24th Mar 2006 14:57
Bank Pekao SA23 March 2006 14. Impairment Impairment IAS 39 Impairment Increase AdjustmentsYear 2005 at the end at the Impairment Foreign Other of beginning charges exchange previous of period during differences period period Impairment of thefinancial assets notvalued at the fairvalue through theprofit and loss:Financial instruments 16 811 - 16 811 - 2 646 -valued at cost (nonquoted equityinstruments and linkedderivativeinstruments)Financial assets 7 709 - 7 709 1 160 - -available for salevalued at fair valuethrough equity.Loans to clients and 3 780 452 287 504 4 067 956 1 357 741 51 981 13 575receivables from banksvalued at amortizedcostFinancial lease 250 753 - 250 753 43 200 - -receivablesInvestments held to 1 788 - 1 788 191 - -maturity valued atamortised costImpairment of:Tangible fixed assets 8 529 - 8 529 - - -Investment real estate 3 775 - 3 775 - - 15propertyIntangible assets 1 - 1 250 - -Goodwill - - - - - -Other intangible 1 - 1 250 - -assetsImpairment of the - - - 9 - -investments in theassociate and jointventure entitiesvalued using theequity methodOther 148 315 - 148 315 11 042 1 690 4 883 Total 4 218 133 287 504 4 505 637 1 413 593 56 317 18 473 DecreaseYear 2005 Write off Release of Foreign Other of assets the exchange from the provisions differences balance sheet Impairment of thefinancial assets notvalued at the fair valuethrough the profit andloss:Financial instruments - - (1 438) (6 503)valued at cost (non quotedequity instruments andlinked derivativeinstruments)Financial assets available - (501) - (744)for sale valued at fairvalue through equity.Loans to clients and (78 839) (1 131 807) (52 240) (263)receivables from banksvalued at amortized costFinancial lease (22 727) (31 813) - -receivablesInvestments held to - (1 783) (32) -maturity valued atamortised costImpairment of:Tangible fixed assets - - (135) (26)Investment real estate - - (202) -propertyIntangible assets - - - -Goodwill - - - -Other intangible assets - - - -Impairment of the - (742) - -investments in theassociate and jointventure entities valuedusing the equity methodOther - (4 563) - (18 189) Total (101 566) (1 171 209) (54 047) (25 725) Impairment charges Influence on the profit and balance at the end of loss statementYear 2005 the period Impairment of the financialassets not valued at thefair value through theprofit and loss:Financial instruments 11 516 -valued at cost (non quotedequity instruments andlinked derivativeinstruments)Financial assets available 7 624 659for sale valued at fairvalue through equity.Loans to clients and 4 228 104 225 934receivables from banksvalued at amortized costFinancial lease receivables 239 413 11 387Investments held to 164 (1 592)maturity valued atamortised costImpairment of:Tangible fixed assets 8 368 -Investment real estate 3 588 -propertyIntangible assets 251 250Goodwill - -Other intangible assets 251 250Impairment of the (733) (733)investments in theassociate and joint ventureentities valued using theequity methodOther 143 178 6 479 Total 4 641 473 242 384 Impairment IncreaseYear 2004 at the Impairment Foreign Other beginning charges during exchange of period differences previous period Impairment of thefinancial assets notvalued at the fair valuethrough the profit andloss:Financial instruments 20 974 - 2 060 -valued at cost (non quotedequity instruments andlinked derivativeinstruments)Financial assets available 13 088 452 - -for sale valued at fairvalue through equity.Loans to clients and 3 720 461 1 280 577 10 626 1 653receivables from banksvalued at amortized cost *Financial lease 260 839 41 919 - -receivablesInvestments held to 2 068 316 - -maturity valued atamortised costImpairment of:Tangible fixed assets 9 950 1 681 - 2 561Investment real estate 4 366 - - -propertyIntangible assets 1 - - -Goodwill - - - -Other intangible assets 1 - - -Impairment of the - 8 599 - -investments in theassociate and jointventure entities valuedusing the equity methodOther 120 338 48 883 - 5 524 Total 4 152 085 1 382 427 12 686 9 738 DecreaseYear 2004 Write off of Release of Foreign Other assets from the exchange the balance provisions differences sheet Impairment of thefinancial assets notvalued at the fair valuethrough the profit andloss:Financial instruments - (171) (6 052) -valued at cost (non quotedequity instruments andlinked derivativeinstruments)Financial assets available (567) - - (5 264)for sale valued at fairvalue through equity.Loans to clients and (109 411) (972 097) (105 780) (45 577)receivables from banksvalued at amortized cost *Financial lease (29 824) (22 181) - -receivablesInvestments held to - (316) (280) -maturity valued atamortised costImpairment of:Tangible fixed assets - - (390) (5 273)Investment real estate - - (591) -propertyIntangible assets - - - -Goodwill - - - -Other intangible assets - - - -Impairment of the - - - (8 599)investments in theassociate and jointventure entities valuedusing the equity methodOther - (7 051) (1 672) (17 707) Total (139 802) (1 001 816) (114 765) (82 420) Impairment charges Influence on the profit and balance at the end of loss statementYear 2004 the period Impairment of the financialassets not valued at thefair value through theprofit and loss:Financial instruments 16 811 (171)valued at cost (non quotedequity instruments andlinked derivativeinstruments)Financial assets available 7 709 452for sale valued at fairvalue through equity.Loans to clients and 3 780 452 308 480receivables from banksvalued at amortized cost *Financial lease receivables 250 753 19 738Investments held to 1 788 -maturity valued atamortised costImpairment of:Tangible fixed assets 8 529 1 681Investment real estate 3 775 -propertyIntangible assets 1 -Goodwill - -Other intangible assets 1 -Impairment of the - 8 599investments in theassociate and joint ventureentities valued using theequity methodOther 148 315 41 832 Total 4 218 133 380 611 Write-downs and write-backs related to impairment of loans, advances and otherfinancial assetss and impairment reverse are presented in the profit and lossaccount under "Net impairment losses on financial assets and provisions forguarantees and commitments". Write-downs for depreciation of other assets arepresented under other operating expenses, reversals of write-downs fordepreciation of other assets are presented under other operating income. 15. Discontinued operations In 2005 and 2004 the Group did not discontinue any of its operations. 16. Share of profit (loss) of associates and joint venture entitiesvalued at the equity method 2005 2004 Entity name Xelion. Doradcy Finansowi Sp. z o. o (11 461) (11 111)Pioneer Pekao Investment Management S.A. 51 811 36 080Krajowa Izba Rozliczeniowa S.A. 6 460 7 226Central Poland Fund LLC (3 741) 872Other entities 1 108 3 090 Total 44 177 36 157 17. Income tax Reconciliation between tax calculated by applying the current tax rate toaccounting gross profit and the actual tax charge presented in the profit andloss account. 2005 2004 Gross Profit 1 873 599 1 527 463Tax at applicable tax rate at 19% 355 984 290 218Tax effect of the permanent differences (17 237) (77 213)Non taxable income (32 657) (38 838)Non tax deductible costs 13 645 16 322Impact of other tax rates applied under a (1 189) (4 722)different tax jurisdiction Impact of utilised tax losses (1 491) (2 575)Tax allowances not included in the profit 2 897 (45 671)and loss account Other 1 558 (1 729)Income tax 338 747 213 005 The applicable tax rate at 19% is the binding in Poland corporate income taxrate. The basic components of income tax charge presented in the profit and lossaccount. Year 2005 Year 2004 Consolidated profit and loss account Current income tax (426 285) (274 229) Current tax charge (407 559) (270 770) Adjustments related to the tax from previous years 683 4 392 Other taxes (for example: withholding tax, income (19 409) (7 851) tax relating to foreign branches) Deferred income tax 87 538 61 224 Due to the occurrence and reversal of timing 87 970 15 267 differences Due to the changes in the tax rates and new tax - 45 000 charges The amount of benefit resulting from not previously (37) 957 enclosed tax loss, tax relief or timing differences from previous years aiming at reducing the current tax charge The tax charge resulting from partial or entire (395) - write off or reversal of prior write-offs of the deferred tax assets connected with the probability of taxable income realisation Tax charge disclosed in the consolidated profit and (338 747) (213 005) loss account Deferred income tax (25 213) (30 302) Due to the occurrence and reversal of timing (25 213) (30 302) differences Tax charge disclosed in the consolidated equity (25 213) (30 302) Total (363 960) (243 307) Deferred income tax assets/liabilities Consolidated balance Consolidated profit sheet and loss account 31.12.2005 31.12.2004 31.12.2005 31.12.2004 Deferred tax liability Income receivable from the 139 540 221 693 (82 153) 17 168 securities Income receivable from the loans 266 724 281 970 (15 247) (4 317) given Upward revaluation of the 101 243 68 572 9 577 (41 209) financial assets Accelerated depreciation 109 135 78 788 30 758 33 119 Investment relief 9 037 10 267 (1 230) (5 810) Other 14 178 7 503 6 797 682 Gross deferred tax liability 639 857 668 793 (51 498) (367) Deferred tax asset Future costs related to securities 20 972 14 118 6 854 8 682 Future costs related to deposits 229 669 249 876 (20 206) (16 991) and loans received Unrealized losses on financial 102 683 87 030 17 772 (9 648) assets Income received to be accounted 61 390 25 574 6 246 25 328 for over time from the loans and current accounts Costs due to the loan provisions 286 513 263 769 22 744 63 589 charges Personnel costs provisions 57 448 51 782 5 624 4 590 Accruals 7 862 1 971 6 321 (7 712) Uncovered losses from previous 26 205 19 692 6 513 (2 114) years Other 22 426 38 397 (15 828) (4 867) Gross deferred tax assets 815 168 752 209 36 040 60 857 Deferred tax charge X X 87 538 61 224 Net deferred tax assets 181 294 84 638 X X Net provision for the deferred tax 5 983 1 222 X X The amount of the provision for the deferred tax presented as at 31 December2005 in the above note includes PLN 5.982 thousand that is presented in assetsheld for sale. That is why the amount of the provision for the deferred taxpresented in the balance sheet is adequately lower and amounts to PLN 1thousand. As at 31 December 2005 and 31 December 2004 there were no temporary differencesrelated to investments in subsidiaries, branches, affiliates, and jointventures, for which no deferred tax liability was created due to meeting thecondition to control the timing of reversal of the differences and existence ofhigh probability that the differences will not reverse in a foreseeable future. The amount of negative temporary differences, unsettled tax losses, unused taxrelieves, in relation to which no deferred tax asset was recognized in thebalance sheet, along with the date those differences will elapse is presented inthe below table. Year when timing differences elapse Amount of Amount of difference difference 31.12.2005 31.12..2004 2005 - 71 7582006 68 893 54 0132007 20 812 6 2932008 8 058 5 9852009 40 757 1 8512010 36 427 -Perpetual - -Total 174 947 139 900 18. Earnings per share Base earnings per share Base earnings per share is calculated on the basis of profit attributable toordinary shareholders of the holding company by dividing their respectiveprofits by the average weighted number of ordinary shares listed during a givenperiod. Earnings per share 2005 2004 Net profit attributed to ordinary 1 537 712 1 317 991shareholders (ths PLN) Weighted average number of ordinary shares 166 481 687 166 261 457in the period Earnings per each share (PLN per share) 9,24 7,93 Diluted earnings per share Diluted earnings per share is calculated based on the respective profit ofordinary shareholders of the holding company by dividing the profit of suchshareholders by the average weighted number of ordinary shares listed during agiven period, adjusted by all potentially diluting ordinary shares. There are diluting instruments in the Group in the form of convertible bonds.For calculation purposes, it is assumed that those will be converted intoshares. 2005 2004 Net profit attributed to ordinary 1 537 712 1 317 991shareholders (ths PLN) Weighted average number of ordinary shares 166 481 687 166 261 457in the period Adjustments to the number of shares for 77 253 -the purpose of calculating the diluted profit Weighted average number of ordinary shares 166 558 940 166 261 457for the calculation of diluted profit Diluted profit per each share (PLN per 9,23 7,93share) 19. Dividends paid and proposed for payment Bank Pekao S.A. prepares a separate financial statement in compliance with IFRSand the net profit recognized in that statement is divided. Dividends declared after the balance sheet date are not recognized asliabilities existing as of the balance sheet date. During the ordinary Shareholders Meeting of Bank Pekao S.A. on 5 April 2005 aresolution was made to pay out dividends for 2004 in the amount of PLN 6,40 pershare. The Management Board of Bank Pekao S.A. will propose a dividend to be paid outof net profit for the year ended 31 December 2005 in amount of PLN 7,40 pershare subject to further approval of the Shareholders. The amount of the dividend tax resulting from the dividends proposed by theBank's Management Board amounts to PLN 1,41 per share, (on the basis of 19%dividend tax rate), except for dividends due to shareholders taxed by lower taxrates or tax-exempted. 20. Cash and amounts due from Central Bank 31.12.2005 31.12.2004 Cash 1 109 965 1 081 349Current account in the Central Bank 1 078 090 1 474 673NBP bonds * 1 313 116 1 313 120Interests 70 355 64 524Other funds 3 265 5 609 Total 3 574 791 3 939 275 (*) The NBP bond is a non-quoted debt security with maturity on 1st March 2012,issued in relation to reduction of the obligatory reserve rate. The bond is notincluded under "cash" in the statement of cash flows. In the course of the day the Bank may use funds in the mandatory reserve accountfor ongoing payments pursuant to an instruction submitted to the National Bankof Poland. It must, however, ensure that the average monthly balance in suchaccounts comply with the requirements described in the mandatory reservedeclaration. Funds in the mandatory reserve account bear interest in the amount of 0.9 of therediscount rate for bills of exchange amounts as of 31 December 2005 4,75%.As of31 December 2005 this interest amounted to 4,28%. 21. Amounts due from banks 31.12..2005 31.12.2004 Current account 827 601 1 432 951Deposits in other banks 4 894 183 3 608 831Loans given 635 909 407 628Unlisted securities 1 127 7 203Repo transactions 588 381 486 093Funds in transit 71 118 60 440Interest 32 801 34 745 Total 7 037 604 6 037 891Provision for the impairment of receivables (85 094) (76 414) Total net 6 966 026 5 961 477 The variable interest rate due from banks amounts to PLN 6 228 859 ths. (as of31.12.2004: PLN 4 584 298 ths.), fixed interest rate due from banks amounts toPLN 718 342 ths. (as of 31.12.2004: PLN 1 358 408 ths.). Receivables from banks according to maturities According to remaining residual maturities at the balance sheet date 31.12.2005 31.12.2004 Current accounts 827 601 1 432 951Term deposits by the repayment period: up to 1 month 4 019 884 2 641 887from 1 to 3 months 626 075 639 901from 3 months to 1 year 1 184 883 841 273from 1 to 5 years 170 616 300 482above 5 years 38 598 -receceivables after the due date 79 544 86 212Funds in transit 71 118 60 440Interest 32 801 34 745 Total 7 051 120 6 037 891 Provision for the impairment of (85 094) (76 414)receivables Total net 6 966 026 5 961 477 22. Financial assets held for trading 31.12.2005 31.12.2004 Debt securities 2 499 216 3 191 953- issued by the State Treasury 2 483 094 3 191 953- issued by non-financial entities 16 122 -Stock and shares in other entities 3 150 3 738- listed in the stock exchange 3 150 3 718- not listed - 20Other financial instruments - 80 Total financial assets held for trading 2 502 366 3 195 771 31.12.2005 31.12.2004 (%) (%) Average Average yield yield Fixed interest debt securities Treasury bills 387 407 4,31 996 553 6,59Treasury bonds 1 499 968 4,58 2 012 861 6,51Treasury bonds- RP Eurobonds (EUR 53 692 3,41 36 012 3,82denominated) Treasury bonds- RP Eurobonds (USD 18 451 5,00 715 4,70denominated) Polish Brady ( "London Club") 13 455 4,82 9 089 5,13bonds Foreign government bonds (USD 9 945 4,37 - -denominated) Other securities issued by the non 16 122 4,73 - -- financial entities Total fixed interest debt 1 999 040 4,50 3 055 230 6,50securities Variable interest debt securities Treasury bonds 451 417 4,27 135 012 6,23Treasury bonds - RP Eurobonds (EUR 48 759 2,52 957 2,23denominated) Treasury bonds - RP Eurobonds (USD - - 754 2,93denominated) Total variable interest debt 500 176 4,10 136 723 6,18securities Total debt securities held for 2 499 216 3 191 953 trading Stock and shares in other entities 3 150 3 738 Other financial instruments - 80 Total securities held for trading 2 502 366 4,42 3 195 771 6,49 Financial assets held for trading according to residual maturities: - up to 1 - between 1 - between 3 - between 1 - above 5 Undefined Total month and 3 months months and 1 and 5 years years maturity year 31 December 2005 Book Average Book Average Book Average Book Average Book Average Book Book Average value yield. value yield. value yield. value yield. value yield. value value yield. (%) (%) (%) (%) (%) (%) Debt securities - issued by the State 62 964 4,30 208 481 4,30 753 343 4,11 980 770 4,60 477 536 4,61 - 2 483 094 4,42Treasury - issued by 10 052 4,72 6 070 4,74 - - - - - - - 16 122 4,73non-financial entities Shares and stock in other entities - listed on the stock - - - - - - - - - - 3 150 3 150 -exchanges - not listed - - - - - - - - - - - - -Total 73 016 4,36 214 551 4,31 753 343 4,11 980 770 4,60 477 536 4,61 3 150 2 502 366 4,42 Including interest - 226 10 092 20 048 7 215 37 581 Financial assets held for trading according to maturities: - up to 1 - between 1 - between 3 - between 1 - above 5 Undefined Total month and 3 months months and 1 and 5 years years maturity year 31 December 2004 Book Average Book Average Book Average Book Average Book Average Book Book Average value yield. value yield. value yield. value yield. value yield. value value yield. (%) (%) (%) (%) (%) (%) Debt securities - issued by the State 207 008 6,60 526 596 6,61 1 565 840 6,65 820 194 6,23 72 315 4,75 - 3 191 953 6,49Treasury Shares and stock in other entities - listed on the stock - - - - - - - - - - 3 718 3 718 -exchanges - not listed - - - - - - - - - - 20 20 -Other financial - - - - - - - - - - 80 80 -instruments Total 207 008 6,60 526 596 6,61 1 565 840 6,65 820 194 6,23 72 315 4,75 3 818 3 195 771 6,49 Including interest - 3 433 9 788 25 654 1 940 - 40 815 23. Derivative financial instruments Derivatives used by the Group In its operations the Group uses different financial derivatives for managingthe risk involved in the Group's business. The majority of derivatives used bythe Group include over-the-counter contracts. Regulated stock exchange contracts(mainly futures) represent a small part of those derivatives. Derivative foreign exchange transactions include either obligation or right topurchase or sell foreign and domestic currency assets. Forward operations arebased on the exchange rate specified during the transaction for a predefineddate in the future. The Group concludes forward transactions to manage itsforeign exchange position and to satisfy its customers' demand for hedgingfuture foreign currency payments. These transactions are measured using thediscounted cash flow models. Foreign exchange swaps combine the exchange of specific currencies as of thespot date and a reverse transaction as of the forward date, with the exchangerates specified in advance during the conclusion of the contract. While thosetransactions are being accounted funds are transferred. Foreign exchange swaptransactions are mostly concluded in the process of managing the Group'scurrency liquidity. These transactions are measured using the discounted cashflow models. Foreign exchange options are contracts where one of the parties, the optionbuyer, purchases from the other party, the option issuer, at a so-called premiumprice, the right without the obligation to buy or sell at a specified point inthe future, or during a specified time range, a foreign currency amountspecified in the contract at the exchange rate set during the conclusion of theoption. Foreign exchange options concluded by the Group are over-the-countercontracts, concluded with the Group's customers in order to hedge the riskinvolved in future foreign currency payments. The Group acts both as optionissuer and buyer. These transactions type That type transactions are measuredusing the Garman-Kohlhagen option measurement models. Derivatives relating to interest rates enable the Group and its customers totransfer, modify or limit the interest rate risk. Interest rate swaps are contracts where parties swap between themselves interestcash flows calculated on a specified nominal value of the base instrument. In atypical swap contract, fixed rate interest flow will be swapped for a floatingrate interest flow. Both flows will be calculated on the basis of the samenominal value of the base instrument, with no actual funds being transferredduring the swap of the base instrument. These transactions type are measuredusing the discounted cash flow models. Forward Rate Agreements involve both parties undertaking to pay interest on apredefined nominal amount, for a specified period starting in the future andcharged according to the interest rate determined on the day of the agreement.As the basis for settlements, the Parties will use the interest rate difference,which will be in proportion to the nominal amount of the agreement anddifference between the FRA rate (term rate as of the date of the transaction)and the reference rate applicable two business days before the settlement date.These transactions type are measured using the discounted cash flow models. Cross currency IRS involves both parties swapping capital and interest flows indifferent currencies in a specified period. Such transactions are used forinterest rate and foreign exchange risk management. These transactions type aremeasured using the discounted cash flow models. Forward transactions on securities are based on prices of securities defined atthe conclusion of the transaction for a specified date in the future. The Groupuses securities forward transactions to manage its investment portfolio and tosatisfy customer demand. These transactions type are measured using thediscounted cash flow models. Stock options, stock market indexes and prices of investment fund units arecontracts where one of the Parties, the option buyer, purchases from the otherparty, the option issuer, at a so-called premium price, the right without theobligation to buy or sell a specific base instrument (shares, share marketindices, investment fund units or their baskets) at a price specified during theconclusion of the option. The Group uses such transactions to manage securitiesrisk and to satisfy customer demand. These transactions type are measure usingthe extended Black-Scholes model or in based on available price from dealer,quoted on active market, to which Bank has immediate access . Interest rate futures transactions refer to standardized forward contractspurchased on stock markets in order to ensure protection against the interestrate risk involved in the securities portfolio owned. Futures for stock market indices and shares are contracts listed on the WarsawStock Exchange. Contracts for indices refer to transactions based on MIDWIGindices. These contracts are valued at direct quotations from Stock Exchange. Warrants are securities issued by the company, entitling the holder to subscribeto a specified number of shares at a predefined price. They are listed on stockexchanges and do not give the holder any entitlements to vote in ShareholdersMeetings. These contracts are valued at direct quotations from Stock Exchange Derivatives embedded in other instruments The group uses derivatives embedded in complex financial instruments, i.e. suchas including both a derivative and base agreement, which results in part of thecash flows of the combined instrument changing similarly to cash flows of anindependent derivative. Derivatives embedded in other instruments cause part orall cash flows resulting from the base agreement to be modified as per aspecific interest rate, price of a security, foreign exchange rate, price indexor interest rate index. Brady bond options are derivatives embedded in balance sheet financialinstruments. In this case, embedded financial instruments are closely related tothe base contract and thus the embedded derivative does not need to be isolatedor recognized and measured separately. Derivatives are also embedded in deposit agreements. The Bank has deposits onoffer which include embedded derivatives. Such derivatives are not by theirnature closely related to their respective deposit agreements. The instrument isisolated and classified in the portfolio to be traded and it is subject tomeasurement. The measurement of that instrument is recognized in the profit andloss account. Embedded derivatives are also option for shares, markets sharesindex, unit price of investment funds and currency options. Options for shares, markets shares index and unit price of investment fundsmeasured in basis on spread Black-Scholes model or basis on available price fromdealer, quoted on active market which the Bank has immediate access. Currency option are measured in based on the Garman-Kohlhagen model. The Group analyzed the loan agreement portfolio and the ordinary agreementportfolio in order to isolate embedded derivatives and decided that suchagreements do not require isolation and separate treatment of embeddedinstruments. Risk involved in financial derivatives Market risk and credit risk are two main categories of derivatives-related risk. At the beginning, financial derivatives usually have a small market value or nomarket value at all. This is due to the fact that derivatives require no initialnet investment or require only minor net investments as compared with otheragreements which react to changes in market conditions in a similar way. Derivatives gain positive or negative value as a result of change in specificinterest rates, prices of securities, prices of commodities, currency exchangerates, price index, credit standing or credit index, or another marketparameter. This results in derivatives becoming more or less advantageous thaninstruments with similar residual maturity available on the market at the sametime. Credit risk related to derivative contracts is a potential cost of concluding anew contract on the original terms and conditions if the other party to theoriginal contract fails to meet its obligations. In order to assess thepotential cost of replacement, the Group uses the same method as for credit riskassessment. In order to control its credit risk levels, the Group performsassessments of other contract parties using the same methods as for of creditdecisions. Credit risk involved in derivatives is presented in Note 3. The following tables present nominal amounts of financial derivatives and fairvalues of such derivatives. Nominal amounts of certain financial instruments areused for comparison with balance sheet instruments, but need not necessarilyindicate what future cash flow amounts will be or what the current fair value ofsuch instruments is, and therefore do not reflect the Group's credit or pricerisk level. Derivatives become advantageous (assets) or disadvantageous (liabilities) due tofluctuations of market interest rates, indices, or foreign exchange rates ascompared with their terms. Financial derivatives as of 31 December 2005 Nominal values of base instruments and fair value of financial derivatives: - up to 1 - between 1 - between 3 - 1 - 5 above 5 Total Fair value Fair value month and 3 months and years years (negative) (positive) months 1 year Currency transactions Currency swaps 4 366 983 2 077 942 1 682 893 - - 8 127 818 (21 089) 40 203Currency purchase 2 187 785 1 038 718 859 678 - - 4 086 181 Currency sale 2 179 198 1 039 224 823 215 - - 4 041 637 Currency forward 2 762 259 2 631 206 3 047 737 7 787 - 8 448 989 (73 991) 49 689contracts Currency purchase 1 378 857 1 317 667 1 508 535 3 927 - 4 208 986 Currency sale 1 383 402 1 313 539 1 539 202 3 860 - 4 240 003 Currency options 1 413 292 1 834 338 4 670 850 78 076 - 7 996 556 (47 923) 47 923Purchase 706 646 917 169 2 335 425 39 038 - 3 998 278 Sale 706 646 917 169 2 335 425 39 038 - 3 998 278 Cross Currency IRS - - 15 878 259 555 947 016 1 222 449 (18 800) 18 988Purchase - - 7 939 129 780 473 508 611 227 Sale - - 7 939 129 775 473 508 611 222 Interest rate transactions Interest rate swaps 980 998 2 074 764 5 181 399 12 323 455 2 963 854 23 524 470 (432 035) 324 019(IRS) Purchase 665 499 1 175 000 3 220 670 6 537 757 2 063 321 13 662 247 Sale 315 499 899 764 1 960 729 5 785 698 900 533 9 862 223 Forward Rate Agreement - 600 000 14 400 000 - - 15 000 000 (3 818) 3 941(FRA) Purchase - 300 000 7 250 000 - - 7 550 000 Sale - 300 000 7 150 000 - - 7 450 000 Nominal values of base instruments and fair value of financial derivatives: - up to 1 - between 1 - between 3 - 1 - 5 above 5 Total Fair value Fair value month and 3 months and years years (negative) (positive) months 1 year Interest rate transactions Futures for debt - 5 474 18 629 - - 24 103 - -securities Purchase - - 516 - - 516 Sale - 5 474 18 113 - - 23 587 Other transactions Securities forward 321 377 - - - - 321 377 (176) 154Purchase 184 437 - - - - 184 437 Sale 136 940 - - - - 136 940 Stock futures - 3 522 1 043 - - 4 565 - -Purchase - 561 196 - - 757 Sale - 2 961 847 - - 3 808 Options related to - - - 511 747 - 511 747 (9 857) 14 373equity securities Purchase - - - 256 075 - 256 075 Sale - - - 255 672 - 255 672 Warrants - - - 151 - 151 - -Purchase - - - 151 - 151 Sale - - - - - - Total derivative 9 844 909 9 227 246 29 018 429 13 180 771 3 910 870 65 182 225 (607 689) 499 290instruments Financial derivatives as of 31 December 2004 Nominal values of base instruments and fair value of financial derivatives: - up to 1 - between 1 - between 3 - 1 - 5 above 5 Total Fair value Fair value month and 3 months and years years (negative) (positive) months 1 year Currency transactions Currency swaps 7 104 346 849 215 1 752 055 - - 9 705 616 (201 235) 197 871Currency purchase 3 540 875 426 800 882 078 - - 4 849 753 Currency sale 3 563 471 422 415 869 977 - - 4 855 863 Currency forward 2 267 284 882 644 1 498 734 127 570 - 4 776 232 (63 247) 46 419contracts Currency purchase 1 126 896 437 763 744 134 68 411 - 2 377 204 Currency sale 1 140 388 444 881 754 600 59 159 - 2 399 028 Currency options 278 114 528 620 579 010 - - 1 385 744 (14 376) 14 376Purchase 139 057 264 310 289 505 - - 692 872 Sale 139 057 264 310 289 505 - - 692 872 Cross Currency IRS 171 080 - - 114 220 662 616 947 916 (82 560) 74 895Purchase 85 540 - - 57 112 331 308 473 960 Sale 85 540 - - 57 108 331 308 473 956 Non Delivery Forward 17 870 37 040 - - - 54 910 (2 128) 2 128Purchase 8 935 18 520 - - - 27 455 Sale 8 935 18 520 - - - 27 455 Exchange rate futures - 72 103 - - 175 - -Purchase - 72 41 - - 113 Sale - - 62 - - 62 Interest rate transactions Interest rate swaps 608 158 44 147 2 172 910 7 093 594 1 566 024 11 484 833 (246 383) 155 526(IRS) Purchase 404 079 25 068 1 122 772 3 833 327 1 056 024 6 441 270 Sale 204 079 19 079 1 050 138 3 260 267 510 000 5 043 563 Forward Rate Agreement 1 850 000 4 300 000 4 745 000 - - 10 895 000 (8 624) 7 162(FRA) Purchase 1 050 000 2 600 000 2 300 000 - - 5 950 000 Sale 800 000 1 700 000 2 445 000 - - 4 945 000 Nominal values of base instruments and fair value of financial derivatives: - up to 1 - between 1 - between 3 - 1 - 5 above 5 Total Fair value Fair value month and 3 months and years years (negative) (positive) months 1 year Interest rate transactions Futures for debt - 45 653 - - - 45 653 - -securities Purchase - - - - - - Sale - 45 653 - - - 45 653 Other transactions Securities forward 371 532 - - - - 371 532 (228) 273Purchase 192 979 - - - - 192 979 Sale 178 553 - - - - 178 553 Stock futures - 3 119 480 - - 3 599 - -Purchase - - - - - - Sale - 3 119 480 - - 3 599 Futures for stock - 35 - - - 35 - -Exchange indexes Purchase - - - - - - Sale - 35 - - - 35 Options related to - - - 322 328 - 322 328 (4 902) 4 832equity securities Purchase - - - 160 000 - 160 000 Sale - - - 162 328 - 162 328 Warrants - - - 151 - 151 - -Purchase - - - 151 - 151 Sale - - - - - - Total derivative 12 668 384 6 690 545 10 748 292 7 657 863 2 228 640 39 993 724 (623 683) 503 482instruments 24. Other financial instruments at fair value through profit and loss 31.12.2005 31.12.2004 Debt securities - issued by other financial 767 892 741 528entities - issued by non-financial entities - 21 842- issued by the State Treasury 1 013 425 573 351 Total other financial instruments 1 781 317 1 336 721at fair value through the financial result 31.12.2005 31.12.2004 (%) (%) Average Average yield yield Fixed interest debt securities Treasury bonds - RP Eurobonds 466 586 3,63 181 755 3,83(EUR denominated) Treasury bonds - RP Eurobonds 546 839 4,95 391 596 4,58(USD denominated) Other securities issued by the 732 015 5,01 703 174 4,24financial entities (USD denominated) Other securities issued by the 35 877 4,11 38 354 3,37financial entities (EUR denominated) Other securities issued by the - - 21 842 3,37non - financial entities (EUR denominated) Total fixed interest debt 1 781 317 4,61 1 336 721 4,24securities Total debt securities at fair 1 781 317 4,61 1 336 721 4,24value through profit and loss Other financial instruments at fair value through profit and loss according toresidual maturities:31 December 2005 - up to 1 month - between 1 and - between 3 - 1 - 5 years above 5 years Undefined Total 3 months months and 1 maturity year Book Average Book Average Book Average Book Average Book Average Book Book Average value yield. value yield. value yield. value yield. value yield. value value yield. (%) (%) (%) (%) (%) (%) Debt securities - issued by other - - - - 35 877 4,11 732 015 5,01 - - - 767 892 4,97financial entities - issued by the - - - - - - - - 1 013 425 4,34 - 1 013 425 4,34State Treasury Total - - - - 35 877 4,11 732 015 5,01 1 013 425 4,34 - 1 781 317 4,61Including interest - - 1 482 8 059 27 484 - 37 025 Other financial instruments at fair value through profit and loss according toresidual maturities:31 December 2004 - up to 1 month - between 1 and - between 3 - 1 - 5 years above 5 years Undefined Total 3 months months and 1 maturity year Book Average Book Average Book Average Book Average Book Average Book Book Average value yield. value yield. value yield. value yield. value yield. value value yield. (%) (%) (%) (%) (%) (%) Debt securities - issued by other - - - - - - 741 528 4,20 - - - 741 528 4,20financial entities - issued by other - - - - - - 21 842 3,37 - - - 21 842 3,37non - financial entities - issued by the - - - - - - - - 573 351 4,34 - 573 351 4,34State Treasury Total - - - 763 370 4,17 573 351 4,34 - 1 336 721 4,24Including interest - - - 9 188 17 466 - 26 654 25. Loans and advances to customers 31.12.2005 31.12.2004 Loans 31 268 403 28 012 284 Payment cards receivables 118 571 84 416 Purchased receivables 723 123 709 513 Realized guarantees and commitments 44 812 40 833 Unlisted securities 96 657 565 779 Repo transactions - 388 919 Receivables in transit 138 8 627 Interest 126 552 130 009 Total 32 378 256 29 940 380 Impairment provisions (4 154 526) (3 720 849) Total net 28 223 730 26 219 531 As of 31 Gross Gross Individual Collective Total net Fair December 2005 value of value of impairment impairment value value not - impaired charges charges* impaired loans loans Loans given to state budget 2 571 760 12 458 (10 000) (18 119) 2 556 099 2 546 850entities non-banking 728 561 65 532 (21 657) (58 832) 713 604 620 158financial entities non-financial 16 661 722 4 139 639 (1 735 420) (1 494 248)17 571 693 17 703 255entities general public 7 092 816 979 216 (35 160) (781 090) 7 255 782 7 729 901Interest 126 552 - - - 126 552 126 552 Total 27 181 411 5 196 845(1 802 237) (2 352 289)28 223 730 28 726 716 * Includes the estimated impairment for losses incurred but not reported (IBNR) Following the exemption allowed by IFRS 1 the Group does not present thecomparative data related to loans and advances to customers. Fixed interest rate loans and lending facilities extended to customers as of 31December 2005 represented 10,88 % % of the total loans and advances portfolio orPLN 3 508 683 ths. Changes in impairment balances in the reporting periods ended 31st December 2005and 31st December 2004 are presented in the Note 14. 26. Net investments in financial leases and other lease transactions Net investments in financial leases The Group runs its lease operations through its subsidiary, Pekao Leasing Sp. zo.o. The Group acting as a lessor in the financial leases embracing mainly meansof transport, machines and equipment. The value of gross lease investments and minimum lease payments were,respectively: 31.12.2005 Gross leasing Present value of investment minimum lease payments Up to 1 year 705 038 504 290Between 1 and 5 years 547 876 547 877Above 5 years 37 669 37 669 Total 1 290 583 1 089 836 Unrealized financial revenue (305 279) Net leasing investment 985 304 Non-guaranteed end value to the - leassor Present value of minimum lease 1 089 836 payments Provisions value (239 413) Balance sheet value 745 891 31.12.2004 Gross leasing Present value of investment minimum lease payments Up to 1 year 693 083 480 313Between 1 and 5 years 355 584 295 314Above 5 years 24 743 22 450 Total 1 073 410 798 077 Unrealized financial revenue (275 333) Net leasing investment 798 077 Non-guaranteed end value to the - lessor Present value of minimum lease 798 077 payments Provisions value (250 753) Balance sheet value 547 324 Other lease transactions Receivables related to operating leases The Bank is the lessor of buildings representing the investment properties underthe operating lease agreements. The amount of future minimum lease payments expected to be received undernon-cancellable operating leases can be summarized as follows: 31.12.2005 31.12.2004 Below 1 year 3 940 4 181From 1 to 5 years 3 179 4 582Over 5 years 2 300 2 848 Total 9 419 11 611 Lease transactions concluded by the Group expose it primarily to foreignexchange risk, credit risk and cash flow risk related to interest rates.Financial instruments risk management procedures are standardized throughout theGroup. They are described in Note 3. 27. Investment securities 31.12.2005 31.12.2004 Securities available for sale 11 903 433 10 114 193 Debt securities 11 899 670 10 060 705 - issued by central banks 87 631 - - issued by other banks 45 535 120 270 - issued by other financial entities 32 940 28 918 - issued by non financial entities 396 078 395 322 - issued by the State Treasury 10 830 636 8 952 457 - issued by local governments 506 850 563 738 Stock and shares in other entities 3 646 53 312 Other financial instruments 117 176 Securities held to maturity 2 588 038 4 931 761 - issued by central banks 193 155 - - issued by other financial entities 60 180 60 439 - issued by the State Treasury 2 334 703 4 836 513 - issued by local governments - 34 809 Total investment securities gross 14 491 471 15 045 954 Impairment of securities available for (535) (7 709) sale Impairment of securities held to maturity (164) (1 788) Total investment securities net 14 490 772 15 036 457 Changes in investment securities 31.12.2005 31.12.2004 Securities available for sale Balance at the beginning of the period 10 106 484 9 511 577 Increase(purchase) 43 136 946 14 621 217 Decrease (sale and redemption) (41 651 387) (13 664 727) Impairment charges during period (659) (452) Changes in the fair value 132 983 162 990 Exchange rate differences 134 465 (519 549) Other 44 066 (4 572) Balance at the end of the period 11 902 898 10 106 484 Securities held to maturity Balance at the beginning of the period 4 929 973 8 501 853 Increase(purchase) 6 141 280 5 717 306 Decrease (sale and redemption) (8 612 798) (9 449 877) Impairment charges during period 1 592 - Changes in the fair value 31 4 272 Exchange rate differences (9 796) (58 018) Other 137 592 214 437 Balance at the end of the period 2 587 874 4 929 973 Total investment securities net 14 490 772 15 036 457 Securities available for sale 31.12.2005 31.12.2004 (%) (%) Average Average yield yield Fixed interest debt securities NBP bills 87 631 4,50 - -Treasury bills 212 174 4,30 745 037 6,54Treasury Bonds 7 064 487 4,74 5 984 221 6,34Polish Brady ( "London Club") 464 037 4,85 401 908 5,02bonds Foreign government bonds (HUF 390 281 6,87 163 636 8,27denominated) Foreign government bonds (USD 800 911 4,35 340 785 3,59denominated) Other securities issued by other 45 535 4,24 44 982 7,04banks Other securities issued by - - 28 918 6,84financial entities Other securities issued by non - 116 942 4,74 115 957 6,59financial entities Other securities issued by non - 2 806 5,14 - -financial entities (USD denominated) Total fixed interest debt 9 184 804 4,79 7 825 444 6,22securities Variable interest debt securities Treasury Bonds 757 079 4,51 122 448 6,48Treasury Bonds - RP Eurobonds (EUR - - 143 089 2,23denominated) Treasury Bonds - RP Eurobonds (USD 1 107 317 4,83 1 014 116 2,93denominated) Foreign government bonds (EUR 34 349 2,90 37 217 3,58denominated) Local authorities bonds 506 850 5,04 563 738 7,27Other securities issued by other - - 75 288 1,70banks (USD denominated) Other securities issued by 32 940 2,71 - -financial entities (EUR denominated) Other securities issued by non - 276 331 4,89 279 365 7,19financial entities Total variable interest debt 2 714 866 4,74 2 235 261 4,54securities Total debt securities available 11 899 670 10 060 705 for sale Stock and shares in other entities 3 111 45 603 Other financial instruments 117 176 Total securities available for 11 902 898 4,77 10 106 484 5,85sale Securities held to maturity 31.12.2005 31.12.2004 (%) (%) Average Average yield yield Fixed interest debt securities NBP bills 193 155 4,50 - -Treasury bills - - 1 046 463 6,88Treasury Bonds 1 966 553 8,25 3 397 973 7,91Treasury Bonds - RP Eurobonds (EUR 160 596 5,69 169 486 5,69denominated) Other securities issued by 23 308 7,94 21 369 7,94financial entities (USD denominated) Other securities issued by 36 872 6,88 37 282 6,88financial entities (EUR denominated) Total fixed interest debt 2 380 484 7,74 4 672 573 7,59securities Variable interest debt securities Treasury Bonds 199 757 4,62 214 342 7,04Foreign governments bonds (EUR 7 633 2,90 8 249 3,95denominated) Local authorities bonds - - 34 809 2,95Total variable interest debt 207 390 4,55 257 400 6,39securities Total debt securities held to 2 587 874 7,47 4 929 973 7,53maturity Securities available for sale according to maturities:31 December 2005 - up to 1 month - between 1 and - between 3 - 1 - 5 years above 5 years Undefined Total 3 months months and 1 maturity year Book Average Book Average Book Average Book Average Book Average Book Book Average value yield. value yield. value yield. value yield. value yield. value value yield. (%) (%) (%) (%) (%) (%) Debt securities - issued by 87 631 4,50 - - - - - - - - - 87 631 4,50central banks - issued by other - - - - 45 535 4,24 - - - - - 45 535 4,24banks - issued by other - - - - - - 32 940 2,71 - - - 32 940 2,71financial entities - issued by non - - - - - - 119 747 4,75 276 331 4,89 - 396 078 4,85financial entities - issued by the 212 174 4,30 215 944 4,07 1 880 270 4,41 6 086 340 4,81 2 435 908 5,04 - 10830636 4,77State Treasury - issued by local - - 157 4,93 94 178 4,56 387 106 5,15 25 409 5,17 - 506 850 5,04governments Shares in other entities - listed - - - - - - - - - - - - -- not listed - - - - - - - - - - 3 111 3 111 -Other financial - - - - - - - - - - 117 117 -instruments Total 299 805 4,36 216 101 4,07 2 019 983 4,42 6 626 133 4,82 2 737 648 5,03 3 228 11902898 4,77Including interest - 15 051 16 834 122 616 33 642 188 143 Securities available for sale according to maturities:31 December 2004 - up to 1 - between 1 - between 3 - 1 - 5 years above 5 years Undefin Total month and 3 months months and 1 ed matur year ity Book Average Book Average Book Average Book Average Book Average Book Book Average value yield. value yield. value yield. value yield. value yield. value value yield. (%) (%) (%) (%) (%) (%) Debt securities - issued by other - - 4 974 6,74 94 920 2,73 20 376 7,46 - - - 120 270 3,70banks - issued by other 28 918 6,84 - - - - - - - - - 28 918 6,84financial entities - issued by non 2 788 6,83 6 158 6,83 - - 107 011 6,57 279 365 7,19 - 395 322 7,01financial entities - issued by the State 34 179 6,57 172 689 6,81 2 231 884 6,69 3 879 082 5,94 2 634 623 4,63 - 8 952 457 5,76Treasury - issued by local - - - - 84 917 6,50 428 592 7,38 50 229 7,65 - 563 738 7,27authorities Shares in other entities - listed - - - - - - - - - - - - -- not listed - - - - - - - - - - 45 603 45 603 -Other financial - - - - - - - - - - 176 176 -instruments Total 65 885 6,71 183 821 6,81 2 411 721 6,53 4 435 061 6,11 2 964 217 4,93 45 779 10106484 5,85Including interest - 12 071 8 148 78 432 19 742 118 393 Securities held to maturity according to maturities:31 December 2005 - up to 1 month - between 1 - between 3 - 1 - 5 years above 5 years Undefined Total and 3 months months and 1 maturity year Book Average Book Average Book Average Book Average Book Average Book Book Average value yield. value yield. value yield. value yield. value yield. value value yield. (%) (%) (%) (%) (%) (%) Debt securities - issued by central 193 155 4,50 - - - - - - - - - 193 155 4,50banks - issued by other - - - - 36 872 6,88 23 308 7,94 - - - 60 180 7,29financial entities - issued by the State - - 26 936 6,23 2 120 899 7,94 26 108 4,04 160 596 5,68 - 2 334 539 7,72Treasury Total 193 155 4,50 26 936 6,23 2 157 771 7,92 49 416 5,88 160 596 5,68 - 2 587 874 7,47Including interest - 1 881 33 345 944 7 468 43 638 Securities held to maturity according to maturities:31 December 2004 - up to 1 - between 1 - between 3 - 1 - 5 years above 5 years Undefined Total month and 3 months months and 1 maturity year Book Average Book Average Book Average Book Book Average Book Average Book value yield. value yield. value yield. value value yield. value yield. value (%) (%) (%) (%) (%) Debt securities - issued by other - - - - - - 58 651 7,27 - - - 58 651 7,27financial entities - issued by the 29 936 6,67 783 266 9,71 1 786 574 6,16 2 067 251 8,13 169 486 5,69 - 4 836 513 7,56State Treasury - issued by local - - - - - - 34 809 2,95 - - - 34 809 2,95governments Total 29 936 6,67 783 266 9,71 1 786 574 6,16 2 160 711 8,02 169 486 5,69 - 4 929 973 7,53 Including Interest - 21 747 43 36 768 7 895 66 453 28. Assets held for sale and liabilities associated with assets held for sale The assets and the liabilities related to disposal of 75% of shares in PekaoDevelopment Sp. z o.o. as well as certain properties of the Bank, which meet theIFRS 5 criteria concerning classification of non-current assets as held forsale, have been presented by the Bank in the consolidated balance sheet inaccordance with IFRS 5 Non-current Assets Held for Sale and DiscontinuedOperations as respectively "Non-current assets held for sale" and "Liabilitiesrelated to non-current assets held for sale". On 15 February 2006, the agreement on disposal of 75% of shares in PekaoDevelopment Sp. z o.o. has been concluded by the Bank. The transaction issupposed to be finalized by the end of March 2006 after having obtained apermission of the Office of Competition and Consumer Protection. The impact of the disposal on the Group's assets and liabilities as of 31December 2005 is as follows (as line-by-line consolidation of Pekao DevelopmentSp. z o.o. is supposed to be discontinued, the 100% value of the assets and theliabilities has been presented): Pekao Banks' fixed Development Sp. assets z o.o. Cash and amounts due from Central Bank 20 -Investments in subordinated 49 -undertakings Intangible assets 39 -Tangible fixed assets 685 378Investment property 50 768 1 842Other assets 113 585 - Total assets 165 146 2 220 Amounts due to other banks 3 -Current income tax liabilities 553 -Provisions for deferred income tax 5 982 -Provisions 557 -Other liabilities 32 568 - Total liabilities 39 663 - - As the Bank exercised control over Pekao Development Sp. z o.o. as of 31December 2005, the respective items of the profit and loss statement of PekaoDevelopment Sp. z o.o. for the financial year then ended have been incorporatedin the consolidated profit and loss statement of the Group for the financialyear then ended. 2005 Net interest income (738)Net fee and commission income 6Foreign exchange result (1 241)Other operating income 165 091Other operating expenses (109 904)Overhead costs (14 304)Operating profit 38 910Profit before income tax 38 910Income tax expense (8 675) Net profit 30 235 As the expected proceedings from disposal of the assets and liabilities exceedthe carrying value of these assets and liabilities, they have been recognized atthe carrying value. 29. Investments in subordinated undertakings Investments in associates and joint ventures entities Summary information about affiliated entities valued using equity method (inPLN): Entity's name Assets Liabilities Revenues Net % share Book profit / value of (loss) shares 31st December 2005 Krajowa Izba 107 519 13 723 97 828 29 019 22,96 21 587Rozliczeniowa S.A. Pioneer Pekao 315 845 96 971 558 549 106 200 49,00 107 248Investment Management S.A. Xelion. Doradcy 44 321 3 868 3 084 (22 921) 50,00 20 226Finansowi Sp. z o.o. Fabryka Sprzetu 14 502 5 218 21 103 188 23,81 1 552Okretowego "Meblomor" S.A. Cental Poland Fund LLC 1 961 41 (578) (1 026) 53,19 931Total 151 54431st December 2004 Krajowa Izba 114 828 9 955 132 139 30 869 22,96 21 378Rozliczeniowa S.A. Grupa Inwestycyjna - 62 483 2 850 12 24,60 2 259NYWIG S.A. Pioneer Pekao 198 674 40 693 434 338 74 481 49,00 71 901Investment Management S.A. Xelion. Doradcy 19 589 3 105 2 150 (22 221) 50,00 6 687Finansowi Sp. z o.o. Fabryka Sprzetu 14 697 4 242 18 180 899 23,81 1 533Okretowego "Meblomor" S.A. Cental Poland Fund LLC 14 764 98 - 1 639 53,19 4 862Total 108 620 Summary information about joint ventures entities valued using equity method (inths. PLN): Entity's name Assets Liabilities Revenues Net % share Book profit / value of (loss) shares 31st December 2005 Anica System S.A. 18 003 5 647 30 947 2 703 33,84 4 182Total 4 18231st December 2004 Anica System S.A. 15 530 4 896 23 271 2 217 33,84 3 943Total 3 943 Summary information about affiliated entities not recognized using equity method(in ths. PLN): Entity's name Assets Liabilities Revenues Net % share Book profit / value of (loss) shares 31st December 2005 Pracownicze 386 184 300 0 39,56 99Towarzystwo Emerytalne "Nowy Swiat" S.A. CPF Management - - - - 40,00 -(not operating) Total 9931st December 2004 Pracownicze 464 214 412 - 39,57 99Towarzystwo Emerytalne "Nowy Swiat" S.A. CPF Management - - - - 40,00 -(not operating) Total 99 According to the adopted accounting principle, the Group ceases to recognize thelosses of its affiliated entity if the share in the loss is equal or greaterthan the amount of investment, provided that the Group is not legally orcustomarily required to cover such amounts. As at 31 December 2005 and 31December 2004, this rule was applied to Hotel Jan III Sobieski Spolka z o.o. Entity's name Share in the Cumulated share Book value of loss for the in losses shares period 31st December 2005 Hotel Jan III Sobieski 7 201 (67 599) -Sp. z o. o. 31st December 2004 Hotel Jan III Sobieski 18 740 (86 340) -Sp. z o. o. Changes in book value of investments in affiliated and joint-venture entities: Year 2005 Year 2004 Book value of subsidiaries at the 12 000 17 333beginning of the reporting period Share in profit / (loss) - (177)Sale - (5 779)Other (11) 623 Book value of subsidiaries at the 11 989 12 000reporting date Book value of affiliated entities at the 108 719 168 715beginning of the reporting period Share in profit / (loss) 43 257 29 239Dividends declared (22 714) (4 351)Sale (2 428) (89 286)Capital increase 25 000 -Other (191) 4 402 Book value of affiliated entities at the 151 643 108 719reporting date Book value of joint-venture entities at 3 943 10 578the beginning of the reporting period Share in profit / (loss) 920 7 095Sale - (14 485)Other (681) 755 Book value of joint-venture entities at 4 182 3 943the at the reporting date Investments in subsidiaries In the Group's financial statements, financial information on the followingsubsidiaries Fabryka Maszyn w Janowie Lubelskim Sp. z o.o., Nowe Ogrody Sp. z o.o. and Pekao Immobiller s.a.r.l. was not included due to its insignificance. Theamount of shares was recognized in the Group's statement based on purchaseprices. See below for summary information about those companies. Entity's name Assets Liabilities Revenues Net % share Book profit / value of (loss) shares 31st December 2005 Fabryka Maszyn w 38 188 18 801 47 951 (1 289) 86,86 11 939Janowie Lubelskim Sp. z o.o. Pekao Immobiller 57 - - (7) 100,00 50s.a.r.l. - dane fin. na 31/12/2003 Total 11 98931st December 2004 Fabryka Maszyn w 40 313 15 220 61 609 1 316 86,68 11 939Janowie Lubelskim Sp. z o.o. Pekao Immobiller 64 - - (8) 100,00 61s.a.r.l. - dane fin. na 31/12/2003 Total 12 000 30. Intangible assets 2005 Development Licenses Other(*) Total cost Gross book value Opening balance 69 777 851 767 82 962 1 004 506Additions, including: - 4 679 163 616 168 295Acquisition - 2 721 156 584 159 305Other additions - 1 958 7 032 8 990Transfers from intangibles 919 115 664 (116 583) -in progress Disposals, including: - (26 293) (8 350) (34 643)Liquidation - (25 405) (5) (25 410)Other disposals - (888) (8 345) (9 233)Closing balance 70 696 945 817 121 645 1 138 158Accumulated depreciation Opening balance 23 811 343 397 5 372 372 580Amortization 14 114 127 070 4 357 145 541Liquidation - (25 364) (4) (25 368)Other changes in value - (225) (78) (303)Closing balance 37 925 444 878 9 647 492 450Impairment write-offs Opening balance - 1 - 1Other changes in value - 250 - 250Closing balance - 251 - 251Net book value Opening balance 45 966 508 369 77 790 631 925 Closing balance 32 771 500 688 111 998 645 457 * Other movements include in particular intangibles in progress Group has any amounts of intangible assets whose deed title is restricted. 2004 Development Licenses Other(*) Total cost Gross book value Opening balance 59 973 700 590 72 798 833 361Additions, including: - 5 579 184 828 190 407Acquisition - 4 947 177 020 181 967Other additions - 632 7 808 8 440Transfers from intangibles 9 804 154 674 (164 478) -in progress Disposals, including: - (9 076) (10 186) (19 262)Liquidation - (8 365) (2 627) (10 992)Other disposals - (711) (7 559) (8 270)Closing balance 69 777 851 767 82 962 1 004 506 Accumulated depreciation Opening balance 11 263 240 066 4 492 255 823Amortization 12 548 110 287 3 269 126 104Liquidation - (6 461) (2 389) (8 850)Other changes in value - (495) - (495)Closing balance 23 811 343 397 5 372 372 582Impairment write-offs Opening balance - 1 - 1Other changes in value - - - -Closing balance - 1 - 1 Net book value Opening balance 48 710 460 523 68 306 577 539 Closing balance 45 966 508 369 77 590 631 925 * Other movements include in particular intangibles in progress 31. Tangible fixed assets 31.12.2005 31.12.2004 Tangible fixed assets: a) ) fixed assets, including: 1 408 547 1 488 394Land and buildings 1 125 468 1 180 616Machinery and equipment 245 232 270 389Means of transport 21 216 14 068Other tangible fixed assets 16 631 23 321b) Capital work in progress 32 594 53 434and prepayments for capital work in progress Tangible fixed assets 1 441 141 1 541 828 Annual ended December Land and Machinery Means of Other Total 31, 2005 buildings and transport tangible tangible equipment fixed fixed assets assets Opening balance as of 1 636 263 970 719 40 704 307 965 2 955 651 January 1, 2005 Increases, including: 60 421 75 935 13 832 5 193 155 381 Acquisitions 489 4 686 818 903 6 896 Transfer from tangibles 32 539 70 873 417 4 063 107 892 under construction Other 27 393 376 12 597 227 40 593 Decreases, including: (76 120) (30 677) (9 635) (11 646) (128 078) Liquidation and sale (13 899) (27 253) (9 053) (11 285) (61 490) Transfer to non-current (1 980) - - - (1 980) assets held for sale Other (60 241) (3 424) (582) (361) (64 608) Closing balance 1 620 564 1 015 977 44 901 301 512 2 982 954 Depreciation Opening balance as of 447 722 699 916 26 636 284 644 1 458 918 January 1, 2005 Increases, including: 58 366 98 630 5 631 11 586 174 213 Depreciation of the 57 582 98 535 5 409 11 452 172 978 period Other 784 95 222 134 1 235 Decreases, including: (18 757) (28 215) (8 582) (11 349) (66 903) Liquidation and sale (6 706) (26 212) (8 095) (11 132) (52 145) Transfer to non-current (917) - - - (917) assets held for sale including depreciation (189) - - - (189) Other (11 134) (2 003) (487) (217) (13 841) Closing balance 487 331 770 331 23 685 284 881 1 566 228 Impairment write-downs Opening balance 7 925 414 - - 8 339 Decreases (160) - - - (160) Closing balance 7 765 414 - - 8 179 Net value Opening balance 1 180 616 270 389 14 068 23 321 1 488 394 Closing balance 1 125 468 245 232 21 216 16 631 1 408 547 Annual ended December 31, Land and Machinery Means of Other Total 2004 buildings and transport tangible tangible equipment fixed fixed assets assets Opening balance as of 1 635 718 972 849 38 473 326 107 2 973 147 January 1, 2004 Increases, including: 32 955 76 555 7 903 3 673 121 086 Acquisitions 586 6 183 938 583 8 290 Transfer from tangibles 21 088 58 224 4 020 3 066 86 398 under construction Other 11 281 12 148 2 945 24 26 398 Decreases, including: (32 410) (78 685) (5 672) (21 815) (138 582) Liquidation and sale (13 516) (67 706) (5 601) (9 084) (95 907) Other (18 894) (10 979) (71) (12 731) (42 675) Closing balance 1 636 263 970 719 40 704 307 965 2 955 651 Depreciation Opening balance as of 393 062 649 479 25 559 287 933 1 356 033 January 1, 2004 Increases, including: 68 728 117 598 5 873 16 096 208 295 Depreciation for the 65 256 107 571 4 651 16 080 193 558 period Other 3 472 10 027 1 222 16 14 737 Decreases, including : (14 068) (67 161) (4 796) (19 385) (105 410) Liquidation and sale (8 301) (65 914) (4 745) (8 900) (87 860) Other (5 767) (1 247) (51) (10 485) (17 550) Closing balance 447 722 699 916 26 636 284 644 1 458 918 Impairment write-downs Beginning value 8 160 405 - - 8 565 Increases 2 497 957 - - 3 454 Decreases (2 732) (948) - - (3 680) Closing balance 7 925 414 - - 8 339 Net book value Beginning value 1 234 496 322 965 12 915 38 175 1 608 551 Closing balance 1 180 616 270 389 14 068 23 321 1 488 394 Taking advantage of the exemption allowed by IFRS 1, the Group recognizedselected items of tangible assets acquired before the period of hyperinflationat a fair value as of the day of transition to IFRS, that is, as of 1 January2004, and it used this fair value as the deemed cost determined for that day. The effect of adjustments made on that account as of 1 January 2004 is presentedin the following reconciliation of net assets as of 1 January 2004. Theaggregate amount of fair value used was PLN 148 888 ths. (mainly properties andbuildings). As of 31st December 2005 assets under construction amounted to PLN 32 594 ths.(as of 31sh December 2004 PLN 51 486 ths.). The amount of damages received and recognized in the profit and loss, inrelation to fixed assets lost in 2005 was PLN 1 608 ths. There are any barriers concerning fixed assets in relation to non current assetswith security title of liabilities. The operational lease payments recognized as expense in 2005 amounted to PLN 106569 ths. (in 2004 amounted to PLN 111 818 ths.) The operational lease payments recognized as income in the 2005 amounted to PLN14 782 ths. (in the 2004 amounted to PLN 18 021 ths.). Agreement Liabilities By 31st December 2005 the Group entities concluded with its contractorsagreements for purchase in the future of intangible assets for amount of PLN50 630 ths. including PLN 50 630 ths. in 2006, and of tangible fixed assets foramount of PLN 21 067 ths. including PLN 21 067 ths. in 2006 (by 31st December2004, the Group entities concluded with its contractors agreements for purchasein 2005 of intangible assets for amount of PLN 56 090 ths. and of tangible fixedassets for amount of PLN 13 337 ths.). 32. Investment property The Group measures the investment property using the historical cost concept. There are no restrictions related to the right to sell and to transfer theprofit attributable to investment property owned by the Group. Changes in value of the investment property: 31.12.2005 31.12.2004 Gross value Opening balance as of 1 January 2005 132 487 141 976Increase of balance 31 245 11 332Acquisitions of real estate - 93Activation of subsequent outlays - 110Transfer from own real estate 30 958 11 129Other changes 287 -Decrease of balance (68 365) (20 821)Transfer to assets hold to sale (62 413) -Buy-out - (9 230)Other changes (5 952) (11 591) Value as of the end of the period 95 367 132 487 Depreciation write-offs Opening balance as of 1 January 2005 25 843 26 961Increase of balance 16 189 3 207Activation of subsequent outlays - 2Transfer from own real estate 11 708 158Other changes 109 -Depreciation 4 372 3 047Decrease of balance (11 512) (4 325)Transfer to non-current assets held for sale (9 802) -including depreciation (2 022) -Buy-out - (1 365)Other changes (1 710) (2 960) Value as of the end of the period 30 520 25 843 Depreciation write-offs due to loss of value Opening balance as of 1 January 2005 3 775 4 366Increase 15 -Transfer from own real estate 15 -Decrease (202) (591)Differences in exchange rates (202) (591) Value as of the end of the period 3 588 3 775 Net balance value Opening balance as of 1 January 2005 102 869 110 649 Value as of the end of the period 61 259 102 869 Future value of investment property as at 31st December 2005 amounted to PLN 83301 ths. (as at 31st December 2004 amounted to PLN 132 823 ths.). Fair value wasmade on the basis of independent valuer who holds a recognised and relevantprofessional qualification. The following amounts of income and expenses were recognized in profit and lossin relation with investment property: 2005 2004 Income on rental of investment property 5 979 7 539 Direct operational expenses (including 3 365 repair and maintenence) related to investment property bringing rental income 2 652 Direct operational expenses (including repair and maintenence) related to investment property not bringing rental 939 597 income 33. Other assets 31.12.2005 31.12.2004 Prepaid expenses 12 051 70 025Perpetual usufruct rights 8 648 9 073Accrued income 22 953 92 094Other assets 7 360 8 755Interbank and interbranch settlements 6 243 6 842Other debtors 459 195 542 699 Total other assets 516 450 729 488 Prepaid expenses concerning single kind of expenditure, which incurred in profitand loss account are reconciled in accordance with time periods in futurereporting periods. 34. Assets used to pledge liabilities As of 31 December 2005, the portfolio of securities available for sale includestwo-year treasury bonds with a nominal value of PLN 16 500 ths. (as of 31December 2004 - PLN 17 106 ths.) used as collateral for the loan extended by theBank Guarantee Fund. The amount of payables which the collateral refers to isPLN 12 816 ths. (as at 31 December 2004 - PLN 14 828 ths.) As of 31 December 2005, the portfolio of securities available for sale alsoincludes treasury bonds with nominal value of PLN 610 339 ths. (as of 31December 2004 - PLN 6 923 ths.) used as collateral for securities sold underrepo transactions. The amount of liabilities which the collateral refers to isPLN 639 250 ths. (as of 31 December 2004 - PLN 7 153 ths.). The following table presents the balance sheet value of assets pledged ascollateral for the liabilities. 31.12.2005 31.12.2004 Treasury two-year bonds constituting 16 194 15 818security of loans received from Bankowy Fundusz Gwarancyjny Treasury bonds security of liabilities 638 884 7 153due to sold securities with granted repurchase promise 35. Amounts due to the Central Bank 31.12.2005 31.12.2004 Received credits Up to 1 month - -From 1 month to 3 months 55 197 52 825From 3 months to 1 year 168 348 145 331From 1 to 5 years 1 057 280 980 770Over 5 years 653 406 942 161Interest charged 16 479 30 656 Total amounts due to Central Bank 1 950 710 2 151 743 36. Amounts due to other banks 31.12.2005 31.12.2004 Current accounts 1 362 956 571 981Deposits of other banks 449 168 475 011Received credits and loans 77 303 73 784Money transfer 20 654 21 418Repo transactions 81 706 186 281Interest accrued 5 256 4 082 Total amounts due to other banks 1 997 043 1 332 557 The variable interest rate due to banks amounts to PLN 285 292 ths. (as of31.12.2004: PLN170 902 ths.), fixed interest rate due to banks amounts to PLN 1 685 841 ths.(as of 31.12.2004: PLN 1 136 155 ths.). Amounts due to banks according to maturities By remaining maturity 31.12.2005 31.12.2004 Current accounts 1 362 956 571 981Future liabilities with maturity period of: Up to 1 month 300 662 542 527From 1 month to 3 months 45 792 45 347From 3 months to 1 year 180 095 60 451From 1 to 5 years 77 161 81 995Over 5 years 4 467 4 756Financial resources under 20 654 21 418way Interest charged 5 256 4 082 Total 1 997 043 1 332 557 37. Financial liabilities held for trading 31.12.2005 31.12.2004 Liabilities due to short 558 973 590 119securities Total liabilities held for 558 973 590 119trading 38. Amounts due to customers 31.12.2005 31.12.2004 Amounts due to business entities 16 181 679 13 356 343Current accounts and overnight deposits 7 937 608 7 836 246Deposits and time money 8 196 925 5 477 452Other 25 585 20 058Interest accrued 21 561 22 587Amounts due to budget entities 3 986 905 2 841 907Current accounts and overnight deposits 2 188 534 2 075 458Deposits and time money 1 794 200 763 834Interest accrued 4 171 2 615Amounts due to individuals 25 948 957 27 473 856Current accounts and overnight deposits 10 826 058 9 538 125Deposits and time money 15 070 376 17 839 432Other 3 743 2 991Interest accrued 48 780 93 308Repo transactions 730 336 2 149 539Deposits 729 699 2 141 979Interest accrued 637 7 560 Total amounts due to customers 46 847 877 45 821 645 By remaining maturity 31.12.2005 31.12..2004 Current accounts and overnight deposits 20 952 200 19 449 829Future liabilities with maturity period of: Up to 1 month 14 404 147 13 009 637From 1 month to 3 months 5 626 596 6 868 700From 3 months to 1 year 4 696 235 4 763 657From 1 to 5 years 489 899 969 588Over 5 years 574 323 611 115Other 29 328 23 049Interest accrued 75 149 126 070 Total 46 847 877 45 821 645 Variable interest rate amounts due to customers amounts to PLN 25 506 048 ths(as at 31.12.2004 amounted to PLN 26 141 573 ths), fixed rate amounts due tocustomers amounts to PLN 21 237 352 ths. (as at 31.12.2004 PLN 19 530 953 ths) 39. Debt securities in issue 31.12.2005 31.12.2004 Liabilities due to issue of bonds 4 22 479Interest accrued - 726 Total liabilities due to issue of 4 23 205debt securities 31.12.2005 31.12.2004 Balance Average Balance Average value effective value effective rate (%) rate (%) Liabilities due to issue of maturity period of: Up to 1 month - - - -From 1 month to 3 months - - - -From 3 months to 1 year - - 23 205 6,40From 1 to 5 years 4 - - -Over 5 years - - - - Total 4 - 23 205 6,40 The Group never has defaulted on repayment of principal or interest orredemption its own securities. 40. Provisions 2005 Reserve for Reserve Reserve Reserve for Reserves Other Total restructurings for for granted for reserves matters old-age liabilities general of pensions and risk dispute guarantees Balance as 9 000 12 449 58 691 16 325 248 453 4 148 349 066of 31 December 2004 IAS 39 - - - - (248 453) - (248 453)adjustment Balance as 9 000 12 449 58 691 16 325 - 4 148 100 613of 1 January 20045 Creation / 3 529 11 013 4 672 54 899 - 1 735 75 848revaluation of reserves Use of (7 939) (768) (1 549) - - (169) (10 425)reserves Dissolution - (1 930) (348) (53 432) - (2 787) (58 497)of reserves Differences - 4 - 489 - (24) 469in exchange rates Other - (160) (21) 2 068 - (1 168) 719changes Balance as 4 590 20 608 61 445 20 349 - 1 735 108 727of 31 December 2005 2005 Reserve for Reserve Reserve Reserve for Reserves Other Total restructurings for for granted for reserves matters old-age liabilities general of pensions and risk dispute guarantees Balance as 21 765 25 436 50 210 32 102 248 453 15 019 392 985of 31 December 2003 Creation / 9 000 9 624 10 458 39 031 - 20 887 89 000revaluation of reserves Use of (21 760) (443) (1 977) (2 333) - (22 362) (48 875)reserves Dissolution - (19 123) - (50 385) - (9 347) (78 855)of reserves Differences (5) (112) - (1 968) - (282) (2 367)in exchange rates Other - (2 933) - (122) - (233) (2 822)changes Balance as 9 000 12 449 58 691 16 325 248 453 4 148 349 066of 31 December 2004 41. Other liabilities 31.12.2005 31.12.2004 Deferred income 103 917 84 119Holiday pay accrual 34 792 36 492Other accruals 197 553 168 476Provision for administrative 69 057 11 968costs Other costs to be paid 8 564 3 572Other creditors 583 151 671 097Inter-bank and inter branch 435 888 84 646settlements Total other liabilities 1 432 922 1 060 370 42. Employee benefits Employee share programs Options for the Bank's shares are granted as a part of the incentive program forsenior management essential to the success of the Capital Group Bank's strategy,set by resolution of Extraordinary General Meeting of Bank Polska Kasa OpiekiS.A from 25 July 2003 The program involve a contingent increase of the Bank's share capital by issuingfollowing shares received in exchange for bonds with pre-emptive rights to takeup the Bank's shares.+-------------+----------+-----------+-----------+----------------------------+|Type of |Number of | Nominal |The issue |Establish basis of share ||shares |options |value of 1 |price of |issue price || | | share |one share | |+-------------+----------+-----------+-----------+----------------------------+|Bearer common| 830 000| 1 PLN| 108,37 PLN|the average of closing ||shares , | | | |prices of the Bank's shares ||F-share | | | |quoted at the Warsaw Stock || | | | |Exchange in July and August || | | | |2003 |+-------------+----------+-----------+-----------+----------------------------+|Bearer common| 830 000| 1 PLN| 123,06 PLN|the average of closing ||shares , | | | |prices of the Bank's shares ||G-share | | | |quoted at the Warsaw Stock || | | | |Exchange in February and || | | | |March 2004 |+-------------+----------+-----------+-----------+----------------------------+ After realization the pre-emptive rights to take up the Bank's shares, theshares are recognized in Bank's equity. The incentive program will be implemented within the confines of sub program(each splited into II instalment ) at the following parameters :+-----------------+---------------------------+---------------------------+---------+| | Program based on F-share | Program based on G-share | || | issue | issue | || | | | |+-----------------+---------------------------+---------------------------+---------+|Expiry date | 31 December 2010 | 31 December 2012 | |+-----------------+---------------------------+---------------------------+---------+|Realization price| 108,37 | 123,06 | |+-----------------+-------------+-------------+-------------+-------------+---------+|Number of options| 415 000 | 415 000 | 415 000 | 415 000 | |+-----------------+-------------+-------------+-------------+-------------+---------+|Criteria to |1. Executive of individual |1. Executive of individual | ||rights purchase |purposes in confines of the|purposes in confines of the| || |MBO program during the 2003|MBO program during the 2003| || |year, |year, | || | | | || |2. Remaining at contract of|2. Remaining at contract of| || |employment within Bank's |employment within Bank's | || |capital group employee as |capital group employee as | || |at the date of option |at the date of option | || |rights execution |rights execution | || +-------------+-------------+-------------+-------------+---------+| | |3. |3. |3. Realize |3. || | |Realization |Realization |assumed ROE |Realize || | |of assumed |of assumed |for the 2006 |assumed || | |ROE for the |ROE for the |year |ROE for || | |2004 year |2005 year | |the 2007 || | | | | |year |+-----------------+-------------+-------------+-------------+-------------+---------+|Fair Value as at | 6 462 | 4 696 | 3 568 | 2 762 | ||31 December 2005 | | | | | ||('000. PLN) | | | | | |+-----------------+-------------+-------------+-------------+-------------+---------+|Assumptions of the fair value model adopted on the day of granted rights:| |+-----------------+---------------------------+---------------------------+---------+|Dividend rate (%)| 4,27 | 5,12 | |+-----------------+---------------------------+---------------------------+---------+|Volatility index | 31,75 | 31,75 | ||(%) | | | |+-----------------+-------------+-------------+-------------+-------------+---------+|Risk-free | 5,33 | 5,41 | 6,66 | 6,70 | ||interest rate (%)| | | | | |+-----------------+-------------+-------------+-------------+-------------+---------+|Foreseen option | 4,76 | 5,26 | 6,18 | 6,68 | ||validity period | | | | | ||(in years) | | | | | |+-----------------+-------------+-------------+-------------+-------------+---------+|Weighted average | 112,50| 125,00| ||of stock price | | | ||(in PLN) | | | |+-----------------+---------------------------+---------------------------+---------+ Fair value of the pre-emptive rights to take up the Bank's shares granted inperiod to 31 December 2005 as at day 31 December 2005 amounted to 17 488 ths PLNand it is settled over time during the estimated period in which rights toacquire the Bank's shares are granted to participating individuals. Costs of payroll in 2005 year was increased by PLN 11 895 ths (in 2004: PLN 4800 ths). Fair value of the pre-emptive rights to take up the Bank's shares was recognizedas of the day of granting options (pre-emptive rights to take up the Bank'sshares) based on the Black-Scholes model for appraisal of dividend-yieldingstock options, according to expectations of the Management Board concerning thenumber of rights to be exercised. The amount of the employee share program isadjusted as of every balance sheet date if expectations of the Management Boardchange concerning the number of rights to be exercised. No efficiency/resultsdata except those related to the price of shares ("market conditions") are takeninto account in the assessment of transactions settled in capital instruments. The expected effective term of the pre-emptive rights to take up the Bank'sshares is determined on the basis of historic data and does not need tospecifically define all possible exercise scenarios. The expected volatility index reflects the assumption according to which thehistoric volatility index. No other parameters related to the granting of pre-emptive rights to take up theBank's shares were taken into account in the assessment of the fair value. 43. Contingent liabilities Litigation As of 31st December 2005 the number of the legal proceedings in courts,appropriate bodies of arbitration or public administration bodies, concerningthe liabilities of the Group was 504 the total value of them was PLN 663 327ths. and EUR 36 008 ths. According to the issuer's Management Board opinion only one of the largestproceedings, that have been in progress against the Group during the reportingperiod, give rise to risk of cash outflow as a result of fulfilling theobligation. Mittal Steel Poland S.A. (till now Ispat Polska Stal S.A.) against Bank PekaoS.A. The subject of litigation: devoid the execution in totality deed executivei.e. the Bank execution deed issued by the Bank and demand adjudge from Bankamount PLN 14 193 ths. with statutory interests since date of prosecution, thedate of action in the course of proceedings - 01.03.2005 Arthur Bras/MTA against Bank Pekao S.A. - branch in Paris The subject of litigation: unwarranted crediting; the quarrel subject valueamounted EUR 7 622 ths; the date of action in the course of proceedings -17.04.2000 As of the reporting day it was not possible to reliably estimate the value ofpotential cash outflow related to these proceedings. As regards all other significant proceedings in progress against the Group, therisk of cash outflow is nominal. Financial obligations granted 31.12.2005 31.12.2004 Granted financial liabilities in total: 10 990 273 10 518 643- towards financial entities 422 701 1 119 486- towards non-financial entities 10 082 906 9 009 100- towards the budget 484 666 390 057Including: granted irrevocable liabilities 10 715 561 10 383 642 The Group granted fixed-rate financial commitments in the nominal amount of PLN2 112 883 ths. (for 31 December 2004 amounts to PLN 1 462 738 ths). The below table presents granted fixed-rate financial commitments according totheir maturities 31.12.2005 31.12.2004 Granted fixed-rate financial liabilities in 2 112 883 1 462 738total: - with maturity date within a year of the 567 783 542 271balance day - with maturity date within more than a year 1 545 100 920 467of the balance day including: granted irrevocable liabilities 2 112 883 1 462 738 Guarantees granted 31.12.2005 31.12.2004 1) Liabilities granted towards financial 168 895 127 841entities: - guarantees 125 231 97 520- sureties 27 482 18 403- confirmed export letters of credit 16 182 11 9182) Liabilities granted towards non-financial 1 197 811 753 405entities: - guarantees 1 197 219 752 664- sureties 23 236- confirmed export letters of credit 569 5053) Liabilities granted towards the budget: 47 389 61 223- guarantees 43 639 57 473- endorsements 3 750 3 750 Granted liabilities in total 1 414 095 942 469 Sub issue program As of 31 December 2005 in the Group were no securities programs subjected to subissue program. As of 31.12.2004 Starostwo Powiatowe Zdunska Wola Community'sBonds were subjected by the Bank sub-issue, nominal value sub-issued securitiesbeing in Group's portfolio amounted to PLN 8 400 ths. Assets held as collateral for conditional liabilities As of 31st December 2005 there were no assets held as collateral againstconditional liabilities. As of 31st December 2004 the deposit placed withUniCredito Italiano New York, amounting to USD 9 336 ths. ,represented acollateral of a guarantee granted to UniCredito Italiano New York, in amount ofUSD 25 019 ths. 44. Share capital SHARE CAPITAL (STRUCTURE) Series Type of Type of Type of Number Value of Manner Date of Right to / shares privileged limitation of series / of registration dividend Issue shares shares shares issue capital (as of) according coverage to nominal value A bearer - - 137 650 000 137 650 paid in 21.12.1997 1.01.1998 common full shares B bearer - - 7 690 000 7 690 paid in 6.10.1998 1.01.1998 common full shares C bearer - - 10 630 632 10 631 paid in 12.12.2000 1.01.2000 common full shares D bearer - - 9 777 571 9 777 paid in 12.12.2000 1.01.2000 common full shares E bearer - - 373 644 374 paid in 29.08.2003 1.01.2003 common full shares H bearer - - 359 840 360 paid in 12.08.2004 1.01.2004 common full shares Total number of shares 166 481 687 Total share capital in 166 482 thousand PLN Nominal value of one share = 1.00 PLN 2005 Shares Total in shares issued and paid in full Balance as of the beginning of the period 166 481 687 166 481 687 Balance as of the end of the period 166 481 687 166 481 687 The Bank has implemented an Incentive Program involving the issue of convertiblebonds. As of 31 December 2005 no shares to replace the convertible bonds wereissued. For a detailed description of the program, see Note 42. 45. Reserves, prior and current year profit 31.12.2005 31.12.2004 Reserves: Reserve Capital 1 618 709 1 601 503share premium 1 361 034 1 361 034other 257 675 240 469Revaluation reserve 96 856 (11 011)valuation of the portfolio of financial 118 929 (15 477)assets available for sale deferred tax (23 094) 2 575other 1 021 1 891General banking risk fund 1 067 850 1 067 850Other reserve capital 3 920 120 3 663 395Differences in the rate of exchange (2 110) (1 374)Bonds convertible into stocks - capital 17 488 5 595constituent Total reserves 6 718 913 6 325 958Prior year profit (loss) attributable to (15 817) 194 274equity holders of the Bank Profit for the year attributable to equity 1 537 712 1 317 991holders of the Bank Total prior year profit and profit for the 1 521 895 1 512 265year attributable to equity holders of the Bank 46. Additional information for the cash flow statement a) Cash and cash equivalents Balance items 31.12.2005 31.12.2004 Cash, amounts due from Central Bank* 2 193 681 2 561 687Receivables from banks up to 3 month 5 473 560 4 714 739(...) Financial resources and equivalents of 7 667 241 7 276 426financial resources presented in the cash flow statements \* The item "Cash, amounts due from Central Bank " does not include the NBP Bondin amount of PLN 1 381 130 ths. (31.12.2004 - PLN - 1 377 588 ths.) Limited availability cash and cash equivalents as of 31 December 2005 amountedto PLN 1 555 238 ths. (as of 31 December 2004 PLN 1 622 256 ths). b) Explanation of the differences between changes of the balance sheet amountsshown in the consolidated cash flow statement The differences between changes of the balance sheet amounts and changes shownin the consolidated cash flow statement resulted from IAS 39 adjustments:impairment and valuation of loans and receivables at amortized cost using theeffective interest rate. The differences concern the following consolidated cashflow statement captions: - changes of loans and receivables; - changes of deferred income tax assets; and - changes of the provisions. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
BPKD.L