J&T FINANCE GROUP, a. s. ANNUAL REPORT 2008

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5 TABLE OF CONTENTS Selected Indicators 005 Board of Directors Report 007 The Group s Financial Operations in Report by the Supervisory Board 013 J&T Management Structure 015 FINANCIAL SECTION Independent Auditors Report to the Shereholders, Board of Directors and Supervisory Board of J&T FINANCE GROUP, a. s. 018 Consolidated Income Statement 019 Consolidated Balance Sheet 020 Consolidated Statement of Changes in Equity 022 Consolidated Cash Flow Statement 024 Notes to the Consolidated Financial Statements 039 Contact

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7 SELECTED INDICATORS In thousands of SKK Assets Total assets 104,157, ,101,157 88,877,517 76,676,599 41,585,549 Property plant and equipment 689,596 19,902,279 14,456,945 16,056,390 5,383,718 Investment property 6,290,181 6,157,697 3,161,985 3,809,434 Loans to customers 45,881,296 25,260,143 17,488,872 14,011,253 8,243,385 Cash and cash equivalents 10,537,769 11,875,092 9,118,003 7,432,641 7,082,661 Equity and liabilities Equity 16,198,807 16,420,099 14,513,493 12,237,905 6,977,875 Deposits from banks 7,836,203 21,341,856 19,103,567 20,242,586 8,842,946 Deposits from customers 57,333,360 44,893,236 30,945,238 26,544,297 17,637,277 Income statement Net interest income (expense) -1,323, , , , ,466 Net fee and commission income (expense) -263,339-1,081,112-3,738,004-1,114, ,062 Operating income 40,475,272 38,602,034 36,658,952 17,772,163 10,770,710 Operating expenses -37,844,808-35,929,157-28,939,440-14,498,550-8,820,407 Net profit 3,194,163 1,684,492 2,572,723 4,315, ,679 Ratios ROA 2.87% 1.43% 3.32% 5.71% 1.93% ROE 17.93% 8.62% 18.25% 31.74% 10.02% Average number of Group employees 9,821 8,869 6,357 4,873 3,724 For more detailed information please see consolidated financial statements presented on pages

8 FUNCTIONAL STRUCTURE OF THE CONSOLIDATED J&T GROUP CONSOLIDATED GROUP J&T UNTIL BANKING Banks Investment funds Private equity funds Servicing companies CORPORATE INVESTMENTS Energy Automotive industry Industry Meat-processing industry REAL ESTATE DEVELOPMENT Multifunctional project Hotels and tourism Flats and offices Residental projects Industrial parks CORPORATE SERVICES Airplanes Health Services Sports Media 006

9 BOARD OF DIRECTORS REPORT J&T GROUP With equity exceeding SKK 16 billion, J&T Group ranks among the strongest financial groups in the Czech and Slovak Republics. By 2008 J&T Group has created a consolidated group comprising banks, financial institutions and a number of non-financial entities (investment projects in the energy and industrial sectors, real estate development and services). Functionally, the internal business segmentation of the consolidated group reflected the above mentioned business areas. A clear vision helped the J&T Group to become one of the business leaders in these areas. The Banking segment is strategically focused on clients and transactions requiring a largely individual approach. Besides complex private banking services, the Group s banks and financial institutions also provide standard and mezzanine financing in the areas of real estate development and business acquisitions and trade in securities on behalf of private investors as well as on their own accounts. The Group s clients are not only private individuals but also institutions. The Banking segment is currently represented by J&T Banka, a. s. in the Czech Republic, J&T BANKA, a.s., pobočka zahraničnej banky in the Slovak Republic, Swiss bank J&T Bank (Switzerland) Ltd., J&T Bank (ZAO) in Russia and J&T Bank and Trust Corporation, domiciled in Barbados. Throughout the years, the J&T Group has built a compact, vertically integrated, investment group in the energy sector producing and selling electric power and heat. Also a progressive increase of the share of renewable sources of energy in power production has traditionally been an important part of the segment s strategy. Investments in the industrial sector historically represent an important part of Group s expansion. Companies engaged in engineering, automotive and food processing have been gradually added to the consolidated group. Another pillar of J&T Group activities was represented by real estate development projects comprising development of residential and office premises, hotels, multifunctional projects, industrial and logistic parks. J&T Group achieved leading position in the Slovak real estate market and had previously been playing an increasingly important role in the Czech Republic. J&T Group developed its investment activities also in the service sector, focusing primarily on private airplanes, health services, media and sport. The Group s management believes that for further efficient and dynamic business development, it is necessary to express the mutual relations between financial and nonfinancial entities strictly via financing or investments. By the end of 2010, J&T Group expects to complete the separation of non-financial entities operating in the Corporate Investment, Real Estate and Service segments into separate homogeneous business units (holding companies). The holding companies will be managed and administered by professional management within private equity funds that, in a structure common in the private equity world, will be open to other potential qualified investors (shareholders). Our aim is to provide funds for these holding companies in a way standard for financial institutions and to participate in their operations as a financial investor. In establishing the holding companies the Group has paid significant attention to compliance with arms-length principles and to the system of corporate governance. The Group intends to apply this approach to all other new investment projects as well. ENERGY-INDUSTRIAL HOLDING In February 2009, J&T Group, PPF and Daniel Křetínský concluded a Joint Venture Agreement (JVA) on the establishment of an energy-industrial holding company. This agreement initiated the creation of a new important player in the Central European market. In December 2008 prior to the JVA signing, several energy and industrial projects exited from the consolidated group. The new holding company will include, among others, UNITED ENERGY, a.s., SLOVENSKÉ ENERGETICKÉ STROJÁRNE a.s., a 41.1% share in PRAŽSKÁ ENERGETIKA a.s., SOR LIBCHAVY spol. s r.o., ČESKOMORAVSKÝ UZENÁŘSKÝ HOLDING, a.s., a portfolio of companies specialized in power distribution equipment installation, PLZEŇSKÁ ENERGETIKA, a.s. and PRVNÍ ENERGETICKÁ, a.s. J&T Group will act as a financial investor, which will enable the Group to participate in income from the new holding company s investment projects. J&T Group will not, however, take part in the management and administration of the projects or of the holding company as a whole. REAL ESTATE HOLDING The real estate holding company is a new business entity resulting from the Group s historically successful strategy in the real estate segment. Geographically, the new holding company operates primarily in the Slovak and Czech Republics. Real estate projects left the consolidated group in October The most important projects include River Park (SK), Westend Business Park (SK), Prosek Point (CZ) and a portfolio of land holdings (CZ, SK). In the future, we expect that the activities of the holding company will be additionally structured into a real estate development arm and a lucrative real estate arm. 007

10 CONSOLIDATED GROUP UNTIL CONSOLIDATED GROUP FROM 2010 BANKING BANKING NON-FINANCIAL INVESTMENTS Investments Financing Partnerships NEW HOLDING COMPANIES Energy-industrial Holding Real Estate Holding Best Hotel Properties Tatry Mountain Resorts Other separated companies Media NEW INVESTMENT PROJECTS 008

11 The position of J&T Group with respect to the real estate holding company will be the same as in the case of the energy-industrial holding company, namely as a financial investor. This will enable the Group to participate in income from investment projects of the holding company, but the Group will not participate in management and administration of the projects or the holding company itself. BEST HOTEL PROPERTIES The aim of the new hotel company BHP a.s. (Best Hotel Properties) is to build a platform for further development of the most important projects of J&T Group in the tourism industry, such as hotel Baltschug Kempinski Moscow and Crowne Plaza (Bratislava), former Sugarmakers Palace (Palác Cukrovarníků) in Prague and two other Kempinski hotels (Bratislava and Štrbské Pleso). The Group will hold a non-controlling interest up to 20% in the company. TATRY MOUNTAIN RESORTS The separation of investments in the areas of the High and Low Tatras from the consolidated group laid the foundation for Tatry Mountain Resorts holding company. The most important projects of the new holding company will be the tourist centres Tatranská Lomnica and Starý Smokovec, Grandhotel Praha Tatranská Lomnica, Grandhotel Starý Smokovec, resort Jasná Nízke Tatry and hotels Grand Jasná and Tri Studničky, among others. Part of the holding company will also be a lucrative portfolio of lands and real estate property designated for further development. As in the case of BHP a.s., the Group will hold a noncontrolling interest up to 20% in the company. OTHER SEPARATED COMPANIES Since the end of 2008 the process of separation of other projects from J&T consolidated group has been in progress. Namely the projects in the Health Services, Airplanes, Media and Sport sub-segments. 009

12 THE GROUP S FINANCIAL OPERATIONS IN 2008 NET PROFIT At the end of 2008, the Group recognised a net profit of SKK 3.2 billion attributable to the equity holders of the parent company, whereas the loss attributable to the minority shareholders was SKK million. The Group result was significantly influenced by the extraordinary events of the global financial and economic crisis and the separation of non-financial entities from the consolidated group commenced in the last quarter of Entities not yet separated are reported in compliance with International Financial Reporting Standards (IFRS) as Disposal group held for sale. The result generated by the Disposal group held for sale together with the effect of the separation of companies from the consolidated group is recognised as a profit from discontinued operations amounting to SKK 6.6 billion after taxes. Banking J&T Banka, a.s., the cornerstone of the J&T banking segment, reached in 2008 a record-breaking profit before tax of SKK million. The bank also achieved a 29% year-to-year increase in operating profit (SKK 535 million). This increase was primarily caused by an increase in the balance sheet amount accompanied by an increased volume of loans provided and related interest income (year-to-year increase of SKK 210 million). The downturn in the markets and continuing uncertainty of investors impacted the fee income from trading, which decreased by 30% year-on-year to SKK 44.6 million. Companies in the Banking segment also manage investments and trade in public markets. Negative revaluation of investments in our portfolios resulted in a loss of SKK 3.14 billion in the Financial Markets sub-segment. The value of our positions, primarily in Erste Bank der oesterreichischen Sparkassen AG and Unipetrol, a.s., were significantly reduced. However, we consider these losses temporary, until such time as the markets stabilise. Corporate investments The Group achieved consolidated profit before tax of SKK 3.4 billion in the Energy sub-segment. Income from joint ventures and associates increased by SKK million to SKK 1.6 billion primarily due to an increase in share in Pražská Energetika, a.s. from 34% to 41.1%. In 2008, West Bohemia Energy Holding a.s., which is a part of the consolidated group, obtained a 50% share in Plzeňská Energetika a.s. and thus increased its ownership in this company to 100%. Change in the consolidation method of this company from the equity method to full consolidation impacted the operating income (increase of SKK 1.22 billion) and expenses (increase of SKK 1.20 billion). The main reason for the negative result of the Industry sub-segment was a loss resulting from an end to the Group s cooperation in the project 1. Garantovaná. 1. Garantovaná a.s. was separated from the consolidated group in August In 2008 the amount of Operating income in the Industry segment also decreased by SKK million to SKK 12.5 billion. Operating income in 2007 was influenced by extraordinary income resulting from the sale of investments (for example, the sale of Kablo Elektro, a.s.). Real estate development The Group recognised consolidated losses of SKK 168 million in the Real Estate Development segment. Due to the separation of real estate projects from the consolidated group, this result includes development up to the exit dates of the respective companies in the last quarter of the year. Companies operating in the tourism industry recognised a consolidated profit of SKK 38.8 million, representing a significant increase compared to 2007, when these companies had a consolidated loss of SKK 413 million. The Group recognised a consolidated loss of SKK 127 million in the Flats and Offices sub-segment. In 2008, the Group was forced to slow the development of selected projects and the assets were restated at fair value in compliance with the chosen accounting policy. The revaluation of investments to fair value was the largest contributor to the consolidated loss in this area. Similarly, in the Industrial Parks sub-segment, the result decreased by SKK 190 million to SKK 48 million primarily due to the revaluation of these investments. Media Companies within the Media segment recognised a consolidated loss of SKK 494 million in 2008, which was mostly the result of the new Czech news television channel Z1, broadcasting of which commenced in June A general decrease in advertising markets in the second half of 2008 prevented the realization of expected income from the sale of advertising time. At the end of the year, the Group s management successfully optimised costs related to television operations. Initial results in 2009 indicate a positive change in trends. The Slovak company TV JOJ observed improvement in its results. Despite the predicted decrease of 20% in advertising markets in 2009, TV JOJ plans to maintain or eventually improve its operating result due to a continuous increase in viewer ratings. ASSETS AND LIABILITIES Due to the separation of projects from the consolidated group, the amount of total assets decreased by 7.1% to SKK billion. A significant effect of this process is an increase in the share of assets and liabilities of the 010

13 Banking segment of J&T Group. The share of total assets increased from 46.2% to 55.3%, whereas the share of total liabilities increased from 39.6% in 2007 to 49.7% in The share of total assets and liabilities of the Group s Banking segment will continue to increase during the ongoing process of project separation. The most significant changes in the balance sheet were observed in the captions Disposal group held for sale and Loans and advances to customers. As at 31 December 2008 the Disposal group held for sale comprised primarily investments of the Group in the energy and industrial sectors. At the end of 2007, the Group recognised primarily real estate investments as Disposal group held for sale (Crowne Plaza, Tower 115). The most significant assets in this category are investments in: Pražská Energetika, a.s. United Energy, a.s. První energetická a.s. SOR Libchavy spol. s r.o. Českomoravský uzenářský holding, a.s. The Disposal group held for sale amounts to SKK 21.9 billion and comprises primarily equity interest, property, plant and equipment and trade receivables. Liabilities of these companies are recognised under Liabilities associated with disposal group held for sale in the amount of SKK 13.5 billion. This is comprised primarily of Deposits and loans from banks (SKK 9.3 billion) and Trade payables and other liabilities (SKK 1.9 billion). Sale of these assets will result in a ratio of consolidated equity to total consolidated assets exceeding 20%. The Group will take advantage of its high capitalisation during these times of global financial and economic crisis to realize lucrative acquisition opportunities in the market. Deposits and loans from customers as at 31 December 2008 amounted to SKK 45.9 billion, representing more than an 81.6% increase year-on-year. Loans provided to companies in the Corporate Investment, Real Estate Development, Airplanes, Health Services and Sport subsegments were in prior years recognised only at the subsegment level and were eliminated at the Group level. As at 31 December 2008 these companies were no longer part of the consolidated group and therefore no longer eliminated at the Group level. 011

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15 REPORT BY THE SUPERVISORY BOARD The Supervisory Board of J&T FINANCE GROUP, a. s., consisted of three members in It carried out the responsibilities required of it under the law and the Company s Articles of Association. In its capacity as a supervisory body, the Supervisory Board monitored the performance of the Board of Directors of J&T FINANCE GROUP, a. s., and communicated key activities across the entire J&T Group. The Supervisory Board monitored the financial management and implementation of strategic plans. On a regular basis the Supervisory Board was informed about the Company s major transactions, financial situation, and other important events and issues relating to the Company and its individual subsidiaries. The Group s consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS). Separate financial statements were prepared in compliance with the Act on Accounting and other mandatory regulations applicable in the Slovak Republic. The consolidated financial statements prepared in accordance with IFRS were audited by KPMG Slovensko spol. s r.o. KPMG issued its auditors report on 15 July 2009, the full wording of which is published on page 18 of this Annual Report. The Supervisory Board has reviewed the separate and consolidated financial statements submitted to it and has concluded that the accounts and records were maintained in a manner which is transparent and in accordance with the regulations applicable in the Slovak Republic, and that the financial statements provide a true and fair picture of the financial situation of J&T FINANCE GROUP, a. s., and the entire Group as at 31 December The Supervisory Board concurs with the auditors conclusions and acknowledges the auditors report. In light of these circumstances, the Supervisory Board recommends that the General Meeting approve the consolidated financial statements of J&T FINANCE GROUP, a. s., for the year ended 31 December August 10, 2009 Bratislava Marta Tkáčová 013

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17 J&T MANAGEMENT STRUCTURE BOARD OF DIRECTORS Chairman of the Board of Directors Jozef Tkáč Vice-chairman of the Board of Directors Ivan Jakabovič SUPERVISORY BOARD Marta Tkáčová Ivan Jakabovič senior Jana Šuterová TOP MANAGEMENT Patrik Tkáč Ivan Jakabovič Tomáš Martinec Štěpán Ašer Monika Céreová Kamil Bendák Jozef Spišiak Jiří Uvíra Miloš Badida Taťána Turziková Jarmila Jánošová 015

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20 INDEPENDENT AUDITORS REPORT TO THE SHAREHOLDERS, BOARD OF DIRECTORS AND SUPERVISORY BOARD OF J&T FINANCE GROUP, a. s. We have audited the accompanying financial statements of J&T FINANCE GROUP, a. s. and its subsidiary companies ( the Group ), which comprise the consolidated balance sheet as at 31 December 2008, and the consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management s Responsibility for the Financial Statements Management as represented by the statutory body is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. 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 our 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, we consider 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 opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2008 and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards. Emphasis of Matter Without qualifying our audit opinion, we draw attention to the fact that the Group started in 2008 a long-term planned process to reorganise its activities. The effect of the related transactions on the Group s financial position and performance is described in Notes 3, 4 and 26 attached to these financial statements. The reader should refer to those notes for a proper understanding of the financial statements. Bratislava, 15 July 2009 Auditing company: Responsible auditor: Responsible audit partner: KPMG Slovensko spol. s r. o. Ľuboš Vančo Marc Derydt Licence SKAU No. 96 Licence SKAU No

21 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2008 In thousands of SKK Note Interest and similar income 5 2,909,899 1,892,056 Interest expense and similar charges 5 (3,274,862) (1,990,585) Net interest expense (364,963) (98,529) Fee and commission income 1,134, ,554 Fee and commission expense 6 (1,316,731) (1,440,314) Net fee and commission expense (182,194) (906,760) Dealing profits (losses), net 7 (3,433,559) 1,908,576 Negative goodwill 8 62,973 16,520 Other operating income 9 8,423,666 3,519,439 Operating income 5,053,080 5,444,535 Personnel expenses 10 (708,450) (2,339,824) Depreciation and amortisation 13, 14 (258,713) (141,177) Goodwill impairment 8, 14 (325,006) Impairment of property, plant and equipment and intangible assets 13, 14 (253,571) (44,808) Other operating expenses 11 (2,927,800) (3,810,541) Operating expenses (4,148,534) (6,661,356) Increase in allowance for impairment of loans 21 (2,323,566) (317,249) Profit (losses) from operations (1,966,177) (2,539,359) Income (expense) from associates and joint ventures 16 (1,515,550) 399,557 Profit (loss) before tax (3,481,727) (2,139,802) Income tax expense 12 (115,235) (188,098) Profit (loss) for the period from continuing operations (3,596,962) (2,327,900) Profit for the period from discontinued operations 4 6,581,769 3,929,025 Profit for the period 2,984,807 1,601,125 Attributable to: Equity holders of the parent 3,194,163 1,684,492 continuing operations (3,422,940) (2,281,753) discontinued operations 6,617,103 3,966,245 Minority interest (209,356) (83,367) continuing operations (174,022) (46,147) discontinued operations (35,334) (37,220) 2,984,807 1,601,125 Profit from discontinued operations in 2007 includes the whole year of operations of the entities discontinued in In 2008, the results of the discontinued entities are included up to the date of disposal. The notes presented on page 39 to page 111 form an integral part of the consolidated financial statements. An analysis of the income statement by segment is provided in Note 2 Segment information. 019

22 CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2008 Assets In thousands of SKK Note Property, plant and equipment ,596 19,902,279 Intangible assets 14 5,069,513 8,372,027 Investment property 15 6,290,181 Investments in joint ventures and associates 16 2,001 14,060,975 Trade receivables and other assets , ,091 Loans and advances to customers 20, 21 8,235,438 2,802,939 Receivables from the sale of discontinued operations 4,065,964 Financial assets at fair value through profit or loss ,487 Financial instruments held to maturity 25,652 20,858 Deferred tax assets 17 26, ,674 Total non-current assets 18,895,149 52,233,511 Inventories ,781 2,139,317 Trade receivables and other assets 19 4,698,823 11,166,519 Loans and advances to customers 20, 21 37,645,858 22,457,204 Receivables from the sale of discontinued operations 1,758,621 Financial assets at fair value through profit or loss 23 7,606,294 7,502,228 Financial instruments held to maturity 5,208 21,993 Securities available for sale ,492 1,130,242 Cash and cash equivalents 25 10,537,769 11,875,092 Disposal group held for sale 26 21,849,918 3,575,051 Total current assets 85,262,764 59,867,646 Total assets 104,157, ,101,157 Equity In thousands of SKK Note Share capital 950, ,000 Share premium 450, ,000 Retained earnings and other reserves 14,798,807 15,020,099 Equity attributable to equity holders of the parent 27 16,198,807 16,420,099 Minority interest ,871 2,159,361 Total equity 16,648,678 18,579,

23 Liabilities In thousands of SKK Note Deposits and loans from banks 29 2,149,914 13,006,777 Deposits and loans from customers 30 1,807,757 1,932,666 Subordinated debt 34 2,798,345 2,497,519 Trade payables and other liabilities , ,338 Provisions ,814,907 Deferred tax liabilities ,892 3,527,567 Total non-current liabilities 7,673,970 24,662,774 Deposits and loans from banks 29 5,686,289 8,335,079 Deposits and loans from customers 30 55,525,603 42,960,570 Subordinated debt 34 3,471 4,988 Financial liabilities at fair value through profit or loss , ,509 Trade payables and other liabilities 33 4,407,553 13,237,151 Current income tax 47, ,932 Provisions 31 58, ,894 Liabilities associated with disposal group held for sale 26 13,534,870 2,856,800 Total current liabilities 79,835,265 68,858,923 Total liabilities 87,509,235 93,521,697 Total equity and liabilities 104,157, ,101,157 The notes presented on page 39 to page 111 form an integral part of the consolidated financial statements. 021

24 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2008 In thousands of SKK Share capital Share premium Non-distributable reserves Balance at 1 January , , ,145 Foreign exchange translation differences Change in fair value of financial assets available for sale Net income recognised directly in equity Profit for the year Total recognised income and expense Contribution to equity by shareholders other than issue of share capital Transfer to legal reserve fund 26,933 Dividends Effect of disposals (83,182) Effect of acquisitions Effect of changes in shareholdings on minority interest Balance at 31 December , ,000 96,896 In thousands of SKK Share capital Share premium Non-distributable reserves Balance at 1 January , ,000 96,896 Foreign exchange translation differences Revaluations from step acquisitions Revaluations on transfers to investment property Change in fair value of financial assets available for sale Cash flow hedges: Effective portion of changes in fair value Net income recognised directly in equity Profit for the year Total recognised income and expense Transfer to legal reserve fund 232,896 Dividends Effect of disposals (34,697) Effect of acquisitions Effect of changes in shareholdings on minority interest Balance at 31 December , , ,095 The notes presented on page 39 to page 111 form an integral part of the consolidated financial statements. 022

25 Foreign exchange translation reserve Revaluation reserve Retained earnings Total attributable to equity holders of the parent Minority interest 370, ,677 11,762,452 14,513,493 1,676,157 16,189, , ,547 23, ,094 (44,662) (44,662) (44,662) 329,547 (44,662) 284,885 23, ,432 1,684,492 1,684,492 (83,367) 1,601, ,547 (44,662) 1,684,492 1,969,377 (59,820) 1,909,557 (62,771) (62,771) (62,771) (26,933) (43,938) (43,938) 83,182 (66,095) (66,095) 864, ,375 (211,318) (211,318) 699, ,015 13,440,422 16,420,099 2,159,361 18,579,460 Total Foreign exchange translation reserve Revaluation reserve Retained earnings Total attributable to equity holders of the parent Minority interest 699, ,015 13,440,422 16,420,099 2,159,361 18,579,460 (1,228,934) (1,228,934) (114,982) (1,343,916) 90,144 90,144 90,144 63,581 63,581 63,581 (2,265) (2,265) (2,265) 264, , ,373 (1,228,934) 415,833 (813,101) (114,982) (928,083) 3,194,163 3,194,163 (209,356) 2,984,807 (1,228,934) 415,833 3,194,163 2,381,062 (324,338) 2,056,724 (232,896) (2,602,354) (2,602,354) (126,908) (2,729,262) (190,119) 224,816 (1,097,743) (1,097,743) 124, ,503 (285,004) (285,004) (529,168) 1,008,729 14,024,151 16,198, ,871 16,648,678 Total 023

26 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2008 Operating Activities In thousands of SKK Note Profit from operations 3,169, ,927 Adjustments for: Depreciation and amortization 13, 14 1,853,617 1,557,642 Impairment losses 13, , ,147 Revaluation of investment property 9 (131,429) (678,865) Revaluation of financial instruments at fair value 3,174,983 (464,576) (Gain) / loss on disposal of property, plant and equipment, investment property and intangible assets 9 153,073 (556,469) (Gain) / loss on the sale of emission rights 9 126,129 (508) Profit on disposal of subsidiaries, special purpose entities, joint ventures, associates and minority interests 9 (6,377,951) (3,527,109) (Profit) / loss on disposal of financial assets 159,168 (1,442,171) Interest expense, net 5 1,323, ,589 Increase in allowance for impairment of loans 21 2,323, ,249 Change in impairment of trade receivables and other assets 315,012 (308,716) Change in impairment of inventories 48,901 56,443 Change in provisions 31 (2,393,921) (264,068) Negative goodwill 8 (267,012) (46,196) Unrealised foreign exchange gains, net 2,522, ,361 Operating profit before changes in working capital 6,305,195 (2,902,320) Change in available for sale and held to maturity financial assets 228,779 (5,946,312) Change in loans and advances to customers 1,191,226 (7,487,543) Change in trade receivables and other assets (4,690,109) (2,808,828) Change in inventories (123,091) 104,985 Change in deposits and loans from banks (947,747) 1,629,479 Change in deposits and loans from customers 10,545,231 13,763,480 Change in trade payables and other liabilities 3,601, ,381 Cash generated from / (used in) operations 16,111,016 (2,917,678) Interest paid (3,184,711) (2,241,379) Income taxes paid (815,435) (1,182,348) Cash flows generated from / (used in) operating activities 12,110,870 (6,341,405) Investing Activities In thousands of SKK Note Purchase of financial instruments at fair value through profit or loss (8,750,781) (12,750,059) Proceeds from sale of financial instruments at fair value through profit or loss 4,986,093 18,167,104 Acquisition of property, plant and equipment, investment property and intangible assets (6,617,231) (4,993,872) Proceeds from sale of emission rights 1,325,851 6,105 Proceeds from sale of property, plant and equipment, investment property and other intangible assets 1,547,076 2,083,922 Acquisition of associates and joint ventures 3 (194,689) Acquisition of subsidiaries and special purpose entities, net of cash acquired 3 (1,465,023) (2,031,190) Net cash (outflow) / inflow from disposal of subsidiaries and special purpose entities 3 (2,179,556) 5,611,310 Increase in participation in existing subsidiaries and special purpose entities 3 (319,766) (188,823) Interest received 1,929,129 1,191,404 Dividends received 308,592 34,159 Cash flows generated from / (used in) in investing activities (9,235,616) 6,935,

27 Financing Activities In thousands of SKK Note Subordinated debt issued 299,309 2,502,507 Payments for finance lease (30,482) (77,698) Dividends paid (2,729,262) (43,938) Cash flows generated from / (used in) by financing activities (2,460,435) 2,380,871 Net increase in cash and cash equivalents 414,819 2,974,837 Cash and cash equivalents at beginning of the year 11,982,459 9,346,397 Effect of exchange rate fluctuations on cash held (749,383) (338,775) Cash and cash equivalents at end of the year 11,647,895 11,982,459 Cash and cash equivalents 25 10,537,769 11,875,092 Cash and cash equivalents included in disposal group held for sale 26 1,110, ,367 Cash and cash equivalents at end of the year 11,647,895 11,982,459 See Note 4 Discontinued operations for the cash flows relating to operating, investing and financial activities from discontinued operations. Cash and cash equivalents includes cash included in disposal group, see Note 26 Disposal group held for sale. The notes presented on page 39 to page 111 form an integral part of the consolidated financial statements. 025

28 J&T FINANCE GROUP, a. s. (the Parent Company or the Company ) is a joint stock company having its legal seat and domicile at Lamačská cesta 3, Bratislava. The Company was founded on 7 February 1995 and incorporated into the commercial register on 20 March In 2008 the Company s shareholder structure changed, as on 14 July 2008 J&T Finance Group II, a.s. sold its 44.53% interest in the Company s share capital to Techno Plus, v.o.s., a partnership between Jozef Tkáč and Ivan Jakabovič, which thus became the sole shareholder. The shareholders of the Company as at 31 December 2008 and 31 December 2007 were as follows: Interest in share capital Voting rights TSKK % % 31 December 2008 Techno Plus, a.s. 950, Total 950, December 2007 Techno Plus, v.o.s. 526, J&T Finance Group II, a.s. 423, Total 950, The consolidated financial statements of the Company for the year ended 31 December 2008 comprise the Parent Company and its subsidiaries (together referred to as the Group ) and the Group s interests in associates, jointly controlled entities and special purpose entities. Until 2008 the main activities of the Group were investment and private banking, the development of real estate properties for sale and commercial use, asset management and corporate investments in the energy and industry sectors. In the last quarter of 2008, the Group started a long-term planned process of reorganisation of its activities, with the aim to separate its banking activities from the other business segments. The first part of the process resulted in disposal of the Real Estate segment by the end of 2008, and partial disposal of the Corporate Investment segment (energy and industry sectors). At the same time, governance of the Group was changed, leading notably to the termination of the positions of Partners and Top Managers. As at 31 December 2008, the disposed or partially disposed non-banking segments are under control of the former partners of the Group. Completion of the reorganisation process is expected in 2010 and, going forward, the Group will focus its activities on private banking, financial markets and investments in specific projects. 026

29 SIGNIFICANT ACCOUNTING POLICIES (a) Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ). The financial statements were approved by the Board of Directors on 15 July (b) Basis of preparation The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties, derivative financial instruments, financial assets and liabilities at fair value through profit or loss and available for sale. Non-current assets held for sale and discontinued operations are stated at the lower of their carrying amount and fair value less costs to sell. The consolidated financial statements are presented in Slovak Crowns, rounded to the nearest thousand. The accounting policies have been consistently applied by the Group enterprises and are consistent with those used in the previous year. Certain comparative amounts have been reclassified to conform with the current year s presentation, notably with regard to presentation of discontinued operations. Financial statements prepared in compliance with International Financial Reporting Standards require various judgements, assumptions, and estimates to be exercised that affect the reported amounts of assets, liabilities, income and expenses. Actual results will likely differ from these estimates. Critical accounting estimates and judgements made by management with a significant risk of material adjustment in the next year are discussed in Note 1 Critical accounting estimates and assumptions. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods. Issued but not yet effective International Financial Reporting Standards A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2008, and have not been applied in preparing these financial statements: The revised IFRS 3 will allow entities to choose to measure non-controlling interests using the existing IFRS 3 method (proportionate share of the acquiree s identifiable net assets) or at fair value. The revised IFRS 3 is more detailed in providing guidance on the application of the purchase method to business combinations. The requirement to measure at fair value every asset and liability at each step in a step acquisition for the purposes of calculating a portion of goodwill has been removed. Instead, goodwill will be measured at acquisition date as the difference between the fair value of any investment in the business held before the acquisition, the consideration transferred and the net assets acquired. Acquisition-related costs will be accounted for separately from the business combination and therefore recognised as expenses rather than included in goodwill. An acquirer will have to recognise at the acquisition date a liability for contingent purchase consideration. Changes in the value of that liability after the acquisition date will be recognised in accordance with other applicable IFRSs, as appropriate, rather than by adjusting goodwill. The revised IFRS 3 brings into its scope business combinations involving only mutual entities and business combinations achieved by contract alone. The Group is currently assessing the impact of the amended standard on its financial statements. The revised standard is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July IFRS 8 requires an entity to report financial and descriptive information about its reportable segments. Generally, financial information is required to be reported on the basis that is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments (management approach). The standard requires an explanation of how segment profit or loss and segment assets and liabilities are measured for each 027

30 reportable segment. IFRS 8 requires an entity to report information about the revenues derived from its products or services (or groups of similar products and services), about the countries in which it earns revenues and holds assets, and about major customers, regardless of whether that information is used by management in making operating decisions. IFRS 8 will affect the presentation and disclosure of segment information. There will be no effect on reported profit or net assets. The provisions of IFRS 8 are effective for annual periods beginning on or after 1 January The main change in IAS 1 is the replacement of the income statement by a statement of comprehensive income which will also include all non-owner changes in equity, such as the revaluation of available-for-sale financial assets. Alternatively, entities will be allowed to present two statements: a separate income statement and a statement of comprehensive income. The revised IAS 1 also introduces a requirement to present a statement of financial position (formerly balance sheet) at the beginning of the earliest comparative period whenever the entity restates comparatives due to reclassifications, changes in accounting policies, or corrections of errors. The Group expects the revised IAS 1 to affect the presentation of its financial statements but to have no impact on the recognition or measurement of specific transactions and balances. The revised standard is effective for annual periods beginning on or after 1 January The revised IAS 23 was issued in March The main change to IAS 23 is the removal of the option of immediately recognising as an expense borrowing costs that relate to assets that take a substantial period of time to get ready for use or sale. An entity is, therefore, required to capitalise such borrowing costs as part of the cost of the asset. The revised standard applies prospectively to borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after 1 January 2009 and the Group will adopt this revised standard accordingly. The revised IAS 27 will require an entity to attribute total comprehensive income to the owners of the parent and to the non-controlling interests (formerly minority interests) even if this results in the non-controlling interests having a negative balance. The current standard requires excess losses to be allocated to the owners of the parent, except to the extent that the non-controlling interests have a binding obligation and are able to make an additional investment to cover the losses. The revised standard also specifies that changes in a parent s ownership interest in a subsidiary that do not result in the loss of control must be accounted for as equity transactions. It also specifies how an entity should measure any gain or loss arising on the loss of control of a subsidiary. Any investment retained in a former subsidiary will have to be measured at its fair value at the date when control is lost. The current standard requires the carrying amount of an investment retained in a former subsidiary to be considered as its cost on initial measurement of the financial asset in accordance with IAS 39, Financial Instruments: Recognition and Measurement. The Group is currently assessing the impact of the amended standard on its financial statements. The revised standard is effective for annual periods beginning on or after 1 July The IAS 32 and IAS 1 Amendment requires classification as equity of some financial instruments that meet the definition of a financial liability. The Group is currently assessing the impact of the amendment on its financial statements. The provisions of the amended standards are effective for annual periods beginning on or after 1 January Amendments to IAS 39 Financial Instruments: Recognition and Measurement Eligible Hedged Items IAS 39 was amended to clarify the application of existing principles that determine whether specific risks or portions of cash flows are eligible for designation in a hedging relationship. The amendments will become mandatory for the Group s 2010 financial statements, with retrospective application required. The Group is currently in the process of evaluating the potential effect of this amendment. Embedded Derivatives When Reclassifying Financial Instruments The reclassification amendment allows entities to reclassify particular financial instruments out of the fair value through profit or loss category in specific circumstances. This amendment clarifies that on reclassification of a financial asset out of the fair value through profit or loss category, all embedded derivatives have to be assessed and, if necessary, separately accounted for. The amendment applies retrospectively and is required to be applied for annual periods ending on or after 30 June The International Accounting Standards Board made certain amendments to existing standards as part of its annual improvements project. The effective dates for these amendments vary by standard and most will be applicable to the Group s 2009 financial statements. The Group is currently assessing the impact of these amendments on its financial statements. 028

31 Other amended standards and new interpretations not yet effective that are currently not applicable to the Group include IFRS 1, IFRS 2, and IFRIC 12 through 18. Other International Financial Reporting Standards The Group has not early adopted any IFRS standards where adoption is not mandatory at the balance sheet date. Where transition provisions in adopted IFRS give an entity the choice of whether to apply new standards prospectively or retrospectively, the Group elects to apply the Standards prospectively from the date of transition. (c) Basis of consolidation (i) Subsidiaries Subsidiaries are those enterprises controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise, so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The consolidated financial statements include the Group s interests in other entities based on the Group s ability to control such entities regardless of whether control is actually exercised or not. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. (ii) Associates Associates are those enterprises in which the Group has significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the Group s share of the total recognised gains and losses of associates on an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases. When the Group s share of losses exceeds the carrying amount of the associate, the carrying amount is reduced to nil and recognition of further losses is discontinued, except to the extent that the Group has incurred obligations in respect of the associate. (iii) Jointly controlled entities (joint ventures) Jointly controlled entities are those enterprises over whose activities the Group has joint control, established by contractual agreement. The consolidated financial statements include the Group s share of the total recognised gains and losses of joint ventures on an equity accounted basis, from the date that joint control commences until the date that joint control ceases. (iv) Special purpose entities ( SPEs ) The Group operates partly through SPEs, in which it does not have any direct or indirect shareholdings. Consolidated special purpose entities are principally those from which the Group will obtain the majority of the economic benefits embodied in or to be realised by those entities. (v) Consolidation scope There are 72 companies included in the consolidation as at 31 December 2008 (2007: 248). All fully consolidated companies prepared their annual financial statements at 31 December The companies are listed in Note 44, and this list is based on ownership hierarchy. Although the Group does not own shares in the SPEs, the majority of the economic benefits belong to the Group (refer to accounting policy c.iv). (vi) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised gains arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates and jointly controlled entities are eliminated to the extent of the Group s interest in the enterprise. Unrealised gains arising from transactions with associates are eliminated against the investment in the associate. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. 029