Within the frame of reorganizing and improving the operational effectiveness of Hatzioannou Group activities, Hatzioannou Holdings S.A. will absorb the subsidiary companies VERTICAL S.A and INFOTRUST S.A.

More specifically, pursuant to the decisions of the Boards of Directors of the companies Hatzioannou Holdings S.A, VERTICAL S.A. and INFOTRUST S.A. as of 30/09/2006, the first one will proceed with the absorption of the two subsidiary companies with date of conversion balance sheet 30/09/2006 according to law 2190/1920 and 2166/1993. These actions are under the approval of the Ministry of Development.

The company VERTICAL S.A is 100% subsidiary of Hatzioannou Holdings S.A., is active in the production of clothes and is consolidated with the full consolidation method. Its FY 2005 sales stood at Euro 52.8 million while 6M 2006 sales at Euro 19.2 million. Respectively, results after taxes and minorities for FY 2005 stood at losses of Euro 19.7 million and for 6M 2006 they stood at losses of Euro 1.8 million. Finally, the Owner's Equity on 31/12/2005 amounted to Euro 13 million and on 30/06/2006 Euro 11.3 million.

With regard to the activities of VERTICAL S.A., which now fall under the operations of the parent company Hatzioannou Holdings S.A., a carefully designed production reorganization plan is already being implemented, while at the same time significant investments are made for the enhancement of the brand names Venus Victoria and Belinda. As a result, its financial results are expected to be negative in the financial years 2006-2007 but a gradual recovery is expected as of 2008.

The abovementioned fact is expected to affect accordingly the financial figures of Hatzioannou Holdings S.A. after the completion of VERTICAL S.A.'s absorption.

The company INFOTRUST S.A is 100% subsidiary of Hatzioannou Holdings S.A. and is consolidated by the full consolidation method. In 2005 it didn't mark any sales, while in 6M 2006 its turnover came up to Euro 48 thousand. Accordingly, results after taxes for 2005 amounted to losses of Euro 30 thousands and for 6M 2006 they stood at losses of Euro 24 thousand. Finally, Owner's equity as of 31/12/2005 stood at Euro 842 thousand and on 30/06/2006 it stood at Euro 818 thousands.

The absorption of the two companies will make a new business entity whose core activity will be the production of clothes and which at the same time will keep its shares of participation to the rest of the subsidiary companies. The advantages arising from the new structure are mainly related to the development of the economies of scale, the cost reduction and the optimization of the group's operational activities.