AUDITOR S REPORT and MEMORANDUM on the review of the annual financial statements of Hanwha Bank Magyarország ZRt. at 31 December 2006
Contents Audit Memorandum I.) Assignment 3 II.) Legal situation 4 III.) Annual Financial Statements 6 IV.) Bookkeeping 14 V.) Details on the Balance Sheet 15 Assets 15 Liabilities 22 VI.) Details on the Income Statement 26 VII.) Notes to the Annual Financial Statements 33 2
I.) Assignment Hanwha Bank Magyarország ZRt. engaged BDO Kontroll Könyvvizsgáló és Adótanácsadó Kft. for the purpose of the audit of the year end closing of the books. The audit was performed pursuant to Act C of 2000 on Accountancy (hereinafter Act), Government Decree No. 250/2000. (XII. 24.) on Specific Rules for the Annual Financial Statements and Book-Keeping of Credit Institutions and Financial Enterprises, and in accordance with the standards prescribed by the Hungarian Chamber of Auditors. The review commenced on 26th February 2007. All the necessary documents were made available by the company, the requested information and certificates were provided by the Company s legal representative and the employees. We asked for a signed letter of representation from the Company s management in which the Chef Excecutive Officer and Deputy Chef Excecutive Officer certify that the books include all the assets and liabilities. The audit included the matching of the accounting records with the account balances and their testing by random sampling. We did not perform a tax review, our work consisted only of matching the tax returns with the accounting records and account balances. 3
II.) Legal situation The Bank was founded in 1990 and was registered by the Metropolitan Court as Company Court under No. Cg. 01-10-041371. Bank s full name: Hanwha Bank Magyarország Zárt Részvénytársaság Bank s registered domicile: 1088 Budapest, Rákóczi út 1-3. Scope of the Bank s major activities: 1. 65.12 Other financial activities 2. 65.21 Financial leasing 3. 65.23 Other financial intermediation not included elsewhere 4. 67.12 Securities broking and fund management 5. 67.13 Other complementary financial activites 6. 74.14 Business management consulting Bank s subcribed capital at the balance sheet date: 5 508 960 Bank s ownership structure: Owner Subscribed capital 31.12.2005 () Subscribed capital 31.12.2006 () Ownership ratio 31.12.2006 Change () Hanwha First Investment Co. B.V. 3 030 430 3 030 430 55,0100% - Hanwha Securities Co. Ltd. 2 379 810 2 379 810 43,1989% - Fransaholding S. A. 91 770 91 770 1,6658% - Hanwha Bank Rt. 6 900 6 900 0,1253% - Total: 5 508 960 5 508 960 100,00% 0 Bank s Chief Excecutive Officer and Deputy Chief Excecutive Officer: Baik Dae Wook Woo Young Jin 4
The Bank s Board of Directors: Baik Dae Wook Woo Young Jin Werner Riecke Dr. János Jákó Kim Chul Hoon Keum Choon Soo The Bank s Supervisory Board: Dr. Péter Kelemen Dr. Zoltán Pápista Lee Young Kyoung The Bank s permanent legal representative: Dr. György Köller 5
III.) Annual Financial Statements Balance Sheet - Assets Prior Year Current Year 1. Cash 584 335 434 301 2. Government securities 142 616 382 752 a) for trading purposes 29 741 382 752 b) for investment purposes 112 875-3. Receivables from credit institutions 2 009 383 3 062 420 a) sight receivables - - b) receivables from financial services 2 009 383 3 062 420 ba) with a maturity of less than one year 2 009 383 3 062 420 of which: - receivables from related parties - - - receivables from parties owning less than 20% - - - receivables from Hungarian National Bank 800 000 1 400 000 - receivables from clearing houses - - bb) with a maturity of more than one year - - of which: - receivables from related parties - - - receivables from parties owning less than 20% - - - receivables from Hungarian National Bank - - - receivables from clearing houses - - c) from investment services - - of which: - receivables from related parties - - - receivables from parties owning less than 20% - - - receivables from clearing houses - - 4. Receivables from clients 8 976 259 9 520 212 a) from financial services 8 976 259 9 520 212 aa) with a maturity of less than one year 2 021 561 2 923 163 of which: - receivables from related parties - - - receivables from parties owning less than 20% - - ab) with a maturity of more than one year 6 954 698 6 597 049 of which: - receivables from related parties 1 450 - - receivables from parties owning less than 20% - - b) from investment services - - of which: - receivables from related parties - - - receivables from parties owning less than 20% - - ba) receivables from investment service activities on the exchange - - bb) receivables from over-the-counter investment service activities - - bc) receivables from clients for investment service activities - - bd) receivables from clearing houses - - be) receivables from other investment service activities - - 5. Other fixed rated securities - - a) issued by local government and other state organisations (except - - government securities) aa) for trading purposes - - ab) for investment purposes - - b) issued by other issuers - - ba) for trading purposes - - of which: - issued by related parties - - - issued by parties owning less than 20% - - - repurchased securities issued by the Bank - - ba) for investment purposes - - of which: - issued by related parties - - - issued by parties owning less than 20% - - 6
6. Shares and other floating rated securities - - a) shares, participations for trading purposes - - of which: - issued by related parties - - - issued by parties owning less than 20% - - b) floating rated securities - - ba) for trading purposes - - bb) for investment purposes - - 7. Shares, participations for investment purposes 33 842 33 842 a) shares, participations for investment purposes 33 842 33 842 of which: - participations in credit institutions - - b) value adjustment of shares, participations for investment purposes - - of which: - participations in credit institutions - - 8. Shares, participations in related enterprises 25 595 31 595 a) shares, participations for investment purposes 25 595 31 595 of which: - participations in credit institutions - - b) value adjustment of shares, participations for investment purposes - - of which: - participations in credit institutions - - 9. Intangible assets 100 026 20 957 a) intangible assets 100 026 20 957 b) value adjustment of intangible assets - - 10. Tangible assets 59 826 60 831 a) tangible assets for financial and investment services 59 826 60 831 aa) land and buildings 12 273 10 533 ab) technical equipment, machinery and vehicles 46 934 32 016 ac) construction 619 18 282 ad) advances on construction - - b) tangible assets not directly related to financial and investment services - - aa) land and buildings - - ab) technical equipment, machinery and vehicles - - ac) construction - - ad) advances on construction - - c) value adjustment of tangible assets - - 11. Own shares 4 000 4 000 12. Other assets 31 963 4 799 a) inventories - - b) other receivables 31 963 4 799 13. Prepayments and accrued income 53 299 64 699 a) accrued income 45 513 57 425 b) prepayments 7 786 7 274 c) deferred expenses - - TOTAL ASSETS 12 021 144 13 620 408 7
Balance Sheet - Liabilities Prior Year Current Year 1. Liabilities to credit institutions 699 465 2 005 625 a) sight liabilities - - b) liabilities for a fixed period of time from financial activities 699 465 2 005 625 ba) with a maturity of less than one year 699 465 2 005 625 - liabilities to Hungarian National Bank - - - liabilities to clearing houses - - ba) with a maturity of more than one year - - - liabilities to Hungarian National Bank - - - liabilities to clearing houses - - c) liabilities from investment services - - - liabilities to clearing houses - - 2. Liabilities to clients 5 284 321 2 830 320 a) savings deposits - - aa) sight - - ab) with a maturity of less than one year - - ac) with a maturity of more than one year - - b) other liabilities from financial services 5 284 321 2 830 320 ba) sight 3 083 535 2 348 157 of which: - liabilities to related parties 17 973 13 179 bb) with a maturity of less than one year 1 895 644 392 131 bc) with a maturity of more than one year 305 142 90 032 c) liabilities from investment services - - ca) liabilities from exchange investment service activities - - cb) liabilities from over-the-counter investment service activities - - cc) liabilities to clients from investment service activities - - cd) liabilities to clearing house - - ce) liabilities from other investment service activities - - 3. a) bonds issued - - aa) with a maturity of less than one year - - ab) with a maturity of more than one year - - b) other securities - - ba) with a maturity of less than one year - - bb) with a maturity of more than one year - - 8
c) documents considered as securities in accounting but not according to Act - - on Financial Institutions ca) with a maturity of less than one year - - cb) with a maturity of more than one year - - 4. Other liabilities 111 143 96 360 a) with a maturity of less than one year 111 143 96 360 - pecuniary contribution of members at credit institutions - - operating as credit cooperatives b) with a maturity of more than one year - - 5. Accruals and deferred income 28 556 62 373 a) deferred income 4 263 - b) accruals 24 293 62 373 c) deferred extraordinary income - - 6. Provisions 113 072 117 687 a) provision for pension and severance-pay - - b) risk provisions for pending and future liabilities 17 482 22 097 c) general risk provisions 95 590 95 590 d) other provisions - - 7. Subordinated liabilities - 2 523 000 a) subordinated loan capital - 2 523 000 b) pecuniary contribution of members at credit institutions operating as - - credit cooperatives c) other subordinated liabilities - - 8. Share capital 5 508 960 5 508 960 of which: - repurchased own shares at par value 6 900 6 900 9. Share capital not paid up - - 10. Capital reserve 81 328 81 328 a) premium (from share issue) 35 757 35 757 b) other 45 571 45 571 11. General reserve 40 536 60 702 12. Retained earnings (losses) brought forward 57 359 152 563 13. Undistributable reserves - - 14. Revaluation surplus - - 15. Net profit (loss) for the year 96 404 181 490 TOTAL EQUITIES AND LIABILITIES 12 021 144 13 620 408 Off-Balance Sheet items Prior year Current year Pending liabilities 2 935 740 3 203 967 Future liabilities - - Code number 2 935 740 3 203 967 9
Income Statement Prior year Current Year 1. Interest received and interest-type income 989 196 1 037 736 a) interest received on fixed rated securities 22 634 41 407 b) other interest received and interest-type income 966 562 996 329 of which: - from related parties 2. Interest paid and interest-type expenses 144 969 200 572 of which: - from related parties 165 INTEREST MARGIN (1-2) 844 227 837 164 3. Income from securities 14 800 16 840 a) income from shares and participations for trading purposes (dividend, - - participation) b) income from participations in related parties (dividend, participation) - - c) income from other participations (dividend, participation) 14 800 16 840 4. Commission and fee income 262 783 299 961 a) from other financial services 262 783 299 961 of which: - from related parties b) from investment services (except trading activities) - - 5. Commission and fee expenses 20 200 31 474 a) from other financial services 20 200 31 474 of which: - to related parties - - - to parties owning less than 20% - - b) from investment services (except trading activities) - - of which: - to related parties - - - to parties owning less than 20% - - 6. Net result of financial activities 8 542 5 329 a) from the income of other financial services 9 120 6 676 b) from the expense of other financial services 578 1 347 of which: - to related parties - - - to parties owning less than 20% - - c) from the income of investment services (income of trading activities) - - - write-back of value adjustment of securities for trading - - purposes - write-back of value adjustment of securities for trading - - purposes d) from the expense of investment services (expense of trading activities) - - of which: - to related parties - - - to parties owning less than 20% - - - value adjustment of securities for trading purposes - - 10
7. Other income from business activities 247 730 347 602 a) income of non-financial and investment services - - b) other income 247 730 347 602 - write-back of value adjustment of inventories - - 8. Costs of general activities 815 321 868 851 a) salaries and personnel 495 588 570 792 aa) salary cost 342 405 387 272 ab) personnel cost 29 995 41 443 of which:- social security cost - - - costs relating to pension - - ac) social contribution 123 188 142 077 of which:- social security cost 105 020 121 059 - costs relating to pension - - b) Other costs (material-type expenses) 319 733 298 059 9. Depreciation 154 717 133 563 10. Other expense from business activities 206 122 233 026 a) expense of non-financial and investment services - - of which: - to related parties - - - to parties owning less than 20% - - b) other expense 206 122 233 026 of which: - to related parties - - - value adjustment of inventories - - - készletek értékvesztése - - 11. Value adjustment for receivables and general risk reserve for pending 103 324 90 852 and future liabilities a) value adjustment on receivables 102 848 84 180 b) general risk reserve for pending and future liabilities 476 6 672 12. Value adjustment write-back for receivables and use of general risk 56 998 108 932 reserve for pending and future liabilities a) value adjustment write-back on receivables 56 440 106 875 b) use of general risk reserve for pending and future liabilities 558 2 057 13. Value adjustment for investment 81-14. Value adjustment write-back for investment - 6 000 15. Result of ordinary business activities 135 315 264 062 of which: - Result of financial and investment activities 135 315 264 062 - Result of non-financial and investment activities - - 16. Extraordinary income 800 505 17. Extraordinary expenses - - 18. Extraordinary profit (loss) 800 505 19. Profit before tax 136 115 264 567 20. Tax liabilities 28 999 62 911 21. Profit after tax 107 116 201 656 22. Formation and utilization of general reserves 10 712 20 166 23. Use of retained earnings for payment of dividend - - 24. Dividend approved and paid - - of which: - to related parties - - - to parties owning less than 20% - - 25. RETAINED PROFIT FOR THE 96 404 181 490 11
IV.) Book-keeping Accounting work at the Bank is performed in accordance with the provisions of Act C of 2000 on Accountancy and Government Decree No. 250/2000. (XII. 24.) on Specific Rules for the Annual Financial Statements and Book-keeping of Credit Institutions and Financial Enterprises. The annual financial statements are based on the general ledger incorporating the changes between the balance sheet date of 31.12.2006 and the closing of the accounts and are prepared on the basis of the accounting records for 2006, the related account balances, and the underlying sub-ledgers. We ascertained the regularity of book-keeping and the documentation of the economic events by random sampling. The books were closed after we had completed our audit. 12
V.) Details on the Balance Sheet ASSETS Cash and cash equivalents, government securities PRIOR CURRENT CASH 584 335 434 301 GOVERNMENT SECURITIES 142 616 382 752 a) for trading purposes 29 741 382 752 b) for investment purposes 112 875 - Cash and cash equivalents The cash and cash equivalents are supported by, and are matching with, the cash report. The cash in hand amounted to 36,389 on the balance sheet date, consisting of the following currencies: HUF 11,633,772, GBP 10,050, CHF 7,680, USD 29,273, EUR 56,138. The cash in hand was included in the balance sheet calculated at the exchange rates valid at the National Bank of Hungary on the balance sheet date. Nostro accounts BANK S NAME BALANCE AT 31.12.2006 () BALANCE AT 31.12.2006 (FC) MNB 237 028 Unicredito 23 162 91 805.29 EUR KBC Bank N.V. 21 005 83 255.83 EUR Union Bank of Switzerland 31 934 203 418.81 CHF Bank of New York 44 556 118 573.21 GBP Bank of New York 27 972 145 976.10 USD Bank of Tokio 2 373 1 472 883.00 JPY Wachovia 9 882 51 572.54 USD Total 397 912 Government securities Negotiable government securities The Company posted to this balance sheet line discount treasury note, the book value of the treasury notes is 382,752. 13
Investment in government securities The government securities purchased for investment purposes expired during the current period and no new government securities were purchased. The number and nominal value of the securities is as shown in the KELER certificate. Receivables from credit institutions PRIOR CURRENT RECEIVABLES FROM CREDIT INSTITUTIONS 2 009 383 3 062 420 Sight receivables - - Receivables from financial services 2 009 383 3 062 420 - with a maturity of less than one year 2 009 383 3 062 420 of which: - receivables from related parties - - - receivables from parties owning less than 20% - - - receivables from Hungarian National Bank 800 000 1 400 000 - receivables from clearing houses - - - with a maturity of more than one year - - of which: - receivables from related parties - - - receivables from parties owning less than 20% - - - receivables from Hungarian National Bank - - - receivables from clearing houses - - From financial services - - of which: - receivables from related parties - - - receivables from parties owning less than 20% - - - receivables from clearing houses - - Itemised other receivables fromcredit institutions from financial services, with a maturity less than one year: Deposits BANK S NAME BALANCE AT BALANCE AT MATURITY 13.12.2006 () 13.12.2006 (FX) HNB term deposit HNB term deposit 700 000 700 000 2007.01.03. 2007.01.10. West LB 300 000 2007.01.02. OTP Bank Zrt. 1 009 200 4,000,000 EUR 2007.01.18. ING Bank Zrt 353 220 1,400,000 EUR 2007.01.02. TOTAL 3 062 420 The receivables from credit institutions as shown in the balance sheet are supported by, and are matching with, certificates. 14
Receivables from clients PRIOR CURRENT RECEIVABLES FROM CLIENTS 8 976 259 9 520 212 from financial services 8 976 259 9 520 212 - with a maturity of less than one year 2 021 561 2 923 163 of which: - receivables from related parties - - - receivables from parties owning less than 20% - - - with a maturity of more than one year 6 954 698 6 597 049 of which: - receivables from related parties 1 450 - - receivables from parties owning less than 20% - - from investment services - - of which: - receivables from related parties - - - receivables from parties owning less than 20% - - - receivables from investment service activities on the exchange - - - receivables from over-the-counter investment service activities - - - receivables from clients for investment service activities - - - receivables from clearing houses - - - receivables from other investment service activities - - Shares, participations for investment purposes PRIOR CURRENT SHARES, PARTICIPATIONS FOR INVESTMENT PURPOSES 33 842 33 842 shares, participations for investment purposes 33 842 33 842 of which: - participations in credit institutions - - value adjustment of shares, participations for investment purposes - - of which: - participations in credit institutions - - Shares, participations for investment purposes The Bank shows the following investments on this balance sheet line. COMPANY NAME NUMBER OF SHARES (PCS) NOMINAL VALUE () PURCHASE PRICE () Giro Rt. 20 20 000 22 000 Hitelgarancia Rt. 100 10 000 10 000 Golf & Country Club 1 3 1 842 TOTAL 30 003 33 842 15
Shares, participations in related enterprises PRIOR CURRENT SHARES, PARTICIPATIONS IN RELATED ENTERPRISES 25 595 31 595 shares, participations for investment purposes 25 595 31 595 of which: - participations in credit institutions - - value adjustment of shares, participations for investment purposes - - of which: - participations in credit institutions - - Shares, participations in related enterprises NAME OF THE RELATED PARTY PROPERTY SHARE NOMINAL VALUE VALUE ADJUSTMENT (ACCUMULATED) RELEASE OF VALUE ADJUSTMENT (ACCUMULATED) Pignus Kft. 100% 30 180 6 585 6 000 Buda-Reál Invest Kft. 100% 3 000 1 000 0 TOTAL 33 180 7 585 6 000 The nominal value of the Bank s investments in related parties and the rate of the share did not change compared to the previous year. No additional value lossed was recognised in the current year which is justified by the data in the balance sheets of the companies. The Bank did not exceed the limits specified by the Act on Credit Institutions in respect of investments. Intangible assets PRIOR CURRENT INTANGIBLE ASSETS 100 026 20 957 Intangible assets 100 026 20 957 Value adjustment of intangible assets - - PRIOR CURRENT Rights of properties - - Intellectual products 100 026 20 957 INTANGIBLE ASSETS 100 026 20 957 Intangible fixed assets The gross value of intangible assets was increased by the Bank by purchasing various financial programs in the course of the current year. The value increased by 13,356. The value of intangible assets decreased by a gross amount of 49,355 during the current period (the net value of which is 0). These assets were posted to off balance sheet items. The value of depreciation recognised in the current year amounted to 103,359, of which unplanned 16
depreciation amounted to 841 due to the writing off of the obsolete telephone system. Recognition was made using the amortisation rates prescribed by the accounting policy. Tangible assets PRIOR CURRENT TANGIBLE ASSETS 59 826 60 831 Tangible assets for financial and investment services 59 826 60 831 - land and buildings 12 273 10 533 - technical equipment, machinery and vehicles 46 934 32 016 - construction 619 18 282 - advances on construction - - tangible assets not directly related to financial and investment services - - - land and buildings - - - technical equipment, machinery and vehicles - - - construction - - - advances on construction - - Value adjustment of tangible assets - - Real estates The gross value of the real estates in the current year increased by 168. The value of the land and buildings decreased by a gross amount of 1,597, the amount of depreciation recognised in accordance with the accounting policy amounts to 1,908. Machinery, plant, equipment The following items have been posted by the Bank to Machinery, plant and equipment: computer devices, telecommunication and office equipment, and cars, the gross value of which amounts to 138 930. The value of procurement in the current year amounted to 9,719, of which IT assets were purchased in the value of 5,416, telecommunication equipment in the value of 3,874, and other equipment in the value of 384. The gross value of assets written off in the current year amounts to 59 637 (net value: 0). The changes in tangible fixed assets are supported by certificates. Depreciation recognised in respect of machinery in the current year in accordance with the accounting policy: 24,637. The value of written off as small-value purchases was 3,659. The Bank has no assets encumbered by mortgage. The Bank complies with the limits prescribed by credit institutions. No unplanned depreciation was performed in the current year. 17
Construction in progress The value of the construction in progress at the balance sheet date is 18,282, consisting of the following items: 16,887 was invested in software in relation to the development performed by LOXON. The date of capitalisation is yet uncertain, negotiations are being carried out. The IT asset investment balance equals to 1,395. PRIOR CURRENT Software 253 16 887 Computer equipment 366 1 395 CONSTRUCTION IN PROGRESS 619 18 282 Own shares and other assets PRIOR CURRENT OWN SHARES 4 000 4 000 OTHER ASSETS 31 963 4 799 Inventories - - Other receivables 31 963 4 799 The balance sheet line Own shares show shares repurchased from the Ministry of Education for 4 000, of a nominal value of 6 900. We have verified the existence of the shares when performing the stocktaking. The ratio of property share of repurchased own shares within the share capital: 0.1153%. Other receivables PRIOR CURRENT Receivables from corporate tax 10 029 907 VAT receivables 9 306 - Receivables from the Customs and Excise Guard 1 036 463 Cash technical account 4 501 - Default interest receivables 1 201 1 201 Special bank tax receivables 4 093 - Advances on payments 79 232 Advances from trade creditors 1 193 659 Other receivables 525 1 337 OTHER RECEIVABLES 31 963 4 799 18
Prepayments and accrued income PRIOR CURRENT PREPAYMENTS AND ACCRUED INCOME 53 299 64 699 Accrued income 45 513 57 425 Prepayments 7 786 7 274 Deferred expenses - - Accrued income The amount of the interest due in respect of the current year but not yet received has been posted to this line in accordance with the legal provisions. Suspended interests were written off from under Prepayments and accrued income, the amount written off is on record at the Company as an off-balance sheet item. Prepayments The prepayments amounting to 7,274 consist of items to be invoiced in the next year, but to be debited to the current year in accordance with the laws. 19
LIABILITIES Liabilities to credit institutions PRIOR CURRENT LIABILITIES TO CREDIT INSTITUTIONS 699 465 2 005 625 Sight liabilities - - Liabilities for a fixed period of time from financial activities 699 465 2 005 625 - with a maturity of less than one year 699 465 2 005 625 - liabilities to Hungarian National Bank - - - liabilities to clearing houses - - - with a maturity of more than one year - - - liabilities to Hungarian National Bank - - - liabilities to clearing houses - - Liabilities from investment services - - - liabilities to clearing houses - - Liabilities to credit institutions with a maturity of less than one year BANK S NAME BALANCE 31.12.2006 BALANCE 31.12.2006 MATURITY () (FC) Raiffeisen Bank Rt 252 300 1 000 000 EUR 2007.01.08. KDB Bank 504 600 2 000 000 EUR 2007.01.31. KDB Bank 252 300 1 000 000 EUR 2007.03.30. OTP Bank Rt. 252 300 1 000 000 EUR 2007.06.30. OTP Bank Rt. 252 300 1 000 000 EUR 2007.03.19. OTP Bank Rt. 252 300 1 000 000 EUR 2007.03.21. OTP Bank Rt. 239 525 1 250 000 USD 2007.01.02. TOTAL 2 005 625 20
Liabilities to clients PRIOR CURRENT LIABILITIES TO CLIENTS 5 284 321 2 830 320 Savings deposits - - - sight - - - with a maturity of less than one year - - - with a maturity of more than one year - - Other liabilities from financial services 5 284 321 2 830 320 - sight 3 083 535 2 348 157 of which: - liabilities to related parties 17 973 13 179 - with a maturity of less than one year 1 895 644 392 131 - with a maturity of more than one year 305 142 90 032 Liabilities from investment services - - - liabilities from exchange investment service activities - - - liabilities from over-the-counter investment service activities - - - liabilities to clients from investment service activities - - - liabilities to clearing house - - - liabilities from other investment service activities - - The portfolio of deposits decreased by 46.44% compared to the previous year. More specifically, the value of demand liabilities decreased by 23.85%, the value of liabilities maturing in less a year by 79.31%, and the value of liabilities with a maturity of more than a year by 70.5%. Other liabilities PRIOR CURRENT OTHER LIABILITIES 111 143 96 360 with a maturity of less than one year 111 143 96 360 - pecuniary contribution of members at credit institutions - - operating as credit cooperatives with a maturity of more than one year - - 21
Other liabilities with a maturity of less than one year PRIOR CURRENT Personal income tax and similar liabilities 23 594 23 446 Liabilities to social security 19 391 20 141 Business tax 1 690 2 267 Other local tax payment obligation 1 649 102 Research and innovation contribution 1 542 2 453 HUF suspence account 3 - Items of different FX date 44 730 9 625 Client accounts 10 412 17 950 Interest tax 1 051 Trade creditors 1 046 801 Liabilities to private pension funds 1 235 1 536 Transit accounts 5 555 16 562 Other short-term liabilities 296 426 OTHER LIABILITIES WITH A MATURITY OF LESS THAN ONE 111 143 96 360 Accruals and deferred income PRIOR CURRENT ACCRUALS AND DEFERRED INCOME 28 556 62 373 Deferred income 4 263 - Accruals 24 293 62 373 Deferred extraordinary income - - Accruals and deferred income Under this item are included the interests payable in the current year in respect of deposits, in the value of 49 878, which has not yet been credited, and other deferred costs in the value of 12 495. Provisions PRIOR CURRENT PROVISIONS 113 072 117 687 Risk provisions for pending and future liabilities 17 482 22 097 General risk provisions 95 590 95 590 22
Provisions OPENING PROVISIONING RELEASE CLOSING BALANCE BALANCE Risk provisions for pending and future liabilities 17 482 6 672 2 057 22 097 General risk provisions 95 590 - - 95 590 TOTAL 113 072 6 672 2 057 117 687 Subordinated liabilities PRIOR CURRENT SUBORDINATED LIABILITIES - 2 523 000 a) subordinated loan capital - 2 523 000 b) pecuniary contribution of members at credit institutions operating as credit - - cooperatives c) other subordinated liabilities - - Subordinated loan On 18 October 2006, 10 dematerialised bonds were issued, each of a value of EUR 1,000,000. The bonds were private placement bonds with a maturity of 18 October 2011. Shareholders equity PRIOR CURRENT SHAREHOLDERS EQUITY 5 784 587 5 985 043 Share capital 5 508 960 5 508 960 of which: - repurchased own shares at par value 6 900 6 900 Share capital not paid up - - Capital reserve 81 328 81 328 a) Premium 35 757 35 757 b) Other 45 571 45 571 General reserve 40 536 60 702 Retained earnings (losses) brought forward 57 359 152 563 Undistributable reserves - - Revaluation surplus - - Net profit (loss) for the year 96 404 181 490 Shareholders equity On the balance sheet date, the Bank holds 7 984 shares in the nominal value of 690, the balance sheet value of which is 5 508 960, which is equivalent to the capital registered at the Company Court. The value of the capital reserve did not change in the current year, its value amounted to 81 328. 23
The retained profit for the previous year has been transferred to retained earnings brought forward, value as of the balance sheet date: 152 563. The accounts and the statements are accurate. The balance sheet profit of the current year was properly stated, 10% of the after tax profit was included in the shareholders equity as general reserve. 24
VI.) DETAILS ON THE INCOME STATEMENT Interest margin PRIOR CURRENT Interest received and interest-type income 989 196 1 037 736 Interest paid and interest-type expenses 144 969 200 572 INTEREST MARGIN 844 227 837 164 Interest received and interest-type income PRIOR CURRENT INTEREST RECEIVED AND INTEREST-TYPE INCOME 989 196 1 037 736 a) interest received on fixed rated securities 22 634 41 407 Other interest received and interest-type income 966 562 996 329 Composition of interest received and interest-type income PRIOR CURRENT Interest from government securities 22 634 41 407 Interest from financial institutions 108 147 140 465 Interest on current accounts 21 238 37 317 Interest on housing loans and mortgage loans 480 776 416 456 Interest on other short-term loans 92 426 141 187 Interest on other long-term loans 195 928 183 372 Interest on refinancng loans 14 689 13 314 Interest on securities purchase from clients - - Interest on employee loans - - Interest on purchased claims - - Default interest 53 358 64 218 COMPOSITION OF INTEREST RECEIVED AND INTEREST-TYPE INCOME 989 196 1 037 736 The interest received and similar income at the Bank in the current year increased by 4.91% compared to the previous year. 25
Interest paid and interest-type expenses PRIOR CURRENT INTEREST PAID AND INTEREST-TYPE EXPENSES 144 969 200 572 Composition of interest paid and interest-type expenses PRIOR CURRENT Interests paid to financial institutions 30 184 63 935 Interest paid on current account deposit 71 154 49 778 Interest paid on sight deposit 2 753 20 188 Interest paid on short-term deposits 50 665 49 015 Interest paid on subordinate loan capital 21 432 Interest paid on housing deposit -9 787-3 776 INTEREST PAID AND INTEREST-TYPE EXPENSES 144 969 200 572 The amount of Interests and interest-type expenses increased by 38.36% compared to the previous year. The structure and the amount of interest expense are matching with the changes in the stock of deposits and the interest rates, however, the composition of the interests paid changed. Income from securities PRIOR CURRENT INCOME FROM SECURITIES 14 800 16 840 Income from shares and participations for trading purposes (dividend, participation) - - Income from participations in related parties (dividend, participation) - - Income from other participations (dividend, participation) 14 800 16 840 The dividend paid on the Giro Rt. shares, credited at the Bank. Commission and fee income PRIOR CURRENT COMMISSION AND FEE INCOME 262 783 299 961 From other financial services 262 783 299 961 from investment services (except trading activities) - - 26
Composition of commission and fee income from the income from other financial services PRIOR CURRENT Commission from cash flow 58 423 48 424 Commission from cash withdrawal 13 684 13 188 Home banking commission 660 698 Availability fee 2 437 2 425 Collection commission 1 928 1 303 L/C commission 14 016 3 421 Other commission 7 135 8 927 Guarantee fee 4 406 6 925 Loan utilisation fee 60 043 91 960 Prepayment fee 29 204 39 927 Account management fee 8 866 9 378 Monthly handling charges 61 271 72 840 Other fees 710 545 COMMISSION AND FEE INCOME 262 783 299 961 The amount of the Commission and fee income received increased by 14.15 % compared to the previous year. Commission and fee expenses PRIOR CURRENT COMMISSION AND FEE EXPENSES 20 200 31 474 from other financial services 20 200 31 474 of which: - to related parties - - - to parties owning less than 20% - - from investment services (except trading activities) - - of which: - to related parties - - - to parties owning less than 20% - - Composition of commission and fee expense related to other financial services PRIOR CURRENT Paid cash flow commission 1 543 1 066 Paid cash withdrawal commission - 6 Agency commission 9 802 22 060 Commission fee 1 788 1 926 Paid costs 7 067 6 416 PAID (PAYABLE) COMMISSION AND FEE EXPENSES 20 200 31 474 27
The amount of Commission and fee expenditure paid (payable) increased by 55.81% compared to the previous year. Net result of financial activities PRIOR CURRENT NET RESULT OF FINANCIAL ACTIVITIES 8 542 5 329 From the income of other financial services 9 120 6 676 From the expense of other financial services 578 1 347 From the income of investment services (income of trading activities) - - - write-back of value adjustment of securities for trading - - purposes From the expense of investment services (expense of trading activities) - - of which: - to related parties - - - to parties owning less than 20% - - - value adjustment of securities for trading purposes - - Other income from business activities PRIOR CURRENT OTHER INCOME FROM BUSINESS ACTIVITIES 247 730 347 602 Income of non-financial and investment services - - Other income 247 730 347 602 - write-back of value adjustment of inventories - - Other operating income PRIOR CURRENT Income from assets sold 4 480 46 Receivables sold 148 371 180 222 Exchange gain 85 226 160 325 Income from other sales 185 185 Prepaid legal costs 9 445 2 507 Other income 23 4 317 OTHER INCOME 247 730 347 602 28
Costs of general activities PRIOR CURRENT COSTS OF GENERAL ACTIVITIES 815 321 868 851 Salaries and personnel 495 588 570 792 aa) salary cost 342 405 387 272 ab) personnel cost 29 995 41 443 of which:- social security cost - - - costs relating to pension - - ac) social contribution k 123 188 142 077 of which:- social security cost 105 020 121 059 - costs relating to pension - - Other costs (material-type expenses) 319 733 298 059 Material-type expenses PRIOR CURRENT Material-type expenses 13 103 7 999 Value of services used 292 682 271 945 Official fees, duties, insurance fees 13 948 18 115 MATERIAL-TYPE EXPENSES 319 733 298 059 Staff costs at the Bank increased by 15.17%, the material costs decreased by 6.78% compared to the previous year. Value adjustment and other expenses from business activities PRIOR CURRENT DEPRECIATION 154 717 133 563 OTHER EXPENSESS FROM BUSINESS ACTIVITIES 206 122 233 026 Result of non-financial and investment activities - - Other expenses 206 122 233 026 - value adjustment of inventories - - 29
Composition of other operating expenses PRIOR CURRENT Net value of tangible fixed assets sold 6 863 - Receivables sold 138 225 182 919 Paid default interest, penalty, fine 371 2 913 Local business tax 27 069 29 692 Other local taxes 24 - VAT 9 300 5 534 Lending losses 6 852 - Scrapping 8 147 - Prepaid costs 5 887 3 353 Research and innovation tax 3 384 4 454 Other expenses - 4 161 OTHER EXPENSES 206 122 233 026 The value of other expenses increased by 13.05 % compared to the previous year. Value adjustment and write-back PRIOR CURRENT Value adjustment for receivables and general risk reserve for pending and 103 324 90 852 future liabilities a) value adjustment on receivables 102 848 84 180 b) general risk reserve for pending and future liabilities 476 6 672 Value adjustment write-back for receivables and use of general risk reserve for 56 998 108 932 pending and future liabilities a) value adjustment write-back on receivables 56 440 106 875 b) use of general risk reserve for pending and future liabilities 558 2 057 Value adjustment for investment 81 - Value adjustment write-back for investment - 6 000 Extraordinary profit PRIOR CURRENT EXTRAORDINARY PROFIT 800 505 Extraordinary income 800 505 Extraordinary expense - - 30
Calculation of the Retained profit for the year The Bank s tax liability was calculated in accordance with Act LXXXI of 1996 as follows: CURRENT Amortisation recognised in accordance with the Accountancy Act 133 563 Fine 17 008 Provisioning 3 000 Donation 500 ITEMS INCREASING THE TAX BASE 154 071 CURRENT Amortisation accoting to the tax law 125 056 Dividend received 16 840 Provisions in the prior year, exceeding the recognised measure 2 056 Tax penalty, late payment interest repayment 2 405 Foundation support, donation 500 100% of local tax 29 692 ITEMS TO BE DEDUCTED FROM THE TAX BASE 176 549 CURRENT Profit before tax 264 567 Items increasing the tax liability 154 071 Items decreasing the tax liability 176 549 Tax base 242 089 Corporate tax (16%) 38 434 Tax allowance - PAYABLE CORPORATE TAX 38 434 CURRENT Profit before tax 264 567 Payable corporate tax 38 434 Additional 24 477 Profit after tax 201 656 General provisioning and use 20 166 Use of profit reserbe for dividend and participation - Paid (approved) dividend, participation - RETAINED PROFIT FOR THE 181 490 31
VII.) Supplementary Notes The Supplementary Notes to the financial statements include the information required by the Act on Accounting hereby fulfilling the shareholders' and market participants' information needs. The notes incorporate all information in addition to the statutory inclusions which is necessary for meeting with the accounting principles and the presentation of a true and fair view in the Balance Sheet and the Income Statement. 32
VIII.) Summary We have performed the audit of the Company's financial statements (Balance Sheet, Income Statement and Supplementary Notes). The Balance Sheet and Income Statement items were measured in accordance with the accounting principles and relevant legislation. The Company's accounting system is appropriate, we did not identify fundamental deficiencies during the course of our audit. Budapest, 17th March, 2007 BDO Kontroll Auditing and Tax Consulting Ltd. József Kosztovics Managing Director Ferenc Baumgartner Chartered Accountant 33