Annual Report 2011 Factoring KB, a.s.

Transcription

1 Factoring KB, a.s. Partnership matters

2 Contents Company Profile 2 Selected Economic Indicators 3 Introduction from the Chairman of the Board of Directors 6 Report of the Board of Directors 8 Strategic Targets for Most Significant Events of Development of the Market and the Company s Position on the Market 9 Business Activities 12 Marketing Activities 12 Product Base 12 Information Technology 13 Human Resources 13 The Financial Situation and Economy Results Commentary 13 Corporate Governance 14 Organizational Chart 16 Ownership Structure 17 Sworn Declaration Supervisory Boards s Report 18 Financial Section 19 Contacts Factoring KB, a.s. Lucemburská 1170/ Praha 3 Tel.: Fax: [email protected] Internet: Komerční banka, a.s. Na Příkopě 33, Praha 1 Tel.: Fax: [email protected] Internet: ADDITIONAL INFORMATION Information on Factoring KB s products and services are available at

3 1 Factoring KB, a.s Company turnover reached CZK 16,096 million, % year-on-year increase. Company profit after tax in 2011 was CZK 69,699 thousand. Year-on-year increase in profit reached %. Company market share was 12.6%. Turnover of domestic FACtoring (CZK mil.) Turnover of international FACtoring (CZK mil.) , , , , , , ,000 4,000 6,000 8,000 10,000 12,000 14, ,000 1,500 2,000 2,500 3,000 The Company was established with the aim of providing a range of factoring services comprising purchase, administration, collection and financing of receivables, including risk assumption within the scope of the insolvency or recalcitrance of local or foreign debtors.

4 2 Factoring KB, a.s. Company Profile Factoring KB, a.s. (hereinafter the Company ), was founded as a wholly owned subsidiary of Komerční banka, a.s. Since its foundation the Company has been a member of the parent bank s financial group, and since 2002 it has been an active member of the financial group Société Générale Banque (hereinafter Société Générale ). Membership in both financial groups has significantly influenced the overall development of the Company and has also brought new impetus for expanding cooperation with other members of the group at home and abroad. Key Information Business name Factoring KB, a.s. Legal form Joint-stock company Business Registration No. (IČ) Registered office Lucemburská 1170/7, Prague 3 Date of incorporation 4 August 1997 Registered capital CZK 1,184,000,000 Membership of associations: Factors Chain International (hereinafter FCI ) since 30 June 2000 Asociace factoringových společností ČR (hereinafter AFS ) since November 2000 Česká leasingová a finanční asociace (hereinafter ČLFA ) since June 2005 The Company was established with the aim of providing a range of factoring services comprising purchase, administration, collection and financing of receivables, including risk assumption within the scope of the insolvency or recalcitrance of local or foreign debtors. The Company offers its services predominantly to Czech businesses and, within its FCI membership, also provides selected services to other members of the international group. Strategic Targets for 2012 Factoring KB will continue in its policy of full use of the synergies existing within FG KB and FG SoGé with the aim of offering top quality services and products that will meet the financial needs of its clients.

5 3 Factoring KB, a.s. Selected Economic Indicators UNIT Total assets CZK million 7, , , Registered capital CZK million 1, , , Equity CZK million 1, , , Profit/Loss CZK million Profit after tax CZK million Market share % Total turnover* CZK million 16, , , Turnover of domestic factoring CZK million 13, , , Turnover of international factoring CZK million 2, , , Level of provisions CZK million Total revenues** CZK million Total costs*** CZK million Average number of employees number Note: * Turnover means the purchase of short-term account receivables at nominal value. ** The amount does not include revenues associated with the sale of re-assignment of account receivables. *** The amount does not include costs associated with the sale of re-assignment of account receivables. Total revenues (CZK mil.)** Total costs (CZK mil.)***

6 Jiří Zikmund Ceo We have been working with Factoring KB for three years and the basis of our cooperation is the financing of account receivables for our biggest and most creditworthy partners. In our company TOPAGRI s.r.o., we have gradually achieved 70% of total turnover. Now, we are planning the expansion of our cooperation with Factoring KB with our other company KVERNELAND GROUP CZECH s.r.o.

7 TOPAGRI s.r.o. TOPAGRI s.r.o. is the exclusive importer of the Finnish tractor brand Valtra. It also imports the farm machinery brands Kuhn and Marathon and forestry machinery brands Pfanzelt, Ahwi and Junkkari. Our company supplies to end customers through twenty contractors in the Czech Republic. TOPAGRI s.r.o. is located in Beroun with its Sister Company KVERNELAND GROUP CZECH s.r.o. which is the exclusive importer of almost the entire range of agricultural machinery from the Norwegian company KVERNELAND GROUP. In addition, it imports and sells through a network of contract partners the machine brands of McConnell, Hatzenbichler and VanDaele, which are used both in the agriculture and in the municipal sector.

8 6 Factoring KB, a.s. Introduction from the Chairman of the Board of Directors Dear Ladies and Gentlemen, Esteemed Business Partners, I am honored to present you with the Annual Report of Factoring KB, a.s. for The Czech economy continued its slight growth in 2011, which started in the second half of 2010 after its downturn in At the end of 2011, there was a clear economic downturn again, and a continuation of this negative trend in the development of the gross domestic product of the Czech Republic can be expected in The year 2011 was a very successful year for the factoring market in the Czech Republic and in particular for our company. During this period we generated a turnover of CZK 16 billion and profit increased to CZK 69.7 million. We saw significant revenue growth when compared with the planned values. We managed to reduce operating costs by 5% and we achieved very good results for the cost of risk. In 2011, we generated the highest annual increase in sales since the establishment of our company with an excellent 34%. It was also a year of dynamic growth in trade volume in cooperation with our two commercial insurance companies Coface and Atradius. I also very positively assess the further developments within the Komerční banka, a.s. group. In conclusion, I would like to thank all my colleagues and especially our clients for their cooperation in 2011 and wish them much happiness and success in the coming period. Sincerely, Miloslav Kukla CEO I assume that the year 2012 will be economically affected by the expected negative development of the gross domestic product of the Czech Republic and the European Union. Despite the stagnant Czech and European economy, however, and with regard to our efficient business activities, particularly in cooperation with Komerční banka, a.s., I predict a continuation of growth in turnover in 2012 the basic business indicator of our company. I also expect annual revenue growth and a slight increase in operating costs in I assume we will keep to the budget for the cost of risk for this year. Our company will continue with the full implementation of some modified factoring products in 2012 and our target will be a more extensive education in the field of international factoring. We would like to take advantage of our small company in the sense of the ability to respond flexibly to the needs of our existing and new clients in the Corporate and Top Corporate segments. We will strive to implement electronic factoring for the best clients in order to minimize operating costs and remain fully competitive.

9 7 Factoring KB, a.s. The year 2011 was a very successful year for the factoring market in the Czech Republic and in particular for our company. During this period we generated a turnover of CZK 16 billion and profit increased to CZK 69.7 million.

10 8 Factoring KB, a.s. Report of the Board of Directors Year 2011 was marked by economic growth in comparison with the previous year. The year 2011 was marked by the growth of the Czech economy and was especially noticeable for the growth of industrial production. There was record growth in the automotive industry and vehicles in general, positive growth in machinery manufacturing and equipment and Czech export developed very well too. Production volume growth was evident in the growth of goods volume delivered by clients of factoring companies, which in turn had a positive impact on the overall factoring market in the Czech Republic. Factoring KB, a.s. has historically achieved the highest sales growth in the turnover of factoring business, which achieved a 34% year-onyear increase, and was thus higher than the growth of the Czech factoring market. This major shift reflects economic growth and was primarily the result of fundamental changes in cooperation with Komerční banka, a.s., both in acquisitions and in other areas such as marketing, risk management etc. Growth was influenced by both increasing the trading volume generated by current clients, who supplied their goods at higher volumes than in previous years, and by new clients who were interested in factoring, and so more new contracts were concluded. The expanded modifications of existing products according to clients requirements also contributed to the revenue growth. The company continues to use the services of commercial insurers Coface and Atradius. With regard to this partnership the company was able to provide its clients not only with financing but also with the insurance against the insolvency of their customers. The development of the national economy in 2011 positively affected the overall approach of insurance companies to risk assessment. The Company was also able to broaden active cooperation with some partner factoring companies under the FCI, the largest network of factoring entities in the world, and to offer its clients another alternative to ensure against the risk of insolvency of their customers or, conversely, to provide credit cover for Czech importers to foreign factoring partners. With regard to active acquisition policy of the company in 2011, a good foundation has been set for further growth of factoring turnover in The development of the factoring business as well as the company s turnover will, however, continue to be affected by the trends of the Czech economy, especially by industrial production and trade. We expect growth in the factoring business in 2012, but it is likely that due to the Czech economy s outlook for 2012 this growth will not be as dynamic as in A major change was the implementation of various projects within the FG KB, thanks to which factoring became fully comparable with other products throughout the whole financial group; a higher and more flexible level of risk assessment was achieved and a higher volume of joint marketing activities was carried out. +34% Factoring KB, a.s. has historically achieved the highest sales growth in the turnover of FACtoring business, which achieved a 34% year-on-year increase, and was thus higher than the growth of the Czech FACtoring market.

11 9 Factoring KB, a.s. STRATEGIC TARGETS FOR 2012 Our activities in 2012 will focus on meeting the following strategic goals: Continue to offer high quality services in conformity with international standards within the Ambition 2015 project Continue to seek and take full advantage of synergic potential within the Financial Group Komerční banka, a.s. (hereinafter the FG KB) and Financial Group Société Générale (hereinafter the FG SoGé) Continue in cooperation with Komerční banka, a.s., in financing the Small Business segment (hereinafter Top Small Business) Focus on new opportunities in the health sector Search for new opportunities for export financing and increase the volume of import factoring. Factoring KB will continue in its policy of full use of the synergies existing within FG KB and FG SoGé with the aim of offering top quality services and products that will meet the financial needs of its clients. Close cooperation with other factoring companies within the FG SoGé or within the network of FCI enables us to offer high quality services and to respond promptly to new client s demands. A strong background within the financial group provides not only synergies in the acquisition process or marketing areas, but also the use of the latest IT solutions, etc. In recent years the Company has launched a program focusing on Top Small Business and the implementation of this project in the second half of the year 2011 enables a better utilization of this segment in the upcoming years. Financing of export and import activities through factoring is experiencing a growing trend. With regards to the favorable trend in the country s exports and the potential of our cooperation with commercial insurers and collaboration within the FCI we see an opportunity for further growth. An equally important event for the year 2012 is the relocation of the headquarters and all of the activities of the company to a new location and the fifteenth anniversary of the company. MOST SIGNIFICANT EVENTS OF 2011 The year 2011 was, contrary to the previous ones, positively influenced by the growth of the economy, production and export. This fact was important for the further positive development of the whole factoring market. This year was a year of positive developments for the company and after two years of the recession there was a visible recovery and growth. There was a change in the composition of the Company s Board of Directors during the year. Former member and Vice Chairman of Board of Directors Mr. Václav Tomandl left the company at the end of the Year 2010 and Ms. Věra Jahnová was appointed as a new Member of the Board of Directors in March There were also changes in the Supervisory Board during the year. We saw significant revenue growth when compared with the planned values. We managed to reduce operating costs by 5% and we achieved very good results for the cost of risk. In terms of a higher level of caution a number of measures were introduced that led to more effective monitoring and risk assessment. The year 2011 was also a year of development and modification for some factoring products. The company implemented some new forms of non-recourse factoring. For the most important clients a new type of factoring was implemented, which is based solely on electronic communication and does not require paper documents from the client or company. The year 2011 was extremely successful for both business volume and profit. The company achieved significant growth in turnover, which could not have been achieved without high quality services. This illustrates the growing volume of business with existing clients who have been using the services for a number of years. The company s aim was to offer both domestic factoring products and increase the volumes of export and import factoring products. The international factoring share grew from 14.5% to 17.5% in parallel with the overall growth in total volume of factoring transactions. In the second half of the year a new form of cooperation with Komerční banka, a.s. was implemented in terms of project Financing of Top Small Business by Factoring. DevelopMENT OF THE MARKET AND THE COMPANY S POSITION ON THE MARKET* The factoring market in the Czech Republic reflects the trend in turnover of factoring companies members of AFS (the Association of Factoring Companies in the Czech Republic). The total turnover achieved by those members for 2011 increased by 14.5% compared to 2010 and showed signs of growth. Some factoring companies reinforced their position, especially those operating within strong parent bank institutions. On the other hand, two companies have announced the conclusion of their factoring business during Factoring KB with its increase of 34% recorded the highest growth in its history, and also strengthened its market share from 10.8% to 12.6%. * non-audited data

12 Richard Gross GeneRAl MAnAGeR We have been working with Factoring KB for four years and this service brings us comprehensive care for our account receivables. We are able to offer our clients longer maturities and we can plan cash flow more effectively.

13 GROSS STAHL s.r.o. The company GROSS STAHL s.r.o. has been operating on the domestic market since It deals with the sales and distribution of iron and steel material it provides supplies in particular for machine production. It has its own service center in Rakovník focusing on structural, stainless and alloy steel. The company offers materials from the warehouse or directly from producers in various European countries. This is the supply of materials according to EN and ultrasound tests or other tests required by the customer. The company s service also includes delivery to the destination, even if in the case of very large cargo. In addition, the company offers services and technical consultancy for the supply of metallurgical materials. The system of sales and services in the company has been certified since 2003 according to ČSN EN ISO 9001:2001.

14 12 Factoring KB, a.s. BUSINESS ACTIVITIES* Factoring KB, a.s. achieved turnover of CZK million in 2011, which is an increase of 34% compared to This extraordinary success has been achieved mainly by intensifying synergic cooperation with Komerční banka, a.s. All products participated in the growth of this turnover. There was increase in the volume of domestic factoring by 29%, and especially international factoring, which in comparison with 2010 increased by 60%. Within international factoring, mainly import factoring, based on cooperation with partner factoring companies and FCI members, grew. From the perspective of the particular client segments the highest turnover was generated by the Corporate segment (hereinafter Corporate) which includes medium and large corporations. The share of this segment achieved 72% of total turnover. The second most important segment was Top Small Business in which the new project Profi Factoring was implemented. This product represents a promising area for further growth in The share of trades which was carried out by clients from the largest corporations segment (hereinafter Top Corporate) was 4.2%, and is a challenge for the future expansion of individual offers of factoring services according to the specific needs of each client in this segment. Trading volume of non-recourse factoring grew in year-onyear comparison by 45% and the total volume of this factoring product increased from 25 to 27%. Recourse factoring volume increased by almost 30% compared to the year MARKETING ACTIVITIES* The marketing activities of Factoring KB, a.s. are determined by a narrow target group which has been offered our products. It is a selective clientele in Corporate and also the Top Corporate or Top Small Business segments. The aim of marketing is to reach these groups through articles, advertisements or export conferences. One possible way is also through raising awareness of factoring products and services among relationship managers in Komerční banka, a.s. and therefore the company continued their training in Emphasis was placed on close effective cooperation with them, which was helped by a new method for the evaluation and reporting of common business activities. We also supported competitions in factoring products sales among relationship managers of all business segments. We continuously compared the product offer of our company with other factoring companies operating on the Czech market, and thereby we determined their competitiveness. Factoring products were presented at export conferences and seminars organized for the clients of Komerční banka, a.s., in cooperation with CzechTrade, focusing on sectors which are interesting for our business activities. A significant part of the budget was devoted to strengthening customer loyalty, which included among other things a theatre performance at the end of the year The charitable foundation cooperated in the production of New Year Cards (support for disabled children social care clients with mental or physical disabilities), purchasing calendars Honour to Hollar 2012 (financial aid for a mixed choir of blind people) and we continued in supporting a disabled cyclist. PRODUCT BASE Products offered in 2011 corresponded with competitive factoring companies and flexibly responded to market demands, as well as to the individual demands of specific clients. Our company s product range in 2011 included the following products: Recourse factoring Domestic Export Non-recourse factoring Domestic Domestic with Insurance Export with Insurance Export with Insurance in Two-Factors System FCI Import factoring Modified forms of factoring Frame Reverse Balance Non-notified This product range is supported by an interactive electronic client tool efactoring. The promotion of the company was continuously provided in the online environment of Seznam.cz and Google.cz. The company presentation was placed in the catalogues of companies, and Pay Per Click advertising was also used. A major reconstruction of web pages was implemented in cooperation with the internet service provider of Komerční banka a.s. FG Forrest. Their appearance and site design were customized for the corporate web sites of Komerční banka a.s. and both qualitative and quantitative changes are visible. * non-audited data

15 13 Factoring KB, a.s. INFORMATION TEChnoloGY In 2011, during the regular renewal of computer equipment based on the extended end of the life cycle, permutation of the first half of laptops and workstations was realized. The equipment was acquired in cooperation with the Sourcing department of Komerční banka, a.s., and they are ensured on service-level adequate standards of FG KB. In the area of Business Continuity Planning (hereinafter BCP) a regular annual test of the activation of the alternative work place enabling emergency crisis team, designed to deal with a prolonged unavailability of the company headquarters and its computer system, took place. Implementation of the expansion of BCP regarding the securing of key contractual documents continued, and after conversion to electronic form these documents should be stored in appropriately secure areas outside of the headquarters. The main information system Faktor, providing back-office processing of client receivables, was promoted to version , which was supplemented by a management client card, support for auto cooperation with the insolvency register and also the promotion of the user interface system. management of the company and individual departments can be considered as a stabilizing element of Factoring KB, a.s. so we have all the necessary tools to handle the more challenging tasks that lie ahead. In many areas, we continued to benefit from close cooperation across FG KB, as well as within the FG SoGé. THE FINANCIAL SITUATION AND ECONOMY RESultS COMMENTARY In the year 2011, Factoring KB, a.s. achieved a significant improvement in financial results in comparison with the previous year. This improvement reflects an increased volume of purchased invoices and provided advance payment. The company s revenue increased from CZK 9,402 thousand in the year 2011 to CZK 69,999 thousand in the year Factoring KB continued with strict cost control and managed to reduce operating and labor costs in comparison with the planned values. Comprehensive income was positively influenced by a major reduction of the costs of risk compared with the year The balance sheet value of adjustment items related to overdue receivables or debtors receivables with deteriorated financial condition decreased from CZK 176,667 thousand in 2010 to CZK 175,453 thousand in the year The main electronic communication channel efactoring has been upgraded to version which includes in particular corrections of the rules for operating certificates and security. On-line blocking of a client certificate was allowed and the procedure for its renewal was modified. The CRM system has been upgraded to version 2.8, which mainly extends the support of client risk department assessments and the change of client s business risks control. In 2011, standardization of the methodology according to the parent company continued in cooperation with the Project Management & Organization Office of Komerční banka, a.s. With regard to the planned headquarters relocation and centralization of data centers within FG KB, cooperation with various departments of Komerční banka, a.s. was established. HUMAN RESOURCES The year 2011 was one of the most active years in the personnel area. In January 2011, the Supervisory Board was completed by Ms. Iveta Ocásková and at the end of the year another member of the Supervisory Board Mr. Petr Kulhánek was replaced by Mr. Adam Fiedler. The Board of Directors was also strengthened by Ms. Věra Jahnová in March. There were some maternity leaves and retirements during the year. In exchange for these employees we employed university graduates and one experienced colleague from the parent bank. Factoring KB, a.s. relied on its high-quality team of nearly 40 employees. Their average number per year was 38. We continued to create an ideal working environment for the activities of our colleagues and in providing attractive employee benefits. The

16 14 Factoring KB, a.s. Corporate Governance Board of Directors Miloslav Kukla CEO Marcela Chalušová Member of the Board of Directors Věra Jahnová Member of the Board of Directors Changes in the composition of the Board of Directors Věra Jahnová Member of the Board of Directors Since 1 March 2011 Supervisory Board Jana Švábenská Chairman of the Supervisory Board Until 31 December 2011 Iveta Ocásková Member of the Supervisory Board Since 1 January 2011 Petr Kulhánek Member of the Supervisory Board Until 11 December 2011 Adam Fiedler Member of the Supervisory Board Since 12 December 2011

17 15 Factoring KB, a.s. Board of Directors Miloslav Kukla Chairman of the Board of Directors and CEO Ú Marcela Chalušová Member of the Board of Directors Věra Jahnová Member of the Board of Directors

18 16 Factoring KB, a.s. Organizational Chart Factoring KB, a.s. CEO Secretariat Human Resources Unit IT Unit Trade Risks Unit Finance Department Client Risk Department Sales and Marketing Department Customer Service Department Customer Service International Unit Customer Service National Unit

19 17 Factoring KB, a.s. Ownership Structure A general meeting was held once in 2011, on 19 April. The meeting approved the Financial Statements for 2010 and the Report of the Board of Directors on Company operations and assets for In addition, it decided on the distribution of profits and acknowledged the Report of the Supervisory Board and the Report on Related Parties. The Company determined that Ernst & Young, s.r.o. would be the external auditor for Shareholder Komerční banka, a.s. 100% ownership interest Sworn Declaration Factoring KB, a.s. hereby confirms that all information and data included in this Annual Report is accurate and complete. The Company also confirms that the document comprises all events that might have a material impact on investors decisions. Furthermore, Factoring KB, a.s. confirms that no subsequent events have occurred that might adversely affect the Company s financial position, or other changes that might influence a fair and accurate assessment of the financial position of Factoring KB, a.s. Prague, 10 May 2012 Signed on behalf of the Board of Directors: Miloslav Kukla Chairman of the Board of Directors and Chief Executive Officer Marcela Chalušová Member of the Board of Directors Věra Jahnová Member of the Board of Directors

20 18 Factoring KB, a.s Supervisory Board s Report The Supervisory Board of Factoring KB, a.s. carried out on an ongoing basis the tasks assigned to it by the Commercial Code and the Company s Article of Association. The Supervisory Board performed the regular supervision of the Company s activities, approved the strategic plans of the Company and presented its proposals and suggestions to the Board of Directors in order to improve the Company s operations. Having examined the Company s annual financial statements for the period from 1 January to 31 December 2011, and considering the external auditor s report on the annual financial statements, the Supervisory Board states that the accounting records and evidence were maintained in a conclusive manner and in accordance with the generally applicable rules regulating the accounting of non-financial institutions. The accounting records express truly in all material respects the Company s financial situation as at 31 December The Supervisory Board further reviewed the Report on Related Parties for the period from 1 January to 31 December 2011 prepared by the Company as a controlled entity under Section 66a, Subsection 9 of the Commercial Code. The Supervisory Board states that on the basis of its review it has not found any materially incorrect information disclosed in that Report and that the Board of Directors of the Company has not identified, based on its evaluation of the relationships, any damages caused to the Company in its relations with the controlling entity. Having reviewed the proposal of the Board of Directors for the profit appropriations, the Supervisory Board recommends to the sole shareholder the approval of the Board of Directors proposal for the profit appropriations as follows: After-tax profit (loss) 69,698, CZK Contribution to the reserve fund: 5% 3,484, CZK Contribution to the welfare fund: 3.5% (3.5% from the payroll volume are contributed, incl. royalties for the statutory bodies: 23,520, ,000 = 23,889,399) 836, CZK Retained earnings of the 2011 year 65,377, CZK The Supervisory Board recommends that the General Meeting approve the Company s annual financial statements for Prague, 26 March 2012 Iveta ocásková Chairman of the Supervisory Board

21 19 Factoring KB, a.s. Financial Section Independent Auditor s Report 20 Balance Sheet as of 31 December Profit and Loss Account for the Year Ended 31 December Statement of Changes in Equity for the Year Ended 31 December Cash Flow Statement for the Year Ended 31 December Financial Statements for the Year Ended 31 December Report on Relations Among the Interconnected Persons for the 2011 Accounting Period 39

22 20 Factoring KB, a.s. Independent Auditor s Report (Translation of a report originally issued in Czech see Note 2 to the financial statements.) To the Shareholder of Factoring KB, a.s.: We have audited the accompanying financial statements of Factoring KB, a.s., which comprise the balance sheet as at 31 December 2011, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. For details of Factoring KB, a.s., see Note 1 to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the Czech Republic, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Act on Auditors and International Standards on Auditing as amended by implementation guidance of the Chamber of Auditors of the Czech Republic. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including an assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Factoring KB, a.s. as at 31 December 2011, and its financial performance and its cash flows for the year then ended in accordance with accounting principles generally accepted in the Czech Republic. Ernst & Young Audit, s.r.o. License No. 401 Represented by Jan Fanta Partner Michaela Kubýová Auditor, License No March 2012 Prague, Czech Republic

23 21 Factoring KB, a.s. Independent Auditor s Report To the Shareholder of Factoring KB, a.s.: We have audited the financial statements of Factoring KB, a.s. ( the Company ) as at 31 December 2011 presented in the annual report of the Company on pages 22 38, on which we have issued an audit report, dated 8 March 2012, which is presented on page 20. We have also audited the consistency of the annual report with the financial statements described above. The management of Factoring KB, a.s. is responsible for the accuracy of the annual report. Our responsibility is to express, based on our audit, an opinion on the consistency of the annual report with the financial statements. We conducted our audit in accordance with International Standards on Auditing and the related implementation guidance issued by the Chamber of Auditors of the Czech Republic. Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether the information presented in the annual report that describes the facts reflected in the financial statements is consistent, in all material respects, with the financial statements. We have checked that the accounting information presented in the annual report on pages 1 19 is consistent with that contained in the audited financial statements as at 31 December Our work as auditors was confined to checking the annual report with the aforementioned scope and did not include a review of any information other than that drawn from the audited accounting records of the Company. We believe that our audit provides a reasonable basis for our opinion. Based on our audit, the accounting information presented in the annual report is consistent, in all material respects, with the financial statements described above. In addition, we have reviewed the accuracy of the information contained in the report on related parties of Factoring KB, a.s. for the year ended 31 December 2011 presented in the annual report of the Company on pages The management of Factoring KB, a.s. is responsible for the preparation and accuracy of the report on related parties. Our responsibility is to issue a report based on our review. We conducted our review in accordance with the applicable International Standard on Review Engagements and the related Czech standard No. 56 issued by the Chamber of Auditors of the Czech Republic. Those standards require that we plan and perform the review to obtain moderate assurance as to whether the report on related parties is free from material misstatement. The review is limited primarily to enquiries of company personnel, to analytical procedures applied to financial data and to examining, on a test basis, the accuracy of information, and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the report on related parties of Factoring KB, a.s. for the year ended 31 December 2011 is materially misstated. Ernst & Young Audit, s.r.o. License No. 401 Represented by Jan Fanta Partner Michaela Kubýová Auditor, License No June 2012 Prague, Czech Republic

24 22 Factoring KB, a.s. Balance Sheet as of 31 December 2011 in CZK thousand Current year Prior year 2010 Gross Allowances Net Net total ASSETS 7,397,696 (247,393) 7,150,303 5,464,504 B. FIXED ASSETS 1,447,795 (71,940) 1,375,855 1,464,297 B. I. Intangible assets 66,883 (60,025) 6,858 7,082 3 Software 65,133 (60,025) 5,108 7,082 7 Intangible assets in progress 1, ,750 0 B. II. Tangible assets 16,398 (11,915) 4,483 6,690 3 Separate movable items and groups of movable items 15,601 (11,915) 3,686 5,893 6 Other tangible assets B. III. Financial investments 1,364, ,364,514 1,450,525 3 Other long-term securities and interests 1,364, ,364,514 1,450,525 C. CURRENT ASSETS 5,948,946 (175,453) 5,773,493 3,999,483 C. II. Long-term receivables 584, ,693 12,013 C. II. 1 Trade receivables 286, , Long-term advances granted 287, , Deferred tax asset 10, ,725 11,913 C. III. Short-term receivables 5,363,312 (175,453) 5,187,859 3,986,107 C. III. 1 Trade receivables 3,301,299 (147,146) 3,154,153 2,460,787 6 Due from government tax receivables ,519 7 Short-term advances granted 2,061,036 (28,307) 2,032,729 1,519,640 8 Unbilled revenue Other receivables C. IV. Short-term financial assets ,363 C. IV. 1 Cash Bank accounts ,338 D. OTHER ASSETS TEMPORARY accounts OF ASSETS D. I. Accrued assets and deferred liabilities D. I. 1 Prepaid expenses

25 23 Factoring KB, a.s. Balance Sheet in CZK thousand Current year Prior year 2010 total EQuity & LIABILITIES 7,150,303 5,464,504 A. EQuity 1,489,896 1,506,949 A. I. Basic capital 1,184,000 1,184,000 A. I. 1 Registered capital 1,184,000 1,184,000 A. II. Capital funds 72, ,419 A II. 1 Share premium (agio) 6,000 6,000 3 Gain or loss on revaluation of assets and liabilities 66, ,419 A III. Reserve funds and other funds created from profit 12,573 11,898 A III. 1 Legal reserve fund 11,470 11,000 2 Statutory and other funds 1, A. IV. Profit (loss) for the previous years 151, ,230 IV. 1 Retained earnings for the previous years 151, ,230 A. V. Profit (loss) for the year (+/-) 69,699 9,402 B. LIABILITIES 5,660,317 3,957,465 B. I. Provisions 5,442 2,644 4 Other provisions 5,442 2,644 B. II. Long-term liabilities 286, Liabilities to group companies with majority control 286,934 0 B. III. Current liabilities 3,196,670 2,481,815 B. III. 1 Trade payables 3,173,938 2,468,141 5 Liabilities to employees 1,531 1,166 6 Liabilities arising from social security and health insurance Due to government taxes and subsidies 7,327 1, Unbilled deliveries 5,294 4, Other liabilities 7,650 5,284 B. IV. Bank loans and borrowings 2,171,271 1,473,006 B. IV. 1 Long-term bank loans 286, Short-term bank loans 1,884,371 1,473,006 C. OTHER LIABILITIES TEMPORARY accounts OF LIABILITIES C. I. Accrued liabilities and deferred assets C. I. 1 Accruals 90 90

26 24 Factoring KB, a.s. Profit and Loss Account for the Year Ended 31 December 2011 in CZK thousand Current year Previous year Gross margin 0 0 II. Production 79,922 68,271 II. 1 Revenue from the sale of finished products and services 79,922 68,271 B. Production related consumption 38,609 35,970 B. 1 Consumption of material and energy 2,287 1,898 B. 2 Services 36,322 34,072 + Value added 41,313 32,301 C. Personnel expenses 33,706 38,380 C. 1 Wages and salaries 23,520 26,552 C. 2 Bonuses to members of the company or cooperating bodies C. 3 Social security and health insurance 8,231 8,442 C. 4 Other social costs 1,586 2,898 D. Taxes and charges E. Amortization and depreciation of intangible and tangible fixed assets 9,694 8,301 III. Revenue from sale of intangible and tangible fixed assets and materials III. 1 Revenues from sale of intangible and tangible fixed assets F. Net book value of intangible and tangible fixed assets and materials sold 0 48 F. 1 Net book value of intangible and tangible fixed assets sold 0 48 G. 1 Change in provisions and allowances relating to operations and in prepaid expenses (specific-purpose expenses) 1,586 41,504 IV. 2 Other operating revenues 267, ,446 H. 1 Other operating expenses 271, ,386 * Profit or loss on operating activities (7,949) (67,911) VII. Income from financial investments 55,847 56,055 2 Income from other long-term securities and interests 55,847 56,055 X. 1 Interest income 60,442 48,461 N. 2 Interest expense 18,888 18,969 XI. 1 Other finance income 129,677 50,415 O. 2 Other finance cost 141,576 61,715 * Profit or loss on financial activities 85,502 74,247 Q. Tax on profit or loss on ordinary activities 7,854 (3,102) Q. 1 due 6,666 0 Q. 2 deferred 1,188 (3,102) ** Profit or loss on ordinary activities after taxation 69,699 9,438 XIII. 1 Extraordinary gains 1 0 R. 2 Extraordinary losses 1 36 * Tax on extraordinary profit or loss 0 0 *** Extraordinary profit or loss 0 (36) **** Profit or loss for the year (+/-) 69,699 9,402 Profit or loss before taxation 77,553 6,300

27 25 Factoring KB, a.s. Statement of Changes in Equity for the Year Ended 31 December 2011 in CZK thousand Share capital Capital funds Gains/losses on revaluation of securities Reserve fund, indivisible fund and other funds from profits Retained earnings for previous years Profit/loss for the current year Total equity As at 1 January ,184,000 6, ,544 10, ,287 28,282 1,505,428 Distribution of profit/loss 2,339 25,943 (28,282) Gain/loss on revaluation (7,125) (7,125) Payments from capital funds (756) (756) Profit/loss for the year 9,402 9,402 As at 31 December ,184,000 6, ,419 11, ,230 9,402 1,506,949 Distribution of profit/loss 1,416 7,985 (9,402) Gain/loss on revaluation (86,011) (86,011) Payments from capital funds (741) (741) Profit/loss for the year 69,699 69,699 As at 31 December ,184,000 6,000 66,409 12, ,215 69,699 1,489,896

28 26 Factoring KB, a.s. Cash Flow Statement for the Year Ended 31 December 2011 in CZK thousand Current year Prior year 2010 Cash flows from operating activities Z. Profit or loss on ordinary activities before taxation (+/-) 77,553 6,336 A. 1. Adjustments to reconcile profit or loss to net cash provided by or used in operating activities (76,636) (15,436) A Depreciation and amortization of fixed assets and write-off of receivables 19,191 28,609 A Change in allowances (1,214) 40,321 A Change in provisions 2,798 1,184 A (Gain)/Loss on disposal of fixed assets (10) (3) A Interest expense and interest income (41,554) (29,492) A Other non-cash movements (e.g. revaluation at fair value to profit or loss, dividends received) (55,847) (56,055) A * Net cash from operating activities before taxation, changes in working capital and extraordinary items 917 (9,100) A. 2. Change in non-cash components of working capital (1,069,267) (105,694) A Change in trade receivables (988,583) (260,885) A Change in other receivables and in prepaid expenses and unbilled revenue (795,539) (113,962) A Change in trade payables 705, ,053 A Change in other payables, short-term loans and in accruals and deferred income 9,058 (12,900) A ** Net cash from operating activities before taxation, interest paid and extraordinary items (1,068,350) (114,794) A Interest paid (18,888) (18,969) A Tax paid (6,678) 2,611 A Gains and losses on extraordinary items 0 (36) A *** Net cash provided by (used in) operating activities (1,093,916) (131,188) Cash flows from investing activities B Purchase of fixed assets 78,748 (1,696) B Proceeds from sale of fixed assets B Interest received 60,442 48,461 B Dividends received 55,847 56,055 B *** Net cash provided by (used in) investing activities 195, ,871 Cash flows from financing activities C. 1. Change in long-term liabilities and long-term, resp. short-tem, loans 985,199 35,956 C Effect of other changes in basic capital on cash (86,752) (7,881) C *** Net cash provided by (used in) financing activities 898,447 28,075 F. Net increase (decrease) in cash (422) (242) P. Cash and cash equivalents at beginning of year 1,363 1,605 R. Cash and cash equivalents at end of year 941 1,363

29 27 Factoring KB, a.s. Financial Statements for the Year Ended 31 December Corporate information Factoring KB, a.s. (hereinafter the Company ) is a joint stock company incorporated on 4 August 1997; its registered office is in Prague 3, Lucemburská 1170/7, Czech Republic, business registration number (IČ) The Company s core business is the provision of factoring and forfaiting services. The following changes to the Company s statutory bodies took place in 2011: Věra Jahnová is a member of the Board of Directors as of 1 March Iveta Ocásková a member of the Supervisory Board since 1 January 2011, replaced Jan Pokorný (a member of the Supervisory Board until 31 December 2010). Adam Fiedler member of the Supervisory Board as of 12 December 2011 replaced Petr Kulhánek (a member of the Supervisory Board until 11 December 2011). Entities holding at least 20% interests in share capital: Komerční banka, a.s. 100%. Factoring KB, a.s. is a member of the financial group of Komerční banka, a.s. and Société Générale. Members of statutory bodies as at 31 December 2011: Board of Directors Chairman: Member: Member: Miloslav Kukla Marcela Chalušová Věra Jahnová Supervisory Board Chair: Member: Member: Jana Švábenská Iveta Ocásková Adam Fiedler

30 28 Factoring KB, a.s. Organizational structure of the Company: Factoring KB, a.s. CEO Secretariat Human Resources Unit IT Unit Trade Risks Unit Finance Department Client Risk Department Sales and Marketing Department Customer Service Department Customer Service International Unit Customer Service National Unit The Company has no foreign affiliate.

31 29 Factoring KB, a.s. Financial Statements 2. Basis of preparation of the financial statements The Company s accounting books and records have been maintained, and the financial statements have been prepared, pursuant to Act No. 563/1991 Coll., on Accounting, as amended; Decree No. 500/2002 Coll., implementing some provisions of Act No. 563/1991 Coll., on Accounting, for reporting entities that are businesses which maintain double-entry accounting records, as amended; and Czech Accounting Standards for Businesses, as amended. Explanation added for Translation into English These financial statements are presented on the basis of accounting principles and standards generally accepted in the Czech Republic. Certain accounting practices applied by the Company that conform with the generally accepted accounting principles and standards in the Czech Republic may not conform with the generally accepted accounting principles in other countries. 3. Summary of significant accounting policies The accounting books and records have been maintained in accordance with general accounting principles, in particular the historical cost valuation convention, the accruals principle, the prudence concept, and the going concern assumption. In the preparation of the financial statements for 2011 and 2010, the Company used the following valuation methods: a) Intangible fixed assets Intangible fixed assets are recorded at cost, comprising acquisition costs and acquisition-related costs. Intangible fixed assets with an acquisition cost of more than CZK 60 thousand are amortized on a straight-line basis over their estimated useful life. Amortization Amortization is calculated on the basis of the acquisition cost and estimated useful life. The estimated useful life is determined as follows: Years Software 3 b) Tangible fixed assets Tangible fixed assets are recorded at cost, comprising acquisition cost, transport, customs and other acquisition-related costs. Tangible fixed assets with an acquisition cost of more than CZK 40 thousand are depreciated for the period of their useful lives. The cost of improvements of tangible fixed assets increases the initial acquisition cost. Repairs and maintenance are expenses as incurred. Depreciation The depreciation of tangible fixed assets is calculated on the basis of the acquisition cost and estimated useful life. The estimated useful life is determined as follows: Years Machinery and equipment 3 10 Fixtures and fittings 5 c) Financial assets Current financial assets comprise stamps and vouchers, cash on hand and cash in the bank. Non-current financial assets comprise available-for-sale securities and equity investments. Upon acquisition, securities and equity investments are valued at acquisition cost. The acquisition cost of securities and equity investments comprises the purchase price and direct acquisition-related costs, such as fees and commissions paid to brokers, advisors and stock exchanges. Available-for-sale securities and equity investments are carried at fair value at the balance sheet date. Any change in the fair value of available-forsale securities and equity investments is recognized as gains or losses on revaluation of assets and liabilities within equity. The Company applies as fair value the market value of the securities as at the balance sheet date.

32 30 Factoring KB, a.s. d) Receivables Upon origination, receivables are carried at their nominal value. Receivables are reported at carrying amounts less respective allowances for doubtful and uncollectable amounts. Receivables acquired for cash consideration or through a deposit are measured at acquisition cost. Factoring involves purchasing current receivables at their nominal values before their due dates, arising from supply of goods or services to several regular customers. The factor pays the supplier an advance pre-financing, which represents a partial payment for the assignment of the receivable and may account for up to 100 percent of the nominal value of the receivable. Amounts due from the purchased receivables are recognized as Trade receivables in the Company s balance sheet, and advances paid are recognized as Short-term advances granted. Amounts payable arising from the purchased receivables are recognized as Trade payables in the balance sheet. Following payment by the customer, the remaining balance of the receivable is paid to the supplier. The factor collects a commission for the services rendered, comprising a fee received for processing the ceded receivables and interest on the provided pre-financing, which amounts to current interest rates on short-term bank loans. Commissions are recognized as Revenue from sale of products and services; interest received from pre-financing is recognized as Interest income in the Income statement. Reassignment of receivables is recognized in the Income statement. Products constituting the Company s core business include: Domestic recourse factoring (the supplier customer relationship where both are based in the Czech Republic) involving a recourse sanction; this means that unless the debt is recovered within 90 days after the due date, it is reassigned to the supplier; Domestic non-recourse factoring (with insurance), whereby the risk of the customer s failure to settle a receivable is eliminated by compensation provided by an insurer; Export recourse factoring (the supplier customer relationship where the customer is based abroad) with a recourse sanction; this means that unless the debt is recovered within 90 days after the due date, it is reassigned to the supplier; Export factoring based on the two-factors system, where the Company is a member of a multi-national association of factoring companies FCI, while all potential risks are hedged by the factoring company in the customer s country; Export factoring with insurance, presuming a certain level of participation in the risk of the customer s insolvency; Import factoring with insurance, which facilitates obtaining of a short-term customer loan for goods purchased from foreign suppliers without the necessary hedging with banking instruments. e) Method of determining allowances and provisions Additions to allowances are charged to income based on inventorying to the extent that the valuation of assets does not correspond with the actual balance. Allowances are created on the basis of the number of days after the due date and an assessment of the risk level of the respective receivable. f) Equity The Company s share capital is stated as the amount recorded in the Commercial Register maintained by the Municipal Court. Any increase or decrease in share capital based on a decision of the General Meeting that has not been recorded as at the reporting date, is recognized as changes in equity. Deposits exceeding share capital are recognized as share premium. The Company allocates a part of annual profits to the reserve fund created from profit, pursuant to the Commercial Code. A joint stock company is required to create a legal reserve fund in the year when it first turns profit, in the amount of 20% of net profits, but no more than 10% of share capital. In the subsequent years, the Company allocates 5% of annual net profit to the reserve fund until the balance reaches 20% of share capital. These funds can only be used to offset losses. g) Provisions and liabilities The Company creates legal provisions pursuant to the Act on Provisions, and provisions for losses and risks if the related purpose, amount and timing can be reliably estimated and the accrual and matching principles are observed. Long-term and current liabilities are recognized at nominal values. Long-term and short-term loans are recognized at nominal values. Any portion of long-term loans due within one year from the balance sheet date is deemed a short-term loan. h) Financial leases The Company has not entered into any financial lease agreement with a subsequent purchase of the leased item.

33 31 Factoring KB, a.s. Financial Statements i) Foreign currency translation Transactions denominated in foreign currencies that are executed in the reporting period are translated using the exchange rates of the Czech National Bank (ČNB) prevailing at the transaction date. At the balance sheet date, assets and liabilities denominated in foreign currencies are translated using the exchange rates published by ČNB as at this date, and foreign exchange gains and losses are credited to financial revenue or charged to financial expense for the year. j) Revenue and expense recognition Revenues and expenses are recognized on an accrual basis, i.e. in the periods in which the actual flow of the related goods or services occurs, regardless of when the related monetary flow arises. The Company realizes its revenues primarily from remuneration (commissions) for each purchased receivable, and from interest on advances granted for payment of the purchase price. Other revenues comprise charges for changes in contractual terms and conditions, applications for factoring services, and other fees. The Company reports factoring commissions in revenues from the sale of goods and services; interest received from provided financing is recognized in interest income. k) Income taxes Income tax expense is computed using the approved tax rate from the book value of profit less or plus permanently or temporarily tax nondeductible expenses and non-taxable revenues (e.g. creation and recognition of other provisions and allowances, entertainment expenses, difference between write-offs for accounting and tax purposes, etc.). The Company makes tax calculations on the basis of its understanding of the interpretation of the tax legislation in the Czech Republic as at the date of preparation of the financial statements. The Company believes the amount of income tax complies with the applicable tax regulations in the Czech Republic. Due to the various interpretations of tax laws and regulations by third parties, including the State Administration authorities, the income tax liability reported in the Company s financial statements may be amended according to a final review by the relevant Tax Office. Deferred income tax reflects the impact on taxation of temporary differences between the carrying amounts of assets and liabilities in the balance sheet, and the determining of the income tax base with regard to the period of application. 4. Fixed assets a) Intangible fixed assets (in CZK thousand) COST Opening balance Additions Disposals Transfers Closing balance Software 59, ,385 65,133 Intangible fixed assets in progress 0 7,135 0 (5,385) 1,750 Total in ,748 7, ,883 Total in ,414 7,301 (3,967) 0 59,748 accumulated AMORTISATION Opening balance Amortization charge Sales, liquidations Disposals Transfers Closing balance Allowances Net book value Software (52,666) (7,359) (60,025) 0 5,108 Intangible fixed assets in progress ,750 Total in 2011 (52,666) (7,359) (60,025) 0 6,858 Total in 2010 (50,674) (5,959) 0 3,967 0 (52,666) 0 7,082 The total for low-value intangible assets not included in the balance sheet amounted to CZK 13 thousand as at 31 December 2011 and CZK 12 thousand as at 31 December 2010 at cost.

34 32 Factoring KB, a.s. b) Tangible fixed assets (in CZK thousand) COST Opening balance Additions Disposals Transfers Closing balance Machinery and equipment 14,299 0 (93) ,335 Fixtures and fittings Low-value tangible assets Works of art Tangible fixed assets in progress (129) 0 Total in , (93) 0 16,398 Total in ,391 1,519 (10,548) 0 16,362 accumulated DEPReciation Opening balance Depreciation charge Sales, liquidations Disposals Transfers Closing balance Allowances Net book value Machinery and equipment (8,521) (2,268) (10,696) 0 3,639 Fixtures and fittings (884) (68) (952) 0 47 Low-value tangible assets (267) (267) 0 0 Works of art Tangible fixed assets in progress Total in 2011 (9,672) (2,336) (11,915) 0 4,483 Total in 2010 (17,831) (2,342) 0 10,500 0 (9,672) 0 6,690 The total for low-value tangible assets not included in the balance sheet amounted to CZK 430 thousand as at 31 December 2011 and CZK 287 thousand as at 31 December 2010 at cost. c) Financial investments (in CZK thousand) On the basis of a Contract for the transfer of securities for consideration concluded between Factoring KB, a.s. and Komerční banka, a.s., in 2007, Factoring KB, a.s. purchased non-current financial assets in the amount of CZK 1,298,106 thousand. The financial investments in this case are Shares in the form of a single collective registered share (in certificate form), replacing 518 units of shares. The collective registered share was issued by a closed unit-linked fund, Protos, uzavřený investiční fond, a.s. (hereinafter Protos ), a subsidiary of Komerční banka, a.s. Movement of non-current financial assets: Balance as at 31 December 2009 Additions Disposals Revaluation Balance as at 31 December 2010 Additions Disposals Revaluation Balance as at 31 December 2011 Other long-term securities and equity investments 1,457, (7,125) 1,450, (86,011) 1,364,514 Total 1,457, (7,125) 1,450, (86,011) 1,364, Receivables Long-term receivables The Company records long-term receivables totalling CZK 584,692 thousand (2010: CZK 12,013 thousand), comprised of a deferred tax asset of CZK 10,725 thousand and long-term advances granted in the amount of CZK 287,034 thousand, and long-term trade receivables in the amount of CZK 286,933 thousand.

35 33 Factoring KB, a.s. Financial Statements Short-term receivables (in CZK thousand) As at 31 December 2011 As at 31 December 2010 Trade receivables (gross), out of which: 3,301,299 2,615,444 commissions from purchased receivables 5,123 3,992 interest on pre-financing 12,299 9,589 reassignments 107,190 95,483 receivables from accession to debts 10,767 11,875 Allowances for trade receivables (147,146) (154,657) Trade receivables (net) 3,154,153 2,460,787 State tax receivables 0 5,519 Receivables from pre-financing 2,061,036 1,541,645 Operating advances 0 5 Allowances for advances granted (28,307) (22,010) Total advances granted net 2,032,729 1,519,640 Unbilled revenues Other short-term receivables Total short-term receivables 5,187,859 3,986,107 Amounts due arising from purchased receivables, where the Company also records a liability to the supplier, represent nominal values of receivables purchased within the scope of the factoring services provided. The maturity of receivables from pre-financing is determined on the basis of specific factoring agreements with respective clients. The standard maturity period is 90 days. The standard due date for commission invoices, interest invoices, and reassignment is 30 days. The Company records no receivables from related parties. Due to inability to collect, rejection of bankruptcy proceedings, and settlement or non-settlement of receivables in bankruptcy proceedings, etc., the Company amortized in 2011: CZK 9,497 thousand (2010: CZK 20,308 thousand). Unbilled revenue in 2011 comprises a claim settlement by an insurer: CZK 69 thousand (2010: CZK 96 thousand) 6. Allowances Allowances reflect a temporary diminution of the value of assets (listed under Article 5). Changes in allowances (in CZK thousand): Allowances for: Balance as at 31 December 2009 Creation of allowances Recognition of allowances Balance as at 31 December 2010 Creation of allowances Recognition of allowances Balance as at 31 December 2011 receivables statutory 62,036 15,487 13,053 64,470 10,266 16,170 58,566 receivables other 74, ,197 74, , , , ,887 Statutory allowances are created pursuant to the Act on Reserves. 7. Other assets Prepaid expenses comprise primarily items related to the insurance of business transactions, advertising and promotion, costs of professional literature, healthcare and other expenses. In 2011, the Company reported other assets totaling CZK 955 thousand (2010: CZK 724 thousand). The Company recognizes these expenses on an accrual basis.

36 34 Factoring KB, a.s. 8. Equity The Company s share capital consists of 400 shares with a nominal value of CZK 100,000 per share, 4,400 ordinary shares with a nominal value of CZK 10,000, and 1,100 ordinary shares with a nominal value of CZK 1,000,000. There was no change in the amount of the Company s share capital in The shares of Factoring KB, a.s. are not publicly tradable; they are fully transferable and carry voting rights. A share premium in the amount of CZK 6,000 thousand represents the difference between the issue and nominal values of the shares. Changes in equity in 2011 and 2010 (in CZK thousand): Balance as at 31 December 2009 Increase Decrease Balance as at 31 December 2010 Increase Decrease Balance as at 31 December 2011 Number of shares 5, , ,900 Share capital 1,184, ,184, ,184,000 Share premium 6, , ,000 Gains and losses on revaluation of assets and liabilities 159, , , , , ,225 66,409 Legal reserve fund 9,586 1, , ,470 Other funds ,103 Profit/Loss for prior years 117,287 25, ,230 7, ,215 Based on a decision of the General Meeting held on 20 April 2010 and 19 April 2011, the following distribution of profits for 2009 and 2010 were approved (in CZK thousand): 2009 profit 28, profit 9,401 Allocation to Allocation to reserve fund 1,414 reserve fund 470 other funds 926 other funds 946 Dividend payments and profit shares 0 Dividend payments and profit shares 0 Other (1) Other (rounding difference) 0 Transfer of retained earnings (25,943) Transfer of retained earnings (7,985) Retained earnings as at 31 December ,230 Retained earnings as at 31 December ,215 Statement of changes in equity see page Provisions Movements in provisions (in CZK thousand): Balance as at Creation Recognition Balance as at Creation Recognition Balance as at Provisions 31 December 2009 of reserves of reserves 31 December 2010 of reserves of reserves 31 December 2011 Other 1,460 1, ,644 4,921 2,123 5,442 The Company creates provisions for unutilized vacation, social and health insurance, and for bonuses distributed among management members.

37 35 Factoring KB, a.s. Financial Statements 10. Liabilities Trade payables (in CZK thousand) As at 31 December 2011 As at 31 December 2010 Current suppliers purchased receivables 3,173,717 2,467,154 Trade payables 3,173,938 2,468,141 other liabilities 7,650 5,284 Total 3,181,588 2,473,425 Liabilities to Company suppliers are before their due dates. Current liabilities mostly arise from receivables purchased by the Company within the scope of the factoring services provided; they represent so-called recourse factoring. 11. Bank loans and borrowings Bank Interest rate Amount in foreign currency Amount in CZK thousand Amount in foreign currency Amount in CZK thousand KB (CZK) PRIBOR ON ACTUAL + f.v. 1,263,069 1,263,069 1,084,782 1,084,782 KB (USD) ON LIBOR USD ACTUAL + f.v. 3,307 65, ,638 KB (EUR) ON LIBOR EUR ACTUAL + f.v. 20, ,979 14, ,184 KB (CHF) LIBOR CHF ACTUAL + f.v KB (GBP) ON LIBOR GBP ACTUAL + f.v , ,340 KB (PLN) ON WIBOR PLN ACTUAL + f.v KB (SEK) ON WIBOR SEK ACTUAL + f.v KB (CZK) Fixed interest rate 0 286, Total 2,171,271 1,473,006 Note: f. v. fixed variance Short-term bank loans amounted to CZK 1,884,371 thousand and CZK 1,473,006 thousand as at and as at Long-term bank loans amounted to CZK 286,900 thousand as at (CZK 0 as at ). Interest expenses related to bank loans amounted to CZK 18,888 thousand in 2011 and to CZK 18,969 thousand in Other liabilities Other liabilities comprise accruals in the amount of CZK 90 thousand (2010: CZK 90 thousand), relating to a levy which was imposed for not employing disabled people.

38 36 Factoring KB, a.s. 13. Income taxes 2011 in CZK thousand 2010 in CZK thousand Profit before taxes 77,553 6,300 Non-taxable revenue (168,095) (130,747) Difference between write-offs for accounting and tax purposes (13) (2,200) Non-deductible costs 125, ,840 allowances 116, ,197 provisions 2,799 1,511 other (e.g. entertainment expenses, deficits and damages) 6,272 11,132 Taxable income 35,402 (1,807) Income tax rate 19% 19% Tax 6,726 0 Adjustment in respect of income tax of previous years 0 0 Tax relief (60) 0 Tax due 6,666 0 The Company has calculated deferred tax as follows (in CZK thousand): Deferred tax items Deferred tax asset Deferred tax liability Deferred tax asset Deferred tax liability Difference between net book value of fixed assets for accounting and tax purposes Other temporary differences: Allowances for receivables 9,623 11,986 Provisions 1, Supplementary pension insurance Total 11,090 12, Net 10,725 11, Leases The Company has entered into a Frame agreement with ALD Automotive s.r.o. Based on the foregoing contractual relationship, separate agreements have been signed on leases of movable items, specifically 12 automobiles. Total costs pertaining to this agreement amounted to CZK 1,762 thousand in 2011 (2010: CZK 2,103 thousand). Assets in the form of operating leases as at 31 December 2011 and as at 31 December 2010 (in CZK thousand): Lease period in Lease amount in Lease amount in Owner s acquisition Description months cost Passenger car Passenger car Passenger car Passenger car Passenger car Passenger car Passenger car Passenger car ,014 Passenger car Passenger car Passenger car Passenger car ,260 Passenger car

39 37 Factoring KB, a.s. Financial Statements 15. Commitments and contingencies The Company recorded commitments from import factoring in the amount of CZK 103,112 thousand (2010: CZK 4,517 thousand). 16. Other operating expenses and income The Other operating expenses of the Company totaled CZK 271,517 thousand as at 31 December 2011 (2010: CZK 289,386 thousand). The most significant items of the Other operating expenses comprise the expenses arising from the reassignment of receivables in the amount of CZK 260,820 thousand (2010: CZK 268,139 thousand) and the write-off of receivables in the amount of CZK 9,497 thousand (2010: CZK 20,308 thousand), in addition to a fee paid for the auditor s services, amounting to CZK 690 thousand (2010: CZK 741 thousand). Other operating income totaled CZK 267,320 thousand as at 31 December 2011 (2010: CZK 277,446 thousand). The most significant items are revenues from reassigned receivables in the amount of CZK 260,820 thousand (2010: CZK 268,139 thousand), income from contractual penalties in the amount of CZK 41 thousand (2010: CZK 2,455), charges pertaining to changes in contractual terms and applications for the provision of factoring services, and entry and monitoring fees totaling CZK 6,459 thousand (2010: CZK 6,851 thousand). 17. Financial expenses and income Financial expenses primarily comprise the following items (in CZK thousand): As at 31 December2011 As at 31 December 2010 Interest expense from overdraft loan facilities 18,888 18,969 Other financial expenses 141,576 61,715 Exchange rate losses 129,213 50,292 ČESCOB, ATRADIUS, COFACE and other insurance premiums 8,273 8,359 Banking expenses 2,851 2,301 Other charges 1, Financial income primarily comprises the following items (in CZK thousand): As at 31 December 2011 As at 31 December 2010 Interest on pre-financed purchased receivables 60,442 48,461 Total interest income 60,442 48,461 Exchange rate gains 129,677 50,415 Income from financial investments (Protos dividend) 55,847 56,055 Total financial income 245, , Personnel expenses The average headcount, members of the management and personnel expenses for 2011 and 2010 (excl. remuneration paid to the members of statutory bodies) are as follows: Overview of personnel expenses (in CZK thousand): Total headcount Management Total headcount Management Average headcount Wages and salaries 23,520 4,435 26,552 9,770 Social security and health insurance 8,231 1,616 8,442 2,075 Other social costs 1, ,898 1,728 Total personnel expenses 33,338 6,274 37,892 13,573

40 38 Factoring KB, a.s. The headcount is based on the average adjusted number of employees. Management means CEO, Head of Customer Service Unit and Head of Client Risk Department see the organizational chart. In 2011, members of the Board of Directors and the Supervisory Board received a total of CZK 369 thousand in remuneration, in addition to their basic salaries (2010: CZK 488 thousand). Based on an agreement made with the Company, the Board of Directors members may use company cars. 19. Transactions with related parties The Company received financial revenue from Komerční banka, a.s. in the amount of CZK 0.3 thousand for 2011 (2010: CZK 0.5 thousand). The services rendered by Komerční banka, a.s. to the Company in 2011 primarily comprised (in CZK thousand): As at 31 December 2011 As at 31 December 2010 Financial expenses 21,884 21,430 Fee for using KB s distribution network 11,148 9,481 Trademark use 2,917 2,917 Other services provided by Komerční banka, a.s Financial expenses comprise primarily interest on loans provided in the amount of CZK 18,888 thousand (2010: CZK 18,969 thousand), banking fees in the amount of CZK 2,841 thousand (2010: CZK 2,291 thousand), and other services provided by Komerční banka in the amount of CZK 155 thousand (2010: CZK 170 thousand). Other Komerční banka s services comprise mainly expenses related to leases of premises for regional offices, such as energies, water supply, heating, telephone charges and lease payments, and expenses related to advisory services and training. The Company made no fixed asset purchase from or sale to Komerční banka, a.s. in 2011 or The Company reported expenses in the amount of CZK 5,281 thousand for 2011 (2010: CZK 5,387 thousand), ensuing from a lease agreement with Penzijní fond Komerční banky, a.s. The Company reported revenue in the form of dividends paid by the Protos fund in 2011, totaling CZK 55,847 thousand (2010: CZK 56,055 thousand). 20. Post balance sheet events No significant events that would have a material impact on the financial statements occurred subsequent to the balance sheet date. Prepared on: 8 March 2012 Signature of the reporting entity s statutory body: Person responsible for bookkeeping (name, signature): Person responsible for preparation of the financial statements (name, signature): Miloslav Kukla Eva Březinová Eva Březinová Věra Jahnová

41 39 Factoring KB, a.s. Report on Relations among the Interconnected Persons for the 2011 Accounting Period (hereinafter referred to as the Report on Relations ) Factoring KB, a.s., a company having its place of business at Lucemburská 1170/7, Prague 3, ID No.: , entered in the Companies Register kept with the Municipal Court at Prague, Section B, Insert 4861 (hereinafter referred to as the Company ) is a part of a business group (holding company), in which the below described relations between the Company and its controlling company exist, as well as other relations between the Company and other legal persons controlled by the same controlling company (hereinafter collectively referred to as the Interconnected Persons ). This Report on Relations among the below-specified persons has been prepared in accordance with the provision of Section 66a (9) of Act 513/1991 Coll., as amended later (the Commercial Code), for the period of 2011, i.e. the period starting on 1 January 2011 and ending on 31 December 2011 (hereinafter referred to as the Accounting Period ). I. Introduction In the period from 1 January 2011 to 31 December 2011, the Company was a part of Société Générale S.A., a holding company having its place of business at 29, BLD Hausmann, Paris, France, registered in the French Companies Register under: R.C.S. Paris B (1955 B 12022) (hereinafter referred to as SG or SG Paris ). In the 2011 Accounting Period, the Company had relations with the following Interconnected Persons: Company Place of business SG share on voting rights in the Company Komerční banka, a.s. Prague 1, Na Příkopě 33/969, postcode: %*) Penzijní fond Komerční banky, a.s. Prague 3, Lucemburská 1170/7, postcode: % Modrá pyramida stavební spořitelna, a.s. Prague 2, Bělehradská 128, Reg. No.222, postcode: % ALD Automotive s.r.o. Prague 10, U Stavoservisu 527/1, postcode: % Protos, uzavřený investiční fond, a.s. Prague 1, Dlouhá 34, postcode: % *) As at II. Relations with the interconnected persons A. Contracts and agreements with the Controlling Person and other Interconnected Persons I. Contracts and agreements entered into within the Accounting Period Contract/agreement type (or the contract subject matter if not specified in its title) Contractual party Framework Contract on Rendering Komerční banka, a.s. of Financial Services Reg. No Annexes to the Framework Contract Komerční banka, a.s. on Rendering of Financial Services Reg. No (2) Contract on opening and maintaining Komerční banka, a.s. of current accounts in SEK with Komerční banka, a.s., incl. its annexes Framework Contract on dealing Komerční banka, a.s. on the financial market Agreement on cooperation Komerční banka, a.s. in the contest implementation Annex No. 1 to the Contract on lease Komerční banka, a.s. of non-residential premises Performance by the Company Interests and charges as per the Tariff Interests and charges as per the Tariff Interests and charges as per the Tariff Interests and charges as per the Tariff Price according to the Agreement Price according to the Contract Counter-performance Rendering of financial services Rendering of financial services Account keeping Concluding of deals on the financial market Organising and running of the contest Cleaning of the lease subject matter Losses incurred to the Company

42 40 Factoring KB, a.s. Contract/agreement type (or the contract subject matter if not specified in its title) Contractual party Agreement on mutual cooperation (Update of Annex No. 2) Contracts on issuing and using of payment cards (2) Rules for cooperation between KB and members of the group in the field of sourcing and purchasing Licence agreement on the use of database Contract on rendering of services access to the C4M Contract on the cancellation of liabilities resulting out of the Contract on lease of nonresidential premises and payments for services connected with their use Contract on lease of non-residential premises and payments for services connected with their use Komerční banka, a.s. Performance by the Company Rendering of services according to the Agreement Counter-performance Rendering of banking services to the FKB employees Losses incurred to the Company Komerční banka, a.s. According to the Tariff Issue and use of payment cards Komerční banka, a.s. Komerční banka, a.s. Komerční banka, a.s. Penzijní fond Komerční banky, a.s. Penzijní fond Komerční banky, a.s. Rules for cooperation between KB and members of the group in the field of sourcing and purchasing Price according to the Agreement (the Parties to the Agreement bear the costs incurred in the connection with the Agreement) Price according to the Contract Settlement of liabilities according to the Contract Price according to the Contract Rules for cooperation between KB and members of the group in the field of sourcing and purchasing Providing of the data necessary for the management accounting Access to the KB application Cancellation and settlement of liabilities according to the Contract Providing of non-residential premises and parking places II. Performance accepted and provided from the contracts/agreements entered into in the past accounting periods Contract/agreement type (or the contract scope if not specified in its title) Contractual party Framework Contract on Rendering of Komerční banka, a.s. Financial Services Reg. No 880AS000, incl. the Annex (1) Contract on opening and maintaining Komerční banka, a.s. of current accounts in CZK with Komerční banka, a.s., incl. its annexes Contract on opening and maintaining Komerční banka, a.s. of current accounts in USD with Komerční banka, a.s., incl. its annexes Contract on opening and maintaining Komerční banka, a.s. of current accounts in EUR with Komerční banka, a.s., incl. its annexes Contract on opening and maintaining Komerční banka, a.s. of current accounts in CHF with Komerční banka, a.s., incl. its annexes Contract on opening and maintaining Komerční banka, a.s. of current accounts in GBP with Komerční banka, a.s., incl. its annexes Contract on opening and maintaining Komerční banka, a.s. of current accounts in PLN with Komerční banka, a.s., incl. its annexes Contract on custody of securities, Komerční banka, a.s. incl. handover certificate Performance by the Company Interests and charges as per the Tariff Interests and charges as per the Tariff Interests and charges as per the Tariff Interests and charges as per the Tariff Interests and charges as per the Tariff Interests and charges as per the Tariff Interests and charges as per the Tariff Charges according to the Contract Counter-performance Rendering of financial services Account keeping Account keeping Account keeping Account keeping Account keeping Account keeping Custody of securities Injury/loses to the Company Contracts of safe-deposit box use (9) Komerční banka, a.s. According to the Tariff Provision of a safe-deposit box

43 41 Factoring KB, a.s. Report on Relations Contract/agreement type (or the contract scope if not specified in its title) Contractual party Contract on using the direct banking services, incl. the Annex Contracts on issuing and using of payment cards (2), incl. the Annex (1) Contract on rendering of auxiliary services Profi Merlin PO Contracts on providing of chip-card readers Contracts on lease of non-residential premises, movables and payments for services connected with their use (3) Performance by the Company Counter-performance Injury/loses to the Company Komerční banka, a.s. According to the Tariff Providing of direct banking services Komerční banka, a.s. According to the Tariff Issue and use of payment cards Komerční banka, a.s. Charges as per the Tariff Insurance covering payment card mishandling Komerční banka, a.s. Charges according Providing of chip-card readers to the Contract Komerční banka, a.s. Price according to the Contracts Distribution Agreement Komerční banka, a.s. Charges according to the Agreement Cooperation Agreement Komerční banka, a.s. Charges according to the Agreement Framework contracts on personal date processing (2) Komerční banka, a.s. Charges according to the Contract Licence agreement Komerční banka, a.s. Charges as per the agreement Agreement on specification of individual prices Contract on insurance premium payment Contract on mutual cooperation, incl. the Annex (1) Agreement on Consultancy Services Amendment (3) Contract on rendering of services outsourcing (HR services) Agreement on cooperation job opportunities Komerční banka, a.s. Komerční banka, a.s. Komerční banka, a.s. Komerční banka, a.s. Komerční banka, a.s. Charges as per the agreement Charges as per the contract Charges as per the contract Price according to the Agreement Price according to the Contract Providing of non-residential premises and movables Product distribution Product distribution, marketing, human resources, taxes, budget creation, reporting and internal audit Processing of client personal data Providing of trademark Individual prices for services invoiced for the client current accounts Entering into the insurance policy for the Company risks Providing of banking services to the FKB employees Specification of rules and responsibilities in the framework of rendering of consulting services in the sphere of risk management Rendering of services in the sphere of accounting for the Human Resources (HR) Komerční banka, a.s. Compensation for costs Publication of advertisements on the web portal of the KB partner Non Disclosure Agreement (NDA) Komerční banka, a.s. Maintaining confidentiality in the sphere of the confidential information Framework contract on rendering of services Contracts on lease of non-residential premises and payments for services connected with their use, incl. annexes (3) Komerční banka, a.s. Penzijní fond Komerční banky, a.s. Price according to the Contract Price according to the Contract Framework contract ALD Automotive s.r.o. Price according to the Contract Contracts on renting of movables (10) ALD Automotive s.r.o. Price according to the Contract Contract of providing of preferential conditions and terms for the employees of Factoring KB, a.s. participants in the housing savings scheme in MPSS Modrá pyramida stavební spořitelna, a.s. Provision of preferential conditions Maintaining confidentiality in the sphere of the confidential information Rendering of services properly and in time Providing of non-residential premises and parking places Renting of movables Renting of movables Provision of preferential conditions

44 42 Factoring KB, a.s. B. other legal acts made by the Company in the interest of the Controlling Person and other Interconnected Persons By the resolution of the General Meeting of Shareholders of Protos, uzavřený investiční fond, a.s. held on 18 April 2011, the motion of the Board of Directors for the profit appropriations was approved and the Company received the dividend in the amount of CZK 55,847, C. Measures adopted and/or implemented by the Company in the interest of the Controlling Person and other Interconnected Persons In the course of 2011, the Company has neither adopted nor implemented any measures in the interest of the Controlling Person and/or other Interconnected Persons or upon their inducement. III. Conclusions Having reviewed all the relations among the Company and the Interconnected Persons for the 2011 Accounting Period, the Company s Board of Directors claims that no injury has occurred to the Company from any of the concluded contracts, agreements or other legal acts adopted and/or implemented by the Company in the relevant Accounting Period Factoring KB, a.s. Consultancy, design and production: ENTRE s.r.o.