ge money bank · 2006. 6. 5. · ge money bank ge money bank, a.s. –annual report 2005 bb centrum...
TRANSCRIPT
GE
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GE Money Bank, a.s.BB CentrumVyskočilova 1422/1a140 28 Praha 4-MichleTel.: +420 224 443 636, 224 443 632Fax: +420 224 441 500Information line: 844 844 844
Please visit our web pageswww.gemoney.cz
GE Money BankAnnual Report 2005
Content:
1 Opening word– Opening word
– Financial results of GE Money Bank, a.s., in 2005
5 Basics data about the bank– Description of GE Money Bank, a.s.
– The Bank’s Shareholders
– Overview of the Bank’s Operations
11 Information on bank management– Supervisory Board, Board of Directors and Management of the Bank
– Members of the Supervisory Board
– Members of the Bank’s management
17 Board of Directors’ Report– Board of Directors’ Report on Operations and Assets
– Economic results of GE Money Bank, a.s.
21 Sophisticated Economic Indices of the Bank– Basic Economic Data of GE Money Bank, a.s.
25 Forecast for 2006
27 Auditor’s report to the shareholders of Bank– Supervisory Board Report
– Auditor’s report
31 Charity and sponzoring
35 Report on Relations between Related Parties
43 Financial Statements– Assets
– Liabilities
– Off-balance sheet items
– Profit and loss account
– Summary of changes in equity
49 Notes to the financial statements
ANNUAL REPORT GE MONEY BANK 1
Opening word
2005 was successful not only for GE Money Bank, a.s. but also for itscustomers and partners, as well as for the General Electric (GE) Groupas a whole. GE, one of the largest global companies based on marketcapitalization, of which GE Money Bank, a.s. is a key part, generated a net profit after taxes of USD 16.3 billion in 2005. The profit of the financial division, GE Money (GE Consumer Finance), which representsone of the six GE divisions, was more than USD 3 billion in 2005. GEMoney provides financial products including credit cards, consumerloans, sales – finance loans, leasing and mortgages to more than 120million customers in 51 countries all over the world. Total GE Moneyassets at the year end reached USD 158.8 billion. The GE Annual report 2005 is available at www.ge.com.
GE Money Czech Republic and Slovakia is one of the most importantGE businesses in Central and Eastern Europe. In the Czech Republic,GE Money (GE Consumer Finance) is represented by GE Money Bank,a.s. together with GE Money Multiservis, a.s. and GE Money Auto, a.s.In 2005 GE Money Bank, a.s. continued its dynamic growth particularly in relation to its lending products linked to the new brand.GE Money Bank, a.s. has maintained a very clear-cut profile since thevery beginning – to retail and corporate clients we want to providequick, easy, and affordable products and services that can be flexiblyadjusted to their needs.
In 2005 GE Money Bank, a.s. introduced a number of new productsand services – flexible Konto Genius and Genius Student accounts,Hypotéka naopak (Reverse Mortgage - a mortgage loan approved
before selecting a property), and Expres Business, a fast and flexibleloan for small and medium-sized enterprises (SME). Since the spring of 2005, GE Money Bank, a.s. has been the only European bankthrough whose ATMs clients can apply for credit (thanks to the uniqueInfolimit service), and since November 2005 GE Money Bank’s clientshave had access to fully-fledged electronic account statements.
As at 31 December 2005 the volume of provided Expres Loans totalled CZK 17.2 billion, which represents an increase of 29% in comparison with the total volume of CZK 13.3 billion at the end of 2004.
The volume of granted mortgage loans grew at an even faster rate;primarily due to interest rates, which hit a record low. GE Money Bank,a.s. guarantees its interest rates to all clients who meet the scoring requirements; thanks to this approach, clients know from the startwhat interest rate the bank will offer for a particular type and amountof mortgage loan and the period for which the rate will be fixed.Moreover, in 2005 the bank significantly simplified and acceleratedthe mortgage loan approval process. At the end of 2005 the volumeof mortgage loans totalled CZK 10.4 billion, which represents growthof 38.2% in comparison with the end of 2004 (CZK 7.56 billion).
The popularity of loans for small and medium-sized enterprises alsosurged last year. At the beginning of 2005 the newly re-branded GEMoney Bank, a.s. presented its new lending products for small andmedium-sized enterprises. These included the Expres Business loan,
OPENING WORD
ANNUAL REPORT GE MONEY BANK2
Dear customers, shareholders, colleagues,
Last year was a year of change for GE Money Czech
Republic. As of 17 January, 2005 all GE Capital businesses
operating in the Czech market were re-branded to GE
Money, including GE Money Bank, a.s. The new brand was
successfully established on the market through the launch
of new products and services. As a result, loans to
customers increased to CZK 47.9 billion (an increase of
28.8%), the net profit reached CZK 2,673 billion
(an increase of 19.2%) while the capital adequacy remains
stable at 23.41%. The number of customers grew to
806 708 (an increase of 7.8%) and the number of current
accounts increased by 2.6% to 948 306.
OPENING WORD
ANNUAL REPORT GE MONEY BANK 3
whereby business clients can now obtain an any-purpose loan of upto CZK 0.5 million: the business client needs only to provide his income tax return and the bank will communicate a provisional decision on the loan within a few minutes of filing the application. Thebank also introduced its new Operative Business any-purpose loan bymeans of which business clients can obtain any amount from CZK300,000 to 5 million. As at 31 December 2005 the overall portfolio of loans to this customer segment amounted to CZK 17.36 billion. Incomparison with the portfolio at the end of 2004 (CZK 14 billion) thisrepresents an increase of 24%.
In respect of deposit products, client demand focused on the newKonto Genius account, whose key competitive advantage is its flexibility and low charges. With a Konto Genius account, the clientcan select more products and services at his own discretion in addition to a current account, and can add, remove, or change themas required. By the end of 2005, one-half of current accounts hadbeen opened as part of a Konto Genius package.
At the end of 2005 GE Money Bank, a.s. had 224,000 registered usersof its Internet Banka, i.e. 20% more than at the end of 2004.Transactions entered via Internet Banka accounted for 23% of alltransactions. Overall, direct banking accounts for 77% of all transactions.
In 2005 GE Money Bank, a.s. increased the number of its branches to201 (up by 9 branches year on year), while the number of its ATMsrose to 390, up by 28 year on year.
GE Money Bank, a.s. emphasizes recruitment of the best people onthe market, their professional development and an enhanced motivation system for existing employees. We invest heavily in training and development opportunities, coaching, comprehensivefeedback and internal traineeships in other departments or abroad.GE Money Bank, a.s. also strengthened its employee benefits. We arewell aware that only good and motivated employees are able to deliver the results expected by our clients and shareholders.
Our strategy remains unchanged. A team of excellent employees,product innovation and simplification and improvement of our processes through digital technology are the key building blocks forour success. Fast, simple and accessible services and processesmake GE Money Bank, a.s. a bank which is growing, profitable and secure.
Thank you for your support and I am looking forward to another successful year in 2006.
The best things are only ahead of us.
Gerard Ryan,Chairman and CEOGE Money Bank, a.s.
OPENING WORD
ANNUAL REPORT GE MONEY BANK4
Financial results of GE Money Bank, a.s. in 2005
Year-on-year change
Year-on-year change
Year-on-year change
Year-on-year change
Year-on-year change
Number of clients
Number of deposit accounts
Number of payment cards
Number of branches
Number of ATMs
Expres loan volume(billions of CZK)
Mortgage volume(billions of CZK)
Loans for SME volume
(billions of CZK)
Year-on-year change
Year-on-year change
Year-on-year change
Basic data about the bank
ANNUAL REPORT GE MONEY BANK 5
BASIC DATA ABOUT THE BANK
ANNUAL REPORT GE MONEY BANK6
Description of GE Money Bank, a.s. as at 31.12. 2005
Business name: GE Money Bank, a. s.
Registered office: Vyskočilova 1422/1a, Prague 4-Michle
Registration No: 25 67 27 20
Legal form: joint-stock company
Date of incorporation: 9 June, 1998
Date of last change: 26. 7. 2005 (reason: changes in the representation on behalf
of GE Money Bank, a.s.)
Registered Capital: CZK 510,000,000
Status: 100% paid up
Type, form, and nominal value of issued shares:
510 registered common stock shares in documentary form, each with a nominal value of CZK 1,000,000
Own shares held, interim documents and other securities with the right to be exchangedfor own shares:GE Money Bank, a.s. does not hold any own shares or similar securities.
Increase in registered capital:
On 25 March 2003 the registered capital was increased by CZK 10,000,000.
BASIC DATA ABOUT THE BANK
ANNUAL REPORT GE MONEY BANK 7
Supervisory Board Position Since
James Desmond O’Shea Chairman 22. 10. 2004
Suzan Elizabeth Crichton Member 22. 6. 2004
Pavel Zídek Member elected by employees 29. 11. 2005
Board of Directors Position Since
Gerard Ryan Chairman 03. 12. 2002
Christoph Glaser Member 05. 05. 2005
Miroslav Červenka Member 28. 11. 2002
Jan Rollo Member 29. 10. 2003
Number of staff, recalculated (as at 31. 12. 2005):
Centre 949 employees
Points of sale 1079 employees
Total 2028 employees
Number of points of sale of the Bank, including booths (as at 31. 12. 2005) – 201
BASIC DATA ABOUT THE BANK
ANNUAL REPORT GE MONEY BANK8
The Bank’s Shareholders
GE Capital International Holdings Corporation
Corporation Trust, 1209 Orange Street, Wilmington, Delaware, the United States of America
100% stake in the voting rights
100% direct stake in the registered capital of the Bank
Subject of business:
foundation of subsidiaries with registered offices outside the United States of America, exercising of rights related to the respective ownership interests and provision of funds to the founded companies through loans or otherwise.
BASIC DATA ABOUT THE BANK
ANNUAL REPORT GE MONEY BANK 9
Overview of the Bank’s Operations
The following activities may be carried out according to the licence to operate as a bank:
1. accepting deposits from the public;2. providing loans; 3. investments in securities on own account; 4. financial leasing;5. clearing and settlement; 6. issuing payment instruments such as payment cards, traveller’s cheques; 7. issuing guarantees;8. opening letters of credit; 9. administering collections;
10. trading on own account or on clients’ account:with foreign exchange (on own account without limitation, on clients’ account with the exception of foreign securities and currency derivatives);with futures and options including currency and interest deals (on own account with the exception of the purchase and sale of derivatives on own account for another person)with transferable securities (trading on own account with the exception of the purchase and sale of securities on own account for another person);
11. financial brokering; 12. consultancy on business matters; 13. services as a depository; 14. exchange operations (purchase of FX);15. provision of banking information;16. lease of safety boxes;
Overview of basic operations and services carried out by the Bank:
Business in crowns:1. opening and maintaining current, term and savings accounts denominated in Czech crowns and related services;2. cheque administration;3. passbooks;4. local letters of credit and collections;5. credit and commercial services (commercial, consumer, mortgage loans); 6. bill administration; 7. bank guarantees;8. purchase of receivables.
FX business:1. opening and maintenance of FX current and term accounts;2. exchange operations;3. foreign letters of credit and collections;4. clean payments;5. cheque services;6. bank guarantees;7. bill administration;8. providing loans;9. factoring, forfeiting
Other products and services:1. card services (by card types); 2. information and consultancy services;3. providing banking information;4. exchange of banknotes and coins.
ANNUAL REPORT GE MONEY BANK10
Information on bankmanagement
ANNUAL REPORT GE MONEY BANK 11
INFORMATION ON BANK MANAGEMENT
ANNUAL REPORT GE MONEY BANK12
Supervisory Board, Board of Directors andManagement of the BankSupervisory Board
James Desmond O’Shea Susan Elizabeth Crichton Pavel ZídekChairman Member Member elected by the employeesHeld since: 22. 10. 2004 Held since: 22. 6. 2004 Held since: 29. 11. 2005
Board of Directors
Gerard Ryan Christoph Glaser Miroslav ČervenkaChairman Member Member Held since: 3. 12. 2002 Held since: 5. 5. 2005 Held since: 28. 11. 2002
Jan RolloMember Held since: 29. 10. 2003
Division Division Director Position Held since
HR Niamh Hegarty Chief Human Resources Officer 1. 7.2005
Risk Management Pavel Vyhnálek Chief Risk Officer 1. 7. 2002
Legal Tomáš Černý Chief Legal Counsel 1. 4. 2005
Retail Banking Jan Rollo Chief Retail Banking Officer 1. 11. 2003
Commercial Banking Radomil Štumpa Chief Commercial Banking Officer 1. 11. 2003
Marketing Erich Čomor Chief Marketing Officer 14. 6. 2004
Customer Relationship Management David Bytsrzycki Chief Customer Relationship Management Officer 1. 5. 2004
Information Systems Pavel Zídek, temporarily appointed Chief Information Technology Officer
Quality Eduard Česnek, temporarily appointed Chief Quality Officer
Finance Christoph Glaser Chief Financial Officer 1. 12. 2004
Operations Jonas Hasselrot Chief Operating Officer 1. 5. 2003
Compliance Petr Karel Chief Compliance Officer 1. 7. 2002
Internal Audit Jana Pěchoučková Internal Audit Manager 22. 11. 2004
Third Party Products Division Not appointed
INFORMATION ON BANK MANAGEMENT
ANNUAL REPORT GE MONEY BANK 13
James Desmond O’Sheagraduated from the Irish University College in Cork in 1977 and received his doctorate there. After his studies, he began working at Arthur Andersen & Co and in 2000, he qualified as an authorizedaccountant.In 1981, he began working with Ulster Investment Bank Limited, a subsidiary of Natwest Bank. He held various positions in corporate banking, temporary financing and in international structural financing. He was appointed Director in 1988. In 1991, he joined Cambridge Finance and in 1992, he moved toWoodchester Investments where he held several positions in riskmanagement. The company became part of GE Consumer Financein 1998 and Des O’Shea was appointed as Risk ManagementDirector for GECF Europe. In 2001, he moved to his present positionas growth and business development manager in GECF Europe. Hewas appointed as a member of the Supervisory Board of GE MoneyBank, a.s. in 2003 and became the Chairman of the Board one yearlater.
Pavel Zídekgraduated from ČVUT in Prague and worked for several years withvarious companies as information technology manager. In 1991, hejoined Agrobanka, where he held various positions in the ITDepartment. Following the bank’s acquisition by GE, he becameSenior IT Manager and later a member of the Supervisory Board,elected by the Bank’s employees (in 2001 and also in 2005).
Susan Elizabeth Crichtonstudied LCB (Language and Culture for Business Program) atBirmingham University. She started her carrier in 1979 with theForward Trust Group, where she worked for the legal departmentuntil 1987. In 1987, she was appointed to the position of EuropeanLegal Counsel at Avco Trust Ltd. She joined GE Consumer Finance inthe United Kingdom in 1999; her first role was Senior Legal Advisorand since 2001, she has been the General Counsel for the entire GEConsumer Finance Europe. In 2004, she became a member of theSupervisory Board of GE Money Bank, a.s.
Members of the Supervisory Board
Gerard Ryangraduated from university in Ireland. After hisstudies, he began working with an Irish consultancy firm. He gained experience whileworking for several international companies inIreland and in Great Britain, where he held various positions, mostly focusing on finance.From 1992, he worked with WoodchesterCredit Lyonnais Plc, acquired in 1998 by GE.
Within the GE Group, he has worked as Finance Director andBusiness Development Manager. He joined GE Money Bank, a.s. in 2002 as its Chief General Officer and Chairman of the Board ofDirectors.
Christoph Glaserjoined GE in 1997 on a European ManagementDevelopment Program. From 1999, he wasExecutive Audit Manager at GE CorporateAudit ultimately specializing in businesses within the financial division of GE ConsumerFinance. Since December 2004, he has beenthe Financial Director of GE Money Bank, a.s.and since 2005 he has also been a member ofthe Board of Directors.
Pavel Vyhnálekgraduated from the Mendel University in Brno.From 1992, he worked for Československá obchodní banka. Among other positions, heworked as a credit officer responsible for largecorporate companies, a branch director, andmortgage banking director; he was involved inthe privatization of ČSOB and in the integration of IPB into ČSOB. Ultimately he
was responsible for risk solutions in retail loans and mortgage loans across the whole ČSOB group in the CR and the SR. He wasengaged in acquiring the mortgage license for ČSOB in the SR andhe was the Chairman of the ČMHB Supervisory Board. In 2002, he joined GE Money Bank, a.s. as its Chief Risk Officer
Jonas Hasselrotpreviously worked as a manager in theAmerican Express Travel Centre in Stockholm.He managed more than 100 travel representa-tives and was responsible for the economic results of the Centre which has a 40% marketshare in Scandinavia. Later, he worked asCustomer Service Director of the company forBenelux and for Scandinavia where he was
responsible for a number of processes in the areas of customer services, cross-selling of new products to existing customers, appro-val of loans and collection of overdue payments. Since 1 May, 2003, he has been the Chief Operations Officer of GE Money Bank, a.s.
Jan Rollograduated from ČVUT in Prague. From 1989,he worked as a specialist in the IT Departmentat Swissair in Switzerland. He was subsequently project manager of the PHAREProgram at the European Union Delegation inPrague. He has worked in the banking industry since 1994, first with Bank Austriawhere he was responsible for relations with
key customers, marketing and direct banking, and then Citibank,where he managed the product management department; he wasinvolved in managing the SME section. He joined GE Money Bank,a.s. as Director of Commercial Sales and since 2000, he has beenthe Chief Commercial Banking Officer and member of the senior management of GE Money Bank, a.s.
Petr Karelgraduated from the Faculty of Law at CharlesUniversity in Prague and from the Universityof Economics in Prague where he obtained hisPhD. From 1995, he worked for a consortiumof international consultancy companies involved in consultancy for the CzechGovernment. From 1999, he worked for GEMoney Bank, a.s. as a lawyer. He then worked
for two years at Komerční banka as a regional manager where hewas responsible for special deals. In 2002, he accepted an offerfrom GE Money Bank, a.s. and became its Chief Compliance Officer.
Jana Pěchoučkovágraduated from the Faculty of Economics andAdministration at the University of Pardubice.After graduation, she worked for Optagliofrom 2000 until 2001 when she joined GE Money Bank, a.s. as an internal auditor. In December 2004, she was appointed to the position of Manager ofInternal Audit at GE Money Bank, a.s.
Tomáš Černýgraduated from the Law Faculty of CharlesUniversity and attended many special programs in Great Britain. Before joining GEMoney Bank, a.s., Tomáš worked for five years in the Prague office of Weil Gotshal & Manges, a leading international law firm, focusing mainly on commercial law, banking, mergers and acquisitions. Before his
work for Weil Gotshal & Manges Tomáš spent 2 years with Deloitte& Touche and also worked for the international law office of CliffordChance. In April 2005 he was appointed Chief Legal Counsel of GE Money Bank, a.s.
INFORMATION ON BANK MANAGEMENT
ANNUAL REPORT GE MONEY BANK14
Members of the Bank’s management
INFORMATION ON BANK MANAGEMENT
ANNUAL REPORT GE MONEY BANK 15
Radomil Štumpagraduated from the Faculty of Law atMasaryk University in Brno. Over the course often years of legal practice, he gained experience at the Brno Court, the prosecutor’soffice in Prague and in 1994 he became a member of the Czech Bar Association. As anattorney he worked for the international legaloffice of McKenna & Co and of Allen & Overy
based in London. In 1997, he joined Citibank as Vice President andChief Legal Counsel and was responsible for all legal matters relating to Citicorp in the Czech Republic. After the acquisition ofAgrobanka, he joined the Bank in 1998 as Chief Legal Counsel of GECapital Czech and Slovak Republics, and at the same time was anofficial representative of the GE shareholders. In 2000, he became a member of the senior management of GE Money Auto, a.s. and became its Chief Executive Officer and Chairman of the Board.Since 1 November 2003, he has been in charge of the commercial banking division of GE Money Bank, a.s.
David Bystrzyckistudied at the Faculty of Mathematics atCharles University. Between 1997 and 2000,he held various positions in the marketing department of Philip Morris, a.s. – his last rolethere was manager of the market researchdepartment. Prior to that, he worked for themarket research agencies AC Nielsen andAISA. He joined GE Money Bank, a.s. four
years ago. In 2001, he became manager of the market researchteam and from 2002 he was manager of the direct marketing department. He was responsible for cross–selling of products andfor telemarketing. Since 1 May 2004, he has been in charge of thecustomer relations management department, which includes bothdirect marketing and telesales.
Erich Čomorgraduated from the University of Economicsin Prague in 1993. At the end of the ninetieshe received his MBA from the J. L. KelloggSchool of Management in the USA. Erich started his professional career with KPMGConsulting, where he worked from 1992 until1993. He then moved to Procter & Gamble,where he was brand manager until 1996.
Before joining GE Money Bank, a.s., Erich spent seven years withMcKinsey & Co as an engagement manager. There he was involvedin consulting in the area of introducing and selling the bank’s products during which time he acquired a deep knowledge of boththe Czech and European banking markets. Since 2004, he has beenManager of marketing at GE Money Bank, a.s.
Niamh Hegartygraduated from the University College Dublin;she studied foreign languages and in 1989,she received her bachelor's degree. In 1995she received the title of Master of BusinessAdministration at the Trinity College in Dublin.Before joining GE, she had held various positions in Dunnes Stores, Ann O'BrienPersonnel Consultants and in Quaestus
Management Consultants in her native Ireland, predominantly inMarketing and HR. In 1996, Niamh joined GE Plastics and progressed through various positions in the HR team. In 2004, shewas appointed HR Manager in GE Advanced Materials – Americasand in July 2005 was appointed Chief Human Resource Officer ofGE Money Bank, a.s.
INFORMATION ON BANK MANAGEMENT
ANNUAL REPORT GE MONEY BANK16
Organizational structure of the Bank
Supervisory BoardD. O’Shea, S. Crichton, P. Zídek
Board of DirectorsG. Ryan, J. Rollo
Ch. Glaser, M. Červenka
Chief ExecutiveOfficer’s Office
Chief Executive OfficerG. Ryan
Retail Banking DivisionChief Retail Banking Officer
J. Rollo
Commercial Banking DivisionChief Commercial Banking Officer
R. Štumpa
Internal Audit DepartmentJ. Pěchoučková
Internal Audit Manager
Risk DivisionChief Risk Officer
P. Vyhnálek
Legal DivisionChief Legal Counsel
T. Černý
Finance DivisionChief Financial Officer
Ch. Glaser
Operations DivisionChief Operations Officer
J. Hasselrot
Compliance DivisionChief Compliance Officer
P. Karel
Marketing & Product Development DivisionChief Marketing & Product Development Officer
E. Čomor
Human Resources DivisionChief Human Resources Officer
N. Hegarty
Customer Relationship Management DivisionChief Customer Relationship Management Officer
D. Bystrzycki
Quality DivisionChief Quality Officer
E. Česnek*
Third Party Products Division
Information Technology DivisionChief Information Technology Officer
P. Zídek*
* temporarily appointed
Board of Directors’ Report
ANNUAL REPORT GE MONEY BANK 17
BOARD OF DIRECTORS’ REPORT
ANNUAL REPORT GE MONEY BANK18
The success of our strategy and business operations in 2005 canbe seen from the economic results of the Bank, which has recordeda significant increase in demand for its credit products – both consumer loans and loans for small to medium-size enterprises.This is evidenced by the year-on-year increase in provided loans of28.6%. In 2005, the volume of loans provided to clients was CZK47,9 billion, while as at 31 December, 2004 it was CZK 37.2 billion.This trend was positively reflected in the interest margin. The portfolio quality remains high.
Thanks to the continued growth in loans provided, the net profit ofGE Money Bank, a.s. grew 19.2% year-on-year to CZK 2.672 billionas at 31 December 2005. At the end of 2004 the bank had achieveda net profit of CZK 2.242 billion, which was reinvested as in previousyears. The net profit per employee grew to CZK 1.318 million as at31 December 2005 compared with CZK 1,091 million at the end of2004 – an increase of 20.8% year-on-year.
Despite the continuing credit expansion, GE Money Bank, a.s. hasretained a high rate of capital adequacy – 23.41% at the end oflast year, making GE Money Bank, a.s. one of the most stable financial institutions in the Czech market.
GE Money Bank, a.s. invested significantly in 2005 into the re-branding from GE Capital Bank, a.s. to GE Money Bank, a.s. and alsoopened 9 new points of sale and 28 new ATMs. Productivity increased as a result of the achieved growth and the opening ofthe new points of sale and the number of employees therefore decreased from 2 056 at the end of 2004 to 2 028 at the end of2005.
GE Money Bank, a.s. had 806,708 clients as at 31 December 2005(year-on-year growth of 7.8%), in respect of which it maintained948,306 deposit accounts (+2.6%). Total deposits received from clients increased by 4.3% in a very stable and unchanged market,while GE Money Bank, a.s. maintained deposits of CZK 47.40 billionas at 31 December 2005 compared with CZK 45.42 billion as at 31December 2004.
GE Money Bank’s total assets were CZK 64,163 billion as at 31December 2005, representing year-on-year growth of 7.3%.
Return on Assets (ROA) reached a value of 4.30% at the end of2005 compared with 3.76% at the end of 2004, representing anincrease of 14.4%. The Return on Equity (ROE) was 21.13% as at 31December 2005, which was 2% less than in 2004 – 21.56%.
The Board of Directors of GE Money Bank, a.s. is satisfied with theBank’s results for 2005 and would like to thank all of its customersfor placing their trust in the Bank and using its services.
Gerard Ryan,Chairman of the Board of Directors
Christoph Glaser,Member of the Board of Directors
Miroslav Červenka,Member of the Board of Directors
Jan Rollo,Member of the Board of Directors
Board of Directors’ Report on Operations and Assets
The business strategy of GE Money Bank, a.s. in 2005 was based on providing
financial services to individuals and small to medium-size enterprises. A portfolio of
modern and top-quality products offered at 201 points of sale throughout the Czech
Republic and 390 ATMs is aimed at satisfying our customers’ needs.
Economic results of GE Money Bank, a.s. (in thousands of CZK, according to Czech accounting standards)
BOARD OF DIRECTORS’ REPORT
ANNUAL REPORT GE MONEY BANK 19
Year-on-year change
Year-on-year change
Net income(CZK thousands)
Client deposits(CZK thousands)
Loans to clients(CZK thousands)
Capital(CZK thousands)
Total Assets (CZK thousands)
Net profitper employee
(mil. CZK)
ROA
Capital adequacy
Year-on-year change
Year-on-year change
Year-on-year change
Year-on-year change
Year-on-year change
Year-on-year change
ANNUAL REPORT GE MONEY BANK20
Sophisticated EconomicIndices of the Bank
ANNUAL REPORT GE MONEY BANK 21
SOPHISTICATED ECONOMIC INDICES OF THE BANK
ANNUAL REPORT GE MONEY BANK22
Basic Economic Data of GE Money Bank, a.s. (according to Czech accounting standards):
Total assets (mil. CZK)
Net profit (mil. CZK)
Client deposits (mil. CZK)
Capital Adequacy (%)
* The reduction compared to 2001 was due to a change in the accounting methodology imposed by CNB.
SOPHISTICATED ECONOMIC INDICES OF THE
ANNUAL REPORT GE MONEY BANK 23
Number ofemployees
Number of points of sale
ANNUAL REPORT GE MONEY BANK24
Forecast for 2006
ANNUAL REPORT GE MONEY BANK 25
Forecast for 2006
ANNUAL REPORT GE MONEY BANK26
2006 will bring new challenges for us. The dynamic growth of ourportfolio and the number of customers of GE Money in the CzechRepublic and Slovakia will require increased capacity. We started to build a new Customer Service Centre in Ostrava in2005, which we expect to open in the first half of 2006. Our competitors are continuously launching new and better products,therefore, to retain our market position, we have to accelerate ourdevelopment of new products while continuously improving ourexisting product range. Regulatory pressure on the banking sectoris increasing and this also generates product structure changes.Financial literacy and responsible lending are increasingly topics ofthe day to assist customers in selecting the right product to covertheir needs. Bank and non-bank credit bureaux are merging, whichshould positively affect credit portfolio quality and further accelerate and simplify the whole loan application process.
Our strategic pillars in 2006 will be the same as last year.
Growth. In 2006, we will further enhance the synergies between the products and services offered by all GE Money businesses in theCzech Republic. In this way, our more than 1.7 million customerswill receive just the right service most suitable for their needs, andwhen they need it most.
Consistent customer orientation. Every customer is different. In 2006 we will pay strong attention tosales of our products and services, to ensure that it is easy to become a GE Money Bank customer, and to relations with our existing customers so that it is beneficial to remain our customer.We will focus on customers who are using any single product (forexample a consumer loan) and we will offer them revolving products – for example a credit card. We will carefully analyze thecustomer’s ability to repay the loan to protect him/her from
excessive debt, and make sure that he/she fully understands the financial products he/she has decided to sign up for at the outset.
Innovation. If we want to achieve long-term success in the market we must always be one step ahead our competitors. All our competitors areusing similar IT platforms and to some extent similar products; however, a competitive advantage still exists in having the rightemployees in an organisation and I am delighted to say that I believe we are a leader in this field. Our teams use their creativityto create new added value products and services that reflect theneeds of our customers. Therefore, we will provide maximum support in 2006 to innovation and new ideas and reflect them, asquickly as possible, in the development of new products. During2005 GE Money Central and Eastern Europe region was created. I am convinced that this will further accelerate best practice sharing and new product development among the countries in the region.
People. In 2006 we will do our best to find, attract, develop and retain thebest people in the Czech employment market. We will do this byusing all forms of best practice available to us from our worldwideorganisation and by maintaining the very strong and positive reputation we have in the market place for being a great businessto work for.
I am confident that we will further increase our market share in2006 both in consumer loans, mortgages and loans to small andmedium-size enterprises.
Gerard Ryan
Forecast for 2006
The priority for 2005 was to re-brand GE Capital Bank, a.s. to GE Money Bank, a.s.
The change was part of the international strategy of GE Money (GE Consumer
Finance) to create a strong global brand for the whole organisation. This aim was
reflected in our strategy: while changing brand, continue to meet the financial
services requirements of our customers and, in so doing, retain existing satisfied
clients and gain new ones. We also maintained our impressive track record of
consistent growth in assets and profitability with a relentless focus on good
customer service, product and service innovation and development of our people.
This strategy has once again enabled us to exceed our targets for the year. With
this in mind, we will continue to apply this strategy in the year ahead.
Auditor’s report to theshareholders of Bank
ANNUAL REPORT GE MONEY BANK 27
SUPERVISORY BOARD REPORT AND AUDITOR’S REPORT
ANNUAL REPORT GE MONEY BANK28
The Supervisory Board has carried out its tasks in compliance with the legislation of the Czech Republic, the Articles of the Bank and theRules of Procedure. The Board of Directors of GE Money Bank, a. s., provided all supporting documents and information necessary for auditactivities.
The Supervisory Board has discussed the Bank’s operating results for 2005 as reported in the financial statements, including the enclosuresaudited by the auditor and has reached the conclusion presented to the General Meeting:
The Supervisory Board recommends that the General Meeting approves the financial statements for 2005.
James Desmond O’Shea,Chairman of the Supervisory Board
Susan Elizabeth Crichton,Supervisory Board member
Pavel Zídek,Supervisory Board member elected by the employees
Supervisory Board Report
Auditor’s report to the shareholders of GE Money Bank, a.s.
On the basis of our audit, on April 7, 2006 we issued an auditor’s report on the Bank’s statutory financial statements, which areincluded in this annual report, and our report was as follows:
“We have audited the accompanying financial statements of GE Money Bank, a.s. for the year ended 31 December 2005. Thesefinancial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the Act on Auditors and International Standards on Auditing and the relevant guidance of the Chamber of Auditors of the Czech Republic. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the Bank’s management, as well as evaluating theoverall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements present, in all material respects, a true and fair view of the assets, liabilities, equity and financial position of GE Money Bank, a.s. as of 31 December 2005 and the results of its operations for the year then ended inaccordance with the Act on Accounting and relevant legislation of the Czech Republic.”
We have reviewed other financial information in the annual report for consistency with the audited financial statements. In ouropinion, the information is consistent in all material respects with the audited financial statements.
The management of the Bank is responsible for the completeness and accuracy of the report on relations between related parties. Our responsibility is to review the accuracy of the information included in the report. During our review nothing came toour attention that would cause us to believe that the information contained in the report is materially inaccurate.
Prague 21 April 2006
KPMG Česká republika Audit, s.r.o.Licence number 71
Ing. Vladimír Dvořáček Ing. František DostálekPartner Partner
Osvědčení číslo 176
SUPERVISORY BOARD REPORT AND AUDITOR’S REPORT
ANNUAL REPORT GE MONEY BANK 29
Auditor’s report
Charity and sponzoring
ANNUAL REPORT GE MONEY BANK 31
CHARITY AND SPONZORING
ANNUAL REPORT GE MONEY BANK32
Ge Money volunteers assist those in need
Charity efforts and support for nonprofit projects are an important part of GE
culture. Last year, GE Money Bank, a.s., GE Money Auto, a.s. and GE Money
Multiservis, a.s. provided assistance both in terms of financial donations and
through the voluntary work of their employees.
Financial assistance to the needy in GE communities
The benevolent activities of GE Money are appreciated by organizations that provide care for physically and socially deprivedchildren and adults, children's homes, centers for substituted familycare, elementary schools, educational centers and a number ofprojects aimed at regenerating green areas.
Financial support is provided to these organizations if they applyfor a GE grant. An application for a GE grant is submitted by the organization in question to the GE Grant Committee through the organization's guarantor, in most cases a GE employee, who worksnear the organization that is applying for the grant (for instance themanager of a GE Money Bank, a.s. branch located in the same cityas the organization's registered office. Such regional ties proved tobe very useful last year. Last year alone, based on approved GEgrants, 39 projects were implemented with a total value of morethan CZK 1 million (see the enclosed table).
In June 2005, representatives of GE Money Bank, a.s. handed overa cheque in the amount of CZK 20 thousand to the Motýlek community center. The center is located in Prague's Černý Mostarea and it is operated by the Association for Assistance toHandicapped Children. The mission of the association is to providemulti-sided assistance to children with impaired health and to socially handicapped children. The purpose of this assistance is toenable handicapped children to grow up in an undisturbed familyenvironment and to become integrated members of society.
As part of its benevolent activities, GE Money Bank, a.s. also assistseducational and nonprofit organizations by donating renovatedPCs and other IT equipment to them.
CHARITY AND SPONZORING
ANNUAL REPORT GE MONEY BANK 33
Support to those in need in 2005 CZKThe Association for the Deaf and Hearing-Impaired in the ČR, Most 5 000.00The associated SOS of children villages Prague- the Castle 8 000.00DANETA, s.r.o.; a private special school for pupils with multiple disabilities in Hradec Králové 10 000.00Friends of the House for Children in Chomutov 10 000.00PROTEBE – non profit association in Prague 2 10 000.00The club for people with cystic fibrosis in Prague 5 10 000.00The Foundation of Charter 77, Prague 1 10 000.00TYFLOCENTRUM Liberec o.p.s. Liberec 10 000.00Garden – institute of social care in Kladno 10 000.00Q KLUB; 747 67 Hrabyně 3 10 000.00Athletic sport club ELNA, Počerady 20 000.00Home for Children; Balkán Plumlov 20 000.00Center of Education for the Mentally Handicapped, Přerov 20 000.00Association for Help to Handicapped Children, Prague 9 20 000.00Special School, Česká Lípa 20 000.00HOSPICE MOVEMENT - VYSOČINA Nové Město na Moravě 20 000.00EWSC LITA SPORT PRAHA, Praha 5 20 000.00Diocesan charity, Brno 20 000.00Home for Children, Ostrava-Slezská Ostrava 20 000.00Nonprofit Association “Life without Barriers”, Nová Paka 20 000.00VIA Association of the Deaf and Blind, Prague 5 20 000.00The City of Prachatice 30 000.00The Association of St. J. N. Neumann in Prachatice 30 000.00ÚSVIT; an association helping mentally handicapped people in Havlíčkův Brod 15 000.00SONS United Organization of the Blind and Purblind, Blansko 15 000.00ENERGIE o.p.s.; Hornická 106; 435 13 Meziboří; CZ; 15 000.00RAINBOW Zámeček, a nonprofit organization, Havířov-Šumbark 15 000.00ÚAMK - RACING CLUB LIBEREC; Hanychovská 37; 460 10 Liberec; ČR; 15 000.00Special schools: Pod parkem 2788; Ústí nad Labem; CZ; 15 000.00INEX – Association of Voluntary Activities Prague 1 15 000.00The Club of Parents and Friends of Children’s Center in Kladno 15 000.00Association of Secondary School Clubs of the Czech Republic, Brno 15 000.00The Club of Parents and Friends of the Children’s Center in Březejc Velké Meziříčí 15 000.00Domestic Assistance and Care Servicse – Hewer, Prague 10 15 000.00VOLTIŽ o.s. Olomouc-Chválkovice 24 000.00Special school for pupils with speech impediments and SPC, Hořičky 28 000.00Elementary school and kindergarten in Bernartice nad Odrou 29 000.00GE ELFUN; Hybernská 18; 110 00 Praha 1 1 300 000.00Czech Radio; department of radio fees, Prague 2; 29 750.00Hamza’s professional sanatorium for children and adults in Košumberk Luže 57 120.00GE ELFUN Praha 1 65 460.00Czech Red Cross - assistance to South East Asia after floods 286 000.00GE ELFUN Prague 1 1 394.70Total 2 358 724.70
CHARITY AND SPONZORING
ANNUAL REPORT GE MONEY BANK34
GE Elfun Volunteers A key role in the charitable activities of GE Money in the Czech republic is played by Elfun, an organization which associates volunteers from among the employees and which provides assistance, through these employees, to various areas and com-munities around the world. An important part of Elfun's activities isvolunteerism benefiting the communities in which GE is present.Approximately 53 500 volunteers have contributed more than 1 million hours of voluntary work as part of Elfun efforts across theworld to support more than one thousand different projects. In theCzech Republic, the Elfun Organization was established as early as2000 and today it assists dozens of projects in three main areas –education, assistance for children and handicapped people andprotection of the living environment. In 2005, more than 500 GE volunteers contributed several thousand hours of voluntary work inthe Czech Republic.
Among the long-term projects, in which GE Elfun participates in theCzech Republic, is Klokánek (“Little Kangaroo”) – a project run bythe Fund of Endangered Children.
In the Czech Republic, Elfun also cooperates with the House ofChildren of Charlotta Masaryková in Zbraslav, for which GE Moneyemployees organize regular collections of diapers, Easter and St.Nicholas presents, and excursions into the countryside.
Blood donorship is a regular activity of GE Money employees. Lastyear, there were three such events and more than 150 GE employees donated blood.
Assistance to Asia following the devastating floods In 2005, GE took a full part in the efforts to assist the regions ofSouth East Asia that were damaged by devastating floods. GEMoney Bank transferred the income from fees to the Czech RedCross Account amounting to CZK 43 thousand and the incomefrom payment orders made by its customers to the accounts offive major charity organizations, which helped to address the devastating consequences of the disaster. The Czech Red Crossalso received almost CZK 77 thousand from the bank’s employeesand another CZK 243 thousand from GE Money Bank. In total, GEMoney in the Czech Republic and in the Slovak Republic and its employees contributed an amount of CZK 363 thousand. Moreover,on a global scale, GE and its employees contributed more than 11million dollars to assist the affected region.
GE Money employees themselves collected CZK 76 924 in a specialaccount of GE Money Bank, a.s.. They also helped indirectly – byparticipating in the GE employees’ satisfaction survey which washeld in February 2005 in all GE business across the world. For eachemployee of GE Money in the Czech Republic and in Slovakia, thatcompleted the questionnaire, GE Money donated an amount ofCZK 100 to the Czech Red Cross. As a total of 2437 GE Money employees in the Czech Republic and Slovakia completed the questionnaire, GE Money contributed a total of CZK 243 700.
Assistance to the High Tatra Mountains A tornado, which swept the High Tatra Mountains on 19 November2004, destroyed a large wooded area in the National Park and in itssurroundings.
GE Money assisted with the restoration of the area in 2005. Besidesthe financial contribution amounting to SK 200 000, which GEMoney donated in December 2004, its employees also helped personally, to ensure that the High Tatras would again be a paradise for tourists and lovers of the mountains. In May 2005, 97 employees helped with repairing the damage after the tornadoand spent 2100 hours cleaning approximately 5 hectares of damaged woods above the cog railway in Starý Smokovec. InAugust 2005, almost 150 employees of GE Money from Bohemiaand Slovakia focused on the area of Štrbské Pleso and spent twoafternoons cleaning almost 8 hectares of damaged woodland.
More information about Elfun and the voluntary work and sponsorship of GE Money in the Czech Republic is available atwww.gemoney.cz - see “Sponsoring and Charity”, or atwww.elfun.org.
Report on Relationsbetween Related Parties
ANNUAL REPORT GE MONEY BANK 35
REPORT ON RELATIONS BETWEEN RELATED PARTIES
ANNUAL REPORT GE MONEY BANK36
In accordance with Article 66a paragraph 9 of Act No. 513/1991 Coll.,
the Commercial Code, as later amended, this report has been produced on the
relations between GE Capital International Holdings Corporation (“the Controlling
Entity”), with its registered office at Corporation Trust, 1209 Orange Street,
Wilmington, Delaware, USA and GE Money Bank, a.s. (“the Controlled Entity”
or “the Bank”), with its registered office in Prague and between the Controlled
Entity and other entities controlled by the Controlling Entity for the reporting
period 1.1.2005 – 31. 12. 2005.
Report on Relations between Related Parties
REPORT ON RELATIONS BETWEEN RELATED PARTIES
ANNUAL REPORT GE MONEY BANK 37
Ge Structure
GE Investments, Inc.
MRA Systems, Inc.
Global Consumer FinanceLimited
GE Money Bank,a.s.
GE Capital (Czech)Holdings, s.r.o.
GE Money Auto,a.s.
GE Money Auto, a.s.(SR)
General Electric Company
Since 15 December, 2004, GE Money Multiservis, a.s. became shareholder of GE Money Auto, a.s.
General Electric CapitalServices, Inc.
General Electric CapitalCorporation
GE Capital InternationalHoldings Corporation
GE MoneyMultiservis, a.s.
GE MoneyMultiservis, k.s. (SR)
100 %
100 %
100 %
99.8 %
100 %
100 %
100 %
100 %
100 %
99 %1 %
0.2 %
REPORT ON RELATIONS BETWEEN RELATED PARTIES
ANNUAL REPORT GE MONEY BANK38
Contracts with affiliated GE companies
GE Money Bank, a.s, GE Money Multiservis, a.s. Mandate Contract
Hybernská 18, Prague 1, Post Code 110 00 Vyskočilova 1422/1a, Prague 4, Post Code 140 28
GE Money Bank, a.s, GE Money Multiservis, a.s. Contract on business co-operation
Hybernská 18, Prague 1, Post Code 110 00 Vyskočilova 1422/1a, Prague 4, Post Code 140 28 No financial commitments
GE Money Bank, a.s, GE Money Auto, a.s. Mandate Contract
Hybernská 18, Prague 1, Post Code 110 00 Vyskočilova 1422/1a, Prague 4, Post Code 140 28
GE Money Bank, a.s, GE Money Multiservis, a.s. Mandate Contract
Hybernská 18, Prague 1, Post Code 110 00 Dobrovičova 8, Bratislava, Post Code 811 09,
Slovak Republic
GE Money Bank, a.s, GE Money Auto, a.s. Mandate Contract
Hybernská 18, Prague 1, Post Code 110 00 Dobrovičova 8, Bratislava, Post Code 811 09,
Slovak Republic
GE Money Bank, a.s, GE Money Multiservis, a.s. Contract on supplied services
Vyskočilova 1422/1a, Prague 4, Post Code 140 28 Vyskočilova 1422/1a, Prague 4, Post Code 140 28
1. RELATED PARTIES
The above should be changed to say “On 15 December, 2004...became a shareholder…“
GE Money Bank, a.s. is part of GE Consumer Finance, a multinational corporation focusing on providing financial servicesparticularly to small and medium sized clients. The Bank co-operates with other companies within the GE Group which jointlyuse its distribution network to provide their services under normalcommercial conditions.
2. LIST OF OTHER CONTRACTS AND LEGAL ACTS
a) List of contractsPaid contracts - commitments
The Bank has concluded the below specified contracts with GE Group companies with the resulting commitments arising fromthem. These are mandate contracts with companies with registered offices in the Czech and Slovak Republics according towhich the Bank invoices a proportionate part of the costs.
The Bank cooperates with GE Money Multiservis, a.s(“Multiservis”) by making its distribution channels available toMultiservis clients. Clients of Multiservis who are OK card holderscan withdraw cash at branches of the Bank. For this serviceMultiservis pays a fix fee for each transaction.
The Bank also cooperates with Multiservis in the area of creditcard handling, distribution and transactions related to the GEMaestro Credit Card/Master Card. The Bank maintains the wholeportfolio in its Vision Plus system. Multiservis pays a fixed fee tothe Bank for each issued and monitored card and also for eachtransaction made using these cards. The cost of each card is reviewed once a year based on the actual costs incurred and theprofit margin of the Bank.
The Bank has concluded contracts with GE Group companiescovering deals made on the money market according to the Bank’sinstructions and on the account of the Bank. Another type of contract with attaching commitments is a contract on use of theGE logo and trade mark. In addition, the Bank has concluded contracts on the provision of support by GE companies in Dublinand Stamford to its HQ departments and to the Bank’s management.
REPORT ON RELATIONS BETWEEN RELATED PARTIES
ANNUAL REPORT GE MONEY BANK 39
Contracts with other companies of the GE Group
GE Money Bank, a.s, GE GmbH Vienna, Austria Contract on supplied services
Vyskočilova 1422/1a, Post Code 140 28
GE Money Bank, a.s, GE Capital Corporation Contract on treasury services
Vyskočilova 1422/1a, Post Code 140 28
GE Money Bank, a.s, GE Capital Corporation – Utilization of GE networks
Vyskočilova 1422/1a, Post Code 140 28 Global Consumer Finance
GE International Incorporated
GE Money Bank, a.s, GE Capital Registry, Inc. Trade mark utilization
Vyskočilova 1422/1a, Post Code 140 28
GE Money Bank, a.s, GE Corporate Computer Services Limited - Fees for mediation of services V+
Vyskočilova 1422/1a, Post Code 140 28 Europe Station, Kingswood
GE Money Bank, a.s. Global Consumer Finance Contract on support for departments of
Vyskočilova 1422/1a, Post Code 140 28 Summer Street 1600, Stamford, U.S.A GECB HQs
GE Money Bank, a.s. Global Consumer Finance Contract on support for departments of
Vyskočilova 1422/1a, Post Code 140 28 Summer Street 1600, Stamford, U.S.A GECB HQs - IT services
GE Money Bank, a.s. GE Capital Woodchester Ltd. Contract on support for departments of
Vyskočilova 1422/1a, Post Code 140 28 Golden Lane, Dublin 8, Ireland GECB HQs
GE Money Bank, a.s. GE Capital Inernational Services Contract on SW support
Vyskočilova 1422/1a, Post Code 140 28 GE Towers, Sector Road, Sector 53 Contract signed on May 12, 2004
Gurgaon 122002, India
GE Money Bank, a.s. GE Capital Inernational Services Contract on SW support
Vyskočilova 1422/1a, Post Code 140 28 GE Towers, Sector Road, Sector 53 Contract signed on May 14, 2004
Gurgaon 122002, India
GE Money Bank, a.s. General Electric Company E-mail service
Vyskočilova 1422/1a, Post Code 140 28 3135 Easton Turnpike, Fairfiled
Connecticut 06431, USA
GE Money Bank, a.s. GE Capital Global Financial Restructuring SW usage (licence fee)
Vyskočilova 1422/1a, Post Code 140 28 201 High Ridge Road, Stamford CT 06927
GE Money Bank, a.s. GE Capital Woodchester Ltd. Contract on support for departments of
Vyskočilova 1422/1a, Post Code 140 28 Golden Lane, Dublin 8, Ireland GECB HQs
GE Money Bank, a.s. GE International, Inc. Contract on supplied services
Vyskočilova 1422/1a, Post Code 140 28 Shelton, Connecticut USA
GE Money Bank, a.s. General Electric Capital Corporation Global contract between GE and INDUS
Vyskočilova 1422/1a, Post Code 140 28 a INDUS SOFTWARE PRIVATE LIMITED SW usage contract - INDUS
GE Money Bank, a.s. GE Corporate Company and Telindus Global contract between GE and Telindus
Vyskočilova 1422/1a, Post Code 140 28
GE Money Bank, a.s. GE Consumer Finance and Global Global contract between
Vyskočilova 1422/1a, Post Code 140 28 eXchange Services, Inc. (Telindus) GE and Global eXchange services – contract
about telecommunication and security
transfer systems maintenance
GE Money Bank, a.s. General Electric Company Global contract between GE
Vyskočilova 1422/1a, Post Code 140 28 and Ford Motor Company and Ford Motor Company
Contract for company car bonuses
REPORT ON RELATIONS BETWEEN RELATED PARTIES
ANNUAL REPORT GE MONEY BANK40
Sub-lease contracts - receivables
The Bank has concluded sub-lease contracts with GE Groupcompanies which have their centre in the building of the BB Centrein Vyskočilova street. The Bank recharges the costs related to therented premises in the BB Centre proportionally to the listed companies on a monthly basis.
The Bank has also concluded sub-lease contracts withMultiservis, which uses part of the premises of the Bank in the regional cities for to sell its products. It pays the Bank a rental fee including a proportion of the operating costs of the point of sale.
GE Money Bank, a.s, GE Money Multiservis, a.s. Sub-lease contract - in BB Centre, Prague 4,
Hybernská 18, Prague 1, Post Code 110 00 Vyskočilova 1422/1a, Prague 4, Post Code 140 28 Vyskočilova 1422/1a
GE Money Bank, a.s, GE Money Auto, a.s. Sub-lease contract - in BB Centre, Prague 4,
Hybernská 18, Prague 1, Post Code 110 00 Vyskočilova 1422/1a, Prague 4, Post Code 140 28 Vyskočilova 1422/1a
GE Money Bank, a.s, GE Capital (Czech) Holdings, s.r.o. Sub-lease contract - in BB Centre, Prague 4,
Hybernská 18, Prague 1, Post Code 110 00 Vyskočilova 1422/1a, Prague 4, Post Code 140 28 Vyskočilova 1422/1a
GE Money Bank, a.s, Global Financial Restructuring Czech Sub-lease contract - in The Park No. 2294/2,
Vyskočilova 1a/1422, Prague 4 Postal Code 140 28 V Parku 2294/2, Postal Code 148 00 Prague 4 Chodov
GE Money Bank, a.s, GE International, Inc. Sub-lease contract - in BB Centre, Prague 4,
Hybernská 18, Prague 1, Post Code 110 00 Two Corporate Drive, Shelton, USA Vyskočilova 1422/1a
GE Money Bank, a.s, GE Medical Systems, SA – organizační složka Sub-lease contract - in BB Centre, Prague 4,
Hybernská 18, Prague 1, Post Code 110 00 Vyskočilova 1a/1422, Prague 4, Postal Code 140 28 Vyskočilova 1422/1a
GE Money Bank, a.s, GE Medical Systems Česká Republika, s.r.oi. Sub-lease contract - in BB Centre, Prague 4,
Hybernská 18, Prague 1, Post Code 110 00 Vyskočilova 1422/1a, Prague 4, Post Code 140 28 Vyskočilova 1422/1a
GE Money Bank, a.s, GE Money Auto, a.s. Sub-lease contract – Plzeň, Anglické nábřeží 1
Vyskočilova 1422/1a, Prague 4, Post Code 140 28 Vyskočilova 1422/1a, Prague 4, Post Code 140 28
GE Money Bank, a.s, GE Money Auto, a.s. Sub-lease contract – Olomouc, Opletalova 2
Hybernská 18, Prague 1, Post Code 110 00 Vyskočilova 1422/1a, Prague 4, Post Code 140 28
GE Money Bank, a.s, GE Money Auto, a.s. Sub-lease contract – Hradec Králové,
Hybernská 18, Prague 1, Post Code 110 00 Vyskočilova 1422/1a, Prague 4, Post Code 140 28 Karla IV. 502
GE Money Bank, a.s, GE Money Auto, a.s. Sub-lease contract – Brno, Lidická 31
Hybernská 18, Prague 1, Post Code 110 00 Vyskočilova 1422/1a, Prague 4, Post Code 140 28
GE Money Bank, a.s, GE Lighting, s.r.o. Sub-lease contract – Brno, Lidická 31
Hybernská 18, Prague 1, Post Code 110 00 Purkyňova 45/2740, Brno, Post Code 612 00
GE Money Bank, a.s, GE International, Inc. Sub-lease contract - in The Park Building
Vyskočilova 1422/1a, Prague 4, Post Code 140 28 Husova 5, Prague 1, Post Code 110 00 No. 2294/2, Prague 4-Chodov
GE Money Bank, a.s. GE Money Multiservis, a.s. Sub-lease contract - in The Park Building
Vyskočilova 1a/1422, Prague 4, Postal Code 140 28 Vyskočilova 1a/1422, Prague 4, Postal Code 140 28 No. 2294/2, Prague 4-Chodov
GE Money Bank, a.s. GE Money Auto, a.s. Sub-lease contract - in The Park Building
Vyskočilova 1a/1422, Prague 4, Postal Code 140 28 Vyskočilova 1a/1422, Prague 4, Postal Code 140 28 No. 2294/2, Prague 4-Chodov
GE Money Bank, a.s. GE Capital (Czech) Holdings, sr.o.. Sub-lease contract - in The Park Building
Vyskočilova 1a/1422, Prague 4, Postal Code 140 28 Vyskočilova 1a/1422, Prague 4, Postal Code 140 28 No. 2294/2, Prague 4-Chodov
GE Money Bank, a.s. GE Money Auto, a.s. Sub-lease contract – Jaromeř,
Vyskočiulova 1a/1422, Prague 4, Postal Code 140 28 Vyskočilova 1a/1422, Prague 4, Postal Code 140 28 Ve Sladovnách 37
GE Money Bank, a.s. GE Money Auto, a.s. Sub-lease contract – České Budějovice,
Vyskočiulova 1a/1422, Prague 4, Postal Code 140 28 Vyskočilova 1a/1422, Prague 4, Postal Code 140 28 Jírovcova 1863/1
REPORT ON RELATIONS BETWEEN RELATED PARTIES
ANNUAL REPORT GE MONEY BANK 41
GE Money Bank, a.s, GE Money Multiservis, a.s. Mandate Contract
Hybernská 18, Prague 1, Post Code 110 00 Vyskočilova 1422/1a, Prague 4, Post Code 140 28
GE Money Bank, a.s, GE Money Auto, a.s. Mandate Contract
Hybernská 18, Prague 1, Post Code 110 00 Vyskočilova 1422/1a, Prague 4, Post Code 140 28
GE Money Bank, a.s, GE Money Multiservis, k.s. Mandate Contract
Hybernská 18, Prague 1, Post Code 110 00 Dobrovičova 8, Bratislava, Post Code 811 09, SR
GE Money Bank, a.s, GE Money Auto, a.s. Mandate Contract
Hybernská 18, Prague 1, Post Code 110 00 Dobrovičova 8, Bratislava, Post Code 811 09, SR
GE Money Bank, a.s, GE Money Multiservis, a.s. Contract on co-operation – concluding
Hybernská 18, Prague 1, Post Code 110 00 Vyskočilova 1422/1a, Prague 4, Post Code 140 28 revolving credit contracts on behalf of
Multiservis, withdrawal through O.K. card
GE Money Bank, a.s, Global Consumer Finance Ltd. Contract on supplied services for IT projects
Hybernská 18, Prague 1, Summer Street 1600, Stamford, U.S.A. management
GE Money Bank, a.s, GE Money Multiservis, a.s. Contract on co-operation – concluding OK
Vyskočilova 1422/1a, Prague 4, Post Code 140 28 Vyskočilova 1422/1a, Prague 4, Post Code 140 28 Karta agreements
GE Money Bank, a.s, GE Money Multiservis, a.s. Contract on co-operation – concluding loan
Vyskočilova 1422/1a, Prague 4, Post Code 140 28 Vyskočilova 1422/1a, Prague 4, Post Code 140 28 agreements On behalf of Multiservis
GE Money Bank, a.s, GE Money Multiservis, k.s. Contract on a movable lease
Vyskočilova 1422/1a, Prague 4, Post Code 140 28 Bottova 7, Bratislava, Post Code 811 09, SR Terminated on April 7, 2005
GE Money Bank, a.s, GE Money Auto, a.s. Contract on a movable lease
Vyskočilova 1422/1a, Prague 4, Post Code 140 28 Bottova 7, Bratislava, Post Code 811 09, SR Terminated on April 30, 2005
GE Money Bank, a.s, GE Money Auto, a.s. Contract on a movable lease
Vyskočilova 1422/1a, Prague 4, Post Code 140 28 Bottova 7 8, Bratislava, Post Code 811 09, SR Terminated on December 31, 2005
GE Money Bank, a.s, GE Money Multiservis, a.s. Contract on a movable lease
Vyskočilova 1422/1a, Prague 4, Post Code 140 28 Vyskočilova 1422/1a, Prague 4, Post Code 140 28 Terminated on February 28, 2005
GE Money Bank, a.s, GE Money Auto, a.s. Contract on a movable lease
Vyskočilova 1422/1a, Prague 4, Post Code 140 28 Vyskočilova 1422/1a, Prague 4, Post Code 140 28
GE Money Bank, a.s, GE Money Multiservis, a.s. Contract on a movable lease
Vyskočilova 1422/1a, Prague 4, Post Code 140 28 Vyskočilova 1422/1a, Prague 4, Post Code 140 28,
b) List of other legal actsNo legal acts have been concluded during the reporting period
in favour of the Controlling Entity or entities controlled by theControlling Entity outside the scope of legal acts normally performed by the Controlling Entity in exercising its rights as a shareholder of the Controlled Entity.
3. OTHER GOODS AND SERVICES PROVIDED ANDOFFSETS RECEIVED
During the reporting period, the Controlled Entity did not receive or provide, in favour or at the request of the ControllingEntity or entities controlled by the Controlling Entity, any goods orservices or offsets in excess of those normally received from orprovided to the Controlling Entity as a shareholder of the ControlledEntity.
Mandate contracts and other contractual receivables
The Bank also provided services in the non-retail area to GEcompanies in the Czech and Slovak Republics. The services weresupplied under normal commercial conditions. The Bank has concluded a contract with Global Consumer Finance Ltd on
supplying IT (Information Technology) project management services.The Bank provides traditional banking services to affiliated companies under normal commercial conditions, for example themaintenance of accounts.
REPORT ON RELATIONS BETWEEN RELATED PARTIES
ANNUAL REPORT GE MONEY BANK42
4. GE Money Bank, a.s. RECEIVABLES FROM AND PAYABLES TO OTHER RELATED PARTIES 31. December, 2005
CZK M Receivables Payables
GE Money Multiservis, Czech Republic 850 472 27 697
GE Money Multiservis, Slovak Republic 56 7
GE Capital (Czech) Holdings, Czech Republic 36 37 230
GE International Zurich, Schwitzerland 41 –
GE International, Shelton BUC: M45000 25 877 763
GE International, Czech Republic 84 –
GE ELFUN – 970
GE Medical Systems S. A., Czech Republic 1 842 –
Czech Republic 24 –
GE Money Auto, Česká republika 183 325 6 073
GE Money Auto, Slovak Republic 259 –
GE Consumer Finance, Watford 3 –
GE Equipment Services CZ, Říčany u Prahy 1 –
Global Financial Restructuring Czech, Prague 4 4 –
GE Industrial Brno, CZ 14 –
Amersham Health (Cnetral East Europe), HaldelsGmbh, Prague 8 9 –
GE Capital Woodcherster Limited Golden Lane, Ireland 3 032 –
GE Capital Europe Limited London, UK BUC: 20001X 46 –
GCF – Global Cards, London, UK 1 390 –
GE Client Business Services Fort Myers FL, USA 68 –
GE Capital Commerzial Finance International, Stamford, USA 449 –
GE Capital Global Cons.Finance Stamford, USA BUC: EB7045 1 703 –
GE Capital, Gdaňsk, Poland 18 227
GE Corporate Audit Staff, Fairfield, USA 5 –
GE Consumer Finance UK Limited, Leeds, UK 66 –
GE Money Services, Gmbh, Eisenstadt, Austria 93 –
Ge Money Bank, Hannover, Germany 46 –
GE Card Services North America, Stamford, USA 125 –
GE Corporate Component, Philadelphia – 193
GE Capital – GCF, Sao Paulo, Brasil 733 –
GE Consumer Finance Brasil, Sao Paulo, Brasil 225 –
GE Real Estate Europe, Paris, France 9 –
GE Money Bank AB, Stockholm 168 –
General Electric Capital Bank SA, Barcelona, Spain 37 –
GE Capital Bank, Budapest, Hungary 155 –
GE Capital Asia Pacific, Hong Kong 22 –
GE Crotonville Training BUC: A01300 – 120
GE Nuovo Pignone Holding BUC: RS1011 – 80
Total 1 070 437 73 359
5. ASSESSMENT
The Bank declares that it has not suffered any detriment as a result of entering into the above listed contracts, or as a result ofthe above listed legal acts, other goods and services provided andoffsets received.
Financial Statements
ANNUAL REPORT GE MONEY BANK 43
Name of the Bank: GE Money Bank, a.s.Registered office: Vyskočilova 1422/1a, Praha 4Identification no: 25672720Business: BankDate of preparation: 7 April 2006Code of the Bank: 0600
FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK44
CZK 000 Note 2005 2004
1 Cash in hand and balances with central banks 2 313 214 3 068 392
2 State zero coupon bonds and other securities eligible
for refinancing with the CNB 15 490 148 4 078 227
of which: a) securities issued by government institutions 490 148 4 078 227
b) others 0 0
3 Receivables from banks and cooperative savings associations 13 11 186 700 13 253 702
of which: a) repayable on demand 56 821 57 944
b) other receivables 11 129 879 13 195 758
4 Receivables from customers - members of cooperative savings associations 14 47 896 504 37 238 532
of which: a) repayable on demand 477 409
b) other receivables 47 896 027 37 238 123
6 Shares, mutual fund certificates and other investments 16 39 027 16 105
7 Participation interests with substantial influence 17 240 240
of which: in banks 0 0
9 Intangible fixed assets 18 250 371 256 156
of which: a) establishment costs 0 0
b) goodwill 0 0
10 Tangible fixed assets 19 777 167 841 770
of which: land and buildings for operating activities 215 816 179 690
11 Other assets 20 1 106 428 913 848
13 Prepaid expenses and accrued income 103 368 114 699
Total assets 64 163 167 59 781 671
The notes set out on pages 50 to 68 form part of these financial statements.
ASSETSBalance sheet as at 31 December 2005
FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK 45
CZK 000 Note 2005 2004
2 Due to customers - members of cooperative savings associations 21 47 400 258 45 428 245
of which: a) repayable on demand 33 829 769 30 847 966
b) other payables 13 570 489 14 580 279
4 Other liabilities 22 1 179 188 1 416 629
5 Deferred income and accrued expenses 113 24 366
6 Provisions 24 12 523 14 447
of which: a) provision for pensions and similar obligations 0 0
b) provision for taxes 0 0
c) other 12 523 14 447
8 Registered capital 23 510 000 510 000
of which: a) registered paid-up capital 510 000 510 000
b) own shares 0 0
9 Share premium 25 4 701 979 4 701 979
10 Reserve funds and other funds from profit 25 102 000 102 000
of which: a) statutory reserve funds and risk funds 102 000 102 000
b) other reserve funds 0 0
c) other funds from profit 0 0
13 Gains (losses) from revalution 26 403 0
of which: a) assets and liabilities 26 403 0
b) hedging derivatives 0 0
c) participation interests 0 0
14 Retained earnings (or accumulated losses) from previous years 25 7 584 005 5 341 830
15 Profit (loss) for the accounting period 25 2 672 698 2 242 175
Total liabilities 64 163 167 59 781 671
The notes set out on pages 50 to 68 form part of these financial statements.
LIABILITIESBalance sheet as at 31 December 2005
FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK46
CZK 000 Note 2005 2004
Off-balance sheet assets
1 Commitments and guarantees granted 28 6 685 515 6 500 297
3 Receivables from spot transactions 12 290 51 619
4 Receivables from fixed term transactions 3 537 267 6 019 332
6 Receivables written-off 2 933 619 3 050 598
Off-balance sheet liabilities
1 Commitments and guarantees received 398 362 347 674
2 Collateral and pledges received 38 736 853 31 118 750
3 Payables from spot transactions 12 269 51 710
4 Payables from fixed term transactions 3 574 332 6 105 277
The notes set out on pages 50 to 68 form part of these financial statements.
OFF-BALANCE SHEET ITEMS
FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK 47
CZK 000 Note 2005 2004
1 Interest income and similar income 4 4 657 295 4 293 912
of which: debt securities 4 23 054 219 916
2 Interest expenses and similar expenses 4 (208 260) (236 861)
of which: debt securities 0 0
3 Income from shares and participation interests: 5 173 156 496
of which: a) income from participation interests with substantial influence 0 0
b) income from participation interests with controlling influence 0 0
c) income from other shares and participation interests 5 173 156 496
4 Commission and fee income 6 2 561 005 2 312 167
5 Commission and fee expenses 6 (315 855) (288 329)
6 Gain or loss from financial operations 7 119 039 114 677
7 Other operating income 8 646 669 812 057
8 Other operating expenses 8 (32 213) (205 088)
9 Administrative expenses 9 (3 193 755) (2 954 459)
of which: a) employee expenses 9 (1 261 556) (1 226 646)
of which : aa) social and health insurance 9 (328 559) (320 129)
b) other administrative expenses 9 (1 932 199) (1 727 813)
11 Depreciation, creation and use of reserves (385 026) (388 949)
and adjustments to tangible and intangible FA
12 Release of adjustments and provisions for receivables 24 417 732 586 611
and guarantees, income from written-off receivables
13 Write-offs, creation and use of adjustments 24 (1 470 718) (1 584 708)
and provisions for receivables and guarantees
19 Current year profit (loss) from ordinary activities before tax 2 796 086 2 617 526
23 Income tax 25 (123 388) (375 351)
24 Net profit (loss) for the accounting period 2 672 698 2 242 175
The notes set out on pages 50 to 68 form part of these financial statements.
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2005
FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK48
Registered Own Share Reserve Capital Revaluation ProfitCZK 000 capital shares premium funds funds gains (losses) (loss) TotalBalance as at 1 January 2004 510 000 0 4 701 979 102 000 0 0 5 341 830 10 655 809
Net profit (loss) for the accouning period 0 0 0 0 0 0 2 242 175 2 242 175
Balance as at 31 December 2004 510 000 0 4 701 979 102 000 0 0 7 584 005 12 897 984
Balance as at 1 January 2005 510 000 0 4 701 979 102 000 0 0 7 584 005 12 897 984
FX gains (losses) and gains (losses) 0 0 0 0 0 403 0 403
not included in the profit and loss statement
Net profit (loss) for the accouning period 0 0 0 0 0 0 2 672 698 2 672 698
Balance as at 31 December 2005 510 000 0 4 701 979 102 000 0 403 10 256 703 15 571 085
The notes set out on pages 50 to 68 form part of these financial statements.
Summary of changes in equity in 2005
Notes to the financialstatements
ANNUAL REPORT GE MONEY BANK 49
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK50
1. BASIC INFORMATION
a) Establishment and description of the BankGE Money Bank, a.s., formerly GE Capital Bank, a.s., (“the bank”)
was established on 9 June 1998 by a contribution of capital fromGE Capital International Holding in the amount of CZK 2 000 million.From this initial capital, the bank purchased selected assets and liabilities from Agrobanka, a.s., a bank, which had earlier been putinto enforced administration by the Czech National Bank. On 22 June 1998, the date of purchase, the assets and liabilities acquired were recorded in the bank’s balance sheet at the values determined in the Purchase Agreement.
On 17 January 2005 the bank was renamed from GE CapitalBank, a.s. to GE Money Bank, a.s. as part of a global rebranding initiative implemented by the parent company. The aim is to usethe worldwide experience of GE Money not only for uniform communication, but also for improvement of processes and tostrengthen our mutual relationships and intensify the successfulcooperation with clients.
Registered office Identification numberGE Money Bank, a.s. 25672720Vyskočilova 1422/1a140 25 Praha 4Česká republika
Members of the board of directors Members of
the supervisory board
Gerard Ryan (předseda) James Desmond O’Shea (předseda)
Jan Rollo Susan Elizabeth Crichton
Christoph Glaser Pavel Zídek
Miroslav Červenka
Changes in the Commercial RegisterIn 2005, the board of directors changed as follows:
• on 22 January 2005, Sonia Slavtcheva resigned from the board of directors,
• on 5 May 2005 Christoph Glaser was appointed as a memberof the board of directors.
For organizational structure see page 16
b) Basis of preparation The financial statements have been prepared on the basis of
accounting maintained in accordance with the Act on Accountingand relevant regulations and decrees of the Czech Republic. Theyhave been prepared under the historic cost convention on the basis of full accrual accounting, except for selected financial instruments that are stated at fair value.
The financial statements have been prepared in accordancewith the Czech Ministry of Finance decree regulating the layoutand definition of financial statements and disclosure requirementsof banks and certain financial institutions dated 6 November 2002(N. 501/2002).
Numbers in brackets represent negative amounts. These financial statements are non-consolidated financial statements.
2. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies adopted in the preparationof the financial statements are set out below:
a) Transaction dateDepending on the type of transaction, the transaction date is
defined as the date of payment or collection of cash; the date ofpurchasing or selling of foreign currency or securities; date of payment or collection from a customer's account; date of order toa correspondent to make a payment, settlement date of the bank’spayment orders with the ČNB clearing centre, the value dateaccording to a statement received from a bank’s correspondent(statement means SWIFT statement, bank’s notice, received media,bank statement or other documents); the trade date and settlement date of transactions with securities, foreign currency,options or other derivatives; the date of issue or receipt of a guarantee or opening credit line; the date of acceptance of valuesinto custody. Accounting transactions involving the purchase orsale of financial assets with a usual term of delivery (spot transactions) as well as fixed term and option contracts are recor-ded in off-balance sheet accounts from the trade date until the sett-lement date.
A financial asset or its part is derecognised from the balancesheet if the bank loses control over the contractual rights to this financial asset or its part. The bank loses this control if it exercisesthe rights to the benefits defined in the contract, if these rights expire or if they are waived by the bank.
b) Debt securities, shares, units and other investmentsTreasury bills, bonds and other debt securities and shares inc-
luding units and other investments are classified into the portfolioheld to maturity, the portfolio valued at fair value through profit orloss, or the available for sale portfolio, based on the Bank’s inten-tion. Only debt securities can be classified into the portfolio held tomaturity.
Treasury bills, bonds and other debt securities are recorded atamortised/accreted cost. Accrued interest income is part of thecarrying amount of these securities. Shares, units and other investments are recorded at acquisition cost.
Premiums and discounts on debt securities are amortised/accreted through the profit and loss account over the period fromthe date of purchase to the date of maturity using the effective interest rate method. In the case of securities which have a residualmaturity of less than 1 year from the date of purchase, the premium and the discount are amortized/accreted equally throughthe profit and loss account over the period from the date of purchase to the date of maturity.
Debt securities and shares, units and other investments valuedat fair value through profit or loss are measured at fair value andgains/losses from this revaluation are charged to the profit and lossaccount in “Gain or loss from financial operations”.
Available for sale securities and shares, units and other investments are measured at fair value and gains/losses from this revaluation are charged to equity in “Gains (losses) from revaluation”. When the security is sold the respective revaluationdifference is charged to the profit and loss account in “Gain or lossfrom financial operations”.
The fair value used for the revaluation of securities is determined based on the market price published as at the date ofthe fair value measurement, if the bank can prove that the securi-
ties can be sold for that market price.For debt and equity securities traded on the public market, fair
values are equal to the price on the public market of OECD count-ries, if, at the same time, the condition of securities liquidity is fulfil-led.
If it is not possible to determine the fair value as the market va-lue (i.e. the bank can not prove that it is possible to sell the securi-ties for such a market price), the fair value is estimated as an adjus-ted value of securities.
The adjusted value of securities equals the share proportion ofequity for shares, the share proportion of the fund’s net asset valuefor units, and the present value of the security for debt securities.
Adjustments are established to debt securities held to maturity.Adjustments to these securities are created by an amount that ref-lects only the change in the risk of the issuer, but not the change inrisk-free interest rates, calculated on an individual basis.
Transactions where securities are purchased under a commit-ment to resell (resale commitment) are treated as collateralised lending transactions. The legal title of securities subject to resale orrepurchase commitments is transferred to the lender. Securities rece-ived under a resale commitment are recorded in off-balance sheetaccounts in “Collaterals and pledges received”. The lending grantedunder a resale commitment is recorded in ‘Receivables from banksand cooperative savings associations’ or ‘Receivables from custo-mers - cooperative savings association’s members.’ Interest on debtsecurities received under a resale commitment is not accrued.
Income arising under resale commitments as the differencebetween the selling and purchase price is accrued over the periodof the transaction and recorded in the profit and loss account as“Interest income and other similar income”.
c) Participation interests with substantial influenceA participation interest with substantial influence is one in
which the bank holds at least 20 per cent of the subject’s registeredcapital. In this case, the bank has substantial influence over thesubject’s management, which arises from participation in registered capital, or from agreement or articles of association regardless of the percentage of participation.
Participation interests with substantial influence are valued atacquisition cost net of adjustments due to the temporary decreasein the value of the participation interests calculated on an individual basis.
d) Receivables from banks and customers Receivables are carried net of adjustments. Accrued interest
income is part of the carrying amount of receivables. Receivables are reviewed for recoverability. Adjustments are
created for specific receivables as considered appropriate. Themethodology for creating adjustments in the appropriate accoun-ting period is described in note 29. Adjustments created by debitingexpenses are reported in “Write-offs, creation and use of adjust-ments and reserves to receivables and guarantees” in the sub-led-gers used to calculate the income tax liability.
The tax-deductible portion of the period charge for the creationof adjustments for credit losses is calculated in accordance withthe requirements of section 5 (“Banking reserves and adjustments”)and section 8 (“Adjustments to receivables from debtors subject tobankruptcy or composition proceedings”) of the Act on Reserves N. 593/1992 Coll.
Receivables are written off when the bank has determined thereceivable to be permanently irrecoverable.
The write off of unrecoverable receivables is accounted for in“Write-offs, creation and use of adjustments and reserves to recei-vables and guarantees” in the profit and loss account. Adjustmentsand reserves are reduced in an equal amount to the amount writ-ten off in the same account in the profit and loss account.Recoveries of loans previously written off are included in the profitand loss account in “Release of adjustments and provisions for re-ceivables and guarantees, income from written-off receivables”.
The bank also accrues interest income from classified recei-vables. Adjustments to accrued interest income are established inaccordance with the appropriate requirement of the ČNB.
Receivables from customers purchased from a third party areinitially recorded at the discounted value of the gross receivableactually due under the contracts with the customers. To the extentthat a customer repays any portion of the receivable in excess ofthe discounted value originally assigned to the receivable, this dif-ference is recorded as operating income.
e) Creation of provisionsA provision represents a probable cash outflow of uncertain ti-
ming and amount. Provisions are established if the following crite-ria are met:
• a present obligation exists (legal or factual) as a result of apast event,
• it is probable that an outflow of resources will be required tosettle the obligation; “probable” meaning a probability excee-ding 50%
• the amount of the obligation can be reliably estimated.
f) Intangible and tangible fixed assets Tangible and intangible fixed assets are stated at historical
cost and are depreciated using the straight-line method over theirestimated useful lives as shown in the following table.
Software 5 years
Cars 4 years
Technical improvement of buldings 10 years
Furniture 10 years
Equipment 5 years
Establishment costs - other intangible fixes assets 5 years
PCs and servers 3 years
Leasehold improvements are depreciated on a straight-line ba-sis over the shorter of the lease term or the relevant asset’s remai-ning useful livetime.
Intangible fixed assets costing less than CZK 60 000 and tan-gible fixed assets costing less than CZK 40 000 with a useful lifetimeof less than 1 year are charged to the profit and loss account in theperiod in which they are acquired.
g) Foreign currency translation Transactions denominated in foreign currencies are recorded
in the local currency at the actual exchange rate on the date of thetransaction. Assets and liabilities denominated in foreign currenciestogether with unsettled spot foreign exchange transactions aretranslated into the local currency at the ČNB foreign exchange rateprevailing on the balance sheet date. Foreign exchange gains orlosses arising from the translation of assets and liabilities denomi-nated in foreign currencies are recognized in the profit and loss
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK 51
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK52
account in “Gain or loss from financial operations”.
h) Financial derivativesTrading instruments
Financial derivatives held for trading are carried at fair value.Gains (losses) from the changes in fair value are recorded in theprofit and loss account in “Gain or loss from financial operations”.
The bank uses all of its trading financial derivatives for macro-hedging purposes.
The fair value of financial derivatives is determined as the present value of expected cash flows from these transactions,using valuation models generally accepted on the market. The parameters used in these models, such as foreign exchange rates,yield curves, volatility of financial instruments, etc. are derived fromthe market.
i) Taxation Tax non-deductible expenses are added to and non-taxable
income is deducted from the profit for the period to arrive at the taxable income which is further adjusted by tax allowances and relevant credits.
Deferred tax is provided on all temporary differences betweenthe carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for taxation purposes multipliedby the enacted income tax rate for the period when the timing difference is expected to reverse. A deferred tax asset is recognizedonly to the extent that there are no doubts that there will be futuretaxable profits available against which this asset can be utilized.
j) Financial leasingAssets acquired under financial leases are recorded in
“Tangible fixed assets” when the legal ownership is transferred tothe bank. Lease payments are recorded in “Other operating expenses”.
3. CHANGES IN ACCOUNTING POLICIES
In 2005, the bank changed the method of recognizing revenuerelated to insolvency insurance (a product of the Cardif Pro Vita insurance company). In 2004, the bank used the gross method forrecognizing income from the Cardif insurance and related expenses, while since 2005, due to an amendment to the agreement signed by the bank and the Cardif Pro Vita insurancecompany, the bank has been recognizing Cardif insurance in“Other operating income” in the net amount only.
The comparative figures for 2004 have been changed accordingly. An amount of TCZK 270 864 has been moved from“Commission and fee income” to “Other operating income”. A further amount of TCZK 105 105 has been moved from“Commission and fee expense” to “Other operating income”. The overall impact of the above mentioned movements on retainedearnings is zero.
4. NET INTEREST INCOME
CZK 000 2005 2004
Interest income 4 657 295 4 293 912
from deposits 72 992 56 325
from loans 4 561 249 4 017 671
from debt securities 23 054 219 916
Interest expense (208 260) (236 861)
from deposits (206 043) (233 975)
from loans (2 217) (2 886)
Net interest income 4 449 035 4 057 051
The bank waived or did not claim default interest of TCZK 11012 (2004: TCZK 7 950).
5. INCOME FROM SHARES AND PARTICIPATION INTERESTS
CZK 000 2005 2004
Income from dividends
and participation interests 173 156 496
Total 173 156 496
6. FEES AND COMMISSIONS
CZK 000 2005 2004
Fee and commission income from
payment processing 425 397 547 605
lending activities 1 900 197 1 536 122
other 235 411 228 440
Total 2 561 005 2 312 167
Fee and commission expense from
payment processing (166 885) (262 069)
other (148 970) (26 260)
Total (315 855) (288 329)
7. GAIN OR LOSS FROM FINANCIAL OPERATIONS
CZK 000 2005 2004
Gains/losses from securities transactions 2 565 (1 381)
Gains/losses from derivative transactions (60 103) (69 914)
Gains/losses from foreign exchange
transactions 66 766 55 498
Foreign exchange gains / losses 109 811 130 474
Total 119 039 114 677
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK 53
8. OTHER OPERATING INCOME AND EXPENSES
CZK 000 2005 2004
Other operating income 646 669 812 057
Service revenues 32 032 115 796
Commissions from third parties 88 982 70 103
Rent 42 554 33 421
Sale of fixed assets 5 614 8 343
Damages 538 218
Income related to purchased loans 685 17 026
Correction 183 181 395 048
Cardif insurance 255 656 165 759
Other 37 427 6 343
Other operating expenses 32 213 205 088
Royalties 85 358 73 616
Deposit insurance 44 951 89 015
Withholding tax 9 587 9 587
Tax penalty (123 173) 0
Other 15 490 32 870
In 2005, the central financial office of Prague 1 cancelled theadditional tax assessment covering the period 1998-2000 (see Note27 a). Consequently, the associated penalties of TCZK 123 173 werealso cancelled.
9. ADMINISTRATIVE EXPENSES
CZK 000 2005 2004
Employee expenses 1 261 556 1 226 646
Wages and salaries 932 997 906 517
Social and health insurance 328 559 320 129
Of which wages and salaries paid to:
Members of the Board of Directors
and executives 17 207 28 436
Members of the Supervisory Board 0 0
Other administrative expenses 1 932 199 1 727 813
of which expenses for audit,
legal and tax advisory 22 058 28 197
Total 3 193 755 2 954 459
The bank did not pay any bonuses tied to equity in 2005 and2004.
The average number of bank employees during the period wasas follows:
2005 2004
Employees 2 028 2 056
Members of the Board of Directors 4 4
Members of the Supervisory Board 3 3
Other Executives 15 15
10. INCOME AND EXPENSES RESULTING FROMPARTICIPATION INTERESTS WITH SUBSTANTIALINFLUENCE
CZK 000 2005 2004
Fee and commission expense 21 916 8 865
Total 21 916 8 865
11. TRANSACTIONS WITH RELATED PARTIES
CZK 000 2005 2004
Receivable 1 088 604 1 053 362
Payable 88 066 275 206
Income 256 644 180 117
Expense 392 911 421 771
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK54
12. INCOME AND EXPENSES ACCORDING TO SEGMENT
a) Business segments
Retail Banking Corporate Banking
CZK 000 2005 2004 2005 2004
Interest income 3 405 147 3 033 012 1 252 148 1 260 900
Interest expense (143 135) (157 105) (65 125) (79 756)
Fee and commission income 2 043 957 1 724 098 517 048 588 069
Fee and commission expenses (290 834) (256 846) (25 021) (31 483)
Gains or losses from financial operations 52 964 51 023 66 075 63 654
b) Geographical segments
Czech Republic European union Other
CZK 000 2005 2004 2005 2004 2005 2004
Interest income 4 621 260 4 264 638 16 062 13 010 19 973 16 264
Interest expense (206 649) (235 222) (718) (765) (893) (874)
Fee and commission income 2 541 190 2 293 611 8 832 7 790 10 983 10 766
Fee and commission expense (313 411) (285 595) (1 089) (1 039) (1 355) (1 695)
Gains or losses from financial operations 118 118 112 787 411 822 510 1 068
13. RECEIVABLES FROM BANKS
a) Analysis of receivables from banks
CZK 000 2005 2004
Standard 11 186 700 13 253 702
Net receivables from banks 11 186 700 13 253 702
b) Analysis of receivables from banks by type of securityreceived
CZK 000 2005 2004
Security held by the bank 7 648 832 11 364 463
Unsecured 3 537 868 1 889 239
Total 11 186 700 13 253 702
14. RECEIVABLES FROM CUSTOMERS
a) Analysis of receivables from customers
CZK 000 2005 2004
Standard 43 314 097 34 038 646
Special mentioned 3 530 476 2 352 806
Sub-standard 1 075 496 914 807
Doubtful 351 236 285 783
Loss 5 140 954 4 252 978
Adjustment to potential losses
from receivables (5 515 755) (4 606 488)
Net receivables from customers 47 896 504 37 238 532
During 2005 the bank created an adjustment of TCZK 325 796(2004: TCZK 264 618) to the portfolio of consumer loans, bringingthe total adjustments created on a portfolio basis to TCZK 1 832987 (2004: TCZK 1 792 667). The bank determined the amount ofthese adjustments using a statistical model derived from its pastexperience of overdue receivables (see Note 30 d). During 2005 thebank restructured receivables from customers totalling TCZK 56483 (2004: TCZK 146 755)
b) Analysis of receivables from customers by sector
CZK 000 2005 2004
Financial institutions 301 477 362 142
Non-financial institutions 12 589 079 9 950 722
Insurance institutions 1 572 26
Government sector 52 938 75 533
Non-profit organisations 39 933 11 509
Self-employed 6 671 859 5 670 039
Resident individuals 33 752 003 25 771 415
Non-residents 3 398 3 634
Total 53 412 259 41 845 020
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK 55
c) Analysis of receivables from customers by sector and type of security received
As at 31 December 2005
Personal Bank Performance Bill of Held CZK 000 guarantee guarantee Mortgage guarantee exchange by Bank Unsecured Total
Financial institutions 0 0 227 248 720 0 0 73 509 301 477
Non financial institutions 3 054 52 484 9 254 188 141 512 2 46 571 3 091 268 12 589 079
Insurance institutions 0 0 1 456 0 0 0 116 1 572
Government sector 0 0 42 176 0 0 0 10 762 52 938
Non profit organizations 0 0 30 577 0 0 0 9 356 39 933
Self employed 0 17 226 4 266 169 62 636 6 13 468 2 312 354 6 671 859
Resident individuals 1 0 8 056 706 3 026 0 0 25 692 270 33 752 003
Non resident individuals 0 0 0 0 0 0 3 398 3 398
Total 3 055 69 710 21 878 520 207 894 8 60 039 31 193 033 53 412 259
As at 31 December 2004
Personal Bank Mortgage Performance Bill of Held UnsecuredCZK 000 guarantee guarantee guarantee exchange by Bank Total
Financial institutions 0 0 11 577 0 0 0 350 565 362 142
Non financial institutions 300 17 662 8 318 407 158 568 2 94 995 1 360 788 9 950 722
Insurance institutions 0 0 0 0 0 0 26 26
Government sector 0 0 56 376 1 000 0 0 18 157 75 533
Non profit organizations 0 0 1 522 0 0 244 9 743 11 509
Self employed 0 2 519 2 725 412 82 715 4 29 839 2 829 550 5 670 039
Resident individuals 16 0 5 792 671 0 0 0 19 978 728 25 771 415
Non resident individuals 0 0 0 0 0 0 3 634 3 634
Total 316 20 181 16 905 965 242 283 6 125 078 24 551 191 41 845 020
d) Net receivables from customers written-off and recovered
CZK 000 2005 2004
Write-offs
Non-financial institutions 113 956 217 796
Self-employed 4 102 25 823
Resident individuals 138 247 59 665
Non-residents 117 12
Total 256 422 303 296
Recoveries
Non-financial institutions 46 882 142 614
Self-employed 9 259 0
Resident individuals 374 2 747
Total 56 515 145 361
e) Receivables from persons with a special relationship to thebank
Board of Supervisory
CZK 000 directors Executives board
At 31 December 2004 3 242 11 617 0
At 31 December 2005 3 107 14 677 384
These receivables represent loans provided under standard employee conditions.
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK56
15. STATE ZERO COUPON BONDS AND OTHERSECURITIES ELIGIBLE FOR REFINANCING WITHTHE ČNB
a) Net book value of state zero coupon bonds and othersecurities eligible for refinancing with the ČNB
CZK 000 2005 2004
State treasury bills 490 148 4 078 227
Net book value 490 148 4 078 227
As at 31 December 2005 the bank held State zero couponbonds under resale commitments with a market value of TCZK 7648 832 (2004: TCZK 11 364 463), which are reported in the off-ba-lance sheet in “Collaterals and pledges received”.
b) Analysis of State zero coupon bonds and other securities eligible for refinancing with the ČNB by individual portfoliobased on the bank’s intention
CZK 000 2005 2004
State zero coupon bonds and other
securities available-for-sale 490 148 4 078 227
Net book value 490 148 4 078 227
16. SHARES, UNITS AND OTHER INVESTMENTS
a) Analysis of shares, units and other investments by individualportfolio based on the bank’s intention
CZK 000 2005 2004
Shares, units and other investments
available-for-sale 39 027 16 105
Net book value 39 027 16 105
b) Analysis of shares, units and other investments available forsale
Book Value
CZK 000 2005 2004
Issued by financial institutions
- Unlisted 18 698 15 724
Issued by non-financial institutions
- Unlisted 20 329 381
Total 39 027 16 105
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK 57
17. PARTICIPATION INTERESTS WITH SUBSTANTIAL INFLUENCE
CZK 000 OtherRegistered Business Registered categories Share Share of
Name office activity capital of equity in equity voting rights Book value
At 31 December 2005
Czech Banking Credit Bureau, a.s. Víta Nejedlého 509/15 service databank
Praha 3 SW, HW and network 1200 910 20% 20% 240
Total 1200 910 240
At 31 December 2004
Czech Banking Credit Bureau, a.s. Víta Nejedlého 509/15 service databank
Praha 3 SW, HW and network 1200 2 20% 20% 240
Total 1200 2 240
18. INTANGIBLE FIXED ASSETS
a) Movements in intangible fixed assets
Establishment Assets not Minor intangibleCZK 000 Software Cost yet in use fixed assets Total
Costs
As at 1 January 2004 908 181 2 045 22 446 0 932 672
Additions 141 514 0 166 739 207 308 460
Disposals (968) 0 (138 226) (149) (139 343)
As at 31 December 2004 1 048 727 2 045 50 959 58 1 101 789
As at 1 January 2005 1 048 727 2 045 50 959 58 1 101 789
Additions 116 631 0 105 193 0 221 824
Disposals (16 851) 0 (116 632) (58) (133 541)
As at 31 December 2005 1 148 507 2 045 39 520 0 1 190 072
Amortization and Adjustments
As at 1 January 2004 695 714 1 943 0 0 697 657
Charge for the period 148 795 102 0 0 148 897
Disposals (921) 0 0 0 (921)
As at 31 December 2004 843 588 2 045 0 0 845 633
As at 1 January 2005 843 588 2 045 0 0 845 633
Charge for the period 109 338 0 0 0 109 338
Disposals (15 270) 0 0 0 (15 270)
As at 31 December 2005 937 656 2 045 0 0 939 701
Net book value
As at 31 December 2004 205 139 0 50 959 58 256 156
As at 31 December 2005 210 851 0 39 520 0 250 371
b) Establishment costs The bank’s first year of operations was 1998 and it capitalized the following establishment costs incurred during the period between its
foundation and incorporation: travel expenses of TCZK 181 and other costs of CZK 1,864 million. Establishment costs were amortised over 5 years.
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK58
19. TANGIBLE FIXED ASSETS
a) Movements in tangible fixed assets
Furniture Low value tangible Land and Buildings Other Fixed Assets CZK 000 Land and Buildings and Fittings Equipment fixed assets not yet in use not yet in use Total
Cost
As at 1 January 2004 250 964 140 067 1 033 186 624 15 649 13 854 1 454 344
Additions 32 754 22 302 235 434 28 941 49 917 297 916 667 264
Disposals (4 834) (11 272) (39 736) (18 227) (32 754) (257 736) (364 559)
As at 31 December 2004 278 884 151 097 1 228 884 11 338 32 812 54 034 1 757 049
As at 1 January 2005 278 884 151 097 1 228 884 11 338 32 812 54 034 1 757 049
Additions 74 032 38 509 178 776 21 476 43 657 171 310 527 760
Disposals (4 810) (14 299) (127 057) (22 493) (74 032) (217 284) (459 975)
As at 31 December 2005 348 106 175 307 1 280 603 10 321 2 437 8 060 1 824 834
Amortization and Adjustments
As at 1 January 2004 69 517 56 229 607 916 0 0 0 733 662
Charge for the period 32 211 25 197 181 025 0 0 0 238 433
Disposals (2 534) (2 095) (52 187) 0 0 0 (56 816)
As at 31 December 2004 99 194 79 331 736 754 0 0 0 915 279
As at 1 January 2005 99 194 79 331 736 754 0 0 0 915 279
Charge for the period 38 249 26 441 192 790 0 0 0 257 480
Disposals (2 716) (11 169) (111 207) 0 0 0 (125 092)
As at 31 December 2005 134 727 94 603 818 337 0 0 0 1 047 667
Net book value
As at 31 December 2004 179 690 92 066 471 830 11 338 32 812 54 034 841 770
As at 31 December 2005 213 379 80 704 462 266 10 321 2 437 8 060 777 167
b) Tangible fixed assets held under finance leasesThe bank is committed to payments under finance leases for fixed assets (not included in the tangible fixed assets of the bank) as follows:
Total leaseDue within Due within Due in payments
CZK 000 Paid during 2005 1 year 1 to 5 years following years remaining
Office equipment 80 0 0 0 0
Other fixed assets 6 717 0 0 0 0
Total 6 797 0 0 0 0
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK 59
20. OTHER ASSETS
CZK 000 2005 2004
Other debtors 270 772 312 526
Other cash values 588 129 341 123
Clearing account for payments 149 078 0
Clearing accounts 1 847 1 179
Other 49 232
Positive fair value of derivates 914 8 683
Accruals 64 085 33 379
Deferred tax assets 107 344 345 226
Less: Adjustments (75 790) (128 500)
Total 1 106 428 913 848
21. DUE TO CUSTOMERS
a) Analysis of due to customers by sector
CZK 000 2005 2004
Due to customers on demand
Financial institutions 137 320 139 738
Non-financial institutions 7 891 966 6 551 658
Insurance institutions 43 873 6 716
Government sector 1 773 468 2 272 093
Non-profit organisations 755 959 661 363
Self-employed 5 798 613 5 423 584
Resident individuals 17 062 937 15 433 533
Non-residents 365 633 359 281
Total 33 829 769 30 847 966
Due to customers with fixed maturity
Financial institutions 37 073 44 570
Non-financial institutions 1 948 136 1 818 953
Insurance institutions 72 438 76 194
Government sector 275 411 286 698
Non-profit organisations 236 216 256 251
Self-employed 536 444 541 593
Resident individuals 7 904 204 8 520 474
Non-residents 87 776 91 604
Total 11 097 698 11 636 337
Due to customers with a notice period
Non-financial institutions 0 40
Self-employed 844 1 786
Resident individuals 2 461 794 2 928 246
Non-residents 10 153 13 870
Total 2 472 791 2 943 942
Total 47 400 258 45 428 245
b) Due to persons with a special relationship to the bank
Board of SupervisoryCZK 000 directors Executives board
At 1 January 2004 2 856 7 632 2 839
Additions 1 100 8 275 459
At 31 December 2004 3 956 15 907 3 298
At 1 January 2005 3 956 15 907 3 298
Additions 0 0 841
Disposals (268) (9 027) 0
At 31 December 2005 3 688 6 880 4 139
c) Due to participation interests with substantial influence The bank had no amounts due to participation interests with
substantial influence as at 31 December 2005 or as at 31 December 2004.
22. OTHER LIABILITIES
CZK 000 2005 2004
Other creditors 779 431 987 661
Other payables 399 757 428 968
of which:
Accruals 359 980 303 916
Other payables to clients 1 698 12 085
Fair value of fixed term contracts 37 980 94 628
Clearing technical account 99 18 134
Others 0 205
Total 1 179 188 1 416 629
Other creditors includes CZK 327 million payable to GE CapitalInternational Holdings Corporation as at 31 December 2005 (2004:CZK 327 million). GE Capital International Holdings Corporation in-tends to use this amount to increase the bank’s registered capital.
23. REGISTERED CAPITAL
In order to establish the bank, GE Capital International HoldingsCorporation subscribed 500 shares of original capital each with anominal value of CZK 1 000 000 for which it paid CZK 2 000 million.
During 1998 the bank issued 10 ordinary shares each with a nominal value of CZK 1 000 000. Each share was issued at a premium of CZK 1 970 750 thousand and was fully paid up. Theincrease in registered capital was recorded in the CommercialRegister on 25 March 2003. From 25 March 2003 the registered capital of GE Money Bank, a.s. is CZK 510 million.
During 2005 the bank did not issue any ordinary shares.
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK60
The shareholders of the bank as at 31 December 2005 are:
Name Seat Number Ownership %
GE Capital
Int'l Holding United States 510 100
Total 510 100
No person with a special relationship to the bank held any shares as at 31 December 2005 or 31 December 2004.
24. RESERVES AND ADJUSTMENTS FOR POSSIBLECREDIT LOSSES
a) Reserves for possible credit and guarantee losses
CZK 000 2004
Tax deductible reserves for credit losses
Balance as at 1 January 2004 1 669
Created during the current year 1 608
Guarantees 1 608
Used during the current year 0
Standard loans 0
Guarantees 0
Release of reserves no longer considered necessary (516)
Balance of tax deductible reserves as at 31 December 2004 2 761
Non tax deductible reserves for credit losses
Balance as at 1 January 2004 2 004
Created during the current year 10 152
Guarantees 10 152
Used during the current year 0
Standard loans 0
Guarantees 0
Release of reserves no longer considered necessary (470)
Balance of non tax deductible reserves as at 31 December 2004 11 686
Total 14 447
CZK 000 2005
Tax deductible reserves for credit and guarantee losses
Balance as at 1 January 2005 2 761
Created during the current year 0
Guarantees 0
Used during the current year 0
Standard loans 0
Guarantees 0
Release of reserves no longer considered necessary (356)
Balance of tax deductible reserves as at 31 December 2005 2 405
Non tax deductible reserves for credit and guarantee losses
Balance as at 1 January 2005 11 686
Created during the current year 0
Guarantees 0
Used during the current year 0
Standard loans 0
Guarantees 0
Release of reserves no longer considered necessary (1 568)
Balance of non tax deductible reserves as at 31 December 2005 10 118
Total 12 523
b) Adjustments to classified receivables
CZK 000 2004
Tax deductible adjustments for credit losses
Balance as at 1 January 2004 411 232
Created during the current year 658 667
Used during the current year (63 196)
Write-off of loans and advances (63 196)
Cover of losses from loans sold 0
Release of adjustments no longer considered necessary (23 344)
Balance of tax deductible adjustments as
at 31 December 2004 983 359
Non tax deductible adjustments for credit losses
Balance as at 1 January 2004 3 374 683
FX rate differences (7 195)
Created during the current year 596 201
Used during the current year (326 890)
Write-off of loans and advances (18 215)
Cover of losses from loans sold (308 675)
Release of adjustments no longer considered necessary (13 670)
Balance of non tax deductible adjustments as
at 31 December 2004 3 623 129
Total adjustments for credit losses as at 31 December 2004 4 606 488
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK 61
CZK 000 2005
Tax deductible adjustments for credit losses
Balance as at 1 January 2005 983 359
Created during the current year 899 845
Used during the current year (113 639)
Write-off of loans and advances (29 542)
Cover of losses from loans sold (84 097)
Release of adjustments no longer considered necessary (125 954)
Balance of tax deductible adjustments as
at 31 December 2005 1 643 611
Non tax deductible adjustments for credit losses
Balance as at 1 January 2005 3 623 129
FX rate differences 1 555
Created during the current year 622 918
Used during the current year (202 377)
Write-off of loans and advances (90 916)
Cover of losses from loans sold (111 461)
Release of adjustments no longer considered necessary (173 081)
Balance of non tax deductible adjustments as
at 31 December 2005 3 872 144
Total adjustments for credit losses 5 515 755
c) Other adjustments to losses from receivables (tax non-deductible)
CZK 000 2004
Balance as at 1 January 2004 126 642
Created during the current year 14 783
Used during the current year 0
Release of adjustments no longer considered necessary (12 925)
Balance of other adjustments as at 31 December 2004 128 500
CZK 000 2005
Balance as at 1 January 2005 128 500
Created during the current year 8 745
Used during the current year (1 196)
Release of adjustments no longer considered necessary (60 259)
Balance of other adjustments as at 31 December 2005 75 790
26. VALUATION DIFFERENCES
CZK 000 Available for sale securities
Balance at 1 January 2005 0
Decrease (1 570)
Increase 1 973
Balance at 31 December 2005 403
25. RETAINED EARNINGS, RESERVE FUNDS AND OTHER FUNDS ALLOCATED FROM PROFIT
The bank proposes to allocate the 2005 profit as follows:
Capital funds and otherCZK 000 Profit Retained earnings Statutory reserve fund funds from profit
Balance at 31 December 2005 before
allocation of 2005 profit 7 584 005 102 000 4 701 979
Profit for the year 2005 2 672 698
Proposed allocation of 2005 profit:
Transfer to retained profits (2 672 698) 2 672 698
10 256 703 102 000 4 701 979
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK62
27. INCOME TAX AND DEFERRED TAX ASSET / LIABILITY
a) Current income taxDuring 2002 the Financial Authority conducted a tax inspection
covering the years 1998-2000. As a result of the inspection theFinancial Authority assessed the bank additional taxes of TCZK 114494 for 1999. In 2005, the central financial office of Prague 1 cancelled the additional tax assessment made in 2001. As a result,the above mentioned additional tax assessment has been cancelled.
b) Deferred tax liability / assetDeferred income taxes are calculated on all temporary
differences using the tax rate for the year in which the difference isexpected to reverse.
Deferred income tax assets and liabilities are attributable to thefollowing items:
CZK 000 2005 2004
Deferred tax assets 554 423 1 028 772
Credit provisions 535 890 378 381
Tax loss carry-forward 0 508 839
Tangible and intangible fixed assets 10 760 141 552
Swap loss carry-forward 7 773 0
Deferred tax liability (447 079) (683 546)
Discounted loans receivable (447 079) (683 546)
Net deferred tax asset/(liability) 107 344 345 226
A deferred tax liability of TCZK 237 882 (2004: an asset of TCZK375 351) results from the change in the balance of the net deferredtax asset calculated as at 31 December 2005 compared with 31 December 2004.
c) Income tax expense
CZK 000 2005 2004
Deferred income tax 237 882 375 351
Cancellation of additional tax
assesment (see Note 27 a) (114 494) 0
Income tax expense 123 388 375 351
28. OFF-BALANCE SHEET
a) Irrevocable contingent liabilities arising from acceptancesand endorsements, other written contingent liabilities and assets pledged as collateral
CZK 000 2005 2004
Customers
Notes acceptances and endorsements 6 556 204 6 402 701
Payables resulting from guarantees 16 777 15 182
Letters of credit and financial guarantees 112 534 82 414
Total 6 685 515 6 500 297
b) Guarantees issued in favour of persons with a special relationship to the bank
The bank did not issue any guarantees in favour of personswith a special relationship to the bank as at 31 December 2005 oras at 31 December 2004.
c) Guarantees issued in favour of participation interests with substantial influence
The bank did not issue any guarantees in favour of parti-cipation interests with substantial influence as at 31 December2005 or as at 31 December 2004.
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK 63
29. FINANCIAL INSTRUMENTS – MARKET RISK
The bank is exposed to market risks arising from the open positions of transactions with interest rates, equity and currencyinstruments, which are sensitive to the changes in conditions on financial markets.
a) TradingThe bank holds trading positions in certain financial
instruments including financial derivatives. The bank’s businessstrategy is concentrated on closing open positions and it thereforepurchases and sells financial derivatives for macro-hedging purposes. The majority of financial assets are held to maturity.
The bank manages the risks associated with its trading activities at the level of individual risks and individual types of financial instruments. The basic instruments used for risk management are volume limits for individual transactions, stoploss limits and Value at Risk (VaR) limits. The quantitative methodsapplied to risk management are described in “Risk managementmethods” below.
The majority of derivatives are contracted on the OTC marketas a result of the non-existence of a public market for financial derivatives in the Czech Republic.
b) Risk managementThe selected risks to which the bank is exposed as a result of
its activities, the management of positions arising as a result ofthese activities and the bank’s approach to the management ofthese risks are described below. More details on the proceduresused by the bank to measure and manage these risks are providedin “Risk management methods”.
Liquidity riskLiquidity risk arises as a result of the type of financing of the
bank’s activities and management of its positions. It includes therisk that the bank is unable to finance its assets using instrumentswith appropriate maturity and the risk that the bank’s is unable todispose of / sell its assets for an appropriate price within an appropriate time frame.
The bank has access to diversified sources of funds, whichcomprise deposits and other savings, securities issued, loansaccepted and equity. This diversification makes the bank flexibleand limits its dependency on one financing source. The bank regularly evaluates its liquidity risk, in particular by monitoringchanges in the structure of its financing and comparing thesechanges with the bank’s liquidity risk management strategy, whichis approved by the bank’s board of directors. The bank also holds,as part of its liquidity risk management strategy, a portion of its assets in highly liquid funds, such as State treasury bills and similarbonds.
d) Off-balance sheet financial instruments
Contractual amounts Fair value
CZK 000 2005 2004 2005 2004
Trading instruments
Forward foreign exchange purchase contracts 44 828 0 (10) 0
Forward foreign exchange sale contracts (44 958) 0 (12) 0
Interest rate swap contracts 3 492 449 6 016 000 (37 044) (85 945)
Total (37 066) (85 945)
e) Residual maturity of financial derivatives
Without CZK 000 Up to 3 months 3 mths to 1 year 1 year to 5 years Over 5 years specification Total
At 31 December 2005
Trading instruments
Forward foreign exchange purchase contracts 44 828 0 0 0 0 44 828
Forward foreign exchange sale contracts (44 958) 0 0 0 0 (44 958)
Interest rate swap contracts 19 949 1 071 000 2 401 500 0 0 3 492 449
At 31 December 2004
Trading instruments
Interest rate swap contracts 34 000 533 800 5 448 200 0 0 6 016 000
f) Borrowing facilities
The bank has available overdraft facilities of up to USD 100 million from ABN AMRO Bank N. V. in accordance with agreement No 98/50000004BM/1 dated 1 July 1998.
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK64
Residual maturity of the bank’s assets and liabilities
Without CZK 000 Up to 3 months 3 mths to 1 year 1 year to 5 years Over 5 years specification Total
At 31 December 2005
Cash and deposits with CB 1 782 546 0 0 0 530 668 2 313 214
State zero coupon bonds 0 490 148 0 0 0 490 148
Receivables from banks 11 186 700 0 0 0 0 11 186 700
Receivables from customers 5 847 479 10 273 349 17 475 627 9 391 847 4 908 202 47 896 504
Shares, units 0 0 0 0 39 027 39 027
Participation interests with substantial influence 0 0 0 0 240 240
Other assets 106 393 749 131 0 0 1 278 442 2 133 966
Prepaid expenses and accrued income 0 0 0 0 103 368 103 368
Total 18 923 118 11 512 628 17 475 627 9 391 847 6 859 947 64 163 167
Due to customers 45 272 477 1 515 489 505 376 8 446 98 470 47 400 258
Other liabilities 711 010 1 698 0 0 16 050 088 16 762 796
Accrued expenses and deferred income 0 0 0 0 113 113
Total 45 983 487 1 517 187 505 376 8 446 16 148 671 64 163 167
Gap (27 060 369) 9 995 441 16 970 251 9 383 401 (9 288 724) 0
Cumulative Gap (27 060 369) (17 064 928) (94 677) 9 288 724 0 0
At 31 December 2004
Cash and deposits with CB 2 240 441 0 0 0 827 951 3 068 392
State zero coupon bonds 2 392 939 1 685 288 0 0 0 4 078 227
Receivables from banks 13 253 702 0 0 0 0 13 253 702
Receivables from customers 5 736 676 8 824 246 12 850 374 6 362 733 3 464 503 37 238 532
Shares, units and other investments 0 0 0 0 16 105 16 105
Participation interests with substantial influence 0 0 0 0 240 240
Other assets 102 874 365 499 0 0 1 543 401 2 011 774
Prepaid expenses and accrued income 0 0 0 0 114 699 114 699
Total 23 726 632 10 875 033 12 850 374 6 362 733 5 966 899 59 781 671
Due to customers 42 979 074 1 722 329 625 513 10 934 90 395 45 428 245
Other liabilities 1 010 424 25 033 0 0 13 293 603 14 329 060
Accrued expenses and deferred income 0 0 0 0 24 366 24 366
Total 43 989 498 1 747 362 625 513 10 934 13 408 364 59 781 671
Gap (20 262 866) 9 127 671 12 224 861 6 351 799 (7 441 465) 0
Cumulative Gap (20 262 866) (11 135 195) 1 089 666 7 441 465 0 0
The above table shows the residual maturity of the accounting value of the items, not the total expected cash flows.
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK 65
Interest rate riskThe bank is exposed to interest rate risk as a result of interest-
bearing assets and liabilities with different maturity dates, interestrate re-fixing periods and volumes during these periods. In the caseof variable interest rates, the risk arises from changes in the individual types of interest rates, such as Pribor, the announcedrate of interest on deposits, etc. The bank’s interest rate risk management activities are aimed at optimising net interest incomein accordance with the bank’s strategy approved by the board ofdirectors and minimising the risk of a loss.
Interest rate derivatives are generally used to manage the incongruity between the interest sensitivity of assets and liabilities.These transactions are carried out in accordance with the bank’sstrategy for the management of assets and liabilities approved bythe board of directors.
The carrying amounts of assets and liabilities and the nominal(notional) values of interest rate derivatives are recorded either inthe period in which they are due or in the period in which the interest rate changes, whichever occurs earlier. Certain assets or liabilities are allocated to individual periods on the basis of an expert judgement due to their expected repayment or non-definedmaturity dates.
Currency riskAssets and liabilities denominated in foreign currency including
off-balance sheet exposures represent the bank’s exposure to currency risks. Both realised and unrealised foreign exchange gainsand losses are reported directly in the profit and loss account.
c) Risk management methodsInterest rate risk
The bank uses an “interest rate sensitivity model“ to monitorthe interest rate risk, which measures the sensitivity to a change inmarket interest rates. The model is based on the classification of interest rate sensitive assets and liabilities into particular time peri-ods with regard to their maturity, meaning the residual maturity inthe case of fixed rate items or the re-pricing period, meaning theresidual re-pricing period in the case of floating rate items. The model comprises 1-month time periods up to 10 years and onetime period over 10 years.
The bank’s interest rate risk management strategy is based onthe “matched-funding” principle, under which the bank attempts tomaintain interest rate sensitive assets in an amount equal to the interest rate sensitive liabilities in each time period. Potential mismatches are caused by:
a) new interest rate sensitive assets;b) new interest rate sensitive liabilities;c) natural movement of interest rate sensitive assets from
one time period to another;d) natural movement of interest rate sensitive liabilities from
one time period to another.
The “Earnings-at Risk” model supplements the interest ratesensitivity model. This model quantifies the impact of various interest rate development on the bank’s earnings.
The bank does not enter into any speculative transactions.
Currency riskThe bank has set currency risk limits based on its net currency
exposure in individual currencies. The bank has determined a currency risk limit of 1% of the bank’s capital with respect to individual currencies and a limit of 5% of its capital with respect tothe total net currency exposure.
The bank does not enter into any speculative transactions.
Value at RiskThe bank applies the Value at Risk (“VAR”) method, to determine
the potential loss from an unfavourable movement on the marketwithin 1 day at a 99% confidence level. The VaR values are calcula-ted on a daily basis. The VaR method is used in addition to the “interest rate sensitivity model” in respect of the interest rate riskand in addition to the management of open positions in respect ofcurrency risk.
At 31 December Average forCZK 000 2005 2005
VaR of interest rate instruments 737 7 683
VaR of currency instruments 216 235
At 31 December Average forCZK 000 2004 2004
VaR of interest rate instruments 939 1 295
VaR of currency instruments 148 283
Stress TestingStress testing of interest and currency risk is carried out on a
regular basis using historical scenarios of important movements inthe financial markets and other internally defined improbable scenarios. The results of the testing show the impact of the scenarios on the bank’s profit and loss statement.
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK66
30. FINANCIAL INSTRUMENTS – CREDIT RISK
The bank is exposed to credit risks as a result of its trading activities, providing loans, hedging transactions, investment andmediation activities.
Credit risks associated with trading and investment activitiesare managed using the methods and instruments used to managethe bank’s market risks.
a) Classification of receivablesThe bank classifies receivables into individual categories in
accordance with ČNB decree No.9 issued on 6 November 2002,which sets out the rules for creating specific adjustments and provisions for receivables from financial services and the procedures for acquiring specific categories of assets. The classification is as follows:
Standard receivablesA standard receivable is a receivable about which there is no
doubt that it will be fully repaid. Principal, interest and fees are consistently paid and are not more than 30 days overdue. None ofthe receivables from the debtor have been restructured in the lasttwo years due to any deterioration in the debtor’s financial situa-tion. The following can also be considered as standard receivables:
• a receivable from a debtor who has, pursuant to a special regulation of the Czech National Bank, been assigned a zerorisk weight and where no payment of principal, interest orfees is more than 540;
• a receivable supported in full by high-quality security andwhere no payment of principal, interest or fees is more than540 days past the due payment date.
Special mentioned receivablesA special mentioned receivable is a receivable which, given the
financial and economic condition of the debtor, is likely to be fullyrepaid. Principal, interest and fees are paid, with some problems,but are no more than 90 days past the due date of payment. Noneof the receivables from the debtor has been restructured in the lastsix months due to any deterioration in its financial situation. Thefollowing can also be considered as special mentioned receivables:
• a receivable from a debtor who has, pursuant to a special regulation of the Czech National Bank, been assigned a zerorisk weight and where one or more payment of principal, interest or fees is more than 540 days;
• a receivable fully secured by a person who has, pursuant to a special regulation of the Czech National Bank, been assigned a zero risk weight and where one or more paymentsof principal, interest or fees is more than 540 days.
Substandard receivablesA substandard receivable is a receivable which, given the
financial and economic condition of the debtor, might not be fullyrepaid, but is most likely to be repaid in part. Principal, interest andfees are paid, with some problems, but are no more than 180 days
Doubtful receivablesA doubtful receivable is a receivable which, given the financial
and economic condition of the debtor, is unlikely to be fully repaid,but may be, and is likely to be, repaid in part. Principal, interest andfees are paid, with some problems, but are no more than 360 days.
Loss receivablesA “loss receivable” is a receivable which, given the financial and
economic condition of the debtor, cannot be fully repaid. The expectation is that such a receivable will not be recovered or will berecovered only in part and in only a very small amount. Principal,interest and fees are more than 360 overdue. The following are alsoconsidered as loss receivables:
• a receivable from a debtor in composition proceedings;• a receivable from a debtor who has been declared bankrupt,
except in the case of a receivable against assets arising afterthe declaration of bankruptcy..
This classification is maintained on a monthly basis. The maincriteria for classification are the following:
• the financial condition of the debtor and fulfillment of theagreed upon repayment schedules
• provision of requested information by the debtor• restructuring (or non restructuring) of the receivable• declaration of bankruptcy or compensation proceedings
In addition, the bank uses an internal rating system for receivables. This system comprises 9 categories, of which the firstseven correspond to the classification of standard receivables inaccordance with the ČNB’s classification. The other categories correspond to the categorisation in accordance with the ČNB’sclassification. The internal rating system also assesses, apart fromthe overdue period, the quality of management, market position ofthe debtor, external environment, collateral structure and financialratios and indicators, such as the balance sheet structure, operating cash flow, productivity, liquidity, etc.
The bank does not include the following receivables in theabove system of categorisation:
• consumer overdraft loans (Flexikredit) with accrued interest• unapproved overdrafts on current accounts
b) Evaluation of collateralThe bank generally requires collateral for loans granted to
certain debtors before the loans are provided. As acceptable collateral, which reduces the gross credit exposure for the purposeof calculating adjustments, the bank considers the following typesof collateral:
• Cash• Securities• First-class receivables• Bank guarantees• Guarantees provided by reputable third parties• Real estate• Machinery and equipment
The bank’s assessment of the net realisable value of the collateral is based on an expert appraisal or internal evaluationprepared by the bank’s specialist department. The net realisablevalue of the collateral is determined by applying a correction coefficient to this value, which reflects the bank’s ability to realisethe collateral when necessary. The bank updates the correction coefficients and the collateral value on a regular (half-yearly) basis.
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK 67
c) Calculation of adjustmentsWhen calculating adjustments, the bank considers the gross
book value of the individual receivables reduced by the net realisable value of the collateral. To these net receivables, whichare determined as described above, the bank creates the followingadjustments in accordance with ČNB Decree No. 9 issued on 6 November 2002:
• Special mentioned 1-19,99%• Sub-standard 20-49,99%• Doubtful 50-99,99%• Loss 100%
Adjustments for consumer overdraft loans are calculated usingthe results obtained from the Markov model (see Note 30 d).
In respect of sub-standard, doubtful and loss receivables, anadjustment to accrued interest of 100% is created in accordancewith ČNB Decree No. 9 issued on 6 November 2002, as amended.
d) Credit risk measurement models for consumer loansFor consumer loans, which are not written off in accordance
with US GAAP rules (based strictly on days overdue), credit risk ismonitored by the bank using models that enable prediction of future losses. The GRR (Gross Roll Rate) model is used for revolvingloans. The Markov model, which is based on Markov chain theory,is used for other types of loan. The Markov model, which is basedon Markov chain theory, is used for other types of loan. Future losses on loans, which are not written off in accordance with USGAAP rules, are predicted on the basis of loan movements betweenindividual model statuses (groups of accounts with similar characteristics). The parameters for the GRR model are based onthe previous year experience. The parameters for the Markov model are based on the previous two years’ experience. The modelparameters and future loss calculations are based on data in thebank’s database. The reserve calculation is based on expected future losses over the following 12-month period. These future los-ses are reduced by the expected payment amounts (recoveries) tobe received over the following 12-month period from loans alreadywritten off according to US GAAP rules.
e) Concentration of credit riskThe concentration of credit risk arises as a result of the
existence of loans with similar economic characteristics affectingthe debtor’s ability to meet his obligations. The bank treats a receivable from a debtor or an economically connected group ofdebtors that exceeds 3% of the bank’s capital as a significant exposure. The bank has created a system of internal limits for individual countries, industries and debtors in order to prevent significant concentrations of credit risk. At the balance sheet datethe bank did not have any significant concentration of credit riskwith respect to any individual debtor.
Sector analysisAn analysis of the concentration of credit risk according to
individual industries / sectors is included in Notes 13a, 14b and 14c.
Analysis by geographical areas
CZK 000 2005 2004
Czech Republic 64 538 629 55 037 143
Slovakia 5 436 5 854
Germany 21 619 12 170
Other 33 275 43 555
Total 64 598 959 55 098 722
Adjustments are not analysed by geographical area.
f) Claiming of debtors’ receivablesThe bank established a “Collections” department that manages
certain receivables, the recovery of which is threatened. This department undertakes the necessary legal steps, carries out restructuring of receivables, etc. in order to ensure the maximumrecovery, including the realization of collateral, and represents thebank on creditors’ committees if bankruptcy is imposed on thedebtors.
The collections department is divided into Early and LateCollections. The Early Collections division is responsible for managing the collection of receivables up to 90 days overdue.Upon expiry of this period the receivable is moved automatically tothe Late Collections department.
g) Quality of the credit portfolioThe quality of the credit portfolio is regularly monitored by the
bank's Risk Department on a monthly basis. The quality of thebank's portfolio is stable and the percentage of classified receivables is also stable at around 19%. The ratio of the commercial and retail portfolios to the total credit receivables is similar to that in prior years. The share of mortgages within thebank's total lending increased to 19% and it is expected that thistrend will continue in the future.
31. OPERATIONAL, LEGAL AND OTHER RISKS
The bank defines operational risk as the risk of possible lossesdue to the internal or external fraud, system outage, other externalevents or legal and documentary risks. Internal processes are controlled and improved on an ongoing basis by the bank’s InternalAudit department and through implementation of the requirementsof the Sarbanes Oxley Act.
Operational risks and information about related losses are managed and monitored on a delegated basis. Direct losses onproperty or losses influenced by employees are the responsibilityof the bank’s damage commission. External and internal fraud,their monitoring and prevention is carried out by the Anti FraudOfficer. The problems connected with IT systems failures are solvedby IT security and the impact of negative external events is minimized by physical security. The legal and documentation risk isminimized by standardization of legal conditions and by externallegal assessment of contracts with a significant impact on the banking portfolio.
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT GE MONEY BANK68
32. LITIGATION
Three lawsuits are currently pending against the bank as defendant, which contest the validity of the Agreement on the Saleof a Part of the Enterprise of Agrobanka Praha, a.s., dated 22 June,1998. In the case of Václav Sládek, a shareholder of AgrobankaPraha, a.s., in liquidation, and of the members of the SupervisoryBoard of Agrobanka Praha, a.s., in liquidation, the lawsuits are conducted for a declaration of invalidity of the Agreement. Thelawsuit conducted by HZ, spol. s r.o., the liquidator of AgrobankaPraha, a.s., in liquidation, is conducted for a declaration of validityof the Agreement. In all the lawsuits, the bank insists on, and hasfurnished the court with its position based on extensive legal analyses supporting the validity of the Agreement on the Sale of aPart of the Enterprise, and, in addition, has highlighted proceduraldefects on the side of the plaintiffs, which alone constitute groundsfor dismissing the actions. However, should the plaintiffs be successful in having the original purchase and sale contract declared null and void, the impact could have a significant impacton the bank’s financial position. At the date of preparation of the financial statements the impact of such an outcome is undeterminable, however the management is convinced that theplaintiffs are unlikely to be successful in their actions.
33. SUBSEQUENT EVENTS
There have been no events subsequent to the balance sheetdate that require adjustment of or disclosure in the financial state-ments or the notes thereto.
Sent: 7 April 2006
Responsible person for accountingName and signature: Lenka Huškovátel.: 22444 3335
Responsible person for financial statementsName and signature: Jana Janečkovátel.: 22444 2337
GE
Mon
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ank
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GE Money BankAnnual Report 2005