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Komercni Banka (KMCA)

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Tuesday 30 April, 2002

Komercni Banka

Annual Report 6/16

Komercni Banka
30 April 2002

Annual Report 2001, part 6/16

Written off loans and income from written off loans to customers by sector
comprise:
                                                                                                2001               2000
                                                                                            CZK '000           CZK '000
Agriculture                                                                                   17,214            100,017
Processing industry                                                                           34,814          1,150,614
Distribution and production of energy                                                              0             36,115
Construction                                                                                   3,121            157,904
Trade, catering, transport and communication                                                  46,481          1,406,906
Insurance, banking                                                                               248          1,217,801
Other                                                                                         25,168          1,068,433
Total written off loans                                                                      127,046          5,137,790
Current account debit balances written off                                                    25,788             69,434
Total written off receivables                                                                152,834          5,207,224
Income from written off receivables                                                        2,252,415          7,402,881



Of the receivables written off, the write-off of CZK 99,640 thousand was covered
by provisioning charges and the write-off of CZK 228 thousand was covered by the
use of general reserves.

Income from written off receivables from customers amounted to CZK 2,252,415
thousand. Of this aggregate balance, recoveries from fully written off
receivables from customers amounted to CZK 2,245,211 thousand and income from
current account debit balances amounted to CZK 7,204 thousand. Income from
written off receivables from customers also include proceeds of CZK 1,414,909
thousand from the sale of fully written off receivables to Konpo.

Set out below is an analysis of types of collateral underlying loans and
advances to customers:
                                           Total client loan         Discounted client loan         Applied client loan
                                                  collateral               collateral value            collateral value

                                                                           31 December 2001            31 December 2001

                                            31 December 2001
                                                    CZK '000                       CZK '000                    CZK '000
Guarantees of state and governmental              60,813,434                     59,366,992                  54,973,068
institutions
Bank guarantee                                     3,729,202                      2,807,939                   2,386,895
Guaranteed deposits                                1,552,622                      1,550,699                   1,224,617
Issued debentures in pledge                       12,994,754                     12,994,754                  12,994,754
Pledge of real estate                            155,856,443                     45,226,625                  29,567,293
Pledge of movable assets                          10,040,130                        978,664                     947,858
Guarantee by corporate entity                     17,421,275                      1,808,369                   1,691,600
Guarantee by individual (physical                  4,821,407                        535,533                     530,379
entity)
Pledge of receivables                             17,285,404                      7,110,070                   6,101,565
Insurance of credit risk                           5,042,738                      4,972,319                   4,939,587
Other                                             13,312,544                      9,009,984                   6,988,059
Total nominal value of collateral                302,869,953                    146,361,948                 122,345,675


                                           Total client loan         Discounted client loan         Applied client loan
                                                  collateral               collateral value            collateral value

                                                                           31 December 2000            31 December 2000

                                            31 December 2000
                                                    CZK '000                       CZK '000                    CZK '000
Guarantees of state and governmental               8,498,194                      7,873,019                   2,751,820
institutions
Bank guarantee                                     2,773,817                      2,644,199                   2,419,500
Guaranteed deposits                                1,496,346                      1,496,146                     988,300
Issued debentures in pledge                            4,000                          3,200                       3,200
Pledge of real estate                            177,920,335                     72,555,149                  45,738,000
Pledge of movable assets                           6,498,491                        657,715                     657,714
Guarantee by corporate entity                     19,738,960                      9,988,326                   8,324,944
Guarantee by individual (physical                  4,069,403                      3,373,621                   2,811,803
entity)
Pledge of receivables                              6,580,620                      5,024,855                   4,188,052
Insurance of credit risk                           6,616,379                      6,616,379                   6,616,379
Other                                             13,264,991                      9,627,391                   8,726,585
Total nominal value of collateral                247,461,537                    119,859,999                  83,226,297





The pledges on industrial real-estate represent 57 percent of total pledges on
real estate (2000: 60 percent).



State guarantee covering losses on the Bank's risk assets

On 29 December 2000, the Bank entered into an agreement with Konsolidacni banka
under which Konsolidacni banka will cover losses, up to a maximum amount of CZK
20,000 million, which may be incurred over a three year period, which began on
31 December 2000, on a defined portfolio of classified exposures. This agreement
was signed on 29 December 2000 on the basis of the resolution of the Government
of the Czech Republic dated 18 December 2000. The guarantee applies to the net
book value (defined as principal less specific provision) of assets classified
as substandard, doubtful and loss (in accordance with relevant CNB regulations)
as of 31 December 2000. This defined portfolio corresponds largely with that
portfolio held within the Bank's Debt Recovery Division. The payment under the
guarantee agreement is effected through a mechanism whereby the Bank's
participation increases as the aggregate loss incurred on the defined portfolio
increases. The Bank will retain these assets on its balance sheet and continue
to maximise recovery. The difference between the net book value as of 31
December 2000 and the actual amount recovered by December 2003 is covered by the
guarantee up to a maximum amount of CZK 20,000 million. In accordance with the
agreement this amount will be settled in either cash or Government securities by
30 June 2004.



The table below sets out the structure of the Bank's participation in losses
incurred on the guaranteed portfolio:


  Final       Guarantee paid by Konsolidacni banka      Bank's participation in final  Bank's cumulative participation
  losses                                                           losses                      in final losses

  (CZKm)                                                                                           (CZKm)
0 - 10,000                     95%                                   5%                              500

10,000 -    CZK 9,500 million plus 85% of the amount           CZK 500 million                      2,000
20,000             over CZK 10,000 million
                                                       plus 15% of the amount over CZK
                                                               10,000 million

20,000 -            CZK 18,000 million                     CZK 2,000 million                     5,000
25,000
             plus 40% of the amount over CZK 20,000    plus 60% of the amount over CZK
                             million                           20,000 million

      
Over                 CZK 20,000 million                     CZK 5,000 million                       -
25,000
                                                        plus 100% of the amount over
                                                             CZK 25,000 million

The Bank is required to report regularly to Konsolidacni banka (now the Czech
Consolidation Agency) on the administration of the assets and the expected
losses on the guaranteed exposures.

The state guarantee became effective at the beginning of October 2001 following
the decision of the Economic Competition Protection Office, dated 20 September
2001, to cease its proceedings in connection with the guarantee as set out in
the Guarantee Agreement dated 29 December 2000 regarding the provision of public
support, pursuant to the Public Support Act No. 59/2000 Coll.





Reserves and provisions to cover the Bank's participation in the expected final
losses on the guaranteed portfolio

The Bank establishes provisions, on an accruals basis, to cover its
participation in the aggregate losses that it estimates will be incurred on the
guaranteed portfolio. As of 31 December 2001, the Bank carried within its
general reserve an amount of CZK 4,449,677 thousand which represents the Bank's
present assessment of its participation in the estimated aggregate losses on the
guaranteed portfolio (that is, total losses in the amount of approximately CZK
24,500 million). Management of the Bank monitors closely the expected
development of the guaranteed portfolio through a series of scenario analyses
and assessments of a large number of individual exposures representing a
substantial proportion of the nominal value outstanding. The scenarios and
assessments employed reflect the uncertainties arising from the absence of
benchmark recovery rates when using systematic recovery efforts in the Czech
Republic, the weaknesses in the legal framework regarding the enforcement of
creditor rights and the intention of management to realise substantially all of
the portfolio over a three year time horizon. Based on the facts presently
available and given that the Bank has only twelve months experience of
realisation of the guaranteed portfolio, management consider it appropriate and
prudent to maintain its estimate of the aggregate loss at a level similar to
that as of 31 December 2000. Management will continue to monitor developments in
the guaranteed portfolio and will revisit its estimates again during 2002.



Exchange of non-performing assets transferred to Konpo as part of the
restructuring of assets in March 2000

On 29 January 2001, the Bank entered into an agreement with Konpo, a subsidiary
of Ceska konsolidacni agentura, under which it agreed to take back certain
assets transferred to it under an original agreement dated 25 March 2000. Under
this latter agreement the Bank had transferred non-performing assets with a
nominal value of CZK 60,000 million. The Bank replaced these assets which did
not comply with the parameters of the original agreement with other assets of
the quality that did so. The final exchange of assets that had a gross nominal
value of CZK 2,958 million took place on 31 May 2001. The transfers were
effected at a price representing 60 percent of the gross nominal value of the
assets, that is, the same price that was used in transferring the assets in
March 2000. The financial impact of this asset transfer on the Bank's profit and
loss statement was negative and amounted to CZK 435 million.



Syndicated loans granted

The Bank acts as an agent, arranger, co-arranger or participant in syndicated
loan arrangements and in circumstances where it acts as an agent it also assumes
the role of an arranger or co-arranger. The table below reflects only those loan
facilities where the Bank acts as an agent and the Bank's participation was
lower than 100 percent as of 31 December 2001 (the table excludes balances where
a portion of the loan is sold on a secondary market).

Non-banking syndicated loans
                                               Participation              Interest rate                 Portion of risk
                                                    CZK '000                        (%)                             (%)
Komercni banka, a. s.                                866,159                       6.58                           50.00
Other creditors                                      866,159                                                      50.00
Total to client 1*                                 1,732,318                                                     100.00
Komercni banka, a. s.                              1,527,940                       6.99                           55.56
Other creditors                                    1,222,132                                                      44.44
Total to client 2*                                 2,750,072                                                     100.00
Komercni banka, a. s.                               112,888,                       7.76                           28.19
Other creditors                                      287,566                                                      71.81
Total to client 3*                                   400,454                                                     100.00
Komercni banka, a. s.                              1,529,528                       3.28                           60.00
Other creditors                                    1,019,686                                                      40.00
Total to client 4*                                 2,549,214                                                     100.00



* The Bank does not indicate names of its clients as a result of banking secrecy
restrictions.



15 Trading securities

Trading securities comprise:
                                                31 December 2001  31 December 2001  31 December 2000  31 December 2000
                                                      Fair value    Carrying value        Fair value          Carrying
                                                                                                                 value
                                                        CZK '000          CZK '000          CZK '000          CZK '000
Trading shares and participation certificates            168,032           168,294           173,023           180,171
Less provisions                                                0             (264)                 0           (7,198)
Net book value of shares                                 168,032           168,030           173,023           172,973
Fixed income debt securities                           2,464,987         2,455,998         1,770,537         1,776,564
Variable yield debt securities                           553,013           553,078         1,279,158         1,276,663
Debt securities                                        3,018,000         3,009,076         3,049,695         3,053,227
Less provisions                                                0             (539)                 0           (3,026)
Net book value of debt securities                      3,018,000         3,008,537        3,049,695,         3,049,693
of which: own debt securities                            243,189           241,974           667,873           680,309
of which: debt security coupons                           62,074            62,074                 0                 0
Total trading securities                               3,186,032         3,176,567         3,222,718         3,222,666



As of 31 December 2001, all securities held for trading include securities that
are publicly listed on stock exchanges.



Trading shares and participation certificates at cost comprise:
                                                                             31 December 2001          31 December 2000
                                                                                     CZK '000                  CZK '000
Trading shares and participation certificates
- Czech crowns                                                                        168,294                   180,171
- Other currencies                                                                          0                         0
Trading shares and participation certificates                                         168,294                   180,171





Shares held for trading at cost, allocated by issuer, comprise:
                                                                               31 December 2001        31 December 2000
                                                                                       CZK '000                CZK '000
Trading shares and participation certificates
- Financial institutions in the Czech Republic                                                0                   4,639
- Non-banking entities in the Czech Republic                                            168,294                 175,532
Total trading shares and participation certificates                                     168,294                 180,171



Trading debt securities at cost comprise:
                                                                          31 December 2001             31 December 2000
                                                                                  CZK '000                     CZK '000
Variable yield debt securities
- Czech crowns                                                                     553,078                    1,041,067
- Other currencies                                                                       0                      235,596
Total variable yield debt securities                                               553,078                    1,276,663
Fixed income debt securities
- Czech crowns                                                                   2,455,998                    1,401,566
- Other currencies                                                                       0                      374,998
Total fixed income debt securities                                               2,455,998                    1,776,564
Total trading debt securities                                                    3,009,076                    3,053,227





Trading debt securities at cost, allocated by issuer, comprise:


                                                                             31 December 2001          31 December 2000
                                                                                     CZK '000                  CZK '000
Trading debt securities issued by
- State institutions in the Czech Republic                                          1,411,601                   460,927
- Financial institutions in the Czech Republic                                        522,635                   761,646
- Foreign financial institutions                                                      124,852                    29,219
- Other entities in the Czech Republic                                                937,148                 1,284,988
- Other foreign entities                                                               12,840                   516,447
Total trading debt securities                                                       3,009,076                 3,053,227




16 Fixed asset investments in subsidiary and associated undertakings

                                   Registered office address     Bank's direct     Bank's direct  Number of shares held
                                                                   holding (%)       holding (%)            by the Bank
                                                                          2001              2000                   2001
Subsidiary undertakings

ALL IN, a. s., v likvidaci   Praha 1, Vodickova 30                         100               100                    209

Investicni kapitalova        Dlouha 34, 110 15 Praha1                      100               100                    500
spolecnost KB, a. s.

Penzijni fond Komercni       Praha 1, Na Prikope 33                        100               100                  2,000
banky, a. s.

Komercni banka Bratislava,   Medena 6, 811 02 Bratislava                   100               100                  5,000
a. s.

Komercni pojistovna, a. s.   Jindrisska 17, 111 21 Praha 1                 100               100                  9,000

Factoring KB, a. s.          Na Porici 36, 110 02, Praha 1                 100               100                  8,400

Komercni Finance, B. V.      Drentestraat 24, 1083 HK                      100               100                     40
                             Amsterdam, Netherlands

ASIS, a. s.                  Nam. OSN 1/844, 190 02 Praha 9                100                                       10

Reflexim, a. s.              Bolzanova 3, 110 00 Praha 1                   100                                       10

A-TRADE, s. r. o.            Truhlarska 18, 110 00 Praha 1                  75                75                210,000

MUZO, a. s.                  V Olsinach 80/626, 150 05 Praha              49.9              49.9                 50,900
                             10

Associated undertakings

CAC LEASING, a. s.           Janackovo nabrezi 55/140, 150                  50                50                   1130
                             05 Praha 5

Vseobecna stavebni           Belehradska 128, 120 21 Praha 2                40                40                  2,000
sporitelna KB, a. s.

CAC LEASING Slovakia, a. s.  Hurbanovo nam. 1 811 06                        10                10                     50
                             Bratislava


                                            Number of shares held by the       Profit/    Equity       Nominal value of
                                                                    Bank        (loss)                           shares
                                                                                                             (CZK '000)
                                                                    2000        (2000)    (2000)                in 2001
Subsidiary undertakings

ALL IN, a. s., v likvidaci                                           209      (15,391)    84,054                    213

Investicni kapitalova spolecnost KB, a.s.                            500        85,898   244,980                    100

Penzijni fond Komercni banky, a. s.                                2,000       292,242 1,296,969                    100

Komercni banka Bratislava, a. s.                                   5,000        16,663   415,604       SKK 100 thousand

Komercni pojistovna, a. s.                                        9,000,       (6,598)   279,153                     50

Factoring KB, a. s.                                                8,400         7,758    99,200                     10

Komercni Finance, B. V.                                               40        19,795    20,432         NLG 1 thousand

ASIS, a. s.                                                                                                         100

Reflexim, a. s.                                                                                                     100

A-TRADE, s. r. o.                                                210,000     (170,021)    32,715                      1

MUZO, a. s.                                                       50,900       164,310   361,395                      1

Associated undertakings

CAC LEASING, a. s.                                                  1130        99,968   567,152                    100

Vseobecna stavebni                                                 2,000       225,498 1,322,293                    100
sporitelna KB, a. s.

CAC LEASING Slovakia, a. s.                                           50        53,482   104,071                SKK 100


                                           Total client loan         Discounted client loan         Applied client loan
                                                  collateral               collateral value            collateral value
                                                                           31 December 2001            31 December 2001
                                            31 December 2001
                                                    CZK '000                       CZK '000                    CZK '000

Guarantees of state and governmental              60,813,434                     59,366,992                  54,973,068
institutions
Bank guarantee                                     3,729,202                      2,807,939                   2,386,895
Guaranteed deposits                                1,552,622                      1,550,699                   1,224,617
Issued debentures in pledge                       12,994,754                     12,994,754                  12,994,754
Pledge of real estate                            155,856,443                     45,226,625                  29,567,293
Pledge of movable assets                          10,040,130                        978,664                     947,858
Guarantee by corporate entity                     17,421,275                      1,808,369                   1,691,600
Guarantee by individual (physical                  4,821,407                        535,533                     530,379
entity)
Pledge of receivables                             17,285,404                      7,110,070                   6,101,565
Insurance of credit risk                           5,042,738                      4,972,319                   4,939,587
Other                                             13,312,544                      9,009,984                   6,988,059
Total nominal value of collateral                302,869,953                    146,361,948                 122,345,675


                                           Total client loan         Discounted client loan         Applied client loan
                                                  collateral               collateral value            collateral value
                                                                           31 December 2000            31 December 2000
                                            31 December 2000
                                                    CZK '000                       CZK '000                    CZK '000

Guarantees of state and governmental               8,498,194                      7,873,019                   2,751,820
institutions
Bank guarantee                                     2,773,817                      2,644,199                   2,419,500
Guaranteed deposits                                1,496,346                      1,496,146                     988,300
Issued debentures in pledge                            4,000                          3,200                       3,200
Pledge of real estate                            177,920,335                     72,555,149                  45,738,000
Pledge of movable assets                           6,498,491                        657,715                     657,714
Guarantee by corporate entity                     19,738,960                      9,988,326                   8,324,944
Guarantee by individual (physical                  4,069,403                      3,373,621                   2,811,803
entity)
Pledge of receivables                              6,580,620                      5,024,855                   4,188,052
Insurance of credit risk                           6,616,379                      6,616,379                   6,616,379
Other                                             13,264,991                      9,627,391                   8,726,585
Total nominal value of collateral                247,461,537                    119,859,999                  83,226,297


In the first half of 2001, the Bank acquired a 100 percent equity interest in
two companies and transformed these investments into wholly owned and controlled
subsidiaries:


- Reflexim, a. s. - with effect from 1 July 2001 the Bank transferred
approximately 450 staff and the related support operations to this newly
established subsidiary; and



- ASIS, a. s. - with effect from 1 September 2001 the Bank transferred
approximately 250 staff and the related information technology user support and
other activities to this newly established subsidiary.

Komercni pojistovna, a. s. incurred significant losses in the year ended 31
December 2001 principally related to the continuing substantial acquisition
costs associated with its life insurance portfolio, unprofitability of its third
party motor liability insurance and losses incurred in the settlement of
liabilities arising from its industrial commercial insurance portfolio. These
losses primarily follow the review of the adequacy of the technical reserves for
its lines of business and a reassessment of the accounting treatment of the
Komercni pojistovna's share in the auto insurance deficit administered by the
Czech Bureau of Insurance. In December 2001, the Bank approved the plan to
increase the company's share capital by 1,050 shares of ordinary stock in the
aggregate amount of CZK 105 million (nominal value of one share being CZK 100
thousand) at an issue rate of CZK 275 thousand per share. Following the
resolution of its sole shareholder, Komercni pojistovna filed a proposal to
update the corporate details held at the Register of Companies maintained by the
Municipal Court in Prague. In January 2002, the Bank made a cash deposit of CZK
288.75 million in Komercni pojistovna. Of this balance, CZK 105 million
represents the nominal value of the issued shares (share capital increase of
Komercni pojistovna) and CZK 183.75 million is the share premium amount. The
aggregate capital increase amounts to CZK 288.75 million. The management of the
Bank is currently reviewing options available to it in further recapitalising
and restructuring this business. The Bank has indicated that it will continue to
provide financial support to Komercni pojistovna, a. s., such that it is able to
meet legal and regulatory requirements applicable to the entity.

Following the previous decision of the Bank to substantially reduce the
activities of the ALL IN Group, the company ALL IN, a. s., v likvidaci was put
into liquidation on 1 April 2001. The carrying value of the Bank's investment in
this company reflects the estimated recoveries from the liquidation process.
Having discontinued its real estate development activities, A-TRADE, s. r. o.,
significantly reduced its operations and presently only administers and
maintains a residual portfolio of assets which have not been transferred to the
Bank. Management of the Bank has been negotiating the sale of this entity.

The Bank has presented its interest in MUZO as at 31 December 2001 as an
interest in subsidiary. In prior accounting periods MUZO was accounted for as an
associate. In 2001 the management consider that the Bank, directly or
indirectly, has the power to exercise control over the financial and operating
policies of MUZO.

Management of the Bank has written down the carrying value of investments in the
Bank's group companies to reflect its present estimate of the recoverable value
of these investments.



During 2001, the Bank sold its equity interest in Bankovni institut, a. s. The
equity holdings in Ceskomoravska zarucni a rozvojova banka, a. s., and Burza
cennych papiru Praha, a. s. (the Prague Stock Exchange) were transferred to the
available-for-sale securities portfolio.



17 Other financial investments

Other financial investments comprise:
                                       31 December 2001   31 December 2001      31 December 2000      31 December 2000
                                             Fair value     Carrying value            Fair value        Carrying value
                                               CZK '000           CZK '000              CZK '000              CZK '000
Shares and participation certificates        4,158,304,          4,239,866             4,714,563             5,153,312
Less provisions                                       0           (81,562)                     0             (582,716)
Net book value of shares                      4,158,304          4,158,304             4,714,563             4,570,596
Fixed income debt securities                 20,050,586         20,351,914            20,855,212            20,949,710
Variable yield debt securities               11,389,207         12,608,903            13,162,995            13,162,995
Treasury bills                                  485,151            481,037             4,030,066             4,030,066
Debt securities                              31,924,943         33,441,854            38,048,273            38,142,771
Less provisions                                       0        (2,050,051)                     0             (109,382)
Net book value of debt securities            31,924,943         31,391,803            38,048,273            38,033,389
of which: own debt securities                   836,674            836,674             1,551,693             1,551,693
Total other financial investments            36,083,248         35,550,107            42,762,836            42,603,985
Securities available for sale                34,274,056         33,753,585            30,014,206            29,855,355
Investments held to maturity                  1,809,192          1,796,522            12,748,630            12,748,630



Other financial investments comprise securities available for sale and
investments held to maturity. As of 1 January 2001, reflecting the requirements
of the amended chart of accounts and accounting procedures for banks, the Bank
revised its security investment strategy and allocated the securities held in
the investment portfolio into new portfolios. Securities carried in the
available for sale category are provisioned to cover a temporary or permanent
impairment in circumstances where the market value is lower than the net
carrying amount of the securities. The Bank provisions any impairment of
investments held to maturity if the impairment results from the deterioration of
credit risk attached to the security's issuer or underlying assets and is other
than temporary.



Securities available for sale

Securities available for sale comprise:
                                       31 December 2001   31 December 2001      31 December 2000      31 December 2000
                                             Fair value     Carrying value            Fair value              Carrying
                                                                                                                 value
                                               CZK '000           CZK '000              CZK '000              CZK '000
Shares and participation certificates        4,158,304,          4,239,866             4,714,563             5,153,312
Less provisions                                       0           (81,562)                     0             (582,716)
Net book value of shares                      4,158,304          4,158,304             4,714,563             4,570,596
Fixed income debt securities                 18,241,394         18,555,392            17,476,870            17,571,368
Variable yield debt securities               11,389,207         12,608,903             7,822,773             7,822,773
Treasury bills                                  485,151            481,037                     0                     0
Debt securities                              30,115,751         31,645,332            25,299,643            25,394,141
Less provisions                                       0        (2,050,051)                     0             (109,382)
Net book value of debt securities            30,115,751         29,595,281            25,299,643            25,284,759
of which: own debt securities                         0                  0               781,279               781,279
of which: debt security coupons                 816,766            816,766                     0                     0
Total securities available for sale          34,274,056         33,753,585            30,014,206            29,855,355



As of 31 December 2001, the available-for-sale portfolio includes securities at
cost of CZK 16,789,434 thousand (2000: CZK 16,249,372 thousand) that are
publicly traded on stock exchanges and securities at cost of CZK 19,095,764
thousand (2000: CZK 14,298,081 thousand) that are not publicly traded.

Shares available for sale at cost comprise:
                                                                                 31 December 2001      31 December 2000
                                                                                         CZK '000              CZK '000
Shares and participation certificates available for sale
issued by
- Czech crowns                                                                          4,234,194             5,147,087
- Other currencies                                                                          5,672                 6,225
Total shares and participation certificates available for sale                          4,239,866             5,153,312



Shares available for sale at cost, allocated by issuer, comprise:
                                                                                 31 December 2001      31 December 2000
                                                                                         CZK '000              CZK '000

Shares and participation certificates available for sale
issued by
- Non-banking entities in the Czech Republic                                            4,234,194             5,147,087
- Foreign non-banking entities                                                              5,672                 6,225
Total shares and participation certificates available for sale                          4,239,866             5,153,312





Debt securities available for sale at cost comprise:
                                                                           31 December 2001            31 December 2000
                                                                                   CZK '000                    CZK '000
Variable yield debt securities
- Czech crowns                                                                    1,088,276                   6,122,101
- Other currencies                                                               11,520,627                   1,700,672
Total variable yield debt securities                                             12,608,903                   7,822,773
Fixed income debt securities
- Czech crowns                                                                   14,371,872                  15,555,813
- Other currencies                                                                4,183,520                   2,015,555
Total fixed income debt securities                                               18,555,392                  17,571,368
Treasury bills                                                                      481,037                           0
Total debt securities available for sale                                         31,645,332                  25,394,141


Debt securities available for sale at cost, allocated by issuer, comprise:
                                                                             31 December 2001          31 December 2000
                                                                                     CZK '000                  CZK '000
Debt securities available for sale issued by
- State institutions in the Czech Republic                                          5,165,778                 4,031,537
- Financial institutions in the Czech Republic                                      3,989,464                 6,160,406
- Foreign financial institutions                                                      304,960                   436,587
- Other entities in the Czech Republic                                              3,732,296                 3,763,577
- Other foreign entities                                                           18,452,834                11,002,034
Total debt securities available for sale                                           31,645,332                25,394,141


Investments held to maturity

Investments held to maturity comprise:
                                                       2001                  2001               2000               2000
                                                 Fair value        Carrying value         Fair value           Carrying
                                                                                                                  value
                                                   CZK '000              CZK '000           CZK '000           CZK '000
Fixed income debt securities                      1,809,192             1,796,522          3,378,342          3,378,342
Variable yield debt securities                            0                     0          5,340,222          5,340,222
Treasury bills                                            0                     0          4,030,066          4,030,066
Debt securities                                   1,809,192             1,796,522         12,748,630         12,748,630
Less provisions                                           0                     0                  0                  0
Net book value of debt securities                 1,809,192             1,796,522         12,748,630         12,748,630
of which: own debt securities                       836,674               836,674            770,414            770,414



As of 31 December 2001, the held-to-maturity portfolio includes securities of
CZK 1,796,522 thousand (2000: CZK 999,063 thousand) that are publicly traded on
stock exchanges and securities of CZK nil (2000: CZK 11,749,568 thousand) that
are not publicly traded.

Debt securities held to maturity at cost comprise:
                                                                          31 December 2001             31 December 2000
                                                                                  CZK '000                     CZK '000
Variable yield debt securities
- Czech crowns                                                                           0                            0
- Other currencies                                                                       0                    5,340,222
Total variable yield debt securities                                                     0                    5,340,222
Fixed income debt securities
- Czech crowns                                                                   1,035,141                    5,029,128
- Other currencies                                                                 761,381                    2,379,280
Total fixed income debt securities                                               1,796,522                    7,408,408
Total debt securities held to maturity                                           1,796,522                   12,748,630



Investments held to maturity at cost, split by issuer, comprise:
                                                                             31 December 2001          31 December 2000
                                                                                     CZK '000                  CZK '000
Debt securities held to maturity issued by
- State institutions in the Czech Republic                                                  0                 4,030,065
- Financial institutions in the Czech Republic                                      1,035,141                   917,717
- Other entities in the Czech Republic                                                      0                    81,346
- Other foreign entities                                                              761,381                 7,719,502
Total debt securities held to maturity                                              1,796,522                12,748,630



As of 31 December 2001, the proportion of fixed income debt securities and
securities with maturity less than one year to the aggregate balance of fixed
income debt securities and securities represents 9.43 percent (2000: 23
percent).




Equity securities

As of 31 December 2001, the Bank holds 56 percent of the issued participation
certificates of Otevreny podilovy fond Globalni ('Globalni'). Globalni is
managed by IKS KB, a. s., the Bank's asset management subsidiary, and the Bank
acts as a depositary institution. As of 31 December 2001, Globalni's portfolio
included 6.75 percent domestic equity securities, 9.23 percent international
equities, 4.92 percent participation certificates, 22.46 percent local debt
securities, and 26.64 percent foreign debt securities. The remaining portion of
the portfolio consists of current receivables, accounts with banks and foreign
accounts. As of 31 December 2001, the Bank carries its interest in Globalni at a
cost of CZK 4,068 million (2000: CZK 4,111 million).

In the last quarter of 2001, the Bank sold 9.99 percent of the issued share
capital of Ceska pojistovna, a. s., the largest insurance company in the Czech
Republic (of which 4.87 percent of the issued share capital was publicly
traded). The Bank realised a profit of CZK 588,174 thousand from this sale.

In the last quarter of 2001, the Bank sold 69.42 percent of the issued share
capital of Ceska zbrojovka, a. s., a Czech small arms manufacturer. The investor
was selected pursuant to a standard tender initiated in June 2001 and was
approved by the Bank's Management and Supervisory Boards. A Share Purchase
Agreement was entered into in November 2001 and this transaction was effected in
December 2001. The Bank realised a profit of CZK 3,703 thousand from this sale.

As of 31 December 2001, the Bank holds 77.18 percent (2000: 77.18 percent) of
the issued share capital of Vodni stavby, a. s., a large Czech construction
company. The Bank acquired the majority of these shares in connection with the
liquidation of the company and the recovery of a syndicated facility provided to
Vodni stavby, a. s., in prior years. The Bank has attributed no value to this
shareholding as of 31 December 2001. Pursuant to Section 183 b (4) (a) (2) of
the Commercial Code, the Bank does not exercise and does not intend to exercise
voting rights, which are equivalent to a 57.22 percent shareholding (of the
aggregate 77.18 percent shareholding of the Bank), attached to these shares nor
will the Bank pass the voting rights to other parties. The Bank's Management
Board has discussed a further course of action in relation to the holding of
these shares. Negotiations that were conducted with regard to the sale of the
shares and the aggregate loan exposure had not been successful by the close of
2001.



Asset Backed Securities

In the last quarter of 2000 and the first half of 2001, the Bank acquired an
unlisted portfolio of USD denominated collateralised bond obligations ('CBO') or
asset backed securities ('ABS') issued by a series of special purpose
corporations. The acquisition cost of the whole portfolio was USD 426 million.
The portfolio of asset backed securities has an average credit rating of A2
(Moody's) as of 31 December 2001 and a substantial portion of the securities
have ratings issued by other recognised international rating agencies. The
securities bear a fix or floating interest rate based on USD LIBOR.

Pursuant to the requirements of IAS 39 the Bank allocated these securities into
the available for sale portfolio and the held to maturity portfolio as of 1
January 2001. In December 2001, management of the Bank determined that all asset
backed securities are to be held in the available for sale category. This
transfer was implemented as of 31 December 2001. The decision on the allocation
of the securities was made by the Bank's new majority shareholder in connection
with the Bank's privatisation reflecting the fact that Societe Generale's global
strategy is to carry such securities as available for sale. The transfer of the
asset backed securities to the available for sale category had no impact on the
profit and loss statement. The Bank, from mid-2001, has provisioned for the
impairment of the asset backed securities held in both categories on a
consistent basis.

The Bank established a provision for impairment of CZK 1,958,888 thousand as of
31 December 2001 against the asset backed securities, the carrying value of
which, net of impairment, is CZK 13,437,359 thousand. Management considers that
this impairment charge represents its best estimate of the net recoverable value
of these assets and reflects changes in market credit conditions in the markets
of the underlying assets since the purchase of the portfolio. The Bank used the
same model also for the fair value of the credit linked note (refer to Other
debt securities).



Other debt securities

Securities issued by banks include a credit linked note (the 'note') with a
nominal value of Euro 9.5 million, issued by an internationally recognised bank,
which amortises to zero over the ten years to its maturity pursuant to the
payment schedule. The note bears interest based on a margin over three month
Euribor. This note forms part of a credit derivative instrument acquired by the
Bank during 2000 under which it sold credit protection to an international
financial institution. The maximum exposure of the Bank under this agreement is
Euro 100 million. The aggregate exposure amortises over the ten year life of the
instrument. Off balance sheet instruments of Euro 100 million associated with
this transaction (the so called 'credit default swaps') are shown within issued
banking payment guarantees. In September and December 2001, the Bank received
notices of credit events in respect of two reference assets within the contract.
The credit quality of other reference assets has also deteriorated. If the
aggregate loss exceeds the contracted threshold, the Bank is required to pay the
amount over the threshold to the issuer. The Bank has created provisions for
potential losses in respect of this instrument in the amount of CZK 244,007
thousand as of 31 December 2001.

The Bank holds a portfolio of CZK denominated debt obligations issued by large
international corporates through private placements. The carrying value of this
portfolio was CZK 3,053,647 thousand as of 31 December 2001 (2000: CZK 7,105,010
thousand) as a result of the redemption of a one of the investments.

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