The Polish original should be referred to in matters of interpretation. Translation of auditors report originally issued in Polish.

Transcription

1 The Polish original should be referred to in matters of interpretation. Translation of auditors report originally issued in Polish. INDEPENDENT AUDITORS REPORT To the Supervisory Board of Bank Ochrony Środowiska S.A. 1. We have audited the attached financial statements for the year ended 31 December 2010 of Bank Ochrony Środowiska S.A. ( the Bank ) located in Warsaw at Al. Jana Pawła II 12, containing the income statement, the statement of comprehensive income for the period from 1 January 2010 to 31 December 2010, the statement of financial position as at 31 December 2010, the statement of changes in equity, the cash flow statement for the period from 1 January 2010 to 31 December 2010 and the summary of significant accounting policies and other explanatory notes ( the attached financial statements ). 2. The truth and fairness 1 of the attached financial statements, the preparation of the attached financial statements in accordance with the required applicable accounting policies and the proper maintenance of the accounting records are the responsibility of the Bank s Management Board. In addition, the Bank s Management Board and Members of the Supervisory Board are required to ensure that the attached financial statements and the Directors Report meet the requirements of the Accounting Act dated 29 September 1994 (2009 Journal of Laws No. 152 item 1223 with subsequent amendments the Accounting Act ). Our responsibility was to audit the attached financial statements and to express an opinion on whether, based on our audit, these financial statements comply, in all material respects, with the required applicable accounting policies, whether they truly and fairly 2 reflect, in all material respects, the financial position and results of the operations of the Bank and whether the accounting records that form the basis for their preparation are, in all material respects, properly maintained. 3. We conducted our audit of the attached financial statements in accordance with: chapter 7 of the Accounting Act, national auditing standards issued by the National Council of Statutory Auditors, in order to obtain reasonable assurance whether these financial statements are free of material misstatement. In particular, the audit included examining, to a large extent on a test basis, documentation supporting the amounts and disclosures in the attached financial statements. The audit also included assessing the accounting principles adopted and used and significant estimates made by the Management Board, as well as evaluating the overall presentation of the attached financial statements. We believe our audit has provided a reasonable basis to express our opinion on the attached financial statements treated as a whole. 4. The financial statements for the financial year ended 31 December 2009 were subject to our audit and on 17 March 2010 we issued a qualified opinion regarding comparative data for the year The qualification has not affected the attached financial statements. 1 Translation of the following expression in Polish: rzetelność i jasność 2 Translation of the following expression in Polish: rzetelnie i jasno

2 The Polish original should be referred to in matters of interpretation. Translation of auditors report originally issued in Polish. 5. In our opinion the attached financial statements, in all material respects: present truly and fairly all information material for the assessment of the results of the Bank s operations for the period from 1 January 2010 to 31 December 2010, as well as its financial position 3 as at 31 December 2010; have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and based on properly maintained accounting records; are in respect of the form and content, in accordance with legal regulations governing the preparation of financial statements and the Bank s Articles of Association. 6. We have read the Directors Report for the period from 1 January 2010 to 31 December 2010 and the rules of preparation of annual statements ( the Directors Report ) and concluded that the information derived from the attached financial statements reconciles with these financial statements. The information included in the Directors Report corresponds with the relevant regulations of the Decree of the Minister of Finance dated 19 February 2009 on current and periodic information published by issuers of securities and conditions for recognition as equivalent the information required by laws of non-eu member states (2009 Journal of Laws No. 33, item 259). on behalf of Ernst & Young Audit Sp. z o.o. Rondo ONZ 1, Warsaw Reg. No 130 Key Certified Auditor Dorota Snarska-Kuman Certified Auditor Registration No Warsaw, 16 March Translation of the following expression in Polish: sytuacja majątkowa i finansowa 2/2

3 ANNUAL FINANCIAL STATEMENTS OF THE BANK OCHRONY ŚRODOWISKA S.A. FOR THE PERIOD OF 12 MONTHS ENDED 31 DECEMBER 2010 INCLUDING THE AUDITOR` REPORT Warsaw, 16 March 2011

4 BOŚ Bank S.A. Contents of the annual financial statements according to IFRS as endorsed by EU Page Annual income statement... 4 Annual statement of comprehensive income... 4 Annual statement of financial position... 5 Annual statement of changes in equity... 6 Annual statement of cash flows... 7 Additional notes to annual financial statements Basic information about Bank Ochrony Środowiska S.A Identification of the consolidated financial statements Information on the accounting policies adopted in the preparation of the financial statements Adjustment of the prior period error Significant accounting estimates and judgements Financial risk management Net interest income Net fee and commission income Dividend income Net trading income Result on investment securities Foreign exchange result Other operating income Other operating expenses Net impairment losses General Administrative expenses Employee benefits Income tax charge Earnings per share Cash and balances with the Central Bank Deposits with other banks, loans and advances to other banks Securities held for trading Loans and advances to customers Investment securities Pledged assets

5 26. Investments in subsidiaries Intangible assets Property, plant and equipment Other assets Amounts due to other banks Amounts due to customers Debt securities issued Subordinated debt Provisions Deferred income tax Other liabilities Contingent assets and liabilities Share capital Revaluation reserve Retained earnings Additional information to the statement of cash flows Description of derivative financial instruments and foreign exchange transactions Fair value of financial assets and liabilities Hierarchy of financial instruments carried at fair value by the method of fair value measurement Segment reporting Related-party transactions Acquisitions and disposals Dividends paid out and declared Events after the reporting period Remuneration for the entity entitled to audit financial statements

6 Annual income statement 12 months ended Continued activities Note comparative data Interest and similar income Interest expense and similar charges Net interest income Fee and commission income Fee and commission expense Net fee and commission income Dividend income Net trading income Result on investment securities Foreign exchange result Other operating income Other operating expenses Net impairment gains/ losses Administrative expenses 16, Operating profit Profit before tax Income tax expense current tax deferred tax Net profit Earnings per share of the Bank during the period (in PLN) basic diluted There were no discontinued operations in 2010 and Annual statement of comprehensive income 12 months ended months ended comparative data Net profit Gain on valuation of available for sale financial assets Deferred tax Total comprehensive income The notes included on pages 9 to 107 are an integral part of these financial statements. 4

7 Annual statement of financial position Note comparative data ASSETS Cash and placements with the Central Bank Placements with other banks, loans and advances to other banks Trading securities Derivative financial instruments Loans and advances to customers Investment securities available for sale held to maturity Pledged assets, Investments in subsidiaries Assets held for sale Intangible assets Property, plant and equipment Income tax assets current deferred Other assets Total assets LIABILITIES Amounts due to the Central Bank Amounts due to other banks Derivative financial instruments Amounts due to customers Debt securities issued Subordinated debt Provisions Current income tax liabilities Other liabilities Total liabilities EQUITY Core capital Share capital Share Premium Revaluation reserve Retained earnings Total equity Total equity and liabilities The notes included on pages 9 to 107 are an integral part of these financial statements. 5

8 BOŚ Bank S.A. in PLN 000 Annual statement of changes in equity Core capital Revaluation Retained earnings (note 39) reserve (note 38) Share capital Share premium Other supplementary capital General risk fund Retained earnings Total equity As at Net result Valuation of available for sale assets Deferred tax on valuation of available for sale assets Total comprehensive income Increase in capital on issue of O-series shares Profit appropriation, of which: Transfer of net profit to other reserves As at As at Net result Valuation of available for sale assets Deferred tax on valuation of available for sale assets Total comprehensive income Profit appropriation, of which: Transfer of net profit to other reserves As at comparative data The notes included on pages 9 to 107 are an integral part of these financial statements. 6

9 Annual statement of cash flows Indirect method 12 months ended Note comparative data CASH FLOWS FROM OPERATING ACTIVITIES Profit (Loss) before tax Adjusted for: Amortization and depreciation Interest on investing activities Interest on financing activities Dividends received (Gains)/losses on investing activities Change trading securities Change assets and liabilities due to valuation of derivative financial instruments Change placements with other banks and loans and advances to other banks Change loans and advances to customers Change investment securities Change pledged assets Change assets available for sale Change other assets Change in amounts due to banks and the Central Bank Change in amounts due to customers Change in provisions Change in debt securites issued Change in other liabilities Income tax paid Net cash flows from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Inflows Redemption of other placements on the money market Redemption of held to maturities investments Interests received Proceeds from disposal of property, plant and equipment Proceeds from disposal of intangible assets Dividends received Outflows Purchase of intangible assets Purchases of property, plant and equipment Net cash flows from investing activities

10 12 months ended Note comparative data CASH FLOWS FROM FINANCING ACTIVITIES Inflows, including: Inflow on issue of bonds including subordinated debt Outflows Interest paid on subordinated debt Net cash flows from financing activities TOTAL NET CASH FLOWS BALANCE SHEET CHANGE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD, including: Restricted Cash The notes included on pages 9 to 107 are an integral part of these financial statements. 8

11 Additional notes to annual financial statements 1. Basic information about Bank Ochrony Środowiska S.A Bank Ochrony Środowiska S.A. Bank Ochrony Środowiska S.A. (hereinafter the Bank, BOŚ S.A., the Company or the parent company ) with its registered office in Warsaw, at Al. Jana Pawła II 12 was incorporated based on the decision No. 42 of the President of the National Bank of Poland (NBP) dated 15 September 1990 and the Notarial Deed of 28 September 1990 on the establishment of the Bank. On 4 June 2001, the Bank was entered into the National Court Register of the District Court in Warsaw, 12 Commercial Department, with the reference number KRS and the statistical number REGON According to the Polish Classification of Activities (PKD), the Bank s activities fall within the category PKD 6419Z. The lifetime of the Bank is indefinite. The Bank s key mission is to support, by providing specialized banking services, activities relating to the development of industry and services for the protection of the environment, and to develop the market for products and services related to the environmental protection. According to the Bank s Statutes, the Bank's area of activity is accumulating cash funds, lending, clearing, providing other banking services as well as financial advisory and consulting services. The scope of the Bank s operations includes: - accepting placements payable on demand or on maturity and maintaining bank accounts for these placements; - maintaining other bank accounts; - granting loans; - issuing and confirming bank guarantees and opening and approving letters of credit; - issuing bank securities; - clearing cash transactions; - issuing e-money instruments; - granting cash loans; - processing checks nd bills of exchange; - issuing payment cards and conducting transactions with the use of cards; - purchasing and selling cash receivables; - custody services in respect of goods and securities and providing safe deposit facilities; - buying and selling monetary instruments; - issuing and confirming warranties; - performing commissioned tasks related to issuing securities; - intermediation in transferring cash and making international settlements; - depositary bank services. The scope of the Bank s operations also includes: - acquiring shares, rights vested in those shares or equity interests in legal entities and participation units in investment funds; - incurring liabilities related to the issuance of securities; - trading in securities; - swapping amounts due from debtors for their assets, on terms and conditions agreed with the debtors; - purchasing and selling real estate; - financial advisory services, especially with respect to the environmental protection; - factoring services; - acquisition activities on behalf of open pension funds; 9

12 - intermediation in the subscription for participation units conducted by investment funds, and intermediation in the sale and repurchase of participation units by investment funds; - intermediation services for brokerage houses; - insurance intermediation services; - receivables collection services on commission of banks and entities with which the Bank concluded joint financing agreements or agreements for action under operation programs. Starting from 24 January 1997, in accordance with a decision of the Management Board of the Warsaw Stock Exchange (WSE), the Bank s shares were admitted to trading on the Warsaw Stock Exchange and classified as belonging to the financial/banking sector category. The annual financial statements were approved by the Management Board of BOŚ S.A. for publication on 16 March Composition of the Management Board and the Supervisory Board of BOŚ S.A. a) Composition of the Management Board of BOŚ S.A.: The composition of the Management Board of the Bank as at 31 December 2010 was as follows: Mariusz Klimczak - President Jacek Pierzyński - Vice-President, the First Deputy of the President Adam Zbigniew Grzebieluch - Vice-President Marek Kazimierz Serafiński - Vice-President Krzysztof Wojciech Telega - Vice-President On 24 November 2010 the Polish Financial Supervision Authority (PFSA) approved the appointment of Mr. Jacek Pierzyński as a Management Board Member. In accordance with the Supervisory Board Resolution as of 29 October 2009, Mr. Jacek Pierzyński took over the position of a Vice-President the First Deputy of the President of the Management Board effective from the day of the approval by PFSA right from the date of the Authority acceptance. On 24 November 2010 Mr Stanisław Kolasiński, a Vice-President of the Management Board, resigned from the position in accordance with the Supervisory Board Resolution as of 29 October 2009 which came into force appointing Mr. Jacek Pierzyński as a Vice-President - the First Deputy of the President of the Management Board. As of the date of the approval of these financial statements the composition of the Management Board of BOŚ S.A. remained unchanged. The Composition of the Management Board of the Bank as at 31 December 2009 was as follows: Mariusz Klimczak - President Adam Zbigniew Grzebieluch - Vice-President Stanisław Kolasiński - Vice-President Marek Kazimierz Serafiński - Vice-President Krzysztof Wojciech Telega - Vice-President On 10 July 2009 the Supervisory Board passed a resolution on the dismissal of Mr. Jerzy Witold Pietrewicz from the position of a Vice-President the First Deputy of the President of the Management Board. At the same time, the Supervisory Board passed a resolution on the appointment of Mr. Stanislaw Kolasinski as a Vice-President of the Management Board. 10

13 b) Composition of the Bank s Supervisory Board As at 31 December 2010, the Bank s Supervisory Board consisted of the following members: Marcin Likierski - President Jacek Maciej Bajorek - Vice-President Marian Adam Pigan - Secretary Józef Kozioł - Member Michał Juliusz Machlejd - Member Marian Malicki - Member Ryszard Ochwat - Member Janusz Marek Topolski - Member Michał Jacek Wysocki - Member On 25 August 2010, the Extraordinary Shareholders Meeting passed a resolution on the appointment of Mr. Janusz Marek Topolski as a Member of the Supervisory Board of the 8 th term. As at the date of the approval of these financial statements the composition of the Supervisory Board of BOŚ S.A. remained unchanged. As at 31 December 2009, the Bank s Supervisory Board consisted of the following members: Marcin Likierski - President Jacek Maciej Bajorek - Vice-President Marian Adam Pigan - Secretary Józef Kozioł - Member Michał Juliusz Machlejd - Member Marian Malicki - Member Ryszard Ochwat - Member Michał Jacek Wysocki - Member 2. Identification of the consolidated financial statements Bank Ochrony Środowiska S.A. prepared also the consolidated financial statements for the year ended 31 December 2010, which was authorized for publication on the 16 March Information on the accounting policies adopted in the preparation of the financial statements 3.1. Basis of the preparation The annual financial statements of the Bank Ochrony Środowiska ( the BOŚ SA, the Bank ) include: - annual income statement for the period of 12 months ended 31 December 2010 and comparative data for the period of 12 months ended 31 December 2009, - annual statement of comprehensive income for the period of 12 months ended 31 December 2010 and comparative data for the period of 12 months ended 31 December 2009, - annual statement of financial position as at 31 December 2010 and comparative data as at 31 December 2009, - annual statement of changes in equity for the period of 12 months ended 31 December 2010 and comparative data for the period of 12 months ended 31 December 2009, - annual consolidated statement of cash flows for the period of 12 months ended 31 December 2010 and comparative data for the period of 12 months ended 31 December 2009, 11

14 - additional explanatory notes. These annual financial statements are prepared in accordance with International Financial Reporting Standards ( IFRS ) as endorsed by the European Union in force as at 31 December 2010 and have been prepared under the same accounting policies for each period except for the presentation of the derivatives valuation. As from 1 January 2010 the changes in fair value of all derivatives are presented in the income statement for the current period as Result on trading activities. The changes in the presentation of comparative data are described in the note 3.27 of the financial statements. The presented financial statements for the year 2010, have been prepared in accordance with IFRS. At the date of the authorization of these financial statements, in light of the current process of IFRS endorsement in the European Union and the nature of the BOŚ S.A. s activities, there is no difference between IFRSs that came into force and IFRSs endorsed by the European Union ( EU ) in the scope of accounting policies applied by the Bank. IFRSs comprise standards and interpretations accepted by the International Accounting Standards Board ( IASB ) and the International Financial Reporting Interpretations Committee ( IFRIC ). The annual financial statements were prepared under the historical cost convention, except for the valuation of the available for sale financial assets and trading securities, and all the derivative contracts measured at fair value. The accounting policies applied by the Bank are described in detail in the Note of these financial statements. The annual financial statements are prepared in Polish zloty (PLN) and all values are presented in PLN thousand, unless stated otherwise. The annual financial statements were prepared based on the assumption that the Bank will continue as going concerns in the foreseeable future, at least 12 months from the balance sheet date. As at the date of the authorization of these financial statements, the Management Board is not aware of any facts or circumstances that would indicate a threat to the continued activity of the Bank within 12 months from the end of the reporting period due to an intended or compulsory abandonment or limitation of the current activity. In these financial statements, the same accounting policy was adopted as in the financial statements for the year 2009, with the exception of the adoption of the amendments listed below and new interpretations obligatory for the annual periods starting from 1 January 2010: IFRS 2 Share-based Payments Group Cash-settled Share-based Payment Transactions applicable to annual periods beginning on or after 1 January The amendment clarifies the method of accounting for group cash-settled share-based payment transactions. This amendment replaces IFRIC 8 and IFRIC 11. The implementation of this amendment did not have any impact on the financial position or performance of the Bank. IFRS 3 Business Combinations (revised) and IAS 27 Consolidated and separate financial statements (amended) - applicable to annual periods beginning on or after 1 July The revised IFRS 3 introduces significant changes to the method of accounting for business combinations that take place after that date. These changes relate to valuation of non-controlling interests, recognition of costs directly related to the transaction, initial recognition and subsequent valuation of contingent payment and settlement of business combinations achieved in stages. These changes have effect on the value of recognized goodwill, the result for the period in which the acquisition took place and the results reported in the subsequent periods. The amendment was introduced on a prospective basis and did not have any material effect on the financial position or performance of the Bank because the Company was not a party to legal mergers that would need to be recognized in these separate financial statements. IAS 39 Amendments to IAS 39 Financial Instruments: Recognition and Measurement: Eligible Hedged Items applicable to annual periods beginning on or after 1 July The amendments relate to recognition of one-sided risk in the hedged item and designation, in appropriate circumstances, the inflation as hedged risk or part of the risk. The amendment did not have any effect on the financial position or performance of the Company. IFRIC 17 Distributions of Non-cash Assets to Owners applicable to annual periods beginning on or after 1 July This interpretation contains guidelines for the accounting treatment of distribution to owners of non-cash assets in the form of reserve/ accumulated profits distribution or dividend payment. This interpretation did not have any effect on the financial position or performance of the Company. 12

15 Improvements to IFRSs (published in May 2008) in May 2008, IASB published the first set of improvements to the already published IFRSs. The amendments that were applied by the Company as of 1 January 2010 were as follows: IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations the amendment explains that if a subsidiary company meets classification criteria of a held for sale entity then all its assets and liabilities are classified as held for sale even if after the transaction of sale the parent retains non-controlling interest in such subsidiary company. This amendment relates only to the consolidated financial statements and as such does not have any impact on the financial position or performance of the Company presented in these separate financial statements. Improvements to IFRSs (published in April 2009) in April 2009, IASB published the second set of improvements to the already published IFRSs, mainly in order to remove inconsistencies and unclear statements. Different transitional provisions are binding for individual standards. Application of the below standards resulted in changes in the Bank s accounting policies, but did not have any effect on the financial position or performance of the Company. IFRS 8 Operating Segments: It was explained, that segment assets and segment liabilities are included only in the measures used by the main body responsible for operational decisions. Due to the fact that the main body of the Bank responsible for taking operational decisions is in the process of reviewing segment assets and segment liabilities the Company continues to disclose the required information in the Note 3.3 and 45. IAS 36 Impairment of assets: explains that the largest unit to account for impairment testing of the post-merger goodwill is the operating segment within the meaning of IFRS 8, before aggregation for reporting purposes. This amendment did not have any impact on the financial statements of the Company, IAS 39 Financial Instruments: Recognition and Measurement: the amendment explains that the alternative of earlier exercise of option is closely related to the host contract if the option exercise price gives the lender the return in the amount approximating the present value of interest lost for the period to the expiry of the host contract. This amendment does not have any effect on the financial position or performance of the Company. Other amendments to the standards resulting from annual review have not influenced the accounting policy, the financial situation or the result of the company s activity: IFRS 2 Share-based Payment IFRS 5 Non-current Assets Held for Sale and Discontinued Operations IAS 1 Presentation of Financial Statements IAS 7 Cash Flow Statements IAS 17 Leases IAS 38 Intangible Assets IAS 39 Financial Instruments: Recognition and Measurement IFRIC 9 Reassessment of Embedded Derivatives IFRIC 16 Hedges of a Net Investment in a Foreign Operation project The Company did not decide for an early adoption of any of the standards, interpretation or amendment that has been issued but has not come into force, yet New standards and interpretation have been issued but have not come into force. The following standards and interpretations were issued by the International Accounting Standards Board or the International Financial Reporting Interpretations Committee but did not come into force: 13