Annual Report 2008 Factoring KB, a.s.

Transcription

1 Annual Report 2008 Factoring KB, a.s.

2 Factoring

3 for companies Selected trading data Unit 2008 Company turnover CZK million 17,259 Year-on-year drop in turnover % (4.88) Company profit (after tax) CZK thousand 51,869 Year-on-year growth in profit % Market share % 12,90

4 Content 2 Content

5 4 Company Profile 5 Selected Economic Indicators 6 Introduction by Chairman of Board of Directors 8 Report of Board of Directors 10 Strategic Aims of the Company for Most Significant Events of Development of Market and Company Status on Market 13 Business Activities 14 Marketing Activities 14 Product Base 15 Information Technology 16 Human Resources 16 Commentary on Financial Situation and Trading Results 18 Supreme Bodies 18 Company Management Board of Directors 18 Changes in Composition of Board of Directors 18 Supervisory Board 19 Organisational Structure 20 Ownership Structure of Company 21 Supervisory Board s Report 22 Auditor s Report 24 Sworn Declaration 25 Financial Section 26 Balance Sheet as of 31 December Profit and Loss Account for the Year Ended 31 December Cash Flow Statement for the Year Ended 31 December Statement of Changes in Equity for the Year ended 31 December Notes to the Financial Statements for the Year Ended 31 December Report on Relations between Connected Persons for the Accounting Period of 2008 Content 3

6 Company Profile Basic information Business name Factoring KB, a.s. Legal form joint-stock company Business ID No Registered office Lucemburská 1170/7, Prague 3 Vinohrady, Date of inception 4 August 1997 Registered capital CZK 1,184,000,000 Membership in associations Factors Chain International since 30 June 2000 Association of Factoring Companies of the Czech Republic since November 2000 Czech Leasing and Finance Association since June 2005 The company Factoring KB, a.s., was founded as the 100% subsidiary of the company Komerční banka, a.s. Since its foundation it has been a member of the financial group of the parent bank, and since 2002 it has also been an active member of the financial group Société Générale Banque (referred to hereinafter as Société Générale). Membership in both financial groups has significantly influenced the overall development of the company and also brings new impulses for the development of cooperation with other members of this group at home and abroad. The company was founded in order to provide a range of factoring services, including the purchase, administration, collection and financing of receivables, including the assumption of risk in the scope of insolvency or unwillingness of a domestic or foreign debtor. It offers its services principally to domestic entrepreneurial subjects, and in the context of FCI (Factors Chain International) it provides selected services to other members of this international group. Since 2006 the company has also offered a new product including the financing of supplier invoices. For 2008 the following strategic aims were selected: full utilisation of synergies in the context of the financial group Komerční banka and the financial group Société Générale, increase in standard of provided services and increase in overall flexibility, expansion of cooperation with existing clients. The general aims of the company followed on from the company strategy, in particular from: development of profitability as the basis of trading, reinforcing the status of the company on the factoring market, improving the quality of the level of provided services to clients of the company. Several facts were reflected in the actual performance of the basic aims for the development of the company in The most significant was the change of economic environment associated with the start of the financial-economic crisis. Another factor also reflected in the results was the change in behaviour of insurers towards the factoring market. Despite this it is possible to assert that in particular in the financial area the company continued in the growth trend. The actual factoring turnover was then influenced by the change of economic situation in the context of the global economy. From the aspect of business activity it was possible to gain the planned number of new clients, but they did not compensate for the lost clients in terms of turnover. It is possible to give a positive evaluation to the growth in turnover, in particular for clients where the business approach of the company was based on the system of segmentation implemented in So in the final phase the individual approach to the clientele has brought about positive effects and constitutes the basis for the focus of the company s business policy in the years to come. 4 Company Profile

7 Selected Economic Indicators Unit Total assets CZK million 5, , , Registered capital CZK million , , Equity CZK million , , Profit/loss CZK million Profit after tax CZK million Market share % Total turnover CZK million 17, , , Turnover of domestic factoring CZK million 14, , , Turnover of international factoring CZK million 2, , , Level of adjusting items CZK million Total revenues CZK million Total costs CZK million Average number of employees persons Factoring turnover (in CZK million) 20,000 15,000 10,000 5, ,666 13,738 17,075 18,144 17, In 2008 we managed to fulfil the other indicators without exception, and we primarily achieved the highest net profit during the existence of Factoring KB, at a level of CZK 51.9 million. Selected Economic Indicators 5

8 Introduction by Chairman of Board of Directors Ladies and gentlemen, respected business friends, It is my honour to be able to present to you the annual report of the company Factoring KB, a.s., for the year By way of introduction I have to state that 2008 has been one of the most complicated years in the existence of our company so far. In this year did not manage to fulfil the turnover plan, where we achieved values of CZK million. On the other hand we manage to fulfil the other indicators without exception, and we primarily achieved the highest net profit during the existence of Factoring KB, at a level of CZK 51.9 million. The main factors influencing us over the past period have undoubtedly and mainly included the nascent financial-economic crisis, which slowed down the growth of our turnover, especially in the second half of the year. There is a close link between this trend and the behaviour of the insurance companies with whom we have cooperated in this period and who have significantly tightened up the criteria for the provision of premiums and have even changed the approach to the entire factoring segment. The success of fulfilling the other indicators was the result of strict adherence to the criteria for the evaluation of risk, systematic work with the segmentation of our clients and use of software tools implemented in the preceding years. In this period it has been seen to be highly appropriate that we should apply a conservative approach in the area of risk management and that we had created a successful mechanism for issuing reminders for and recovering receivables, by which we achieved the more positive generation of adjusting items. In 2009 we can expect a significant worsening of the economic situation both in the Czech Republic and in the other states of Europe and the world in general. We therefore assume a further drop in turnover and a concurrent increase in the danger of business risks. From this it is evident that one of our tasks in this period will continue to be the search for new business opportunities and very strict adherence to the principles for the evaluation of risk, primarily in cooperation with the parent company Komerční banka and the financial group Société Générale. In this area we have to cooperate more with the relevant units of the bank and utilise all the available signals indicating a possible increase in risk. Naturally other areas are the more intense cooperation with existing clients in such a way that we react in good time to their situations and needs. We will also focus our activities on the segment of small and medium-sized businesses. In 2009 we also intend to offer our clients services of other insurance companies which are establishing themselves on the Czech market and with which we have not yet cooperated. 6 Introduction by Chairman of Board of Directors

9 In conclusion I would like to thank all my colleagues for their cooperation in 2008 and wish them much satisfaction and success in the period to come. But I would primarily like to thank our clients for the cooperation and confidence that they have in the company Factoring KB, a.s. With regards Milan Corjak, MSc. Chairman of Board of Directors and Chief Executive Officer In the context of the economic environment, in 2008 Factoring KB, a.s. focussed more on improving the treatment of the profile of the portfolio, and we adopted stricter rules for the evaluation of business cases. Introduction by Chairman of Board of Directors 7

10 Report of Board of Directors In 2008 we noted two tendencies in the development of the Czech economy which were subsequently reflected in the development of the factoring market in the context of the Czech Republic. Both are an expression of the full engagement of the Czech economy, in particular industry, in the European and global economic structure. They are also a reflection of the foreign capital increasing till that time which was being invested in the Czech Republic and the increasing dependence of the economy on export per se. The still dynamic growth of the economy is characteristic of the first half of 2008, but in the second half of the year we have to mention the incipient significant drop in production and services in connection with our linkage with the European economic space. The ongoing economic crisis is very closely linked with, and is indeed a reflection of, the crisis of the financial sector itself starting in 2007 in the USA, which was very quickly reflected in European financial institutions in the context of the globalisation of financial markets. And so the economy, in particular in the second half of 2008, began to face a shortage of support from the part of financial capital, with a loss of liquidity on the interbank markets and limited financing from the part of banks themselves. In terms of turnover, the factoring market in the Czech Republic grew by a total of 5% in 2008, but the actual 2nd half was marked by a drop in comparison with the comparable period of In the context of the aforementioned economic environment, in 2008 Factoring KB, a.s. focussed more on improving the treatment of the profile of the portfolio, and we adopted stricter rules for the evaluation of business cases. Although on the one hand this strategy has meant a reduction in the year-on-year turnover of 5%, on the other hand it has brought the greatest profit in the history of the company. The company had to generate extraordinary adjusting items and reserves in connection with the worsening economic basis of entrepreneurial subjects. From the aspect of the gaining of resources, our economic position has been strengthened greatly by our membership in the Komerční banka group, and in particular by the strong capital position of our parent company Komerční banka, a.s. We see the entrepreneurial environment of 2009 as being significantly more complex than the preceding period. The financial-economic crisis is significantly influencing the performance of the Czech economy. It is possible to anticipate that the branches of industry, construction and transport will be the most heavily impacted. The drop in production must be perceived as a reality of the year 2009, and the company strategy must adapt to it. We will continue to build upon the previous cooperation with Komerční banka, a.s., which represents the decisive business opportunity for us. But we also anticipate more active cooperation with the other companies in the context of the financial group KB and SG. In the case of the active full involvement of our clients in the European exchange of goods and services we also anticipate an expansion of cooperation with other factoring companies of the financial group Société Générale and our active participation in the international grouping of factoring companies FCI. Only these activities can help keep us competitive on the domestic factoring market.. 8 Report of Board of Directors

11 The strong background in the context of the group Komerční banka also ensures synergies in the area of acquisition and marketing policy, the use of the latest IT solutions, support in tax consultation. Factoring KB, a.s., will as in previous years rely on the use of the synergetic potential of the group Komerční banka and also more on the actual financial group Société Générale. Teamwork Report of Board of Directors 9

12 Strategic Aims of the Company for 2009 Our activities in 2009 must focus on the meeting of the following strategic aims: full utilisation of synergetic opportunities in the context of the financial group Komerční banka and the financial group Société Générale; higher activation of the scope of cooperation with existing clients; active offer of factoring services for the segment of small and medium-sized businesses; emphasis on risk management when evaluating business opportunities. The company can and will as in previous years rely on the use of the synergetic potential of the group Komerční banka and also more on the actual financial group Société Générale. In relation to the client we are thus able to offer comprehensive financial products which will be relevant to all their needs. Close cooperation with other factoring companies in the context of financial group Société Générale allows us to manage our product base at the level of the European standard whilst ensuring the anticipated quality of our services. The strong background in the context of the group Komerční banka also ensures synergies in the area of acquisition and marketing policy, the use of the latest IT solutions, support in tax consultation. But in the current period our strong financial position and access to sources for financing from the part of the parent company are fundamental. We see opportunities for turnover growth in an expansion of business cooperation with existing clients who know and use factoring in addition to finance also because of its additional services, i.e., insurance, collection and receivables management. The current period, which is marked by lower loan openness of banks or a general extension of the period for the payment of receivables, offers a new opportunity for the development of factoring use. In addition to the development of business activities amongst the segments corporate and top corporate we have also prepared the implementation of factoring in cooperation with Komerční banka for the small business segment. This is a new business opportunity which is part of the standard business offer of our associate company in France. The priority area for the meeting of planned targets in the financial area of our trading will be the ability in 2009 to govern the level of risk in relation to the provided financing. We have prepared many tools for controlling the development of risk, and in the past year we have tightened up our policy for releasing resources. At the same time we will also continue in the strategy of greater participation of insurance products with our factoring financing. Factoring KB, a.s., started the year 2008 with a reinforced capital base the highest registered capital in 2007 attained a level of CZK million. 10 Report of Board of Directors

13 Most Significant Events of 2008 The company started the year 2008 with a reinforced capital base the highest registered capital in 2007 attained a level of CZK million. We were capable of offering an equal range of factoring services, with the focus on insured products, and we worked with a stable group of employees and historically strong client portfolio. These facts were seen to be very important for our ability to react to the very rapidly changing conditions of the economic environment in the Czech Republic. In the course of the first half of the year we started to experience the first signals of the financial-economic crisis. Our reaction was a new view of the evaluation of risk and gradual implementation of new elements for its elimination. These activities accompanied us throughout the rest of the year. Our business model is historically based on greater participation with insurance companies. In 2008 we worked with Komerční úvěrová pojišťovna EGAP, and we increased insurance turnover with another partner the insurer Euler Hermes Čescob. But in the second half of 2008 the insurers significantly tightened up access to the area of insuring risk arising from the insolvency of debtors. This new policy of the insurers constituted a heavy impact for our company, in particular on the level of implemented factoring turnover. For Komerční úvěrová pojišťovna EGAP it is necessary to mention the situation where there was an increase in the number of rejected applications for insurance cover, and the existing limits were often reduced or even cancelled. But we had to deal with a more serious situation in relation to the other insurer Euler Hermes Čescob. In the course of October 2008 this insurer cancelled insurance limits en masse, and on 1st January 2009 it terminated cooperation with our company completely. In addition to a negative impact on the overall turnover, this fact also meant that the employees of the company had to make great efforts to gain insurance limits for our clients with Komerční úvěrová pojišťovna EGAP or the possibility of the offer of a regressive form of financing. At the end of the year we also implemented the project of the electronic sending of invoices in relation to the services of our company on the platform efactoring, and in this way we ensured a fundamental rationalisation of cooperation with our company for clients. In the course of the year there was also a change in the composition of the company board of directors aimed at reinforcing the business links with the client base of the parent company. We also successfully handled the role of host of the 5th international factoring conference of factoring companies from the global finance group Société Générale, and in October we welcomed 12 associate companies to Prague. During the three-day meeting we discussed the themes of a unified IT system in the context of the group, product offer of the individual companies and, in particular, the realistically performed innovation of factoring products. Development of Market and Company Status on Market In 2008 the factoring market in the Czech Republic was influenced primarily by members of the Association of Czech Factoring Companies. The dynamic market growth was still very high, particularly in the first half of the year, and attained a 14% increase compared with the comparable period of The drop in factoring turnover in the second half of the year then corrected this growth to 5% for the entire year of One new moment in the growth of factoring turnover in 2008 was the fact that some factoring companies operating on our market had started to replace their product systematically with loans with clients of their parent companies. Despite the more careful financing policy, Factoring KB, a.s. held on to 4th position in the context of the association from the aspect of market share, which in 2008 reached 12.9%. At the end of the year there appeared the first signals about the prepared reduction in the number of companies providing factoring services within the Czech Republic. Report of Board of Directors 11

14 Despite the more careful financing policy, Factoring KB, a.s., held on to 4 th position in the context of the association from the aspect of market share, which in 2008 reached 12.9%. In 2008, 88.3% of company turnover consisted of domestic factoring, and international factoring represented 11,7%. Responsibility 12 Report of Board of Directors

15 Business Activities In 2008 the company attained a turnover of CZK 17,259 million, which represents a year-on-year drop of 5%. Despite the market environment, which we have already mentioned, this is the second highest attained turnover in the history of the company. Both the main groups of factoring played a role in the reduction of turnover compared with The turnover of domestic factoring dropped by 5.1% year-on-year, and the turnover of international factoring dropped by 3.4%. The company was not able to implement the required growth in particular for import factoring. In 2008, 88.3% of company turnover consisted of domestic factoring, and international factoring represented 11.7%. The positive development (growth by 29%) for the financing of undertakings, a product implemented in the product offer for the first time in 2006, could not make up for the fall in core products. We have to include the following amongst the factors which to a decisive extent influenced the drop in turnover: drop in the number of newly concluded contracts by 10% compared with This fact was influenced in particular by the aggressive loan offer of banks on the Czech market in the first half of the year in an attempt to gain a greater market share, but in the second period there were already the first signals of the worsening economic position of the clients themselves. We preserved business activities measured in terms of the number of meetings and indicative offers at the level of the preceding year; the commencing downturn of certain branches in the course of the year (construction, industry, deliveries for the automobile industry, logistics etc.) which represent a significant share of turnover in the company portfolio; increased restriction in the approach of insurers to this segment of insuring supplier-client relations associated with greater caution when releasing financial resources directly by the company itself. In 2008 the company continued in the strategy of focussing on the insured form of factoring finance with the aim of minimising the business-finance risks. The share of insured form of financing grew from 41% in 2007 to the 47% attained in In compliance with the strategy of securing risk, in several cases the company utilised the form of reverse factoring, which makes it possible to finance even economically weaker entrepreneurial subjects in existing supplier-client relations with a strong concentrated client represented another positive shift in the financial performance of the company. There was success in maintaining the trend of faster growth of yields compared with costs, and the company generated the greatest profit in its history at a level of CZK million. The 88.4% growth in profit compared with 2007 was made possible in particular by: participation in the revenues from investments in the closed investment fund Protos; the greater balance between revenue and costs interest; savings in the field of administrative costs; the ability to manage costs on risk from the part of the company. Overall it is possible to state that the drop in turnover in the given economic environment of last year was compensated for greatly by the dynamic of the actual financial area. Report of Board of Directors 13

16 Marketing Activities During the past year marketing activities focussed on two areas. In view of the fact that the factoring product is sold almost exclusively through an individual presentation, as part of our cooperation with the parent company, we focussed in particular on the training of their banking advisors. The target last year was the training of banking advisors specialised for the segment of small businesses and entrepreneurs, because this is an area of our activity for the year In addition to this activity, we participated in many events of Komerční banka, a.s. itself where we presented our product to its clients. It is possible to characterise positively cooperation upon the occasion of the international mechanical engineering fair in Brno in particular. We then significantly increased activities, in particular presentation in the press and professional periodicals. In 2008 we selected the form of interview with the representative of the company where we presented our offer. We consider the performed comparison of the web pages of our competition, on the basis of which we innovated our pages, to be important. At the same time a survey showed that our product offer is very comprehensive in comparison with the competition, and we build the further development of our business activities on it. Product Base In the year 2008 the offer of products corresponded with the requirements of the market and with the offer of competing factoring companies. This was confirmed by a special internal survey. From the products themselves there was the greatest development and demand for a product of approach to trade liabilities financing of liabilities. We can characterise this product as an acquisition tool. The product offer of our company in 2008 was thus represented by the following products: Domestic regressive factoring, Domestic factoring with insurance, Export factoring by system of two factors, Export factoring with insurance, Export regressive factoring, Import factoring Reverse factoring, Accession to liabilities. At the end of the year we augmented the actual offer of products with the expansion of efactoring, our communication platform with the clientele. A newly implemented module was the sending of einvoices relating to our services, which brings clients more comfort and a saving in administrative activities. 14 Report of Board of Directors

17 Information Technology In 2008 the replacement of workstations and laptops in the context of planned regular replacement of IT equipment was completed, including creation of two monitoring reference stations allowing greater effectiveness of work in the area of receivable processing. In the context of ensuring the greater accessibility of factoring systems, increased backup UPS-cluster capacity was planned in the form of added battery cabinets. In this configuration power cuts of up to 45 minutes will be eliminated. At the same time, in view of the greater accessibility of the electronic communication channel efactoring, the capacity of data lines was increased, there was a change of internet service provider, and the connection architecture was changed. In this configuration the full hardware redundancy of all active elements was ensured, including the ensuring of backup connectivity. A scanning site was also set up for the planned conversion of crucial contractual documentation into electronic form and ongoing saving in the electronic system CRM. On the basis of a requirement for ensuring a higher degree of security during communication between Factoring KB, a.s., and the parent company Komerční banka, a.s., the IT components necessary for a communication system in the context of the project DSDCII were acquired. In the area of Business Continuity Planning there was a regular annual test of activation of the alternative workplace allowing emergency activity of the crisis team in the case of the long-term inaccessibility of the company headquarters and its IT resources. Preparations were also made for an expansion of the BCP in the area of ensuring crucial contractual documents which after conversion to electronic form should be saved in adequately secured premises outside the company headquarters. The main production system Factor, ensuring back-office processing of client receivables was augmented, in addition to minor operational adjustments, with an extensive control array and support for comprehensive reminders. There was also preparation for the transfer from SKK to EUR. The main electronic communication channel efactoring was upgraded to versions 2.1 and 2.2, containing in particular requirements ensuring full electronic support for the distribution of issued invoices in electronic form. In this area there was also an optimisation of the performance of running of the most commonly used customer configurations. Steps were also taken in support of easier administration and increase in the quality of work with the internet communication portal. The CRM system was used as planned for the saving of the electronic form of contractual documentation which is created in the context of the expansion of BCP. For this reason there was also a planned full separation of the database of the system CRM from the database of the main production system Faktor. During the year the system was regularly developed and augmented with functionalities supporting other departments of the company. Report of Board of Directors 15

18 Human Resources In 2008 the company supervisory board operated in the same composition as the previous year. The company management was strengthened with a manager with many years of experience in the environment of Komerční banka, a.s. The company bases its activities on a stable group of employees. There was the same average number as in 2007, i.e., 41. A total of 4 new employees joined. We try to create the ideal conditions for the activities of all employees, and we continue to provide interesting employee benefits. Increased attention is given to evaluation and professional education. The management and the individual unions can be considered a stabilising element of the firm, and it is possible to anticipate the further successful development of the entire company. Commentary on Financial Situation and Trading Results From the aspect of the financial situation and trading results, 2008 can be considered a successful year for the company. We managed to achieve nearly all the aims which the company set for itself in the financial plan for Despite the fact that the business plan was not complied with from the aspect of turnover, the trading result was achieved through a saving on costs. The net profit in the amount of CZK 29,488 thousand (without the influence of the paid out dividends from the fund PROTOS) is the highest attained trading result in the entire history of Factoring. The overall net profit then achieved a record level of CZK 51,869 thousand. The revenues of the company are primarily the result of the provision of factoring services; in the same way as in previous years, the fundamental part of the revenues was generated by domestic factoring. International factoring s share of the turnover reached a level of 11.70% of overall company turnover in Overall revenues reached the level of CZK 498,871 thousand, and total costs were CZK 438,811 thousand. In 2008 adjusting items for post-due receivables were created with a balance-sheet value of CZK 89,223 thousand. 16 Report of Board of Directors

19 The company achieved nearly all the aims which the company set for itself in the financial plan for Overall revenues Factoring KB, a.s., reached the level of CZK 498,871 thousand, and total costs were CZK 438,811 thousand. Professionalism Report of Board of Directors 17

20 Supreme Bodies Company Management Board of Directors Milan Corjak, MSc. Chairman of Board of Directors and company CEO Václav Tomandl, MSc. Deputy chairman of the Board of Directors and first deputy to the company CEO since 1 September 2008 Marcela Chalušová, MSc. Member of the Board of Directors and deputy to company CEO Changes in Composition of Board of Directors Tomáš Kunst, MSc. Deputy chairman of the Board of Directors and first deputy to the company CEO up to 30 June 2008 Supervisory Board Jana Švábenská, MSc. Chairwoman of the Supervisory Board since 31 May 2005 Jana Hanibalová, MSc. Member of Supervisory Board since 1 October 2007 Petr Kulhánek, MSc. Member of Supervisory Board since 10 September Supreme Bodies

21 Organisational Structure Director Human Resources Secretary Information Technology Department First Deputy Director Deputy Director Financial Director Client Risk Business Risk Sales and Marketing Domestic International Financial Department Client Client Department Service Service Department Department Organisational Structure 19

22 Ownership Structure of Company Shareholder Percentage share of registered capital Komerční banka, a.s One general meeting was held in 2008, on 15 April During the general meeting the final accounts for 2007 were approved, as was the report of the board of directors about trading activity and about the state of the company assets for A decision was taken on the allocation of the company profit, and the report of the supervisory board of the company and the report on relations between connected persons were taken due note of. 20 Ownership structure of company

23 Supervisory Board s Report The Supervisory Board of Factoring KB, a.s. carried out on ongoing basis tasks assigned to it by the Commercial Code and the Company s Article of Association. The Supervisory Board performed regular supervision of the Company s activities, approved strategic plans of the Company and presented its proposals and suggestions to the Board of Directors in order to improve the Company s operations. Having examined the Company s annual financial statements for the period from 1 January to 31 December 2008, considering the external auditor s report on the annual financial statements, the Supervisory Board states that the accounting records and evidence were maintained in a conclusive manner and in accordance with the generally applicable rules regulating accounting of non-financial institutions. The accounting records express truly in all material respects the Company s financial situation as at 31 December The Supervisory Board futher reviewed the Report on Related Parties for the period from 1 January to 31 December 2008 prepared by the Company as the controlled entity under Section 66a, Subsection 9 of the Commercial Code. The Supervisory Board states that on the basis of its review it has not found any materially incorrect information disclosed in that Report and that the Board of Directors of the Company has not identified, based on its evaluation of the relationships, any damages caused to the Company in its relations with controlling entity. The Supervisory Board recommends to the General Meeting to approve the Company s annual financial statements for Prague, 7 April 2009 Jana Švábenská Chairman of the Supervisory Board Supervisory Board s Report 21

24 Auditor s Report Tel.: Fax: DeloitteCZ@deloitteCE.com Deloitte Audit s.r.o. Karolinská 654/ Prague 8 Czech Republic Registered at the Municipal Court in Prague, Section C, File Id Nr.: Tax Id Nr.: CZ To the Shareholders of Factoring KB, a.s. Having its registered office at: Lucemburská 1170/7, Praha 3 Identification number: Principal activities: Provision of factoring and forfaiting services Report on the Financial Statements Based upon our audit, we issued the following audit report dated on 13 February 2009 on the financial statements which are included in this annual report on pages 26 to 45: We have audited the accompanying financial statements of Factoring KB, a.s., which comprise the balance sheet as of 31 December 2008, and the profit and loss account, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Statutory Body s Responsibility for the Financial Statements The Statutory Body is responsible for the preparation and fair presentation of these financial statements in accordance with accounting regulations applicable in the Czech Republic. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Act on Auditors and International Standards on Auditing and the related application guidelines issued by the Chamber of Auditors of the Czech Republic. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of Factoring KB, a.s. as of 31 December 2008, and of its financial performance and its cash flows for the year then ended in accordance with accounting regulations applicable in the Czech Republic. 22 Auditor s Report

25 Report on the Related Party Transactions Report We have also reviewed the factual accuracy of the information included in the related party transactions report of Factoring KB, a.s. for the year ended 31 December 2008 which is included in this annual report on pages 46 to 48. This related party transactions report is the responsibility of the Company s Statutory Body. Our responsibility is to express our view on the related party transactions report based on our review. We conducted our review in accordance with International Standard on Review Engagements (ISRE) 2400 and the related application guidelines issued by the Chamber of Auditors of the Czech Republic. Those standards require that we plan and perform the review to obtain moderate assurance as to whether the related party transactions report is free of material factual misstatements. A review is limited primarily to inquiries of Company personnel and analytical procedures and examination, on a test basis, of the factual accuracy of information, and thus provides less assurance than an audit. We have not performed an audit of the related party transactions report and, accordingly, we do not express an audit opinion. Nothing has come to our attention based on our review that indicates that the information contained in the related party transactions report of Factoring KB, a.s. for the year ended 31 December 2008 contains material factual misstatements. Report on the Annual Report We have also audited the annual report for consistency with the financial statements referred to above. This annual report is the responsibility of the Company s Statutory Body. Our responsibility is to express an opinion on the consistency of the annual report and the financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and the related application guidelines issued by the Chamber of Auditors of the Czech Republic. Those standards require that the auditor plan and perform the audit to obtain reasonable assurance about whether the information included in the annual report describing matters that are also presented in the financial statements is, in all material respects, consistent with the relevant financial statements. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the information included in the annual report is consistent, in all material respects, with the financial statements referred to above. In Prague on 1 June 2009 Audit firm: Deloitte Audit s.r.o. Certificate no. 79 Represented by: Statutory auditor: Diana Rogerová Diana Rogerová authorised employee certificate no Auditor s Report 23

26 Sworn Declaration Factoring KB, a.s., declares that all the information and data specified in this annual report is truthful and complete. It also confirms that all facts which could be important for the decisions of the investors are contained in this document. Factoring KB, a.s., also declares that up to the date of processing of the annual report there were no negative changes in the financial situation or other changes which could influence the precise and correct evaluation of the financial situation of Factoring KB, a.s. Prague, 19 May 2009 Signed on behalf of the board of directors: Milan Corjak Chairman of Board of Directors and company CEO Václav Tomandl Deputy chairman of Board of Directors Marcela Chalušová Member of the Board of Directors and deputy to CEO 24 Sworn Declaration

27 Financial Section Content 26 Balance Sheet as of 31 December Profit and Loss Account for the Year Ended 31 December Cash Flow Statement for the Year Ended 31 December Statement of Changes in Equity for the Year ended 31 December Notes to the Financial Statements for the Year Ended 31 December Report on Relations between Connected Persons for the Accounting Period of 2008 Financial Section 25

28 Balance Sheet as of 31 December 2008 CZK thousand Gross Adjustment Net Net TOTAL ASSETS 7,156, ,084 7,009,786 7,319,268 B. Fixed assets 1,514,713 57,861 1,456,852 1,364,160 B.I. Intangible fixed assets 51,565 42,363 9,202 9,500 B.I.3. Software 50,275 42,363 7,912 9,500 B.I.7. Intangible fixed assets under construction 1,290 1,290 B.II. Tangible fixed assets 19,954 15,498 4,456 7,309 B.II.3. Individual movable assets and sets of movable assets 19,157 15,498 3,659 6,512 B.II.6. Other tangible fixed assets B.III. Non-current financial assets 1,443,194 1,443,194 1,347,351 B.III.3. Other securities and investments 1,443,194 1,443,194 1,347,351 C. Current assets 5,641,273 89,223 5,552,050 5,952,711 C.II.5. Long-term prepayments made C.II.8. Deferred tax asset 3,551 3,551 2,976 C.III. Short-term receivables 5,633,639 89,223 5,544,416 5,945,183 C.III.1. Trade receivables 3,588,257 74,715 3,513,542 3,746,964 C.III.6. State tax receivables C.III.7. Short-term prepayments made 2,045,227 14,508 2,030,719 2,198,126 C.III.8. Estimated receivables C.III.9. Other receivables C.IV. Current financial assets 4,033 4,033 4,382 C.IV.1. Cash on hand C.IV.2. Cash at bank 3,807 3,807 4,125 D. I. Other assets ,397 D.I.1. Deferred expenses , Balance Sheet as of 31 December 2008

29 CZK thousand TOTAL LIABILITIES & EQUITY 7,009,786 7,319,268 A. Equity 1,511,686 1,364,790 A.I. Share capital 1,184,000 1,184,000 A.I.1. Share capital 1,184,000 1,184,000 A.II. Capital funds 151,088 55,246 A.II.1. Share premium 6,000 6,000 A.II.3. Gains or losses from the revaluation of assets and liabilities 145,088 49,246 A.III. Statutory funds 7,442 5,950 A.III.1. Statutory reserve fund/indivisible fund 6,992 5,616 A.III.2. Statutory and other funds A.IV. Retained earnings 117,287 92,067 A.IV.1. Accumulated profits brought forward 117,287 92,067 A.V. Profit or loss for the current period (+ -) 51,869 27,527 B. Liabilities 5,498,097 5,954,475 B.I. Reserves 1,255 1,223 B.I.4. Other reserves 1,255 1,223 B.III. Short-term liabilities 3,156,411 3,485,491 B.III.1. Trade payables 3,135,937 3,471,661 B.III.5. Payables to employees 1,443 1,113 B.III.6. Social security and health insurance payables B.III.7. State tax payables and subsidies 0 3,993 B.III.10. Estimated payables 1,248 1,325 B.III.11. Other payables 16,979 6,669 B.IV. Bank loans and borrowings 2,340,431 2,467,761 B.IV.2. Short-term bank loans 2,340,431 2,467,761 C. I. Other liabilities 3 3 C.I.1. Accrued expenses 3 3 Balance Sheet as of 31 December

30 Profit and Loss Account for the Year Ended 31 December 2008 CZK thousand II. Production 96, ,888 II.1. Sales of own products and services 96, ,888 B. Purchased consumables and services 45,147 45,276 B.1. Consumed material and energy 4,390 4,461 B.2. Services 40,757 40,815 + Added value 51,029 59,612 C. Staff costs 34,614 32,344 C.1. Payroll costs 25,149 22,829 C.2. Remuneration to members of statutory bodies C.3. Social security and health insurance costs 8,490 8,546 C.4. Social costs D. Taxes and charges E. Depreciation of intangible and tangible fixed assets 10,650 9,921 III. Sales of fixed assets and material 2, III.1. Sales of fixed assets 2, F. Net book value of fixed assets and material sold 995 F.1. Net book value of sold fixed assets 995 G. Change in reserves and provisions relating to operating activities and complex deferred expenses 10,051 3,637 IV. Other operating income 578, ,697 H. Other operating expenses 581, ,922 * Operating profit or loss (5,297) 12,523 VII. Income from non-current financial assets 22,381 VII.2. Income from other non-current securities and investments 22,381 X. Interest income 146, ,269 N. Interest expenses 87,170 73,705 XI. Other financial income 223,106 99,944 O. Other financial expenses 239, ,601 * Financial profit or loss 65,357 30,907 Q. Income tax on ordinary activities 8,191 15,903 Q 1. due 8,766 12,036 Q 2. deferred (575) 3,867 ** Profit or loss from ordinary activities 51,869 27,527 *** Profit or loss for the current period (+/-) 51,869 27,527 **** Profit or loss before tax 60,060 43, Profit and Loss Account for the Year Ended 31 December 2008

31 Cash Flow Statement for the Year Ended 31 December 2008 CZK thousand P. Opening balance of cash and cash equivalents 4,382 67,851 Cash flows from ordinary activities Z. Profit or loss from ordinary activities before tax 60,060 43,430 A.1. Adjustments for non-cash transactions (86,077) (30,864) A.1.1. Depreciation of fixed assets 10,650 9,921 A.1.2. Change in provisions and reserves 10,051 3,637 A.1.3. Profit/(loss) on the sale of fixed assets (1,954) (70) A.1.5. Interest expense and interest income (59,818) (51,565) A.1.6. Adjustments for other non-cash transactions (45,006) 7,213 A.* Net operating cash flow before changes in working capital (26,017) 12,566 A.2. Change in working capital 111,809 (511,849) A.2.1. Change in operating receivables and other assets 490,627 (722,168) A.2.2. Change in operating payables and other liabilities (378,818) 210,319 A.** Net cash flow from operations before tax and extraordinary items 85,792 (499,283) A.3. Interest paid (87,170) (73,705) A.4. Interest received 146, ,269 A.5. Income tax paid from ordinary operations (12,268) (12,879) A.*** Net operating cash flows 133,342 (460,597) Cash flows from investing activities B.1. Fixed assets expenditures (8,494) (1,307,549) B.1.1. Expenditures associated with the acquisition of Protos (1,298,105) B.1.2. Fixed assets expenditures (9,444) B.2. Proceeds from fixed assets sold 2, B.*** Net investment cash flows (5,545) (1,307,479) Cash flow from financial activities C.1. Change in payables from financing (127,331) 605,490 C.2. Impact of changes in equity (815) 1,099,117 C.2.1. Cash increase in share capital 0 1,100,000 C.2.5. Payments from capital funds (815) (883) C.*** Net financial cash flows (128,146) 1,704,607 F. Net increase or decrease in cash and cash equivalents (349) (63,469) R. Closing balance of cash and cash equivalents 4,033 4,382 Cash Flow Statement for the Year Ended 31 December

32 Statement of Changes in Equity for the Year ended 31 December 2008 CZK thousand Share Capital Revaluation Statutory Accumula- Accumula- Profit or Total capital funds gains or funds ted profits ted losses loss for Equity losses on brought brought the current securities forward forward period Balance at 31 December ,000 6,000 4,685 66,694 27, ,900 Distribution of profit or loss 2,148 25,373 (27,521) Change in share capital 1,100,000 1,100,000 Revaluation gains 49,246 Payments from capital funds (883) (883) Profit or loss for the current period 27,527 27,527 Balance at 31 December ,184,000 6,000 49,246 5,950 92,067 27,527 1,364,790 Distribution of profit or loss 2,307 25,220 (27,527) Revaluation gains 95,842 Payments from capital funds (815) (815) Profit or loss for the current period 51,869 51,869 Balance at 31 December ,184,000 6, ,088 7, ,287 51,869 1,511, Statement of Changes in Equity for the Year ended 31 December 2008

33 Notes to the Financial Statements for the Year Ended 31 December General Information 1.1. Incorporation and Description of the Business Factoring KB, a.s. (hereinafter the Company ), was formed as a joint stock company by a Memorandum of Association on 24 July 1997 and was incorporated following its registration in the Register of Companies maintained at the Court in Prague on 4 August The Company s financial statements have been prepared as of and for the year ended 31 December The reporting year is the calendar year. The following table shows individuals and legal entities with an equity interest greater than 20 percent and the amount of their equity interest: Shareholder Ownership percentage Komerční banka, a.s. 100% Total 100% The Company is primarily engaged in the provision of factoring and forfaiting services Changes in and Amendments to the Register of Companies During the year ended 31 December 2008, the following changes were made to the Register of Companies maintained at the Municipal Court in Prague: the addition of administration, organisational and economic services to the scope of the Company s activities and changes in the composition of the Board of Directors Organisational Structure of the Company During the year ended 31 December 2008, changes were made in the organisational structure of the Company. The IT department ceased to report to the First Deputy CEO and currently reports directly to the Company s CEO. The Sales and Marketing department ceased to report directly to the Deputy CEO and currently reports directly to the First Deputy CEO and the Customer Services National Department ceased to report directly to the First Deputy CEO and currently reports directly to the Deputy CEO CEO Human Resources Secretariat IT Department First Deputy CEO CFO Client Risk Trade Risk Deputy Department Department CEO Sales and Customer Customer Finance Marketing Services Services Department Department National International Department Department Notes to the Financial Statements for the Year Ended 31 December

34 1.4. Group Identification The Company is included in the Komerční banka, a.s., Financial Group Board of Directors and Supervisory Board Position Name Board of Directors Chairman Milan Corjak Vice Chairman Václav Tomandl Member Marcela Chalušová Supervisory Board Chairwoman Jana Švábenská Member Jana Hanibalová Member Petr Kulhánek Board of Directors Original Member New Member Date of Change Position Vice-Chairman Tomáš Kunst Václav Tomandl 1 September 2008 The change in the composition of the Company s Board of Directors was registered in the Register of Companies. There was no change in the composition of the Company s Supervisory Board in the reporting period. 2. Basis of Accounting and General Accounting Principles The Company s accounting books and records are maintained and the financial statements were prepared in accordance with Accounting Act 563/1991 Coll., as amended; Regulation 500/2002 Coll. which provides implementation guidance on certain provisions of the Accounting Act for reporting entities that are businesses maintaining double-entry accounting records, as amended, and Czech Accounting Standards for Businesses, as amended. The accounting records are maintained in compliance with general accounting principles, specifically the historical cost valuation basis, the accruals principle, the prudence concept and the going concern assumption. These financial statements are presented in thousands of Czech crowns (CZK thousand), unless stated otherwise. 3. Summary of Significant Accounting Policies 3.1. Tangible Fixed Assets Purchased tangible fixed assets are stated at cost less accumulated depreciation. Tangible fixed assets include assets with an acquisition cost greater than CZK 40 thousand on an individual basis and an estimated useful life greater than one year. The cost of fixed asset improvements exceeding CZK 40 thousand per asset for the period increases the acquisition cost of the related fixed asset. Depreciation is charged so as to write off the cost of tangible fixed assets over their estimated useful lives, using the straight line method, on the following basis: Category of assets Depreciation period in years Buildings 30 Machinery and equipment 3 12 Vehicles 4 Furniture and fixtures 6 12 Assets with an acquisition cost lower than CZK 40 thousand on an individual basis and an estimated useful life greater than one year are expensed in the period of acquisition. Tangible fixed assets put into use as a bulk with the acquisition cost (invoiced amount) lower than CZK 200 thousand are expensed in the period of acquisition. Tangible fixed assets put into use in a greater volume with the acquisition cost (invoiced amount) greater than CZK 200 thousand are expensed in the period of acquisition at 50 percent and at 50 percent in the following financial reporting period reported as deferred expenses. The gain or loss arising from the sale or the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised through the profit and loss account. 32 Notes to the Financial Statements for the Year Ended 31 December 2008

35 3.2. Intangible Fixed Assets Purchased intangible fixed assets are stated at cost less accumulated amortisation. Intangible fixed assets include assets with an acquisition cost greater than CZK 60 thousand on an individual basis and an estimated useful life greater than one year. The cost of fixed asset improvements exceeding CZK 40 thousand per asset for the period increases the acquisition cost of the related fixed asset. Amortisation of intangible fixed assets is recorded on a straight line basis over their estimated useful lives as follows: Number of years Software 3 Assets with an acquisition cost lower than CZK 60 thousand on an individual basis and an estimated useful life greater than one year are expensed in the period of acquisition. Intangible fixed assets put into use as a bulk with the acquisition cost (invoiced amount) lower than CZK 200 thousand are expensed in the period of acquisition. Intangible fixed assets put into use in a greater volume with the acquisition cost (invoiced amount) greater than CZK 200 thousand are expensed in the period of acquisition at 50 percent and at 50 percent in the following financial reporting period reported as accrued expenses Non-Current Financial Assets Non-current financial assets are equity investments and securities available for sale. Upon acquisition securities and equity investments are carried at cost. The cost of securities or equity investments includes the direct costs of acquisition, such as fees and commissions paid to brokers, advisors and stock exchanges. The available-for-sale securities and equity investments are stated at their fair value as of the date of the financial statements. The change in the fair value of the available-for-sale securities and equity investments is recognised as gains or losses from the revaluation of assets and liabilities within equity. The Company s fair value is the market value of the securities as of the date of the financial statements Inventory The Company carries no inventory and has no warehouse in place. All overhead materials are expensed as purchased Receivables Upon origination, receivables are stated at their nominal value. The receivables are reported at carrying amounts as reduced by appropriate provisions for doubtful and bad amounts. Receivables acquired for consideration or through an investment are stated at cost Trade Payables Trade payables are stated at their nominal value Loans Loans are reported at nominal value. The portion of long-term loans maturing within one year from the balance sheet date is included in short-term loans Accounting Treatment for Factoring Transactions Factoring involves purchasing short-term receivables at nominal values that arose from supplies of goods or services to a number of regular customers and are before their due dates. The factor makes a prepayment to the supplier (pre-funding) which can amount up to 90 percent of the nominal value of the receivable. Amounts due from purchased receivables and prepayments made are reported as Trade receivables and Short-term prepayments made, respectively, on the face of the Company s balance sheet. Amounts payable arising from purchased receivables are presented within Trade payables on the face of the Company s balance sheet. Following payment by the customer, the remaining balance of the receivable is funded to the suppliers. The factor collects a commission in respect of the provision of the services. The commission reflects the costs involved in processing the ceded receivables and interest on the provided pre-funding which corresponds to the rates attached to short-term bank loans. Commissions and interest on pre-funding are reported within the profit and loss account lines Sale of own products and services and Interest income, respectively. Notes to the Financial Statements for the Year Ended 31 December

36 The re-ceding of receivables is reported through the profit and loss account. Products that represent the Company s principal operations specifically include: Domestic recourse factoring (relation between a supplier and customer in the Czech Republic); recourse means that unless the debt is recovered within 90 days after maturity, it is assigned back to the supplier; Domestic non-recourse factoring (with insurance) whereby the risk of a customer s failure to settle a receivable is eliminated by the compensation provided by an insurer; Export recourse factoring (relation between a supplier and customer abroad) with a recourse sanction; recourse means that unless the debt is recovered within 90 days from maturity, it is assigned back to the supplier; Export factoring that is operated by two factors. In this respect, the Company is a member of an international association of factoring companies FCI, where all potential risks are hedged by the factoring company on the territory of the country of the customer; Export factoring with insurance which includes an element of participation in the risk of the customer s insolvency; Import factoring with insurance which facilitates the obtaining of a short-term customer loan for goods purchased from foreign suppliers without the necessary collateralisation by banking instruments; and Funding of payables: Following the framework contract entered into with a customer, the payables of the customer to domestic suppliers are funded up to the amount of the insurance limit Provisioning and Reserving Policies Provisions are made based on the results of the inventory taking, to the extent that the valuation of assets does not correspond with the actual balance. Reserves are intended to cover future obligations or expenditure, the nature of which is clearly defined and which are either likely to be incurred or certain to be incurred, but which are uncertain as to the amount or the date on which they will arise. In the year ended 31 December 2008, the Company recognised provisions against receivables (commissions, interest, receding, pre-funding) on the basis of reconciliation procedures as of 31 December 2008 by reference to the aging categories of individual receivables and taking into account the risk profile and the estimated rate of collection. Reserves are intended to cover future obligations or expenditure, the nature of which is clearly defined and which are either likely to be incurred or certain to be incurred, but which are uncertain as to the amount or the date on which they will be used. Reserves for outstanding vacation days are recognised on the basis of an analysis of outstanding vacation days as of the balance sheet date and the average payroll costs, including social security and health insurance costs according to individual employees Foreign Currency Translation During the reporting period, transactions denominated in foreign currencies are translated using daily exchange rates as promulgated by the Czech National Bank ( CNB ). At the balance sheet date, assets and liabilities in foreign currencies are translated using the effective exchange rate announced by the CNB as of that date. Any resulting foreign currency translation differences are recorded through the current year s financial expenses or revenues as appropriate Finance Leases The Company has not entered into any finance lease agreements Taxation Depreciation of Fixed Assets for Tax Purposes Depreciation of fixed assets is calculated using the straight-line method for tax purposes Current Tax Payable The tax currently payable is based on taxable profit for the reporting period. Taxable profit differs from the net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The Company s liability for current tax is calculated using tax rates that have been enacted by the balance sheet date Value Added Tax The Company is registered as a VAT payer. 34 Notes to the Financial Statements for the Year Ended 31 December 2008

37 Deferred Tax Deferred tax is accounted for using the balance sheet liability method. Under the liability method, deferred tax is calculated at the income tax rate that is expected to apply in the period when the tax liability is settled or the asset realised. The balance sheet liability method focuses on temporary differences which are differences between the tax base of an asset or liability and its carrying amount in the balance sheet. The tax base of an asset or liability is the amount that will be deductible for tax purposes in the future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered. Deferred tax is charged or credited to the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset and reported on an aggregate net basis in the balance sheet Use of Estimates The presentation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period. The Company might be affected by the impacts of the global financial and economic crisis. The Company may be exposed to an increased risk, specifically due to the high volatility and uncertainty regarding the valuation, possible asset impairment, contingent liabilities and future developments on the market. These potential risks may have an impact on the financial statements in the future. The presented financial statements for the year ended 31 December 2008 are based on the current best estimates and management of the Company believes that they give the truest and fairest view of the Company s financial results and financial position using all relevant and available information at the financial statements date Revenue Recognition The Company generates its revenues primarily from remuneration (commissions) for each ceded receivable, and from interest on the provided purchase price prepayments. Other revenues principally comprise charges for changes in contractual terms and conditions, applications for factoring services, and other fees Year-on-Year Changes in Valuation, Depreciation or Accounting Policies In the year ended 31 December 2008, there were no year-on-year changes in valuation, depreciation or accounting policies Cash Flow Statement The cash flow statement is prepared using the indirect method. Cash equivalents include current liquid assets easily convertible into cash in an amount agreed in advance. Cash and cash equivalents can be analysed as follows: CZK thousand Cash on hand and cash in transit Cash at bank 3,807 4,125 Cash and cash equivalents Total cash and cash equivalents 4,033 4,382 Cash flows from operating, investment and financial activities presented in the cash flow statement are not offset Hedging against the Risk of Insolvency of the Business Partner In the case of recourse factoring, the business partner is required to sign a bill-of-exchange statement and a blank bill of exchange. Potential risks attached to other products (refer to Note 3.8) are covered by insurers or factoring firms in the customer s country. Notes to the Financial Statements for the Year Ended 31 December

38 4. Additional Information on the Balance Sheet and Profit and Loss Account 4.1. Fixed Assets Intangible Fixed Assets Cost CZK thousand 2007 Additions Disposals 2008 Software 44,230 6, ,275 Acquisition of assets 0 7,335 6,045 1,290 Total 44,230 13,380 6,045 51,565 Accumulated Amortisation CZK thousand 2007 Additions Disposals 2008 Software 34,730 7, ,363 Total 34,730 7, ,363 Net Book Value CZK thousand Software 9,500 7,912 Acquisition of assets 0 1,290 Total 9,500 9,202 During the year ended 31 December 2008, the Company predominantly purchased software related to the factoring system. Amortisation of intangible fixed assets was CZK 7,633 thousand and CZK 6,500 thousand for the years ended 31 December 2008 and 2007, respectively. The aggregate amount of directly expensed low value intangible assets was CZK 27 thousand and CZK 8 thousand for the years ended 31 December 2008 and 2007, respectively Tangible Fixed Assets Cost CZK thousand 2007 Additions Disposals 2008 Individual movable assets 26,523 1,159 8,525 19,157 Machinery and equipment 17,515 1, ,872 Vehicles 7, ,717 0 Furniture and fixtures Low value assets Other assets Acquisition of tangible fixed assets 0 1,159 1,159 0 Total 27,320 2,318 9,684 19, Notes to the Financial Statements for the Year Ended 31 December 2008

39 Accumulated Depreciation CZK thousand 2007 Additions Disposals 2008 Individual movable assets 20,011 3,017 7,530 15,498 Machines and equipment 13,507 1, ,567 Vehicles 5,665 1,057 6,722 0 Furniture and fixtures Low value assets Other assets Total 20,011 3,017 7,530 15,498 Net Book Value CZK thousand Individual movable assets 6,512 3,659 Machines and equipment 4,008 3,305 Vehicles 2,052 0 Furniture and fixtures Low value assets 0 0 Other assets Acquisition of tangible fixed assets 0 0 Total 7,309 4,456 During the year ended 31 December 2008, the Company predominantly purchased computers. The Company s vehicles were sold during the reporting period. Depreciation of tangible fixed assets was CZK 3,017 thousand and CZK 3,421 thousand for the years ended 31 December 2008 and 2007, respectively. The aggregate amount of directly expensed low value tangible assets was CZK 2,196 thousand and CZK 2,222 thousand in the years ended 31 December 2008 and 2007, respectively Assets Held under Finance and Operating Leases During the reporting period, the Company entered into a framework agreement with ALD Automotive s.r.o. Based on this contractual arrangement, individual separate contracts for the lease of a movable asset were concluded with regard to 11 passenger cars. The aggregate costs arising from this agreement amounted to CZK 826 thousand and the related payables amounted to CZK 98 thousand in the year ended 31 December Pledged Fixed Assets The Company has not pledged any fixed assets Non-Current Financial Assets On the basis of a contract between the Company and Komerční banka, a.s., for transferring securities for a consideration, the Company purchased non-current financial assets amounting to CZK 1,298,106 thousand in The non-current financial assets are in the form of a collective registered share (in the certificate form) replacing 518 shares. The collective registered share was issued by the closed investment fund PROTOS which is a subsidiary company of Komerční banka, a.s. Fair Value CZK thousand Fair value Cost Fair value at Revaluation at Balance at 31 December 31 December 31 December Non-current securities and equity investments available for sale 1,298,106 1,347, ,088 1,443,194 Total 1,298,106 1,347, ,088 1,443,194 Notes to the Financial Statements for the Year Ended 31 December

40 4.2. Receivables Long-Term Receivables The Company reports long-term receivables of CZK 3,601 thousand which predominantly consist of a deferred tax asset of CZK 3,551 thousand and long-term prepayments made of CZK 50 thousand Short-Term Receivables CZK thousand Trade receivables Amounts due from purchased recourse receivables 3,163,792 3,481,287 Commissions from purchased receivables 4,998 6,324 Interest on pre-funding 23,108 24,068 Re-ceding 71,267 43,276 Amounts due from non-recourse purchases 27,751 26,300 Amounts due from accession to debt 292, ,565 Other trade receivables 5,276 5,283 Provisions against trade receivables (74,715) (58,139) Total trade receivables 3,513,542 3,746,964 Short-term prepayments made Receivables from pre-funding 2,045,067 2,219,038 Operating prepayments Provisions against prepayments made (14,508) (21,064) Total prepayments made 2,030,719 2,198,126 Other short-term receivables Total short-term receivables 5,544,416 5,945,183 Amounts due from purchased receivables represent nominal values of receivables purchased as part of the provision of factoring services. The schedule of the aging of accounts receivable does not present receivables from purchased recourse receivables where the Company concurrently records an amount payable to the supplier (refer to Note 4.6.1). 38 Notes to the Financial Statements for the Year Ended 31 December 2008

41 Aging of Accounts Receivable CZK thousand Category Before due date Overdue Total Total years overdue Year days days days yearsand greater 2008 Commissions 3, ,098 4,998 Provisions Interest 16,246 4, ,036 6,862 23,108 Provisions ,036 2,203 2,203 Re-ceding 11,700 11,031 14,176 16,072 4,818 13,470 59,567 71,267 Provisions 0 2,441 3,535 11,444 4,282 13,470 35,172 35,172 Non-recourse purchases ,789 24,962 27,751 27,751 Provisions ,789 24,962 27,751 27,751 Amounts due from accession to debt 240,469 22,374 11,938 13,312 3, , ,065 Provisions 0 0 1,490 2, ,981 4,981 Other receivables 1, ,979 4,137 5,276 Provisions ,979 3,986 3, Commissions 3,844 2, ,480 6,324 Provisions Interest 20,655 1, ,007 3,413 24,068 Provisions ,007 1,772 1,844 Re-ceding 6,844 8,857 1,180 3,603 7,308 15,484 36,432 43,276 Provisions ,062 7,193 15,484 26,689 26,689 Non-recourse purchases ,466 15,834 26,300 26,300 Provisions ,044 15,834 24,878 24,878 Amounts due from the accession to debt 207,193 7, , , ,565 Provisions Other receivables 1, ,975 4,184 5,283 Provisions ,975 3,979 3,979 The maturity of amounts due from pre-funding is established reflecting the specific factoring contract with the client. The average maturity is 90 days. The average maturity for invoices issued in respect of commissions, interest and re-ceding is 30 days. The Company maintains no amounts due from related parties Financial Assets CZK thousand Cash Cash equivalents Current accounts 3,807 4,125 Total current financial assets 4,033 4,382 Notes to the Financial Statements for the Year Ended 31 December

42 4.4. Shareholder s Equity Share Capital The registered share capital as of 1 January 2008 consisted of 400 shares with a nominal value of CZK 100 thousand per share, 4,400 ordinary shares with a nominal value of CZK 10 thousand and 1,100 ordinary shares with a nominal value of CZK 1,000 thousand. There was no change in the amount of the Company s share capital during The shares are registered, carry voting rights, are fully negotiable but not readily marketable. The share premium amount of CZK 6,000 thousand represents the difference between the issue and nominal values of the shares Gains or Losses from the Revaluation of Assets and Liabilities CZK thousand Balance at 1 Jan ,246 Revaluation of securities available for sale 95,842 Balance at 31 Dec , Reserves CZK thousand Reserve for Reserve for Total outstanding social security reserves vacation and health days insurance Balance at 31 December ,223 Charge for reserves Release of reserves Balance at 31 December , Payables Trade Payables CZK thousand Short-term Suppliers 6,021 5,752 Purchased receivables 3,129,916 3,465,909 Trade payables 3,135,937 3,471,661 Other payables 16,979 6,669 Total 3,152,916 3,478,330 The payables to suppliers are before their due dates. The Company s payables of CZK 3,129,916 thousand and CZK 3,465,909 thousand as of 31 December 2008 and 2007, respectively, which arose from the purchased receivables under the provision of factoring services, represent recourse factoring, that is, unless the customer settles its debts within the recourse period of 90 days, the purchased debt is assigned back to the supplier. Prepayments that take the form of pre-funding are made in respect of these payables. Other payables amount to CZK 16,979 thousand (CZK 6,669 thousand in 2007). These predominantly include unidentified payments amounting to CZK 14,987 thousand settled in the following reporting period and retained payments of CZK 1,991 thousand Intercompany Payables The Company reported aggregate payables of CZK 2,668 thousand to Komerční banka, a.s. as of 31 December 2008, which are presented within trade payables. These balances predominantly include fees for the use of the distribution network of Komerční banka totalling CZK 2,519 thousand, advisory services of CZK 110 thousand, fees for the safekeeping of securities totalling CZK 21 thousand and fees for the rent and services of regional workplaces within KB s network of CZK 18 thousand (2007: a total of CZK 2,206 thousand). The Company also reports an intercompany payable to Penzijní fond KB of CZK 82 thousand. 40 Notes to the Financial Statements for the Year Ended 31 December 2008

43 4.7. Bank Loans 2008 CZK thousand Bank/ Purpose Balance at Interest Interest Form of Creditor 31 December 2008 expense rate collateral KB loan 1,728,526 67,758 PRIBOR ON ACTUAL+FV None KB loan 62,380 1,650 ON LIBOR USD ACTUAL+FV None KB loan 511,262 16,072 ON LIBOR EUR ACTUAL+FV None KB loan 3, LIBOR CHF ACTUAL+FV None KB loan 7, ON LIBOR GBP ACTUAL+FV None KB loan 26, ON BRIBOR SKK ACTUAL+FV None KB loan ON WIBOR PLN ACTUAL+FV None Total 2,340,431 87,170 Note: FV- fixed variance 2007 CZK thousand Bank/ Purpose Balance at Interest Interest Form of Creditor 31 December 2008 expense rate collateral KB loan 0 23,689 Under a specific contract None KB loan 1,989,570 21,741 PRIBOR ON ACTUAL+FV None KB loan 64, ON LIBOR USD ACTUAL+FV None KB loan 352,284 5,838 ON LIBOR EUR ACTUAL+FV None KB loan 1,825 2 LIBOR CHF ACTUAL+FV None KB loan 15, ON LIBOR GBP ACTUAL+FV None KB loan 43, ON BRIBOR SKK ACTUAL+FV None KB loan 1,321 2 ON WIBOR PLN ACTUAL+FV None ČSOB loan 0 8,588 PRIBOR+FV Guarantee of Komerční banka, a.s. ČS loan 0 11,173 PRIBOR+FV Guarantee of Komerční banka, a.s. Raiffeisen Bank loan 0 1,743 PRIBOR+FV Guarantee of Komerční banka, a.s. Total 2,467,761 73,705 Note: FV- fixed variance All of the bank loans are short-term Income Tax on Ordinary and Extraordinary Activities CZK thousand Income tax charge on ordinary activities 8,766 12,036 Deferred tax (575) 3,867 Total 8,191 15,903 Notes to the Financial Statements for the Year Ended 31 December

44 The charge for the year can be reconciled to the profit per the profit and loss account as follows: CZK thousand Profit before tax 60,060 43,430 Tax at the domestic income tax rate for the relevant year 12,613 10,423 Tax effect of expenses that are not deductible in determining taxable profit 10,763 13,340 Tax effect of tax deductible expenses (14,550) (11,667) Tax effect of tax allowances (60) (60) Current changes in the deferred tax (575) 3,867 Total income tax on ordinary and extraordinary activities 8,191 15,903 The effective tax rate was 13.6 percent and 36.6 percent as of 31 December 2008 and 2007, respectively Deferred Tax The deferred tax asset is analysed as follows: Deferred Tax Arising from CZK thousand Accumulated depreciation and amortisation of fixed assets Receivables 3,183 2,645 Reserves Other 9 5 Total 3,551 2,976 Analysis of movements CZK thousand 1 January ,976 Effect on deferred tax balances due to the change in the income tax rate 9 Current changes charged to the profit and loss account December , Details of Income by Principal Activity CZK thousand In-country Cross-border Total In-country Cross-border Total Commission 83,917 12,259 96,176 91,522 13, ,888 Interest on pre-funding 131,662 15, , ,009 12, ,494 The Company principally generates its income from commissions collected in respect of each ceded receivable and interest on prepayments made to settle the purchase price. Interest on current account balances amounted to CZK 1 thousand and CZK 1,775 thousand for the years ended 31 December 2008 and 2007, respectively. 42 Notes to the Financial Statements for the Year Ended 31 December 2008

45 4.10. Services Services primarily include the following items: CZK thousand Repairs and maintenance, travel and representation expenses 1,140 1,202 Rental 4,704 4,200 Telephone fees and postal charges 1,538 1,407 Audit services costs Software maintenance 2,369 2,379 Legal services 1, Commission paid to an import factor 380 1,444 Analysis of the risk of EGAP and ČESCOB insurance 4,683 4,170 Services of Komerční banka, a.s. 17,041 18,587 Other services 6,807 5,799 Total services 40,757 40,815 Details about services of Komerční banka, a.s., are provided in Note Change in Reserves and Provisions Relating to Operating Activities and Complex Deferred Expenses CZK thousand Change in reserves (31) 63 Change in tax-deductible provisions against receivables (17,186) (4,323) Change in tax non-deductible provisions against receivables 7, Total (10,051) (3,637) Other Operating Income and Expenses For the year ended 31 December 2008, the Company recorded other operating expenses of CZK 581,287 thousand (2007: CZK 478,922 thousand), which predominantly include the expense arising from the re-ceding of receivables of CZK 571,073 thousand and the write-off of receivables of CZK 8,596 thousand. Other operating expenses also include expenses amounting to CZK 1,617 thousand which predominantly comprise financial bonuses to customers totalling CZK 1,176 thousand. For the year ended 31 December 2008, the Company records other operating income of CZK 578,344 thousand (2007: CZK 477,697 thousand). Other operating income predominantly consists of income from the re-ceding of receivables of CZK 571,073 thousand, fees for changes in contractual terms, applications for the provision of factoring services, and entry and monitoring fees of CZK 7,271 thousand. In 2008, the Company sold cars with the net book value of CZK 995 thousand. The proceeds from the sale of these tangible assets amounted to CZK 2,949 thousand Financial Expenses and Income Financial expenses primarily consist of the following items: CZK thousand Interest expense from overdraft loan facilities 87,170 73,705 Exchange rate losses 223, ,088 EGAP, ČESCOB and other insurance premiums 12,947 14,495 Banking expenses 2,928 3,130 Bank guarantee 0 1,970 Other charges Total other financial expenses 239, ,601 Notes to the Financial Statements for the Year Ended 31 December

46 Financial income primarily consists of the following items: CZK thousand Interest on pre-funded purchased receivables 146, ,494 Interest on current and term accounts 1 1,775 Total interest income 146, ,269 Foreign exchange gains 223,106 99,944 Income from financial investments (Protos dividend) 22,381 0 Total other financial income 245,487 99, Related Party Transactions For the years ended 31 December 2008 and 2007, the Company generated financial income of CZK 1 thousand and CZK 1,775 thousand, respectively, from transactions with Komerční banka, a.s. The services that Komerční banka, a.s., provided to the Company in the year ended 31 December 2008 principally include: CZK thousand Financial expenses 90,243 57,323 Fee for the use of Komerční banka s distribution network 13,452 14,268 Use of the trademark 2,941 2,941 Other services of Komerční banka, a.s ,412 Financial expenses principally consist of interest on granted loans of CZK 87,170 thousand (2007: CZK 52,201 thousand), banking fees of CZK 2,917 thousand (2007: CZK 3,117 thousand) and other services of Komerční banka, a.s. of CZK 156 thousand (2007: CZK 35 thousand). Other services of Komerční banka, a.s. predominantly include the costs related to the rental of non-residential premises for regional offices, such as the costs of electricity, water, heat, telephone charges and rental charges, and also the costs of advisory and consulting services and trainings. In the year ended 31 December 2008, the Company effected no sale or purchase of fixed assets in relation to Komerční banka, a.s. In 2008, the Company reported expenses of CZK 4,974 thousand related to Penzijní fond Komerční banky, a.s. arising from the lease contract. Moreover, the Company reported income in the form of dividends paid in relation to the closed investment fund PROTOS in the amount of CZK 22,381 thousand. 5. Employees, Management and Statutory Bodies 5.1. Staff Costs and Number of Employees The following tables summarise the average number of the Company s employees and managers and staff costs (exclusive of bonuses paid to the members of the statutory bodies) for the years ended 31 December 2008 and 2007: 2008 CZK thousand Number Payroll Social security Other Total costs and health costs staff costs insurance Staff 38 17,197 6, ,666 Management 3 7,952 1, ,515 Total 41 25,149 8, , Notes to the Financial Statements for the Year Ended 31 December 2008

47 2007 CZK thousand Number Payroll Social security Other Total costs and health costs staff costs insurance Staff 38 16,064 6, ,801 Management 3 6,765 2, ,117 Total 41 22,829 8, ,918 The number of employees is based on the average recalculated headcount. The category of management includes the Company s CEO and Deputy CEOs Loans, Borrowings, and Other Benefits Provided During the years ended 31 December 2008 and 2007, the members of the Company s Board of Directors and Supervisory Board received bonuses of CZK 433 thousand and CZK 426 thousand, respectively, in addition to their basic salaries. In addition, members of the Board of Directors are entitled to use a car pursuant to their contracts entered into with the Company. 6. Contingent Liabilities and Off Balance Sheet Commitments As of 31 December 2008 and 2007, the Company had contingent liabilities arising from import factoring of CZK 11,072 thousand and CZK 8,076 thousand, respectively. The Company also reported undrawn loan commitments to the clients based on factoring contracts in the amounts of CZK 7,025,411 thousand and CZK 4,796,189 thousand as of 31 December 2008 and 2007, respectively. 7. Legal Disputes As of 31 December 2008, the Company acted as a plaintiff in court cases brought against its debtors with a view to recovering receivables in the aggregate amount of approximately CZK 289,000 thousand which arose from factoring transactions. The Company has recognised provisions against these receivables pursuant to applicable legislation and its internal guidance (refer to Note 3.9). The Company also acts as a defendant in a legal dispute with one of its debtors who requires the Company to return approximately CZK 2,000 thousand. The Company believes it will be successful in these proceedings. 8. Significant Post Balance Sheet Events On 4 December 2008, the Company received the opinion of the Egap insurer stating that Egap refuses to pay out insurance benefits in three cases, totalling CZK 26,000 thousand. The refusal of payment of the insurance benefits is based on reasons which have been respected by the insurer in other cases to date; however, the insurer currently presents a different approach to the interpretation of certain information. The Company responded with a letter on 29 December 2008 and the issue was discussed at a joint meeting of the representatives of both parties on 9 January 2009; however, no agreement regarding the interpretation of the insurance contract has been achieved. On 6 February 2009, the Company sent an official opinion in which it contests the new interpretation of the insurer. No other significant events that would have a material impact on the financial statements occurred subsequent to the balance sheet date. Notes to the Financial Statements for the Year Ended 31 December

48 Report on Relations between Connected Persons for the Accounting Period of 2008 (referred to hereinafter as the report on relations") Factoring KB a.s., having its registered office at the address Lucemburská 1170/7, Prague 3, business ID No , entered in the Companies Register kept by the Municipal Court in Prague, section B, volume 4861, (referred to hereinafter as the Company ), is a part of a business group (concern) in which exist the following relations between the Company and the person controlling it and also the relations between the Company and other persons controlled by the same controlling person (referred to hereinafter as connected persons ). This report on relations between the persons shown hereinafter was prepared in compliance with the provisions of section 66a, paragraph 9 of Act No 513/1991 Coll., in the valid wording (Commercial Code) for the period 2008 i.e., from to (referred to hereinafter as the accounting period ). I. Introduction From 1 January 2008 to 31 December 2008 the Company was part of the concern of the company Société Générale S.A., having its registered office at the address 29, BLD Hausmann, Paris, France, registration number in French companies register: R.C.S. Paris B (1955 B 12022) (referred to hereinafter as SG or SG Paříž ). In the accounting period of 2008 the Company had relations with the following connected persons: Company Registered office Share of SG in voting rights of Company Komerční banka, a.s. Prague 1, Na Příkopě 33 land-registry number 969, postcode: % Penzijní fond Komerční banky, a.s. Prague 3, Lucemburská 1170/7, postcode: % Modrá pyramida stavební spořitelna, a.s. Prague 2, Bělehradská 128, land-registry number 222, postcode: % ALD Automotive s.r.o. Prague 10, U Stavoservisu 527/1, postcode: % PROTOS, uzavřený investiční fond, a.s. Prague 1, Dlouhá 34, postcode: % II. Relations with connected persons A. Contracts and agreements with controlling person and other connected persons I. Contracts and agreements concluded during the accounting period Type of contract(or subject Contracting party Performance of Consideration Harm incurred of contract if no name is given) Company by company Outline contract for provision Komerční banka, a.s. Interest and charges Provision of financial did not arise of financial services according to table of charges services Contract for use of safe deposit box Komerční banka, a.s. Charges according Provision of safe did not arise to table of charges deposit box Contract for issue and use Komerční banka, a.s. Charges according to table Issue of payment cards and did not arise of payment card of charges processing of transaction Contract concerning cooperation Komerční banka, a.s. Price according to contract Organisation and holding did not arise during performance of competition of competition Mutual cooperation contract Komerční banka, a.s. Provision of services Provision of Banking did not arise (update of Annex No 1) according to contract services to employees of FKB 46 Report on Relations between Connected Persons for the Accounting Period of 2008

49 Type of contract(or subject Contracting party Performance of Consideration Harm incurred of contract if no name is given) Company by company Agreement about cancellation of rights and Komerční banka, a.s. Settlement of mutual Termination of lease did not arise undertakings (termination of lease contract) rights and liabilities contract Contract for leasing of non-residential premises, movable Komerční banka, a.s. Price according to contract Provision of did not arise things and payment for services associated with their use Distribution contract Cooperation contract Framework contract for processing of personal data premises and movable things non-residential Komerční banka, a.s. Price according to contract Distribution of products did not arise Komerční banka, a.s. Price according to contract Distribution of product, did not arise marketing, human resources, taxes, creation of budgets, reporting, internal audit Komerční banka, a.s. Price according to contract Processing of clients did not arise personal data Contract for leasing of non-residential premises Penzijní fond Price according to contract Provision of non- did not arise and payment for services associated with their Komerční banky, a.s. -residential premises use designation of rent for 2008 and parking places Framework contract ALD Automotive s.r.o.price according to contract Provision of leasing of did not arise movable things Contacts for provision of ALD Automotive s.r.o.price according to contract Provision of leasing of did not arise movable things (11) movable things Purchase contract (11) ALD Automotive s.r.o. Price according to contract Sale of movable things did not arise II. Performance received and provided in the accounting period from contracts concluded in past accounting periods Type of contract(or subject Contracting party Performance of Consideration Harm incurred of contract if no name is given) Company by company Outline contract for provision of Komerční banka, a.s. Interest and charges Provision of financial did not arise financial services according to table of charges services Contracts for establishment and management of account Komerční banka, a.s. Interest and charges Managing account did not arise in CZK by Komerční banka, a.s. including addenda according to table of charges Contracts for establishment and management of account Komerční banka, a.s. Interest and charges Managing account did not arise in USD by Komerční banka, a.s. including addenda according to table of charges Contracts for establishment and management of account Komerční banka, a.s. Interest and charges Managing account did not arise in EUR by Komerční banka, a.s. including addenda according to table of charges Contracts for establishment and management of account Komerční banka, a.s. Interest and charges Managing account did not arise in CHF by Komerční banka, a.s. including addenda according to table of charges Contracts for establishment and management of account Komerční banka, a.s. Interest and charges Managing account did not arise in GBP by Komerční banka, a.s. including addenda according to table of charges Contracts for establishment and management of account Komerční banka, a.s. Interest and charges Managing account did not arise in SKK by Komerční banka, a.s. including addenda according to table of charges Contracts for establishment and management of account Komerční banka, a.s. Interest and charges Managing account did not arise in PĹN by Komerční banka, a.s. including addenda according to table of charges Contract for safekeeping of securities, Komerční banka, a.s. Charges according to Safekeeping of did not arise including handover protocol contract securities Contracts for use of safe deposit box Komerční banka, a.s. Charges according to table Provision of safe did not arise (1 terminated on date ) of charges deposit box Contract for use of direct banking, Komerční banka, a.s. Charges according to table Provision of direct did not arise including addendum of charges banking services Contract for issue and use of payment cards Komerční banka, a.s. Charges according to table Issue of payment did not arise of charges cards and processing of transaction Agreement on provision of chip card readers Komerční banka, a. s. Price according to contract Provision of chip did not arise card readers Report on Relations between Connected Persons for the Accounting Period of

50 Type of contract(or subject Contracting party Performance of Consideration Harm incurred of contract if no name is given) Company by company Contracts for leasing of non-residential Komerční banka, a. s. Price according to contract Provision of non-residential did not arise premises, movable things and payment for premises and movable things services associated with their use Individual contract for provision of Komerční banka, a.s. Charges according Consultation in the area of did not arise consultation, including addendum to contract risk management Contract for processing of data Komerční banka, a. s. Charges according to Processing of client data did not arise contract Framework mutual cooperation contract Komerční banka, a.s. Charges according to Ensuring mutually effective did not arise contract cooperation Individual mutual cooperation contract Komerční banka, a.s. Charges according to Provision of banking did not arise table of charges information Licence contract Komerční banka, a.s. Charges according to contract Provision of trademark did not arise Distribution contract, including addendum Komerční banka, a.s. Charges according to contract Brokering of sale of products did not arise Agreement on designation of Komerční banka, a.s. Price according to contract Individual prices for services did not arise individual prices billed on current accounts of clients Mutual cooperation contract Komerční banka, a.s. Provision of services Provision of Banking services did not arise according to contract to employees of FKB Insurance premium payment contract Komerční banka, a.s. Payment of insurance Conclusion of insurance for did not arise premium the risks of the Company Contract for leasing of non-residential Penzijní fond Price according to contract Provision of non-residential did not arise premises and payment for services Komerční banky, a.s. premises and parking places associated with their use, including addendum Contract for provision of advantageous Modrá pyramida Provision of advantageous Provision of advantageous did not arise conditions for employees of KB, a.s. stavební conditions conditions participants of building savings in MPSS spořitelna, a.s. B. Other acts in law performed by the Company in the interests of the controlling person and other connected persons On the basis of the decision of the general meeting of the company PROTOS, uzavřený investiční fond, held on the date 31 March 2008, a proposal of the board of directors was approved for the allocation of profit, and the Company received a dividend in the amount of CZK 22,380, C. Measures adopted or made by the Company in the interests of the controlling person and other connected persons or at their instigation In the course of 2008 no measures were adopted or made by the Company in the interests of the controlling person and other connected persons or at their instigation. III. Conclusion The board of directors of the Company has examined all the relations between the Company and the connected person for the accounting period of 2008, and it asserts that no harm was incurred by the Company from any concluded contract, agreement, other act in law or other measures made or adopted by the Company in the accounting period. Prague, 6 February 2009 Milan Corjak Václav Tomandl Marcela Chalušová Chairman of Board of Directors Deputy chairman of Board of Directors Member of Board of Directors 48 Report on Relations between Connected Persons for the Accounting Period of 2008

51 Factoring KB, a.s. Lucemburská 7/ Prague 3 tel.: fax: info@factoringkb.cz internet: Consulting, design and production: B.I.G. Prague, 2009

52