factoring kb, a.s. annual report 2007 · factoring kb, a.s. is the fourth largest factoring company...

Factoring KB achieved the highest turnover in the history of the company, amounting to

CZK18,143 million

Factoring KB, a.s. Annual Report 2007

www.factoringkb.cz

S T R A T E G Y • V A L U E S • P E O P L E • R E S U L T S • O U T L O O K • F A C T A N D F I G U R E S

Differentcompanies,different needs

In 2007 Factoring KB, a.s. continued in its growth trends, manifesting thusa steadily growing interest in factoring services. The key clients in the Czech

Republic are medium-size enterprises. Management, purchases andfinancing of receivables from the domestic business dealings become more

frequently a matter of course in the financial management of the companies.

Your business. Our guarantee.

1

Factoring KB

Factoring KB, a.s. is the fourth largest factoringcompany on the Czech market. Since its

establishment in 1997, it has been a 100% subsidiaryof Komerční banka, a.s. and belongs to the Société

Générale Group. The Company provides a set offactoring services, which includes purchases,

management, collection and financing of debtsincluding a risk assumption in the extent of payment

insolvency of a domestic or foreign debtor.

2

4 Company’s Profile

6 Selected EconomicIndicators

8 Foreword by theChairman of the Boardof Directors

10 Report of the Board ofDirectors11 Strategic Objectives for 200812 Major Events in 200712 Market Development and

Company’s Position on the Market

13 Business Activities14 Marketing Activities14 Product Base14 Information Technologies16 HR Policy16 Comments on the Financial

Situation and BusinessResults

17 Statutory Bodies17 Board of Directors17 Supervisory Board17 Management

18 Organizational Structureof the Company

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6

8

3

19 Ownership Structure

20 Report of theSupervisory Board

21 Sworn Statement

22 Auditor’s Report

24 Financial Section26 Balance Sheet as

of 31 December 200728 Profit and Loss Statement

for the year ended 31 December 2007

29 Cash Flow Statement as for the year ended31 December 2007

30 Statement of changes in Equity as of 31 December 2007

31 Notes to the FinancialStatements for the yearended 31 December 2007

46 Report on Relationsamong Related Entitiesfor the year ended 31 December 2007

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2519

Contents

Company’s Profile

4

Company’s Profile

Business Name: Factoring KB, a.s.

Legal Form: Joint-stock company

Company Registration Number (IČ):25148290

Place of Business: Lucemburská 1170/7, Prague 3-Vinohrady, 130 00

Date of Establishment: 4 August 1997

Registered Capital: CZK 1,184,000,000

Memberships & Associations: Factors Chain International (FCI)from 30 June 2000Czech Association of FactoringCompanies from November 2000Czech Leasing and FinancialAssociation from June 2005

From April 2007, the Company has a new place of business at the address of Lucemburská 7, Prague 3-Vinohrady.

5

Company’s Profile

Factoring KB, a.s. (hereinafter referredto as “Factoring KB”) was establishedas a subsidiary fully owned byKomerční banka, a.s. (hereinafter also“Komerční banka” or “KB”). Since itsestablishment, the Company has beena member of the Financial Group of theparent bank and from 2002 also anactive member of the Financial Groupof Société Générale Banque (hereinafteralso as “Société Générale” or “SG”).The membership in both financialgroups affects significantly the overalldevelopment of the company and atthe same time, it brings in new incentivesfor further improvement of cooperationwith the other members of this groupboth in our country and abroad.

The Company was founded to offera set of factoring services, whichincludes purchases, management,collections and financing of receivables,including takeover of risks related toinsolvency of a domestic or foreigndebtor. In the first place, the Companyoffers its services to domestic businessentities and within its membership in the FCI provides selected servicesalso to the other members of thisinternational association. From 2006,within the framework of the servicesrendered, the Company offers vendorinvoice financing.

In 2007, some strategic objectiveswere fulfilled to a larger degree, someto a lesser one. The Company continuedin active cooperation with Komerčníbanka and other, mainly factoringcompanies from the Société GénéraleFinancial Group. In cooperation withSG, it took an active part in tenders for financing commercial activities ofseveral global companies. In contrast,the increased activity by the bankregarding loans for corporate clientsaffected the Company’s cooperationwith Komerční banka in the acquisitionsector, which thus did not grow sorapidly as compared with previousyears. In spite of this situation,Factoring KB achieved an interannualincrease to a total of CZK 18,143 million,which represents the largest volume inthe history of the Company. With regardto improvement of services andoperating readiness, Factoring KB plansto divide clients into several segmentsby size, reliability and volume ofcooperation, with rules for serviceactivities set for individual segments.

Factoring KB is the fourthlargest factoring company

on the Czech market.

The Company’s Position on the Market

For 2007, the following strategicobjectives have been set:

Full utilisation of synergies withinthe Financial Group of Komerčníbanka and Société Générale;Segmentation of the client portfoliowithin the Financial Group of Komerčníbanka and Société Générale;Focus on larger enterprises from the Corporate segment;Participation in tenders for a provisionof factoring services.

Similarly to previous years, the generaltargets of the Company focus primarily on:

Company’s development and a stabileprofit growth;Maintaining the Company’s positionon the market;Improvement of services provided tothe Company’s clients.

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Selected Economic Indicators

SelectedEconomicIndicators

Factoring KB achieved the highest net profit in the history of the Company –

CZK 27,527thousand.

Unit 2006 2007

Total assets CZK million 5,324.15 7,319.27

Registered capital CZK million 84.00 1,184.00

Equity capital CZK million 188.90 1,364.79

Profit/loss CZK million 35.61 43.43

After-tax profit CZK thousand 27.52 27.53

Market share % 16.30 14.30

Total sales CZK million 17,075.15 18,143.76

Domestic factoring turnover CZK million 14,467.03 16,053.67

International factoring turnover CZK million 2,608.12 2,090.09

Volume of adjustments CZK million 75.50 79.20

Total revenues CZK million 260.96 336.56

Total costs CZK million 225.35 293.13

Average employee headcount 38 41

7

Selected Economic Indicators

Domestic factoringturnover has increased

by11%.

Factoring turnover (in CZK million)

8,0

94

8,0

64 9,1

92

11,

666 13,

738

17,

075

18,

143

2004200320022001 2005 2006 2007

0

5,000

10,000

15,000

20,000

8

Foreword of the Chairman of the Board of Directors

It is my honour to provide you with theAnnual Report of Factoring KB, a.s. for2007. In the introduction, I would like to state that we continue the growthtrend and that 2007 has been the mostsuccessful year in the history of ourCompany. Practically all our targets weset for the year were met. At the sametime, our successful cooperation withour parent company, Komerční banka,a.s. and with the entire Société GénéraleFinancial Group has continued. Despitethe keen competition in the factoringsector in the Czech Republic, we havemanaged to increase the Company’sturnover up to approximately CZK 18.1 billion. The most significantactivities of this year consist, withoutany doubt, an increase in the registeredcapital by the parent company Komerční banka, a.s., by CZK 1.1 billion.Another major activity was that theCompany has moved to new offices at Lucemburská Street no. 1170/7.

This strenuous relocation, whichhappened after 10-year operation of KB Factoring in the original offices at Na Poříčí Street, was handled withoutany disturbance to our activities.Furthermore, in 2007 we managed toimplement our client base segmentationand thus to prepare space for improvementand modification of communicationprocesses with our clients. Also in the software development we haveimplemented the second stage of CRMdevelopment this year, which allows us to utilise the information about ourclients and customers more efficiently. In the past period we maintained ourconservative approach towards riskmanagement and also achieved a morefavourable generation of adjustments,therefore of the business results too, via successful debtor-reminding andcollection activities.

Foreword of the Chairman of theBoard of Directors

Dear Ladies and Gentlemen, Dear Business Partners,

In 2008, a deepening of cooperationwith our parent company is naturallyahead of us. Moreover, we plan todevelop software tools which will enableefficiency of our business activities to bemeasured and CRM developed further.We also assume to deepen and improvecooperation with our clients, regardingsolutions for their needs in particular.

In conclusion,allow me to say my thanksto all colleagues for cooperation in 2007(namely for successful handling ofcompany moving to our new premises)and wish them success and satisfactionin 2008. I would like to thank our clientsfor their confidence in Factoring KB, a.s.

Yours respectfully,

Milan CorjakChairman of the Board of Directors and CEO

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Factoring KB continues in the growth trend,

with 2007 being the mostsuccessful year for our Company.

Milan Corjak, Chairman of the Board of Directors and CEO

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Report of the Board of Directors

Report of the Boardof Directors

The most significant event in 2007 for Factoring KB was without any doubt the relocation ofthe Company’s place of business. From April 2007 the Company is located in the building ofPenzijní fond Komerční banky, a.s., at the address Lucemburská 7, Prague3-Vinohrady.

The event of no less importance was an increase in the Company’s registered capital byCZK 1,100 million to the total of CZK 1,184 million. This step significantly contributed to thestrengthening of the Company’s position on the market.

In 2007, Factoring KBcontinued in making fulluse of synergies withinthe Financial Group of

Komerční banka andSociété Générale.

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The year 2007 was another successful yearafter the accession of the Czech Republic tothe European Union in terms of the growthof the country’s economy. GDP grewat a record-breaking rate as a resultof a positive development of businessentities operating in the Czech Republic,both domestic and foreign ones, or joint-ventures. The production growth wasaccompanied by an increased domesticconsumption and export of goods. Also thevolume of services rendered increasedinterannually. This overall growth resultedin an increased demand for standard bankfinancing as well as for alternative resourceswhere factoring as a form of financing ofbusiness relations and securing of mutualpayments belongs to.

The year 2007 was a successful year alsofor Factoring KB, a.s. The Company’sturnover, the total number of clients as wellas the number of active contracts have risen.

In 2008 we will continue in the closecooperation with Komerční banka andother factoring companies – members ofthe Financial Group of Société Générale –mostly in the area of international factoringand mutual exchange of experience. This cooperation as well as the participationof our Company in the internationalassociation of factoring companies (FCI)will undoubtedly contribute to the maintainingand strengthening of the Companycompetitive edge in the factoring market.

Strategic objectives for 2008

The major strategic objectives for 2008include:

Full utilisation of synergies withinthe Financial Group of Komerčníbanka and Société Générale;Improvement of services renderedand increase in the total flexibility;Extended cooperation with theexisting clients.

As in past years, the Company willcontinue in its policy of full use of thesynergies existing within Komerčníbanka and the Financial Group ofSociété Générale, with the aim ofoffering our clients top quality servicesfocused to the satisfaction of theirfinancial needs with the simultaneousapplication of prudent approaches from the side of the Company and the Group. Acquisitions and marketingpolicies, risk management system,development of information technologies,human resources, corporate financingsystem, tax consultancy issues, etc.can be mentioned as the main spheresof cooperation. In its acquisition policy,the Company will focus its attention on all segments of the corporate clientportfolio, with its major effort inrendering services both to large-sizedand international corporations andsmall-sized businesses with a potentialof further development.

Factoring KB will pursue the goal offurther growth in its total sales, thusstrengthening its position on the Czech factoring market. Even in theforthcoming year, the sphere of thedomestic market should remain thekey sphere of the rendered factoringservices; nevertheless, the Companywill focus its effort to increase theshare of the international factoring. The continuous efforts of the Companywill aim at an increased share of thenon-recourse factoring using insuranceor securing from the side of internationalfactors within the FCI cooperation for export factoring. Prerequisites forfurther growth in the sales volume arerepresented by offering all the existingproducts with an increasing share of the “reverse factoring” or, asapplicable, financing of purchases of goods, materials and raw stock. The provision of this product extendscooperation with the existing clientsand also contributes to acquisitions of new clients who do not use thestandard factoring.

Finally, the Company will exert everyeffort in the coming year to achievegrowth in gross and net profits, whilepreserving the increasing trend oflabour productivity.

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Major Events in 2007The relocation of the Company belongsundoubtedly to the most significantevents of the year. From 2007, theofficial place of business of our Companyis at the address of Lucemburská 7,Prague 3-Vinohrady. To maintaincontinuity of our business activitiesduring the relocation period, alternateoffices were secured for the Companyfor a temporary or permanentunavailability of the former offices.

The only shareholder of the Companymade a decision to increase theregistered capital of the Company by CZK 1,100 million to the total of CZK 1,184 million. This step increasedthe financial strength of our Companysignificantly, obliging the new legislationin force from 2010 concerning theincreased tax burden in case ofa discrepancy between the financingvolume and the volume of correspondingcapital of the business entity.

Moreover, the participation of theCompany in the investment project,a purchase of shares of the closedinvestment fund PROTOS, should bementioned.

Even for the next period, the riskmanagement policy can be characterisedas a conservative one, respectingprudent principles in business activitieson one side, however, resulting in theloss of some business deals on theother side. A higher level of caution of the Company leads to an increasedvolume of insured deals, resulting thus

in an expanded offer of the non-recoursefactoring structure. In accordance withthis policy, the Company focused onfurther deepening of cooperation withcommercial insurance companies. As a consequence, the share ofinsured deals in the total sales of theCompany has risen again.

The Company continued in closecooperation in the sphere of riskinsurance against debtor insolvency,namely with Komerční úvěrovápojišťovna EGAP, a.s. and Euler HermesČescob, úvěrová pojišťovna, a.s.Besides insurance, the Company alsocooperates, in the risk coverage area related to the foreign debtorinsolvencies, with its foreign partners –other members of Factors ChainInternational (FCI), and conversely, the Company provides such services,on a larger scale, in cases of importsperformed by Czech entities.

In 2007, the factoring market in the CRwas predominantly affected by membersof the Czech Association of FactoringCompanies (Asociace factoringovýchspolečností ČR), whose numberincreased to eight. The market growthdynamics in 2007 remained relativelyhigh, specifically 21%.

The total sales of factoring companies,the Association members, amountedto CZK 127,141 million. The high marketgrowth was mostly influenced by theaccession of the eighth member, whosesales represented 9% of the market,and by an enormous growth of onemember of the Association; on thecontrary, two members registereda decline in their sales.

The interest in the factoring serviceswas reflected in the overall Companydevelopment; the Company acquiredmany new clients and was the fourthlargest factoring company in the CzechRepublic in 2007 with a factoringmarket share of 14.3%.

Factoring KB launched a newproduct on the market – accessionto liabilities resulting from tradeactivities.

Market Developmentand the Company’sPosition on the Market

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Business Activities In 2007, the Company achieved thehighest sales in its history, amountingto CZK 18,144 million, which representsthe interannual increase by 6%.

This significant growth was caused by a positive trend in the growth ofvolumes of factoring deals in 2006 and 2007. In spite of the fact that theCompany achieved the sales growth in the year-to-year comparison, thetotal number of factoring contractsconcluded did not reach the level ofthe previous year. In total, 265 factoringcontracts were concluded.

The Company gives emphasis on thegrowth in security of separate factoringdeals with the aim of reducingcommercial risks to minimum. Thesecircumstances contributed to furthergrowth in insured deals that accountedfor 41% of the total sales of the

Company. In domestic factoring, non-recourse factoring deals (insured)accounted for 36% of the sales ofdomestic factoring, compared to 30%in 2006 with the parallel growth of thetotal sales volume. In export factoring,the volume of insured deals, or dealsguaranteed within the FCI accountedfor 86% of the total export factoringvolume with its parallel interannualincrease.

Our Company also continued inproviding “reverse factoring” servicesfor the reasons of further expansion of the client portfolio. This specificmethod of funding enables the full useof factoring services by financiallyweak business entities on one side, or their utilisation in cases, where thissource of funding is used under a highexposure concurrently with a highlyconcentrated risk on the other side.

In 2007, a significant increase in thevolume, both in terms of sales andnumber of concluded, contracts, is associated with a new product –Financing of liabilities. This productfulfils two basic roles in the development:it expands the range of productsoffered by the Company (at the parallelstabilisation and strengthening ofcooperation with the existing clientswho use standard factoring services)and represents a significant product interms of acquisition of new clients. For our clients it is a welcome opportunitypredominantly for achieving the permittedlimit of credit in case of a standardbank loan. At the same time, it preservesthe basic principle of the trade riskmanagement, since it is providedsolely to business entities whosesolvency is checked by the insurer.

The domestic factoring sales increasedby 11%, the international factoring salesregistered a drop by 20% in comparisonwith 2006. The main reason for thedecreased volume of the internationalfactoring consists in the significantreduction of the share of importfactoring. This is confirmed by the factthat the export factoring itself, as a partof the international factoring, increasedinterannually. Domestic factoringaccounted for 88% of the Company’ssales and the share of internationalfactoring reached the level of 12%.

The increased sales resulted in itsbigger revenues. The Companycontinues in the trend of highly growingrevenues as compared to the growthof costs. This fact results in a positivetrend in the development of theCompany’s total financial results.

A major increase in the Company’sregistered capital enabled the parentcompany, as the only shareholder, tobe dominant in the securing of fundingfor our Company, via short-term loansin the local as well as foreign currency.Due to these reasons, the share of fundingby other financial institutions declined.

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MarketingActivitiesDuring 2007 the Company continued in organising specialised trainingcourses for employees of its parentcompany, focusing on the product base and procedures of business case processing. In order to supportacquisition activities within the smalland mid-sized companies, the Companypresented itself in the press viaadvertisements and articles, alsoorganized specialised trainings forbusiness partners from the existingclient base.

The Company focuses on regularupdates of its web sites, concerning in particular modifications andextension of the product base, updatesof contact data and business results of the previous period. The Companycontinues to use services provided by external companies specialising inadvertising and promotion in media.

Product BaseThe range of products offered in 2007has developed in compliance withmarket and client requirements, takinginto account the offers of competitivefactoring companies. Also in 2007, the Company kept utilising the product“Accession to liabilities resulting fromtrade activities”. In 2007, both currentand new clients showed interest in thisproduct.

In 2007, the Company offered theproducts listed below:

Domestic recourse factoring;Domestic factoring with insurance;Export factoring within the “factor-factor” system;Export factoring with insurance;Export recourse factoring;Import factoring;Reverse factoring; andAccession to liabilities.

InformationTechnologiesWithin the Company’s relocation in 2007 to the building of Penzijnífond KB, a.s., in Prague 3, an entirelynew network infrastructure has beenimplemented, comprising of data lines as well as power cables. In thiscontext, the equipment in the serverroom has been modernized, including,for instance, backup supplies, air-conditioning units, central activeelements, telephone exchange, etc.A new security card system has been introduced in the building anda modern alarm system set in theoffices of Factoring KB. In order tosecure an advanced level of protectionand availability of internet servicesprovided as well as utilised by ourCompany, the hardware configurationof the main firewall and routersensuring the internet connectivity hasbeen extended. At the end of the year,the first stage of replacement ofworkstations and notebooks wascarried out, as a part of a regularrenewal of computer technology.

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Within the Business ContinuityPlanning, a contract was arranged in2007 for an alternate location in ordera backup office could be establishedfor a potential temporary or permanentunavailability of the Company’s offices,including all the corresponding server equipment, computers for an emergency team of 20 people and internet connectivity necessary to secure an emergency operation. For the key systems of the Companyto be put into operation in the backupoffices, respective methods of workingprocesses were prepared and tested inJune during a trial operation of thisoffice. This test proved that within therequired time of 72 hours (determinedin the previous BIA) all the necessarysystems to start an emergencyoperation had been restored ahead ofschedule. Moreover, it was found outthat all the companies participating inthis activity were able to provide thenecessary service in the required timeand quality.

The main production system Faktor, for the processing of client inquiries,was extended besides minor operatingmodifications ensuring higher workproductivity and a friendlier userinterface, by a support of the newproduct working with non-specificcustomers.

The major electronic communicationchannel eFactoring was upgraded toversion 1.8, containing requirementsensuring the full electronic support of the Accession to Liabilities product,electronic assess to details of thepurchased liabilities for clients andother extension of the specialisedconsolidated reports. Additionally,a support of certificates of the qualifiedpublic certifying authorities has beenintroduced. As a part of synergies withthe parent company, KB certificatesused for internet banking in Komerčníbanka are also supported.

The CRM system was extended basedon requirements by the Commercialand Marketing division and Client Riskdivision. These requirements shouldensure a higher degree of support for acquisition of new clients andassessment of potential risks. Anothermajor change was an extension offunctions of this system in terms of document management and supportof work with electronic documents.

During the year, basic requirementshave been set regarding the selection,parameterization and development ofa new system securing data warehousefunctions which will replace MISoperating already on a weakly supporteddatabase platform. In this context,licences for Arbes Business Intelligencesystem were purchased and a schedulehas been set for development ofspecific requirement support to assistat the risk management and businesscase setting.

In 2007 new network infrastructurehas been produced, comprising ofdata lines as well as power cables.


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HR PolicyIn 2007, a change took place in the Supervisory Board, whereMrs. Hanibalová became a member ofthe Supervisory Board, replacing thusMrs. Březinová. The Board of Directorsworked in the same composition as in 2006. Average headcount amountedto 41.

The cooperation with Komerční bankacontinued not only in the commercialsphere. Factoring KB acquired newreinforcement from the parent bank.Also thank to the newly established

position of the human resourcemanager, the Company makes effortsin the professional development if itsemployees who are professionallycapable and always willing toaccommodate our clients´ demands.The Company is aware of the fact that employees are the most valuableassets. Therefore, it makes effort tocreate optimal conditions for their workperformance.

Significant attention is paid to the system of employee benefits,evaluation and vocational training.

Comments on theFinancial Situationand BusinessResultsIn the perspective of the financialsituation and business results, 2007can be characterised as a verysuccessful year for our Company. We managed to achieve almost all thegoals the Company set in its financialplan for 2007. The Company achievedthe highest net profit in its history,amounting to CZK 27,527 thousand.Revenues of the Company comeprimarily from the rendering of factoringservices. Alike in previous years, themost substantial part of revenues wasgenerated by the domestic factoring. In 2007, the share of internationalfactoring sales in the total sales of the Company reached 11.52%. The total revenues amounted to CZK 336,557 thousand; the total costsamounted then to CZK 293,127 thousand.

As in the past, the Company createdprovisions to overdue receivables, the balance sheet value of whichamounted to CZK 79,203 thousand, as of 31 December 2007.

The total sales of the Czech factoring companies amounted to

CZK127,141million.

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Statutory Bodies

Supervisory BoardJana ŠvábenskáChairman of the Supervisory Boardfrom 31 May 2005

Jana Hanibalová Member of the Supervisory BoardFrom 1 October 2007

Petr KulhánekMember of the Supervisory Boardfrom 10 September 2003

The composition of the Supervisory Board was changed in 2007 with Mrs. Březinová replaced byMrs. Hanibalová.

Management of the CompanyMilan CorjakChief Executive Officer

Tomáš KunstFirst Deputy CEO

Marcela ChalušováDeputy CEO

The composition of the top management was identical to the composition of the Board of Directors.

Milan CorjakChairman of the Board of Directors

Tomáš KunstVice-Chairman of the Board of Directors

Marcela Chalušová Member of the Board of Directors

Statutory BodiesBoard of Directors

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Organizational Structure of the Company

Chief Executive Officer (CEO)

CEO´s Office Human Resources

1st Deputy CEO Deputy CEO Chief Financial Client Risk Trade Risk Officer (CFO) Division Department

IT Client Client Commercial Financial Department Service Service and Department

Department Department Marketing– CR – International Department

OrganizationalStructure of the Company

A regular General Meeting ofShareholders was held on 19 April2007, approved the Final Accounts for2006 and the Report of the Board ofDirectors on the Company’s Businessand State of the Company’s Assets for2006. It decided on the profit distributionand acknowledged the Report of theSupervisory Board Report and theReport on Relations among RelatedEntities.

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Ownership Structure of the Company

Shareholder Share in the Registered Capital (%)

Komerční banka, a.s. 100

Total 100

OwnershipStructure ofthe Company

Factoring KB has a

14.3% share on the factoringmarket in the CzechRepublic.

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Report of the Supervisory Board

The Supervisory Board ofFactoring KB, a.s., continuouslypursued tasks which are assigned to it pursuant to provisions of theCommercial Code and Articles ofAssociation. The Board performed the regular supervision over theCompany’s activities, approvedstrategic plans and provided the Boardof Directors with its proposals andrecommendations aiming atimprovement of the Company’sactivities.

After the review of the Final Accountsof the Company for the period between1 January and 31 December 2007 andbased on the Report by an externalauditor regarding these Final Accounts,the Supervisory Board declares thataccounting records and reporting weremade in a conclusive manner and incompliance with statutory regulationsgoverning book-keeping of non-financialinstitutions. Accounting records reflectthe financial situation of the Companyas of 31 December 2007 accurately in all significant aspects.

Moreover, the Supervisory Boardreviewed the Report on Relationsprepared by the Company asa controlled entity pursuant to Article66a, section 9 of the Commercial Code,for the period between 1 January and31 December 2007. The SupervisoryBoard declares that based on thereview, the Board did not find anysignificant objective incorrectness ofdata presented in this report and theBoard of Directors of the Company,based on their assessment, did notidentify any detriment for the Companyin terms of relations with theControlling Entity.

Based on these facts, the SupervisoryBoard recommends to the GeneralMeeting of Shareholders to approvethe Financial statements for 2007.

Prague, 18 March 2008

Jana ŠvábenskáChairman of the Supervisory Board

Report of theSupervisory Board

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Sworn Statement

Factoring KB, a.s. hereby declares that all the information and data presented in this Annual Report are complete and correct. Furthermore, the Company confirmsthat the Report contains all the facts that might be important in the investors’decision-making process.

In addition, Factoring KB, a.s. hereby declares that until the date of processing of this Annual Report no negative changes in the financial situation and/or otherchanges that could influence correct and proper evaluation of the financial situationof Factoring KB, a.s. have occurred.

In Prague, on 19 May 2008

On behalf of the Board of Directors signed by:

Milan Corjak Marcela ChalušováChairman of the Board of Directors Member of the Board of Directorsand CEO and Deputy Director

Sworn Statement

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Auditor’s Report

Based upon our audit, we issued the following audit report dated on18 February 2008 on the financialstatements which are included in thisannual report on pages 26 to 45:

“We have audited the accompanyingfinancial statements of Factoring KB, a.s.,which comprise the balance sheet asof 31 December 2007, and the profitand loss account, statement of changesin equity and cash flow statement forthe year then ended, and a summary of significant accounting policies andother explanatory notes.

Statutory Body’sResponsibility for theFinancial StatementsThe Statutory Body is responsible forthe preparation and fair presentation ofthese financial statements in accordancewith accounting regulations applicablein the Czech Republic. This responsibilityincludes: designing, implementing andmaintaining internal control relevant tothe preparation and fair presentation offinancial statements that are free frommaterial misstatement, whether due tofraud or error; selecting and applying

Phone: +420 246 042 500Fax: +420 246 042 [email protected]

Deloitte Audit s.r.o.Karolinská 654/2186 00 Prague 8Czech Republic

Incorporated by the MunicipalCourt in Prague, in section C, insert no. 24349Company Registration Number (IČ): 49620592Tax identification Number (DIČ):CZ49620592

Auditor’s Report

Independent Auditor’s Report to the Shareholders of Factoring KB, a.s.Having its registered office at: Lucemburská 1170/7, Prague 3Identification number: 25148290Principal activities: Provision of factoring and forfaiting services

appropriate accounting policies; andmaking accounting estimates that arereasonable in the circumstances.

Auditor’s ResponsibilityOur responsibility is to express anopinion on these financial statementsbased on our audit. We conducted ouraudit in accordance with the Act onAuditors and International Standardson Auditing and the related applicationguidelines issued by the Chamber ofAuditors of the Czech Republic. Thosestandards require that we comply withethical requirements and plan andperform the audit to obtain reasonableassurance whether the financialstatements are free from materialmisstatement.

An audit involves performing proceduresto obtain audit evidence about theamounts and disclosures in thefinancial statements. The proceduresselected depend on the auditor’sjudgment, including the assessment ofthe risks of material misstatement ofthe financial statements, whether dueto fraud or error. In making those riskassessments, the auditor considers

internal control relevant to the entity’spreparation and fair presentation of thefinancial statements in order to designaudit procedures that are appropriate in the circumstances, but not for thepurpose of expressing an opinion on the effectiveness of the entity’sinternal control. An audit also includesevaluating the appropriateness ofaccounting policies used and thereasonableness of accounting estimatesmade by management, as well asevaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for ouraudit opinion.

OpinionIn our opinion, the financial statementsgive a true and fair view of the financialposition of Factoring KB, a.s. as of31 December 2007, and of its financialperformance and its cash flows for theyear then ended in accordance withaccounting regulations applicable in the Czech Republic.”

Report on the Financial Statements

Report on theAnnual ReportWe have also audited the annual report for consistency with thefinancial statements referred to above.This annual report is the responsibilityof the Company’s Statutory Body. Our responsibility is to express anopinion on the consistency of theannual report and the financialstatements based on our audit.

We conducted our audit in accordancewith International Standards onAuditing and the related applicationguidelines issued by the Chamber ofAuditors of the Czech Republic. Thosestandards require that the auditor plan and perform the audit to obtainreasonable assurance about whetherthe information included in the annualreport describing matters that are alsopresented in the financial statementsis, in all material respects, consistentwith the relevant financial statements.We believe that our audit providesa reasonable basis for our opinion.

In our opinion, the information includedin the annual report is consistent, in allmaterial respects, with the financialstatements referred to above.

In Prague on 20 June 2008

Audit firm:Deloitte Audit s.r.o.Certificate no. 79Represented by:

Diana Rogerová,authorised employee

23

Auditor’s Report

Report on theReport on Relationsamong RelatedEntitiesWe have also reviewed the factualaccuracy of the information included in the report on relations amongrelated entities of Factoring KB, a.s.for the year ended 31 December 2007which is included in this annual reporton pages 46 to 48. This report onrelations among related entities is the responsibility of the Company’sStatutory Body. Our responsibility is to express our view on the report onrelations among related entities basedon our review.

We conducted our review in accordancewith International Standard on ReviewEngagements (ISRE) 2400 and therelated application guidelines issued bythe Chamber of Auditors of the CzechRepublic. Those standards require thatwe plan and perform the review toobtain moderate assurance as to whetherthe report on relations among relatedentities is free of material factualmisstatements. A review is limitedprimarily to inquiries of Companypersonnel and analytical proceduresand examination, on a test basis, of thefactual accuracy of information, andthus provides less assurance than anaudit. We have not performed an auditof the report on relations amongrelated entities and, accordingly, we do not express an audit opinion.

Nothing has come to our attentionbased on our review that indicates that the information contained in thereport on relations among relatedentities of Factoring KB, a.s. for the year ended 31 December 2007contains material factual misstatements.

Statutory auditor:

Diana Rogerová, certificate no. 2045

24

Financial Section

Financial Section

25

Financial Section

Contents

26 Balance Sheet as of 31 December 2007

28 Profit and Loss Account for the year ended 31 December 2007

29 Cash Flow Statment for the year ended 31 December 2007

30 Statement of Changes in Equity as of 31 December 2007

31 Notes to the Financial Statements for the year ended 31 December 2007

46 Report on Relations among Related Entities for the year ended 31 December 2007

26

Balance Sheet as of 31 December 2007

CZK thousand 2007 2006

Gross Adjustment Net Net

ASSETS

Total assets 7,453,212 133,944 7,319,268 5,324,145

B. Fixed assets 1,418,901 54,741 1,364,160 18,030

B.I. Intangible fixed assets 44,230 34,730 9,500 8,472

B.I.3. Software 44,230 34,730 9,500 5,526

B.I.7. Intangible fixed assets under construction – – – 2 946

B.II. Tangible fixed assets 27,320 20,011 7,309 9,558

B.II.2. Structures – – – 592

B.II.3. Individual movable assets and sets of movable assets 26,523 20,011 6,512 7,816

B.II.6. Other tangible fixed assets 797 – 797 928

B.II.7. Tangible fixed assets under construction – – – 222

B.III. Non-current financial assets 1,347,351 – 1,347,351 –

B.III.3. Other securities and investments 1,347,351 – 1,347,351 –

C. Current assets 6,031,914 79,203 5,952,711 5,305,462

C.II. Long-term receivables 3,146 – 3,146 7,013

C.II.5. Long-term prepayments made 170 – 170 170

C.II.8. Deferred tax asset 2,976 – 2,976 6,843

C.III. Short-term receivables 6,024,386 79,203 5,945,183 5,230,597

C.III.1. Trade receivables 3,805,103 58,139 3,746,964 3,332,310

C.III.7. Short-term prepayments made 2,219,190 21,064 2,198,126 1,897,602

C.III.8. Estimated receivables 29 – 29 –

C.III.9. Other receivables 64 – 64 685

C.IV. Current financial assets 4,382 – 4,382 67,851

C.IV.1. Cash on hand 257 – 257 150

C.IV.2. Cash at bank 4,125 – 4,125 67,701

D. I. Other assets 2,397 – 2,397 653

D.I.1. Deferred expenses 2,397 – 2,397 653


27



LIABILITIES

Total liabilities & equity 7,319,268 5,324,145

A. Equity 1,364,790 188,900

A.I. Share capital 1,184,000 84,000

A.I.1. Share capital 1,184,000 84,000

A.II. Capital funds 55,246 6,000

A.II.1. Share premium 6,000 6,000

A.II.3. Gains or losses from the revaluation of assets and liabilities 49,246 0

A.III. Statutory funds 5,950 4,685

A.III.1. Statutory reserve fund/Indivisible fund 5,616 4,240

A.III.2. Statutory and other funds 334 445

A.IV. Retained earnings 92,067 66,694

A.IV.1. Accumulated profits brought forward 92,067 66,694

A.V. Profit or loss for the current period (+/-) 27,527 27,521

B. Liabilities 5,954,476 5,134,076

B.I. Reserves 1,224 1,287

B.I.4. Other reserves 1,224 1,287

B.III. Short-term liabilities 3,485,491 3,270,517

B.III.1. Trade payables 3,471,662 3,257,649

B.III.5. Payables to employees 1,113 1,028

B.III.6. Social security and health insurance payables 730 689

B.III.7. State – tax payables and subsidies 3,993 3,774

B.III.10. Estimated payables 1,325 1,659

B.III.11. Other payables 6,669 5,717

B.IV. Bank loans and borrowings 2,467,761 1,862,271

B.IV.2. Short-term bank loans 2,467,761 1,862,271

C. I. Other liabilities 3 1,169

C.I.1. Accrued expenses 3 1,169

28

Profit and Loss Account for the year ended 31 December 2007


+ Gross margin

II. Production 104,888 97,609

II.1. Sales of own products and services 104,888 97,609

B. Purchased consumables and services 45,276 38,105

B.1. Consumed material and energy 4,461 2,715

B.2. Services 40,815 35,390

+ Added value 59,612 59,504

C. Staff costs 32,344 30,337

C.1. Payroll costs 22,829 21,579

C.2. Remuneration to members of statutory bodies 426 468

C.3. Social security and health insurance costs 8,546 7,850

C.4. Social costs 543 440

D. Taxes and charges 32 33

E. Depreciation of intangible and tangible fixed assets 9,921 10,998

III. Sales of fixed assets and material 70 0

III.1. Sales of fixed assets 70 –

G. Change in reserves and provisions relating to operating activities and complex deferred expenses 3,637 5,039

IV. Other operating income 477,697 510,726

H. Other operating expenses 478,922 517,127

* Operating profit or loss 12,523 6,696

X. Interest income 125,269 88,793

N. Interest expenses 73,705 43,296

XI. Other financial income 99,944 68,734

O. Other financial expenses 120,601 85,322

* Financial profit or loss 30,907 28,909

Q. Income tax on ordinary activities 15,903 8,084

Q.1. – due 12,036 12,020

Q.2. – deferred 3,867 (3,936)

** Profit or loss from ordinary activities 27,527 27,521

*** Profit or loss for the current period (+/-) 27,527 27,521

**** Profit or loss before tax 43,430 35,605

Profit and Loss Account for the year ended 31 December 2007

29

Cash Flow Statment for the year ended 31 December 2007


P. Opening balance of cash and cash equivalents 67,851 61,120

Cash flows from ordinary activities

Z. Profit or loss from ordinary activities before tax 43,430 35,605

A.1. Adjustments for non-cash transactions (30,863) (12,483)

A.1.1. Depreciation of fixed assets 9,921 10,998

A.1.2. Change in provisions and reserves 3,637 5,039

A.1.3. Profit/(loss) on the sale of fixed assets (70) –

A.1.5. Interest expense and interest income (51,565) (45,497)

A.1.6. Adjustments for other non-cash transactions 7,213 16,977

A.* Net operating cash flow before changes in working capital 12,567 23,122

A.2. Change in working capital (511,849) (353,460)

A.2.1. Change in operating receivables and other assets (722,168) (906,258)

A.2.2. Change in operating payables and other liabilities 210,319 552,798

A.** Net cash flow from operations before tax and extraordinary items (499,283) (330,338)

A.3. Interest paid (73,705) (43,754)

A.4. Interest received 125,269 88,793

A.5. Income tax paid from ordinary operations (12,879) (14,307)

A.*** Net operating cash flows (460,597) (299,606)

Cash flows from investing activities

B.1. Fixed assets expenditures (1,307,549) (8,020)

B.1.1. Expenditures associated with the acquisition of Protos (1,298,105) –

B.1.2. Fixed assets expenditures (9,444) –

B.2. Proceeds from fixed assets sold 70 –

B.*** Net investment cash flows (1,307,479) (8,020)

Cash flow from financial activities

C.1. Change in payables from financing 605,490 314,961

C.2. Impact of changes in equity 1,099,117 (604)

C.2.1. Cash increase in share capital 1,100,000 –

C.2.5. Payments from capital funds (883) (604)

C.*** Net financial cash flows 1,704,607 314,357

F. Net increase or decrease in cash and cash equivalents (63,469) 6,731

R. Closing balance of cash and cash equivalents 4,382 67,851

Cash Flow Statment for the year ended 31 December 2007

30

Statement of Changes in Equity as of 31 December 2007

CZK thousand Share Capital Revaluation Statutory Accumulated Accumulated Profit or Total

capital funds gains or funds tprofits losses loss for Equity

losses on brought brought the current

securities forward forward period

Balance at 31 December 2005 84,000 6,000 – 3,906 50,033 – 18,044 161,983

Distribution of profit or loss – – – 1,383 16,661 – (18,044) –

Change in share capital – – – – – – – –

Dividends paid – – – – – – – –

Payments from capital funds – – – (604) – – – (604)

Profit or loss for the current period – – – – – – 27,521 27,521

Balance at 31 December 2006 84,000 6,000 – 4,685 66,694 – 27,521 188,900

Distribution of profit or loss – – – 2,148 25,373 – (27,521) –

Change in share capital 1,100,000 – – – – – – 1,100,000

Dividends paid – – – – – – – –

Profit/(loss) – – 49,246 – – – – 49,246

Payments from capital funds – – – (883) – – – (883)

Profit or loss for the current period – – – – – – 27,527 27,527

Balance at 31 December 2007 1,184,000 6,000 49,246 5,950 92,067 – 27,527 1,364,790

Statement of Changes in Equity as of 31 December 2007

31

Notes to the Financial Statements for the year ended 31 December 2007


CEO

Secretariat Human Resources

First Deputy CEO Deputy CEO CFO Client Risk Trade RiskDepartment Department

IT Customer Customer Sales and FinanceDepartment Services Services Marketing Department

– national – international Department

1. General Information

1.1. Incorporation and Description of the Business

Factoring KB, a.s. (hereinafter the “Company”) was formed as a joint stock company by a Memorandum of Association on 24 July 1997and was incorporated following its registration in the Register of Companies maintained at the Court in Prague on 4 August 1997.The Company’s financial statements have been prepared as of and for the year ended 31 December 2007.The reporting year is the calendar year. The following table shows individuals and legal entities with an equity interest greater than 20 percent and the amount of theirequity interest:

Shareholder Ownership percentage (%)

Komerční banka, a.s. 100

Total 100

The Company is primarily engaged in the provision of factoring and forfaiting services.

1.2. Changes in and Amendments to the Register of CompaniesIn the year ended 31 December 2007 a decision was made by the sole shareholder Komerční banka, a.s. acting in the capacity asthe General Meeting of the Company to change the register office to Lucemburská 1170/7, Prague 3 – Vinohrady.With a view to strengthening the capital of the Company, the sole shareholder, Komerční banka, a.s., decided to increase theshare capital of the Company by CZK 1,100,000 thousand from the original amount of CZK 84,000 thousand to the total of CZK 1,184,000 thousand. During 2007, a change in the composition of Supervisory Board was made in the Register of Companies maintained at theMunicipal Court in Prague.

1.3. Organisational Structure of the CompanyIn the year ended 31 December 2007 a Human Resources department was added to the organisational structure of the Company.

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1.4. Group Identification The Company is included in the Komerční banka, a.s. Financial Group.

1.5. Board of Directors and Supervisory Board

Position Name

Board of Directors Chairman Milan Corjak

Vice-Chairman Tomáš Kunst

Member Marcela Chalušová

Supervisory Board Chairwoman Jana Švábenská

Member Jana Hanibalová

Member Petr Kulhánek

There were no changes in the Company’s Board of Directors during the reporting period.During 2007, there was a change in the Company’s Supervisory Board.

Supervisory Board Original Member New Member Date of Change

Member Eva Březinová Jana Hanibalová 1 October 2007

The change was registered in the Register of Companies.

2. Basis of accounting and general accounting principles

The Company’s accounting books and records are maintained and the financial statements were prepared in accordance withAccounting Act 563/1991 Coll., as amended; Regulation 500/2002 Coll. which provides implementation guidance on certainprovisions of the Accounting Act for reporting entities that are businesses maintaining double-entry accounting records, asamended, and Czech Accounting Standards for Businesses, as amended. The accounting records are maintained in compliance with general accounting principles, specifically the historical cost valuationbasis, the accruals principle, the prudence concept and the going concern assumption.These financial statements are presented in thousands of Czech crowns (“CZK”), unless stated otherwise.

3. Summary of significant accounting policies

3.1.Tangible Fixed AssetsPurchased tangible fixed assets are stated at cost less accumulated depreciation. Tangible fixed assets include assets with an acquisition cost greater than CZK 40,000 on an individual basis and an estimateduseful life greater than one year. The cost of fixed asset improvements exceeding CZK 40,000 per asset for the period increases the acquisition cost of the relatedfixed asset.Depreciation is charged so as to write off the cost of tangible fixed assets over their estimated useful lives, using the straight linemethod, on the following basis:

Category of assets Depreciation period in years

Buildings 30

Machinery and equipment 3–12

Vehicles 4

Furniture and fixtures 6–12

Assets with an acquisition cost lower than CZK 40,000 on an individual basis and an estimated useful life greater than one yearare expensed in the period of acquisition.

33


Tangible fixed assets put in use as a bulk with the acquisition cost (invoiced amount) lower than CZK 200,000 are expensed in theperiod of acquisition.Tangible fixed assets put to use in a greater volume with the acquisition cost (invoiced amount) greater than CZK 200,000 areexpensed in the period of acquisition at 50 percent and at 50 percent in the following financial reporting period reported asaccrued expenses.The gain or loss arising from the sale or the disposal or retirement of an asset is determined as the difference between the salesproceeds and the carrying amount of the asset and is recognised through the profit and loss account.

3.2. Intangible Fixed AssetsPurchased intangible fixed assets are stated at cost less accumulated amortisation.Intangible fixed assets include assets with an acquisition cost greater than CZK 60,000 on an individual basis and an estimateduseful life greater than one year. The cost of fixed asset improvements exceeding CZK 40,000 per asset for the period increases the acquisition cost of the relatedfixed asset.Amortisation of intangible fixed assets is recorded on a straight line basis over their estimated useful lives as follows:

Number of years

Software 3

Assets with an acquisition cost lower than CZK 60,000 on an individual basis and an estimated useful life greater than one yearare expensed in the period of acquisition.Intangible fixed assets put in use as a bulk with the acquisition cost (invoiced amount) lower than CZK 200,000 are expensed inthe period of acquisition.Intangible fixed assets put to use in a greater volume with the acquisition cost (invoiced amount) greater than CZK 200,000 areexpensed in the period of acquisition at 50 percent and at 50 percent in the following financial reporting period reported asaccrued expenses.

3.3. Non-Current Financial AssetsNon-current financial assets are equity investments and securities available for sale .Securities and equity investments are stated at cost upon acquisition. The acquisition cost includes direct costs of acquisition,e.g. fees and commissions to brokers, consultants and stock exchanges.The available for sale portfolio and equity investments are stated at their fair value as of the date of the financial statements. The change in fair value of the available for sale portfolio and equity investments is recognised as gains or losses from the revaluation ofassets and liabilities in terms of equity.The Company’s fair value is the market value of the securities as of the date of the financial statements.

3.4. InventoryThe Company carries no inventory and has no warehouse in place. All overhead materials are expensed as purchased.

3.5. Receivables Upon origination, receivables are stated at their nominal value. The receivables are reported at carrying amounts as reduced byappropriate provisions for doubtful and bad amounts. Receivables acquired for consideration or through an investment are statedat cost.

3.6. Trade Payables Trade payables are stated at their nominal value.

3.7. LoansLoans are reported at nominal value. The portion of long-term loans maturing within one year from the balance sheet date isincluded in short-term loans.

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3.8. Accounting Treatment for Factoring TransactionsFactoring involves purchasing short-term receivables at nominal values that arose from supplies of goods or services to a numberof regular customers and are before their due dates. The factor makes a prepayment to the supplier (pre-funding) which canamount up to 90 percent of the nominal value of the receivable. Amounts due from purchased receivables and prepaymentsmade are reported as “Trade receivables” and “Short-term prepayments made” on the face of the Company’s balance sheet.Amounts payable arising from purchased receivables are presented within “Trade payables” on the face of the Company’sbalance sheet. Following payment by the customer, the remaining balance of the receivable is funded to the suppliers. The factor collects a fee in respect of the provision of the services. The fee reflects the costs involved in processing the cededreceivables and interest on the provided pre-funding which corresponds to the rates attached to short-term bank loans.Commissions and interest on pre-funding are reported within the profit and loss account lines “Sale of own products andservices” and “Interest income”, respectively. Products that represent the Company’s principal operations specifically include:

Domestic recourse factoring (relation between a supplier and customer in the Czech Republic); recourse means that unlessthe debt is recovered within 90 days after maturity, it is assigned back to the supplier; Domestic non-recourse factoring (with insurance) whereby the risk of a customer’s failure to settle a receivable is eliminatedby the compensation provided by an insurer; Export recourse factoring (relation between a supplier and customer abroad) with a recourse sanction; recourse means thatunless the debt is recovered within 90 days from maturity, it is assigned back to the supplier;Export factoring that is operated by two factors. In this respect, the Company is a member of an international association offactoring companies – FCI, where all potential risks are hedged by the factoring company on the territory of the country of thecustomer; Export factoring with insurance which includes an element of participation in the risk of the customer’s insolvency; Import factoring with insurance which enables the obtaining of a short-term customer loan for goods purchased from foreignsuppliers without the necessary collateralisation by banking instruments; andFunding of payables: Following the framework contract entered into with a customer, the payables of the customer todomestic suppliers are funded up to the amount of the insurance limit.

3.9. Provisioning and Reserving PoliciesProvisions are made based on the results of the inventory taking, to the extent that the valuation of assets does not correspondwith the actual balance. Reserves are intended to cover future obligations or expenditure, the nature of which is clearly definedand which are either likely to be incurred or certain to be incurred, but which are uncertain as to the amount or the date on whichthey will arise.In the year ended 31 December 2007, the Company recognised provisions against receivables (commissions, interest, receding,pre-funding) on the basis of count procedures as of 31 December 2007 by reference to the aging categories of individualreceivables and taking into account the risk profile and the estimated rate of collection. Reserves are intended to cover future obligations or expenditure, the nature of which is clearly defined and which are either likelyto be incurred or certain to be incurred, but which are uncertain as to the amount or the date on which they will be used.Reserves for outstanding vacation days are recognised on the basis of an analysis of outstanding vacation days as of the balancesheet date and the average payroll costs, including social security and health insurance costs according to individual employees.

3.10. Foreign Currency TranslationDuring the reporting period, transactions denominated in foreign currencies are translated using daily exchange rates asannounced by the Czech National Bank (CNB).At the balance sheet date, relevant assets and liabilities in foreign currencies are translated using the effective exchange rateannounced by the CNB as of that date. Any resulting foreign currency translation differences are recorded through the currentyear’s financial expenses or revenues as appropriate.

3.11. Finance LeasesThe Company has not entered into any finance lease agreements.

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3.12. Taxation3.12.1. Depreciation of Fixed Assets for Tax Purposes Depreciation of fixed assets is calculated using the straight-line method for tax purposes.

3.12.2. Current Tax PayableThe tax currently payable is based on taxable profit for the reporting period. Taxable profit differs from net profit as reported in theprofit and loss account because it excludes items of income or expense that are taxable or deductible in other periods and itfurther excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax ratesthat have been enacted by the balance sheet date.

3.12.3. Value Added TaxThe Company is registered as a VAT payer.

3.12.4. Deferred TaxDeferred tax is accounted for using the balance sheet liability method. Under the liability method, deferred tax is calculated at the income tax rate that is expected to apply in the period when the taxliability is settled or the asset realised.The balance sheet liability method focuses on temporary differences which are differences between the tax base of an asset orliability and its carrying amount in the balance sheet. The tax base of an asset or liability is the amount that will be deductible fortax purposes in the future.The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longerprobable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.Deferred tax is charged or credited to the profit and loss account, except when it relates to items charged or credited directly toequity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset and reported on an aggregate net basis in the balance sheet.

3.13. Use of Estimates The presentation of financial statements requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during thereporting period. Management of the Company believes that the estimates and assumptions used will not significantly differ fromthe actual results and outcomes in the following reporting periods.

3.14. Revenue Recognition The Company generates its revenues primarily from remuneration (commission) for each ceded receivable, and from interest onthe provided purchase price prepayments. Other revenues principally comprise charges for changes in contractual terms andconditions, applications for factoring services, and other fees.

3.15. Year-on-Year Changes in Valuation, Depreciation or Accounting PoliciesIn the year ended 31 December 2007, there were no year-on-year changes in valuation, depreciation or accounting policies.

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3.16. Cash Flow Statement The cash flow statement is prepared using the indirect method. Cash equivalents include current liquid assets easily convertibleinto cash in an amount agreed in advance. Cash and cash equivalents can be analysed as follows:


Cash on hand and cash in transit 47 32

Cash at bank 4,125 67,701

Cash and cash equivalents 210 118

Total cash and cash equivalents 4,382 67,851

Cash flows from operating, investment and financial activities presented in the cash flow statement are not offset.

3.17. Hedging against the Risk of Insolvency of the Business PartnerIn the case of recourse factoring, the business partner is required to sign a bill-of-exchange statement and a blank bill ofexchange.Potential risks attached to other products (refer to Note 3.8.) are covered by insurers or factoring firms in the customer’s country.

4. Additional information on the balance sheet and profit and loss account

4.1. Fixed Assets4.1.1. Intangible Fixed AssetsCost

CZK thousand 2006 Additions Disposals 2007

Software 33,852 10,474 96 44,230

Acquisition of assets 2,946 7,528 10,474 0

Total 36,798 18,002 10,570 44,230

Accumulated Amortisation


Software 28,326 6,500 96 34,730

Total 28,326 6,500 96 34,730

Net Book Value


Software 5,526 9,500

Acquisition of assets 2,946 0

Total 8,472 9,500

During the year ended 31 December 2007, the Company predominantly purchased software related to the factoring system. Amortisation of intangible fixed assets was CZK 6,500 thousand and CZK 7,218 thousand for the years ended 31 December 2007and 2006, respectively.The aggregate amount of directly expensed low value intangible assets was CZK 8 thousand and CZK 473 thousand for the yearsended 31 December 2007 and 2006, respectively.

37


4.1.2. Tangible Fixed AssetsCost


Buildings 780 0 780 0

Individual movable assets 29,052 2,139 4,668 26,523

– Machines and equipment 17,244 1,601 1,330 17,515

– Vehicles 7,717 0 0 7,717

– Furniture and fixtures 952 538 538 952

– Low value assets 3,139 0 2,800 339

Other assets 928 0 131 797

Acquisition of tangible fixed assets 222 1,917 2,139 0

Total 30,982 4,056 7,718 27,320

Accumulated Depreciation


Buildings 188 18 206 0

Individual movable assets 21,236 3,403 4,628 20,011

– Machines and equipment 13,335 1,501 1,329 13,507

– Vehicles 3,866 1,799 0 5,665

– Furniture and fixtures 896 103 499 500

– Low value assets 3,139 0 2,800 339

Other assets 0 0 0 0

Total 21,424 3,421 4,834 20,011

Net Book Value


Buildings 592 0

Individual movable assets 7,816 6,512

– Machines and equipment 3,909 4,008

– Vehicles 3,851 2,052

– Furniture and fixtures 56 452

– Low value assets 0 0

Other assets 928 797

Acquisition of tangible fixed assets 222 0

Total 9,558 7,309

During the year ended 31 December 2007, the Company predominantly purchased computers. Depreciation of tangible fixed assets was CZK 3,421 thousand and CZK 3,780 thousand for the years ended 31 December 2007and 2006, respectively.The aggregate amount of directly expensed low value tangible assets was CZK 2,222 thousand and CZK 524 thousand in theyears ended 31 December 2007 and 2006, respectively.

4.1.3. Assets Held under Finance and Operating LeasesThe Company has not entered into any finance or operating lease agreements.

4.1.4. Pledged Fixed AssetsThe Company has not pledged any fixed assets.

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4.1.5. Non-Current Financial Assets On the basis of a contract dated 29 August 2007 between the Company and Komerční banka, a.s. for transferring securities for a consideration, the Company bought non-current financial assets amounting to CZK 1,298,105 thousand. The non-currentfinancial assets are in the form of a collective registered share (in the certificate form) replacing 518 shares. The collectiveregistered share was issued by the closed investment fund Protos which is a subsidiary company of Komerční banka, a.s.

Cost

CZK thousand Cost Fair value

Balance at Additions Disposals Revaluation at Balance at

1 January 31 December 31 December

2007 2007 2007

Non-current securities and equity investments

available for sale – 1,298,105 – 49,246 1,347,351

Total – 1,298,105 – 49,246 1,347,351

4.2. Receivables 4.2.1. Long-Term ReceivablesThe Company reports long-term receivables of CZK 3,146 thousand which predominantly consist of a deferred tax asset of CZK 2,976 thousand and long-term prepayments made of CZK 170 thousand.

4.2.2. Short-Term Receivables


Short-term receivables

– Amounts due from purchased recourse receivables 3,481,287 3,246,267

– Commissions from purchased receivables 6,324 5,950

– Interest on pre-funding 24,068 14,802

– Re-ceding 43,276 41,866

– Amounts due from non-recourse pre-funding 26,300 31,440

– Amounts due from accession to debt 218,565 52,642

– Bills of exchange to be collected 834

– Other trade receivables 5,283 4,914

– Provisions against trade receivables (58,139) (66,405)

Total trade receivables 3,746,964 3,332,310

Short-term prepayments made

– Receivables from pre-funding 2,219,038 1,905,139

– Operating prepayments 152 1,561

– Provisions against prepayments made (21,064) (9,098)

Total prepayments made 2,198,126 1,897,602

Other short-term receivables 93 685

Total short-term receivables 5,945,183 5,230,597

Amounts due from purchased receivables represent nominal values of receivables purchased as part of the provision of factoringservices.

39


The schedule of the aging of accounts receivable does not present receivables from purchased recourse receivables where theCompany concurrently records an amount payable to the supplier (refer to Note 4.6.1.).

Aging of Accounts Receivable

CZK thousand Before due date Overdue Total Total

overdue

Year Category 0–90 91–180 181–360 1–2 2 years

days days days years and

greater

2007 Commissions 3,844 2,176 0 34 63 207 2,480 6,324

Provisions 5 0 0 31 63 207 301 306

Interest 20,655 1,784 181 273 168 1,007 3,413 24,068

Provisions 72 210 150 238 167 1,007 1,772 1,844

Re-ceding 6,844 8,857 1,180 3,603 7,308 15,484 36,432 43,276

Provisions 0 0 950 3,062 7,193 15,484 26,689 26,689

Non-recourse purchases 0 0 0 0 10,466 15,834 26,300 26,300

Provisions 0 0 0 0 9,044 15,834 24,878 24,878

Amounts due from the accession

to debt 207,193 7,984 0 3,388 0 0 11,372 218,565

Provisions 0 0 0 0 0 0 0 0

Other receivables 1,099 200 5 0 4 3,975 4,184 5,283

Provisions 0 0 0 0 4 3,975 3,979 3,979

2006 Commissions 4,294 1,386 – 63 171 36 1,656 5,950

Provisions – – – 63 171 36 270 270

Interest 13,156 359 55 160 422 650 1,646 14,802

Provisions 7 22 33 143 422 650 1,270 1,277

Re-ceding 10,075 4,418 3,626 7,277 14,335 2,135 31,791 41,866

Provisions 3,373 – 3,010 6,221 14,335 2,135 25,701 29,074

Non-recourse purchases – – 4,528 8,519 2,550 15,843 31,440 31,440

Provisions – – 4,528 7,746 2,550 15,843 30,667 30,667

Amounts due from the accession

to debt 51,672 970 – – – – 970 52,642

Provisions – – – – – – – –

Other receivables 777 105 5 6 3,838 183 4,137 4,914

Provisions – – – 3 3,838 – 3,841 3,841

The maturity of amounts due from pre-funding is established reflecting the specific factoring contract with the client. The averagematurity is 90 days. The average maturity for invoices issued in respect of commissions, interest and re-ceding is 30 days.The Company maintains no amounts due from related parties.

4.3. Financial Assets


Cash 47 32

Cash equivalents 210 118

Current accounts 4,125 67,701

Total current financial assets 4,382 67,851

40


4.4. Shareholder’s Equity4.4.1. Share CapitalThe registered share capital as of 1 January 2007 consisted of 400 shares with a nominal value of CZK 100,000 per share and4,400 ordinary shares with a nominal value of CZK 10,000. During the current year, the sole shareholder, Komerční banka, a.s.,decided to increase the share capital of the Company by CZK 1,100,000 thousand from the original amount of CZK 84,000 thousandto the total of CZK 1,184,000 thousand by means of subscribing for 1,100 new shares with a nominal value of CZK 1,000 thousandper share.The shares are registered, carry voting rights, are fully negotiable but not readily marketable.The share premium amount of CZK 6,000 thousand represents the difference between the issue and nominal values of the shares.

4.4.2. Gains or Losses from the Revaluation of assets and Liabilities

CZK thousand

Balance at 1 January 2007 0

Revaluation of securities available for sale 49,246

Balance at 31 December 2007 49,246

4.5. Reserves

CZK thousand Reserve for Reserve for Total

outstanding social security reserves

vacation days and health

insurance

Balance at 31 December 2006 931 356 1,287

Charge for reserves 927 297 1,224

Release of reserves 931 356 1,287

Balance at 31 December 2007 927 297 1,224

4.6. Payables4.6.1. Trade Payables


Short-term

– Suppliers 5,753 4,727

– Purchased receivables 3,465,909 3,252,922

Trade payables 3,471,662 3,257,649

– Other payables 6,669 5,717

Total 3,478,331 3,263,366

The payables to suppliers are before their due dates. The Company’s payables of CZK 3,465,909 thousand and CZK 3,252,922 thousand as of 31 December 2007 and 2006,respectively, which arose from the purchased receivables under the provision of factoring services, represent “recoursefactoring”, that is, unless the customer settles its debts within the recourse period of 90 days, the purchased debt is assignedback to the supplier. Other payables amount to CZK 6,669 thousand (CZK 5,717 thousand in 2006). The most significant item of“Other payables” are payments from costumers amounting to CZK 2,700 thousand credited to the accounts of the Companybefore the suppliers’ receivables were financed.Prepayments that take the form of pre-funding are made in respect of these payables.

41


4.6.2. Intercompany Payables The Company reported aggregate payables of CZK 2,206 thousand to Komerční banka, a.s. as of 31 December 2007, which arepresented within trade payables. These balances predominantly consist of fees for the use of Komerční banka’s distributionnetwork totalling CZK 1,372 thousand, financing of the tenth anniversary of the Company’s founding amounting toCZK 668 thousand, advisory services of CZK 93 thousand, contribution to the bonus for winners for the organisation of thecompetition totalling CZK 60 thousand, fees for safekeeping of securities totalling CZK 7 thousand and fees for rent and servicesof regional workplaces within KB’s network of CZK 6 thousand (2006: a total of CZK 1,582 thousand). The payable to Penzijní fondKB of CZK 24 thousand is recorded within payables arising from social security and health insurance.

4.7. Bank Loans2007

CZK thousand Purpose Balance at Interest Interest Form of

Bank/creditor 31 December 2007 expense rate collateral

Komerční banka, a.s. loan 0 23,689 under a specific contract None

Komerční banka, a.s. loan 1,989,570 21,741 PRIBOR ON ACTUAL+FV None

Komerční banka, a.s. loan 64,184 856 O/N LIBOR USD ACTUAL+FV None

Komerční banka, a.s. loan 352,284 5,838 O/N LIBOR EUR ACTUAL+FV None

Komerční banka, a.s. loan 1,825 2 LIBOR CHF ACTUAL+FV None

Komerční banka, a.s. loan 15,418 33 O/N LIBOR GBP ACTUAL+FV None

Komerční banka, a.s. loan 43,159 40 O/N BRIBOR SKK ACTUAL+FV None

Komerční banka, a.s. loan 1,321 2 O/N WIBOR PLN ACTUAL+FV None

Československá loan 0 8,588 PRIBOR+FV Guarantee of

obchodní banka, a. s. Komerční banka, a.s.

Česká spořitelna, a.s. loan 0 11,173 PRIBOR+FV Guarantee of

Komerční banka, a.s.

Raiffeisenbank a.s. loan 0 1,743 PRIBOR+FV Guarantee of


Total 2,467,761 73,705

Note: FV – fixed variance

2006

CZK thousand Purpose Balance at Interest Interest Form of

Bank/creditor 31 December 2006 expense rate collateral

Komerční banka, a.s. loan 485,375 12,577 under a specific contract None

Komerční banka, a.s. loan 2,369 131 O/N LIBOR+FV None

Komerční banka, a.s. loan 74,527 2,282 O/N EURIBOR+FV None

Československá loan 500,000 11,519 PRIBOR+FV Guarantee of

obchodní banka, a. s. Komerční banka, a.s.

Česká spořitelna, a.s. loan 700,000 16,441 PRIBOR+FV Guarantee of


Raiffeisenbank a.s. loan 100,000 346 PRIBOR+FV Guarantee of


Total 1,862,271 43,296

Note: FV – fixed variance

All of the bank loans are short-term.

42


4.8. Temporary Liabilities


Accrued expenses 3 1,169

Total temporary liabilities 3 1,169

In previous years, accrued expenses primarily included outstanding interest on bank loans which predominantly consisted of the outstanding interest on the loan provided by Československá obchodní banka, a. s. in the amount of CZK 642 thousand,outstanding interest from the loan provided by Česká spořitelna, a.s. in the amount of CZK 157 thousand and outstanding intereston the loan provided by Raiffeisenbank a.s. in the amount of CZK 128 thousand as of 31 December 2006. Accrued expenses in respect of Komerční banka, a.s. amounted to CZK 242 thousand as of 31 December 2006. During 2007 all bank loans providedby Československá obchodní banka, a. s., Česká spořitelna, a.s. and Raiffeisenbank a.s. were settled and the Company reports no outstanding bank loan interest. As of 31 December 2007, accrued expenses in respect of Komerční banka, a.s. amounted to CZK 3 thousand.

4.9. Income Tax on Ordinary and Extraordinary Activities


Income tax charge on ordinary activities 12,036 12,020

Deferred tax 3,867 (3,936)

Total 15,903 8,084

The charge for the year can be reconciled to the profit per the profit and loss account as follows:


Profit before tax 43,430 35,605

Tax at the domestic income tax rate for the relevant year 10,423 8,545

Tax effect of expenses that are not deductible in determining taxable profit 13,340 13,205

Tax effect of tax deductible expenses (11,667) (9,670)

Tax effect of tax allowances (60) (60)

Current changes in the deferred tax 3,867 (3,936)

Total income tax on ordinary and extraordinary activities 15,903 8,084

The effective tax rate was 36.6 percent and 22.7 percent as of 31 December 2007 and 2006, respectively.

4.9.1. Deferred TaxThe deferred tax asset/(liability) is analysed as follows:

Deferred Tax Arising from


Accumulated depreciation and amortisation of fixed assets 69 (56)

Receivables 2,645 6,585

Reserves 257 309

Other 5 5

Total 2,976 6,843

Analysis of movements

CZK thousand

1 January 2007 6,843

Current changes charged to the profit and loss account (385)

Effect on deferred tax balances due to the change in income tax rate (3,482)

31 December 2007 2,976

43


4.10. Details of Income by Principal Activity


In-country Cross-border Total In-country Cross-border Total

Commission 91,522 13,366 104,888 85,158 12,451 97,609

Interest on pre-funding 111,009 12,485 123,494 79,790 8,958 88,748

The Company principally generates its income from commissions collected in respect of each ceded receivable and interest onprepayments made to settle the purchase price. Interest on current account balances amounted to CZK 1,775 thousand and CZK 45 thousand for the years ended 31 December 2007 and 2006, respectively.

4.11. ServicesServices primarily include the following items:


Repairs and maintenance, travel and representation expenses 1,202 769

Rental 4,200 2,736

Telephone fees and postal charges 1,407 1,419

Software maintenance 2,379 1,706

Legal services 891 1,411

Commission paid to an import factor 1,444 1,575

Analysis of the risk of EGAP and ČESCOB insurance 4,170 3,522

Services of Komerční banka, a.s. 18,587 15,837

Other services 6,535 6,415

Total services 40,815 35,390

Details about services of Komerční banka, a.s. are provided in Note 4.15.

4.12. Change in Reserves and Provisions Relating to Operating Activities and Complex Deferred Expenses


Change in reserves 63 (68)

Change in statutory provisions against receivables (4,323) 3,287

Change in tax non-deductible provisions against receivables 623 (8,258)

Total (3,637) (5,039)

4.13. Other Operating Income and ExpensesFor the year ended 31 December 2007, the Company recorded other operating expenses of CZK 478,922 thousand (2006:517,127 thousand), which predominantly include the expense arising from the re-ceding of receivables of CZK 471,311 thousandand the write-off of receivables of CZK 6,373 thousand. Other operating expenses also include expenses amounting to CZK 1,215 thousand which predominantly include the write-off of rented asset improvements totalling CZK 744 thousand. As of 31 December 2007, the Company records other operating income of CZK 477,697 thousand (2006: CZK 510,726 thousand).Other operating income predominantly consists of income from the re-ceding of receivables of CZK 471,311 thousand, fees forchanges in contractual terms, applications for the provision of factoring services and entry and monitoring fees of CZK 5,783 thousand.

44


4.14. Financial Expenses and IncomeFinancial expenses primarily consist of the following items:


Interest on short-term loans 45,193 40,883

Interest on overdraft facilities 28,512 2,413

Total interest expense 73,705 43,296

Exchange rate losses 100,088 68,187

EGAP, ČESCOB and other insurance premiums 14,495 11,187

Banking expenses 3,130 3,080

Bank guarantee 1,970 2,331

Other charges 918 537

Total other financial expenses 120,601 85,322

Financial income primarily consists of the following items:


Interest on pre-funded purchased receivables 123,494 88,748

Interest on current and term accounts 1,775 45

Total interest income 125,269 88,793

Foreign exchange gains 99,944 68,734

Total other financial income 99,944 68,734

4.15. Related Party TransactionsFor the years ended 31 December 2007 and 2006, the Company generated financial income of CZK 1,775 thousand andCZK 43 thousand, respectively, from transactions with Komerční banka, a.s.The services that Komerční banka, a.s. provided to the Company in the year ended 31 December 2007 principally include:


Advisory and consulting services 315 310

Use of the trademark 2,941 2,941

Fee for the use of Komerční banka’s distribution network 14,268 12,315

Expenses on promotion and advertising of the Komerční banka, a.s. Group 835 25

Financial expenses 57,323 20,406

Other services of Komerční banka, a.s. 262 280

Financial expenses principally consist of interest on granted short-term loans of CZK 52,201 thousand (2006: CZK 14,990 thousand),banking fees of CZK 3,117 thousand (2006: CZK 3,061 thousand), and the fee for a bank guarantee of CZK 1,970 thousand (2006:CZK 2,331 thousand) and other services of Komerční banka, a.s. of CZK 35 thousand (2006: CZK 24 thousand). The increase in interest on granted loans is caused by the transfer of all loans to Komerční banka, a.s. during 2007. A detailedschedule of loans is presented in Note 4.7.In the year ended 31 December 2007, the Company substantially increased the volume of transactions conducted throughKomerční banka’s distribution network which led to a year-on-year increase in the related fees of CZK 1,953 thousand. In the year ended 31 December 2007, the Company effected no sale or purchase of fixed assets in relation to Komerční banka, a.s.During 2007, Komerční banka, a.s. provided guarantees for loans granted to the Company by Česká spořitelna, a.s.,Československá obchodní banka, a. s. and RaiffeisenBank a.s. in the total amount of CZK 1,700 million (2006: CZK 1,300 million). As of 31 December 2007, the amount of the provided guarantees was CZK 0. On the basis of a contract dated 29 August 2007 between the Company and Komerční banka, a.s. for transferring securities fora consideration, the Company bought non-current financial assets amounting to CZK 1,298,105 thousand (refer to Note 4.1.5.). The Company reports expenses of CZK 3,505 thousand related to Penzijní fond Komerční banky, a.s. according to the leasecontract entered into in 2007 and the Company’s contribution to the employees’ retirement funds also with Penzijní fondKomerční banky, a.s. totalling CZK 270 thousand (2006: CZK 261 thousand).

45


5. Employees, Management and Statutory Bodies

5.1. Staff Costs and Number of EmployeesThe following tables summarise the average number of the Company’s employees and managers and staff costs (exclusive ofbonuses paid to the members of the statutory bodies) for the years ended 31 December 2007 and 2006:

2007

CZK thousand Number Payroll Social Other Total

costs security costs staff

and health costs

insurance

Staff 38 16,064 6,234 503 22,801

Management 3 6,765 2,312 40 9,117

Total 41 22,829 8,546 543 31,918

2006

CZK thousand Number Payroll Social Other Total

costs security costs staff

and health costs

insurance

Staff 35 15,572 5,689 405 21,666

Management 3 6,007 2,161 35 8,203

Total 38 21,579 7,850 440 29,869

The number of employees is based on the average recalculated headcount. The category of ‘management’ includes theCompany’s CEO and Deputy CEOs.

5.2. Loans, Borrowings, and Other Benefits ProvidedDuring the years ended 31 December 2007 and 2006, the members of the Company’s Board of Directors and Supervisory Boardreceived bonuses of CZK 426 thousand and CZK 468 thousand, respectively, in addition to their basic salaries. In addition,members of the Board of Directors are entitled to use a car pursuant to their contracts entered into with the Company.

6. Contingent Liabilities and off Balance Sheet Commitments

As of 31 December 2007 and 2006, the Company had contingencies arising from import factoring of CZK 8,076 thousand andCZK 24,893 thousand, respectively. The Company also maintains not fully utilised commitment credits of CZK 4,796,189 thousand and CZK 3,445,472 thousand as of31 December 2007 and 2006, respectively.

7. Legal disputes

As of 31 December 2007, the Company acted as a plaintiff in court cases brought against its debtors with a view to recoveringreceivables in the aggregate amount of approximately CZK 148 million which arose from factoring transactions. The Company hasrecognised provisions against these receivables pursuant to applicable legislation and its internal guidance (refer to Notes 3.9. and 4.2.).The Company is involved in no legal disputes where it would be named as the defendant.

8. Significant Post Balance Sheet Events

No significant events occurred subsequent to the balance sheet.

46

Report on Relations among Related Entities

(hereinafter the “Report on Relations”)

Factoring KB, a.s., with its registered office at Lucemburská 1170/7, Corporate ID 25148290, incorporated in the Register ofCompanies maintained at the Municipal Court in Prague, Section B, File 4861, (hereinafter referred to as “Factoring KB” or the“Company”), is part of a business group (holding company) in which the following relations between Factoring KB and itscontrolling entity and further between Factoring KB and other entities controlled by the same controlling entity (hereinafterreferred to as “related entities”) exist. This report on relations between the entities stated below was prepared in accordance with the provision of Section 66a (9) of ActNo. 513/1991 Coll., as amended (the Commercial Code) for the year ended 31 December 2007, that is, from 1 January 2007 to 31 December 2007 (hereinafter referred to as the “reporting period”).

I. Introduction

In the period from 1 January 2007 to 31 December 2007, Factoring KB, a.s. was a member of the Société Générale S.A. Group,with its registered office at 29, BLD Haussmann, 75009 Paris, France, registration number in the French Register of Companies:R.C.S. Paris B552120222 (1955 B 12022) (hereinafter referred to as “SG” or “SG Paris”).In the reporting period, the Factoring KB entered into arrangements with the following related entities:

Entity Registered office Share of SG in the voting rights of the company

Komerční banka, a.s. Na Příkopě 33/ 969, 114 07 Prague 1 60.35%

Penzijní fond Komerční banky, a.s. Lucemburská 1170/7, 130 11 Prague 3 100 %

Modrá pyramida stavební spořitelna, a.s. Bělehradská 128/222, 120 21 Prague 2 100 %

II. Arrangements with Related Entities

A. Contracts and Agreements with the Controlling Entity and Other Related Entities I. Contracts and Agreements Entered into during the Reporting Period

Type of agreement (or its subject matter Contractual party Performance Counter- Damage incurred

– unless referred to in the title) -performance by the Company

Amendments to the Framework contract Komerční banka, a.s. Interest and fees Provision of None

for the provision of financial services according to the price list financial services

Framework contract for the provision Komerční banka, a.s. Interest and fees Provision of None

of financial services according to the price list financial services

Amendments to the contract for the opening Komerční banka, a.s. Interest and fees Account None

and maintenance of a current account in CZK according to the price list maintenance


and maintenance of a current account in USD according to the price list maintenance


and maintenance of a current account in EUR according to the price list maintenance


and maintenance of a current account in CHF according to the price list maintenance


and maintenance of a current account in GBP according to the price list maintenance

Report on Relations among Related Entities for the year ended 31 December 2007

47





and maintenance of a current account in SKK according to the price list maintenance


and maintenance of a current account in PLN according to the price list maintenance

Contracts for the opening and maintenance Komerční banka, a.s. Contractual fees Account None

of a current account in CZK maintenance

Contract for the sale of securities Komerční banka, a.s. Purchase price Transfer of shares of Protos, None

uzavřený investiční fond, a.s.

Contract for the custody of securities Komerční banka, a.s. Contractual fees Custody of None

including the completion certificate securities

Agreement of shareholders regarding Komerční banka, a.s. New shares have not None None

the participation scope on the increase of share been subscribed

capital of Protos, uzavřený investiční fond, a.s.

Amendment to the contract for the provision Komerční banka, a.s. Fees according Provision of direct None

of direct banking to the price list banking services

Contract for cooperation for a contest Komerční banka, a.s. Contractual fee Organisation and None

performance of the contest

Agreements regarding the provision Komerční banka, a.s. Contractual fee Provision of a smart None

of a smart card scanner card scanner

Contract for cooperation Komerční banka, a. s. Provision of services Provision of “Banking None

pursuant to the contract services” to FKB employees

Contract for the rent of non-residential premises, Penzijní fond Contractual fee Provision of None

movable assets and the payment for services Komerční banky, a.s. non-residential premises

relating to their use, including an amendment thereto and parking lots

II. Performance Received and Provided during the Reporting Period under Contracts Entered into in Prior Reporting Periods



Framework contract for the provision of Komerční banka, a.s. Interest and fees Provision of financial None

financial services, including amendments according to the price list services

Contracts for the opening and maintenance of Komerční banka, a.s. Contractual fees Account None

a current account in CZK with Komerční maintenance

banka, a.s., including amendments thereto

Contract for the opening and maintenance of Komerční banka, a.s. Contractual fees Account None

a current account in USD with Komerční maintenance

banka, a.s., including an amendment thereto


a current account in EUR with Komerční maintenance



a current account in CHF with Komerční maintenance



a current account in GBP with Komerční maintenance



a current account in SKK with Komerční maintenance



a current account in PLN with Komerční banka, a.s. maintenance

Contracts for the use of the safety deposit box Komerční banka, a.s. Fees according to Provision of the safety None

the price list deposit box

Contract for the use of direct banking, Komerční banka, a.s. Fees according Provision of direct None

including an amendment thereto to the price list banking services

48




Contracts for the issuance and the use Komerční banka, a.s. Fees according Issuance and provision None

of payment cards to the price list of payment cards

Contracts for the lease of non-residential Komerční banka, a.s. Contractual fees Provision of None

premises, movable assets and payment for non-residential premises

the services relating to their use and movable assets

Subcontract for advisory services, including Komerční banka, a.s. Contractual fees Risk management None

an amendment thereto advisory

Data processing contract Komerční banka, a.s. Contractual fees Processing of client None

information

Framework contract for cooperation Komerční banka, a.s. Contractual fees Provision of efficient None

cooperation

Subcontract for cooperation Komerční banka, a.s. Fees according Provision of banking None

to the price list information

Licence Agreement Komerční banka, a.s. Contractual fees Provision of trademark None

Distribution contract, including Komerční banka, a.s. Contractual fees Mediation of the sale None

amendments thereto of products

Agreement on the determining Komerční banka, a.s. Contractual price Individual prices for None

of individual prices services charged on

client current accounts

Contract for the insurance payment Komerční banka, a.s. Insurance payment Taking out insurance of None

to the insurer the Company’s risks

Contract for the provision of advantageous Modrá pyramida Provision of Provision of None

conditions for the employees of Factoring KB, a.s. stavební advantageous advantageous

– participants of MPSS’s building savings scheme spořitelna, a.s. conditions conditions

B. Other Legal Acts Implemented by the Company in the Interest of the Controlling Entity and Other Related EntitiesBased on a decision of the sole shareholder on 15 May 2007 regarding the increase in the Company’s share capital Komerčníbanka, a.s. contributed CZK 1,100,000 thousand to the Company’s share capital. Due to the increase in the Company’s sharecapital, the Company concluded a contract for the subscription of shares with Komerční banka, a.s. on 8 June 2007. The Companysuffered no detriment as a result of the decision of the sole shareholder regarding the increase of the Company’s share capital oras a result of signing the above-mentioned contract for the subscription of shares.

C. Measures Taken or Implemented by the Company in the Interest of or at the Initiative of the ControllingEntity and Other Related Entities

During the reporting period, Factoring KB did not take or implement any measures that would be in the interest of or at theinitiative of the related entities.

III. Conclusion

The Board of Directors of Factoring KB has reviewed all arrangements put in place between Factoring KB and the related entitiesduring the reporting period and states that the Company incurred no damage as a result of any contracts, agreements, any otherlegal acts or any other measures taken or implemented by Factoring KB in the reporting period.

In Prague on 4 February 2008

For and on behalf of

Milan Corjak Tomáš Kunst Marcela ChalušováChairman of the Board of Directors Vice-Chairman of the Board of Directors Member of the Board of Directors

Factoring KB, a.s.Lucemburská 7/1170130 00 Prague 3tel.: +420 222 825 111fax: +420 224 814 628e-mail: [email protected]: www.factoringkb.cz

Consulting, design and production: © B.I.G. Prague, 2008

factoring kb, a.s. annual report 2007 · factoring kb, a.s. is the fourth largest factoring company...

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