SECURITIES AND STOCK EXCHANGE COMMISSION

Transcription

1 SECURITIES AND STOCK EXCHANGE COMMISSION Consolidated annual report SAB-RS 2003 (pursuant to 57 par. 2 of the Decree of the Council of Ministers dated 16 Oct 2001 (Official Journal No 139, item 1569 and No 31/2002, item. 280) (for banks) For the p eriod from 01 Jan 2003 and 31 Dec Apr 2004 and for the period from 01 Jan 2002 and 31 Dec 2002 (date of issue of the report) ING Bank Slaski Spólka Akcyjna (issuer full name) ING Bank Slaski S.A. (issuer short name) Katowice Sokolska 34 (032) (032) maria.pawlas@ingbank.pl (telephone) (fax) ( ) (NIP) (REGON) (www) KPMG Polska Audyt Sp. z o.o. (The company authorised to audit financial statements) ============================================================================================================= The annual report consists of: Auditor s opinion and report on the consolidated financial statements Letter from the President of the Management Board Annual consolidated financial statements Introduction Consolidated balance sheet Consolidated profit and loss account Commentary of the Bank Management Board (report regarding the activity of the year) SELECTED FINANCIAL DATA Changes in consolidated equity capital Consolidated cash flow statement Additional information and notes in thousand PLN end of the year 2003 end of the year 2002 in thousand EUR end of the year 2003 end of the year 2002 I. Interest income II. Fee and commission income III. Result on banking activity IV. Operating profit V. Gross profit (loss) VI. Net profit (loss) VII. Net cash flow from operating activities VIII. Net cash flow from investment activities IX. Net cash flow from financial activities X. Net cash flow, total XI. Total assets XII. Due to Central Bank XIII. Due to other financial institutions XIV. Due to customers and State budget XV. Own equity XVI. Share capital XVII. Number of shares XVIII. Net book value per share (in PLN / EUR) 207,71 208,86 44,03 51,95 XIX. Diluted book value per share (in PLN / EUR) XX. Solvency ratio 14,57 14,32 XXI. Net profit (loss) per ordinary share (in PLN / EUR) 2,21 10,85 0,50 2,80 XXII. Diluted net profit (loss) per ordinary share (in PLN / EUR) XXIII. Declared or paid dividend per ordinary share ( in PLN / EUR) 0,80 2,40 0,17 0,60

2 Translation of document originally issued in Polish OPINION OF THE INDEPENDENT AUDITOR To the Shareholders of ING Bank Slaski S.A. We have audited the accompanying consolidated financial statements of Capital Group, in which ING Bank Slaski S.A. seated in Katowice is a parent entity, consisting of the introduction to the consolidated financial statements, the consolidated balance sheet as at 31 December 2003, with total assets and total liabilities and equity of PLN 28,166,795 thousand, the capital adequacy ratio, the statement of consolidated contingencies and commitments granted as at 31 December 2003 amounting to PLN 8,039,869 thousand, the consolidated profit and loss account for the year then ended with a net profit of PLN 28,735 thousand, the statement of changes in consolidated equity for the period from 1 January 2003 to 31 December 2003, with a decrease in equity of PLN 14,911 thousand, the consolidated cash flow statement for the year then ended with an increase in cash amounting to PLN 53,235 thousand, and the supplementary information and explanations. These financial statements are the responsibility of the Management Board of the parent entity. Our responsibility is to audit and express an opinion on whether these financial statements and the accounting records from which they were derived present a true and fair view. We conducted our audit in accordance with International Standards on Auditing as promulgated by the International Federation of Accountants, section 7 of the Polish Accounting Act dated 29 September 1994 (Official Journal published 2002, No 76, item 694 with subsequent amendments) and the professional standards established by the Polish National Council of Certified Auditors. These standards require that we plan and perform the audit to obtain reasonable assurance that will enable us to express an opinion on the consolidated financial statements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by Management Board of the parent entity, as well as evaluating the overall consolidated financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.

3 Translation of document originally issued in Polish In our opinion, the consolidated financial statements of ING Bank Slaski S.A. Capital Group present fairly, in all material aspects, the financial position of the Capital Group as at 31 December 2003 and the results of its operations and cash flows for the year then ended in accordance with the accounting standards applied in Poland as set out in the Polish Accounting Act dated 29 September 1994, the ordinance of Minister of Finance dated 10 December 2001 regarding special accounting principles for banks (Official Journal published 2001, no 149, item 1673 with subsequent amendments), the ordinance of Minister of Finance dated 12 December 2001 regarding the preparation of the consolidated financial statements of banks and financial holdings (Official Journal published 2001, no 152, item 1728), the requirements relating to issuers of publicly traded securities and are in compliance with the respective laws, regulations of the Capital Group, that apply to the consolidated financial statements. As required under the Polish Accounting Act dated 29 September 1994 we also report that the Report on the Capital Group s activities includes the information required by Art. 49 Note 2 of the Accounting Act and the information is consistent with the consolidated financial statements. signed on the Polish original... Certified Auditor No. 4979/2575 Hanna Fludra signed on the Polish original... For KPMG Polska Audyt Sp. z o.o. ul. Chlodna 51; Warsaw Certified Auditor No. 9941/7390 Bozena Graczyk, Member of the Board Warsaw, 16 April 2004

4 Translation of document originally issued in Polish CAPITAL GROUP OF ING BANK SLASKI S.A. OPINION AND REPORT OF INDEPENDENT AUDITOR AND CONSOLIDATED FINANCIAL STATEMENTS FOR PERIOD FROM 1 JANUARY 2003 TO 31 DECEMBER 2003

5 kpmg Capital Group of ING Bank Slaski S.A. for the year ended 31 December 2003 TRANSLATION o 1 General General information on the Bank Structure of the Capital Group Auditor information Legal status Prior period consolidated financial statements of the Capital Group Audit scope responsibilities Information about audits of financial statements of entities included in consolidated financial statements Financial analysis of the Capital Group of ING Bank Slaski S.A Summary of the consolidated financial statements Selected financial ratios for the Capital Group of ING Bank Slaski S.A Interpretation of selected financial ratios Detailed report Accounting principles Basis for preparation consolidated financial statements Principles of prudence applied by the Bank and the capital adequacy ratio Materiality levels applied by the auditor Introduction to consolidated financial statements Supplementary information and explanations Directors report on the Bank s activities Information on independent auditor s opinion...12 Translation of document originally issued in English 2

6 kpmg Capital Group of ING Bank Slaski S.A. for the year ended 31 December 2003 TRANSLATION o 1 General 1.1 General information on the Bank Holding entity name ING Bank Slaski S.A Registered office ul. Sokolska Katowice Commercial registration Seat of the court: Katowice Date: 9 April 2001 Registration number: KRS Tax Office and Provincial Statistical Office registration NIP: REGON: Structure of the Capital Group In the audited year the structure of the Capital Group of ING Bank Slaski S.A. was as follows: Parent entity: ING Bank Slaski S.A. Subsidiaries: ING Securities S.A. ING BSK Leasing S.A. Slaski Bank Hipoteczny S.A. SOLVER Sp. z o.o. ING Services Sp. z o.o. Centrum Banku Slaskiego Sp. z o.o. Translation of document originally issued in English 3

7 kpmg Capital Group of ING Bank Slaski S.A. for the year ended 31 December 2003 TRANSLATION o Associates: Powszechne Towarzystwo Emerytalne Nationale Nederlanden S.A. Powszechne Towarzystwo Emerytalne ING Nationale Nederlanden S.A. included in the Capital Group of ING Bank Slaski S.A. is an associated entity and was presented in consolidated financial statement using equity method. 1.3 Auditor information KPMG Polska Audyt Sp. z o.o. Ul. Chlodna 51, XVI p Warszawa KPMG Polska Audyt Sp. z o.o. is registered as an authorised company to audit financial statements (number 458). 1.4 Legal status Share capital Holding entity ING Bank Slaski S.A. was established for undefined period by a decision of Banking Supervisory Commission dated 18 October 1991 for undefined period. The share capital of the parent entity as at 31 December 2003 amounted to PLN 130,100.0 thousand divided into 9,260,000 A type ordinary shares and 3,750,000 B type ordinary shares. All shares have nominal value of PLN 10 each Board of Directors of parent entity At 31 December 2003, the Management Board of the holding entity ING Bank Slaski S.A. comprised of the following members: President of the Management Board I Vice-president of the Management Board Vice-president of the Management Board Vice-president of the Management Board Vice-president of the Management Board Vice-president of the Management Board Mr Marian Czakanski Mr Frederik Van Etten Mr Krzysztof Brejdak Mr Grzegorz Cywinski Mr Anthonius Johannes Maria Roozen Mr Cornelis, Theodor Tuijnman Translation of document originally issued in English 4

8 kpmg Capital Group of ING Bank Slaski S.A. for the year ended 31 December 2003 TRANSLATION o There were no changes in the Management Board in On 2 April 2004 the Supervisory Board of ING Bank Slaski S.A. accepted resignation of Mr. Marian Czakanski, which will take place on 25 May At the same time the Supervisory Board of the Bank proposed Mr. Brunon Bartkiewicz as a candidate for the position of President of the Management Board and authorized President of the Supervisory Board, Mr. Andrzej Wróblewski, to make a motion to Banking Supervisory Commission to give assent to the appointment. The Supervisory Board of the Bank dismissed Mr. Cornelis Tuijnmam from the position of Vice- President of the Management Board with date 31 May 2004 due to the fact of his transition to work in other entity of ING Group. At the same time the Supervisory Board of the Bank designated Mr. Maciej Wegrzynski for the position of Vice-President of the Management Board at 1 July Prior period consolidated financial statements of the Capital Group The consolidated financial statements of the Capital Group of ING Bank Slaski S.A. (formerly Capital Group of Bank Slaski w Katowicach S.A.) for the period between 1 January 2002 and 31 December 2002 were audited by KPMG Polska Audyt Sp. z o.o. and received an unqualified opinion. The consolidated financial statements of the Capital Group for the year ended 31 December 2002 were approved at the Shareholders Meeting on 27 May 2003, submitted to the Regional Court for Katowice on 16 Jube 2003 and published in the "National Journal B" No. 256, item 2395 dated 21 August Audit scope responsibilities Audit of the consolidated financial statements of the Capital Group of ING Bank Slaski S.A. was carried out on the basis of the agreement dated 14 November The financial statements consist of: introduction to the consolidated financial statements; consolidated balance sheet as at 31 December 2003 with the total assets and liabilities of PLN 28,166,795 thousand; capital adequacy ratio; consolidated statement of contingencies and commitments granted amounting to PLN 8,039,869 thousand; consolidated profit and loss account for the year ended 31 December 2003 with the net profit of PLN 28,735 thousand; consolidated statement of changes in equity for the period from 1 January 2003 to 31 December 2003 with a decrease in equity of PLN 14,911 thousand; consolidated cash flow statement for the year then ended with an increase in cash amounting to PLN 53,235 thousand. additional notes to financial statements. Translation of document originally issued in English 5

9 kpmg Capital Group of ING Bank Slaski S.A. for the year ended 31 December 2003 TRANSLATION o We conducted the audit in accordance with International Accounting Standards on Auditing as issued by the International Federation of Accountants, section 7 of the Polish Accounting Act dated 29 September 1994 (Official Journal no.76, item 694 with subsequent amendments) and the professional norms established by the Polish National Council of Certified Auditors. We have conducted an independent audit of these consolidated financial statements in order to express an opinion thereon and present it, together with a written auditors report, to the Bank s Supervisory Board, and to the Shareholders. On 16 April 2004, the Parent entity s Board of Directors submitted a representation letter as to the completeness, fairness and accuracy of the financial statements presented for audit which, amongst other things, confirmed that there were no undisclosed matters significantly influencing the information presented in the financial statements for the audited year. All our requests for additional documents and information necessary for expressing our opinion and preparing the report have been fulfilled. KPMG Polska Audyt Sp. z o.o. is independent of the entities forming the Capital Group and the scope of the work planned and performed has not been limited in any way. The method and scope of our audit is detailed in working papers prepared by us and retained at KPMG Polska Audyt Sp. z o.o. premises. 1.7 Information about audits of financial statements of entities included in consolidated financial statements. The financial statements of the Group entities for the period ended 31 December 2002 were audited by KPMG Polska Audyt Sp. z o.o., with the exception for Powszechne Towarzystwo Emerytalne Nationale Nederlanden S.A., which were audited by Ernst & Young Audit Sp. z o.o. Financial statements of Solver Sp. z o.o. and ING Services Sp. z o.o. for the year ended 31 December 2003 were not subject to the audit. Translation of document originally issued in English 6

10 kpmg Capital Group of ING Bank Slaski S.A. for the year ended 31 December 2003 TRANSLATION o 2 Financial analysis of the Capital Group of ING Bank Slaski S.A. 2.1 Summary of the consolidated financial statements Detailed information relating to consolidated balance sheet, consolidated profit and loss and consolidated cash flow items are included in consolidated financial statements of the Capital Group Consolidated balance sheet ASSETS PLN 000 PLN 000 Cash and due from NBP 1,083, ,770 Treasury bills and other bills eligible for refinancing with NBP 16,552 37,572 Due from financial sector 7,738,952 7,987,551 Due from non-financial sector 11,887,913 12,319,761 Due from budget sector 447, ,536 Receivables deriving from the purchase of buy-sell back securities - - Debt securities 4,841,939 2,435,294 Due from subsidiaries consolidated on equity method basis - - Investments in subsidiaries consolidated on equity method basis - - Investments in associated undertakings consolidated on equity method basis 53,208 42,388 Other investments 34,728 14,130 Other securities and other financial assets 432, ,941 Intangible assets 267, ,578 Goodwill of subsidiaries - - Tangible fixed assets 849, ,926 Other assets 229, ,856 Interperiod settlements 284, ,131 TOTAL ASSETS 28,166,795 26,941,434 Translation of document originally issued in English 7

11 kpmg Capital Group of ING Bank Slaski S.A. for the year ended 31 December 2003 TRANSLATION o LIABILITIES PLN 000 PLN 000 Liabilities Due to financial sector 3,099,697 2,694,421 Due to non-financial sector 19,774,321 18,762,365 Due to budget sector 1,060,265 1,297,767 Liabilities deriving from the sale of sell buy back securities 337,375 - Debt securities issued - - Other financial instruments 256,362 82,236 Due to subsidiaries consolidated on equity basis 19,092 8,747 Special funds and other liabilities 315, ,972 Accruals and deferred income 290, ,789 Negative value of minority shareholders - - Provisions 316, ,709 Subordinated debt - - Minority capital (4,511) 17,191 25,464,469 24,224,197 Equity Share capital 130, ,100 Equity reserves 998, ,700 Revaluation reserve 22,447 34,332 Other reserves 1,541,632 1,429,030 Undistributed profit (not covered loss) from prior year (18,773) (9,032) Net profit 28, ,107 2,702,326 2,717,237 Total equity & liabilities 28,166,795 26,941,434 Capital adequacy ratio 14.57% 14.32% OFF BALANCE SHEET PLN 000 PLN 000 Liabilities granted 8,039,869 9,415,374 Liabilities received 11,945,735 8,338,834 Commitments resulting from sale/purchase transactions 55,853,333 50,649,245 Other 84,916,975 33,581,254 Total off balance sheet 160,755, ,984,707 Translation of document originally issued in English 8

12 kpmg Capital Group of ING Bank Slaski S.A. for the year ended 31 December 2003 TRANSLATION o Consolidated profit and loss account PLN 000 PLN 000 Interest income 1,629,023 2,304,125 Interest expense (750,903) (1,288,355) Net interest income 878,120 1,015,770 Fee and commission income 610, ,854 Fee and commission expense (85,072) (63,139) Net fee and commission income 525, ,715 Income from shares, other securities and other financial instruments 1,468 1,121 Net profit on financial operations 59,197 21,426 Net profit on foreign exchange 53, ,847 Profit on banking activity 1,518,187 1,669,879 Other operating income 39,818 49,704 Other operating expenses (80,511) (87,689) General expenses (828,677) (925,035) Depreciation (145,621) (151,994) Charges to provisions and revaluation (2,447,068) (2,327,974) Release of provisions and revaluation 2,041,318 1,948,074 Net releases of provisions and decrease in respect of revaluation (405,750) (379,900) Operating profit 97, ,965 Extraordinary gains / (losses) Charges to goodwill from consolidation Charge to capital reserve from consolidation Profit before taxation 97, ,280 Corporate income tax (101,451) (63,766) Other gross profit charges (22) (1,438) Share in (profits) losses of entities included in the consolidation on equity basis 10,820 13,777 Profit / (loss) of minority shareholders 21,703 17,254 Net profit 28, ,107 Translation of document originally issued in English 9

13 kpmg Capital Group of ING Bank Slaski S.A. for the year ended 31 December 2003 TRANSLATION o 2.2 Selected financial ratios for the Capital Group of ING Bank Slaski S.A Total assets (PLN thousand) 28,166,795 26,941,434 Profit before taxation (PLN thousand) 97, ,280 Net profit (PLN thousand) 28, ,107 Consolidated equity (PLN thousand), excl. current year profit 2,673,591 2,576,130 Net profit to consolidated equity (average value of equity) 1.1% 5.5% Capital adequacy ratio of the Capital Group 14.57% 14.32% Net receivables to total assets 71.3% 77.6% Income earning assets to total assets 92.4% 90.5% Cost bearing liabilities to total liabilities 86.2% 84.5% Irregular loans to toal loans (non-financial sector) 26.6% 28.3% 2.3 Interpretation of selected financial ratios The most significant changes in the consolidated balance sheet and the profit and loss account items are analysed below. The total consolidated balance sheet grew by 1,225,361 thousand, i.e. 4.5% during the year. The main growth driver in 2003 was an increase in deposits taken from customers. Gross consolidated profit before tax for the year ended 31 December 2003 amounted to PLN 97,685 thousand. It was lower than in the previous year by PLN 77,595 thousand, despite significant reduction of general expenses from PLN 925,035 thousand in prior year to PLN 828,677 thousand in The main factor for it is decrease in net interest income from PLN 1,015,770 thousand to PLN 878,120 thousand and lower foreign exchange result. As a result, return on equity decreased from 5.5% in prior year to 1.1% in Translation of document originally issued in English 10

14 kpmg Capital Group of ING Bank Slaski S.A. for the year ended 31 December 2003 TRANSLATION o 3 Detailed report 3.1 Accounting principles The accounting principles applied by the Parent Entity comply with the Accounting Act dated 29 September 1994 (Official Journal published 2002 No. 76, item 694 with subsequent amendments) and the Resolution of Minister of Finance dated 10 December 2001 regarding specific accounting rules for banks (Official Journal No. 149, item 1673 with amendments). The financial statements of the consolidated entities were prepared on the same balance sheet date as financial statements of the Parent Entity namely 31 December The consolidated entities, in all material aspects, apply the same accounting principles. 3.2 Basis for preparation consolidated financial statements. The consolidated financial statements of the Capital Group of ING Bank Slaski S.A. have been prepared in accordance with relevant legal regulation concerning capital groups, included in the chapter 6 of the Accounting Act dated 29 September 1994, regulations issued on the basis of the Act as well as regulations concerning entities issuing securities admitted to public trading, which are applied on a consistent basis. The basis for preparation of the consolidated financial statements was the consolidation documentation. The consolidation documentation prepared by the Parent Entity complies with the Regulation of Minister of Finance dated 12 December 2001 in respect of the special rules for consolidated bank accounting and consolidated financial holding companies accounting (Official Journal No. 152, item 1728). The method of consolidation of subsidiaries and associates has been presented in detail in the Introduction to consolidated financial statements of Capital Group of ING Bank Slaski S.A. Translation of document originally issued in English 11

15 kpmg Capital Group of ING Bank Slaski S.A. for the year ended 31 December 2003 TRANSLATION o 3.3 Principles of prudence applied by the Bank and the capital adequacy ratio In the context of the audit of the consolidated financial statements, no material exceptions have been noted in the principles of prudence applied by the Capital Group. The capital adequacy ratio was calculated properly. 3.4 Materiality levels applied by the auditor In order to issue the audit opinion on the consolidated financial statements treated as a whole, materiality levels applied by the auditor were adequate to the materiality and the risk assessment of particular items of the financial statements. 3.5 Introduction to consolidated financial statements The introduction to the consolidated financial statements constitutes an integral part of the financial statements. All information included in the Introduction to the financial statements is presented fairly by the Bank when read in conjunction with the financial statements taken as a whole. Notes to the consolidated financial statements 3.6 Supplementary information and explanations All information included in the notes to the consolidated financial statements is presented accurately and completely by the holding entity. They should be treated as an integrated part of the financial statements. 3.7 Directors report on the Bank s activities The information presented in the Directors report on the Bank's activities is consistent with the financial statements and requirements specified in art. 49 par. 2 of the accounting act. 3.8 Information on independent auditor s opinion Based on our audit of the consolidated financial statements of Capital Group of ING Bank Slaski S.A. as at 31 December 2003 we issued unqualified auditor s opinion. Translation of document originally issued in English 12

16 kpmg Capital Group of ING Bank Slaski S.A. for the year ended 31 December 2003 TRANSLATION o signed on the Polish original... Certified Auditor No 4979/2575 Hanna Fludra signed on the Polish original... For KPMG Polska Audyt Sp. z o.o. ul. Chlodna 51; Warsaw Certified Auditor No. 9941/7390 Bozena Graczyk, Member of the Board Warsaw, 16 April 2004 Translation of document originally issued in English 13

17 ING Bank Slaski Spólka Akcyjna Group TRANSLATION of DRAFT DOCUMENT ISSUED IN POLISH INTRODUCTION TO THE CONSOLIDATED FINANCIAL STATEMENTS AS AT 31 DECEMBER 2003 I GENERAL INFORMATION OF THE ISSUER ING BANK SLASKI SPÓLKA AKCYJNA GROUP KATOWICE, UL. SOKOLSKA 34 With decision of District Court in Katowice of 9 April 2001, Bank Slaski S.A. in Katowice was registered in the National Court Register under the number KRS With decision of District Court in Katowice of 6 September 2001, the new name of the Bank was registered in the National Court Register, and this legally binding name is: ING Bank Slaski Spólka Akcyjna or in short ING Bank Slaski S.A.. The share capital of ING Bank Slaski S.A. amounts to PLN 130,100,000 consisting of 13,010,000 ordinary shares with a nominal value of PLN 10 each. ING Bank Slaski S.A. is a parent entity of the Group of ING Bank Slaski S.A.. The primary activity of the parent entity according to polish activity classification 65.12A The activities of the ING Bank Slaski S.A. Group are as follows: - opening and maintaining bank accounts; - accepting savings deposits and term deposits; - issuing own securities, including bonds and certificates, and trading them on the securities markets, purchasing and selling securities for its own account and for the account of third parties; - granting and obtaining loans, acting as an agent and intermediary for granting loans; - foreign exchange transactions; - financial services supporting foreign trade operations; - cash settlements, bills of exchange operations, granting and accepting guarantees and other commitments; - acceptance of cheques and promissory notes; - concluding agreements and processing of payments on bank accounts and on the purchase of goods and services in Poland; - making payments according to inter-bank transactions agreements; - financial and operational participation in international financial transactions; - taking and placing funds in domestic and foreign banks; - safe-keeping of assets and securities; - custodian services; 1

18 ING Bank Slaski Spólka Akcyjna Group TRANSLATION of DRAFT DOCUMENT ISSUED IN POLISH - providing services ordered by other banks; - other co-operation with domestic, foreign and international banks and financial institutions; - on request of the Ministry of Privatisation, performing services relating to the privatisation of state-owned companies; - managing shares from State Treasury; - leasing, factoring, forfeiting, underwriting and other financial services; - brokerage services, including the maintenance of securities accounts, accepting orders to purchase units of trust funds, investment funds, and purchasing and acquisition of investment certificates; - running of housing saving societies; - issuing payment cards and processing operations made with cards; - acting as a broker for insurance companies and pension funds; - activities related to warranties; - other types of activities outlined in the Bank s Statutes - activities related to operations of other members of the ING Bank Slaski Group within the scope of: - granting mortgage loans; - trading mortgage-backed securities; - brokerage services; - leasing and factoring services; - financial consulting and intermediary; - creating and management of pension funs; - financial intermediary, market research and analysis; - real estate rental services. II SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS The financial statements are prepared for the year 2003 and contain comparable financial data as at 31 December The consolidated financial statements have been prepared in accordance with: - The Accounting Act of 29 September 1994 (Official Journal of 2002, No. 76, item 694, with subsequent amendments); - Resolution of Minister of Finance, dated 10 December 2001, in respect of provisions against the risk of banking activity (Official Journal No. 149, item 1672, with subsequent amendments); - Resolution of Minister of Finance, dated 10 December 2001, in respect of specific accounting principles for banks (Official Journal No. 149, item 1673, with subsequent amendments); - Resolution of Minister of Finance, dated 12 December 2001, in respect of accounting principles for preparing consolidated financial statements of a bank and financial holding (Official Journal No. 152, item 1728); - Resolution of Minister of Finance, dated 12 December 2001, in respect of the recognition, valuation, disclosure and presentation of financial instruments (Official Journal No. 149, item 1674, with subsequent amendments); 2

19 ING Bank Slaski Spólka Akcyjna Group TRANSLATION of DRAFT DOCUMENT ISSUED IN POLISH - additionally, in accordance with the applicable accounting principles currently applied by the ING Bank Slaski S.A. and recommendations of the General Inspectorate of Banking Supervision of NBP and the Securities and Stock Exchange Commission. III THE MANAGEMENT BOARD AND THE SUPERVISORY BOARD The Management Board of the Bank In the year 2003 there was no changes in the Management Board. As at 31 December 2003 the Management Board was comprised of the following members: Mr. Marian Czakanski President of the Management Board Mr. Frederik Van Etten I-st Vice-President of the Management Board Mr. Krzysztof Brejdak Vice-President of the Management Board Mr. Grzegorz Cywinski Vice-President of the Management Board Mr. Anthonius Johannes Maria Roozen Vice-President of the Management Board Mr. Cornelis Theodor Tuijnman Vice-President of the Ma nagement Board On 29 March 2004 President of the Management Board, Mr. Marian Czakanski, informed about his intension to resign from the position because of personal reasons at date of the General Shareholders Meeting for year On 2 April 2004 the Supervisory Board of ING Bank Slaski S.A. accepted resignation of Mr. Marian Czakanski, which will take place on 25 May 2004 at the General Shareholders Meeting for year At the same time the Supervisory Board of the Bank designated Mr. Brunon Bartkiewicz as a candidate for the position of President of the Management Board and authorized President of the Supervisory Board, Mr. Andrzej Wróblewski, to make a motion to Banking Supervisory Commission to give assent to the appointment. The Supervisory Board of the Bank dismissed Mr. Cornelis Tuijnmam from the position of Vice-President of the Management Board with date 31 May 2004 due to the fact of his transition to work in other entity of ING Group. At the same time the Supervisory Board of the Bank designated Mr. Maciej Wegrzynski for the position of Vice-President of the Management Board at 1 July The Supervisory Board of the Bank On 27 May 2003 at the General Shareholders Meeting Mr. Erik Dralans was appointed as Supervisory Board Member. On 28 May 2003 Mr. Ralf Hartmut Fiedler resigned from the position of Supervisory Board Member of ING Bank Slaski. As at 31 December 2003 the Supervisory Board was comprised of the following members: Mr. Andrzej Wróblewski Mr. Johannes Nijssen President of the Supervisory Board Vice-President of the Supervisory Board 3

20 ING Bank Slaski Spólka Akcyjna Group Mr. Jerzy Rokita Mr. Erik Dralans Mr. Lech Weclewski TRANSLATION of DRAFT DOCUMENT ISSUED IN POLISH Secretary of the Supervisory Board Member of the Supervisory Board Member of the Supervisory Board IV GOING CONCERN Formatted The consolidated financial statements were prepared in accordance with the going concern assumption, taking into account that the ING Bank Slaski Group will continue its activity in the foreseeable future. There are no known circumstances directly indicating any threat to the Group s continued operations. 4

21 ING Bank Slaski Spólka Akcyjna Group TRANSLATION of DRAFT DOCUMENT ISSUED IN POLISH V THE GROUP ORGANISATIONAL STRUCTURE OF THE ISSUER S RELATED ENTITIES AND INFORMATION CONCERNING THE TYPE OF RELATIONSHIP Formatted CAPITAL GROUP ING BANK SLASKI S.A. PARENT ENTITY ING SECURITIES S.A. SUBSIDIARY 100% 20% PTE ING NN S.A. ASSOCIATED ENTITY SOLVER SP. Z O.O. SUBSIDIARY 79,79% 100% SLASKI BANK HIPOTECZNY S.A. SUBSIDIARY 99% ING Services Sp. z o.o. SUBSIDIARY 100% \ ING BSK LEASING S.A. SUBSIDIARY 50% of votes on the General Shareholders Meeting 60% of statutory capital CENTRUM BANKU SLASKIEGO SP.Z O.O. JOINTLY-CONTROLLED ENTITY 5

22 ING Bank Slaski Spólka Akcyjna Group TRANSLATION of DRAFT DOCUMENT ISSUED IN POLISH VI LIST OF RELATED ENTITIES Formatted Formatted List of related entities comprising issuer s capital group under full consolidation or equity method (in PLN 000) Name of entity (legal status) ING Securities Spólka Akcyjna ING BSK Leasing Spólka Akcyjna Slaski Bank Hipoteczny Spólka Akcyjna ING Services Sp. z o.o. Solver Sp. z o.o. Location Warsaw Katowice Warsaw Katowice Bielsko-Biala Primary activity (according to Polish Classification of Activity) Register Court Percentage of share capital Share in general number of votes at general meeting of shareholders Character of capital connection Way of recognition in financial statements Day of gaining control in subsidiary Brokerage District Court of Warsaw, XIX Economic Department, KRS no of Leasing and factoring District Court of Katowice, VIII Economic Department KRS no of Banking services District Court of Warsaw, XX Economic Department, KRS no of IT services, IT process management services, lease of IT equipment District Court of Katowice, VIII Economic Department, KRS no of Whole- and retail sale of foods and industry goods, real estate services District Court of Bielsko-Biala, VIII Economic Department, KRS no of % 100% 100% 99% 79.79% 100% 100% 100% 99% 79.79% Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Consolidation Consolidation Consolidation Consolidation Consolidation ING Securities S.A., ING BSK Leasing S.A., Slaski Bank Hipoteczny S.A., Solver Sp. z o.o., ING Services Sp. z o.o. and Centrum Banku Slaskiego Sp.z o.o. were fully consolidated in the financial statements of ING Bank Slaski S.A. 6

23 ING Bank Slaski Spólka Akcyjna Group TRANSLATION of DRAFT DOCUMENT ISSUED IN POLISH Related entities outside ING Bank Slaski Capital Group (in PLN 000) in PLN thousand Name of entity (legal status) Centrum Banku Slaskiego Sp. z o.o. * Powszechne Towarzystwo Emerytalne ING Nationale Nederlanden S.A. Location Katowice Warsaw Primary activity Realisation of building contracts, rendering various services, organising conferences and trainings Creating and management of Open Pension Fund Register Court District Court of Katowice, VIII Economic Department KRS no dated District Court of Warsaw, XIX Economic Department KRS no dated Percentage of share capital 60% 20% Share in general number of votes 50% 20% at general meeting of shareholders Type of capital relation Jointly-controlled entity Associated entity Way of recognition in financial Consolidation Equity method statements Date of gaining control or starting to exert a significant influence Equity: 8, ,840 - share capital 91,791 33,000 - reserve capital ,000 - unpaid contributions to share - - capital - other: undistributed profit or -37,213 9,445 uncovered loss of prior years - net profit (loss) of current year -63,088 56,595 Liabilities: 361,265 no information Long-term 357,421 no information Receivables incl: 6,301 no information Long-term - no information Total assets 355,043 no information Sales 26,918 no information Shares unpaid by issuer - - Dividends received or receivable for last financial year - - * data from preliminary, not audited financial statement. Centrum Banku Slaskiego Sp. z o.o. is a jointly-controlled company (established under provisions of Trade Code) and a subsidiary running entirely different activity (not being a bank, credit or financial institution or auxiliary banking services enterprise). However, taking into account the nature of relations of Centrum Banku Slaskiego with ING BSK S.A. i.e. financing the company with loans granted by ING Bank Slaski S.A. (together 7

24 ING Bank Slaski Spólka Akcyjna Group TRANSLATION of DRAFT DOCUMENT ISSUED IN POLISH with credit risk resulting from it) and pledging company s property as a collateral for these loans the entity was recognised in consolidated financial statements of ING Bank Slaski S.A. Group under full consolidation method. ING PTE Nationale -Nederlanden S.A. as an entity associated with ING Bank Slaski S.A. was recognised in consolidated financial statements of ING Bank Slaski S.A. Group under equity method. VII COMPARABILITY OF FINANCIAL DATA Formatted The consolidated financial statements for the year ending 31 December 2002, in accordance to the Regulation of Board of Ministers, dated 16 October 2001, on detailed conditions on the issuing prospectus, and the Regulation of the Board of Ministers, dated 16 October 2001, on current and periodic information, which is presented by the issuers of securities (Official Journal No. 139, item 1568 and item 1569, with later amendments), were adjusted, so they are comparable to the information contained in the financial statements for the year ended 31 December The breakdown of differences resulting from the changes in the way financial statements are prepared is presented in Note 34 of the additional information to the financial statements. VIII AUDITOR S OPINION Formatted The consolidated financial statements for the year ended 31 December 2002 were audited by KPMG Polska Audyt Sp. z o.o. and received an unqualified opinion. IX ACCOUNTING PRINCIPLES Formatted The ING Bank Slaski S.A. Group s accounting records are maintained in accordance with the generally accepted accounting principles as defined in the Accounting Act dated 29 September 1994 and the Resolution of Ministry of Finance dated 10 December 2001 in respect of specific accounting principles for banks and the Resolution of Ministry of Finance dated 18 December 2001 in respect of specific accounting principles for brokerage houses and banking entities that run brokerage activity. The Group s accounting records are prepared with reference to the underlying accounting principles i.e. completeness, chronology, accrual basis, matching concept, materiality, no netting off of assets and liabilities, related income and expenses, and extraordinary profits and losses, consistency principle and the double entry principle in the sub-accounts. X PRINCIPLES FOR PREPARING CONSOLIDATED FINANCIAL STATEMENTS Formatted The following subsidiaries: ING Securities S.A., ING BSK Leasing S.A., Slaski Bank Hipoteczny S.A. ING Services and Solver Sp. z o.o. have been consolidated under full consolidation method. 8

25 ING Bank Slaski Spólka Akcyjna Group TRANSLATION of DRAFT DOCUMENT ISSUED IN POLISH Jointly controlled company Centrum Banku Slaskiego Sp. z o.o. has been consolidated under full consolidation method. Under full consolidation method, all balance sheet and income statement, as well as, off-balance sheet items of parent and subsidiaries are summed up in full amounts. Then, consolidation adjustments and exclusions are made. The following items were eliminated during the consolidation process: 1. share capitals of subsidiaries consolidated under the full method; 2. acquisition price of shares of subsidiaries consolidated under the full method; 3. equity method valuation of subsidiary entities; 4. intercompany receivables and payables; 5. contribution-in-kind transferred from the parent company to the subsidiaries; 6. intergroup securities transactions; 7. purchase and sales values of securities between parent and subsidiaries consolidated; 8. income and expenses of intergroup operations; 9. unrealised gains and losses, from the point of view of the group, from operations between parent and subsidiaries; 10. negative goodwill of the subsidiary 11. undrawn credit lines granted and received and other off balance sheet transactions between parent entity and entities under consolidation. Furthermore, adjustments resulting from different accounting policies applied within the group were made. More detailed information is presented in Note 17 of the supplementary notes to the consolidated financial statements. XI ACCOUNTING PRINCIPLES APPLIED IN PREPARING CONSOLIDATED FINANCIAL STATEMENTS Formatted Accounting for entities under consolidation is conducted in accordance with the generally accepted accounting principles as determined in the Accounting Act dated 29 September 1994, the Resolution of Minister of Finance dated 10 December 2001 concerning specific accounting principles for banks, Resolution of Minister of Finance, dated 12 December 2001, in respect of accounting principles for preparing consolidated financial statements of a bank and financial holding (Official Journal No. 152, item 1728), and the Resolution of Minister of Finance, dated 18 December 2001 concerning specific accounting principles for brokerage houses and banking entities that run brokerage activity (Official Journal No. 153, item 1753). Assets, liabilities and equity of the ING BSK S.A. Group were valued at cost/ acquisition price not higher than net realisable value i.e. taking into account impairment or revaluation. The impairment and revaluation was made in compliance with the prudence principle. The valuation of assets, liabilities, income and expenses, the calculation of the net result and the presentation of financial data in financial statements is made as follows: 9

26 ING Bank Slaski Spólka Akcyjna Group TRANSLATION of DRAFT DOCUMENT ISSUED IN POLISH Fixed assets Tangible and intangible fixed assets are stated at net book value as initial value (purchase price or cost) plus any improvements made less accumulated depreciation and impairment. Depreciation for tax purposes is calculated on a straight-line basis in accordance with the rates defined by the Corporate Income Tax Act dated 15 February 1992 (Official Journal No. 106, item 482 of 1993, with later amendments). For accounting purposes, tangible and intangible fixed assets are depreciated at rates that are determined in accordance with article 32 of the Accounting Act of 29 September 1994 (Official Journal of 2002, No. 76, item 694, unified version). The Group applies depreciation rates based on identified groups of fixed assets. Individual depreciation rates within each group are applied to leasehold investments/improvements and to computer software and copyrights. Initial value of asset is increased by any expenses of improvements, such as adaptation, modernization, or reconstruction that increase at the same time an asset s utility value. Assets Under Construction include the overall costs incurred directly related to unfinished construction, installation, purchase of new, or improvement of an existing fixed asset. They are valued at cost or purchase price. The acquisition cost or price includes all costs incurred from the beginning of the investment up to the balance sheet date or the date when the asset was put into use, and also includes non-deductible VAT, interests, commission, and foreign exchange differences. Tangible and intangible fixed assets put into use subject to finance lease agreements are recorded as fixed assets and depreciated with the same methods applicable to other fixed assets or intangibles, for lower of the agreement period or estimated useful life of the assets. The fixed assets under finance lease agreements are also subject to impairment. In the period between 1994 and 1999, the parent entity availed of investment tax relief. The value of assets under construction included in the tax relief during this period amounted to PLN 255,898 thousand. Depreciation of fixed assets under investment tax relief is a non-deductible cost for tax purposes. It is treated as a timing difference in the deferred tax calculations caused by different recognition of revenues as earned and costs as incurred, in accorda nce with the accounting and tax regulations. The depreciation charge for fixed assets under investment tax relief amounted to PLN 8,012 thousand for the period from 1 January 2003 to 31 December As at 31 December 2003, PLN 85,557 thousand of investment tax relief remains to be depreciated. This amount is included in the deferred tax calculation as a timing difference. Goodwill acquired as a result of the acquisition of Wielkopolski Bank Rolniczy S.A. is being amortised over a 5-year period. Goodwill of ING Bank N.V. Warsaw Branch brought in as a contribution-in-kind is being amortised over a 10-year period. Goodwill acquired as a result of acquisition of ING Barings Securities (Poland) S.A. is being amortised over a 5-year period. Depreciation of goodwill is charged to other operating expenses. 10

27 ING Bank Slaski Spólka Akcyjna Group TRANSLATION of DRAFT DOCUMENT ISSUED IN POLISH Share capital raising costs composing of brokerage costs, costs of prospectus and payments to National Depository of Securities together with consulting costs related to preparation of Issuance Prospectus according to the amended Commercial Code decreased the reserve capital that arisen from the surplus of the issuance value over the nominal value of shares. Other expenses related to the increase in share capital were presented as accruals and amortised over a 5-year period. The Group capitalises costs relating to realisation of long-term IT projects as well as research and development (R&D) projects. The costs incurred result from past events, are reliably quantifiable and are capitalised after the analysis and assessment of probability of realising future gains. Verification is made as at the balance sheet date. They are amortised over period justified by type and volume of the expenses, and in case of R&D projects after decision of classification to intangibles over period no longer than 5 years. Assets for sale represent fixed and current assets that were repossessed in lieu of receivables during the process of restructuring of corporate entities, settlements of repossession, acquisition of collateral and vindication (including private debtors) and are intended to be sold. These assets are recognized in the balance sheet at fair value and for the difference between the value of outstanding debt and the lower asset s estimated fair value write-offs is made. If the fair value is higher than the value of an outstanding debt the difference is recognised as a liability to a borrower. These assets are not subject to depreciation but are subject to impairment. The parent entity is obliged to sell them within a three-year period from the purchase/repossession date. After this period they are treated as assets utilised by the parent entity. Long term investments in properties Investments in properties presented in the balance sheet as fixed assets are valued at the day of purchase or origination at the purchase price or cost, less accumulated depreciation and impairment. The impact of revaluation of investments, that results in an increase in their value to market prices is recognised in the revaluation capital. The impact of a decrease in the valuation, which was previously revaluated and recognised in revaluation capital decreases the revaluation capital up to the amount of this revaluation for the particular asset. Impairment of investment property is presented in an item specific provision charges and revaluation. Loans and granted off-balance sheet commitments Loans granted and other non-trading receivables are presented in the annual financial statements at amortised cost (without consideration of effective interest rate) net of specific provisions established to cover possible losses resulting from credit risk. The level of specific provisions is determined by the risk assessment in respect of the receivables and complies with Regulation of the Minister of Finance dated 10 December 2001 regarding the principles of specific provisions creation for the risks of banking activities. The following minimum rates of specific provisions are applied to individual risk categories: - normal (granted for individuals, excluding mortgage loans) 1.5 % 11

28 ING Bank Slaski Spólka Akcyjna Group TRANSLATION of DRAFT DOCUMENT ISSUED IN POLISH - watch 1.5 % - sub-standard 20.0 % - doubtful 50.0 % - loss % In accordance with the MF Regulation, collateral offset is taken into consideration when calculating provisions for credit risk. Bank applies methodology of creating and releasing of provisions taking tax aspect into consideration, which results in the form of technical increase of incomes and expenses connected with update of level of provisions. Furthermore, in accordance with the MF Regulation of 10 December 2001 regarding the principles of specific provisions creation for the risks of banking activities, parent entity decreased the level of provisions in the normal and watch categories by an allocation of up to 25% of the general risk reserve. As at 31 December 2003, to cover the provision for normal and watch loans, PLN 32,850 thousand was allocated from the general risk reserve. Off-balance sheet commitments granted are recognised at nominal amount. For offbalance sheet commitments granted, which are classified as irregular, including irrevocable, undrawn credit lines and the Bank s commitments arising on the rediscounting of bills of exchange and factoring with recourse, in accordance with Regulation of the Banking Supervisory Commission dated 10 December 2001, regarding the conditions that should be met to create provisions for the risk of banking activity, specific provisions are created and presented in the balance sheet item Provisions. For other receivables where collection has been assessed as doubtful, the Group writes them off to fair value and this impairment can be treated as a kind of collateral for potential losses in the lack of repayment. Principles of receivables write-off. In the case when loan receivables are classified as lost for at least one year and provision created is equal to remaining exposure (i.e. net value of receivables amounts to zero), the Bank creates specific provisions against loan receivables (incl. interest) transferring them to off-balance sheet till their write-off, termination or repayment. Along with transferred receivables, the Bank also transfers created specific provision. Investments and debt securities Initially, debt securities are presented at acquisition cost. At the balance sheet date historical cost is adjusted by the revaluation that is subject to the classification of the financial instrument to a particular portfolio, specified in two Resolutions of Minister of Finance dated 10 and 12 December 2001 concerning specific accounting principles for banks and the specific rules for recognition, valuation, disclosure and presentation of financial instruments (Dz. U. no. 149, item 1673 and 1674 respectively). 12