min       Max
Loans and advances to
customers                              10 %       20%          7%            14%            -          -
Liabilities
Loans from banks and other
financial institutions                 3.1%           8%       0%            8.8%        4%      8.5%

The management of interest rate risk against interest rate gap limits is supplemented by monitoring the
sensitivity of interest rate changes and its resultant effect on profitability of the Company. Standard
scenarios that are considered include a sensitivity analysis at 5% and 10% parallel increase and 5% and
10% parallel decrease in interest rates for assets and liabilities.

e2)   Currency risk
The Company is exposed to currency risk through transactions in foreign currencies against RON.
There is also a balance sheet risk that the net monetary liabilities in foreign currencies will take a
higher value when translated into RON as a result of currency movements.

The Company manages its exposure to movements in exchanges rates by modifying its assets and
liabilities mix and by using derivative financial instruments.
The net foreign currency position is defined as the difference between assets and liabilities in one
foreign currency, whereas it may be:
       Open long foreign currency position, if the amount of such Company’s assets in a particular
foreign currency exceeds the amount of its liabilities in the same currency
       Open short foreign currency position, if the amount of such Company’s assets in a particular
foreign currency is below the amount of its liabilities in the same currency.
The net foreign currency position is monitored on a monthly basis using the same methodology as for
Interest Rate risk by the Finance and Accounts Department, which is then reported to the CEO.




                                                                                                  31
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

4.      Risk management policies (continued)
e)      Market risk (continued)

e2)     Currency risk
The monetary assets and liabilities held in RON and in foreign currencies as at 31 December 2008 are
presented below:
In RON                                            RON             EUR           CHF       Other               Total
Assets
Cash and cash equivalents                       848,631         805,793         1,263        364       1,656,051
Loans and advances to customers              11,114,030       4,426,330     1,024,835      8,502      16,573,697

Total financial assets                       11,962,661       5,232,123     1,026,098      8,866      18,229,748

Liabilities
   Loans from banks and other
financial institutions                        7,711,316       5,618,351      935,095              -   14,264,762

Total financial liabilities
                                              7,711,316       5,618,351      935,095              -   14,264,762

     Net financial assets/ (liabilities)      4,251,345        -386,228        91,003      8,866       3,964,986


(i) Loans and advances to customers do not include non-monetary assets such as loan loass provision
and deferred commission income amounting to RON 625,225

The monetary assets and liabilities held in RON and in foreign currencies as at 31 December 2007 are
presented below:
      In RON                                   RON            EUR           CHF          Other                Total
      Assets
      Cash and cash equivalents               310,061       824,068       326,977       114,369         1,575,475
      Loans and advances to customers       7,688,930     3,278,218             -        13,085        10,980,233

      Total financial assets                7,998,991     4,102,286       326,977       127,454        12,555,708

      Liabilities
      Loans from banks and other
      financial institutions                5,147,591     1,418,838   3,142,214               -            9,708,642

      Total financial liabilities           5,147,591     1,418,838   3,142,214               -            9,708,642

      Net financial assets/ (liabilities)   2,851,400     2,683,449 (2,815,237)         127,454            2,847,066




                                                                                                      32
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

4.    Risk management policies (continued)

e)     Market risk (continued)

e2)   Currency risk
(i) Loans and advances to customers do not include non-monetary assets such as loan loass provision
and deferred commission income amounting to RON 159,980.

The management of currency risk against currency gap limits is supplemented by monitoring the
sensitivity of exchange rate changes and its resultant effect on profitability of the Company. Standard
scenarios that are considered include a sensitivity analysis at 5% and 10% parallel increase and 5% and
10% parallel decrease in exchange rates for foreign currency assets and liabilities.

e3)   Operating environment risk
The process of risk repricing during 2007 and 2008 in the international financial markets severely
affected the performance of those markets, including the Romanian financial and banking market, and
fostered heightened uncertainty with regard to economic developments going forward.

The ongoing global credit and liquidity crisis which commenced in the middle of 2007 has resulted in,
among other things, lower level and difficult access to the capital market funding, lower liquidity levels
across the Romanian banking sector, and higher interbank lending rates. The significant losses
experienced in the global financial market could affect the ability of the Company to obtain new
borrowings and refinance its existing borrowings at terms and conditions similar to those applied to
earlier transactions.

The determination of compliance with debt agreement and other contract covenants, and the evaluation
of significant uncertainties, including uncertainties associated with an entity's ability to continue as a
going concern for a reasonable period of time, bring their own challenges.

The customers of the Company may also be affected by the lower liquidity situation which could in
turn impact their ability to repay their outstanding loans. Deteriorating operating conditions for
customers may also have an impact on the management cash flow forecasts and assessment of the
impairment of financial and non-financial assets. To the extent that information is available,
management has reflected revised estimates of expected future cash flows in its impairment
assessment.

Such ongoing fears that the deteriorating financial conditions could contribute, at a later stage to a
further retrenchment in confidence, prompted a coordinated effort of governments and central banks to
adopt special measures aimed at countering a vicious circle of growing risk aversion and to helping
minimising the effects of the financial crisis and finally restoring normal market functioning.

Management is unable to predict all developments which could have an impact on the Romanian
financial institutions sector and consequently what effect, if any, they could have on these financial
statements.




                                                                                                     33
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements
4.    Risk management policies (continued)

e)    Market risk (continued)

e3)   Operating environment risk (continued)
Management is unable to reliably estimate the effects on the Company's financial statements of any
further deterioration in the liquidity of the financial markets, devaluation of financial assets influenced
by the illiquid credit market conditions and the increased volatility in the currency and equity markets.
Management believes it is taking all the necessary measures to support the sustainability and growth of
the Company’s business in the current circumstances by:

         constantly monitoring its liquidity position and over-dependence on specific funds

         forecasting on short-term basis its net liquidity position

         obtaining commitment from the shareholders regarding the latter’s continuous support of the
          Company’s operations in Romania

         examining terms and conditions of financing agreements and considering the implications of
          obligations imposed and risks identified such as approaching maturity dates or the
          implications of any terms or covenants that may have been breached or which may be
          breached in the foreseeable future.

e4)   Taxation risk
On 1 January 2007 Romania became a member of the European Union (‘EU”) and therefore has to
apply detailed and complex rules on the basis of the EU Treaties, Regulations and Directives. The
Company has to conform to EU legislation from 1 January 2007 and, therefore, it has prepared to apply
the changes arising from the EU legislation. These changes have been implemented, however the tax
authorities have up to 5 years to audit the way these changes were implemented.

Interpretation of the text and practical implementation procedures of the newly enforced EU tax
regulations could vary, and there is a risk that certain transactions, for example, could be viewed
differently by the tax authorities as compared to the Company's treatment.

Furthermore, the Romanian Government has a number of agencies that are authorized to conduct audits
(controls) of companies operating in Romania. These controls are similar in nature to tax audits
performed by tax authorities in many countries, but may extend not only to tax matters but to other
legal and regulatory matters in which the applicable agency may be interested. It is likely that the
Company will continue to be subject to regular controls as new laws and regulations are issued.




                                                                                                      34
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

5.    Use of estimate and judgments

The Company makes estimates and assumptions that affect the reported amounts of assets and
liabilities within the next financial year. Estimates and judgments are continually evaluated and are
based on historical experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.

Impairment losses on loans and advances
The Company reviews its loan portfolios to assess impairment at least on a monthly basis. In
determining whether an impairment loss should be recorded in the income statement, the Company
makes judgments as to whether there is any observable data indicating that there is a measurable
decrease in the estimated future cash flows from a portfolio of loans before the decrease can be
identified with an individual loan in that portfolio. This evidence may include observable data
indicating that there has been an adverse change in the payment status of borrowers in a group, or
national or local economic conditions that correlate with defaults on assets in the group.

Management uses estimates based on historical loss experience for assets with credit risk
characteristics and objective evidence of impairment similar to those in the portfolio when scheduling
its future cash flows. The methodology and assumptions used for estimating both the amount and
timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and
actual loss experience.

The loan impairment assessment considers the visible effects on current market conditions on the
individual / collective assessment of loans and advances to customers’ impairment. Because of the
significant uncertainties on the international and local financial markets such estimates could be revised
in the near future. Hence, the Company has estimated the impairment loss provision for loans and
advances to customers based on the internal methodology and assessed that no further provision for
impairment losses is required except as already provided for in the financial statements. Because of the
inherent limitations related to the historical experience in obtaining cash flow information, in
methodologies applied and to the uncertainties on the international and local financial markets
regarding assets valuation, that Company’s estimate could be revised after the date of the approval of
the financial information included in the financial statements.

To the extent that the net present value of estimated cash-flows differs by +/-5 percent, the provision
would be estimated RON xxx higher or RON xxx lower (31 December 2006: RON xxx higher or RON
xxx lower).

Determining fair values

The Company measures fair values using the following hierarchy of methods:

         Quoted market price in an active market for an identical instrument.




                                                                                                     35
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

5.    Use of estimate and judgments (continued)

      Determining fair values (continued)

         Valuation techniques based on observable inputs. This category includes instruments valued
          using: quoted market prices in active markets for similar instruments; quoted prices for
          similar instruments in markets that are considered less than active; or other valuation
          techniques where all significant inputs are directly or indirectly observable from market data.
         Valuation techniques using significant unobservable inputs. This category includes all
          instruments where the valuation technique includes inputs not based on observable data and
          the unobservable inputs could have a significant effect on the instrument’s valuation. This
          category includes instruments that are valued based on quoted prices for similar instruments
          where significant unobservable adjustments or assumptions are required to reflect differences
          between the instruments.
Fair values of financial assets and financial liabilities that are traded in active markets are based on
quoted market prices or dealer price quotations. For all other financial instruments the Company
determines fair values using valuation techniques. Valuation techniques include net present value and
discounted cash flow models and comparison to similar instruments for which market observable prices
exist. Assumptions and inputs used in valuation techniques include benchmark interest rates, and credit
spreads used in estimating discount rates, bond and equity prices and foreign currency exchange rates.
The objective of valuation techniques is to arrive at a fair value determination that reflects the price of
the financial instrument at the reporting date, which would have been determined by market
participants acting at arm’s length.

As at 31 December 2008, the Company does not have financial instruments carried at fair value.

The following is a summary of the carrying amounts and fair values of each class of assets and
liabilities that are not presented on the Company’s balance sheet as at 31 December 2008 at their fair
value:
  RON                                                          Net book value                   Fair value
  Financial assets

  Loans and advances to customers                                  15,948,472                  16,124,645

  Financial liabilities

  Loans from banks and financial institutions                      14,264,762                  14,264,762




                                                                                                      36
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

5.    Use of estimate and judgments (continued)

      Determining fair values (continued)
The following is a summary of the carrying amounts and fair values of each class of assets and
liabilities that are not presented on the Company’s balance sheet as at 31 December 2007 at their fair
value:
  RON                                                         Net book value                   Fair value
  Financial assets

  Loans and advances to customers                                  10,980,233                 11,163,547

  Financial liabilities

  Loans from banks and financial institutions                       9,708,642                  9,708,642
The following summarizes the major methods and assumptions used in estimating the fair values of
financial instruments reflected in the table above.

Loans and advances to customers: These are net of provisions for impairment losses. The estimated fair
value of loans and advances with fixed interest rate and with changes in credit status since inception are
estimated based on discounted cash flows at current market rates. Loan repayments are assumed to
occur at contractual repayment dates, where applicable.

Loans from banks and financial institutions: The fair value of loans from banks and other financial
institutions is based on the present value of future cash flows, discounted at interest rates available at
the balance sheet date for new debt with similar remaining maturity as no quoted market price is
available to the Company for loans that have floating interest rate or maturing within one year it is
assumed that their fair value is not significantly different from carrying amount.




                                                                                                    37
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

6.      Interest income
In RON                                                                                          2008

Interest income on loans (i)                                                               2,491,942
Penalty interest income on loans                                                              35,342
Interest on deposits with banks                                                               44,080
Total                                                                                      2,571,364

(i)     Interest income on loans includes the origination commissions amortized using the effective
        interest rate method.


7.    Fee and commission income

Fee and commission income comprises of the fees and commissions charged by the Company for
services like acceptance of early reimbursements on the loans and other modifications requested by the
customers to the loan agreements.

8. Net charge of provision for impairment losses
In RON
                                                                                                  2008
Charge for impairment losses (Note 13)                                                         557,358
Release of provisions for impairment losses (Note 13)                                        (165,887)

Total                                                                                          391,471

9. Personnel expenses
In RON                                                                                            2008

Salaries                                                                                       295,769
Social security contributions                                                                   83,906
Other personnel expenses                                                                        17,223
Total                                                                                          396,898


The average number of employees of the Company for the year ended as at 31 December 2008 was 10 (31
December 2007:10).




                                                                                                 38
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

10. Other operating expenses
 In RON                                                                                2008

 Other third party services and charges                                              252,649
 Advertising                                                                          37,216
 Rent                                                                                 65,825
 Postage and telephone                                                                22,313
 Insurance expense                                                                     9,350
 Depreciation and amortization (Note 12 and Note 13)                                  42,489
 Consumables                                                                          21,257
 Transportation and travel                                                            20,678
 Repairs and maintenance                                                              32,328
 Other taxes                                                                           6,252
 Other administrative expenses                                                        16,998

 Total                                                                              527,354S

11. Taxation
 In RON                                                                                2008

 Current tax expense                                                                 48,430
 Deferred tax revenue
                                                                                    (9,038)

 Total                                                                               39,392

Reconciliation of profit before tax to income tax expense in the income statement
 Profit before tax                                                                   235,509

 Taxation at statutory rate of 16%                                                    37,681

 Tax effect of non deductible items                                                    9,648
 Non taxable income
                                                                                    (26,669)
 Impact of permanent differences                                                      17,202
 Impact of temporary differences                                                       9,038
 Tax deduction for sponsorship
                                                                                     (7,509)
 Income tax expense                                                                  39,392




                                                                                        39
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

12. Cash and cash equivalents

  In RON                                                       31 December 31 December
                                                                      2008        2007

  Cash on hand and at banks                                         125,867      1,575,475
  Short term deposits                                             1,522,189              -
  Accrued interest                                                    7,655              -
  Cash and cash equivalents, net of restricted cash               1,655,711      1,575,475

  Cash pledged                                                         340               -

  Total cash and cash equivalents                                 1,656,051      1,575,475


13. Loans and advances to customers

                                                               31 December    31 December
     In RON
                                                                      2008           2007

     Agriculture loans                                            6,829,762      5,607,019
     Alimentary industry                                            237,617        231,535
     Small industry and services                                  4,980,412      3,705,241
     Productions loans                                              552,147        270,387
     Personal needs loans                                         3,973,760      1,326,031
     Total loans and advances to customers before provisions     16,573,698     11,140,213

     Less provision for impairment losses on loans                (439,924)       (51,678)
     Less deferred commission income                              (185,302)      (108,302)
     Total loans to customers, net                               15,948,472     10,980,233




                                                                                       40
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements
13. Loans and advances to customers (continued)
The provision for impairment losses can be analyzed as follows:

In RON                                                                     2008                2007

Balance at the beginning of the year                                    51,678              60,966
 individually impaired loans                                           18,388              60,966
 collectively impaired loans                                           33,291                  -

Charge for the year (Note 9)                                           557,358             171,359
 individually impaired loans                                          166,939             138,068
 collectively impaired loans                                          387,193              33,291

Release of the year (Note 9)                                           (165,887)           (180,646)
 individually impaired loans                                                -                    -
 collectively impaired loans                                          (165,887)           (180,646)

Balance at the end of the year                                         439,924              51,678
      individually impaired loans                                     185,327              18,388
 collectively impaired loans                                          254,597              33,291

14. Property and equipment



  In RON                         Land       Fixed assets    Vehicles        Furniture,          Total
                                  and             under                   fixtures and
                             buildings     construction                          other
                                                                           equipments
  Cost
  Balance as at
  1 January 2008                36,390                 -    112,365              18,839      167,594
  Additions                            -               -      65,133               1,980       67,113
  Disposals                            -         -            11,900                   -       11,900
  Balance as at
  31 December 2008              36,390                 -    165,598              20,819      222,807

  Accumulated
  depreciation
  Balance as at
  1 January 2008                 4,899                 -      42,702             12,731       60,332
  Charge for the year            8,398                 -      25,832               2,524       36,754
  Disposals                            -               -      11,900                   -       11,900
  Balance as at
  31 December 2008              13,297                 -      56,634             15,255        85,186

  Carrying amounts
  At 1 January 2008             31,491                 -      69,663               6,108     107,262
  At 31 December 2008           23,093                 -    108,964                5,564     137,621

                                                                                                  41
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements
14. Property and equipment (continued)


   In RON                           Land and      Vehicles         Furniture,         Total
                                    buildings                    fixtures and
                                                                        other
                                                                  equipments
Cost
   Balance as at
   1 January 2007                           -       89,550            13,306        102,856
   Additions                           36,390       22,815             5,533         64,738
   Disposals                                -            -              -                 -
   Balance as at
   31 December 2007                    36,390      112,365            18,839        167,594

   Accumulated depreciation
   Balance as at
   1 January 2007                           -       17,988             7,593         25,581
   Charge for the year                  4,899       24,714             5,138         34,751
   Disposals                                -            -              -                 -
   Balance as at
   31 December 2007                     4,899       42,702            12,731         60,332

   Carrying amounts
   At 1 January 2007                        -       71,562             5,713         77,275
   At 31 December 2007                 31,491       69,663             6,108        107,262

   The Company had no fixed assets pledged or in custody as at 31 December 2008 and 31 December
   2007.




                                                                                       42
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements
15. Intangible assets

 In RON                                     31 December   31 December
                                                   2008          2007


 Cost
 Balance as at 1 January                         18,769          4,572
 Additions                                        1,099         14,197
 Disposals                                            -              -
 Balance as at 31 December                       19,868         18,769

 Accumulated amortization
 Balance as at 1 January                          5,640          4,008
 Amortization                                     5,734          1,632
 Accumulated amortization of disposals                -              -
 Balance as at 31 December                       11,374          5,640

 Carrying amounts
 At 1 January                                    13,129           564

 At 31 December                                   8,494         13,129


16. Other assets

 In RON                                     31 December 31 December
                                                   2008        2007

Prepaid expenses                                 20,618       13,454
Tax receivable                                   11,168            -
Inventory                                           792            -
Other debtors                                    17,328        1,356
Total                                            49,906      14,810




                                                                  43
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

17. Loans and borrowings

                                                                 31 December           31 December
 In RON                                                                 2008                  2007
 Hilfswerk der Evangelischen Kirchen Schweiz (“HEKS”)
 (i)                                                                 4,236,560            3,207,718
 CoopEst (ii)                                                        1,992,600            1,088,361
 UP Berlin                                                             186,086              154,164
 Fundatia LAM (iii)                                                  5,580,644            5,258,400
 Casa de Pensii a Bisericii Reformate (iv)                           2,268,872                    -
 Total                                                              14,264,762            9,708,642

  (i) The Company contracted the following loans from HEKS:


                                                        Credit limit in
                                                              original    Interest       Maturity
 Nume finantator                 Date        CCY            currency         Rate            date
                                                                                      31 December
 Fundatia HEKS          12 March 2002        EUR                404,985    6.20%             2010
                                                                                      30 November
 Fundatia HEKS           19 April 2004       EUR                 62,305    6.20%             2010
                                                                                      30 November
 Fundatia HEKS         3 February 2005       EUR                 50,000          0%          2009
                                                                                      30 November
 Fundatia HEKS          16 March 2005         CHF               250,000          4%          2010
                                                                                      31 December
 Fundatia HEKS           15 April 2006       EUR                311,526    6.50%             2011
                                                                                      31 December
 Fundatia HEKS        25 October 2007         CHF               100,000          8%          2010
                                                                                      31 December
 Fundatia HEKS         15 January 2008       EUR                400,000          8%          2013
                          23 December
 Fundatia HEKS                    2008       EUR                 70,000    7.25%      30 April 2009

      ii) On 19 November 2007 the Company contracted a loan in EUR from CoopEst S.A.. bearing
      an interest rate of 6M EURIBOR+ 4% margin and is due on November 2015. The outstanding
      balance of this loan s at 31 December 2008 amounts to RON 1,992,600.

      (iii) The Company contracted the following loans from Fundatia Lam:
                                                         Credit limit in
                                                               original Interest
                                  Date        CCY             currency     Rate       Maturity date
                                                                                         31 January
Fundatia LAM           31 January 2006      RON               1,690,150          5%            2014
                                                                                       30 November
Fundatia LAM           31 January 2006      RON               1,916,429          4%            2013
                                                                                       30 November
Fundatia LAM            15 March 2007       RON               1,200,000    5.00%               2015
                         30 November                                                   30 November
Fundatia LAM                     2007       RON               1,000,000          8%            2015


                                                                                              44
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements
17. Loans and borrowings (continued)

(iv) On 21 April 2008 the Company contracted a loan from its shareholder Casa de Pensii a Bisericii
Reformate amounting to RON 3,000,000, bearing an interest rate of 12.25% and maturing on 30 June
2016. The outstanding balance of this loan s at 31 December 2008 amounts to RON 2,268,872.

18. Other liabilities
                                                                   31 December       31 December
                                                                          2008              2007
In RON

Payables related to employees                                             13,482             9,002
Other tax payables                                                        26,832            31,089
Suppliers                                                                 61,916            56,121
Sundry creditors                                                          49,153            13,680
Total other liabilities                                                  151,383           109,892

19. Share capital and share premium
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are
entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the
Company’s residual assets.

The share capital as at 31 December 2008 comprises of 26.110 shares (31 December 2007:23.500 shares)
with a nominal value of RON 100 as at 31 December 2008 and 31 December 2007. The structure of the
share capital of the Company is as follows:

                                                       31 December 2008           31 December 2007
Shareholder                          Nationality      % of      Number           % of      Number
                                                     shares    of shares        shares    of shares

Fundatia LAM                         RO             89,9695         23.491     99,9531         23.489
Casa de Pensii a Bisericii Reformate
din Romania                          RO              9,9963          2.610            -                -

Individuals                          RO              0,0038              8      0,0042                10

Own shares                                           0,0038              1      0,0042                 1
                                                      100%          26.110       100%          23.500




                                                                                                45
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

20. Reserves

                                                                         31 December        31 December
                                                                                2008               2007
 In RON

 Legal reserves (i)                                                             48,734             29,437


 Total reserves                                                                 48,734             29,437

(i) Legal reserves represent accumulated transfers from retained earnings in accordance with local
    regulations that require 5% of the Company’s profit to be transferred to a non-distributable statutory
    reserve until such time this reserve represents 20% of the Company’s share capital. The legal
    reserves are not distributable to the shareholders.


21. Related party transactions

Balances with related parties
                                                                        31 December       31 December
                                                                               2008              2007
In RON

Interest bearing loan and borrowings
Fundatia LAM                                                                5,580,644         5,258,403
Casa de Pensii a Bisericii Reformate : Credit                               2,268,872                 -
Total interest bearing loans and borrowings                                 7,849,516         5,258,403


Transactions with the related parties
The Company entered into a number of transactions with the related parties in the normal course of
business. During the year ended 31 December 2008 and the year ended 31 December 2007 the
following transactions were carried out:

                                                                                2008             2007
In RON

Interest expense
Fundatia LAM Ilieni – Credit                                                 312,406          182,029
Casa de Pensii a Bisericii Reformate –credit                                 161,395
Total interest expense                                                       473,801          182,029

Services expense
Fundatia LAM Ilieni – rent expense                                            16,563           15,032
Casa de Pensii a Bisericii Reformate –rent expense                            18,867            2,678
Fundatia LAM- other                                                           10,588                -
Total services expense                                                        46,018           17,710
TOTAL                                                                        509,231          199,739

                                                                                                   46
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

21.    Related party transactions (continued)

Transactions with the management of the Company

Expenses with salaries of key management of the Company during 2008 were 75,700 RON (2007:
54,947 RON).


22.    Commitments and contingencies

a)    Litigations

As at 31 December 2008, the Company was involved as plaintiff in a number of 18 litigations,
amounting to RON 185,327 which were fully provisioned for as loan loss provision.
The management of the Company, following the information received from its legal advisers, estimates
that there are no possible losses to be associated with any of the litigations in which the Company is
involved.

b)    Commitments received and commitments given

The Company had no commitments received or given as at 31 December 2008 and 31 December 2007.

c)    Commitments for loans to customers

As at 31 December 2008, the Company had committed 122,744 RON (31 December 2007: 0 RON) to
extend credit. The commitments to extend credit represent the value of loan contracts signed but for
which disbursements have not been made yet.




                                                                                                 47
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

23. Explanation of transition to IFRS
As stated in note 2(a), these are the Company’s preliminary financial statements prepared in
accordance with IFRS.
The accounting policies set out in note 2 have been applied in preparing the preliminary financial
statements for the year ended 31 December 2008 and the preliminary balance sheet as at 31 December
2007.
In preparing its preliminary financial statements, the Company has adjusted amounts reported in
financial statements prepared in accordance with its previous basis of accounting (statutory GAAP). An
explanation of how the transition from statutory GAAP to IFRS affected the Company’s financial
position, is set out in the following tables and the notes that accompany the tables.
                               Note   Statutory        Effect of            IFRS     Statutory        Effect of              IFRS
                                         GAAP      transition to                        GAAP      transition to
                                                         IFRSs                                          IFRSs
 In RON
                                               31 December 2008                              31 December 2007

Assets
                                                                    -                                            -
Cash and cash equivalents              1,656,051                         1,656,051    1,575,475                           1,575,475

Loans and advances to           a,b
customers                             16,075,922      (127,450)         15,948,472   11,121,826      (141,593)        10,980,233
Property and equipment                  137,621                 -         137,621      107,262                   -         107,262

Intangible assets                         8,494                 -            8,494      13,129                   -          13,129
                                                                                                             -
Other assets                             49,906                 -          49,906       14,810                              14,810
                                                                -
Total Assets                          17,927,994      (127,450)         17,800,544   12,832,502      (141,593)        12,690,909
                                                                -
Loans from banks and other
financial institutions         c      14,403,125      (138,363)         14,264,762    9,917,637      (208,995)            9,708,642
                               d                                                                        10,784
Deferred tax liability                         -          1,746              1,746            -                             10,784
Other liabilities                       151,383                 -         151,383      109,893                   -         109,893


Total liabilities                     14,554,508      (136,617)         14,417,891   10,027,530     (198,211)             9,829,319


Equity                                                          -

Share capital                          2,674,845           -             2,674,845    2,349,900                  -        2,349,900
Reserves                                 48,734            -               48,734       29,437                   -          29,437
Retained earnings               e       649,907         9,167             659,074      425,635          56,618             482,253
                                                           -
Total equity                           3,373,486        9,167            3,382,653    2,804,972         56,618            2,861,590
                                                           -


Total liabilities and equity          17,927,994      (127,450)         17,800,544   12,832,502     (141,593)         12,701,694




                                                                                                                     48
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

23. Explanation of transition to IFRS (continued)
      a)   For the financial years ended on 31 December 2008 the Company performed an analysis
           regarding the impairment of loans and advances to customers based on peer analysis and
           historical data. The impairment provision differs from the statutory impairment provision
           as at 31 December 2008 by 137,221 and as at 31 December 2007 by RON 33,291.
      b)   In accordance with IAS 39 “Financial instruments: recognition and measurement” the
           Company deferred the commission on loans granted that are an integral part of the effective
           interest rate over the life of the loan. This resulted in a difference from the statutory
           accounts with the amount of RON (9,771) as at 31 December 2008 and with RON 108,302.
      c)   During 2008 and 2007 the Company booked a deferred tax liability in amount of RON
           1,746 and 10,784 related to the following:
                       i. RON 22,138 (31 December 2007: RON 33,439) (liability) related to the fair
                          value difference on interest free or low interest loans;
                      ii. RON 1,563 (31 December 2007: RON 17,327) (asset) related to up front
                          commission deferred.
                     iii. RON 21,995 (31 December 2007: RON 5,328) (asset) related to impairment
                          of loans.
      d)   In accordance with IAS 39 “Financial instruments: recognition and measurement” if the
           Company receives a low-interest loan, the initial carrying amount is not necessary the
           amount borrowed, but rather it is the fair value of the consideration received. A low-interest
           or interest-free loan discounted at a market rate of interest results in a present value that is
           less than the amount received. The difference should be recognized as income. The total
           amount adjusted in 2007 was of RON 208,996. The impact of this adjustment in 2008 is of
           was of RON 70,633 which resulted in a remaining balance of RON 138,363.
e)   The effect of the above mentioned adjustments on retained earnings is as follows:
                                                                         31 December          31 December
                                                                                2008                 2007
 In RON                                                         Note

 Income from initial recognition low-interest loan                  d       (138,363)            (208,996)
 Up-front commission deferred                                       b          (9,771)             108,303
 Deferred tax expense                                               c            1,746              10,784
 Provision for loans and advances to customers                      a         137,222               33,291

                                                                                 9,167              56,618




                                                                                                      49
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

Notes to the preliminary financial statements (continued)
23. Explanation of transition to IFRS (continued)
Reconciliation of profit for 2008
                                                             Previous      Effect of transition   IFRS
                                                   Note       GAAP              to IFRS


 Interest income                                    f          2,547,232                24,134      2,571,364
 Interest expense                                   g          (797,451)              (70,633)      (868,085)


 Net interest income                                           1,749,780              (46,500)      1,703,280




 Net fees and commissions income                                (14,328)                      -      (14,328)
 Other operating income                                          33,182                       -          33,182
                                                                 18,856
 Other operating income                                                                       -          18,855


 Net impairment loss on financial asset             h          (287,541)             (103,930)      (391,471)
 Personnel expenses                                            (396,898)                      -     (396,898)
 Other operating expenses                                      (527,354)                      -     (527,354)
 Net foreign exchange gain/loss                                (170,902)                      -     (170,902)
                                                             (1,382,695)             (103,930)     (1,486,625)
                                                                                              -
 Profit before income tax                                       385,940              (150,430)        235,509
                                                                  -                           -
 Tax expense                                         i          (48,430)                 9,038       (39,392)
                                                                  -                           -
 Net Profit for the period                                      337,510              (141,392)        196,118
  f) The difference represents the following:
       The difference between last year up-front commission deferred and current year deferred
  commission in amount of RON 50,803.
       An adjustment to reverse a statutory entry related to the linear amortization of up up-front
  commission in amount of RON (26,670).
  g) The difference represents the interest expenses for current year related to low interest loan
  recognized on initial recognition at fair value and subsequently measured at amortized cost. The total
  amount adjusted in 2008 is RON 70,633.

  h) For the financial year ended on 31 December 2008 the Company performed an analysis regarding
  the impairment of loans and advances to customers based on peer analysis and historical data. The
  impairment provision expenses differ from the statutory accounts as at 31 December 2008 by RON
  103,931.

  i) The difference represents the movement in deferred tax between current year and previous year
  balance.

                                                                                                    50
SOCIETATEA DE FINANTARE RURALA LAM IFN SA


Notes to the financial statements

Notes to the preliminary financial statements (continued)
16. Explanation of transition to IFRS (continued)
     Explanation of material adjustments to the cash flow statement for 2008
     There are no other significant differences between the cash flow statement presented under
     IFRSs and the cash flow statement presented under previous GAAP.




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