BPKD.L Regulatory News (BPKD)

12 May 2006 07:44

Bank Pekao SA12 May 2006 BANK POLSKA KASA OPIEKI SPOLKA AKCYJNA Interim financial statements of the Bank Pekao S.A. Group for the first quarter of 2006 prepared according to the International Financial Reporting Standards 1 Summary2 Accounting principles adopted in the preparation of the quarterly report3 Financial statements4 Additional information4.1 The Group4.2 Achievements of Bank Pekao S.A.4.3 Achievements of subsidiaries4.3.1 Pioneer Pekao TFI S.A.4.3.2 Centralny Dom Maklerski Pekao S.A. (CDM)4.4 Results achieved in the first quarter of 2006 and the factors whichinfluenced these results4.4.1 Results of the Group4.4.2 The structure of the net profit4.5 Segment reporting4.6 Adjustments for provisions, deferred tax provision and assets4.7 Write-offs for revaluation of assets4.8 Information on contingent assets and liabilities4.9 Post balance sheet events4.10 Share capital increase of Bank Pekao S.A.4.11 Seasonality or cyclical nature of the Bank's activity4.12 Issuance, redemption and repayment of debt securities4.13 Dividend paid4.14 Effects of changes in the Group's structure4.15 The position of the Management Board regarding the possibility of achievingpreviously published forecasts4.16 The information about the shareholders owning at least 5% of the totalnumber of votes at the General Meeting of Bank Pekao S.A.4.17 The Issuer's shares held by the Management and Supervisory Board members4.18 Pending litigations4.19 Transactions of related entities4.20 Loan or credit sureties and guarantees given4.21 Factors which will affect the results of at least the next quarter 1 Summary In this quarterly report the Bank and the Group present their results inaccordance with the International Financial Reporting Standards (IFRS).The Group's consolidated financial statements and the Bank's individualfinancial statements fulfil the requirements of International AccountingStandard - IAS 34 "Interim Financial Reporting". Net profit of the Group in the first quarter of 2006 was the best quarterlyresult achieved to date and amounted to PLN 418.3 million, i.e. 26.6% higherthan in the first quarter of 2005 confirming continued growth in Group'sprofitability. The increase in the net profit was possible thanks to increased businessactivity which translated into higher income, particularly fee and commissionincome, with stable operating costs and lower cost of risk. • Group's income amounted to PLN 1,134.0 million in the first quarter of 2006 and was by 8.9% higher than in the previous year, with interest income being higher by 6.6% and other income higher by 11.3%. • In the first quarter of 2006, the Group noted a continued positive trend in the results of its business activity, with successful sales of key products: mutual funds, consumer loans "Express Loan", PLN mortgage loans and credit cards. Sales of the "Express Loan" in the first quarter of 2006 were 57.3% higher than in the previous year reaching PLN 363.2 million. Sales of PLN mortgage loans amounted to PLN 405.3 million contributing to a growth in the stock of 5.8% in the first quarter of 2006. The value of mutual funds increased by 5.7% and the number of credit cards increased by 9.3% compared with the end of 2005. • In the first quarter of 2006, total overhead costs including depreciation were kept under control and amounted to PLN 582.4 million, i.e. were by 1.2% higher than in the previous year. In the first quarter of 2006, the Group's cost / income ratio amounted to 51.4% and was by 3.9 p.p. lower than in the previous year. • In the first quarter of 2006, impairment losses on loans and advances amounted to PLN 58.4 million and were 7.7% lower than in the previous year. This resulted primarily from the effective credit risk management and improved macroeconomic situation. The ratio of impaired receivables to total receivables decreased from 15.6% at the end of 2005 to 15.4% at the end of March 2006. • Savings of the Group's clients increased by PLN 1,715.9 million i.e. by 2.6% in the first quarter of 2006 resulting from an increase both in the savings of individual clients and in corporate deposits. The savings of retail clients increased by PLN 377.7 million in the first quarter of 2006. High demand for mutual funds allowed for further increase in mutual funds assets by PLN 1,101.7 million in the first quarter of 2006 bringing the total retail savings at the PLN 45.5 billion level confirming Group's significant market share. Corporate deposits increased by PLN 1,338.2 million in the first quarter of 2006. • In the first quarter of 2006, the gross loan portfolio grew by PLN 449.5 million, i.e. by 1.4% . This growth was driven by successful sale of the "Express Loan" and PLN mortgage loans and an increase in the volume of corporate loans. 2 Accounting principles adopted in the preparation of the quarterly report The interim consolidated report of the Group of Bank Pekao S.A. and the standalone report of Bank Pekao S.A. were prepared in compliance with theInternational Financial Reporting Standards (IFRS), published by theInternational Accounting Standards Board. The presented report meets the requirements of the International AccountingStandard 34 related to interim financial reports and of the Decree of theCouncil of Ministers dated 19th October 2005 on current and periodic informationsubmitted by the issuers of securities. The consolidated financial report of the Group and enclosed financial report ofthe Bank have been prepared in accordance with the accounting principles appliedfor the purpose of asset and liabilities valuation and measurement of financialresults, as disclosed in the consolidated report and the stand alone report ofBank Pekao S.A. for the year 2005, published on 22nd March 2006. There were no changes of accounting principles in the first quarter of 2006financial reports in comparison to the accounting principles applied for theGroup and the Bank annual reports for the year 2005.In this report the data have been presented to manner assuring comparability. 3 Financial statements CONSOLIDATED INCOME STATEMENT I Quarter I Quarter(in '000 PLN) 2006 2005 period period from from 06-01-01 05-01-01 to 06-03-31 to 05-03-31Interest income 915 096 948 292Interest expense (343 858) (406 225)Net interest income 571 238 542 067Fee and commission income 506 209 405 296Fee and commission expense (46 141) (38 877)Net fee and commission income 460 068 366 419Dividend income - -Result on financial instruments at fair 2 527 25 477valueResult on investment securities 31 971 15 049Foreign exchange result 52 320 79 067Other operating income 49 267 67 129Other operating expenses (33 416) (53 654)Net other operating income 15 851 13 475Net impairment losses on financial (58 375) (63 306)assets and net provisions for guaranteesand commitmentsOverhead costs (582 391) (575 685)Operating profit 493 209 402 563Share of profit (loss) of associates and 20 762 11 530joint venture entities valued at theequity methodProfit before income tax 513 971 414 093Income tax expense (95 654) (83 602) Net profit for the period 418 317 330 491 1. Attributable to equity holders of the 418 860 331 463Company2. Attributable to minority interest (543) (972) Earnings per share (in PLN per share)- basic for the period 2,51 1,99- diluted for the period 2,51 1,99 CONSOLIDATED BALANCE SHEET(in '000 PLN) 31.03.2006 31.12.2005 31.03.2005Assets Cash and balances with Central Bank 3 484 022 3 574 791 2 516 501 Debt securities eligible for 5 254 6 106 8 244 rediscounting at the Central Bank Loans and advances to banks 8 302 448 6 966 026 7 207 397 Financial assets as held for trading 1 909 078 2 502 366 1 847 555 Derivative financial instruments 482 176 499 290 552 807 Other financial instruments at fair 1 739 849 1 781 317 1 577 513 value through profit or loss Loans and advances to customers 28 524 551 28 223 730 25 896 190 Net investment in the finance lease 783 493 745 891 612 370 Investment securities 16 225 668 14 490 772 16 550 946 1. Available for sale 13 600 564 11 902 898 12 264 726 2. Held to maturity 2 625 104 2 587 874 4 286 220 Assets of disposal group classified as 159 503 167 366 - held for sale Investments in associated undertakings 188 574 167 814 136 076 Intangible assets 617 909 645 457 609 967 Tangible fixed assets 1 413 202 1 441 141 1 508 415 Investment property 61 477 61 259 102 649 Income taxes 225 885 182 180 94 741 1. Current tax assets 660 886 18 588 2. Deferred income tax assets 225 225 181 294 76 153 Other assets 709 894 516 450 928 575 Total assets 64 832 983 61 971 956 60 149 946 Liabilities and shareholders' equityLiabilities Amounts due to the Central Bank 1 895 029 1 950 710 2 103 038 Amounts due to other banks 2 105 329 1 997 043 2 606 698 Financial liabilities as held for 1 245 771 558 973 - trading Derivative financial instruments 523 766 607 689 539 274 Amounts due to customers 48 494 093 46 847 877 44 961 141 Debt securities in issue - 4 23 557 Liabilities directly associated with 32 258 39 663 - assets classified as held for sale Current income tax liabilities 63 879 5 621 38 530 Provisions for deferred income tax - 1 4 968 Provisions 100 745 108 727 104 446 Other liabilities 1 551 855 1 432 922 1 540 093 Total liabilities 56 012 725 53 549 230 51 921 745 Shareholders' equityCapital and reserves attributable to the 8 805 303 8 407 290 8 210 396Company's equityHolders Share capital 166 733 166 482 166 482 Other capital and reserves 6 694 462 6 718 913 6 361 939 Prior and current year profits 1 944 108 1 521 895 1 681 975Minority interest 14 955 15 436 17 805 Total shareholders' equity 8 820 258 8 422 726 8 228 201 Total liabilities and shareholders' equity 64 832 983 61 971 956 60 149 946 Capital adequacy ratio 19,45 19,47 19,66Book value 8 805 303 8 407 290 8 210 396Number of shares 166 733 166 481 687 166 481 320 687Book value per share ( in PLN per share) 52,81 50,50 49,32Diluted number of shares 166 875 166 558 940 166 517 902 930Diluted book value per share (in PLN per 52,77 50,48 49,31share) CONSOLIDATED STATEMENT OF CHANGES I Quarter 2005 I QuarterIN SHAREHOLDERS' EQUITY 2006 period 2005(in '000 PLN ) period from period from 05-01-01 from 06-01-01 to 05-12-31 05-01-01 to 06-03-31 to 05-03-31 Shareholders equity at the beginning of the 8 422 726 8 023 481 7 903 625perioda) adjustment related to IFRS/IAS - (192 460) (176 492)introductionb) change of consolidation method - -c) adjustment due to fundamental errors - - -Adjusted shareholders equity at the 8 422 726 7 812 245 8 017 197beginning of the period1. Share capital at the beginning of the 166 482 166 482 166 482perioda) Increase 251 - -- new shares issue 251 - -b) Decrease - - -- redemptions - - -1. Share capital at the end of the period 166 733 166 482 166 4822. Earnings from previous years at the 1 521 895 1 512 265 1 527 004beginning of the perioda) adjustment related to IFRS/IAS - (192 460) (176 492)introductionb) change of consolidation method - - -2. Adjusted earnings from previous years at 1 521 895) 1 319 805 1 350 512the end of the perioda) Increase 3 353 1 761 -- adjustment related to IFRS/IAS - - -introduction- other 3 353 1 761 -b) Decrease - (1 337 383) -- appropriation to other reserve capital - (271 900) -- dividend - (1 065 483) -2. Earnings from previous years at the end 1 525 248 (15 817) 1 350 512of the period3. Other capital and reserves at the 6 718 913 6 325 958 6 486 054beginning of the perioda) adjustment related to IFRS/IAS - - -introductionb) change of consolidation method - - -3. Adjusted other capital and reserves at 6 718 913 6 325 958 6 486 054the beginning of the perioda) Increase 28 321 393 691 68 292- appropriation of net profit - 271 900 -- share premium on issue of new shares 26 810 - -- valuation of securities available for - 107 867 67 178sale (net)- employee share option proceeds 1 469 11 893 -- foreign exchange differences on valuation 42 - -of foreign branches- other - 2 031 -b) Decrease (52 723) (736) (30 064)- valuation of securities available for (49 272) - -sale (net)- foreign exchange differences on valuation - (736) -of foreign branches- adjustment related to IFRS/IAS - - (30 064)introduction- foreign exchange differences on valuation - - -of foreign branchesfor the previous years- other (3 500) - -3. Other capital and reserves at the end of 6 694 469 6 718 913 6 361 939the period4. Net profit 418 860 1 537 712 331 463II. Shareholders' equity at the end of the 8 805 302 8 407 290 8 210 396periodIII. Minority interest at the beginning of 15 436 18 776 18 776the perioda) Decrease (481) (3 340) (971)- net profit (543) (2 860) (972)- other 62 (480) 1IV. Minority interest at the end of the 14 955 15 436 17 805periodTotal equity 8 820 258 8 422 726 8 228 201 CONSOLIDATED STATEMENT OF CASH FLOW I Quarter I Quarter(in '000 PLN) 2006 2005 period period from from 06-01-01 05-01-01 to to 06-03-31 05-03-31A. Cash flow from operating activities -indirect methodI. Net profit (loss) 418 860 331 463Adjustments: 1 689 119 361 753Depreciation 79 313 80 475Share of profit of associates (20 762) (11 530)Foreign exchange differences 12 927 (108 133)(Profit) loss on investing (38 011) (15 049)activitiesImpairment (5) -Interest and dividend (199 030) (265 906)Change in loans and advances to (708 488) (198 282)banksChange in financial assets as held for trading and 634 756 1 107 424other financial instruments at fair value through profit or lossChange in derivative financial 17 114 (49 325)instrumentsChange in loans and advances to (299 969) (146 618)customersChange in net investment in the (37 602) (65 046)finance leaseChange in investment securities available - (16 915)for saleChange in deferred income tax (32 282) 32 598assetsChange in other assets (185 213) (207 493)Change in amounts due to banks 52 605 1 225 436Change in liabilities as held for 686 798 (590 119)tradingChange in derivative financial instruments and (83 923) (84 409)other financial liability at fair value through profit or lossChange in amounts due to customers 1 646 216 (860 504)Change in debt securities in issue - 352Change in provisions (7 982) 3 833Change in other liabilities 114 200 497 725Income tax paid (68 394) (35 923)Current tax 126 851 69 162Net cash from operating activities 2 107 979 693 216 B. Cash flows from investingactivitiesInvesting activity inflows 7 310 818 4 029 452Sale of shares in associates - -Sale of shares in subsidiaries, net of cash - -disposedSale of investment securities 7 187 127 3 927 476Proceeds from sale of intangible assets and 6 039 846tangible fixedAssetsOther investing inflows 117 652 101 130Investing activity outflows (8 908 (5 097 691) 804)Purchase of associates - -Purchase of subsidiaries, net of - -cash acquiredPurchase of investment securities (8 882 (5 069 836) 913)Purchase of intangible assets and tangible (25 825) (27 563)fixed assetsOther investing outflows (30) (328)Net cash used in investing (1 597 (1 068activities 873) 352) C. Cash flows from financingactivitiesFinancing activity inflows 27 062 -Proceeds from loans and advances from other - -banksProceeds from other loans and - -advancesIssue of debt securities - -Increase of subordinated - -liabilitiesIssue of ordinary shares 27 062 -Sale of own shares - -Other financing inflows - -Financing activity outflows (4) -Repayments of loans and advances from other - -banksRepayments of other loans and - -advancesRedemption of debt securities (4) -Decrease of subordinated - -liabilitiesOther financial liabilities - -Payments of financial lease - -liabilitiesDividends and other payments to - -shareholdersOther than payments to shareholders expenditures - -due to appropriation of profitPurchase of own shares - -Other financing outflows - -Net cash from financing activities 27 058 - D. Total net cash flow (A.III+/-B.III+/-C.III) 537 164 (375 136)E. Net change in cash and cash equivalents 537 164 (375 136)F. Cash and cash equivalents at the beginning of 7 667 221 7 276 426the periodG. Cash and cash equivalents at the end of the 8 204 385 6 901 290period (F+/- D) QUARTERLY INDIVIDUAL FINANCIAL REPORT INCOME STATEMENT I Quarter I Quarter(in '000 PLN) 2006 2005 period period from from 06-01-01 05-01-01 to 06-03-31 to 05-03-31Interest income 900 151 935 651Interest expense (350 521) (420 318)Net interest income 549 630 515 333Fee and commission income 424 964 346 017Fee and commission expense (37 496) (31 012)Net fee and commission income 387 468 315 005Dividend income - 71 500Result on financial instruments at fair 1 876 23 662valueResult on investment securities 31 971 15 049Foreign exchange result 52 061 79 360Other operating income 16 734 21 848Other operating expenses (15 300) (13 911)Net other operating income 1 434 7 937Net impairment losses on financial assets (49 872) (63 563)and net provisions for guarantees andcommitmentsOverhead costs (536 846) (530 533)Operating profit 437 722 433 750Profit before income tax 437 722 433 750Income tax expense (84 305) (74 176) Net profit for the period 353 417 359 574 Earnings per share (in PLN per share)- basic for the period 2,12 2,16- diluted for the period 2,12 2,16 BALANCE SHEET(in '000 PLN) 31.03.2006 31.12.2005 31.03.2005Assets Cash and amounts due from Central Bank 3 482 911 3 573 613 2 514 903 Debt securities eligible for 5 254 6 106 8 244 rediscounting at the Central Bank Amounts due from banks 8 234 53 7 7 000 770 7 208 295 Financial assets held for trading 1 580 495 2 217 887 1 632 922 Derivative financial instruments 482 162 499 290 552 806 Other financial instruments at fair value 1 739 849 1 781 317 1 577 513 through profit or loss Loans and advances to customers 29 077 206 28 727 143 26 363 858 Investment securities 16 225 280 14 490 374 16 536 085 1. Available for sale 13 600 176 11 902 500 12 249 865 2. Held to maturity 2 625 104 2 587 874 4 286 220 Non-current assets held for sale 37 296 37 650 - Shares in subsidiaries 514 667 514 666 544 801 Shares in associates 42 234 42 234 28 690 Intangible assets 609 267 636 048 596 873 Tangible fixed assets 1 396 222 1 422 389 1 487 582 Investment property 58 472 58 170 48 512 Income taxes 195 688 152 008 65 591 1. Current tax assets - - 17 893 2. Deferred income tax assets 195 688 152 008 47 698 Other assets 425 665 285 547 678 193 Total assets 64 107 205 61 445 212 59 844 868 Liabilities and shareholders' equityLiabilities Amounts due to the Central Bank 1 895 029 1 950 710 2 103 038 Amounts due to other banks 2 086 910 1 993 601 2 607 145 Financial liabilities held for trading 1 203 175 545 930 - Derivative financial instruments 523 781 607 689 539 274 Amounts due to customers 48 491 188 46 849 748 45 063 686 Debt securities in issue 12 17 23 557 Current income tax liabilities 60 822 4 427 - Provisions for deferred income tax - - - Provisions 98 724 105 013 100 419 Other liabilities 1 218 588 1 191 819 1 287 864 Total liabilities 55 578 229 53 248 954 51 724 983 Shareholders' equity Share capital 166 733 166 482 166 482 Profit for the year and retained earnings 1 860 196 1 506 779 1 754 632 Other capital and reserves 6 502 047 6 522 997 6 198 771 Total shareholders' equity 8 528 976 8 196 258 8 119 885 Total liabilities and shareholders' equity 64 107 205 61 445 212 59 844 868 Capital adequacy ratio (%) 17,62 17,95 17,89 STATEMENT OF CHANGES IN SHAREHOLDERS' I Quarter 2005 I QuarterEQUITY (in '000 PLN) 2006 period 2005 period from period from 05-01-01 from 06-01-01 to 05-01-01 to 06-03-31 05-12-31 to 05-03-31 I. Shareholders equity at the beginning 8 196 258 7 896 096 7 903 625of the perioda) adjustment related to IFRS/IAS - (192 460) (2 741)introductionb) adjustment due to fundamental errors - - -I. Adjusted shareholders equity at the 8 196 258 7 703 636 7 900 884beginning of the period1. Share capital at the beginning of the 166 482 166 482 166 482perioda) Increase 251 - -- new shares issue 251 - -b) Decrease - - -- redemptions - - -1.2. Share capital at the end of the 166 482 166 482 166 482period2. Retained earnings (loss) from previous 1 506 779 1 602 824 1 444 257years at the beginning of the perioda) adjustment related to IFRS/IAS - (192 460) 158 553introduction2. Adjusted retained earnings (loss) from 1 506 779 1 410 363 1 602 810previous years at the beginning of theperioda) Increase - - --- adjustment related to IFRS/IAS - - -introductionb) Decrease - - (207 752)- adjustment related to IFRS/IAS - - (207 752)introduction- appropriation to reserve capital - (277 518) -- dividends - (1 065 - 483)2. Retained earnings (loss) at the end of 1 506 779 67 363 1 395 058the period3. Other capital at the beginning of the 6 522 997 6 126 790 6 292 886period- adjustment related to IFRS/IAS - - (161 294)introduction3.Adjusted other capital at the beginning 6 522 997 6 126 790 6 131 592of the perioda) Increase 28 322 396 693 67 179- appropriation of net profit - 277 518 -- issue of shares under its' nominal 26 811 - -value- valuation of securities available for - 107 282 67 179sale (net)- valuation of management options 1 469 11 893 -- foreign exchange differences on 42 - -branches abroadb) Decrease (49 272) (486) -- valuation of securities available for (49 272) - -sale (net)- foreign exchange differences on - (486) -branches abroad3. Other capital at the end of the period 6 502 047 6 522 997 6 198 7714. Net profit 353 417 268 578 359 574II. Shareholders' equity at the end of 8 528 976 8 196 258 8 119 885the period CASH FLOW STATEMENT I Quarter I Quarter(in '000 PLN) 2006 2005 period period from from 06-01-01 05-01-01 to 06-03-31 to 05-03-31A. Cash flow from operating activities -indirect methodI. Net profit (loss) 353 417 359 574Adjustments: 1 621 867 766 870Depreciation 75 565 75 886Foreign exchange differences 12 958 (108 134)(Profit) loss on investing (72 557) (72 169)activitiesImpairment - -Interest and dividend (199 030) (265 800)Change in loans and advances to (700 548) 291 395banksChange in financial assets as held for trading and other 678 860 1 065 489financialInstruments at fair value through profit or lossChange in derivative financial 17 128 (49 325)instrumentsChange in loans and advances to (349 211) (300 108)customersChange in investment securities available for 550 (15 731)saleChange in deferred income tax assets (32 257) 30 945Change in other assets (139 304) (254 444)Change in amounts due to banks 37 628 1 207 644Change in liabilities as held for 657 245 (438 219)tradingChange in derivative financial instruments and other (83 908) (84 409)financial liabilityat fair value through profit or lossChange in amounts due to customers 1 641 440 (796 678)Change in debt securities in issue - 352Change in provisions (6 289) 4 798Change in other liabilities 26 769 443 597Income tax paid (59 733) (29 713)Current tax 116 561 61 494Net cash from operating activities 1 975 284 1 126 444 B. Cash flows from investingactivitiesInvesting activity inflows 7 345 093 4 082 152Sale of shares in associates - -Sale of shares in subsidiaries, net - -of cash disposedSale of investment securities 7 227 314 3 980 296Proceeds from sale of intangible assets and tangible 127 727fixed assetsOther investing inflows 117 652 101 129Investing activity outflows (8 904 917) (5 085 713)Purchase of associates - -Purchase of subsidiaries, net of - -cash acquiredPurchase of investment securities (8 882 836) (5 060 041)Purchase of intangible assets and tangible fixed assets (22 081) (25 344)Other investing outflows - (328)Net cash used in investing (1 559 824) (1 003 561)activities C. Cash flows from financingactivitiesFinancing activity inflows 27 062 -Proceeds from loans and advances from other - -banksProceeds from other loans and - -advancesIssue of debt securities - -Increase of subordinated liabilities - -Issue of ordinary shares 27 062 -Sale of own shares - -Other financing inflows - -Financing activity outflows (5) -Repayments of loans and advances from other - -banksRepayments of other loans and - -advancesRedemption of debt securities (5) -Decrease of subordinated liabilities - -Other financial liabilities - -Payments of financial lease - -liabilitiesDividends and other payments to shareholders - -Other than payments to shareholders expenditures due to - -appropriationof profitPurchase of own shares - -Other financing outflows - -Net cash from financing activities 27 057 - D. Total net cash flow (A.III+/ 442 517 122 883-B.III+/-C.III)E. Net change in cash and cash 442 517 122 883equivalentsF. Cash and cash equivalents at the beginning 7 688 574 6 776 809of the periodG. Cash and cash equivalents at the end of the period 8 131 091 6 899 692(F+/- D) Selected financial statements translated into EUR: +-----------------------------------+---------------------+---------------------+| | in '000 PLN | in '000 EUR || | | |+-----------------------------------+----------+----------+----------+----------+| Position |I Quarter |I Quarter |I Quarter |I Quarter || | of 2006 | of 2005 | of 2006 | of 2005 |+-----------------------------------+----------+----------+----------+----------+|Net interest income | 571 238| 542 067| 148 543| 135 000|+-----------------------------------+----------+----------+----------+----------+|Net fee and commission income | 460 068| 366 419| 119 635| 91 256|+-----------------------------------+----------+----------+----------+----------+|Operating profit | 493 209| 402 563| 128 253| 100 257|+-----------------------------------+----------+----------+----------+----------+|Profit before income tax | 513 971| 414 093| 133 652| 103 129|+-----------------------------------+----------+----------+----------+----------+|Net profit (loss) | 418 317| 330 491| 108 778| 82 308|+-----------------------------------+----------+----------+----------+----------+|Net profit (loss) attributable to | 418 860| 331 463| 108 919| 82 550||equity holders of the Company | | | | |+-----------------------------------+----------+----------+----------+----------+|Net profit (loss) attributable to | (543)| (972)| (141)| (242)||minority interest | | | | |+-----------------------------------+----------+----------+----------+----------+|Net cash from operating activities | 2 107 979| 693 216| 548 153| 172 644|+-----------------------------------+----------+----------+----------+----------+|Net cash used in investing | (1 597| (1 068| (415 507)| (266 070)||activities | 873)| 352)| | |+-----------------------------------+----------+----------+----------+----------+|Net cash from financing activities | 27 058| -| 7 036| -|+-----------------------------------+----------+----------+----------+----------+|Net increase / decrease in cash and| 537 164| (375 136)| 139 683| (93 427)||cash equivalents | | | | |+-----------------------------------+----------+----------+----------+----------+|Total assets |64 832 983|60 149 946|16 473 050|14 729 276|+-----------------------------------+----------+----------+----------+----------+|Amounts due to the Central Bank | 1 895 029| 2 103 038| 481 497| 514 983|+-----------------------------------+----------+----------+----------+----------+|Amounts due to other banks | 2 105 329| 2 606 698| 534 931| 638 318|+-----------------------------------+----------+----------+----------+----------+|Amounts due to customers |48 494 093|44 961 141|12 321 593|11 009 903|+-----------------------------------+----------+----------+----------+----------+|Minority interest | 14 955| 17 805| 3 800| 4 360|+-----------------------------------+----------+----------+----------+----------+|Equity attributable to the | 8 805 303| 8 210 396| 2 237 290| 2 010 529||Company's equity holders | | | | |+-----------------------------------+----------+----------+----------+----------+|Share capital | 166 733| 166 482| 42 364| 40 767|+-----------------------------------+----------+----------+----------+----------+|Number of shares | 166 733| 166 481| 166 733| 166 481|| | 320| 687| 320| 687|+-----------------------------------+----------+----------+----------+----------+|Book value per share ( in zl/EUR | 52,81| 49,32| 13,42| 12,08||per share) | | | | |+-----------------------------------+----------+----------+----------+----------+|Diluted book value per share (in zl| 52,77| 49,31| 13,41| 12,07||/EUR per share) | | | | |+-----------------------------------+----------+----------+----------+----------+|Capital adequacy ratio | 19,45| 19,66| x | x |+-----------------------------------+----------+----------+----------+----------+|Earnings per 1 ordinary share (in | 2,51| 1,99| 0,65| 0,50||zl/EUR per share) | | | | |+-----------------------------------+----------+----------+----------+----------+|Diluted earnings per 1 ordinary | 2,51| 1,99| 0,65| 0,50||share (in zl/EUR per share) | | | | |+-----------------------------------+----------+----------+----------+----------+|Declared or paid dividend per share| 7,40| 6,40| 1,84| 1,42||(in zl/EUR per share) | | | | |+-----------------------------------+----------+----------+----------+----------+ 4 Additional information 4.1 The Group Bank Pekao S.A. Capital Group as at 31st March 2006 consists of Bank Pekao S.Aas the parent entity and 15 subsidiaries. As at 31st March 2006 there were nochanges in the structure of the Group in comparison to the structure presentedas at 31st December 2005.The following entities are included in the consolidated financial report as at31st March 2006: No Name of company Core activity % of Status Consolidation shareholder's method share capital 1. Bank Pekao S.A. banking - parent - 2. Bank Pekao (Ukraina) banking 100,00 subsidiary full Ltd. 3. Centralny Dom Maklerski brokerage 100,00 subsidiary full Pekao S.A. 4. Pekao Fundusz financial 100,00 subsidiary full Kapitalowy Sp. z o.o. 5. Pekao Leasing Sp. leasing 100,00 subsidiary full Z o.o. 6. Pekao Faktoring Sp. financial 100,00 subsidiary full z o.o. 7. Pekao Pioneer financial 65,00 subsidiary full Powszechne Towarzystwo Emerytalne S.A. 8. Drukbank Sp. z o.o. no activities 100,00 subsidiary full performed 9. Centrum Kart S.A. financial 100,00 subsidiary full 10. Pekao Financial financial 100,00 subsidiary full Services Sp. z o.o. 11. Pekao Development Sp. real estate 100,00 subsidiary full z o.o.* management 12. Pekao Access Sp. z o.o. consulting 55,26 subsidiary full 13. BDK Consulting Sp. consulting, 99,99 subsidiary full z o.o. hotels, transportation The companies listed below were not consolidated, due to the insignificant size of theiroperations in comparison to the size of the operations of the whole Group. Companiesthat were not consolidated, in the consolidated financial statements are recognized atthe cost of purchase. 14. Fabryka Maszyn manufacturing 86,68 subsidiary non-consolidated w Janowie Lubelskim Sp. of spare parts z o.o. to building machinery 15. Pekao Immobilier real estate 100,00 subsidiary non-consolidated s.a.r.l. management 16. Nowe Ogrody real estate 100,00 subsidiary non-consolidated management and sale Other listed below exposures of the Group constitute investments in the associatedentities and are recognized in the consolidated report of the Group with the use of theequity method. Companies that were not revalued, were recognized in the consolidatedfinancial report at the cost of purchase. Companies were not revalued due to theimmateriality of their financial results. 1. Anica System S.A. IT 33,84 / 13,49 co-subsidiary equity 2. Central Poland Fund LLC financial 53,19 subsidiary equity intermediary 3. Xelion. Doradcy auxiliary, 50,00 subsidiary equity Finansowi Sp. z o.o. financial and insurance 4. Pioneer Pekao financial 49,00 subsidiary equity Investment Management intermediary S.A. 5. Krajowa Izba chamber of 22,96 subsidiary equity Rozliczeniowa S.A. settlement 6. Grupa Inwestycyjna financial 24,60 subsidiary equity NYWIG S.A. advisory 7. Hotel Jan III Sobieski hotel 37,50 subsidiary equity Sp. z o.o. 8. Fabryka Sprzetu manufacturing 23,81 subsidiary equity Okretowego of ship "Meblomor" S.A. equipment 9. CPF Management mutual funds 40,00 subsidiary not valuated management-dose under equity not operate method 10. Pracownicze Towarzystwo management of 39,56 subsidiary not valuated Emerytalne "Nowy Swiat" employee under equity S.A. pension fund method * On 3 April 2006, Bank Pekao S.A. divested of to Pirelli & C Real Estate S.p.A.26,572 shares of Pekao Development Sp. z o.o. (Bank's subsidiary) representingthe total par value of PLN 26,572,000, comprising a 75% stake in the Company'sshare capital, and carrying 75% of votes in the General Meeting of PekaoDevelopment Sp. z o.o. The net book value of sold shares on the balance sheet ofBank Pekao S.A. is equal to their total par value 4.2 Achievements of Bank Pekao S.A. Commercial activity The performance in the first quarter of 2006 was primarily the result of afurther development in its business activity. The key success factor was theincreased sales pace, particularly in consumer loans, PLN mortgage loans andmutual funds. Sales of the "Express Loan" in the first quarter of 2006 were 57.3% higher thanin the previous year reaching PLN 363.2 million. In the first quarter of 2006, sales of PLN mortgage loans amounted to PLN 405.3million (22.8% higher compared to the first quarter of 2005) contributing to agrowth in the stock of 5.8% compared to the end of 2005. The Bank continued itspolicy of selling mortgage loans in PLN. The Pekao Group confirmed its leading position in the mutual funds market -total assets of mutual funds managed by PPIM S.A. reached the level of PLN 20.3billion as at the end of March 2006 with market share amounting to 28.0%. Thanksto continued activities aimed at tailoring the product offer to the needs ofclients, the sales of mutual funds were very satisfactory again. Key commercial indicators: 31.03.2006 31.12.2005 ChangeTotal number of PLN current 3,017.7 3,019.2 (1.5)accounts(in thousand) *of which packages 2,180.0 2,176.9 3.1Number of mortgage loans accounts 62.5 60.3 2.2(in thousand)Number of "Express Loans" accounts 195.2 166.6 28.6(in thousand)Number of mutual fund registers (in 709.6 665.3 44.3thousand)Payment cards (in thousand)** 2,680.1 2,673.8 6.3Credit 160.0 146.4 13.6Charge 259.6 269.2 (9.6)Debit (including Maestro) 2,260.5 2,258.2 2.3Total number of outlets (in items) 779 778 1Total number of ATMs (in items) 1,254 1,244 10 * number of accounts including accounts of pre-paid cards** the number of cards is calculated according to the definition used byinternational payment organizations Visa and MasterCard 4.3 Achievements of subsidiaries 4.3.1 Pioneer Pekao TFI S.A. As at 31 March 2006, the net asset value of Pioneer Pekao TFI S.A., a companymanaged by Pioneer Pekao Investment Management S.A. (in which the Bank holds a49% share), amounted to PLN 20,339.2 million and was higher by PLN 1,101.7million compared with the end of 2005. As at 31 March 2006, the Company had848.2 thousand open accounts (an increase by 5.3% during the first quarter of2006). The net asset value of Pioneer Pekao TFI S.A. mutual funds is presented in thetable below: (PLN million) 31.03.2006 31.12.2005 Change Net assets value of Pioneer Pekao 20,339.2 19,237.5 1,101.7TFI- bond and money market funds 7,872.4 9,308.0 (1,435.6)- equity funds 2,487.0 1,586.5 900.5- balanced funds 9,979.8 8,343.0 1,636.8 4.3.2 Centralny Dom Maklerski Pekao S.A. (CDM) In the first quarter of 2006, CDM provided the full scope of services (permittedto brokerage houses), excluding asset management. After 3 months of 2006, the Company achieved: - a 27.5% share in the bond trading volume at the Warsaw Stock Exchange;- a 13.0% share in the stock trading volume at the Warsaw Stock Exchange;- a 8.0% share in the futures trading volume at the Warsaw Stock Exchange. At the end of March 2006, CDM maintained 138.5 thousand investment accounts andits market share was 16.0%. CDM offered also on-line access to investmentaccounts, allowing its customers to buy and sell all instruments listed on theWarsaw Stock Exchange and on the OTC market (CeTO) through the Internet. As atthe end of March 2006, CDM maintained 20.2 thousand on-line accounts. 4.4 Results achieved in the first quarter of 2006 and the factors whichinfluenced these results 4.4.1 Results of the Group Net profit of the Group in the first quarter of 2006 was the best resultachieved to date and amounted to PLN 418.3 million, i.e. 26.6% higher than inthe first quarter of 2005. The increase in the net profit was possible thanks to increased businessactivity which translated into higher income, particularly fee and commissionincome, with stable operating costs and lower cost of risk. Good results of Bank Pekao S.A. were accompanied by positive results of theGroup's companies. The consolidated profit and loss account for the first quarter of 2006 incomparison with the first quarter of 2005 is presented below: (PLN million) I Q 2006 I Q 2005 ChangeNet interest income * 573.3 537.7 6.6%Fee and commission income 460.1 366.4 25.6%Dividend income 0.0 0.0 xTrading income 32.4 44.9 (27.8)FX income 52.3 79.1 (33.9%)Other operating income / cost net 15.9 13.5 17.8%Total income 1,134.0 1,041.6 8.9%Overhead costs (including depreciation) (582.4) (575.7) 1.2%Personnel (301.9) (295.3) 2.2%Non-personnel (200.6) (198.7) 1.0%Depreciation (79.9) (81.6) (2.1%)Operating income 551.6 465.9 18.4%Impairment losses on loans and advances (58.4) (63.3) (7.7%)Share in net profit (loss) of the 20.8 11.5 80.9%associatesPre-tax profit 514.0 414.1 24.1%Tax charge (95.7) (83.6) 14.5%Net profit 418.3 330.5 26.6%Attributable to equity holders of the 418.9 331.5 26.4%CompanyAttributable to minority interest (0.6) (1.0) (40.0%) * including income on SWAP transactions. The Group's income In the first quarter of 2006, the Group's income amounted to PLN 1,134.0 millionand was by PLN 92.4 million (8.9%) higher than in the comparable period of theprevious year. The growth in income was due to the development of business activity, supportedby pro-sales activities relating to the key products of both the Bank and theother Group companies. The main growth factors included interest income as wellas fee and commission income. Interest income grew by 6.6%, among others, as a result of improving asset mixwhich was driven by increasing share of loans. This contributed to offsettingthe impact of declining interest rates in the market. Fee and commission income increased by 25.6% primarily thanks to commissions oninvestment products and loans. The Group's overhead costs (including depreciation) Overhead costs (including depreciation) in the first quarter of 2006 remainedunder control and amounted to PLN 582.4 million, i.e. were 1.2% higher comparedwith the previous year. In the first quarter of 2006, the Group's cost / income ratio amounted to 51.4%and was by 3.9 p.p. lower than in the previous year.As at the end of March 2006, the Bank had 14,761 employees (a reduction of 57employees compared with the end of 2005), and the Group had 15,917 employees (25employees less than at the end of 2005 on comparable basis). Impairment losses on loans and advances In the first quarter of 2006, impairment losses on loans and advances amountedto PLN 58.4 million and were by 7.7% lower than in the previous year. Thisresulted primarily from the effective credit risk management and improvedmacroeconomic situation. The ratio of impaired receivables to total receivables(1) decreased from 15.6% at the end of 2005 to 15.4% at the end of March 2006 asa result of an increase in the volume of not impaired receivables and a decreasein the volume of impaired receivables. Loans In the first quarter of 2006, the gross loans portfolio grew by PLN 449.5million, i.e. by 1.4% (in terms of a nominal exposure). This growth was due to: - the growth in the volume of corporate loans of PLN 315.4 million (by 1.3%);- the growth in the volume of retail loans of PLN 134.1 million (by 1.6%). (PLN million) 31.03.2006 31.12.2005Gross loans (principal) 33,684.7 33,235.2corporate (principal) 25,373.6 25,058.2retail (principal) 8,311.1 8,177.0 Savings Savings of the Group's clients increased by PLN 1,715.9 million i.e. by 2.6% inthe first quarter of 2006 resulting from an increase both in the savings ofindividual clients and in corporate deposits. The savings of retail clients increased by PLN 377.7 million in the firstquarter of 2006. High demand for mutual funds allowed for further increase inmutual funds assets by PLN 1,101.7 million in the first quarter of 2006 bringingthe total retail savings at the PLN 45.5 billion level confirming Group'ssignificant market share. Corporate deposits increased by PLN 1,338.2 million in the first quarter of2006. (PLN milllion) 31.03.2006 31.12.2005Deposits (principal) 46,627.9 46,013.7corporate (principal) 21,457.8 20,119.6retail (principal) 25,170.1 25,894.1Pioneer Pekao TFI mutual funds 20,339.2 19,237.5incl. distributed through the 19,056.8 18,009.2Group's networkTotal savings 66,967.1 65,251.2incl. retail 45,509.3 45,131.6 4.4.2 The structure of the net profit The structure of the net profit of the Group is shown in the following table: (PLN mil.) I Q 2006 I Q 2005Net profit of Bank Pekao S.A.* 353.4 359.6Net profit (loss) of entities consolidated 51.3 35.6under full methodCentralny Dom Maklerski Pekao S.A. 31.4 23.8Pekao Development Sp. z o.o. 6.5 2.9Pekao Leasing Sp. z o.o./Leasing Fabryczny 4.1 0.7Sp. z o.o.Pekao Financial Services Sp. z o.o. 2.8 3.3Pekao Faktoring Sp. z o.o. 2.4 2.2Pekao Pioneer PTE S.A. 2.3 1.7Centrum Kart S.A. 1.1 0.7Pekao Fundusz Kapitalowy Sp. z o.o.** 0.5 0.6Bank Pekao (Ukraina) Ltd. w Lucku 0.2 (0.3)Drukbank Sp. z o.o. 0.0 0.2Pekao Access Sp. z o.o. 0.0 (0.2)Net profit (loss) of entities valued under 20.4 11.8equity methodPioneer Pekao Investment Management S.A. 21.5 13.1Krajowa Izba Rozliczeniowa S.A. 1.4 1.8Grupa Inwestycyjna Nywig S.A. - 0.0Central Poland Fund LLC 0.0 (0.2)Xelion. Doradcy Finansowi Sp. z o.o. (2.5) (2.8)Exclusions and consolidation adjustments*** (6.8) (76.5)Net profit (loss) of the Group 418.3 330.5 * the first quarter of 2005 includes income on dividends in the amount of PLN71.5 million (PLN 96.7 million in the whole 2005) whereas in 2006, according tothe proposals of the management bodies of the companies, dividends in the amountof PLN 157 million are expected to be accounted in the second quarter ** the result of the company includes the valuation of associates based onequity method *** include transactions within the Group, including dividends from subsidiariesand associates The results of Bank Pekao S.A. In the first quarter of 2006, net profit of the Bank amounted to PLN 353.4million and did not include income on dividends differently than in 2005, whendividends in the amount of PLN 71.5 million were accounted for. On a homogeneousbasis, the growth in the net profit would amount to 22.7%. The main items from the profit and loss account of the Bank are as follows: (PLN million) I Q 2006 I Q 2005 Change Net interest income* 551.7 510.9 8.0%Non-interest income 472.7 445.4 6.1%Total income (excluding dividend) 1,024.4 956.3 7.1%Overhead costs (including depreciation) (536.8) (530.5) 1.2%Operating income 487.6 425.8 14.5%Impairment losses on loans and advances (49.9) (63.6) (21.5%)Pre-tax profit 437.7 362.3 20.8%Net profit (excluding dividend) 353.4 288.1 22.7%Dividend income 0.0 71.5 xNet profit after dividend 353.4 359.6 (1.7%) * including income on SWAP operations The main items of the Bank's balance sheet at the end of March 2006 incomparison with the end of 2005 are as follows: 31.03.2006 31.12.2005 Change Total gross loans in PLN million* 33,036.1 32,748.7 0.9%Impaired receivables to total receivables 14.5 14.7 (0.2 p.p.)in %Total deposits in PLN million* 46,638.1 46,062.3 1.3%Total assets in PLN mil. 64,107.2 61,445.2 4.3%Mutual funds sold in Bank's network in PLN 16,644.7 15,539.0 7.1%millionCapital adequacy ratio in % 17.6 18.0 (0.4 p.p.) * the nominal value 4.5 Segment reporting Segment reporting of the Pekao Group covers following areas: - Retail banking area - full-range of banking activity related to retail clients and small and micro companies with annual turnover not exceeding PLN 10 million, and also income of companies consolidated under the full method and assigned to retail activity, - Corporate banking area - full-range of banking activity related to medium and large companies, and also income of companies consolidated under the full method and assigned to corporate activity, - Treasury and Investment activities area - Bank's involvement on inter-bank market, in debt securities and capital investments in companies, which are not a part of other segments, and also income of companies consolidated under the full method and assigned to this activity. Information on main segments' results for the first quarter of 2006: (PLN million) Retail Corporate Treasury and Total banking area banking Investment area banking areaInterest income 352.7 107.0 111.5 571.2Non-interest income 437.9 93.5 31.4 562.8Total income 790.6 200.5 142.9 1,134.0 Information on main segments' results for the first quarter of 2005: (PLN million) Retail Corporate Treasury and Total banking area banking investment area banking areaInterest income 341.3 140.6 55.8 537.7Non-interest income 345.1 82.6 76.2 503.9Total income 686.4 223.2 132.0 1,041.6 4.6 Adjustments for provisions, deferred tax provision and assets (PLN million) Group Bank Pekao S.A. 31.03.2006 31.12.2005 31.03.2006 31.12.2005Total provisions 100.7 108.7 98.7 105.0of which:provisions for off-balance 18.7 20.3 18.7 20.3sheet liabilitiesprovisions for liabilities to 66.0 66.0 65.0 65.0employeesother provisions 16.0 22.4 15.0 19.7Provision for deferred tax 0.0 0.0 0.0 0.0Deferred tax assets 225.2 181.3 195.7 152.0 4.7 Write-offs for revaluation of assets (PLN million) Group Bank Pekao S.A. I Q 2006 I Q 2005 I Q 2006 I Q 2005Total (58.4) (63.3) (49.9) (63.6)for loan receivables (60.0) (58.4) (51.5) (58.6)for off-balance sheet 1.6 (4.9) 1.6 (5.0)liabilitiesfor financial assets 0.0 0.0 0.0 0.0 4.8 Information on contingent assets and liabilities (PLN ths.)+------------------------------------------+-------------+---------------+| | 31.03.2006| 31.12.2005|+------------------------------------------+-------------+---------------+|Contingent liabilities granted and | 17,376,469| 15,994,786||received | | |+------------------------------------------+-------------+---------------+|Liabilities granted: | 13,551,727| 12,404,368|+------------------------------------------+-------------+---------------+|financial | 11,913,880| 10,990,273|+------------------------------------------+-------------+---------------+|guarantees | 1,637,847| 1,414,095|+------------------------------------------+-------------+---------------+|Liabilities received: | 3,824,742| 3,590,418|+------------------------------------------+-------------+---------------+|financial | 713,197| 457,353|+------------------------------------------+-------------+---------------+|guarantees | 3,111,545| 3,133,065|+------------------------------------------+-------------+---------------+|Financial derivatives | 78,120,815| 65,182,224|+------------------------------------------+-------------+---------------+|currency transactions | 30,199,513| 25,795,810|+------------------------------------------+-------------+---------------+|interest rate transactions | 43,100,888| 38,548,574|+------------------------------------------+-------------+---------------+|securities transactions | 4,820,414| 837,840|+------------------------------------------+-------------+---------------+|Other | 7,058,935| 6,615,255|+------------------------------------------+-------------+---------------+|Total off-balance sheet items | 102,556,219| 87,792,265|+------------------------------------------+-------------+---------------+ 4.9 Post balance sheet events Divestment to Pirelli RE of a 75% stake in the share capital of PekaoDevelopment Sp. z o.o. On 3 April 2006, Bank Pekao S.A. divested of to Pirelli & C Real Estate S.p.A.26,572 shares of Pekao Development Sp. z o.o. (Bank's subsidiary) representingthe total par value of PLN 26,572,000, comprising a 75% stake in the Company'sshare capital, and carrying 75% of votes in the General Meeting of PekaoDevelopment Sp. z o.o. The net book value of sold shares on the balance sheet ofBank Polska Kasa Opieki S.A. is equal to their total par value. Bank Polska Kasa Opieki S.A. currently holds 8,858 shares representing the totalvalue of PLN 8,858,000, comprising a 25% stake in the share capital of PekaoDevelopment Sp. z o.o. and carrying 25% of votes in the General Meeting ofShareholders of Pekao Development Sp. z o.o. That operation did not require adjusting of financial data for 31 March 2006. Agreement between the Ministry of the Treasury and UniCredito Italiano S.p.A. The Management Board of Bank Pekao S.A. received from strategic investorUniCredito Italiano S.p.A. ("UniCredito") an information, that on 19 April 2006,the agreement between the State Treasury and the UniCredito has been signed. Theagreement is aimed at ensuring that Bank BPH S.A. remains an independent bank onthe Polish market. UniCredito will divest 200 outlets and banking servicesassociated with them, operating under the BPH brand, for the benefit of anindependent third party, by way of an international, competitive and transparentprocess. The operations not to be divested, might be incorporated into BankPekao S.A. The parties agree that UniCredito shall make due efforts to cause thetransaction to be carried out and completed at the latest within thirty months. Appointment of Members of the Supervisory Board of Bank Pekao S.A. for newcommon term of office On 4th May 2006, the following persons were appointed by the Ordinary GeneralMeeting of Bank Pekao S.A. as the Members of the Supervisory Board of Bank PekaoS.A. for the period of common term of office of the Supervisory Board, lastingthree years, which will began on 5th May 2006: Pawel Dangel,Paolo Fiorentino,Fausto Galmarini,Oliver Greene,Andrea Moneta,Enrico Pavoni,Leszek Pawlowicz,Jerzy Starak,Jerzy Woznicki. 4.10 Share capital increase of Bank Pekao S.A. The share capital of the Bank was increased:- on 16 January 2006 by the total amount of PLN 186,755,- on 6 February 2006 by PLN 5,169,- on 24 March 2006 by PLN 58,564,- on 29 March 2006 by PLN 1,145, and- on 21 April 2006 by PLN 74,937 as a result of issue of total 326,570 series F ordinary bearer shares. The sharecapital of the Bank amounts currently to PLN 166,808,257 and is divided into: - 137,650,000 series A ordinary bearer shares with nominal value of PLN 1.00 each,- 7,690,000 series B ordinary bearer shares with nominal value of PLN 1.00 each,- 10,630,632 series C ordinary bearer shares with nominal value of PLN 1.00 each,- 9,777,571 series D ordinary bearer shares with nominal value of PLN 1.00 each,- 373,644 series E ordinary bearer shares with nominal value of PLN 1.00 each,- 326,570 series F ordinary bearer shares with nominal value of PLN 1.00 each,- 359,840 series H ordinary bearer shares with nominal value of PLN 1.00 each. Total number of votes at the Bank's General Shareholders Meeting under allissued shares is 166,808,257. The increase was conducted as a result ofregistration on buyers accounts of 326,570 series F ordinary bearer sharesissued within the conditional share capital increase on the base of ResolutionNo. 7 of the Extraordinary General Shareholders Meeting of the Bank conducted on25 July 2003 on contingent increase of the statutory capital, exclusion of thepre-emptive rights on the series F and G shares of the Bank and amendment to theStatute of the Bank. 4.11 Seasonality or cyclical nature of the Bank's activity The demand for the financial services offered by the Bank is stable, and so theimpact of seasonal changes is immaterial. Due to the nature of the Bank'sactivity, it is not subject to seasonal or cyclical changes. 4.12 Issuance, redemption and repayment of debt securities Issuance of registered bonds with pre-emptive rights to take up the Bank's F andG shares The Bank issued 415 thousand registered A series bonds and 415 thousandregistered B series bonds with pre-emptive rights to take up the Bank's F seriesshares, and 415 thousand registered C series bonds and 415 thousand registered Dseries bonds with pre-emptive rights to take up the Bank's G series shares.1,660 of the Bank's registered bonds were allocated to Pekao Faktoring (theBank's subsidiary) acting as the Trustee, and registered in the Bonds Registerof Centralny Dom Maklerski Banku Pekao S.A. The Bonds were issued on the basis of Resolution No. 6 of the Bank'sExtraordinary General Meeting dated 25 July 2003 on the issue of registeredbonds under an incentive programme.Each Bond entitles to take up 1 ordinary bearer share of the Bank: - 1 A series bond entitles taking up 1 F series share;- 1 B series bond entitles taking up 1 F series share;- 1 C series bond entitles taking up 1 G series share;- 1 D series bond entitles taking up 1 G series share. The nominal value of one bond is PLN 0.01.The total value of the issued A, B, Cand D series bonds amounts to PLN 16,600. The issue price of one bond is equalto its nominal value. The bonds do not bear interest. The bonds are not secured. The issue price of F series shares amounts to PLN 108.37, and of G series sharesPLN 123.06. The Bank acquired 88,430 registered series A bonds from Pekao Faktoring Sp. z o.o., for the purpose of redemption, and the total of 326,570 series A bondsfrom eligible persons, upon the request thereof for early redemption, pursuantto the implementation of the right of priority to take up the Bank's sharesensuing from the bonds, for the purpose of redemption thereof. The period of acquisition of series A bonds from the Trustee by eligible personslasted from 6 May until 30 December 2005. Bonds of the other series will be available for purchase from the Trustee by theeligible persons in the following periods: - B series bonds in the period from the 31st day after the date of the General Shareholders' Meeting, approving financial statements for the financial year 2005 until 30 December 2006.- C series bonds in the period from the 31st day after the date of the General Shareholders' Meeting, approving financial statements for the financial year 2006 until 30 December 2007.- D series bonds in the period from the 31st day after the date of the General Shareholders' Meeting, approving financial statements for the financial year 2007 until 30 December 2008. All Bonds which are not sold off by the Trustee by 30 December 2006, 2007 and2008 respectively shall be acquired by the Bank on 31 December 2006, 2007 and2008 respectively to be redeemed at their nominal value. As at the day of submitting this report, all the pre-emptive rights to take up Fseries shares pursuant to the implementation of the right of priority ensuingfrom the A series bonds were executed. The execution of the pre-emptive rights to take up F and G series shares can beexercised in the following periods: - in respect of B series bonds - from 1 January 2007 to 31 December 2010;- in respect of C series bonds - from 1 January 2008 to 31 December 2012;- in respect of D series bonds - from 1 January 2009 to 31 December 2012. 4.13 Dividend paid Pursuant to Resolution No. 8 of the General Meeting of Bank Pekao S.A., PLN 7.40per one share was appropriated for the payment of dividend for 2005, i.e. 15.6%higher compared to the dividend for 2004 (PLN 6.40 per one share). Theex-dividend date was determined at 19 May 2006 and the date of dividend paymentat 2 June 2006. All the Bank's shares are ordinary shares. 4.14 Effects of changes in the Group's structure In the first quarter of 2006 there were no significant changes in the Group'sstructure. 4.15 The position of the Management Board regarding the possibility ofachieving previously published forecasts The Bank has not published the forecast of financial results for 2006. 4.16 The information about the shareholders owning at least 5% of the totalnumber of votes at the General Meeting of Bank Pekao S.A. The shareholders of Bank Pekao S.A. owning directly or indirectly through theirsubsidiaries at least 5% of the total number of voting rights at the GeneralMeeting of Bank Pekao S.A. are as follows: Shareholder's name # of Share in share # of Share in share shares and capital and total shares and capital and total votes at number of votes at votes at number of votes at the the General the the General General Meeting General Meeting Meeting Meeting 31 March 2006 31 December 2005 UniCredito 88,121,725 52,85% 88,121,725 52.93%Italiano S.p.A.Other shareholders 78,611,595 47,15% 78,359,962 47.07%Total 166,733,320 100,00% 166,481,687 100.00% In the first quarter of 2006 share capital of the Bank was increased by thetotal amount of PLN 251,633 as a result of issue of series F ordinary bearershares. On 21 April 2006 the share capital of the Bank was increased by the amount ofPLN 74,937 as a result of issue of series F ordinary bearer shares. As at thedate of submitting this report, the share capital of the Bank amounts currentlyto PLN 166,808,257. The share of UniCredito Italiano S.p.A. in the share capitaland the total number of votes at the General Meeting amounts to 52.83% while theshare of other shareholders stands for 47.17%. According to the information known by the Bank, as at the date of submittingthis report no significant changes were made in the shareholding structure. 4.17 The Issuer's shares held by the Management and Supervisory Board members According to the Bank's knowledge, as at the date of submitting this report themembers of the Bank's management and supervisory bodies held 120,154 shares ofBank Pekao S.A. All these shares were held by members of the Bank's management.The Bank Pekao S.A. Capital Group is running an incentive programme in the formof management stock options. The Programme covers the Management Board of theBank, the remaining managerial staff, key bank strategy employees, as well asemployees of subsidiaries. The incentive programme for 2003 covers 40 people on the day of conveying thereport, with a total of 313,356 shares, 126,635 of which will be available forthe management. The incentive programme for 2004 includes 44 persons for a total 691,921 shares,391,348 of which will be able to be purchased by the management. The change in the number of shares in the incentive programme for 2003 inrelation to the amount in the annual report for 2005 stems from enacting thepriority principle in Bank's shares acquisition resulting from bonds. Therefore,41 persons effectively acquired a total of 326,570 shares. The Bank has beeninformed that 29 persons participating in the programme have sold 145,136 sharessince the beginning of 2006. 4.18 Pending litigations In the first quarter of 2006 the number of the legal proceedings in courts,appropriate bodies of arbitration or public administration bodies, concerningthe liabilities of the Group was 462. The total value of them was PLN 768,8million. The number of legal proceedings concerning the receivables was 3,186 attotal value of PLN 867.4 million. The legal proceedings involving the largest amounts in receivables groupinclude: - The action brought by Bank Pekao S.A., Paris branch against LA HUPPE regarding the vindication of the loan receivables. The value of the subject of litigation amounts to EUR 23.6 million. The proceedings were instituted on December 23, 1998.- The action in the course of proceedings brought by Pekao Leasing Sp. z o.o. against Salomon Industries S.A. The value of the subject of litigation amounts to PLN 67.4 million. The proceedings were instituted on December 15, 2003.- The action in the course of proceedings brought by Pekao Leasing Sp. z o.o. against Royal Grant S.A. The value of the subject of litigation amounts to PLN 53.5 million. The proceedings were instituted on December 15, 2003. According to the issuer's opinion any single proceeding that was in progress incourts, appropriate bodies of arbitration or public administration bodies in thefirst quarter of 2006, as well as all the proceedings together do not create anythreat to financial liquidity of the Bank. 4.19 Transactions of related entities In the first quarter of 2006, the Bank and its subsidiaries have not concludedany transactions with related entities other than typical and routinetransactions whose aggregate value exceeded the equivalent of EUR 500 thousand. 4.20 Loan or credit sureties and guarantees given In the first quarter 2006, the Bank and its subsidiaries did not give anysureties or guarantees in respect of loans or advances to any single entity or asubsidiary of that entity, as a result of which the total value of the existingsureties and guarantees would equal 10% of the Bank's equity. 4.21 Factors which will affect the results of at least the next quarter The predominant part of the assets of Bank Pekao S.A. and its subsidiaries islocated on the territory of Poland. Therefore, the results of the Bank will beinfluenced by the economic events occurring in this country and the worldwideevents that influence the domestic economy. The Group results may be impacted by trends in PLN and USD interest rates.Additional impact may come from further development of economic situation inPoland, including the level of investments having an effect on the corporatecustomers loan demand, changes in the level of employment and salaries, whichwill impact the level of retail savings, improvement of customerscreditworthiness and demand for loans. --------------------------(1) loan receivables without buy-sell-back transactions and not quotedsecurities, valued under effective interest rate This information is provided by RNS The company news service from the London Stock Exchange