GEMB en Annual Report 2010

CONSOLIDATED ANNUAL REPORT 2010

GE Money Bank

CEO STATEMENT

CEO Statement

Dear Shareholder, Clients, Business Partners, and

Colleagues:

The year 2010 saw recovery from the recent global

economic crisis. However, the recovery is weak

and marked by diffi culties arising from persistent

high unemployment and the need for public

fi nance consolidation. In this challenging economic

environment we stuck to our strategy. Thanks to this

and the hard work of our colleagues we achieved good

business results.

GE Money Bank Consolidated Annual Report 2010132

Contents

1 CEO Statement

5 Key Statistics of GEM Group

7 Key Data

Key Data on the Regulated Consolidated Entity

Information about the shareholders

The activities

13 Information on Supervisory Board Members

Supervisory Board, Board of Directors and Management

Information about Supervisory Board Members

Information about the management

19 Report of the Board of Directors

Report of the Board of Directors on Commercial

Activity and the State of Assets

Economic results

23 Key Financial Trends

27 Corporate Social responsibility at GE

31 Outlook for 2011

33 Report of the Supervisory Board

35 Independent Auditor’s Report to the Shareholders of GE Money Bank, a.s.

39 Reports on Relations between Related Parties

GE Money Bank, a.s.

GE Money Auto, s.r.o.

53 Consolidated Auditor’s Report and Financial Statements

Consolidated balance sheet

Consolidated off-balance sheet Items

Consolidated profi t and loss statement

Summary of changes in consolidated equity

59 Notes to the Consolidated Financial Statements

87 Independent Auditor’s Report to the Shareholders of GE Money Bank, a.s.

91 Financial Statements of GE Money Bank, a.s.

Balance sheet

Off-balance sheet Items

Profi t and loss statement

Summary of changes in equity

97 Notes to the Financial Statements of GE Money Bank, a.s.

1

GEM Group’s ratio of total adjustments to balance of

non-performing loans stood at 75% refl ecting our

prudent approach.

The liquidity position of our Bank remained very strong

with a liquidity cushion of CZK 18.5 billion. Our capital

adequacy is one of the highest in the Czech fi nancial

market. As of the end of 2010, the GEM Group had

over CZK 21 billion of available high quality regulatory

capital resources, and a capital adequacy ratio of

14.7%.

Product and Service Innovations

To address the requirements of our customers we

maintained our track record of product innovations

during 2010. In commercial banking we introduced 57

new products and product innovations. We established

a “branch in the sky”, which enables our commercial

customers to resolve their queries quickly via phone

with professional bankers. We have thus created

a unique new concept of commercial banking.

At the end of 2010, our Bank was the fi rst player in

the market to revolutionize fees for europayments.

Our europayments fees are set at the same level

as domestic payments, decreasing the operating

expenses of our customers and delivering our goal of

providing easier, clearer and more rewarding services.

In the fi eld of personal banking, we introduced a new

credit card concept that addresses the needs of each

individual customer. Moreover, our Bank expanded its

portfolio of current account products by launching the

award winning Genius Optimal account with special

rewards to GEnius Optimal customers on their savings

and mortgage products.

A requirement of today’s society is to stay connected

with families, friends and business partners. In line with

our aim to be a real business partner for our clients, we

expanded our online activities to cover social networks

such as Facebook, Twitter and LinkedIn in order to

open additional, modern communication channels. We

believe that these alternative ways of communication

enhance options for matching the supply and demand

for fi nancial services, and bring our Bank even closer to

our customers.

We are very pleased that our customers have recognized

our efforts to be an exceptionally straightforward and

open bank by awarding our Internet Banking service

the Public Prize for the best product in the Golden

Crown 2010 competition. We have now won the award

for two years in a row. Moreover, we are delighted to be

honored with the award “Most Customer Friendly Bank

of the Year 2010”. These recognitions motivate us to

work even harder on further benefi ts and innovations

for our customers.

Corporate Social Responsibility

As a major employer and contributor to the

development of the Czech economy, we believe that we

have a responsibility to contribute to the development

of society by supporting socially responsible projects.

As a result of our initiative in this area, we have two

major programs focusing on equal opportunities and

fi nancial education.

The project “Život nápadům” (“bringing ideas to

life”) focuses on encouraging women to start their

own businesses, and facilitates support for women

embarking on entrepreneurial activities. We are very

proud that our own gender diversity efforts have been

recognized with second place in the “Company of the

Year: Equal Opportunities” 2010 awards given by the

Gender Studies Association.

We also understand the need for providing fi nancial

education to our young generation, and for improving

fi nancial awareness generally within the Czech

Republic. We sponsored the unique project “Rozumíme

penězům” (understanding money), which focuses on

bringing fi nancial education to schools. This initiative

was recognized by being proclaimed the second most

benefi cial activity of the year 2010 in the Fincentrum

Bank of the Year contest.

In order to provide our customers exceptionally

straightforward and high quality products, we

continued with the simplifi cation of our group structure.

Pursuant to management changes in 2009 and legal

restructuring in 2010 of the GE Money entities in

the Czech Republic, the customers, operations and

assets of GE Money Multiservis, a.s. (GEMM) including

the Multiservis brand were transferred to GE Money

Bank a.s. (GEMB or the Bank) and GE Money Auto

s.r.o. (GEMA). Since the restructuring, GEMA is a 100%

owned subsidiary of GEMB. Post the restructuring,

GEMM is no longer an operating entity and therefore

as of 31 December 2010 is not included within the

GE Money Bank, a.s. Regulated Consolidated Entity

(the GEM Group and the RCE). This restructuring will

improve our operational effi ciency and effectiveness,

and enable us to serve our customers better.

We expect the economic environment to improve in

2011; however, we understand that the situation of

our customers may remain tough due to necessary

social and economic reforms. We therefore reaffi rm

our commitment to understanding the needs of our

customers and to the responsible provision of services

that our customers need and request.

Business and Financial Results

2010 was a successful year for us. The GEM Group net

income reached CZK 4.1 billion. Additionally deposits

from our customers grew, and we maintained strong

liquidity as well as capital adequacy.

In 2010, the number of deposit accounts held with

our group increased by almost 18,000. The deposit

base of our customers reached nearly CZK 110 billion,

1.4% higher than in 2009. The growing deposit base

improved the GEM Group loan/deposit ratio to 108%

from 111% in 2009.

Total unsecured personal loans to customers increased

by almost 2%, reaching CZK 47.3 billion at the end of

2010. In a weak market we also increased loans to

commercial customers by 3% compared with 2009,

a performance that underlines the strength of our

offerings in this segment.

We understand that direct contact with our customers

and easy access to the Bank are essential and we

continued to enhance our customer contact points.

During 2010 we opened 15 new branches, increasing

our branch network to 240 branches. Additionally, we

expanded our ATM network by 24 to 649 ATMs. Of these

11 are deposit-taking, providing our customers with an

easy way to deposit cash directly into their current

accounts.

Our responsible and world class risk management

helped us to navigate through the challenging macro-

economic environment. As of 31 December 2010 the

CEO StatementGE Money Bank Consolidated Annual Report 20102 3

Conclusion

I would like to take this opportunity to thank our

Shareholder, Clients and Business Partners for their

support and loyalty during 2010. Our colleagues

work hard to do a great job for our customers, and

I am very proud of the great team we have. Therefore

I would like to express a very special thanks to all my

colleagues for their hard work during the last year.

We look forward to further mutually benefi cial

cooperation with our customers and business partners

in 2011.

Peter R. Herbert

CEO and Chairman of the Board of Directors

GE Money Bank, a.s.

Key Statistics of GEM Group

KEY STATISTICS OF GEM GROUP

GE Money Bank Consolidated Annual Report 20104 5

Key Data

KEY DATA

Basic details of GE Money Bank, a.s.

(being the leading company within

the GEM Group) as at 31 December 2010

Trade name: GE Money Bank, a.s.

Registered offi ce: Vyskočilova 1422/1a,

140 28 Praha 4-Michle

Company ID no.: 25 67 27 20

Legal form: Joint-stock company

Date of registration: 9 June 1998

Date of the last change: 7. 12. 2010 (change in

the composition of the

Board of Directors)

Capital stock: CZK 510,000,000

Paid up: 100 %

31. 12. 2010

31. 12. 2010

1. 1. 2010

1. 1. 2010

Key Statistics of GEM Group

Number of credit cards

Numberof deposits

accounts

Totalnumber

of clients

252,524

294,431

1,160,057

1,142,248

1,081,263

1,048,892

200,0000 400,000 600,000 800,000 1,000,000 1,200,000

1000 200

Numberof ATMs

Numberof banks

branches

300 400 500 600 700

240

225

649

625


Type, form and format of issued shares and their nominal value:

510 dematerialised ordinary inscribed shares with

a nominal value of CZK 1,000,000 each

Details of acquisition of the bank’s own shares and share warrants and other securities with an attached right to their exchange for shares:

GE Money Bank, a.s. does not hold any of its own

shares or other similar securities.

Details of increases in the bank’s capital stock:

25.3.2003 – an increase in the capital stock

of CZK 10,000,000

Bank’s Supervisory Board Position Position held from

Robert Charles Green Chairman of the Supervisory Board 13. 07. 2009

Aleš Blažek Supervisory Board Member 10. 06. 2008

Pavel Zídek Supervisory Board Member elected by employees 01. 12. 2009

Bank’s Board of Directors Position Position held from

Peter Ronald Herbert Chairman of the Board of Directors 10. 07. 2008

Christoph Glaser Member of the Board of Directors 06. 05. 2009

Brett Matthew Belcher Member of the Board of Directors 20. 12. 2007

Rajesh Ramakrishna Gupta Member of the Board of Directors 26. 08. 2009

Jiří Báča Member of the Board of Directors 06. 04. 2010

Wade Udell Robison Member of the Board of Directors 07. 12. 2010

Number of bank employees (as at 31.12.2010):

Headquarters 1,988 employees

Branch offi ces 1,408 employees

Total 3,396 employees

Number of branch offi ces (as at 31. 12. 2010): 240

GE Money Bank Consolidated Annual Report 2010 Key Data 98

Basic facts about the GEM Group’s ultimate shareholder

GE Capital International Holdings Corporation

Corporation Trust, 1209 Orange Street,

Wilmington, Delaware

United States of America

100% share of voting rights

(direct or indirect)

100% direct or indirect interest in the capital

stock of companies within the RCE

Scope of business:

Establishing subsidiary companies with seats outside

the United States of America, exercising rights arising

from the existence of the relevant investments and

providing fi nance to these companies in the form of

loans or otherwise

Overview of activities arising from the banking licence

1. Acceptance of deposits from the public

2. Providing loans

3. Investment in securities on the bank’s

own account

4. Financial leasing

5. Payments and settlement

6. Issue and administration of means of payment

7. Providing guarantees

8. Opening letters of credit

9. Ensuring collection of payments

10. Providing investment services including:

- supplementary investment service in

accordance with Section 4, Paragraph 3, Letter d)

of Act No. 256/2004 Coll., on conducting business

activities on the capital market – advisory

activities relating to the structure of capital,

industrial strategy and other related matters,

and providing advice and services associated

with transformation of companies or transfer of

enterprises

11. Financial brokerage

12. Discharge of the depository function

13. Foreign exchange activities

(purchase of foreign-exchange resources)

14. Providing banking information

15. Trading in foreign-exchange values and gold on

the bank’s own account or on a client’s account

to the following extent:

- Trading in foreign-exchange values and gold on

the bank’s own account

- Trading in foreign-exchange values and gold on

a client’s account

16. Lease of safe deposit boxes

17. Activities directly related to activities listed in the

banking licence held by GE Money Bank, a.s.

Overview of the basic activities and services actually carried out by the GEM Group:

In Czech Koruna:

1. Opening and administration of current, time and

savings accounts in Czech crowns and related

services

2. Cheque services

3. Bank books

4. Domestic documentary letters of credit and

collections

5. Credit and business services (commercial credits,

consumer and mortgage loans)

6. Bill of exchange services

7. Bank guarantees

8. Acquisition of receivables

9. Financial Leasing (car fi nancing)

In foreign exchange:

10. Opening and administration of current and time

foreign currency accounts

11. Foreign exchange services

12. Foreign documentary letters of credit and

collections

13. Smooth payments

14. Cheque services

15. Bank guarantees

16. Bill of exchange services

17. Providing credit

18. Factoring, forfaiting

Other products and services:

19. Card services (according to types of cards)

20. Information and consultancy services

21. Providing banking information

22. Exchange of bills and coins

Overview of activities whose performance has been

limited, suspended or terminated by the competent

authority: N/A

Key DataGE Money Bank Consolidated Annual Report 2010

Overview of the GEM Group’s activities

1110

Information on Supervisory Board Members

INFORMATION ON SUPERVISORY BOARD MEMBERS




Robert Charles Green graduated from the University

of Maryland in USA. He joined GE in 1990 in the

European Manager Development Programme and

since then he has worked in various management

positions including Vice President & manager of

GE Capitaľs audit staff, Chief Financial Offi cer of GE

Healthcare in Great Britain and Chief Financial Offi cer

GE Money – Americas. He currently works as a Vice

President & Chief Financial Offi cer, GE Capital Global

Banking. Since June 30, 2009 he is a member and since

July 13, 2009 also the chairman of the Supervisory

Board of GE Money Bank, a. s.

Aleš Blažek graduated from the Faculty of Law of

Charles University and started working as a law clerk in

White & Case in 1998. He worked as the Director of the

Legal Department of Citibank in Prague from 2000 and

became the Director of the Citibank Legal Department

for Central and Eastern Europe in 2002. In 2004, he

moved to London to work as the Deputy Director of the

Legal Department for the EMEA region in Citigroup. He

has worked in GE Money as the Director of the Legal

Department for Central and Eastern Europe since

2007 and he is now Chief Legal Counsel for GE Capital

Global Banking. He is also a member of the Czech Law

Association.

Pavel Zídek graduated from the Czech Technical

University in Prague and worked as an Information

Technology Manager in various companies. He joined

Agrobanka in 1991 and worked in various posts in

the Information Technologies Department. Following

the acquisition of Agrobanka by GE, he became the

Senior IT Manager and later also a member of the

Supervisory Board of GE Money Bank, a.s. elected

by employees (elected by employees in 2001, 2005

and 2009).

Supervisory Board, Board of Directors and Senior Management Team of GE Money Bank, a.s. (being the leading company within GEM Group)

Bank’s Supervisory Board Position Position held from

Robert Charles Green Chairman of the Supervisory Board 13. 07. 2009

Aleš Blažek Supervisory Board Member 10. 06. 2008

Pavel Zídek Supervisory Board Member elected by employees 01. 12. 2009

Bank’s Board of Directors Position Position held from

Peter Ronald Herbert Chairman of the Board of Directors 10. 07. 2008

Brett Matthew Belcher Member of the Board of Directors 20. 12. 2007

Christoph Glaser Member of the Board of Directors 06. 05. 2009

Rajesh Ramakrishna Gupta Member of the Board of Directors 26. 08. 2009

Jiří Báča Member of the Board of Directors 06. 04. 2010

Wade Udell Robison Member of the Board of Directors 07. 12. 2010

Senior Management Team Position Position held from

Peter Ronald Herbert Chief Executive Offi cer 26. 06. 2008

Christoph Glaser Chief Distribution Offi cer 12. 02. 2009

Brett Matthew Belcher Chief Risk Offi cer 01. 09. 2007

Rajesh Ramakrishna Gupta Chief Financial Offi cer 09. 02. 2009

Jiří Báča Chief Commercial Banking Offi cer 05. 10. 2009

Radka Pekelsá Chief Human Resources Offi cer 01. 06. 2010

Tomáš Černý Chief Legal & Compliance Offi cer 12 .02. 2009

Manu Pal Acting Chief Marketing & Strategy Offi cer 01. 10. 2010

Rajaram Ramalingam Chief Information Offi cer 01. 11. 2010

Jonas Hasselrot Chief Operations Offi cer 01. 05. 2003

Wade Udell Robison Chief Products Offi cer 01. 04. 2009

Thomas Broadhurst Dodd Senior Internal Audit Manager 01. 05. 2007



Tomáš Černý is a graduate of the

Faculty of Law of Charles University,

with a number of study internships in the

United Kingdom. Before joining GE Money

Bank, Tomáš Černý worked at the Prague

offi ce of the international law fi rm Weil,

Gotshal & Manges for fi ve years. There he focused primarily

on commercial law, banking, and mergers and acquisitions.

Before joining Weil, Gotshal & Manges, Tomáš worked at the

Deloitte & Touche consulting company for two years, and

at the international law fi rm Clifford Chance. From April

2005, he was the Chief Legal Offi cer at GE Money Bank, a.

s., and since February 2009 he has been the Chief Legal &

Compliance Offi cer.

Manu Pal is a certifi ed Chartered

Accountant from The Institute of

Chartered Accountants for India. Prior to

joining General Electric he worked with

PricewaterhouseCoopers and Deloitte

in India. He has been with GE for eleven

years and is experienced in fi nance, marketing and strategy

functions. He joined GE Money Bank, a.s. in 2005 and from

October 2010 he has been the Acting Chief of Marketing &

Strategy Division.

Ramalingam Rajaram attended the State

University of New York and graduated with

a Bachelor of Science degree in Computer

Science. He has wide experience in

Information Technology. Over the course

of his career, he has held various leadership

roles with responsibilities ranging from organizational

development, enterprise wide software implementation,

relationship management and project management. He

has worked in several leading Information Technology

companies, such as Siebel Systems, Lotus Development and

Sybase. Prior to joining GE Money, Ram was the CIO at GE

Commercial Distribution Finance, based in Hoffman Estates,

USA. Since November 1st, 2010, he has held the position of

the Chief Information Offi cer of GE Money Bank.

Jonas Hasselrot previously worked

as the head of the American Express

travel centre in Stockholm. He managed

more than 100 travel agents and was

directly responsible for the results of

the centre, which held a 40% share of

the entire Scandinavian market. He subsequently held the

post of Customer Service Director at the same company

for Benelux and Scandinavia, and was responsible for

the complete range of processes from customer service,

customer retention, new product cross-selling to existing

customers and loan approval to the collection of overdue

payments. He has been the Chief Operations Offi cer

of GE Money Bank, a.s. since 1 May 2003.

Wade Udell Robison studied international

fi nance at Brigham Young University in

Utah, USA. He has profound knowledge

of banking and fi nancial services, which

he gained during his many years in the

Citigroup banking group, where he held

a number of management positions. In 1997, he started as

a branch manager in the USA; in 2000, he transferred to the

position of product manager in Citibank Hungary; and in

subsequent years, he held the positions of Country Business

Manager and Head of Assets in Hungary, Romania, and

Poland. Since April 2009, he has been the Chief Products

Offi cer of GE Money Bank, a.s. Since December 2010, he has

also been a member of the Management Board of GE Money

Bank, a.s.

Thomas B. Dodd graduated from

Manchester Metropolitan University and

Warwick University in the UK. He holds an

MBA title and is also a qualifi ed fi nancial

adviser. He has extensive experience,

particularly in international banking and

audit. Prior to joining GE Money Bank, a.s., he was responsible

for bank inspections for the Central Bank of the United Arab

Emirates. He joined GE Money Bank, a.s. in May 2007 as the

Senior Internal Audit Manager. He is also a member of the

Czech Club of Internal Audit Managers.

Peter Ronald Herbert joined GE with more

than 30 years of experience in international

banking, acquired mainly during his work

in the Barclays Bank Group. The posts held

in this group included the General Director

of Barclaycard International, which he

elevated to a leading player in the market, and the Financial

Director of the banking division of Barclays UK. He also

worked as the Group Strategy Director for Barclays Bank and

held a number of other major posts in corporate and retail

banking. Prior to joining GE Money Bank, a. s., he helded the

position of the Deputy General Director of the National Bank

of Kuwait Group. He has been the Chief Executive Offi cer of

GE Money Bank, a.s. since 26 June 2008 and since 10 July

2008 also the Chairman of the Board of Directors.

Christoph Glaser graduated from the

Chinese University in Hong Kong, and then

in economics at the Free University in Berlin

and linguistics at Humboldt University in

Berlin. He joined GE in 1997 in the European

Manager Development Programme. From

1999, he held the position of Executive Audit Manager in GE

Corporate Audit. During his more than 10-year career at GE,

he has gathered considerable experience in many world

markets – he has worked, for example, in Germany, USA,

Russia, UK, and Japan. From December 2004, he worked as

the CFO of GE Money Bank, a.s., and since February 2009,

he has held the newly created position of Chief Distribution

Offi cer. Since 2005, he has also been a member of the

Management Board of GE Money Bank, a.s.

Brett Matthew Belcher holds a Bachelor of

Science (BS) degree in transitive economies

and an MBA from Pittsburgh University. He

commenced his professional career in the

United States, where he worked for 7 years

in the Business Supervision Offi ce. He

arrived in the Czech Republic in 1997 as the Citigroup’s Vice-

President for risk analysis and management, and was later

promoted to the post of the Risk Manager for retail banking

in the Czech Republic. Prior to joining GE Money, he worked

for two years in Raiffeisenbank as the Risk Manager for the

Czech Republic. He also assisted Raiffeisen in establishing

a risk management system in retail banking in Ukraine.

He joined GE Money in 2006 as the Risk Manager for retail

banking in the Central and Eastern Europe region and has

held the post of the Chief Risk Offi cer of GE Money Bank, a.s.

since 1 September 2007.

Rajesh Ramakrishna Gupta holds

a Bachelor of commerce degree from

Mumbai University, India and is also

a graduate of the Institute of Cost and

Works Accountants of India. He joined

General Electric in 1994 on the Financial

Management Program and worked in the Godrej-GE

Appliances joint venture in India. Since then, he has held

many different positions in the company in fi nance, at GE

Capital in Stamford, USA, and in London, UK. Rajesh moved

to GE Money Bank, a.s. from GE Money in London, where

he worked as the Global Business Development Finance

Leader. Since February 2009, he has held the position of the

Chief Financial Offi cer of GE Money Bank, a.s. Since August

2009, he has also been a member of the Management Board

of GE Money Bank, a.s.

Jiří Báča brought with him a wealth of

experience, both from retail banking and

commercial banking. He has been working

in this line of business for more than fi fteen

years. He started his banking career in

Komerční banka, where he held various

positions, both in retail and commercial banking. He then

spent fi ve years in HVB Bank, where he held increasingly

responsible positions, including the positions of the Head of

Commercial Clients’ Division and the Head of Distribution.

In 2005, he left for Citibank, where he was appointed to the

Board of Directors. As the Head of Sales and Distribution,

he was responsible both for the retail and for the SME

distribution. After a short stay in the Ukraine, where he

worked for PPF Financial Group, he returned to Prague and

became the CEO of mBank. From October 5, 2009, he has

been the Chief Commercial Banking Offi cer of GE Money

Bank, a.s. Since April 2010, he has also been a member of

the Management Board of GE Money Bank, a.s.

Radka Pekelská joined GE Money as

Chief HR Offi cer on June 1st 2010. She

was previously HR Director for Tesco in

the Czech Republic and Slovakia. She has

over ten years HR experience with Tesco

and was instrumental in driving growth

in this very competitive industry. Tesco has over 200 stores

in the Czech Republic and Slovakia and approximately

23,000 employees. In addition to leading the HR function at

Tesco, Radka led change programmes within the company,

resulting in improved results in employer brand image as

well as reduced employee turnover.

Information on members of the Board of Directors and Management


Report of the Board of Directors on Business

Activities and the State of Assets

During 2010, GE Money Bank, a.s. continued to pursue

its business strategy of providing comprehensive

fi nancial services to individuals and small and

medium-sized enterprises, based on the principles

of being easier, clearer and more rewarding to

customers.

Report of the Board of Directors

REPORT OF THE BOARD OF DIRECTORS

Organisation Chart (as at 31 December 2010)

Chief Executive Offi cerP. R. Herbert

Internal Audit DepartmentSenior Internal Audit Manager

T. B. Dodd

Distribution DivisionChief Distribution Offi cer

Ch. Glaser

Risk DivisionChief Risk Offi cer

B. M. Belcher

Supervisory BoardR. Ch. Green, A. Blažek, P. Zídek

Board of DirectorsP. R. Herbert, C. Glaser, W. U. Robison

B. M. Belcher, R. R. Gupta, J. Báča

Finance DivisonChief Financial Offi cer

R. R. Gupta

Commercial Banking DivisionChief Commercial Banking Offi cer

J. Báča

Human Resources DivisionChief Human Resources Offi cer

R. Pekelská

Legal & Compliance DivisionChief Legal & Compliance Offi cer

T. Černý

Marketing & Strategy DivisionChief Marketing & Strategy Offi cer

M. Pal, Acting

Information Technologies DivisionChief Information Offi cer

R. Rajaram

Operations DivisionChief Operations Offi cer

J. Hasselrot

Products DivisionChief Products Offi cer

W. U. Robison


Report of the Board of Directors

Pursuant to management changes in 2009 and legal

restructuring of the GE Money entities in the Czech

Republic in 2010, the customer and operating assets

of GE Money Multiservis, a.s. (GEMM) including the

Multiservis brand were transferred to GE Money

Bank, a.s. (GEMB or the Bank) and GE Money Auto,

s.r.o. (GEMA). Since the restructuring, GEMA is

a 100% owned subsidiary of GEMB. GEMM no longer

pursues any business activity and is therefore not

included within the GE Money Bank, a.s. Regulated

Consolidated Entity forwards (the GEM Group).

As at 31 December 2010, the gross value of the GEM

Group loans to customers stood at CZK 118.8 billion.

Unsecured consumer loans increased by 1.9% to over

CZK 47 billion. Outstanding mortgage loans, as at 31

December 2010, amounted to CZK 22.4 billion, and

loans to commercial clients stood at CZK 29.6 billion.

Credit card receivables (as part of the merged Bank)

grew by 3.6% year-on-year and amounted to CZK 6.1

billion at the end of 2010. Auto loans account for most

of the assets of GEMA, at CZK 7.6 billion.

As at 31st December 2010, client deposits reached over

CZK 110 billion, achieving a year-on-year increase of

1.4%. The growing deposit base improved the GEM

Group loan/deposit ratio to 108% from 111% in 2009.

The GEM Group’s total equity reached CZK 25.7 billion

(Tier1 regulatory capital CZK 21 billion] at the end of

2010, with a strong capital adequacy ratio of 14.7%.

During 2010 GEMB invested into establishing and

opening 15 new branch offi ces and 24 new ATMs. The

Board of Directors of GEMB is satisfi ed with the results

that the Bank and the GEM Group achieved in 2010 in

an improving economic environment.

The Directors would like to thank our customers for

their loyalty, our partners for their support and all

employees for their hard efforts.

Main Financial IndicatorsConsolidated economic results and selected key economic indicators(According to Czech Accounting Standards)

Loans to Clients, Net of Adjustments

(CZK 000)

Total Assets(CZK 000)

120,069,035

20,000,0000 40,000,000 60,000,000 80,000,000 100,000,000 120,000,000 140,000,000 160,000,000

Due to Customers and Corporate Funding

(CZK 000) 108,615,141

110,177,309

118,836,003

140,056,459*

147,023,962

50 10

Capital Adequacy

15 20 25

19,07 %

14,73 %*

20102009

* Capital adequacy and total assets decreased as a result of the legal restructuring and the exclusion of GEMM from the GEM Group fi nancials as of 31 December 2010.


Key Financial Trends

KEY FINANCIAL TRENDS


Selected Key Business Indicators

31. 12. 2010 31. 12. 2010 31 December 31 December Year-on-year Year-on-year

GEM Group GEM Group 2010 2009 change change

Stand-alone Stand-alone Consolidated Stand-alone

GEMB GEMB fi gures GEMB

Capital adequacy 14.73 % 19.07 % 15.26 % 16.90 % -22.79 % -9.70 %

Tier 1 (CZK 000) 21,518,061 26,806,669 21,565,402 19,623,294 -19.73 % 9.90 %

Tier 2 (CZK 000) 1,283 2,191 1,283 2,191 -41.47 % -41.46 %

Total of regulatory capital (CZK 000) 21,519,344 26,808,860 21,566,685 19,625,485 -19.73 % 9.89 %

Registered capital stock

in the Commercial Register (CZK 000) 510,000 510,000 510,000 510,000 0.00 % 0.00 %

Required reserve funds (CZK 000) 102,000 102,000 102,000 102,000 0.00 % 0.00 %

Share premium (CZK 000) 4,701,979 4,701,979 4,726,087 4,701,979 0.00 % 0.51 %

Retained earnings from previous periods (CZK 000) 17,367,804 15,238,840 17,367,804 15,238,840 13.97 % 13.97 %

Intangible fi xed assets other

than goodwill (CZK 000) -1,163,722 -1,171,235 -1,140,489 -929,525 -0.64 % 22.70 %

Minority interest (CZK 000) 0 7,427,276 0 0 -100.00 % n/a

Total capital requirement (CZK 000) 11,690,025 11,244,849 11,306,191 9,292,916 3.96 % 21.66 %

Capital requirement for credit risk (CZK 000) 10,099,067 9,791,357 10,056,607 8,452,847 3.14 % 18.97 %

Capital requirement for operational risk (CZK 000) 1,590,958 1,453,492 1,249,584 840,069 9.46 % 48.75 %

The legal restructuring in 2010 results in incomparable information for the current and preceding periods in certain components of the fi nancial statements. Therefore, no comparisons are presented.

31. 12. 2010 31. 12. 2010

GEM Group GEMB

Return on Average Capital 15.17% 15.26%

Return on Average Assets 2.77% 2.32%

Administrative Expenses

per Employee (CZK 000) 1,520 1,603

Assets per Employee (CZK 000) 41,241 52,763

Net Profi t per Employee (CZK 000) 1,204 1,216

Number of employees 3,396 2,646

22 23

Key Financial Trends

0

500

2002 2003 2004 2005 2006 2007 2008 2009

1,000

1,500

2,000

2,500

1,949 1,9192,056 2,028

2,1562,299 2,342

3,397 3,396

3,000

3,500

4,000

* 2010 *

AverageHeadcount

240

02002 2003 2004 2005 2006 2007 2008 2009

50

100

150

200

250

300

187 185 192201 209 214 219 225

* 2010*

Numberof Branches

911

1,9882,242

2,673

3,046

2,366

2,973

2,254

4,089

*0

2002 2003 2004 2005 2006 2007 2008 2009 *2010

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Net Profi t (mil. CZK)

0

10,000

2002 2003 2004 2005 2006 2007 2008 2009 2010

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

120,000

41,41145,559 45,428 47,400

51,878

61,112

108,615

110,177

71,957

* *

Due to Customersand Corporate Funding

(mil. CZK)

*Including items related

to the credit agreement provided

by the parent company GE Capital

International Holdings Corporation,

where drawn balance as at the close

of business on December 31, 2008 was

CZK 4.5 billion (December 31, 2007: CZK

5 billion). As at December 31, 2009, the

bank fully repaid the loan.

Total Assets (mil. CZK)

*The fi gures as at December

31, 2009 and 2010 and for the

period then ended represent

consolidated fi gures. Prior periods

represent only the stand-alone

fi gures of GE Money Bank, a.s.

Key Financial Trends(According to Czech Accounting Standards)

51,71159,78257,806

64,163

84,875

72,783

98,556

147,024 140,056

* 2010*

0

20,000

2002 2003 2004 2005 2006 2007 2008 2009

40,000

60,000

80,000

100,000

120,000

140,000

160,000


Corporate social responsibility is a signifi cant

component of the overall GE Money strategy in the

Czech Republic and is based on 4 pillars.

CORPORATE SOCIAL RESPONSIBILITY AT GE

GE Money Bank Consolidated Annual Report 201026 Corporate social responsibility at GE 27

Grants for 2010:

Applicant Subject of grant Amount provided

Prosaz, civic association Construction modifi cations to a convalescence

and rehabilitation centre 55,087

Town of Prachatice “Celebrations of the golden salt trail” 40,000

Civic association for the support

and assistance of physically handicapped children “Family holiday” 48,000

Vyšší Hrádek, p.s.s. Equipment for HQ 100,000

ADRA civic association Aid to HAITI 79,000

ZŠ,Pr.Š a MŠ Česká Lípa, p.o. Compensatory aid for children with severe physical handicap 47,783

ALKA o.p.s. Hippotherapy for the handicapped 95,000

Naděje, civic association. Utilisation of the space of a garden for clients

– construction of a summer house 45,000

ASK ELNA - European handbike circuit Support for a contest for handicapped sportspeople 50,000

Break Through Silence Foundation Fund Support for programme of cochlear implantations 105,185

SK Akáda Jánské Lázně Support for mono-skiers (physically handicapped) 40,000

Spastic Tricycle sport club Support for the activities of sportspeople with

severe physical handicaps 40,000

Orphanage and school canteen, Plumov, Balkán Contribution to the operations of the orphanage 50,000

Municipal Hospital Ostrava, an organisation

receiving contributions from the state budget Construction of a playground for handicapped children 40,000

Other organisations 1,122,190 Total 1,957,245

Suitable participants in this programme might be

organisations or other legal entities that work with

children or adults suffering health or social disadvantages,

orphanages, foster care centres, not-for-profi t

organisations operating in these spheres, elementary

schools, training centres, middle schools or universities,

libraries, educational centres, land reclamation projects,

etc.

1) Financial education project “We Understand Money”

This is a unique project which has accreditation from

the Ministry of Education, Youth and Sports. GE Money

Bank brings fi nancial expertise and is one of the

project designers. The project is provided by the civic

association AISIS. It was created at the instigation of

GE Money Bank and has become an integral part of the

bank’s strategy in the sphere of “responsible lending”. It

aims to improve the level of fi nancial literacy of school

children by means of specialised tuition in schools.

The project “We Understand Money” is an integrated

programme which allows junior schools to effectively

expand their syllabus into the sphere of fi nancial

education and to participate in increasing the fi nancial

literacy not only of pupils and staff, but indirectly of

parents as well.

The project trains second-level elementary school

teachers to effectively familiarise their pupils with the

principles of handling money and the basic range of

fi nancial products and services. An important aspect

of fi nancial education is an examination of responsible

decision-making. Elementary school pupils (11 – 15 years

old) form the primary target group.

Pupils learn this as though they were members of model

households resolving practical situations occurring

in normal life (fi nding accommodation, buying a car,

booking a holiday, facing increased accommodation

costs, investments, etc.). The training is given in the form

of day-long projects or in individual hours during the

school year. GE Money volunteers are actively involved

in the project as specialist consultants and lecturers

running seminars for teachers. The principles of the “We

Understand Money” project were used by GE Money in

2010 to develop the game “Money Genius”, designed for

Facebook.

So far more than 60 schools and over 2,000 pupils have

joined the project from fi ve regions: Central Bohemia,

Pilsen, Pardubice, Liberec and Vysočiny. From 2008 to

2010 the civic association AISIS received support of CZK

27 million from the European Social Fund for realisation of

the project in these regions.

The general public showed its appreciation of the project

by awarding it second place in the Most Benefi cial Activities

category in the Bank of the Year 2010 competition.

2) Regional grant programme providing support to those in need

In line with GE global strategy, the GEM Group in the

Czech Republic has initiated a programme providing

support for those in need, which is mainly focused

on offering assistance to disadvantaged children

and adults as well as educational and environmental

projects. In 2010 GE Money donated almost CZK 2

million as part of the grant programme. Fifty-nine

projects of regional assistance were made possible on

the basis of grants we provided.

In 2010 funds were provided to organizations supporting

abandoned or sick children and handicapped people. The

projects assisted handicapped children in their schools

and their out-of-school activities, and with repairs to

orphanages. They allowed handicapped people to buy

essential healthcare equipment, and aids the integration

of various social groups into society via the associations

supported.

CSR

FINANCIALEDUCATION

PROJECT

REGIONAL GRANT

PROGRAMME SUPPORTING

THOSE IN NEED

GE VOLUNTEERSORGANIZATION

WOMEN ENTREPRENEURS

PROJECT

1. 2. 3. 4.

Corporate social responsibility at GEGE Money Bank Consolidated Annual Report 2010 292928

The majority of economic analysts agree that the year

2011 will bring moderate economic growth, important

reforming steps, especially of the pension and tax

systems, and new business opportunities.

Outlook for 2011

OUTLOOK FOR 2011

3) GE Volunteers organisation

GE Volunteers plays a key role in GE s charity activities.

The organisation brings together volunteers from the

ranks of employees and with their assistance provides

support in various spheres and places around the

entire world. In the Czech Republic the organisation GE

Volunteers was founded in 1999. In 2010 it organised

a total of 89 initiatives, on which 789 volunteers spent

a total of 8,693 hours. This represents an 86% increase

in the number of volunteers year-on-year and a 44%

increase in the number of volunteering hours.

GE Volunteers focus on the following four main spheres

of activity:

• Children and education

• Assistance to disadvantaged citizens

• Senior citizens

• The environment

It cooperates with many elementary and middle schools,

orphanages, homes for elderly people and other non-

profi t organisations around the whole of the Czech

Republic. It offers help in national parks, forests and river

basin regions and regularly organizes blood donation

drives. The strongest volunteer bases are in Prague and

Ostrava, with provinces progressively getting stronger.

4) Project supporting women in business “Bringing Ideas to Life”

The project entitled “Bringing Ideas to Life” is part

of a global programme called Banking on Women

organised by GE Capital, the parent company of GE

Money Bank, in 8 countries.

The aim of the initiative in the Czech Republic is to support

women who have decided to start their own business, and

to promote female role models in the business sphere. It

offers women a forum for discussion and the sharing of

advice and ideas.

“Bringing Ideas to Life” – is a community of women that

provides a source of practical advice, tools and instruction

on how to begin in business. Real-life stories from women

who run their own business are a huge inspiration for all

women who are wondering whether to take their fi rst

business step. The project s aim is to tell these stories and

support women in taking this most important fi rst step.

Dynamic Internet community

A key communication platform for the project is the

interactive website www.zivotnapadum.cz, which allows

women to discuss issues online, share their ideas and

concerns, and ask about anything that interests them.

It also contains practical advice and tools, such as tips

on how to begin doing business, useful documents to be

downloaded, links and news and reports from the market.

Seminars, webinars, and practical assistance

In 2010 GEM Group organised two seminars where

specialists from the bank as well as successful

businesswomen and representatives of non-profi t

organisations participated. These specialist seminars,

featuring genuine experts in their fi eld, allowed women to

acquire practical advice on the topic of taxes, marketing,

company fi nancing, or improving operations.

Successful women inspire

The project is overseen by an Advisory Board of patrons

comprising women who have achieved success in many

spheres. These women are experts who help specify the

direction and programme of the project. The patrons

guarantee the total independence of the project and are

an inspiration for women who are only just beginning

their business activities.


Report of the Supervisory Board

REPORT OF THE SUPERVISORY BOARD

We share the view that the economic environment

will improve, but we expect the recovery to continue

at a relatively slow pace. Therefore, in 2011 we will

continue to implement our strategy by introducing

new product innovations and simplifi cations, and

maintaining prudent risk management policies. We

will also focus on further expanding our network of

branches and ATMs to provide our customers more

contact points.

At the same time we will stay customer focused,

strengthening our relationship with current customers

and building a credible base for new ones. We will also

continue in our social activities, enhancing current

benefi cial programs and putting more effort into our

brand recognition.

Our strong capital and liquidity positions as well as

the high level of expertise of our colleagues give us

a lot of potential for long-term sustainable organic

growth. Together with prudent risk management and

responsible sales staff, our portfolio of sound products

fulfi lls all necessary conditions for future success.

I am confi dent that we are prepared to manage the

challenges that 2011 has in store for us and thereby to

strengthen our market position.

Peter R. Herbert

CEO and Chairman of the Board of Directors

GE Money Bank, a.s.


The Supervisory Board carried out its tasks in

accordance with the law of the Czech Republic, the

Bank’s Articles of Association, and the Board’s rules of

procedure. The Board of Directors of GE Money Bank,

a.s. provided all materials and information necessary

for the Board’s supervisory activities.

The Supervisory Board discussed the 2010 results

of the Bank and the Regulated Consolidated Entity

as detailed in the fi nancial statements, including the

attachments verifi ed by the auditing fi rm KPMG, and

came to the following conclusion to be presented to the

company’s General Meeting - “The Supervisory Board

recommends that the General Meeting approve the

fi nancial statements for 2010”.

Robert Charles Green

Supervisory Board Chairman

Aleš Blažek

Supervisory Board Member

Pavel Zídek

Supervisory Board Member elected by the employees

GE Money Bank Consolidated Annual Report 2010 Independent Auditor’s Report to the Shareholders of GE Money Bank, a.s.

INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF GE MONEY BANK, A.S.

34 35


KPMG Česká republika Audit, s.r.o., a Czech limited liability company and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative („KPMG International“), a Swiss entity.

Obchodní rejstřík vedenýMěstským soudem v Prazeoddíl C, vložka 24185.

IČ 49619187DIČ CZ699001996

Independent Auditor’s Report to the Shareholders of GE Money Bank, a.s.

Consolidated fi nancial statements

On the basis of our audit, on 20th April 2011 we issued an auditor’s report on the Company’s consolidated fi nancial

statements, which are included in this annual report, and our report was as follows:

“We have audited the accompanying consolidated fi nancial statements of GE Money Bank, a.s., which comprise the balance

sheet as of 31 December 2010, and the income statement for the year then ended, and the notes to these consolidated

fi nancial statements including a summary of signifi cant accounting policies and other explanatory notes. Information

about the company is set out in Note 1 to these consolidated fi nancial statements.

Statutory Body's Responsibility for the Consolidated Financial Statements

The statutory body of GE Money Bank, a.s. is responsible for the preparation of consolidated fi nancial statements that

give a true and fair view in accordance with Czech accounting legislation and for such internal controls as the statutory

body determines are necessary to enable the preparation of consolidated fi nancial statements that are free from material

misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these consolidated fi nancial statements based on our audit. We conducted

our audit in accordance with the Act on Auditors and International Standards on Auditing and the relevant guidance of

the Chamber of Auditors of the Czech Republic. Those standards require that we comply with ethical requirements and

plan and perform the audit to obtain reasonable assurance whether the consolidated fi nancial statements are free from

material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated

fi nancial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks

of material misstatement of the consolidated fi nancial statements, whether due to fraud or error. In making those risk

assessments, the auditor considers internal controls relevant to the entity's preparation and fair presentation of the

consolidated fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for

the purpose of expressing an opinion on the effectiveness of the entity's internal controls. An audit also includes evaluating

the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management,

as well as evaluating the overall presentation of the consolidated fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated fi nancial statements give a true and fair view of the assets and liabilities of GE Money Bank,

a.s. as of 31 December 2010, and of its expenses, revenues and net result for the year then ended in accordance with Czech

accounting legislation.”

Auditor’s Report KPMG Česká republika Audit, s. r. o.Pobřežní 648/1a186 00 Praha 8Česká republika

Telephone +420 222 123 111Fax +420 222 123 100Internet www.kpmg.cz

Auditor’s Report (continued)

Report on relations between related parties

We have reviewed the factual accuracy of the information disclosed in the report on relations between related parties of GE

Money Bank, a.s. for the year ended 31 December 2010. The responsibility for the preparation and factual accuracy of this

report rests with the Company’s statutory body. Our responsibility is to express our view on the report on relations based

on our review.

We conducted our review in accordance with Auditing Standard No. 56 of the Chamber of Auditors of the Czech Republic.

This standard requires that we plan and perform the review to obtain limited assurance as to whether the report on relations

is free of material misstatement. A review is limited primarily to inquiries of the Company’s personnel and analytical

procedures and examination, on a test basis, of the factual accuracy of information, and thus provides less assurance than

an audit. We have not performed an audit of the report on relations and, accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that would lead us to believe that the report on relations between

related parties of GE Money Bank, a.s. for the for the year ended 31 December 2010 contains material factual misstatements.

Annual report

We have audited the consistency of the annual report with the audited consolidated fi nancial statements. This annual

report is the responsibility of the Company’s statutory body. Our responsibility is to express our opinion on the consistency

of the annual report with the audited consolidated fi nancial statements based on our audit.

We conducted our audit in accordance with the Act on Auditors and International Standards on Auditing and the relevant

guidance of the Chamber of Auditors of the Czech Republic. Those standards require that we plan and perform the audit to

obtain reasonable assurance that the information disclosed in the annual report describing matters that are also presented

in the fi nancial statements is, in all material respects, consistent with the audited consolidated fi nancial statements. We

believe that the audit we have conducted provides a reasonable basis for our audit opinion.

In our opinion, the information disclosed in the annual report is, in all material respects, consistent with the audited

consolidated fi nancial statements.

Prague, 20th April 2011

KPMG Česká republika Audit, s. r. o.

Licence number 71

Ing. Vladimír Dvořáček Ing. Pavel Závitkovský

Partner Partner

Licence number 69

Independent Auditor’s Report to the Shareholders of GE Money Bank, a.s. 3736

GE Money Bank Consolidated Annual Report 2010 Report on Relations between Related Parties

REPORT ON RELATIONS BETWEEN RELATED PARTIES

38 39

GE Money Bank Consolidated Annual Report 2010 Report on Relations between Related Parties

2. LIST OF OTHER CONTRACTS AND LEGAL ACTS

(a) List of contracts

Contracts for consideration - receivables/liabilities

The Bank concluded the contracts listed below with

companies in the GE group, under which liabilities

ensue to it. These are namely mandate contracts with

companies having their registered offi ces in the Czech

Republic and the Slovak Republic, on the basis of which

the company invoiced a proportional part of the costs

to the Bank.

The Bank also co-operated with GE Money Multiservis,

a.s., (hereinafter referred to as ”Multiservis“) in the area

of keeping, distribution and processing of transactions

made on the GE Money Card Maestro/MasterCard

credit card. The Bank provided administration services

with respect to individual credit cards. It administered

and managed the whole portfolio in its Vision Plus

system. Multiservis paid the Bank a fi xed fee per credit

card issued and evidenced for these services and also

for individual transactions made on these credit cards.

The costs per card are revalued once a year on the

basis of the actual costs and the Bank’s profi t margin.

The Bank also co-operated with Multiservis as part of

the deal whereby the clients of Multiservis would use

the Bank’s distribution channels. Multiservis clients,

who hold an OK card, may make cash withdrawals at

the Bank’s counters. In return, Multiservis paid the Bank

a fi xed fee per transaction made.

The Bank concluded a contract with companies in the

GE group pertaining to the realisation of transaction on

the money market according to the Bank’s instructions

and on the Bank’s account. Another type of contract,

from which liabilities ensue, is the contract on the use

of GE’s logo and trademark.

The Bank has also concluded contracts on receiving

support services from GE in Dublin and Stamford, which

they provide to the departments at the headquarters

and management of the Bank.

Contracts with subsidiary companies of GE

GE Money Bank, a.s. Inkasní a exekuční servis s.r.o. Contract on a bank overdraft loan

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28

GE Money Bank, a.s. GE Money Auto, s.r.o. Contract on a bank overdraft loan


GE Money Bank, a.s. Inkasní a exekuční servis s.r.o. Mandate contract claiming

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 of debtors’ receivables SB0000967

GE Money Bank, a.s. AgroConsult Bohemia, s.r.o. Contract on Cooperation, Training,

Vyskočilova 1422/1a, Prague 4, 140 28 Rudolfovská tř. 207/84, Promotion

České Budějovice, 370 21 As of 14. 7. 2008, SB0001835

GE Money Bank, a.s. GE Money Auto, s.r.o. Contract on the provision of IT Services

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 SB0002374

GE Money Bank, a.s. GE Money Auto, s.r.o. Contract on the provision of Services:

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 operation and supervision

over IBS90 and SWIFT, SB0003693

GE Money Bank, a.s. GE Money Auto, s.r.o. Contract on the provision of IT Services

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 – in connection with AS 400

SB0000484

GE Money Bank, a.s. GE Money Auto, s.r.o. Mandate contract

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 SA0000018

GE Money Bank, a.s., is part of the GE Capital group,

a multinational GE corporation, which focuses on

providing fi nancial services, mainly to retail and

medium-sized clients. The Bank co-operates most

In accordance with paragraph 9 of Section 66a of

Act No. 513/1991 Coll., the Commercial Code, as

amended, a report was compiled on relations between

the company GE Capital International Holdings

Corporation, (hereinafter referred to as the “Controlling

Party“) as the Controlling Party and the company

GE Money Bank, a.s., (hereinafter referred to as the

“Controlled Party“ or “Bank“) as the Controlled Party

and between the Controlled Party and other parties

controlled by the Controlling Party for the accounting

period from 1 January 2010 – 31 December 2010.

This report was compiled in order to meet the

information duty under paragraph 9 of Section 66a

of Act No. 513/1991 Coll., the Commercial Code, as

amended.

closely with its affi liated companies within the GE group

of companies, which use each other’s distribution

networks to provide their products at arms-length

business conditions.

1. INTERCONNECTION OF PARTIES

General Electric Company

Global Consumer Finance

General Electric Capital

Services, Inc.


Corporation

GE Capital International

Holdings Corporation

GE Money Bank, a.s. GE Money Multiservis, a.s.

AgroConsult

Bohemia s.r.o.GE Money Auto, s.r.o.

GE Capital (Czech)

Holdings, s.r.o.GE Money, a.s. (SR)

GE Money Brokers, a.s. (SR)Inkasní a exekuční

servis s.r.o.

100 %

100 %

100 %

100 % 100 % 100 %

100 %

100 %

100 %100 % 100 %

100 %

GE Money Bank, a.s.

40 41


Contracts with other companies within the GE group (continued)

GE Money Bank, a.s. General Electric Company E-mail service

Vyskočilova 1422/1a, Prague 4, 140 28 3135 Easton Turnpike, Fairfi eld SB0002514

Connecticut 06431, USA

GE Money Bank, a.s. GE Capital Global Financial Restructuring Contract on the use of SW (licensing fee)

Vyskočilova 1422/1a, Prague 4, 140 28 201 High Ridge Road, Stamford CT 06927 SB0002521

GE Money Bank, a.s. General Electric Capital Corporation, Global contract between GE a INDUS

Vyskočilova 1422/1a, Prague 4, 140 28 201 High Ridge RD, Stamford, USA Contract on software use – INDUS

and INDUS Software Private Limited SB0002518

8 Chinar Heights, 359 + Model Colony, India

GE Money Bank, a.s. General Electric Service, Summer Street Global contract between GE a INDUS

Vyskočilova 1422/1a, Prague 4, 140 28 1600, Stamford, USA and Telindus, SB0002515

B.V., Utrecht, Netherlands

GE Money Bank, a.s. GE Consumer Finance, Summer Street Contract on the maintenance

Vyskočilova 1422/1a, Prague 4, 140 28 1600, Stamford, USA and of telecommunication and security

Global eXchange Service, Inc (Telindus), equipment for data transmission

Savannahweg 19, Utrecht, Netherlands SB0002516

GE Money Bank, a.s. General Electric Capital Corporation Implementation Flexcube@connect

Vyskočilova 1422/1a, Prague 4, 140 28 Summer Street 1600, Stamford, USA and SB0000696

i-fl ex solutions, Ltd., SDF1, United Nos. 10811,

Andherl (East), Mumbai 400096, India

GE Money Bank, a.s. General Electric Capital Corporation Implementation Flexcube

Vyskočilova 1422/1a, Prague 4, 140 28 Summer Street 1600, Stamford, USA and WORKFLOW management SW

i-fl ex solutions, Ltd., SDF1, United Nos. 10811,

Andherl (East), Mumbai 400096, India SB0000695

GE Money Bank, a.s. GE Capital International Holdings Corp. Revolving Credit Agreement

Vyskočilova 1422/1a, Prague 4, 140 28 120 Long Ridge Road, Stamford, USA SB0002484

GE Money Bank, a.s. General Electric Copany, Fairfi eld, Global contracts between GE

Vyskočilova 1422/1a, Prague 4, 140 28 USA, CT06828 a Chubb Insurance and Chubb Insurance Company

Company of Europe S.A. (Insurance for people travelling abroad)

SB0002522

GE Money Bank, a.s. General Electric Capital Corporation, Global contracts between GE and

Vyskočilova 1422/1a, Prague 4, 140 28 201 High Ridge RD, Stamford, USA Actimize Anti-Money Laundering

System, SB0002376

GE Money Bank, a.s. General Eletric Company, Contract on the provision

Vyskočilova 1422/1a, Prague 4, 140 28 3135 Easton Turnpike, Fairfi eld Information technology

Connecticut, USA SB0002480

GE Money Bank, a.s. General Electric Capital Corporation, Master Servives Agreement

Vyskočilova 1422/1a, Praha 4, 140 28 201 High Ridge RD, Stamford, USA SB0001887

GE Money Bank, a.s. GE Money EMEA MSA (Operational / Consulting Support

Vyskočilova 1422/1a, Prague 4, 140 28 6 Agar Street, London, England Services)

Great Ship street, Dublin, Ireland SB0004313, amendment SB0004314

GE Money Bank, a.s. General Electric International, INC Rental of meeting rooms

Vyskočilova 1422/1a, Prague 4, 140 28 Shelton, Connecticut, CT 06484-08621 USA SB0003485

Contracts with other companies within the GE group

GE Money Bank, a.s. GE Money Multiservis, a.s. Mandate contract

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 SB0002602,SB0002603,B0002604

GE Money Bank, a.s. GE Money Multiservis, a.s. Contract on the provision

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 of accounting services SB0003694

GE Money Bank, a.s. GE Money Multiservis, a.s. Business co-operation contract –

Vyskočilova 1422/1a, Prague 4, Vyskočilova 1422/1a, Prague 4, 140 28 No fi nancial settlement ensuing

SM0000266

GE Money Bank, a.s. GE Money Multiservis, a.s. Contract on the provision of Services


GE Money Bank, a.s. GE Money Multiservis, a.s. Contract on a bank overdraft loan


GE Money Bank, a.s. GE Money Multiservis, a.s. Contract on Cooperation – hypo referal


GE Money Bank, a.s. GE Money Multiservis, a.s. Contract on Cooperation and processing

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 personal data – hypo processing,

SB0002603

GE Money Bank, a.s. GE Money Multiservis, a.s. Contract on the provision of IT Services


GE Money Bank, a.s. GE Money Multiservis, a.s. Contract on Cooperation in the personal

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 data processing OPTIMAL BUSINESS Loan

SB0002383

GE Money Bank, a.s. GE Money Multiservis, a.s. Contract on the provision of Services

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 (state of vehicle, registration certifi cates)

SB0002601

GE Money Bank, a.s. GE Money Brokers, a.s. Mandate contract

Vyskočilova 1422/1a, Prague 4, 140 28 Bottova 7, Bratislava, 811 09, Slovakia

GE Money Bank, a.s. GE Money, a.s. Mandate contract

Vyskočilova 1422/1a, Prague 4, 140 28 Bottova 7, Bratislava, 811 09, Slovakia

GE Money Bank, a.s. GE Money Czech Holding Company Contract on a bank overdraft loan

Vyskočilova 1422/1a, Prague 4, 140 28 Orange Street 1209, Wilmington

United States

GE Money Bank, a.s. GE Money, a.s. Contract on the provision of IT Services

Vyskočilova 1422/1a, Prague 4, 140 28 Bottova 7, Bratislava, 811 09, Slovakia SB0002375

GE Money Bank, a.s. GE Austria GmbH, Donaucity Strasse Service arrangement contract

Vyskočilova 1422/1a, Prague 4, 140 28 6/8th Floor, A-1220 Vienna, Austria SB0002487

GE Money Bank, a.s. GE Capital Corporation, 260 Long Ridge Contract on treasury services

Vyskočilova 1422/1a, Prague 4, 140 28 Road, Stamford, USA SB0002488

GE Money Bank, a.s. GE Capital Corporation, 260 Long Ridge Use of GE networks

Vyskočilova 1422/1a, Prague 4, 140 28 Road, Stamford, USA-Gl. Cons. Finance SB0002490

and GE International Incorporated,

777 Long Ridge Road, Stamford, USA

GE Money Bank, a.s. GE Capital Registry, Inc., 260 Long Use of trademarks

Vyskočilova 1422/1a, Prague 4, 140 28 Ridge Road, Stamford, USA SB0002523

GE Money Bank, a.s. GE Corporate Computer Service Limited Fees for mediation of services V+

Vyskočilova 1422/1a, Prague 4, 140 28 Europe Station Road, Kingswood, SB0002517

Bristol, England

GE Money Bank, a.s. Global Consumer Finance Contract on the provision of support

Vyskočilova 1422/1a, Prague 4, 140 28 Summer Street 1600, Stamford, USA to HQ GEMB

SB0002486

GE Money Bank, a.s. Global Consumer Finance Contract on the provision of support

Vyskočilova 1422/1a, Prague 4, 140 28 Summer Street 1600, Stamford, USA to HQ GEMB – IT services

SB0002485

Report on Relations between Related Parties42 43

Mandate contracts and other receivables

ensuing from contracts

The Bank also provided services in the non-retail area to GE

companies in the Czech Republic and the Slovak Republic.

These services were rendered at arms-length business

conditions. The Bank has also concluded a contract with

Global Consumer Finance Ltd on the provision of services in

the area of IT project management (Information technology).

The Bank also provides traditional banking services to its

affi liated companies at arms-length conditions, e.g. keeping

of current accounts and overdraft accounts.

GE Money Bank, a.s. GE Money Multiservis, a.s. Co-operation agreement (as of

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 01. 01. 2006) - for credit cards/loans/

OK cards - cash withdrawals

GE Money Bank, a.s. GE Money, a.s. Co-operation agreement (as of

Vyskočilova 1422/1a, Prague 4, 140 28 Bottova 7, Bratislava 811 09, SR 01. 01. 2006) - management of credit

cards (cash withdrawals)


Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 01. 01. 2006) - lease of telephone

exchange /services (direct/indirect costs)

for training purposes in Ostrava

GE Money Bank, a.s. GE Money Multiservis, a.s. Mandate contract as of 10. 11. 1999

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 OPS Services

GE Money Bank, a.s. GE Money Auto, s.r.o. Mandate contract as of 01. 07. 2000

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 OPS Services

GE Money Bank, a.s. GE Money Brokers, a.s. Mandate contract as of 10. 01. 2001

Vyskočilova 1422/1a, Prague 4, 140 28 Bottova 7, Bratislava, 811 09, SR OPS Services

GE Money Bank, a.s. GE Money, a.s. Mandate contract as of 10. 01. 2001

Vyskočilova 1422/1a, Prague 4, 140 28 Bottova 7, Bratislava, 811 09, SR OPS Services


Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 28. 05. 2007) Internetbank for clients

GEMM, who have only a credit card

GE Money Bank, a.s. GE Money Multiservis, a.s. Contract of custody and technical

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 Certifi cates as of 15. 03. 2007

Performance from 01. 01. 2007

GE Money Bank, a.s. GE Money Multiservis, a.s. Mandate contract as of 10. 11. 1999

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 – credit card transactions fee

GE Money Bank, a.s. GE Money Auto, s.r.o. Contract on the provision

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 Information Technology as of 2. 1. 2008

SM0000288



SM0000288

GE Money Bank, a.s. Inkasní a exekuční servis s.r.o. Contract on the provision


SM0000288

GE Money Bank, a.s. GE Capital (Czech) Holdings, s.r.o. Contract on the provision


SM0000288

GE Money Bank, a.s. GE Money Brokers, a.s. Contract on the provision

Vyskočilova 1422/1a, Prague 4, 140 28 Bottova 7, Bratislava 811 09, SR Information Technology as of 2. 1. 2008

SM0000288

GE Money Bank, a.s. GE Money, a.s. Contract on the provision

Vyskočilova 1422/1a, Prague 4, 140 28 Bottova 7, Bratislava, 811 09, SR Information Technology as of 2. 1. 2008

SM0000288

Lease contracts – receivables

The Bank concluded lease contracts with companies in the

GE group, which have their headquarters in the BB Centre

building in Vyskočilova Street. The Bank reinvoices the

costs associated with the lease at the BB Centre building

proportionally to these companies on a monthly basis.

The Bank concluded lease contracts with GE Money Auto,

s.r.o., which uses part of the Bank’s premises located in

regional cities for the sale of its products. As consideration

it pays the Bank arms-length rent including proportional

associated costs for the operation of the commercial

locations.

GE Money Bank, a.s. GE Money Multiservis, a.s. Lease contract – in the BB Centre

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 building, Vyskočilova 1422/1a, Prague 4

SM0000454

GE Money Bank, a.s. GE Money Auto, s.r.o. Lease contract – in the BB Centre


SA0000048

GE Money Bank, a.s. GE Capital (Czech) Holdings, s.r.o. Lease contract – in the BB Centre


GE Money Bank, a.s. GE Medical Systems Czech Republic, s.r.o., Lease contract – in the BB Centre


GE Money Bank, a.s. GE Money Auto, s.r.o. Lease contract – Olomouc, Opletalova 2


GE Money Bank, a.s. GE Money Auto, s.r.o. Lease contract – Hradec Králové, Karla

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 IV. 502

SA0000230

GE Money Bank, a.s. GE Money Auto, s.r.o. Lease contract – Brno, Lidická 31


GE Money Bank, a.s. GE Money Auto, s.r.o. Lease contract – Jaroměř,

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 Ve Sladovnách 37

SA0000229

GE Money Bank, a.s. GE Money Auto, s.r.o. Lease contract – České Budějovice,

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 Jírovcova 1863/1

SA0000231

GE Money Bank, a.s. GE Money Multiservis, a.s. Lease contract – in The Park building

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 no.2294/2, Prague 4 - Chodov

SM0000455

GE Money Bank, a.s. GE Money Auto, s.r.o. Lease contract – in The Park building no.

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 2294/2, Prague 4 - Chodov

SA0000227

GE Money Bank, a.s. Inkasní a exekuční servis s.r.o. Lease contract – in the in the BB Centre

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 building, valid from 01. 05. 2007 for

an indefi nite period

GE Money Bank, a.s. Inkasní a exekuční servis s.r.o. Lease contract – AXIS Ostrava

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 valid from 01. 05. 2007 or an defi nite

period to 31. 12. 2011

Report on Relations between Related PartiesGE Money Bank Consolidated Annual Report 201044 45

(b) List of other legal acts

In connection with the changes in legal structure of the GE

companies in the Czech Republic, that occurred during the

course of the accounting period, the contracts concluded

between Multiservis and GE Money Auto, s.r.o. (formerly GE

Money Auto, a.s.), the aim of which was the support to the

car fi nancing business, were transferred to GE Money Auto,

s.r.o. (and thus ceased to exit). The other contracts concluded

between GE Money Multiservis, a.s. and GE Money Auto, s.r.o.

on the basis of which other supplementary and supporting

services were provided, were trasnferred to GE Money, s.r.o.

(which subsequently merged with GE Money Bank, a.s.).

Contracts concluded between Multiservis and GE Money

Bank, a.s. related to the Credit Card and Consumer Credit

business were transferred to GE Money, s.r.o., which

subsequently merged with GE Money Bank, a.s.

During the course of the accounting period no legal acts,

other than the ones mentioned above, were made in favor

of the Controlling Party and the controlled parties over

and above the framework of the normal legal acts by the

Controlling Party as part of the performance of its rights as

a shareholder of the Controlled Party.

3. OTHER MEASURES, PERFORMANCE RENDERED AND COUNTER-PERFORMANCE ACCEPTED

During the course of the accounting period no other

measures, performance or counter-performance were

adopted or made in the interest or at the urging of the

Controlling Party and controlled parties on the part of

the Controlled Party over and above of the framework of

normal measures, performance and counter-performance

of the Controlled Party in relation to the Controlling Party as


4. EVALUATION

The Bank declares that it has not incurred any loss as

a result of the conclusion of the above-mentioned contracts,

the performance of the other legal acts and other measures

mentioned above, or the performance rendered or counter-

performance accepted.

Prague, March 31, 2011

Mandate contracts and other receivables ensuing from contracts (continued)

GE Money Bank, a.s. GE Money Multiservis, a.s. Contract on the Cooperation - Credit

Vyskočilova 1422/1a, Prague 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 Card, O.K. Card, Loan

Internet Bank – as of 7. 3. 2008

SM0000126

GE Money Bank, a.s. Budapest Hitel és Fejlesztési Bank Nyrt. Loan Budapest bank

Vyskočilova 1422/1a, Praha 4, 140 28 Budapest, 1138 Váci út 188. Hungary Loan Facility


Vyskočilova 1422/1a, Praha 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 as of 30. 6. 2009 – application use GE

Money e-servicing

GE Money Bank, a.s. GE Money Auto, s.r.o. Contract on the provision as of 30. 6. 2009

Vyskočilova 1422/1a, Praha 4, 140 28 Vyskočilova 1422/1a, Prague 4, 140 28 – application use GE Money e-servicing


2. LIST OF OTHER CONTRACTS AND LEGAL ACTS

(a) List of contracts

Contracts for consideration – liabilities

Auto concluded the contracts listed below with

companies in the GE group, under which liabilities

ensue to it. These are namely mandate contracts

GE Money Multiservis, a.s. and Inkasní a exekuční

servis, s.r.o. on the basis of which the company

invoiced a proportional part of the costs to the

GE Money Bank, a.s.

Besides the above, there are the liabilities from the

sub-rental contracts of the branches of GE Money

Bank, a.s., contract with GE Money Bank, a.s. related

to the use of the application of GE Money e-servicing,

contracts of the rental of tangible assets related to GE

Money Multiservis, a.s. and few contracts about the

current accounts held at GE Money Bank, a.s.

Another type of contracts resulting in obligations of

GE Money Auto, s.r.o., were the contracts on providing

accounting services, services of the Operation dept.

and SATELIT with GE Money Multiservis, a.s. and

the contract on using logo and trademarks of GE.

Furthermore, Auto has concluded the contracts on the

support of GE in Dublin, Paris and Stamford that they

provide to the departments at headquarters and to the

Auto management.

Contracts with parent company – liabilities

GE Money Auto, s.r.o. GE Money Bank, a.s. Contract on a bank overdraft loan

Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a, 140 28 Prague 4

GE Money Auto, s.r.o. GE Money Bank, a.s. Contract on providing services

Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a, 140 28 Prague 4 regarding application GE Money

e.servicing (UFO – universal frontend)

GE Money Auto, s.r.o. GE Money Bank, a.s. Contract on the provision

Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a , 140 00 Prague 4 of IT services

GE Money Auto, s.r.o. GE Money Bank, a.s. Mandate contract as of

Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a , 140 00 Prague 4 01. 07. 2000 OPS Services

GE Money Auto, s.r.o. GE Money Bank, a.s. Mandatory contract

Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a , 140 28 Prague 4

GE Money Auto, s.r.o., is part of the GE Money,

a multinational GE corporation, which focuses on

providing fi nancial services, mainly to retail and

medium-sized clients. Auto co-operates most closely

In accordance with paragraph 9 of Section 66a of Act

No. 513/1991 Coll., the Commercial Code, as amended,

a report was compiled on relations between the

company GE Money Bank, a.s Vyskočilova 1422/1a,

Praha 4, ČR (hereinafter referred to as the “Controlling

Party“) as the Controlling Party and the company

GE Money Auto, a.s., Vyskočilova 1422/1a, Praha

4, (hereinafter referred to as the “Controlled Party“

or “Auto“) as the Controlled Party and between the

Controlled Party and other parties controlled by the

Controlling Party for the accounting period from 1

January 2010 – 31 December 2010.

This report was compiled in order to meet the

information duty under paragraph 9 of Section 66a

of Act No. 513/1991 Coll., the Commercial Code, as

amended.

with its affi liated companies within the GE group

of companies, which use each other’s distribution

networks to provide their products at arms-length

business conditions.

1. INTERCONNECTION OF PARTIES

General Electric Company

Global Consumer Finance


Services, Inc.


Corporation

GE Capital International

Holdings Corporation

GE Money Bank, a.s. GE Money Multiservis, a.s.

AgroConsult

Bohemia s.r.o.GE Money Auto, s.r.o.

GE Capital (Czech)

Holdings, s.r.o.GE Money, a.s. (SR)

GE Money Brokers, a.s. (SR)Inkasní a exekuční

servis s.r.o.

100 %

100 %

100 %

100 % 100 % 100 %

100 %

100 %

100 %100 % 100%

100 %

GE Money Auto, s.r.o.

Report on relations between related partiesGE Money Bank Consolidated Annual Report 2010 4948

Lease contracts – liabilities

GE Money Auto, s.r.o. GE Money Bank, a.s. Lease contract – in the BB Centre building,

Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a , 140 28 Prague 4 Vyskočilova 1422/1a

GE Money Auto, s.r.o. GE Money Bank, a.s. Lease Contract –

Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a , 140 28 Prague 4 Olomouc, Opletalova 2


Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a , 140 28 Prague 4 Hradec Králové, Karla IV. 502


Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a , 140 28 Prague 4 Brno, Lidická 31

GE Money Auto, s.r.o. GE Money Bank, a.s. Lease contract –

Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a , 140 28 Prague 4 Jaroměř, Ve Sladovnách 37

GE Money Auto, s.r.o. GE Money Bank, a.s. Lease contract –

Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a , 140 28 Prague 4 České Budějovice, Jírovcova 1863/1

GE Money Auto, s.r.o. GE Money Bank, a.s. Lease contract – in the bulding

Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a , 140 28 Prague 4 – The Park 2294/2, Prague 4 – Chodov

Contracts with parent company – receivables

GE Money Auto, s.r.o. GE Money Bank, a.s. Contract on the provision of services

Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a , 140 28 Prague 4 – operation a supervision nad IBS90 a SWIFT

GE Money Auto, s.r.o. GE Money Bank, a.s. Contract on the provision of

Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a , 140 28 Prague 4 IT services in connection – AS 400

GE Money Auto, s.r.o. GE Money Bank, a.s. Contract on the provision of

Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a, 140 00 Prague 4 Information Technology

Contracts with other companies within the GE group – receivables

GE Money Auto, s.r.o. GE Money Multiservis, a.s. Co-operation agreement –

Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a, 140 28 Prague 4 marketing services

GE Money Auto, s.r.o. GE Money Multiservis, a.s. Contract on cost share

Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a, 140 28 Prague 4 Construct

GE Money Auto, s.r.o. GE Money Multiservis, a.s. Contract on cost share of credit

Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a, 140 28 Prague 4 card purchasing

GE Money Auto, s.r.o. GE Money Multiservis, a.s. Contract on cost share Defend Lock


GE Money Auto, s.r.o. GE Money Multiservis, a.s. Contract on the provision of


GE Money Auto, s.r.o. GE Capital (Czech) Holdings, s.r.o. Contract on the provision of


GE Money Auto, s.r.o. GE Money Brokers, a.s. Contract on the provision of

Vyskočilova 1422/1a, 140 00 Prague 4 Bottova 7, 811 09 Bratislava Information Technology

GE Money Auto, s.r.o. Inkasní a exekuční servis s.r.o. Contract on the provision of


GE Money Auto, s.r.o. GE Money, a.s. Contract on the provision of

Vyskočilova 1422/1a, 140 00 Prague 4 Bottova 7, 811 09 Bratislava Information Technology

GE Money Auto, s.r.o. GE Capital Woodchester Ltd.; Contract on the provision of

Vyskočilova 1422/1a, 140 00 Prague 4 Trading as GE Money Ireland; 31-36 Golden Lane; IT services – in connection with AS 400

Ireland Dublin 8; UK;

GE Money Auto, s.r.o. GE Money Servicing Limited, Malvern House, Contract on the provision of

Vyskočilova 1422/1a, 140 00 Prague 4 Croxley Business Prak, Watford Hertfordshire IT services – in connection with AS 400

WD 18 8Y, UK

Contracts with other companies within the GE group – liabilities

GE Money Auto, s.r.o. GE Money Multiservis, a.s. Contract on the provision

Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a, 140 28 Prague 4 of accounting and controlling services

GE Money Auto, s.r.o. GE Money Multiservis, a.s. Contract on renting a property

Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a, 140 28 Prague 4 – DELL LATITUDE D600 JG9181J

GE Money Auto, s.r.o. GE Money Multiservis, a.s. Contract on renting a property

Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a, 140 28 Prague 4 – DELL LATITUDE D610 HQZMM1J

GE Money Auto, s.r.o. Global Consumer Finance International Contract on providing Master

Vyskočilova 1422/1a, 140 00 Prague 4 Holdings SAS, Tour Europlaza, LaDefense 4, Services Agreement

20 Av. Andre Prothin

92063 Paris, La Defense Cedex, FR

GE Money Auto, s.r.o. GE Money Multiservis, a.s. Contract on the provision of

Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a, 140 28 Prague 4 IT services

GE Money Auto, s.r.o. GE Money, a.s. Contract on the provision of

Vyskočilova 1422/1a, 140 00 Prague 4 Bottova 7, 811 09 Bratislava IT services

GE Money Auto, s.r.o. GE capital Corporation, Contract on the provision of

Vyskočilova 1422/1a, 140 00 Prague 4 GE Consumer Finance IT services (MSA)

Summer Street 1600, Stamford, U.S.A

GE Money Auto, s.r.o. GE capital Corporation, Contract on the provision of

Vyskočilova 1422/1a, 140 00 Prague 4 GE Consumer Finance advisory service (MSA)

Summer Street 1600, Stamford, U.S.A

GE Money Auto, s.r.o. GE Capital Registry, Inc. Use of trademarks

Vyskočilova 1422/1a, 140 00 Prague 4

GE Money Auto, s.r.o. General Electric Company E-mail services

Vyskočilova 1422/1a, 140 00 Prague 4

GE Money Auto, s.r.o. General Electric a Chub Insurance Company Global contract between GE and Chub

Vyskočilova 1422/1a, 140 00 Prague 4 of Europe S.A Insurance Company – insurance

of persons travelling abroad

GE Money Auto, s.r.o. General Electric Capital Corporation Global contract between GE

Vyskočilova 1422/1a, 140 00 Prague 4 a GENPACT INTERNATIONAL and GENPACT Services

Swiss Branch Zug, Luxembourg MSA – providing system Global AD

GE Money Auto, s.r.o. GE Money Multiservis, a.s. Agreement on the sales support

Vyskočilova 1422/1a, 140 00 Prague 4 Vyskočilova 1422/1a, 140 28 Prague 4 (IF interests)

GE Money Auto, s.r.o. GE Money Multiservis, a.s. Mandatory contract

Vyskočilova 1422/1a, 140 00 Prague4 Vyskočilova 1422/1a, 140 28 Prague 4 (services OPS and SATELIT)

GE Money Auto, s.r.o. Inkasní a exekuční servis s.r.o. Mandatory contract


Auto concluded lease contracts with company GE Money

Bank, a.s., which uses part of the Bank’s premises located in

regional cities for the sale of its products. As consideration

it pays the Bank arms-length rent including proportional

associated costs for the operation of the commercial

locations. GE Money Auto, s.r.o. also sub-leases contracts

of offi ce space where is its headquarters in the BB Centre

building in Vyskocilova street.

(continued)


Consolidated Auditor’s Report and Financial Statements

CONSOLIDATED AUDITOR’S REPORT AND FINANCIAL STATEMENTS(b) List of other legal acts

In connection with changes in legal structure of GE

companies in the Czech Republic, that occurred during the

course of the accounting period, the contracts concluded

between Multiservis and GE Money Auto, s.r.o. (formerly

GE Money Auto, a.s.) (and thus ceased to exist) related to the

AutoCredit business, were transferred to GE Money Auto,

s.r.o.

During the course of the accounting period, no legal acts,

other than the ones mentioned above, were made in favor

of the Controlling Party and the controlled parties over

and above the framework of normal legal acts by the

Controlling Party, as part of the performance of its rights as


3. OTHER MEASURES, PERFORMANCE RENDERED AND COUNTER-PERFORMANCE ACCEPTED

During the course of the accounting period no other

measures, performance, or counter-performance were

adopted or made in the interest, or at the urging, of the

Controlling Party, and controlled parties on the part of the

Controlled Party, over and above the framework of normal

measures, performance, and counter-performance of the

Controlled Party in relation to the Controlling Party, as


4. EVALUATION

GE Money Auto, s.r.o. declares that it has not incurred any

loss as a result of the conclusion of the above-mentioned

contracts, the performance of the other legal acts and other

measures mentioned above, or the performance rendered

or counter-performance accepted.

Prague, March 31, 2011

Contracts with other companies within the GE group – receivables (continued)

GE Money Auto, s.r.o. GE Money EMEA Service Agreement- CEE services

Vyskočilova 1422/1a, 140 00 Prague 4 3rd Floor Le Pole House

Great Ship Street, Dublin 8 Ireland

GE Money Auto, s.r.o. GE CAPITAL CORPORATION GLOBAL Contract on the provision of

Vyskočilova 1422/1a, 140 00 Prague 4 CONSUMER FINANCE 1600 Summer Street IT services – in connection with AS 400

Stamford, CT 06927 USA

GE Money Auto, s.r.o. GE CAPITAL GLOBAL CONSUMER FINANCE; Contract on the provision of

Vyskočilova 1422/1a, 140 00 Prague 4 Capital House, 2 Off Bruntcliffe Way, IT services – in connection with AS 400

Morley, Leeds, UK


The leading entity:

Name of the Bank: GE Money Bank, a. s.

Regestered offi ce: Vyskočilova 1422/1a, Prague 4

Identifi cation no: 25672720

Business: Bank

Date of preparation: 20 April 2011

Code of the Bank: 0600

5352

CONSOLIDATED BALANCE SHEET – LIABILITIESas at 31 December 2010

CZK 000 note 31. 12. 2010 1. 1. 2010

1 Due to banks and cooperative savings associations 22 296,719 672,404

of which: a) repayable on demand 198,437 131,634

b) other payables 98,282 540,770

2 Due to customers – cooperative savings association's members 23 110,177,309 108,615,141

of which: a) repayable on demand 94,377,490 82,626,831

b) other payables 15,799,819 25,988,310

4 Other liabilities 24 3,142,053 2,484,097

5 Deferred income and accrued expenses 27,026 195,575

6 Provisions 718,302 844,917

of which: a) provision for pensions and similar obligations 0 0

b) provision for taxes 244,679 0

c) other 473,623 844,917

8 Registered capital 25 510,000 510,000

of which: a) registered paid up capital 510,000 510,000

9 Share premium 4,701,979 4,701,979

10 Reserve funds and other funds from profi t 27 102,000 102,000

of which: a) statutory reserve funds and risk funds 102,000 102,000

13 Gains (losses) from revalution 28 63,517 50,861

of which: a) assets and liabilities 63,517 50,861

14 Retained earnings from previous years 27 17,367,804 17,367,804

15 Profi t for the accounting period 27 3,212,131 0

16 Impact of acquisition of minority shares (262,381) 0

17 Minority registered capital 0 30,000

18 Minority share premium 0 3,319,842

19 Minority reserve funds and other funds from profi t including

retained earnings from previous years 0 8,129,342

20 Minority profi t for the accounting period 876,578 0

21 Impact of deconsolidation on minority interest (876,578) 0

Total liabilities 140,056,459 147,023,962

The notes set out on pages 59 to 86 form part of these consolidated fi nancial statements.

CONSOLIDATED BALANCE SHEET – ASSETSas at 31 December 2010

CZK 000 note 31. 12. 2010 1. 1. 2010

1 Cash in hand and balances with central banks 3,044,808 3,894,896

2 State zero coupon bonds and other securities eligible

for refi nancing with the CNB 15 11,092,667 12,466,458

of which: a) securities issued by the government institutions 11,092,667 12,466,458

3 Receivables from banks and cooperative savings associations 13 15,673,325 17,732,635


b) other receivables 15,519,910 17,668,534

4 Receivables from customers - cooperative savings association's members 14 103,079,607 106,129,870

of which: a) repayable on demand 27 20


5 Debt securities 15 751,349 0

of which: a) issued by government institutions 0 0

b) issued by other entities 751,349 0

6 Shares, mutual fund certifi cates and other investments 16 47,015 43,597

7 Participation interests with substantial infl uence 17 240 240

8 Participation interests with controlling infl uence 18 12,575 6,652

9 Intangible fi xed assets 19 1,163,722 1,171,235

10 Tangible fi xed assets 20 1,757,380 2,550,858

of which: land and buildings for operating activities 384,816 371,332

11 Other assets 21 3,317,796 2,898,592

13 Prepaid expenses and accrued income 115,975 128,929

Total assets 140,056,459 147,023,962


GE Money Bank Consolidated Annual Report 2010 Consolidated Auditor’s Report and Financial Statements 5554

CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 31 DECEMBER 2010

CZK 000 note 2010

1 Interest income and similar income 4 11,918,477

of which: interest income from debt securities 190,531

2 Interest expense and similar expense 4 (1,496,175)

3 Income from shares and participation interests: 5 7,211

of which: a) income from participation interests with substantial infl uence 614

b) income from participation interests with controlling infl uence 0

c) income from other shares and participation interests 6,597

4 Commission and fee income 6 4,181,236

5 Commission and fee expense 6 (678,150)

6 Gain or loss from fi nancial operations 7 75,344

7 Other operating income 8 1,758,596

8 Other operating expenses 8 (1,109,764)

9 Administrative expenses 9 (5,162,832)

of which: a) employee expenses (2,261,865)

of which: aa) social and health insurance (557,375)

b) other administrative expenses (2,900,967)

11 Depreciation, creation and use of reserves and adjustments to tangible and intangible FA (1,339,210)

12 Release of adjustments and provisions for receivables and guarantees,

income from written-off receivables 14, 26 2,359,076

13 Write-offs, creation and use of adjustments and provisions for receivables and guarantees 14, 26 (5,937,457)

14 Release of adjustments to participation interests with controlling and substantial infl uence 5,923

17 Creation and use of other provisions 26 365,343

19 Current year profi t (loss) from ordinary activities before tax 4,947,618

23 Income tax 29 (858,909)

24 Net profi t for the accounting period 4,088,709

25 Bank shareholders profi t 3,212,131

26 Minority profi t 876,578


OFF-BALANCE SHEET ITEMS

CZK 000 note 31. 12. 2010 1.1.2010

Off-balance sheet assets

1 Commitments and guarantees granted 30 13,508,231 14,002,312

3 Receivables from spot transactions 140,160 30,559

4 Receivables from fi xed term transactions 30 14,249,685 18,204,223

6 Receivables written-off 8,550 5,559

Off-balance sheet liabilities

9 Commitments and guarantees received 67,757,105 68,998,832

10 Collaterals and pledges received 55,172,315 61,763,760

11 Payables from spot transactions 138,014 30,643

12 Payables from fi xed term transactions 30 30 14,585,330 18,678,924

14 Values taken into custody, administration and deposit 123,566 13,681


Consolidated Auditor’s Report and Financial Statements GE Money Bank Consolidated Annual Report 2010 5756

Notes to the Consolidated Financial Statements

NOTES TO THECONSOLIDATED FINANCIALSTATEMENTS

Year ended:

31 December 2010

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2010

CZK 000 Registered Share Reserve Revaluation Profi t Impact Total Minority Total

capital premium funds gains (loss) of acquisition equity interests equity

(losses) of minority incl. minority

shares interests

Balance as at 1. 1. 2010 510,000 4,701,979 102,000 50,861 17,367,804 0 22,732,644 11,479,184 34,211,828

FX gains (losses) and gains

(losses) not included

in the profi t and loss account 0 0 0 12,656 0 0 12,656 0 12,656

Net profi t for

the accouning period 0 0 0 0 3,212,131 0 3,212,131 876,578 4,088,709

Changes due to legal

restructuring of the Group 0 0 0 0 0 0 0 (12,355,762) (12,355,762)

Impact of acquisition

of minority shares 0 0 0 0 0 (262,381) (262,381) 0 (262,381)

Balance as at 31. 12. 2010 510,000 4,701,979 102,000 63,517 20,579,935 (262,381) 25,695,050 0 25,695,050



Notes to the Consolidated Financial Statements

1. BASIC INFORMATION (CONTINUED)

(b) Defi nition of the Regulated Consolidated Entity

Regulated Consolidated Entity of GE Money Bank, a.s., as

a group of the local controlling bank pursuant to Section 26d

(1) (a), (b) and (k) of Banking Act No. 21/1992 Coll., was formed

on 3 December 2009.

The Group’s Companies Included in Consolidation

As at 31 December 2010, the Regulated Consolidated Entity

included GE Money Bank, a.s. and GE Money Auto, s.r.o.

The entities were consolidated using the full consolidation

method.

Unconsolidated Subsidiary and Associated Undertakings

In 2010, Inkasní a exekuční servis s.r.o., AgroConsult Bohemia

s.r.o., and CBCB - Czech Banking Credit Bureau, a.s. were not

included in the Regulated Consolidated Entity because their

impact for the Group is immaterial.

(c) Basis of Preparation

The consolidated fi nancial statements have been prepared

on the basis of the accounting records maintained in

accordance with the Act on Accounting and the relevant

regulations and decrees of the Czech Republic. They have

been prepared under the historical cost convention on the

basis of full accrual accounting, except for selected fi nancial

instruments that are measured at fair value.

The consolidated fi nancial statements have been prepared

in accordance with Czech Ministry of Finance Decree No.

501/2002 Coll. dated 6 November 2002, as amended, which

regulates the layout and defi nition of fi nancial statements

and disclosure requirements for banks and certain fi nancial

institutions.

Numbers in brackets represent negative amounts.

These fi nancial statements are consolidated fi nancial

statements.

(d) Comparative Information

The legal restructuring in 2010 discussed above results in

incomparable information for the current and preceding

periods in certain components of the fi nancial statements.

Therefore, no comparisons are presented in the profi t and

loss account and related footnote disclosure. The balance

sheet comparatives show the opening balances as at 1

January 2010, i.e. as at the decisive date of the merger of

the Bank with GE Money, s.r.o.

2. SIGNIFICANT ACCOUNTING POLICIES

The signifi cant accounting policies adopted in the

preparation of the fi nancial statements are set out below.

(a) Transaction Date

Depending on the type of transaction, the transaction date

is defi ned as the date of payment or collection of cash; the

date of purchasing or selling of foreign currency or securities;

the date of payment or collection from a customer's account;

the date of order to a correspondent to make a payment,

the settlement date of the Bank’s payment orders with the

ČNB clearing centre, the value date according to a statement

received from a Bank’s correspondent (statement means

SWIFT statement, bank’s notice, received media, bank

statement or other documents); the trade date and

settlement date of transactions with securities, foreign

currency, fi nancial derivatives; the date of issue or receipt of

a guarantee or opening credit line; the date of acceptance of

values into custody.

The Bank’s subsidiaries as at 31 December 2010 are as follows:

Name of the company Direct interest in % Minority interest in % Principal activities Registered offi ce

GE Money Auto, s.r.o. 100 0 Finance leases, loans Prague

Inkasní a exekuční servis s.r.o. 100 0 Administration Prague

AgroConsult Bohemia s.r.o. 100 0 Agriculture consulting České Budějovice

The Bank’s associates as at 31 December 2010 are as follows:

Name of the company Direct interest in % Minority interest in % Principal activities Registered offi ce

CBCB – Czech Banking Credit Bureau, a.s. 20 20 Collection of data for credit Prague

risk assessment

1. BASIC INFORMATION

(a) Information on the Parent Company

GE Money Bank, a.s., formerly GE Capital Bank, a.s.,

(hereinafter the “Bank” or “GEMB”) together with the

subsidiaries set out in point b) of this Note, form the regulated

consolidated entity of GE Money Bank, a.s. (hereinafter

collectively referred to as the “GEM Group” or the “Group”).

The parent company of the Group is the Bank, which was

established on 9 June 1998 by a capital contribution from

GE Capital International Holdings Corporation in the amount

of CZK 2,000 million. From this initial capital, the Bank

purchased selected assets and liabilities from Agrobanka,

a.s., a bank that had previously been put under enforced

administration by the Czech National Bank. On 22 June

1998, i.e. the date of purchase, the acquired assets and

liabilities were recorded in the Bank’s balance sheet at the

values determined based upon the purchase agreement.

On 17 January 2005 GE Capital Bank, a.s. was renamed GE

Money Bank, a.s. as a part of a rebranding initiative that

was implemented around the world by the ultimate parent

company General Electric Company. The aim is to use the

worldwide experience of GE Money not only to allow uniform

communication, but also to improve processes, strengthen

our mutual relationships, and heighten successful

cooperation with clients.

GE Money entities in the Czech Republic underwent legal

restructuring in 2010 as follows:

• GE Money Auto, a.s. (GEMA) changed its legal form from

a joint-stock company to a limited company.

• The GE Money Multiservis, a.s. (GEMM) enterprise was

divided into three parts.

• The fi rst part, which comprised the auto loans business

(the auto loan portfolio at the net book value of CZK

4.3 billion), was contributed into GEMA, and GE Money

Multiservis, a.s., as its sole shareholder, subsequently

transferred the ownership interest in GEMA to the Bank.

• The second part, the credit cards and consumer loans

business (fi nancing receivables at the net book value

of CZK 5.9 billion), was contributed into GE Money, s.r.o.,

a newly acquired subsidiary of the Bank.

• The ownership interests in Inkasní a exekuční servis, s.r.o.

and AgroConsult Bohemia s.r.o. were transferred to the

Bank from GEMM.

• GE Money, s.r.o. then merged with the Bank

on 30 September 2010 (whereas the merger’s decisive

date was 1 January 2010) and ceased to exist.

• The Bank lost control over the remaining part of GEMM,

which consisted of cash and equity accounts, which

were deconsolidated as at 31 December 2010.

The Bank generates a substantial proportion of the Group’s

income and represents substantially all of the assets and

liabilities of the GEM Group.

Business Firm Identifi cation

and Registered Offi ce Number:

GE Money Bank, a.s. 25672720

Vyskočilova 1422/1a

140 28 Praha 4, Michle

Czech Republic – registered in the

Czech Republic by the Municipal

Court in Prague, Section B, Entry No. 5403

Members of the Board of Directors and Supervisory Board of

the Bank as the Controlling Company of the Group as at 31

December 2010

Members of the Board Members of

of Directors the Supervisory Board

Peter Ronald Herbert Robert Charles Green

(Chairman) (Chairman)

Christoph Glaser Aleš Blažek

Brett Matthew Belcher Pavel Zídek

Rajesh Ramakrishna Gupta

Jiří Báča

Wade Udell Robison

Changes in the Board of Directors and Supervisory Board

In 2010, the Board of Directors changed as follows:

• On 6 April 2010 Jiří Báča was appointed as a member of

the Board of Directors.

• On 7 December 2010 Wade Udell Robison was appointed

as a member of the Board of Directors.

To view the organizational structure, please see page 18.


2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(d) Receivables from Banks and Customers

Receivables are carried net of adjustments. Accrued interest

income is part of the carrying amount of receivables.

Receivables are reviewed for recoverability. Adjustments

are created against specifi c receivables when considered

appropriate. The methodology for the creation of

adjustments in the appropriate accounting period is included

in Note 30. Adjustments created by debiting expenses are

reported in “Write-offs, creation and use of adjustments and

provisions to receivables and guarantees”.

The tax-deductible portion of the period charge for the

creation of adjustments for credit losses is calculated in

accordance with the requirements of Section 5 (“Banking

provisions and adjustments”) for the banking business,

Section 8a “Adjustments to unforfeited receivables due after

31 December 1994” for the non-banking business and, for

both businesses, Section 8 (“Adjustments to receivables from

debtors subject to bankruptcy or composition proceedings”)

of the Act on Provisions No. 593/1992 Coll.

Receivables are written off when the Group has determined

the receivable to be permanently irrecoverable.

The write off of unrecoverable receivables is accounted for as

“Write-offs, creation and use of adjustments and provisions

to receivables and guarantees” in the profi t and loss account.

Adjustments and provisions are reduced in an amount equal

to the amount written off on the same account in the profi t

and loss account. Recoveries on loans previously written

off are included in the profi t and loss account in “Release of

adjustments and provisions for receivables and guarantees,

income from written-off receivables”.

The Group also accrues interest income from classifi ed

receivables. Adjustments to accrued interest income are

established in accordance with the appropriate requirement

of the ČNB.

Receivables from customers purchased from a third

party are initially recorded at discounted values from the

gross receivables actually due under the contracts with

customers. To the extent that a customer repays any portion

of the receivable in excess of the discounted value originally

assigned to the receivable, this difference is recorded as

operating income.

(e) Creation of Provisions

A provision represents a probable cash outfl ow of uncertain

timing and amount. Provisions are established if the

following criteria are met:

• A duty (legal or factual) to perform exists, resulting from

past events.

• It is probable or certain that the event will occur and

that it will require a cash outfl ow representing economic

benefi ts; “probable” meaning a probability exceeding 50

percent.

• The amount of such performance can be reliably

estimated.

(f) Intangible and Tangible Fixed Assets

Tangible and intangible fi xed assets are stated at historical

cost and are depreciated using the straight-line method

over their estimated useful lives.

The annual depreciable lives for each category of intangible

and tangible fi xed asset are as follows:

Buildings 40 years

Technical improvement of buildings 10 years

Furniture 10 years

Software 5 years

Cars 4 years

Inventory 10 years

Equipment 5–10 years

Establishment costs – other intangible fi xes assets 5 years

PCs and servers 3 years

Tangible fi xed assets – leasing On the basis of lease contracts

Leasehold improvements are depreciated on a straight-line

basis over the shorter of the lease terms or their remaining

useful lives.

Intangible fi xed assets costing less than CZK 60 thousand

and tangible fi xed assets costing less than CZK 40

thousand with a useful life less than 1 year are charged to

the profi t and loss account in the period in which they are

acquired.


(a) Transaction Date (continued)

Accounting transactions involving the purchase or sale

of fi nancial assets with a usual term of delivery (spot

transactions) and fi xed term contracts are recorded in

off-balance sheet accounts from the trade date until the

settlement date.

A fi nancial asset or part thereof is derecognized from the

balance sheet if the Group loses control over the contractual

rights to the fi nancial asset or part thereof. The Group loses

this control if it exercises the rights to the benefi ts defi ned in

the contract, if such rights expire or the Group waives these

rights.

(b) Debt Securities, Shares, Units and Other Investments

Treasury bills, bonds and other debt securities and shares,

including share units and other investments, are classifi ed

into the portfolio that is held to maturity, the portfolio valued

at fair value through the profi t and loss, or the available

for sale portfolio, based on the Bank’s intention. Only debt

securities can be classifi ed into the portfolio held to maturity.

Treasury bills, bonds and other debt securities are recorded

at amortized/accreted cost. Accrued interest income is part

of the carrying amount of these securities. Shares, units and

other investments are recorded at acquisition cost.

Premiums and discounts on debt securities are amortized/

accreted through the profi t and loss account over the period

from the date of purchase to the date of maturity using the

effective interest rate method. In the case of securities, which

have a residual maturity of less than 1 year from the date

of purchase, the premium and the discount are amortized/

accreted equally through the profi t and loss account over

the period from the date of purchase to the date of maturity.

Available for sale securities and shares, units and other

investments are measured at fair value and gains/losses

from this revaluation are charged to equity in “Gains (losses)

from revaluation”. When the security is sold, the respective

revaluation difference is charged to the profi t and loss

account in “Gain or loss from fi nancial operations”.

The fair value used to revalue securities is determined based

on the market price published as of the date of the fair value

measurement, if the Group proves that securities can be

sold for that market price.

For debt and equity securities traded on the public market,

fair values are equal to the price reached on the public

market of OECD countries, if, at the same time, the condition

of securities liquidity is fulfi lled.

If it is not possible to determine whether the market value

represents fair value (i.e. if the Group does not prove that it

is possible to sell securities for such a market price), the fair

value is estimated as an adjusted value of securities.

The adjusted value of the securities is equal to the share

proportion of equity for shares, the share proportion of

a fund’s net assets value for units, or the present value of

the security for debt securities.

Transactions where securities are purchased under

a commitment to resell (resale commitment) are treated

as collateralized lending transactions. The legal title of

securities subject to resale or repurchase commitments is

transferred to the lender. Securities received under a resale

commitment are recorded in off-balance sheet accounts

in “Collaterals and pledges received”. The lending granted

under a resale commitment is recorded in “Receivables

from banks and cooperative savings associations” or

“Receivables from customers - cooperative savings

association’s members”. Interest on debt securities received

under a resale commitment is not accrued.

Income arising under resale commitments based on

the difference between the selling and purchase price is

accrued over the period of the transaction and recorded in

the profi t and loss account as “Interest income and other

similar income”.

(c) Participation Interest with Controlling/Substantial

Infl uence

Participation interest with controlling infl uence is one in

which the Bank holds at least 50 percent of a subject’s

registered capital or one arising from an agreement or

from articles of association regardless of the percentage of

participation.

Participation interest with substantial infl uence is one

in which the Bank holds at least 20 percent of a subject’s

registered capital but not more than 50 percent or one

arising from an agreement or from articles of association

regardless of the percentage of participation.

Non-consolidated participation interest with controlling/

substantial infl uence is valued at acquisition cost net of

adjustments owing to the temporary decrease in the value

of the participation interest calculated on an individual basis.

GE Money Bank Consolidated Annual Report 2010 Notes to the Consolidated Financial Statements 6362

3. CHANGES IN ACCOUNTING POLICIES

The Group did not make any changes in its accounting

policies in 2010.

4. NET INTEREST INCOME

CZK 000 2010

Interest income 11,918,477

– deposits 44,006

– loans 11,683,940

– debt securities 190,531

Interest expense (1,496,175)

– deposits (1,484,669)

– loans (11,506)

Net interest income 10,422,302

The Group waived or did not claim default interest in the

amount of CZK 2,684 thousand.

5. INCOME FROM SHARES AND PARTICIPATION INTERESTS

CZK 000 2010

Income from participation interests

with substantial infl uence 614

Income from other shares 6,597

Total 7,211

6. FEES AND COMMISSIONS

CZK 000 2010

Fee and commission income from

payment processing 1,724,781

lending activities 2,306,639

other 149,816

Total 4,181,236

Fee and commission expense from

payment processing (217,076)

other (461,074)

Total (678,150)

7. GAIN OR LOSS FROM FINANCIAL OPERATIONS

CZK 000 2010

Gain/losses from derivatives operations (124,008)

Gain from currency exchange services 11,012

Gain/losses from FX rate differences

from revaluation 188,340

Total 75,344

8. OTHER OPERATING INCOME AND EXPENSES

CZK 000 2010

Other operating income

Service revenues 168,838

Commissions from third parties 91,353

Rent 27,057

Sale of fi xed assets 111,723

Damages 537

Corrections 15,980

Insurance 389,416

Income from fi nancial leasing 904,419

Other 49,273

Total 1,758,596

Other operating expenses

Deposit insurance (134,147)

Royalties (228,033)

Sale of fi xed assets (175,956)

Damages (52,673)

Withholding tax (21,412)

Other (497,543)

Total (1,109,764)

Other operating expenses include a charge relating to the

2010 Agrobanka case settlement (refer to Note 25 and 33).

9. ADMINISTRATIVE EXPENSES

CZK 000 2010

Employee expenses (2,261,865)

Wages and salaries (1,704,490)

Social and health insurance (557,375)

Of which wages and salaries paid to:

Members of the Board of Directors (6,674)

Members of the Supervisory Board 0

Other executives (79,581)

Other administrative expenses (2,900,967)

Of which expenses for services provided

by the statutory auditor relating to

Statutory audit (11,946)

Other assurance services (1,762)

Tax (2,178)

Other non-audit services (1,870)

Total (5,162,832)

The Group did not pay any bonuses tied to equity in 2010.


The valuation difference on acquired assets represents

a positive or negative difference between the valuation of

the business or part thereof acquired through the purchase

and the sum of the carrying values of individual components

of assets of the selling entity net of assumed liabilities.

A positive difference on acquired assets is amortized to

expenses on a straight line basis over 48 months from

the acquisition of the business or part thereof. A negative

difference on acquired assets is released into income over

60 months from the acquisition of the business or part.

(g) Leased Assets

The Group depreciates assets leased to clients over the

contractual life of the lease agreements. The straight-

line method is used to recognize fi nance lease interest

income over the contractual life. Advances received from

clients are recorded in “Due to customers – cooperative

savings association’s” and recognized as income through

contractual life.

(h) Foreign Currency Translation

Transactions denominated in foreign currencies are recorded

in the local currency at the actual exchange rates on the

date of the transaction. Assets and liabilities denominated

in foreign currencies together with unsettled spot foreign

exchange transactions are translated into the local currency

at the ČNB foreign exchange rate prevailing on the balance

sheet date. Foreign exchange gains or losses arising from the

translation of assets and liabilities denominated in foreign

currencies are recognized in the profi t and loss account as

“Gain or loss from fi nancial operations”.

(i) Financial Derivatives

Trading Instruments

Financial derivatives held for trading are carried at fair value.

Gains (losses) from the changes in fair value are recorded

in the profi t and loss account in “Gain or loss from fi nancial

operations”.

The Group uses all its trading investment derivatives for

macro-hedging purposes.

Hedging Derivatives

Hedging derivatives are carried at fair value. The method

of recognizing fair value depends on the model of hedge

accounting applied.

Hedge accounting can be applied if:

• The hedge is in line with the Group’s risk management

strategy.

• The hedge relationship is formally documented at the

inception of the hedge.

• It is expected that the hedge relationship will be highly

effective throughout its life.

• The effectiveness of the hedge relationship can be

objectively measured.

• The hedge relationship is highly effective throughout the

accounting period.

If the derivative hedges the exposure to changes in the fair

value of assets and liabilities or commitments, the hedged

item attributable to the risk being hedged is also carried

at fair value. Gains (losses) from revaluing the interest

bearing hedged item and hedging derivative are recorded

in the profi t and loss account in “Interest income and similar

income” and “Interest expense and similar expense”.

The fair value of fi nancial derivatives is determined as

the present value of expected cash fl ows from these

transactions, using valuation models generally accepted

on the market. The parameters used in these models are

ascertained on the active market, such as foreign exchange

rates, yield curves, volatility of fi nancial instruments, etc.

All of derivatives (both trading and hedging) are contracted

in the OTC (over-the-counter) market.

(j) Taxation

Tax non-deductible expenses are added to and non-taxable

income is deducted from the profi t for the period in order to

arrive at the taxable income, which is further adjusted by tax

allowances and relevant credits.

Deferred tax is provided on all temporary differences

between the carrying amounts of assets and liabilities for

fi nancial reporting purposes and the amounts used for

taxation purposes multiplied by the enacted income tax

rate for the period when the timing difference is expected to

reverse. A deferred tax asset is recognized only to the extent

that there are no doubts that there will be future taxable

profi ts available against which this asset can be utilized.

(k) Financial Leasing

Assets acquired under fi nancial leases are recorded

in “Tangible fi xed assets” when the legal ownership is

transferred to the Bank. Lease payments are recorded in

“Other operating expenses”.

GE Money Bank Consolidated Annual Report 2010 Notes to the Consolidated Financial Statements 6564

67

13. RECEIVABLES FROM BANKS

(a) Classifi cation of Receivables from Banks

CZK 000 31. 12. 2010 1. 1. 2010

Standard 15,673,325 17,732,635

Net receivables from banks 15,673,325 17,732,635

(b) Analysis of Receivables from Banks by Type of

Security Received

CZK 000 31. 12. 2010 1. 1. 2010

Security held by the Bank 2,400,290 8,135,274

Guarantee from parent

company 11,975,012 7,777,330

Unsecured 1,298,023 1,820,031

Total 15,673,325 17,732,635

In 2010, the Bank held state zero-coupon bonds under

resale commitments with a market value of CZK 2,350,258

thousand (1.1.2010: CZK 7,982,049 thousand), which are

reported in the off balance sheet in “Collaterals and pledges

received”.

In 2010, the Bank provided a collateralized loan to an affi liate

entity, for which it obtained a guarantee from the ultimate

parent company of CZK 11,965,671 thousand (1.1.2010: CZK

7,794,769). The guarantee is reported in the off balance sheet

in “Commitments and guarantees”.

(c) Analysis of Receivables from Customers by Sector and Type of Security Received

66

9. ADMINISTRATIVE EXPENSES (CONTINUED)

The average number of the Group’s employees during the

period was as follows:

2010

Employees 3,396

Members of the Bank’s Board of Directors 6

Members of the Bank’s Supervisory Board 3

Other executives 7

10. INCOME AND EXPENSES RESULTING FROM PARTICIPATION INTERESTS WITH SUBSTANTIAL INFLUENCE

CZK 000 2010

Fee and commission expenses (20,040)

Dividends 614

Total (19,426)

12. INCOME AND EXPENSE ACCORDING TO SEGMENTS

a) Business Segments

b) Geographical Segments

11. TRANSACTIONS WITH RELATED PARTIES

CZK 000 31. 12. 2010 1. 1. 2010

Receivable 11,986,453 8,972,641

Payable 927,830 678,468

Receivables from related parties contain mainly the loan

granted to another GE entity within Central and Eastern

Europe totalling CZK 11,975,012 thousand (1.1.2010: CZK

7,777,151). Refer to Note 13 (b).

CZK 000 2010

Income 326,926

Expense 602,832

CZK 000 Personal banking and fi nance Corporate banking Total

2010 2010 2010

Interest income 9,672,107 2,246,370 11,918,477

Interest expense (1,211,709) (284,466) (1,496,175)

Fee and commission income 3,108,440 1,072,796 4,181,236

Fee and commission expense (623,314) (54,836) (678,150)

Gains or losses from fi nancial operations 21,871 53,473 75,344

CZK 000 Czech Republic European Union Other Total

2010 2010 2010 2010

Interest income 11,825,083 62,996 30,398 11,918,477

Interest expense (1,479,588) (12,246) (4,341) (1,496,175)

Fee and commission income 4,148,094 17,162 15,980 4,181,236

Fee and commission expense (671,842) (4,166) (2,142) (678,150)

Gains or losses from fi nancial operations 72,608 1,382 1,354 75,344

14. RECEIVABLES FROM CUSTOMERS

(a) Classifi cation of Receivables from Customers

CZK 000 31. 12. 2010 1. 1. 2010

Standard 94,095,043 98,283,474

Watched 3,739,671 6,265,401

Sub-standard 3,470,027 1,917,003

Doubtful 2,871,575 2,956,302

Loss 14,659,687 10,646,855

Adjustment to potential

losses from receivables (15,756,396) (13,939,165)

Net receivables from

customers 103,079,607 106,129,870

During 2010 the Bank restructured receivables from

customers totaling CZK 1,484,722 thousand (1.1.2010: CZK

482,510 thousand).

(b) Analysis of Receivables from Customers by Sector

CZK 000 31. 12. 2010 1. 1. 2010

Financial institutions 105,210 106,039

Non-fi nancial institutions 21,990,907 21,576,479

Government sector 116,315 89,608

Non-profi t organizations 3,920 103,206

Entrepreneurs 7,441,517 7,192,468

Resident individuals 89,162,337 90,992,210

Non-residents 15,797 9,025

Total 118,836,003 120,069,035

The analysis of receivables by sector does not refl ect

adjustments.

As at 31. 12. 2010

CZK 000 Personal Bank Performance Bill of Held by

guarantee guarantee Mortgage guarantee exchange the Bank Unsecured Total

Financial institutions 0 0 14,913 0 0 0 90,297 105,210

Non-fi nancial institutions 0 629,260 11,495,847 52,806 1,378 75,330 9,736,286 21,990,907

Government sector 0 0 28,122 0 0 43,300 44,893 116,315

Non-profi t organizations 0 0 0 0 0 0 3,920 3,920

Entrepreneurs 0 82,352 4,216,202 3,760 0 6,657 3,132,546 7,441,517

Resident individuals 588 0 21,348,258 587,167 0 0 67,226,324 89,162,337

Non-resident individuals 0 0 0 0 0 0 15,797 15,797

Total 588 711,612 37,103,342 643,733 1,378 125,287 80,250,063 118,836,003

GE Money Bank Consolidated Annual Report 2010 Notes to the Consolidated Financial Statements

69

15. STATE ZERO-COUPON BONDS AND OTHER SECURITIES ELIGIBLE FOR REFINANCING WITH THE CENTRAL BANK, DEBT SECURITIES ISSUED BY OTHER ENTITIES (CONTINUED)

(b) Classifi cation of State Zero-coupon Bonds and Other

Securities Eligible for Refi nancing with the ČNB into

Individual Portfolios based on the Group’s Intention

CZK 000 31. 12. 2010 1. 1. 2010

State zero-coupon bonds

and other securities

available-for-sale 11,092,667 12,466,458

Net book value 11,092,667 12,466,458

(c) Net Book Value of Bonds issued by Other Institutions

CZK 000 31. 12. 2010 1. 1. 2010

Eurobonds available for sale 751,349 0

Net book value 751,349 0

17. PARTICIPATION INTERESTS WITH SUBSTANTIAL INFLUENCE

68

The analysis of receivables by sector and type of security

received does not refl ect adjustments.

(d) Analysis of Receivables from Customers

by Geographical Areas

CZK 000 31. 12. 2010 1. 1. 2010

Czech Republic 118,818,909 120,059,205

Slovakia 6,872 6,966

Other 10,222 2,864

Total 118,836,003 120,069,035

The analysis of receivables by geographical areas does not

refl ect adjustments.

(e) Net Receivables from Customers Written-off

and Recovered

CZK 000 31. 12. 2010

Write-offs

Non-fi nancial institutions 238,843

Entrepreneurs 17,382

Resident individuals 1,699,488

Total 1,955,713

Recoveries


Entrepreneurs 2,233

Resident individuals 108,751

Total 112,664

(f) Receivables from Persons with a Special Relationship

to the Group

Board of Supervisory

CZK 000 Directors Executives Board

At 1. 1. 2010 0 5,890 23

At 31. 12. 2010 0 0 0

The loans mentioned above were provided under standard

employee conditions.

15. STATE ZERO-COUPON BONDS AND OTHER SECURITIES ELIGIBLE FOR REFINANCING WITH THE CENTRAL BANK, DEBT SECURITIES ISSUED BY OTHER ENTITIES

(a) Net Book Value of State Zero-coupon Bonds and Other

Securities Eligible for Refi nancing with the ČNB

CZK 000 31. 12. 2010 1. 1. 2010

State treasury bills 7,065,442 8,470,358

State bonds 4,027,225 3,996,100

Net book value 11,092,667 12,466,458

As at 1. 1. 2010




Non-fi nancial institutions 1,200 330,657 11,195,432 108,371 214,460 102,094 9,624,265 21,576,479


Non-profi t organizations 0 0 60,775 0 0 0 42,431 103,206

Entrepreneurs 0 36,653 3,783,522 8,360 0 9,561 3,354,372 7,192,468

Resident individuals 599 7,636 23,266,190 727,352 0 0 66,990,433 90,992,210

Non-resident individuals 0 0 6,830 0 0 0 2,195 9,025

Total 1,799 374,946 38,353,861 844,083 214,460 134,083 80,145,803 120,069,035

14. RECEIVABLES FROM CUSTOMERS(CONTINUED)

(c) Analysis of Receivables from Customers by Sector

and Type of Security Received (continued)

16. SHARES, UNITS AND OTHER INVESTMENTS

(a) Classifi cation of Shares, Units and Other Investments

into Individual Portfolios based on the Group’s Intention

CZK 000 31. 12. 2010 1. 1. 2010

Shares, units and other

investments available for sale 47,015 43,597

Net book value 47,015 43,597

(b) Analysis of Shares, Units and Other

Investments Available for Sale

CZK 000 31. 12. 2010 1. 1. 2010

Market value Market value

Issued by fi nancial

institutions

- Unlisted 28,486 37,026

Issued by non-fi nancial

institutions

- Listed elsewhere 4,887 5,949

- Unlisted 13,642 622

Total 47,015 43,597

CZK 000 Other

Registered Business Registered categories Share Share of Book

Name offi ce activity capital of equity in equity voting rights value

As at 31. 12. 2010

CBCB – Czech Banking Prague 4, Na Vítězné Service databank, 1,200 3,308 20% 20% 240

Credit Bureau, a.s. pláni č.p.1719, č.o.4, SW, HW

PSC 140 00 and network

As at 1. 1. 2010

CBCB - Czech Banking Prague 4, Na Vítězné Service databank, 1,200 3,165 20% 20% 240

Credit Bureau, a.s. pláni č. p. 1719, č. o. 4 SW, HW



71

20. TANGIBLE FIXED ASSETS

(a) Movements in Tangible Fixed Assets

(b) Tangible Fixed Assets held under Finance Leases

The Group is not committed to any payments under fi nance

leases for fi xed assets in 2010.

21. OTHER ASSETS

CZK 000 31. 12. 2010 1. 1. 2010

Other debtors 308,047 347,836

Other cash values 1,400,375 1,425,271

Receivable to state bodies 5,037 76,682

Clearing account

for payments 0 14,376

Other 18,097 552

Positive fair value

of derivatives 1,640 2,749

Accruals 238,027 239,140

Deferred tax assets 1,431,490 940,625

Inventory 9,156 21,579

Less: Adjustments (94,073) (170,218)

Total 3,317,796 2,898,592

The item Other cash values includes cash in transit.

22. DUE TO BANKS

Analysis by Residual Maturity

CZK 000 31. 12. 2010 1. 1. 2010

Repayable on demand 198,437 131,634

Up to 3 months 98,282 540,770

Total 296,719 672,404

70

The fi nancial statements of the above un-consolidated

entities were not audited both as at 31 December 2009

and 2010. During 2009 RCE released an adjustment to

AgroConsult Bohemia s.r.o. of CZK 5,923 thousand.

19. INTANGIBLE FIXED ASSETS

(a) Movements in Intangible Fixed Assets

CZK 000 Group’s Business Value of Profi t Book Adjustments Valuation

share activity the share for 2010 value to fi nance as at

in equity as assets 31. 12. 2010

at 31. 12. 2010

As at 31. 12. 2010

Inkasní a exekuční servis s.r.o. 100% Debt 18,236 9,234 200 0 200

Vyskočilova 1422/1a, recovery

140 28 Prague 4 services

AgroConsult Bohemia s.r.o. 100% Technical 7,394 1,049 12,375 0 12,375

Rudolfovská tř. 207/84, advisory

370 01 České Budějovice in agriculture

and woodcraft

industry

As at 31. 12. 2010 12,575 0 12,575

As at 1.1.2010

Inkasní a exekuční servis s.r.o. 100% Debt 9,071 6,690 200 0 200

Vyskočilova 1422/1a, 140 28 Prague 4 recovery

services

AgroConsult Bohemia s.r.o. 100% Technical 6,440 1,649 12,375 5,923 6,452

Rudolfovská tř. 207/84, advisory

370 01 České Budějovice in agriculture

and woodcraft

industry

As at 1. 1. 2010 12,575 5,923 6,652

18. PARTICIPATION INTERESTS WITH CONTROLLING INFLUENCE

CZK 000 Software and other Establishment

intangible fi xed assets costs Assets not yet in use Total

As at 1.1.2010 2,957,427 2,092 161,072 3,120,591

Additions 158,411 0 209,581 367,992

Disposals (3,392) 0 (24,574) (27,966)

As at 31.12.2010 3,112,446 2,092 346,079 3,460,617

Amortization and adjustments

As at 1.1.2010 (1,947,264) (2,092) 0 (1,949,356)

Charge for the period (350,213) 0 0 (350,213)

Disposals 2,674 0 0 2,674

As at 31.12.2010 (2,294,803) (2,092) 0 (2,296,895)

Net book value

As at 31.12.2010 817,643 0 346,079 1,163,722

Other and

low value Land and Other

Furniture tangible buildings Fixed Adjustments

Land and and fi xed Leased not yet Assets not – valuation

CZK 000 Buildings Fittings Equipment assets Assets in use yet in use difference Total

Cost

As at 1. 1. 2010 689,961 65,669 1,848,752 2,557 4,158,329 16,140 0 (244,511) 6,536,897

Additions 65,121 3,379 92,204 0 98,815 14,389 73,057 0 346,965

Disposals (3,869) (3,119) (159,817) (2,489) (1,924,765) (4,270) (10,238) 244,511 (1,864,056)

Transfers 0 0 30,957 0 (30,957) (11,548) 11,548 0 0

As at 31. 12. 2010 751,213 65,929 1,812,096 68 2,301,422 14,711 74,367 0 5,019,806

Amortization and Adjustments

As at 1. 1. 2010 (323,222) (30,697) (1,395,606) (773) (2,480,252) 0 0 244,511 (3,986,039)

Charge for the period (60,299) (5,383) (170,425) (54) (770,785) 0 0 0 (1,006,946)

Change adjustments 0 0 17,949 0 0 0 0 0 17,949

Disposals 2,413 3,504 102,664 827 1,847,713 0 0 (244,511) 1,712,610

As at 31. 12. 2010 (381,108) (32,576) (1,445,418) 0 (1,403,324) 0 0 0 (3,262,426)

Net book value

As at 31. 12. 2010 370,105 33,353 366,678 68 898,098 14,711 74,367 0 1,757,380


73

25. REGISTERED CAPITAL

In order to establish the Bank, GE Capital International

Holdings Corporation subscribed 500 shares of original

capital with the nominal value of CZK 1,000,000 per share

and paid CZK 2,000 million for such shares.

In 1998 the Bank issued 10 ordinary shares with the nominal

value of CZK 1,000,000 each. Each share was issued at

a premium of CZK 1,970,750 thousand and was paid in

full. The increase in registered capital was recorded in the

Commercial Register on 25 March 2003. As of 25 March 2003

the registered capital of GEMB was CZK 510 million.

In 2010 the Bank did not issue any ordinary shares.

The shareholders of the Bank as at 31 December 2010

include:

Name Seat Number Ownership %

GE Capital Wilmington, 1209 510 100

International Orange Street,

Holdings Corporation Delaware, USA

No person with a special relationship to the Bank held any

of the Bank’s shares as at 31 December 2010.

26. PROVISIONS AND ADJUSTMENTS FOR POSSIBLE CREDIT LOSSES

(a) Provisions for Guarantee Losses

CZK 000 31. 12. 2010

Balance as at 1. 1. 2010 5,951

Creation during the current year 0

Use during the current year 0

Release of provisions

no longer considered necessary (5,951)

Balance of provisions as at 31. 12. 2010 0

(b) Provisions for Litigations

CZK 000 31. 12. 2010

Balance as at 1. 1. 2010 820,000

Creation during the current year 63,316

Use during the current year (417,174)

Balance of provisions as at 31. 12. 2010 466,142

Included in the total provison is a provision of CZK 800

million created in 2007 for an anticipated settlement in the

Agrobanka Praha, a.s. v likvidaci case. In the current period,

part of this provision was used to satisfy the conditions

of the settlement concluded in 2010 (refer to Note 33). The

balance as at 31 December 2010 in the amount of CZK 422

million will be used to complete the settlement.

(c) Provisions for Leased Assets

CZK 000 31. 12. 2010

Balance as at 1.1.2010 18,966




(d) Adjustments to Customer Receivables

CZK 000 31. 12. 2010

Balance as at 1. 1. 2010 13,939,165

FX rate differences (197)

Creation during the current year 4,765,096

Use during the current year (1,431,642)

Write-off of loans and advances (81,254)

Cover of losses from loans sold (1,350,388)

Release of adjustments

no longer considered necessary (2,208,444)

Creation and use of adjustments

within consolidated entities 692,418

Balance of adjustments

as at 31. 12. 2010 15,756,396

(e) Adjustments to Operational Receivables

CZK 000 31. 12. 2010

Balance as at 1.1.2010 170,218


Use during the current year (399)



Creation and use of adjustments

within consolidated entities (61,320)

Balance of adjustments as at 31. 12. 2010 94,073

72

23. DUE TO CUSTOMERS

(a) Analysis by Sector

(b) Due to Persons with a Special Relationship to the

Group



As at 1.1.2010 3,248 18,261 4,399

Additions 5,724 0 3,968

Disposals 0 (13,840) 0

As at 31. 12. 2010 8,972 4,421 8,367

(c) Due to Participation Interest with Substantial

Infl uence

The Group had no amounts due to participation interest with

substantial infl uence as at 31 December 2010.

24. OTHER LIABILITIES

CZK 000 31. 12. 2010 1. 1. 2010

Trade payables 706,288 852,433

Payables from deposit insurance 41,783 90,252

Payables to state bodies 47,754 170,397

Payables from social

and health insurance 55,166 53,397

Accruals 867,245 471,226

Negative fair value of derivatives 337,285 477,450

Clearing technical account 636,367 1,609

Other 450,165 367,333

Total 3,142,053 2,484,097

The item “Other” includes mainly CZK 327 million obtained

from GE Capital International Holdings Corporation. GE

Capital International Holdings Corporation intends to use

this amount to increase the Bank’s registered capital.

The increase in the clearing technical account balance as

at 31 December 2010 refl ects the changes in the Bank’s

internal process of clearing with the Czech National Bank.

CZK 000 Repayable on Savings with Term deposits

demand notice with fi xed maturity Other Total

At 31. 12. 2010

Financial institutions 946,744 0 622 3,732 951,098

Non-fi nancial institutions 19,215,020 0 1,791,321 10,336 21,016,677

Insurance institutions 131,571 0 431,182 0 562,753

Government sector 4,297,828 0 676,566 130 4,974,524

Non-profi t organizations 962,548 0 138,734 0 1,101,282

Entrepreneurs 7,641,328 0 250,836 0 7,892,164

Resident individuals 58,285,161 758,921 10,896,586 557,259 70,497,927

Non-residents 2,897,290 3,423 242,954 37,217 3,180,884

Total 94,377,490 762,344 14,428,801 608,674 110,177,309



At 1. 1. 2010

Financial institutions 1,507,036 0 80 5,920 1,513,036



Government sector 4,083,740 0 2,192,786 25 6,276,551

Non-profi t organizations 1,255,719 0 251,717 0 1,507,436

Entrepreneurs 7,133,699 0 435,563 0 7,569,262


Non-residents 694,581 4,418 302,103 29,621 1,030,723

Total 82,626,831 993,688 24,076,916 917,706 108,615,141


75

30. OFF-BALANCE SHEET (CONTINUED)

(b) Guarantees Issued in favour of Persons with a Special

Relationship to the Group

The Group did not issue any guarantees in favour of persons

with a special relationship to the Group as at 31 December

2010.

(d) Off-balance Sheet Financial Instruments

Total net fair value of trading instruments of CZK (20,547)

thousand (1.1.2010: CZK (106,000) thousand) corresponds to

the difference of receivables from fi xed term transactions of

CZK 2,546,318 thousand (1.1.2010: CZK 10,732,696 thousand)

and liabilities from fi xed term transactions in the amount of

CZK 2,566,865 thousand (1.1.2010: CZK 10,838,696 thousand).

All the above transactions were concluded on the interbank

market (over-the-counter).

CZK 000 Contractual amounts Fair value

31. 12. 2010 1. 1. 2010 31. 12. 2010 1. 1. 2010

Hedging instruments

Interest rate swap contracts 11,640,630 7,394,040 (315,098) (368,701)

Total 11,640,630 7,394,040 (315,098) (368,701)

Trading instruments

Forward foreign exchange contracts (7,079) 25

Forward Purchase 946,427 96,801

Forward Sale (953,640) (96,776)


Total (20,547) (106,000)

CZK 000 Up to 3 months 3 months to 1 year 1 year to 5 years Total

At 31. 12. 2010

Hedging instruments

Interest rate swap contracts 0 8,459,030 3,181,600 11,640,630

Trading instruments

Forward foreign exchange purchase contracts 809,410 137,017 0 946,427

Forward foreign exchange sale contracts (816,795) (136,845) 0 (953,640)

Interest rate swap contracts 0 0 1,601,000 1,601,000

At 1. 1. 2010

Hedging instruments

Interest rate swap contracts 0 7,394,040 0 7,394,040

Trading instruments

Forward foreign exchange purchase contracts 96,801 0 0 96,801

Forward foreign exchange sale contracts (96,776) 0 0 (96,776)

Interest rate swap contracts 0 700,000 9,934,500 10,634,500

74

27. RETAINED EARNINGS, RESERVE FUNDS AND OTHER FUNDS ALLOCATED FROM PROFIT

The Bank proposes to allocate the 2010 profi t as follows:

28. VALUATION DIFFERENCES

CZK 000 Available for sale securities

Balance at 1. 1. 2010 50,861

Decrease 0

Increase 12,656

Balance at 31. 12. 2010 63,517

29. INCOME TAX AND DEFERRED TAX ASSET / LIABILITY

(a) Current Income Tax

CZK 000 2010

Current year profi t before tax 4,947,618

Current year profi t before tax

– infl uance of consolidation 1,082,000

Income not liable to tax (8,364,088)

Tax non-deductible expenses 9,631,645

Items increasing the tax base 33,404

Items decreasing tax base (83,598)

Subtotal 7,246,981

Income tax calculated using

a tax rate of 19% (1.1.2010: 20%) 1,376,926

Tax discount and offsets used (357)

Own tax base 5

Tax calculated using a tax rate of 15% 1

Current income tax 1,376,570

Additional income tax relating to previous years (23,828)


(b) Deferred Tax Liability/Asset

Deferred income taxes are calculated on all temporary

differences using the tax rate in the year of the expected

reversal of the timing difference, i.e. 19% for 2010 onwards.

Deferred income tax assets and liabilities are attributable to

the following items:

CZK 000 31. 12. 2010 1. 1. 2010

Deferred tax assets 1,711,757 1,155,666

Credit provisions 1,631,646 988,495

Tax loss carry-forward 0 15,171

Other reserves 80,111 152,000

Deferred tax liability (280,267) (215,041)

Penalty interests (145,389) (23,040)

Tangible and intangible

fi xed assets (117,014) (111,874)

Revaluation of available for

sale fi nancial assets (14,899) (11,930)

Discounted loans receivable (2,965) (68,197)

Net deferred tax

asset/(liability) 1,431,490 940,625

(c) Income Tax Expense

CZK 000 2010

Deferred income tax 493,833

Income tax due (1,352,742)

Income tax expense (858,909)

30. OFF-BALANCE SHEET

(a) Irrevocable Contingent Liabilities arising from

Acceptances and Endorsements, Other Written

Contingent Liabilities and Assets Pledged as Collateral

CZK 000 31. 12. 2010 1. 1. 2010

Customers

Notes acceptances

and endorsements 12,843,425 13,490,081

Payables resulting

from guarantees 8,348 10,556

Letters of credit

and fi nancial guarantees 656,458 501,675

Total 13,508,231 14,002,312

CZK 000 Profi t Retained earnings Statutory reserve fund

Balance at 31. 12. 2010

before allocation of 2010 profi t 17,367,804 102,000

Profi t for 2010 3,217,511

Proposed allocation of 2010 profi t:

Transfer to retained earnings (3,217,511) 3,217,511

(c) Guarantees Issued in favour of Participation Interests

with Substantial Infl uence

The Group did not issue any guarantees in favour of

participation interests with substantial infl uence as at 31

December 2010.

The total net fair value of hedging instruments in the amount

of CZK (315,098) thousand (1. 1. 2010: CZK (368,701) thousand)

corresponds to the difference of receivables from fi xed term

transactions in the amount of CZK 11,703,367 thousand

(1.1.2010: CZK 7,471,527 thousand) and liabilities from fi xed

term transactions in the amount of CZK 12,018,465 thousand

(1.1.2010: CZK 7,840,228 thousand).

(e) Residual Maturity of Financial Derivatives


77

31. FINANCIAL INSTRUMENTS – MARKET, CREDIT AND OPERATIONAL RISK (CONTINUED)

(A.) Risk Management Organizational Structure (continued)

(A.c.) Enterprise Risk Management

The Enterprise Risk Management Department (ERM) is

a part of the Risk Division; the head of the ERM Department

is approved by the Bank’s Board of Directors. The ERM

Department is responsible for the key parts of credit, market,

operational, and liquidity risk management, in particular in

the area of methodology, monitoring and measurement.

The ERM Department performs, among other things, the

following tasks, both on an enterprise basis and at the level

of the consolidated Group:

• Coordinates all activities of credit, market, operational,

and liquidity risk management with the aim to ensure

GEMB risks are managed reliably and effi ciently;

• Coordinates the effort to maintain a stable asset and

liability structure and the value of capital;

• Supervises all rating and scoring models and processes

(including methodology development, development or

selection, implementation and validation of models, and

regular reviews and back testing);

• Develops and maintains the methodology of operational

risk management, including identifi cation and

classifi cation models and key risk indicators;

• Implements and maintains the processes and

infrastructure for recording and analyzing operational

risk data;

• Maintains and develops the methodology of calculating

and allocating regulatory and economic capital; and

• Prepares risk reports for the ALCO, CRCO and GCC.

(B.) Level of Risks Accepted

The Bank’s business activities are primarily directed at

providing deposit, transaction and credit services for retail

clients, natural persons acting as entrepreneurs, and small

and medium-sized enterprises. The Bank’s strategy is to

avoid all risks that are not associated with its main line of

business and to minimize all other risks. The Bank:

• Does not trade in equity or debt securities, currencies,

or commodities for the purpose of achieving speculative

profi ts;

• Uses fi nancial derivatives exclusively for risk management

purposes;

• Carries out operations on the money market exclusively

for liquidity management purposes;

• In the case of operations on money markets requires its

counterparties to have at least an A-1 (Standard & Poor’s)

/ P-1 (Moody’s) rating; and

• Minimizes potential losses from operational risk via

economically effi cient remedial measures.

The aforementioned principles are applied in the framework

of the consolidated Group as well.

(C.) Credit Risk

Credit risk is the risk of loss for the Bank resulting from the

failure of a counterparty to meet its obligations arising from

the terms and conditions of the contract under which the

Bank became the creditor of this counterparty.

The Bank/the Group is exposed to credit risk in particular in

the case of credits granted, non-approved current account

debits, guarantees provided, letters of credit issued, and

interbank deals.

(C.a.) Categorization of Receivables

The Bank assigns receivables into individual categories in

compliance with CNB Decree No. 123/2007 Coll. of 15 May

2007, which stipulates prudential rules for banks, credit

unions and investment fi rms. The categorization is as

follows:

Receivables Without Debtor Default

The Bank assigns receivables without debtor default to the

following sub-categories:

a) Standard Receivables

A receivable is regarded as “standard” if there is no reason

to doubt that it will be repaid in full. The Bank includes in this

category receivables where the principal and accessions

are being duly paid, with none of them being more than 30

days past due. None of the receivables from the debtor have

been restructured in the last 2 years due to the deterioration

in the debtor’s fi nancial situation. The Bank has suffi cient

information about the debtor's fi nancial situation and the

current value of the debtor's internal rating is better than 8.

76

31. FINANCIAL INSTRUMENTS – MARKET, CREDIT AND OPERATIONAL RISK

Risk Management

The aim of the Bank is to achieve within its business

activities competitive yields at an acceptable risk level.

Risk management covers control of risks associated with

all business activities in the environment in which the Bank

operates and ensures that the risks taken are in compliance

with the prudential limits.

The level of risk is measured in terms of its impact on the

value of assets and/or capital and the profi tability of the

Bank. In this respect, the Bank evaluates potential effects

of changes in political, economic, market and operational

conditions and changes of clients’ creditworthiness on its

business.

When managing risks, the Bank relies on the qualifi cations

and experience of its employees, the organizational

segregation of duties, and the use of sophisticated

analytical instruments and technologies. This combination

of a prudent approach, analytical skills and technologies,

together with adherence to procedural measures, support

the Bank’s success and the stability of its economic results.

The same objectives and principles are used in the

framework of the consolidated Group.

(A.) Risk Management Organizational Structure

(A.a.) Risk Management Committees

The Bank has three main risk management committees: the

Asset & Liability Committee (ALCO) for assets and liabilities

management, market risks and liquidity risk management

and the internal capital adequacy assessment process;

the Credit Committee (CRCO) for credit risk management

issues; the Governance & Control Committee (GCC) for

the management and control system and operational

risk management. The members of these committees

include members of the Board of Directors and other

senior managers of the Bank. The committees carry out in

particular the following, both on an enterprise basis and at

the level of the consolidated Group:

• Monitoring of the development of relevant risks,

including the observance of limits, approval of remedial

measures in the case of exceeded limits or unfavorable

development trends;

• Approval of the principles of risk management as well

as the basic methods, limits, scenario assumptions

and any other parameters used in the process of risk

management; and

• Monitoring of the adequacy, reliability and effi ciency of

risk management’s internal regulations, processes and

limits.

The Credit Monitoring and Management Committee (CMMC)

monitors and manages the credit risk of the commercial

credit portfolio. CMMC was established by the GEMB

Chief Risk Offi cer (CRO) and its members are experienced

managers of the Risk Division and the Commercial Banking

Division.

(A.b.) Risk Division

The Risk Division is responsible for risk management, both

on an enterprise basis and at the level of the consolidated

Group. The CRO is a member of the Board of Directors of the

Bank. Among other things, the Risk Division:

• Monitors, measures and reports credit, market,

operational and liquidity risks and proposes remedial


trends;

• Sets terms and conditions for granting credit;

• Ensures credit approvals;

• Administers the data infrastructure and analytical

systems supporting risk management;

• Ensures the development, implementation and

maintenance of reserve and capital allocation models;

• Monitors fraudulent operations and is involved in the

prevention and investigation of fraud; and

• Ensures the collection of receivables from individually

approved commercial loans, mortgages and

automatically approved commercial loans.

Supervisory Board

CEO

CRO

Consumer Risk

Commercial Risk

Enterprise RiskManagement

Credit Risk

Market Risk

Liquidity Risk

Asset & Liability

Operational Risk

Capital Allocation

Board of Directors

Credit Committee(Credit Risk)

Asset & Liability Committee(Asset & Liability, Market Risk, Liquidity, Capital Allocation)

Governance & Control Committee

(Corporate Govemance, Compliance, Internal Audit,

Operational Risk)

PMT(portfolio monitoring)


79


(C.) Credit Risk (continued)

(C.b.) Collateral Assessment (continued)

To determine the realizable value of collateral, the Bank uses

external expert appraisals or internal assessments made by

the Collateral Management Department of the Risk Division,

a department operating independently of the Bank’s

business units. The ultimate realizable value of collateral is

then set by applying the correction coeffi cient refl ecting the

Bank’s ability to realize the collateral in case of need. The

Bank has its own rules and methodology for the collateral

assessment and regularly reviews the values of correction

coeffi cients, which are approved by the CRCO.

The principles above are applied in a consistent manner

within the whole Group.

(C.c.) Adjustment Calculation

Adjustments are calculated according to Decree of the Czech

National Bank No. 123/2007 Coll. (hereinafter “Decree”),

applying coeffi cient and statistical methods.

As a result of the merger statistical methods have been

consistently applied for all un-secured products of the

GEM Group since 2010. This change in the estimate had no

material impact on the adjustments reported.

The methods described below apply to the whole GEM

Group.

Coeffi cient Method:

Adjustments to individually approved small and medium-

sized enterprises’ loans, mortgage loans, secured

consolidations and inventory fi nancing, including secured

troubled debt restructuring, are calculated using the

coeffi cient method defi ned in the Decree. Coeffi cients are

applied to the gross book value of an individual receivable

reduced by the realizable value of collateral as follows:

• Watch 1%

• Sub-standard 20%

• Doubtful 50%

• Loss 100%

Statistical Method:

Adjustments for products where the coeffi cient method is

not applied (un-secured products) are based on statistical

models developed according to the Decree. Coverage levels

(ratio of statistical estimate of losses to the portfolio) derived

from models for a given product are applied to the gross

book value of the individual receivables.

Statistical models for standard receivables are based on

the incurred but not recognized loss principle, where the

probability of default (PD) and discounted recoveries are

applied. The PD is scaled to a loss identifi cation period of 6

months.

Statistical models for watch receivables and receivables

with debtor’s default are based on discounted life-time

recoveries capped at 48 months.

The average contractual interest rate for a particular

product line is used as the discount rate.

(C.d.) Credit Risk Management

The fi eld of credit risk management is divided into two main

domains.

Retail exposures include credit risk associated with

exposures to natural persons, natural persons acting as

entrepreneurs, and small- and medium-sized enterprises

(SME) that are granted credits on the basis of an automated

approval process (based on scoring models). For car

fi nancing products, the automated approval process is

supplemented with individual assessment.

Commercial exposures cover credit risk associated with

exposures to small and medium-sized enterprises (SME),

to which credits are provided on an individual basis, and

exposures to banks and institutions. Credit risk management

in the mortgage business has a specifi c position as

mortgages form part of the retail exposures, but a number

of the processes and methods used fall within the category

of commercial exposures.

(C.e.) Commercial Banking (SME Credits)

(C.e.1.) Internal Rating

The Bank uses an internal statistical model to estimate

the probability that its commercial clients will default. The

rating model assigns clients that are not in default to 9

rating classes (rated 0 to 8). Clients in default constitute the

tenth rating class. The prediction power of this rating tool

is reviewed annually and changes in the model, if any, are

approved by the CRCO.

78


(C) Credit Risk (continued)

(C.a.) Categorization of Receivables (continued)

b) Watch Receivables

A receivable is regarded as “watch” if, given the debtor’s

fi nancial and economical situation, it is likely to be repaid in

full. The Bank includes in this category receivables where the

principal or accessions are being paid with some problems,

but none of them are more than 90 days past due. None of

the receivables towards the debtor have been restructured

in the last 6 months owing to a deterioration in the debtor’s

fi nancial situation. In addition, receivables meeting at least 1

of the following conditions are also included in this category:

• The Bank does not have suffi cient information on the

debtor's fi nancial situation more than 30 days after the

date when this information was to be provided to the

Bank;

• The debtor had repayments of a mortgage loan deferred

more than 18 months and less than 3 years ago;

• The debtor had repayments of a consumer loan deferred

more than 12 months and less than 30 months ago; and

• Internal rating of the debtor is 8.

Receivables With Debtor Default

Receivables with debtor default are considered non-

performing receivables. The Bank assigns them to the

following subcategories:

a) Sub-standard Receivables

A receivable is regarded as “substandard” if, given the

debtor’s fi nancial and economical situation, its full

repayment is uncertain, although its partial settlement is

highly likely. The Bank involves in this category receivables

where the principal or accessions are being paid with

problems, but with none of them more than 180 days past

due. Receivables meeting at least one of the following

criteria are also considered sub-standard:

• A debtor’s receivable has been restructured owing to

a worsening fi nancial situation within the last 6 months;

• The debtor had its mortgage loan repayments deferred

less than 18 months ago;

• The debtor had its consumer loan repayments deferred

less than 12 months ago; and

• The debtor’s internal rating is 9.

b) Doubtful Receivables

A receivable is regarded as “doubtful” if, given the debtor’s

fi nancial and economical situation, its full repayment is

highly unlikely, although its partial settlement is possible and

likely. The Bank includes in this category receivables where

the principal or accessions are being paid with problems,

but with none of them being more than 360 days past due.

A receivable is also considered doubtful if a competent court

has issued a decision on settling the debtor’s bankruptcy via

a discharge from debts or reorganization.

c) Loss Receivables

A receivable is regarded as “loss” if, given the debtor’s


impossible. The expectation is that such receivable will

not be repaid or will only be repaid in part in a very small

amount. The Bank involves in this category receivables

where principal or accessions are more than 360 days past

due. A receivable from a debtor who is subject to bankruptcy

or settlement proceedings is also considered to be a loss

receivable.

The categorization in 2010 was carried out on a daily basis

and the evaluation concerns in particular the following:

• Debt service performance;

• Financial situation of the debtor;

• Meeting of the obligation regarding information with

respect to the Bank;

• Restructuring of the debt, if any; and

• Adjudication of bankruptcy or an authorization to

discharge, reorganize, or settle the debtor’s property.

Receivables within the Group are categorized according to

the same principles.

(C.b.) Collateral Assessment

The Bank requires collateral covering credit receivables

either by means of an individual assessment of the obligor

or as a standard part of the given credit product. The Bank

considers the following types of collateral to be acceptable

to decrease the gross credit exposure for the purpose of

calculating the adjustment:

• Cash;

• Securities;

• Reliable receivables;

• Bank guarantees;

• Guarantee of a reliable third party;

• Real estate properties; and

• Movable assets (machinery, equipment, breeding stock).


81



(C.f.4.) Credit Risk Measurement Models (continued)


The coverage coeffi cient for standard receivables is based

on the gross coverage and the discounted recovery

percentage. The probability of default (PD) is scaled to the

loss identifi cation period set at 6 months

b) Watch Receivables and Receivables

with Debtor Default

The percentage of receivables for each particular category

that are not repaid in a given period are identifi ed.

Repayments of receivables are monitored over the product

life time of 48 months. The repayment percentage identifi ed

hereby is discounted using the average interest rate for the

given portfolio and is applied as a coverage coeffi cient to

the particular category of receivables.

• Models for Unsecured Revolving Loans




percentage. The PD is scaled to the loss identifi cation period

set at 6 months.

b) Watch Receivables and Receivables

with Debtor Default

The migration among delinquency categories over the period

of 48 months is monitored. The percentage of accounts that

moved to the doubtful or loss categories during the period

is calculated.

For loans whose full repayment was enforced at the

beginning of the period, the gradual pattern of repayment

of receivables is refl ected in the model. For these loans, the

coverage calculated shows what part of the accounts is

recovered during 48 months. This percentage is discounted

by the average interest rate applicable to the given portfolio.

The outputs of the statistical models are reviewed annually

using the data as at 30 September. In the event of a signifi cant

change in the macroeconomic environment, the review is

performed more frequently. The CRCO approves any update

of the coverages.

(C.f.5.) Collection

The Collections unit of the Operations Division is in charge

of the initial phase of collection. If no solution is found

within 60 days after the due date, receivables from the

automatically approved commercial credits and mortgages

are transferred to the administration of the Remedial &

Collection department of the Risk Division. Other receivables

are collected by the Collections unit of the Operations

Division with the aim of achieving maximum recovery. The

Group uses external agencies and/or sales of receivables in

the collection process as well.

(C.g.) Financial Market Operation Exposures

The main tool for measuring the credit risk of countries and

counterparties (institutions) with respect to transactions

in fi nancial markets is the rating of international rating

agencies: Standard & Poor’s, Moody’s, and Fitch. The Group

sets individual limits for individual countries and institutions,

for which it requires a minimum short-term rating of A-1 /

P-1 / F1.

(C.h.) Credit Risk Capital Requirement

The Bank uses the standardized approach (STA) in the credit

risk capital requirement calculation both on an enterprise

basis and at the level of the consolidated Group.

(D.) Risk of Concentration

The risk of concentration means the risk arising from the

concentration of exposures with respect to (one) person,

an economically related group of persons, sector, region,

activity, or commodity.

The Group manages the risk of concentration through

limits applicable to countries, counterparties and economic

sectors.

(E.) Interest Rate Risk

Interest rate risk is the risk of a loss arising from changes of

interest rates on fi nancial markets.

The Group is exposed to interest rate risk as interest bearing

assets and liabilities have different maturity periods or

interest rate change/adjustment periods, as well as different

volumes in these periods.

The Group strives to minimize interest rate risk. Its activities

in the area of interest rate risk management are aimed at

reducing the risk of losses.

80




(C.e.2.) Approval Process

The SME credit approval process is based on individual

evaluation and each exposure has to be approved by

two persons with appropriate approval authorities. Apart

from some selected products permitting the granting of

credits by 2 commercial bankers from the Commercial

Banking Division, all other credits have to be approved

by an authorized employee of the Commercial Banking

Division and by an authorized employee of the Risk Division.

Approval authorities are set on an individual basis and are

determined by combining the level of exposure, the debtor’s

internal rating, maturity, product and collateral.

Within the frame of the approval process, the Bank analyzes

in particular the fi nancial situation of the debtor and the

persons economically related to the debtor, evaluates

collateral, and uses external data sources including credit

registers.

The Bank has implemented its own IT solution supporting

the process of SME credit approval and administration

facilitating the preparation of credit applications, the linking

thereof with data warehouses, document storage and the

subsequent production of contract documentation. The

system enables access to fi nancial analysis tools including

internal ratings.

(C.e.3.) Monitoring

All SME clients are monitored both individually and on the

portfolio basis. Individual monitoring and any potential

remedial measures are dealt with by the CMMC, which

also decides on categorization changes in cases when the

change does not clearly follow from the categorization rules.

Reports on the quality of the SME portfolio are discussed by

the CRCO each month and, if necessary or required by CRCO,

the CRCO also deals with individual credit exposures.

(C.e.4.) Claiming of Debtors’ Receivables

In order to achieve maximum recovery, the Remedial &

Collection Department of the Risk Division administers

receivables whose recoverability is endangered. This

department deals with debtors and discusses possible

solutions, including receivable restructuring; takes relevant

legal steps to realize collateral in order to collect receivables

in legal proceedings or to sell receivables; and represents

the Bank in creditors’ committees in the event a debtor

declares bankruptcy.

(C.f.) Retail Banking

(C.f.1.) Scoring Instruments

When approving retail exposures, internal scorings are

used. These statistical models classify individual clients

into categories of homogeneous exposures using socio-

demographic and behavioural data. The development of

these scoring models and approval strategies is carried

out by the PMT Department of the Risk Division. In order to

ensure methodological and factual accuracy, ERM checks

them and regularly monitors the predictive power of

individual models. The outcomes are regularly discussed by

the CRCO.

(C.f.2.) Approval Process

The approval process in the retail exposures segment is (with

the exception of mortgages) based on the use of internally

developed scoring models and the access to external data

sources (in particular credit registers). Approval strategies

are set by the Risk Division.

Risk Division underwriters may approve individual exposures

that do not pass the automatic approval process. For car

fi nancing products approval process is automated and


Mortgages are approved individually by the Risk Division

underwriters on the basis of individually set approval

authorities.

(C.f.3.) Monitoring

The Risk Division regularly monitors individual retail

portfolios, and monthly reports on the quality of retail

portfolios are presented to the CRCO.

(C.f.4.) Credit Risk Measurement Models

The models refl ect the historical performance of the

portfolios by product line. The average contractual rate is

used to discount the expected payments on a product-by-

product basis.

Given the different nature of individual products, the

Group applies the following approaches to the coverage

calculation:

• Models for Unsecured Closed-End Loans and Troubled

Debt Restructuring


83


(G.) Liquidity Risk (continued)

• Liquidity positions in individual time buckets;

• Ratio of highly liquid assets to expected outfl ows;

• Ratio of highly liquid assets to the total deposit base; and

• Volume of assets intended to cover the stress scenario.

For other currencies, the Bank uses limits for the ratio of

quickly liquid assets to liabilities.

The Bank has access to diversifi ed sources of fi nancing. The

fi nancing sources consist of savings and other deposits,

credits taken, as well as the Bank’s equity. To diversify and

stabilize liquidity sources and to deposit excess fi nancial

assets, the money market and bond market is used. The

Bank also has a fl exible credit line within the General Electric

Group, which, together with the diversifi cation of other

sources of fi nancing, signifi cantly increases the fl exibility of

source acquisition and reduces the dependency on partial

sources.

For the purpose of liquidity management under

extraordinary circumstances, the Bank has a contingency

plan containing measures for recovering liquidity.

The ERM regularly reviews the contingency plan and liquidity

management scenarios, which are based on the analysis of

historical data, and forwards them to the ALCO for approval.

As other members of the consolidated Group are fi nanced

by the Bank, liquidity management on a consolidated basis

is executed within the Bank's liquidity management via the

inclusion of credit exposures to the consolidated Group.

82


(E.) Interest Rate Risk (continued)

To monitor and measure interest rate risk, a model of

interest rate sensitivity is used, which serves to determine

the sensitivity of the Group to changes in market interest

rates. The model is based on the inclusion of interest-

sensitive assets and liabilities into relevant time bands.

The Bank prefers to use behavioral features of cash fl ows

rather than those that are purely contractual. All behavioral

assumptions are approved regularly by the ALCO. The model

works with 1-month time bands up to the 10 year period and

a time band exceeding 10 years.

To measure interest rate risk, the Group also applies the

historical method of calculating Value at Risk (VaR) for the

investment portfolio at the confi dence level of 99%. Taking

into account the stable structure of the investment portfolio

with respect to the interest rate risk, the Bank uses a 1-year

horizon for calculating VaR.

At 31. 12. Average for At 1. 1.

CZK 000 2010 2010 2010

VaR of interest rate instruments 361,596 378,294 367,779

Simultaneously, the Group carries out stress testing based

on the parallel shift of the yield curve by 200 basis points

for all currencies that account for more than 5% of the

Group’s assets. In 2010 the 5% share of the Group’s assets

was exceeded only by the portfolio denominated in Czech

Koruna.

Interest rate risk management uses the following limits:

• Ratio of assets to liabilities in each time band; and

• Impact of stress test on capital (Tier 1 and Tier 2).

To manage the discrepancy between the interest sensitivity

of assets and liabilities, interest rate derivatives are used in

most cases.

(F.) Foreign Exchange Risk

Foreign exchange risk is the risk of a loss owing to changes

in the market exchange rates of the individual foreign

currencies in the Group’s portfolio.

Assets and liabilities in foreign currencies, including off-

balance sheet exposures, represent the Group’s exposure to

foreign exchange risk.

To measure foreign exchange risk, the Bank uses, on a daily

basis, net currency positions and a VaR model based on

historical data.

The Bank strives to minimize foreign exchange risk. For

this purpose, the Bank maintains a balance of assets and

liabilities in foreign currencies and uses the following limits:

• Ratio of the absolute value of the net currency position

to capital for each foreign currency;

• Ratio of the absolute value of the net currency position

in Czech Koruna to capital;

• Ratio of the absolute value of the total currency position

to capital;

• Absolute value of the total currency position ;

• VaR (maximum expected loss per business day at the

99% confi dence level) for the foreign currency portfolio;

and

• Ratio of assets to liabilities for each foreign currency, if

a net currency position of a currency exceeds a given

limit.

The same methods of measurement, monitoring and control

of foreign exchange risk are also used on a consolidated

basis. The currency positions, however, arise only in the

Bank’s portfolio.


CZK 000 2010 2010 2010

VaR of currency instruments 48 52 21

(G.) Liquidity Risk

Liquidity risk is the risk of losing the ability to meet fi nancial

liabilities when due or losing the ability to fi nance assets.

The daily measurement of liquidity risk in main currencies

(share of the balance sheet total exceeding 5%) includes:

• Calculation of the liquidity position based on the liquidity

gap model, which measures net cash fl ows in set time

bands;

• Calculation of the expected outfl ow (99% quantile of the

distribution of a one-day outfl ow of cash from GEMB in

the given period); and

• Assessment of the impact of the liquidity management

stress scenarios on the Bank’s liquidity position.

To manage the liquidity risk for main currencies, the Bank

applies a system of the following limits:

Residual Maturity of the Group’s Assets and Liabilities

3 months 1 year Over 5 Without

CZK 000 Up to 3 months to 1 year to 5 years years specifi cation Total

At 31.12.2010

Cash and deposits with central banks 1,996,228 0 0 0 1,048,580 3,044,808

State debt securities 999,103 6,083,591 2,024,573 1,985,400 0 11,092,667

Receivables from banks 3,698,314 8,752,298 3,222,713 0 0 15,673,325

Receivables from customers 12,380,495 15,685,132 38,010,147 27,086,409 9,917,424 103,079,607

Debt securities 751,349 0 0 0 0 751,349

Shares, units 0 0 0 0 47,015 47,015

Participation interests

with substantial infl uence 0 0 0 0 240 240

Participation interests with

controlling infl uence 0 0 0 0 12,575 12,575

Other assets 1,439,949 8,119 0 0 4,790,830 6,238,898

Prepaid expenses and accrued income 0 0 0 0 115,975 115,975

Total 21,265,438 30,529,140 43,257,433 29,071,809 15,932,639 140,056,459

Due to banks and credit institutions 296,674 45 0 0 0 296,719

Due to customers 100,546,504 3,859,943 5,279,748 244,680 246,434 110,177,309

Other liabilities 2,027,071 1,005,814 33,321 0 26,489,199 29,555,405

Accrued expenses and deferred income 0 0 0 0 27,026 27,026

Total 102,870,249 4,865,802 5,313,069 244,680 26,762,659 140,056,459

Gap (81,604,811) 25,663,338 37,944,364 28,827,129 (10,830,020) 0

Cumulative Gap (81,604,811) (55,941,473) (17,997,109) 10,830,020 0 0

At 1. 1. 2010


Debt securities 4,992,625 3,499,887 2,051,946 1,922,000 0 12,466,458

Receivables from banks 9,979,728 7,752,907 0 0 0 17,732,635

Receivables from customers 16,325,208 16,308,116 37,695,891 35,664,854 135,801 106,129,870


(continued next page)

85


(H.) Operational Risk (continued)

(H.a.) Operational Risk Management (continued)

and applies the following methods:

• Mitigation of the risk by means of process improvements,

process changes, organization, introduction of limits and

checks, and use of technologies;

• Transfer of the risk via outsourcing or insurance; and

• Avoidance of the risk by terminating risk-inducing

activities.

The same methods of identifi cation, measurement,

monitoring and control of operational risk are also used on

a consolidated basis.

(H.b.) Calculation of Operational Risk Capital Requirement

The Bank used the alternative standardized approach (ASA)

to calculate the capital requirement for the operational risk

on an enterprise level in 2010.

The standardized approach (TSA) was used to calculate the

capital requirement for operational risk on a consolidated

basis for the rest of the consolidated Group.

32. NTERNAL CAPITAL ADEQUACY

(A.) Internal Capital Requirement

on the One-Year Horizon

Internal capital requirement represents the stock of capital,

which is needed to cover unexpected losses in the following

12 months on a chosen confi dence level.

Currently, GEMB uses a model called “ECAP”, which was

developed in 2008 to assess its internal capital requirement.

The ECAP model covers all regular risks that are identifi ed as

material for GEMB and for which GEMB decided to reserve

capital. The confi dence level used in the ECAP model is set

up to respect the General Electric Group target rating AAA.

Risks covered by the ECAP model are:

• Credit risk, including concentration risk;

• Interest rate risk in the banking book;

• Operational risk;

• Business risk: a risk that GEMB will miss its planned profi t

due to common volatility in business volumes.

In addition, a workshop with the senior management team

takes place at the end of each accounting period. During the

workshop, risks are identifi ed that may become material

in the following year. After identifying any risks, the ALCO

decides, based on expert judgment, whether the identifi ed

risks will be covered by an additional stock of capital, by

creating a specifi c reserve, or by adopting an action plan to

reduce the potential impact.

Capital sources for covering internal capital requirements

are identical to the regulatory capital.

The procedure is processed both on an enterprise basis and

at the level of the consolidated Group.

(B.) Three-Year Forward-Looking Capital Outlook

In addition to internal capital requirement assessment, once

a year GEMB designates a 3-year capital outlook, which

includes base case development expectations and at least

one scenario of stressed development. The capital outlook

includes an outlook of the regulatory capital requirement, an

outlook of the internal capital requirement and an outlook of

capital sources. Stressed cases are based on stress scenarios

that refl ect a signifi cant downgrade of risk factors that could

occur approximately once in 25 years. Stress scenarios are

developed in cooperation with the senior management

team and discussed at a separate workshop.

Currently, based on one base case and two stress scenarios,

the capital outlook shows that, measured by CAR (Capital

Adequacy Ratio), GEMB will have enough capital sources

to cover both regulatory and internal capital requirements

under both stressed cases. Calculations show that CAR

would not drop below 10% (target capital adequacy ratio),

even in the worst case scenario both on an enterprise basis

and at the level of the consolidated Group.

84

The increase in receivables from customers reported under

the “Without specifi cation” category was caused by the

change in the applicable Czech National Bank reporting

methodology (watch receivables and receivables with

debtor default are excluded from the assigment of residual

maturity) . If the same principles were applied to the data

as at 1 January 2010 the amount of CZK 8,819,210 thousand

would be added to the “Without specifi cation” category.

(H.) Operational Risk

Operational risk is defi ned as the risk of a loss owing to the

drawbacks or failure of internal processes, the human factor

or systems, or owing to external circumstances, including

the risk of loss owing to the breach of or non-compliance

with a legal or a regulatory standard or to endangerment to

the Bank’s reputation. It also covers legal risk.

(H.a.) Operational Risk Management

Within the scope of operational risk management, the Bank

uses identifi cation and classifi cation models to identify and

describe events, risk factors, effects, the organizational

structure, and indicators. The ERM maintains the models

following the Basel II methodology and notifi es the GCC of

changes. The CRO approves models and their modifi cations.

Individual organizational units have operational risk

coordinators who provide employees with methodological

support in the area of the operational risk management

and who cooperate with the ERM in activities relating to

operational risk.

The operational risk measurement uses the LDC process

(Loss Data Collection, the collection of data on loss events).

Events whose impact exceeded the limit (CZK 10 thousand)

are the subject of the data collection.

Key risk indicators are monitored as well.

The basic limit for the operational risk management is the

operational risk tolerance (represented as the expected loss

caused by operational risk in the given year). The limit is

approved by the GCC on the basis of the outcomes of the

annual RCSA process (Risk Control Self Assessment).

To mitigate the operational risk, the Bank produces and

maintains:

• A business continuity plan for critical situations and

operations recovery, with the aim to ensure business

activities at a backup workplace; and

• IT disaster recovery plans (activity recovery plans) for

key IT applications;



Debt securities 0 0 0 0 0 0

Shares, units 0 0 0 0 43,597 43,597

Participation interests with substantial infl uence 0 0 0 0 240 240

Participation interests with controlling infl uence 0 0 0 0 6,652 6,652

Other assets 166,329 1,087,662 0 0 5,366,694 6,620,685


Total 33,635,174 28,648,572 39,747,837 37,586,854 7,405,525 147,023,962

Due to banks 672,404 0 0 0 0 672,404

Due to customers 93,841,166 8,235,599 5,516,713 140,121 881,542 108,615,141

Other liabilities 1,240,437 166,520 0 0 36,133,885 37,540,842


Total 95,754,007 8,402,119 5,516,713 140,121 37,211,002 147,023,962

Gap (62,118,833) 20,246,453 34,231,124 37,446,733 (29,805,477) 0

Cumulative Gap (62,118,833) (41,872,380) (7,641,256) 29,805,477 0 0



Residual Maturity of the Group’s Assets and Liabilities (continued)


8786

33. LITIGATION

In the past, three lawsuits against the Bank as a defendant

were fi led, which contested the validity of the agreement

on the sale of a part of the enterprise of Agrobanka Praha,

a.s. from 22 June 1998 (see the Annual Report for 2009). The

Bank concluded a settlement agreement with the involved

parties of the Agrobanka Praha, a.s. v likvidaci case on 1

July 2010. In the following months, the settlement process

has been progressing satisfactorily and initial settlement

conditions have been satisfi ed, including the withdrawal

of the lawsuits. The settlement process will continue in

the next accounting period. Following satisfaction of initial

settlement conditions, part of the provision created for this

case was used (refer to Note 25).

34. SUBSEQUENT EVENTS

There have been no events subsequent to the balance

sheet date that require an adjustment of or disclosure in the

fi nancial statements or notes thereto.

GE Money Bank Consolidated Annual Report 2010 Independent Auditor’s Report to the Shareholders of GE Money Bank, a.s.

INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF GE MONEY BANK, A.S.

89Independent Auditor’s Report to the Shareholders of GE Money Bank, a.s.88 GE Money Bank Consolidated Annual Report 2010

Auditor’s Report KPMG Česká republika Audit, s. r. o.Pobřežní 648/1a186 00 Praha 8Česká republika

Telephone +420 222 123 111Fax +420 222 123 100Internet www.kpmg.cz

Auditor’s Report (continued)

KPMG Česká republika Audit, s.r.o., a Czech limited liability company and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative („KPMG International“), a Swiss entity.

Obchodní rejstřík vedenýMěstským soudem v Prazeoddíl C, vložka 24185.

IČ 49619187DIČ CZ699001996

Independent Auditor’s Report to the Shareholders of GE Money Bank, a.s.

We have audited the accompanying fi nancial statements of GE Money Bank, a.s., which comprise the balance sheet as

of 31 December 2010, and the income statement for the year then ended, and the notes to these fi nancial statements

including a summary of signifi cant accounting policies and other explanatory notes. Information about the company is set

out in Note 1 to these fi nancial statements.

Statutory Body's Responsibility for the Financial Statements

The statutory body of GE Money Bank, a.s. is responsible for the preparation of fi nancial statements that give a true and

fair view in accordance with Czech accounting legislation and for such internal controls as the statutory body determines

are necessary to enable the preparation of fi nancial statements that are free from material misstatement, whether due to

fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in

accordance with the Act on Auditors and International Standards on Auditing and the relevant guidance of the Chamber of

Auditors of the Czech Republic. Those standards require that we comply with ethical requirements and plan and perform

the audit to obtain reasonable assurance whether the fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial

statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material

misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor

considers internal controls relevant to the entity's preparation and fair presentation of the fi nancial statements in order

to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion

on the effectiveness of the entity's internal controls. An audit also includes evaluating the appropriateness of accounting

policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall

presentation of the fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the fi nancial statements give a true and fair view of the assets and liabilities of GE Money Bank, a.s. as of 31

December 2010, and of its expenses, revenues and net result for the year then ended in accordance with Czech accounting

legislation.

Prague, 20th April 2011

KPMG Česká republika Audit, s. r. o.

Licence number 71

Ing. Vladimír Dvořáček Ing. Pavel Závitkovský

Partner Partner

Licence number 69

90 GE Money Bank Consolidated Annual Report 2010

FINANCIAL STATEMENTS OF GE MONEY BANK, A.S.

Name of the Bank: GE Money Bank, a. s.

Regestered offi ce: Vyskočilova 1422/1a, Prague 4

Identifi cation no: 25672720

Business: Bank

Date of preparation: 20 April 2011

Code of the Bank: 0600

Year ended: 31 December 2010

Financial Statements of GE Money Bank, a.s. 91


LIABILITIESBalance sheet as at 31 December 2010

CZK 000 note 31. 12. 2010 1. 1. 2010

1 Due to banks and cooperative savings associations 21 296,674 658,254


b) other payables 98,281 526,620

2 Due to customers - cooperative savings association's members 22 109,942,444 108,834,583

of which: a) repayable on demand 94,437,458 83,461,262

b) other payables 15,504,986 25,373,321

4 Other liabilities 23 2,681,821 1,891,158

5 Deferred income and accrued expenses 16,847 2,488

6 Provisions 695,657 825,951

of which: a) provision for pensions and similar obligations 0 0

b) provision for taxes 229,515 0

c) other 466,142 825,951

8 Registered capital 24 510,000 510,000

of which: a) registered paid up capital 510,000 510,000

9 Share premium 4,726,087 4,701,979

10 Reserve funds and other funds from profi t 26 102,000 102,000

of which: a) statutory reserve funds and risk funds 102,000 102,000

13 Gains (losses) from revalution 27 63,517 50,861

of which: a) assets and liabilities 63,517 50,861

14 Retained earnings from previous years 26 17,367,804 15,238,840

15 Profi t for the accounting period 26 3,217,511 2,128,964

Total liabilities 139,620,362 134,945,078

The notes set out on pages 97 to 123 form part of these fi nancial statements..

ASSETSBalance sheet as at 31 December 2010

CZK 000 note 31. 12. 2010 1. 1. 2010

1 Cash in hand and balances with central banks 3,035,486 3,889,098

2 State zero coupon bonds and other securities eligible for refi nancing with the CNB 15 11,092,667 12,466,458

of which: a) securities issued by the government institutions 11,092,667 12,466,458

3 Receivables from banks and cooperative savings associations 13 15,663,357 17,707,748



4 Receivables from customers - cooperative savings association's members 14 97,261,696 96,576,377

of which: a) repayable on demand 27 20


5 Debt securities 15 751,349 0

of which: a) issued by government institutions 0 0

b) issued by other entities 751,349 0

6 Shares, mutual fund certifi cates and other investments 16 47,015 43,597

7 Participation interests with substantial infl uence 17 240 240

8 Participation interests with controlling infl uence 17 6,832,968 0

9 Intangible fi xed assets 18 1,140,489 929,525

10 Tangible fi xed assets 19 774,965 792,904

of which: land and buildings for operating activities 384,816 351,816

11 Other assets 20 2,909,195 2,426,742

13 Prepaid expenses and accrued income 110,935 112,389

Total assets 139,620,362 134,945,078


Financial Statements of GE Money Bank, a.s.92 93


PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2010

CZK 000 note 2010

1 Interest income and similar income 4 9,345,190

of which: interest income from debt securities 190,531

2 Interest expense and similar expense 4 (1,485,164)

3 Income from shares and participation interests: 5 7,211

of which: a) income from participation interests with substantial infl uence 614

b) income from participation interests with controlling infl uence 0

c) income from other shares and participation interests 6,597

4 Commission and fee income 6 3,595,657

5 Commission and fee expense 6 (426,212)

6 Gain or loss from fi nancial operations 7 76,907

7 Other operating income 8 536,843

8 Other operating expenses 8 (794,067)

9 Administrative expenses 9 (4,241,636)

of which: a) employee expenses (1,818,921)

of which: aa) social and health insurance (449,492)

b) other administrative expenses (2,422,715)

11 Depreciation, creation and use of provisions and adjustments to tangible and intangible FA (492,375)

12 Release of adjustments and provisions for receivables and guarantees, income from written-off receivables 14, 25 2,279,561

13 Write-offs, creation and use of adjustments and provisions for receivables and guarantees 14, 25 (4,904,658)

17 Creation and use of other provisions 25 353,858

19 Current year profi t (loss) from ordinary activities before tax 3,851,115

23 Income tax 28 (633,604)

24 Net profi t for the accounting period 3,217,511


OFF-BALANCE SHEET ITEMS

CZK 000 note 31. 12. 2010 1. 1. 2010

Off-balance sheet assets

1 Commitments and guarantees granted 29 17,009,932 10,575,824

3 Receivables from spot transactions 140,160 30,559

4 Receivables from fi xed term transactions 14,249,685 18,204,223

6 Receivables written-off 8,550 5,559

Off-balance sheet liabilities

9 Commitments and guarantees received 67,757,105 53,337,207

10 Collateral and pledges received 55,172,315 61,763,760

11 Payables from spot transactions 138,014 30,643

12 Payables from fi xed term transactions 14,585,330 18,678,924

14 Values taken into custody, administration and deposit 123,566 13,681


Financial Statements of GE Money Bank, a.s.94 95

Notes to the Financial Statements of GE Money Bank, a.s.

NOTES TO THEFINANCIALSTATEMENTSOF GE MONEY BANK, A.S.

Year ended:

31 December 2010


STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2010

Registered Share Reserve Revaluation Profi t

CZK 000 capital premium funds gains (losses) (loss) Total

Balance as at 1. 1. 2010 510,000 4,701,979 102,000 50,861 17,367,804 22,732,644

FX gains (losses) and gains (losses) not included

in the profi t and loss account 0 0 0 12,656 0 12,656

Valuation difference of merger infl uence 0 24,108 0 0 0 24,108

Net profi t for the accounting period 0 0 0 0 3,217,511 3,217,511

Balance as at 31. 12. 2010 510,000 4,726,087 102,000 63,517 20,585,315 25,986,919


96 97

1. BASIC INFORMATION (CONTINUED)

(c) Comparative Information

The legal restructuring in 2010 discussed above results in

incomparable information for the current and preceding

periods in certain components of the fi nancial statements.

Therefore, no comparisons are presented in the profi t and

loss account and related footnote disclosure. The balance

sheet comparatives show the opening balances as at 1

January 2010, i.e. as at the decisive date of the merger of

the Bank with GE Money, s.r.o.

2. SIGNIFICANT ACCOUNTING POLICIES

The signifi cant accounting policies adopted in the

preparation of the fi nancial statements are set out below.

(a) Transaction Date

Depending on the type of transaction, the transaction date is

defi ned as the date of payment or collection of cash; the date

of purchasing or selling of foreign currency or securities; the

date of payment or collection from a customer's account;

the date of an order to a correspondent to make a payment,

the settlement date of the Bank’s payment orders with

the ČNB clearing centre, the value date according to

a statement received from a Bank’s correspondent

(statement means SWIFT statement, bank’s notice, received

media, bank statement or other documents); the trade date

and settlement date of transactions with securities, foreign

currency, fi nancial derivatives,; the date of issue or receipt of

a guarantee or opening credit line; or the date of acceptance

of values into custody.

Accounting transactions involving the purchase or sale

of fi nancial assets with a usual term of delivery (spot

transactions) and fi xed term contracts shall be are recorded

in off-balance sheet accounts from the trade date until the

settlement date.

A fi nancial asset or part thereof is derecognized from the

balance sheet if the Bank loses control over the contractual

rights to the fi nancial asset or part thereof. The Bank loses

this control if it exercises the rights to the benefi ts defi ned

in the contract, if such rights expire or the Bank waives the

rights.


Treasury bills, bonds and other debt securities and shares

including share units and other investments are classifi ed

into the portfolio that is held to maturity, the portfolio valued

at fair value through the profi t and loss, or the available

for sale portfolio, based on the Bank’s intention. Only debt

securities can be classifi ed into the portfolio held to maturity.

Treasury bills, bonds and other debt securities are recorded

at amortized/accreted cost. Accrued interest income is part

of the carrying amount of these securities. Shares, units and

other investments are recorded at acquisition cost.

Premiums and discounts on debt securities are amortized/

accreted through the profi t and loss account over the period

from the date of purchase to the date of maturity using the

effective interest rate method. In the case of securities, which

have a residual maturity of less than 1 year from the date

of purchase, the premium and the discount are amortized/

accreted equally through the profi t and loss account over

the period from the date of purchase to the date of maturity.

Available for sale securities and shares, units and other

investments are measured at fair value, and gains/losses

from this revaluation are charged to equity in “Gains (losses)

from revaluation”. When the security is sold, the respective

revaluation difference is charged to the profi t and loss

account in “Gain or loss from fi nancial operations”.

The fair value used to revalue securities is determined based

on the market price published as of the date of the fair value

measurement, if the Bank proves that securities can be sold

for that market price. For debt and equity securities traded

on the public market, fair values are equal to the price

reached on the public market of OECD countries, if, at the

same time, the condition of securities liquidity is fulfi lled.

If it is not possible to determine whether the market value

represents fair value (i.e. if the Bank does not prove that it

is possible to sell securities for such a market price), the fair

value is estimated as an adjusted value of securities.

The adjusted value of the securities is equal to the share

proportion of equity for shares, the share proportion of

a fund’s net assets value for units, or the present value of

the security for debt securities.

1. BASIC INFORMATION

(a) Establishment and Description of the Bank

GE Money Bank, a.s., formerly GE Capital Bank, a.s.,

(hereinafter the “Bank” or “GEMB”) was established on

9 June 1998 by a capital contribution from GE Capital

International Holdings Corporation in the amount of CZK

2,000 million. From this initial capital, the Bank purchased

selected assets and liabilities from Agrobanka, a.s., a bank

that had previously been put under enforced administration

by the Czech National Bank. On 22 June 1998, i.e. the date of

purchase, the acquired assets and liabilities were recorded

in the Bank’s balance sheet at the values determined based

upon the purchase agreement.

On 17 January 2005 GE Capital Bank, a.s. was renamed

GE Money Bank, a.s. as a part of a rebranding initiative

that was implemented around the world by the parent

company General Electric Company. The aim is to use the

worldwide experience of GE Money not only to allow uniform

communication, but also to improve processes, strengthen

our mutual relationships, and heighten successful

cooperation with clients.

GE Money entities in the Czech Republic underwent legal

restructuring in 2010 as follows:

• GE Money Auto, a.s. (GEMA) changed its legal form from

a joint-stock company to a limited company.

• The GE Money Multiservis, a.s. (GEMM) enterprise was

divided into three parts.

• The fi rst part, which comprised the auto loans business

(the auto loan portfolio at the net book value of CZK

4.3 billion), was contributed into GEMA, and GE Money

Multiservis, a.s., as its sole shareholder, subsequently

transferred the ownership interest in GEMA to the Bank.

• The second part, the credit cards and consumer loans

business (fi nancing receivables at the net book value

of CZK 5.9 billion), was contributed into GE Money, s.r.o.,

a newly acquired subsidiary of the Bank.

• The ownership interests in Inkasní a exekuční servis,

s.r.o. and AgroConsult Bohemia s.r.o. were transferred to

the Bank from GEMM.

• GE Money, s.r.o. then merged with the Bank on 30

September 2010 (whereas the merger’s decisive date

was 1 January 2010) and ceased to exist.

• The remaining part of GEMM, the cash and equity

accounts, is outside the local GE Money Group as at 31

December 2010.

Business Firm Identifi cation

and Registered Offi ce Number:

GE Money Bank, a.s. 25672720

Vyskočilova 1422/1a

140 28 Praha 4, Michle

Czech Republic – registered in the

Czech Republic by the Municipal

Court in Prague, Section B, Entry No. 5403

Members of the Board of Directors and Supervisory Board

as at 31 December 2010

Members of the Board Members of

of Directors the Supervisory Board

Peter Ronald Herbert Robert Charles Green

(Chairman) (Chairman)

Christoph Glaser Aleš Blažek

Brett Matthew Belcher Pavel Zídek

Rajesh Ramakrishna Gupta

Jiří Báča

Wade Udell Robison

Changes in the Board of Directors and Supervisory Board

In 2010, the Board of Directors changed as follows:

• On 6 April 2010 Jiří Báča was appointed as a member of

the Board of Directors.

• On 7 December 2010 Wade Udell Robison was

appointed as a member of the Board of Directors.

Organizational chart (as at 31 December 2010) see page 18.

(b) Basis of Preparation

The fi nancial statements have been prepared on the basis of

the accounting records maintained in accordance with the

Act on Accounting and the relevant regulations and decrees

of the Czech Republic. They have been prepared under

the historical cost convention on the basis of full accrual

accounting, except for selected fi nancial instruments that

are measured at fair value.

The fi nancial statements have been prepared in accordance

with Czech Ministry of Finance Decree No. 501/2002 Coll.

dated 6 November 2002, as amended, which regulates the

layout and defi nition of fi nancial statements and disclosure

requirements for banks and certain fi nancial institutions.

Numbers in brackets represent negative amounts.

These fi nancial statements are unconsolidated fi nancial

statements.

Notes to the Financial Statements of GE Money Bank, a.s.GE Money Bank Consolidated Annual Report 201098 99


(f) Intangible and Tangible Fixed Assets

Tangible and intangible fi xed assets are stated at historical

cost and are depreciated using the straight-line method

over their estimated useful lives.

The annual depreciable lives for each category of intangible

and tangible fi xed asset are as follows:

Software 5 years

Cars 4 years

Technical improvement of buildings 10 years

Furniture 10 years

Equipment 5 years

Establishment costs

– other intangible fi xes assets 5 years

PCs and servers 3 years

Leasehold improvements are depreciated on a straight-line

basis over the shorter of the lease terms or their remaining

useful lives.

Intangible fi xed assets costing less than CZK 60 thousand

and tangible fi xed assets costing less than CZK 40 thousand

with a useful life less than 1 year are charged to the profi t

and loss account in the period in which they are acquired.

The valuation difference on acquired assets represents

a negative difference between the valuation of the business

or part thereof acquired through the merger and the sum of

the carrying values of individual components of contributed

assets net of assumed liabilities. A negative difference on

acquired assets is released into income over 60 months

from the acquisition of the business.

(g) Foreign Currency Translation

Transactions denominated in foreign currencies are recorded

in the local currency at the actual exchange rates on the

date of the transaction. Assets and liabilities denominated

in foreign currencies together with unsettled spot foreign

exchange transactions are translated into the local currency

at the ČNB foreign exchange rate prevailing on the balance

sheet date. Foreign exchange gains or losses arising from the

translation of assets and liabilities denominated in foreign

currencies are recognized in the profi t and loss account as

“Gain or loss from fi nancial operations”.

(h) Financial Derivatives

Trading Instruments

Financial derivatives held for trading are carried at fair value.

Gains (losses) from the changes in fair value are recorded

in the profi t and loss account in “Gain or loss from fi nancial

operations”.

The Bank uses all its trading investment derivatives for

macro-hedging purposes.

Hedging Derivatives

Hedging derivatives are carried at fair value. The method

of recognizing fair value depends on the model of hedge

accounting applied.

All of derivatives (both trading and hedging) are contracted

in the OTC (over-the-counter) market.

Hedge accounting can be applied if:

• The hedge is in line with the Bank’s risk management

strategy.

• The hedge relationship is formally documented at the

inception of the hedge.

• It is expected that the hedge relationship will be highly

effective throughout its life.

• The effectiveness of the hedge relationship can be

objectively measured.

• The hedge relationship is highly effective throughout

the accounting period.

If the derivative hedges the exposure to changes in the fair

value of assets and liabilities or commitments, the hedged

item attributable to the risk being hedged is also carried

at fair value. Gains (losses) from revaluing the interest

bearing hedged item and hedging derivative are recorded

in the profi t and loss account in “Interest income and similar

income” and “Interest expense and similar expense”.

The fair value of fi nancial derivatives is determined as

the present value of expected cash fl ows from these

transactions, using valuation models generally accepted

on the market. The parameters used in these models are

ascertained on the active market, such as foreign exchange

rates, yield curves, volatility of fi nancial instruments, etc.



(continued)

Transactions where securities are purchased under

a commitment to resell (resale commitment) are treated

as collateralized lending transactions. The legal title of

securities subject to resale or repurchase commitments is

transferred to the lender. Securities received under a resale

commitment are recorded in off-balance sheet accounts

in “Collaterals and pledges received”. The lending granted

under a resale commitment is recorded in “Receivables

from banks and cooperative savings associations” or

“Receivables from customers - cooperative savings

association’s members”. Interest on debt securities received

under a resale commitment is not accrued.

Income arising under resale commitments based on

the difference between the selling and purchase price is

accrued over the period of the transaction and recorded in

the profi t and loss account as “Interest income and other

similar income”.

(c) Participation Interest with Controlling/Substantial

Infl uence

Participation interest with controlling infl uence is one in

which the Bank holds at least 50 percent of a subject’s

registered capital or one arising from an agreement or

from articles of association regardless of the percentage of

participation.

Participation interest with substantial infl uence is one

in which the Bank holds at least 20 percent of a subject’s

registered capital but not more than 50 percent or one

arising from an agreement or from articles of association

regardless of the percentage of participation.

Participation interest with controlling/substantial infl uence

is valued at acquisition cost net of adjustments owing to the

temporary decrease in the value of the participation interest

calculated on an individual basis.

(d) Receivables from Banks and Customers

Receivables are carried net of adjustments. Accrued interest

income is part of the carrying amount of receivables.

Receivables are reviewed for recoverability. Adjustments

are created against specifi c receivables when considered

appropriate. The methodology for the creation of

adjustments in the appropriate accounting period is included

in Note 30. Adjustments created by debiting expenses are

reported in “Write-offs, creation and use of adjustments and

provisions to receivables and guarantees”.

The tax-deductible portion of the period charge for the

creation of adjustments for credit losses is calculated in

accordance with the requirements of Section 5 (“Banking

provisions and adjustments”) and Section 8 (“Adjustments

to receivables from debtors subject to bankruptcy or

composition proceedings”) of the Act on Provisions No.

593/1992 Coll.

Receivables are written off when the Bank has determined

the receivable to be permanently irrecoverable.

The write off of unrecoverable receivables is accounted for as

“Write-offs, creation and use of adjustments and provisions

to receivables and guarantees” in the profi t and loss account.

Adjustments and provisions are reduced in an amount equal

to the amount written off on the same account in the profi t

and loss account. Recoveries on loans previously written

off are included in the profi t and loss account in “Release of

adjustments and provisions for receivables and guarantees,

income from written-off receivables”.

The Bank also accrues interest income from classifi ed

receivables. Adjustments to accrued interest income are

established in accordance with the appropriate requirement

of the ČNB.

Receivables from customers purchased from a third

party are initially recorded at discounted values from the

gross receivables actually due under the contracts with

customers. To the extent that a customer repays any portion

of the receivable in excess of the discounted value originally

assigned to the receivable, this difference is recorded as

operating income.

(e) Creation of Provisions

A provision represents a probable cash outfl ow of uncertain

timing and amount. Provisions are established if the

following criteria are met:

• A duty (legal or factual) to perform exists, resulting from

past events.

• It is probable or certain that the event will occur and

that it will require a cash outfl ow representing economic

benefi ts; “probable” meaning a probability exceeding 50

percent.

• The amount of such performance can be reliably

estimated.


8. OTHER OPERATING INCOME AND EXPENSES(CONTINUED)

CZK 000 2010

Other operating expenses

Deposit insurance (134,147)

Royalties (202,197)

Sale of fi xed assets (139)

Damages (8,396)

Withholding tax (18,286)

Other (430,902)

Total (794,067)

Other operating expenses include a charge relating to the

2010 Agrobanka case settlement (refer to Notes 25 and 32).

9. ADMINISTRATIVE EXPENSES

CZK 000 2010

Employee expenses (1,818,921)

Wages and salaries (1,369,429)

Social and health insurance (449,492)

Of which wages and salaries paid to:

Members of the Board of Directors (5,580)


Other executives (41,104)

Other administrative expenses (2,422,715)

Of which expenses for audit, legal

and tax advisory services (55,419)

Total (4,241,636)

The Bank did not pay any bonuses tied to equity in 2010.

The average number of the Bank’s employees during the

period was as follows:

2010

Employees 2,646

Members of the Board of Directors 6


Other executives 7

10. INCOME AND EXPENSES RESULTING FROM PARTICIPATION INTERESTS WITH CONTROLLING/SUBSTANTIAL INFLUENCE

CZK 000 2010

Interest income and similar income 237,457

Fee and commission income 112,037

Fee and commission expenses (20,040)

Dividends 614

Other operating income 59,201

Other administrative expenses (99,854)

Total 289,415

11. TRANSACTIONS WITH RELATED PARTIES, RECEIVABLES AND PAYABLES FROM PARTICIPATION INTERESTS WITH A CONTROLLING OR SUBSTANTIAL INFLUENCE

(a) Transactions with related parties

CZK 000 31. 12. 2010 1. 1. 2010

Receivables 12,478,522 17,028,946

Payables 994,474 1,526,664

Receivables from related parties contain mainly the loan

granted to another GE entity within Central and Eastern

Europe totaling CZK 11,975,012 thousand (1.1.2010: CZK

7,777,151). Refer to Note 13 (b).

CZK 000 2010

Income 657,117

Expense 625,208

(b) Receivables and payables from participation interests

with a controlling or substantial infl uence

CZK 000 31. 12. 2010 1. 1. 2010

Controlling Substantial Controlling Substantial

interest Interest Interest Interest

Receivable 501,886 0 8,028 0

Payable 99,682 0 856,152 0


(i) Taxation

Tax non-deductible expenses are added to and non-taxable

income is deducted from the profi t for the period in order to

arrive at the taxable income, which is further adjusted by tax

allowances and relevant credits.

Deferred tax is provided on all temporary differences

between the carrying amounts of assets and liabilities for

fi nancial reporting purposes and the amounts used for

taxation purposes multiplied by the enacted income tax

rate for the period when the timing difference is expected to

reverse. A deferred tax asset is recognized only to the extent

that there are no doubts that there will be future taxable

profi ts available against which this asset can be utilized.

(j) Financial Leasing

Assets acquired under fi nancial leases are recorded

in “Tangible fi xed assets” when the legal ownership is

transferred to the Bank. Lease payments are recorded in

“Other operating expenses”.

3. CHANGES IN ACCOUNTING POLICIES

The Bank did not make any changes in its accounting policies

in 2010.

4. NET INTEREST INCOME

CZK 000 2010

Interest income 9,345,190

- from deposits 38 803

- from loans 9 115 856

- from debt securities 190,531

Interest expense (1,485,164)

- from deposits (1,484,665)

- from loans (499)

Net interest income 7,860,026

The Bank waived or did not claim default interest in the

amount of CZK 2,684 thousand.

5. INCOME FROM SHARES AND PARTICIPATION INTERESTS

CZK 000 2010

Income from participation interests

with substantial infl uence 614

Income from other shares 6,597

Total 7,211

6. FEES AND COMMISSIONS

CZK 000 2010

Fee and commission income from

payment processing 1,724,781

lending activities 1,743,876

other 127,000

Total 3,595,657

Fee and commission expense from

payment processing (217,076)

other (209,136)

Total (426,212)

7. GAIN OR LOSS FROM FINANCIAL OPERATIONS

CZK 000 2010

Gain/losses from derivative operations (124,008)

Gain from currency exchange services 11,012

Gain/losses from FX rate differences

from revaluation 189,903

Total 76,907

8. OTHER OPERATING INCOME AND EXPENSES

CZK 000 2010

Other operating income

Service revenues 27,423

Commissions from third parties 66,024

Rent 26,790

Sale of fi xed assets 1,345

Damages 522

Corrections 15,980

Insurance 381,808

Other 16,951

Total 536,843


(continued next column)



In 2010, the Bank created an adjustment of CZK 2,625,097

thousand. The remaining change in adjustments relates

primarily to the additional portfolio transferred to the Bank

as part of the legal restructuring (see Note 1a). During 2010

the Bank restructured receivables from customers totaling

CZK 1,484,722 thousand (1.1.2010: CZK 482,510 thousand).

The analysis of receivables by sector and type of security

received does not refl ect adjustments.

(c) Analysis of Receivables from Customers by Sector and Type of Security Received

(b) Analysis of Receivables from Customers by Sector

CZK 000 31. 12. 2010 1. 1. 2010

Financial institutions 603,508 8,174,398

Non-fi nancial institutions 21,990,907 21,362,019

Government sector 116,315 89,608

Non-profi t organizations 3,920 103,206

Entrepreneurs 7,441,517 7,192,468

Resident individuals 80,600,348 68,365,549

Non-residents 15,797 9,025

Total 110,772,312 105,296,273

The analysis of receivables by sector does not refl ect

adjustments.

12. INCOME AND EXPENSE ACCORDING TO SEGMENTS

a) Business Segments

13. RECEIVABLES FROM BANKS

(a) Classifi cation of Receivables from Banks

CZK 000 31. 12. 2010 1. 1. 2010

Standard 15,663,357 17,707,748

Net receivables from banks 15,663,357 17,707,748

(b) Analysis of Receivables from Banks

by Type of Security Received

CZK 000 31. 12. 2010 1. 1. 2010

Security held by the Bank 2,400,290 8,135,274

Guarantee from

parent company 11,975,012 7,777,330

Unsecured 1,288,055 1,795,144

Total 15,663,357 17,707,748

In 2010, the Bank held state zero-coupon bonds under

resale commitments with a market value of CZK 2,350,258

thousand (1.1.2010: CZK 7,982,049 thousand), which are

reported in the off balance sheet in “Collaterals and pledges

received”.

b) Geographical Segments

In 2010, the Bank provided a collateralized loan to an affi liate

entity, for which it obtained a guarantee from the ultimate

parent company of CZK 11,965,671 thousand (1.1.2010: CZK

7,794,769). The guarantee is reported in the off balance sheet

in “Commitments and guarantees”.

14. RECEIVABLES FROM CUSTOMERS

(a) Classifi cation of Receivables from Customers

CZK 000 31. 12. 2010 1. 1. 2010

Standard 88,843,615 90,596,064

Watch 3,451,334 4,341,817

Sub-standard 3,299,926 1,554,307

Doubtful 2,639,767 2,272,030

Loss 12,537,670 6,532,055

Adjustment to potential losses

from receivables (13,510,616) (8,719,896)

Net receivables

from customers 97,261,696 96,576,377


CZK 000 Personal banking and fi nance Corporate banking Total

2010 2010

Interest income 7,098,820 2,246,370 9,345,190

Interest expense (1,200,698) (284,466) (1,485,164)

Fee and commission income 2,522,861 1,072,796 3,595,657

Fee and commission expense (371,376) (54,836) (426,212)

Gains or losses from fi nancial operations 23,434 53,473 76,907

CZK 000 Czech Republic European Union Other Total

2010 2010 2010

Interest income 9,251,796 62,996 30,398 9,345,190

Interest expense (1,468,577) (12,246) (4,341) (1,485,164)

Fee and commission income 3,562,515 17,162 15,980 3,595,657

Fee and commission expense (419,904) (4,166) (2,142) (426,212)

Gains or losses from fi nancial operations 74,171 1,382 1,354 76,907

As at 31. 12. 2010




Non-fi nancial institutions 0 629,260 11,495,847 52,806 1,378 75,330 9,736,286 21,990,907


Non-profi t organizations 0 0 0 0 0 0 3,920 3,920

Entrepreneurs 0 82,352 4,216,202 3,760 0 6,657 3,132,546 7,441,517

Resident individuals 588 0 21,348,258 587,167 0 0 58,664,335 80,600,348

Non-resident individuals 0 0 0 0 0 0 15,797 15,797

Total 588 711,612 37,103,342 643,733 1,378 125,287 72,186,372 110,772,312

As at 1. 1. 2010



Financial institutions 0 0 18,013 0 0 0 8,156,385 8,174,398

Non-fi nancial institutions 1,200 330,657 11,195,432 108,371 0 102,094 9,624,265 21,362,019


Non-profi t organizations 0 0 60,775 0 0 0 42,431 103,206

Entrepreneurs 0 36,653 3,783,522 8,360 0 9,561 3,354,372 7,192,468

Resident individuals 599 7,636 23,266,190 727,352 0 0 44,363,772 68,365,549

Non-resident individuals 0 0 6,830 0 0 0 2,195 9,025

Total 1,799 374,946 38,353,861 844,083 0 134,083 65,587,501 105,296,273


17. PARTICIPATION INTERESTS WITH SUBSTANTIAL AND CONTROLLING INFLUENCE

(a) Participation Interests with Substantial Infl uence

(b) Participation Interests with Controlling Infl uence



(d) Analysis of Receivables from Customers by

Geographical Areas

CZK 000 31. 12. 2010 1. 1. 2010

Czech Republic 110,755,218 105,286,443

Slovakia 6,872 6,966

Other 10,222 2,864

Total 110,772,312 105,296,273

The analysis of receivables by geographical areas does not

refl ect adjustments.

(e) Net Receivables from Customers Written-off

and Recovered

CZK 000 2010

Write-offs


Entrepreneurs 17,382

Resident individuals 1,297,766

Total 1,553,991

Recoveries


Entrepreneurs 2,233

Resident individuals 29,236

Total 33,149

(f) Receivables from Persons with a Special Relationship

with the Bank



At 1. 1. 2010 0 5,890 23

At 31. 12. 2010 0 0 0

The loans mentioned above were provided under standard

employee conditions.

15. STATE ZERO-COUPON BONDS AND OTHER SECURITIES ELIGIBLE FOR REFINANCING WITH THE CENTRAL BANK, DEBT SECURITIES ISSUED BY OTHER ENTITIES

(a) Net Book Value of State Zero-Coupon Bonds and Other

Securities Eligible for Refi nancing with the ČNB

CZK 000 31. 12. 2010 1. 1. 2010

State treasury bills 7,065,442 8,470,358

State bonds 4,027,225 3,996,100

Net book value 11,092,667 12,466,458

(b) Classifi cation of State Zero-Coupon Bonds and Other

Securities Eligible for Refi nancing with the ČNB into

Individual Portfolios based on the Bank’s Intention

CZK 000 31. 12. 2010 1. 1. 2010

State zero-coupon bonds

and other securities

available-for-sale 11,092,667 12,466,458

Net book value 11,092,667 12,466,458

(c) Net Book Value of Bonds issued by Other Institutions

CZK 000 31. 12. 2010 1. 1. 2010

Eurobonds available for sale 751,349 0

Net book value 751,349 0

16. SHARES, UNITS AND OTHER INVESTMENTS

(a) Classifi cation of Shares, Units and Other Investments

into Individual Portfolios based on the Bank’s Intention

CZK 000 31. 12. 2010 1. 1. 2010

Shares, units and other

investments available for sale 47,015 43,597

Net book value 47,015 43,597

(b) Analysis of Shares, Units and Other Investments

Available for Sale

CZK 000 31. 12. 2010 1. 1. 2010

Market value Market value

Issued by fi nancial institutions

– Unlisted 28,486 37,026

Issued by

non-fi nancial institutions

– Listed elsewhere 4,887 5,949

– Unlisted 13,642 622

Total 47,015 43,597

CZK 000 Other


Name offi ce activity capital of equity in equity voting rights value

As at 31. 12. 2010


Credit Bureau, a.s. pláni č.p. 1719, č.o. 4, SW, HW


As at 1. 1. 2010


Credit Bureau, a.s. pláni č.p. 1719, č.o. 4, SW, HW


CZK 000 Other


Name offi ce activity capital* of equity* in equity voting rights value

As at 31.12.2010

Inkasní Vyskočilova 1422/1a, Debt 200 18,036 100% 100% 32,224

a exekuční servis s.r.o 140 28 Prague 4, recovery service

AgroConsult Rudolfovská tř. 207/84, Technical advisory 200 7,194 100% 100% 13,616

Bohemia s.r.o. 370 01 České Budějovice in agriculture

and woodcraft

industry

GE Money Auto, s.r.o. Vyskočilova 1422/1a, Car fi nancing 4,427,829 2,148,189 100% 100% 6,787,128

140 28 Prague 4 (leasing and loans)

As at 31. 12. 2010 6,832,968

As at 1. 1. 2010

Inkasní Vyskočilova 1422/1a, Debt 0 0 0% 0% 0

a exekuční servis s.r.o 140 28 Prague 4, recovery service

AgroConsult Rudolfovská tř. 207/84, Technical advisory 0 0 0% 0% 0

Bohemia s.r.o. 370 01 České Budějovice in agriculture

and woodcraft

industry

GE Money Auto, s.r.o. Vyskočilova 1422/1a, Car fi nancing 0 0 0% 0% 0

140 28 Prague 4 (leasing and loans)

As at 1. 1. 2010 0

*) Based on non-audited fi nancial statements.


20. OTHER ASSETS

CZK 000 31. 12. 2010 1. 1. 2010

Other debtors 290,581 356,682

Other cash values 1,400,375 1,425,271

Receivable to state bodies 0 30,263

Clearing account

for payments 0 15,196

Other 2,665 41

Positive fair value


Accruals 77,932 44,293


Less: Adjustments (91,628) (101,687)

Total 2,909,195 2,426,742

The item “Other cash values” includes cash in transit.

22. DUE TO CUSTOMERS

(a) Analysis by Sector

21. DUE TO BANKS

Analysis by Residual Maturity

CZK 000 31. 12. 2010 1. 1. 2010

Repayable on demand 198,393 131,634

Up to 3 months 98,281 526,620

Total 296,674 658,254

18. INTANGIBLE FIXED ASSETS

(a) Movements in Intangible Fixed Assets

19. TANGIBLE FIXED ASSETS

(a) Movements in Tangible Fixed Assets

CZK 000 Software and other Establishment

intangible fi xed assets costs Assets not yet in use Total

Cost

As at 1. 1. 2010 2,398,824 2,045 142,879 2,543,748

Additions 130,909 0 168,828 299,737

Additions due to legal restructuring 512,959 0 32,994 545,953

Disposals (3,196) 0 (671) (3,867)

As at 31.12.2010 3,039,496 2,045 344,030 3,385,571

Amortization and Adjustments

As at 1 January 2010 (1,612,178) (2,045) 0 (1,614,223)

Charge for the period (281,854) 0 0 (281,854)

Additions due to legal restructuring (351,502) 0 0 (351,502)

Disposals 2,497 0 0 2,497

As at 31. 12. 2010 (2,243,037) (2,045) 0 (2,245,082)

Net book value

As at 31. 12. 2010 796,459 0 344,030 1,140,489

Low value Land and Other

Furniture tangible buildings Fixed Adjustments

Land and and fi xed not yet assets not – valuation

CZK 000 Buildings Fittings Equipment assets in use yet in use difference Total

As at 1. 1. 2010 667,020 64,763 1,353,400 1,550 4,592 11,139 0 2,102,464

Additions 64,713 3,379 84,645 0 14,389 70,556 0 237,682

Additions due to legal

restructuring 22,007 962 64,226 0 0 173 (65,421) 21,947

Disposals (2,608) (3,990) (90,681) (1,482) (4,270) (7,579) 0 (110,610)

As at 31. 12. 2010 751,132 65,114 1,411,590 68 14,711 74,289 (65,421) 2,251,483

Amortization

and Adjustments

As at 1. 1.2010 (319,796) (30,568) (959,196) 0 0 0 0 (1,309,560)

Charge for the period (58,370) (5,320) (150,102) 0 0 0 3,271 (210,521)

Additions due to legal

restructuring (4,013) (198) (45,878) 0 0 0 0 (50,089)

Disposals 1,152 3,510 88,990 0 0 0 0 93,652

As at 31. 12. 2010 (381,027) (32,576) (1,066,186) 0 0 0 3,271 (1,476,518)

Net book value

As at 31. 12. 2010 370,105 32,538 345,404 68 14,711 74,289 (62,150) 774,965


(b) Tangible Fixed Assets held under Finance Leases

The Bank is not committed to any payments under fi nance

leases for fi xed assets in 2010.



At 31. 12. 2010

Financial institutions 1,006,712 0 622 432 1,007,766



Government sector 4,297,828 0 676,566 130 4,974,524

Non-profi t organizations 962,548 0 138,734 0 1,101,282

Entrepreneurs 7,641,328 0 250,836 0 7,892,164


Non-residents 2,897,290 3,423 242,954 37,217 3,180,884

Total 94,437,458 762,344 14,428,801 313,841 109,942,444



At 1. 1. 2010

Financial institutions 1,507,036 0 80 5,920 1,513,036



Government sector 4,083,740 0 2,192,786 25 6,276,551

Non-profi t organizations 1,255,719 0 251,717 0 1,507,436

Entrepreneurs 7,133,699 0 435,563 0 7,569,262


Non-residents 694,581 4,418 302,103 29,621 1,030,723

Total 83,461,262 993,688 24,076,916 302,717 108,834,583


25. PROVISIONS AND ADJUSTMENTS FOR POSSIBLE CREDIT LOSSES (CONTINUED)

(b) Provisions for Litigations

CZK 000 31. 12. 2010

Balance as at 1. 1. 2010 820,000



Release of provisions no longer

considered necessary 0


Included in the total provisions is a provision of CZK 800

million created in 2007 for an anticipated settlement in the

Agrobanka Praha, a.s. v likvidaci case. In the current period,

part of this provision was used to satisfy the conditions of the

settlement concluded in 2010 (refer to Note 32). The balance

as at 31 December 2010 in the amount of CZK 422 million will

be used to complete the settlement.

(c) Adjustments to Customer Receivables

CZK 000 31. 12. 2010

Tax deductible adjustments

for credit losses

Balance as at 1. 1. 2010 4,036,989

Increase in adjustment due

to legal restructuring 1,073,884


Use during the current year (1,140,117)


Cover of losses from loans sold (1,074,941)


no longer considered necessary (1,433,055)

Balance of tax deductible

adjustments as at 31.12.2010 4,573,865

26. RETAINED EARNINGS, RESERVE FUNDS AND OTHER FUNDS ALLOCATED FROM PROFIT

The Bank proposes to allocate the 2010 profi t as follows:

CZK 000 31. 12. 2010

Tax non-deductible

adjustments for credit losses

Balance as at 1. 1. 2010 4,682,907


to legal restructuring 2,592,023

FX rate differences (197)




Cover of losses from loans sold (275,446)



Balance of tax non-deductible

adjustments as at 31. 12. 2010 8,936,751

Total adjustments for credit

losses as at 31. 12. 2010 13,510,616

(d) Adjustments to Operational Receivables

CZK 000 31. 12. 2010

Balance as at 1. 1. 2010 101,687


to legal restructuring 4,746


Use during the current year (399)



Balance of other adjustments

as at 31.12.2010 91,628

22. DUE TO CUSTOMERS (CONTINUED)

(b) Due to Persons with a Special Relationship

with the Bank



As at 1. 1. 2010 3,248 18,261 4,399

Additions 5,724 0 3,968

Disposals 0 (13,840) 0

As at 31.12.2010 8,972 4,421 8,367

(c) Due to Participation Interest with Substantial Infl uence

The Bank had no amounts due to participation interest with

substantial infl uence as at 31 December 2010.

23. OTHER LIABILITIES

CZK 000 31. 12. 2010 1. 1. 2010

Trade payables 589,689 620,177

Payables from

deposit insurance 41,783 90,252

Payables to state bodies 46,210 0

Payables from social

and health insurance 51,218 38,329

Accruals 648,614 334,139

Negative fair value


Clearing technical account 636,367 2,429

Other 330,655 328,382

Total 2,681,821 1,891,158

The item “Other” includes mainly CZK 327 million obtained

from GE Capital International Holdings Corporation GE

Capital International Holdings Corporation intends to use

this amount to increase the Bank’s registered capital.

The increase in the clearing technical account balance as at

31 December 2010 refl ects the changes in the Bank’s internal

process of clearing with the Czech National Bank.

24. REGISTERED CAPITAL

In order to establish the Bank, GE Capital International

Holdings Corporation subscribed 500 shares of original

capital with the nominal value of CZK 1,000,000 per share

and paid CZK 2,000 million for such shares.

In 1998 the Bank issued 10 ordinary shares with the nominal

value of CZK 1,000,000 each. Each share was issued at

a premium of CZK 1,970,750 thousand and was paid in

full. The increase in registered capital was recorded in the

Commercial Register on 25 March 2003. As of 25 March 2003

the registered capital of GEMB was CZK 510 million.

In 2010 the Bank did not issue any ordinary shares.

The shareholders of the Bank as at 31 December 2010

include:

Name Seat Number Ownership %

GE Capital Wilmington, 1209 510 100

International Orange Street,

Holdings Corporation Delaware, USA

No person with a special relationship to the Bank held any

shares of the Bank as at 31 December 2010.

25. PROVISIONS AND ADJUSTMENTS FOR POSSIBLE CREDIT LOSSES

(a) Provisions for Guarantee Losses

CZK 000 31. 12. 2010

Tax deductible provisions

for guarantee losses

Balance as at 1. 1. 2010 1,644



Release of provisions


Balance of tax deductible

provisions as at 31. 12. 2010 (0)

Tax non-deductible provisions

for guarantee losses

Balance as at 1. 1. 2010 4,307



Release of provisions no longer

considered necessary (4,307)

Balance of tax non-deductible provisions

as at 31. 12. 2010 (0)


CZK 000 Profi t Retained earnings Statutory reserve fund

Balance at 31. 12. 2010

before allocation of 2010 profi t 17,367,804 102,000

Profi t for 2010 3,217,511

Proposed allocation of 2010 profi t:

Transfer to retained earnings (3,217,511) 3,217,511

(continued next column)


29. OFF-BALANCE SHEET (CONTINUED)

(d) Off-balance Sheet Financial Instruments

The total net fair value of hedging instruments in the amount

of CZK (315,098) thousand (1.1.2010: CZK (368,701) thousand)

corresponds to the difference of receivables from fi xed term

transactions in the amount of CZK 11,703,367 thousand

(1.1.2010: CZK 7,471,527 thousand) and liabilities from fi xed

term transactions in the amount of CZK 12,018,465 thousand

(1.1.2010: CZK 7,840,228 thousand).

(e) Residual Maturity of Financial Derivatives

27. VALUATION DIFFERENCES

CZK 000 Available for sale securities

Balance at 1. 1. 2010 50,861

Decrease 0

Increase 12,656

Balance at 31. 12. 2010 63,517

28. INCOME TAX AND DEFERRED TAX ASSET / LIABILITY

(a) Current Income Tax

CZK 000 2010

Current year profi t before tax 3,851,115

Income not liable to tax (1,422,682)

Tax non-deductible expenses 2,880,355

Items increasing the tax base 7,032

Items decreasing the tax base (2,423)

Subtotal 5,313,397

Income tax calculated using a tax rate of 19% 1,009,545

Tax discount and offsets used (285)

Own tax base 5

Tax calculated using a tax rate of 15% 1


Additional income tax relating to previous years 1,218


(b) Deferred Tax Liability/Asset

Deferred income taxes are calculated on all temporary

differences using the tax rate in the year of the expected

reversal of the timing difference, i.e. 19% for 2010 onwards.

Deferred income tax assets and liabilities are attributable to

the following items:

CZK 000 31. 12. 2010 1. 1. 2010


Credit provisions 1,351,096 580,857

Valuation difference

on acquired assets 11,809 0

Other reserves 80,111 152,000

Deferred tax liability (215,386) (78,923)

Penalty interests (140,303) (20,600)

Tangible and intangible

fi xed assets (57,219) (43,953)

Revaluation of available

for sale fi nancial assets (14,899) (11,930)

Other reserves (2,965) (2,440)

Net deferred tax asset/(liability) 1,227,630 653,934

The deferred tax benefi t of CZK 376,875 thousand results

from the change in the balance of the net deferred tax

asset calculated as at 31 December 2010. The deferred tax

liability from revaluing available for sale fi nancial assets of

CZK 14,899 thousand is recognized in the equity. The change

in the deferred tax asset of CZK 187,360 thousand relates

primarily to the additional portfolio transferred to the Bank

as part of the legal restructuring (see Note 1a).

(c) Income Tax Expense

CZK 000 2010

Deferred income tax 376,875

Income tax due (1,010,479)

Income tax expense (633,604)

29. OFF-BALANCE SHEET

(a) Irrevocable Contingent Liabilities arising from

Acceptances and Endorsements, Other Written

Contingent Liabilities and Assets Pledged as Collateral

CZK 000 31. 12. 2010 1. 1. 2010

Customers

Notes acceptances

and endorsements 16,345,126 10,063,593

Payables resulting

from guarantees 8,348 10,556

Letters of credit

and fi nancial guarantees 656,458 501,675

Total 17,009,932 10,575,824

(b) Guarantees Issued in Favour of Persons with a Special

Relationship with the Bank

The Bank did not issue any guarantees in favour of persons

with a special relationship to the Bank as at 31 December

2010.

(c) Guarantees Issued in Favour of Participation Interests

with Substantial Infl uence

The Bank did not issue any guarantees in favour of

participation interests with substantial infl uence as at 31

December 2010.


CZK 000 Contractual amounts Fair value

31. 12. 2010 1. 1. 2010 31. 12. 2010 1. 1. 2010

Hedging instruments


Total 11,640,630 7,394,040 (315,098) (368,701)

Trading instruments

Forward foreign exchange contracts (7,079) 25

Forward purchase 946,427 96,801

Forward sale (953,640) (96,776)


Total (20,547) (106,000)

CZK 000 Up to 3 months 3 months to 1 year 1 year to 5 years Total

At 31. 12. 2010

Hedging instruments

Interest rate swap contracts 0 8,459,030 3,181,600 11,640,630

Trading instruments

Forward foreign exchange purchase contracts 809,410 137,017 0 946,427

Forward foreign exchange sale contracts (816,795) (136,845) 0 (953,640)

Interest rate swap contracts 0 0 1,601,000 1,601,000

At 1. 1. 2010

Hedging instruments

Interest rate swap contracts 0 7,394,040 0 7,394,040

Trading instruments

Forward foreign exchange purchase contracts 96,801 0 0 96,801

Forward foreign exchange sale contracts (96,776) 0 0 (96,776)

Interest rate swap contracts 0 700,000 9,934,500 10,634,500

Total net fair value of trading instruments of CZK (20,547)

thousand (1.1.2010: CZK (106,000) thousand) corresponds to

the difference of receivables from fi xed term transactions of

CZK 2,546,318 thousand (1.1.2010: CZK 10,732,696 thousand)

and liabilities from fi xed term transactions in the amount of

CZK 2,566,865 thousand (1.1.2010: CZK 10,838,696 thousand).

All the above transactions were concluded on the interbank

market (over-the-counter).




(continued)

(A.c.) Enterprise Risk Management (continued)

The ERM Department performs, among other things, the

following tasks:

• Coordinates all activities of credit, market, operational,

and liquidity risk management with the aim to ensure

GEMB risks are managed reliably and effi ciently;

• Coordinates the effort to maintain a stable asset and

liability structure and the value of capital;

• Supervises all rating and scoring models and processes

(including methodology development, development or

selection, implementation and validation of models, and

regular reviews and back testing);

• Develops and maintains the methodology of operational

risk management, including the identifi cation and

classifi cation models and key risk indicators;

• Implements and maintains the processes and

infrastructure for recording and analyzing operational

risk data;

• Maintains and develops the methodology of calculating

and allocating regulatory and economic capital; and

• Prepares risk reports for the ALCO, CRCO and GCC.

(B.) Level of Risks Accepted

The Bank’s business activities are primarily directed at

providing deposit, transaction and credit services for retail

clients, natural persons acting as entrepreneurs, and small

and medium-sized enterprises. The Bank’s strategy is to

avoid all risks that are not associated with its main line of

business and to minimize all other risks. The Bank:

• Does not trade in equity or debt securities, currencies,

or commodities for the purpose of achieving speculative

profi ts;

• Uses fi nancial derivatives exclusively for risk

management purposes;

• Carries out operations on the money market exclusively

for liquidity management purposes;

• In the case of operations on money markets requires its

counterparties to have at least an A-1 (Standard & Poor’s)

/ P-1 (Moody’s) rating; and

• Minimizes potential losses from operational risk via

economically effi cient remedial measures.

(C.) Credit Risk

Credit risk is the risk of a loss for the Bank resulting from the

failure of a counterparty to meet its obligations arising from

the terms and conditions of the contract under which the

Bank became the creditor of the counterparty.

The Bank is exposed to credit risk in particular in the case of

credits, non-approved current account debits, guarantees,

letters of credit, and interbank deals.

(C.a.) Categorization of Receivables

The Bank assigns receivables into individual categories in

compliance with CNB Decree No. 123/2007 Coll. of 15 May

2007, which stipulates prudential rules for banks, credit

unions and investment fi rms. The categorization is as follows:

Receivables Without Debtor Default

The Bank assigns receivables without debtor default to the

following sub-categories:


A receivable is regarded as “standard” if there is no reason

to doubt that it will be repaid in full. The Bank includes in this

category receivables where the principal and accessions

are being duly paid, with none of them being more than 30

days past due. None of the receivables from the debtor have

been restructured in the last 2 years due to the deterioration

in the debtor’s fi nancial situation. The Bank has suffi cient

information about the debtor's fi nancial situation and the

current value of the debtor's internal rating is better than 8.

b) Watch Receivables

A receivable is regarded as “watch” if, given the debtor’s

fi nancial and economical situation, it is likely to be repaid in

full. The Bank includes in this category receivables where the

principal or accessions are being paid with some problems,

but none of them are more than 90 days past due. None of

the receivables towards the debtor have been restructured

in the last 6 months owing to a deterioration in the debtor’s

fi nancial situation. In addition, receivables meeting at least 1

of the following conditions are also included in this category:

• The Bank does not have suffi cient information on the

debtor's fi nancial situation more than 30 days after the

date when this information was to be provided to the

Bank;

30. FINANCIAL INSTRUMENTS – MARKET, CREDIT AND OPERATIONAL RISK

Risk Management

The aim of the Bank is to achieve within its business

activities competitive yields at an acceptable risk level.

Risk management covers control of risks associated with

all business activities in the environment in which the Bank

operates and ensures that the risks taken are in compliance

with the prudential limits.

The level of risk is measured in terms of its impact on the

value of assets and/or capital and the profi tability of the

Bank. In this respect, the Bank evaluates potential effects

of changes in political, economic, market and operational

conditions and changes of clients’ creditworthiness on its

business.

When managing risks, the Bank relies on the qualifi cations

and experience of its employees, the organizational

segregation of duties, and the use of sophisticated analytical

instruments and technologies. This combination of a prudent

approach, analytical skills and technologies, together with

adherence to procedural measures, support the Bank’s

success and the stability of its economic results.


(A.a.) Risk Management Committees

The Bank has three main risk management committees: the

Asset & Liability Committee (ALCO) for assets and liabilities

management, market risks and liquidity risk management

and the internal capital adequacy assessment process;

the Credit Committee (CRCO) for credit risk management

issues; and the Governance & Control Committee (GCC)

for the management and control system and operational

risk management. The members of these committees

include members of the Board of Directors and other

senior managers of the Bank. The committees carry out in

particular the following:

• Monitoring of the development of relevant risks,

including the observance of limits, approval of remedial


development trends;

• Approval of the principles of risk management as well

as the basic methods, limits, scenario assumptions

and any other parameters used in the process of risk

management; and

• Monitoring of the adequacy, reliability and effi ciency of

risk management’s internal regulations, processes and

limits.

The Credit Monitoring and Management Committee (CMMC)

monitors and manages credit risk of the commercial credit

portfolio. CMMC was established by the GEMB Chief Risk

Offi cer (CRO) and its members are experienced managers of

the Risk Division and the Commercial Banking Division.

(A.b.) Risk Division

The Risk Division is responsible for risk management. The

CRO is a member of the Board of Directors of the Bank.

Among other things, the Risk Division:

• Monitors, measures and reports credit, market,

operational and liquidity risks and proposes remedial


trends;

• Sets terms and conditions for granting credit;

• Ensures credit approvals;

• Administers the data infrastructure and analytical

systems supporting risk management;

• Ensures the development, implementation and

maintenance of reserve and capital allocation models;

• Monitors fraudulent operations and is involved in the

prevention and investigation of fraud; and

• Ensures the collection of receivables from individually

approved commercial loans, mortgages and

automatically approved commercial loans.

(A.c.) Enterprise Risk Management

The Enterprise Risk Management Department (ERM) is

a part of the Risk Division; the head of the ERM Department

is approved by the Bank’s Board of Directors. The ERM

Department is responsible for the key parts of credit, market,

operational, and liquidity risk management, in particular in

the area of methodology, monitoring and measurement.


Supervisory Board

CEO

CRO

Consumer Risk

Commercial Risk

Enterprise RiskManagement

Credit Risk

Market Risk

Liquidity Risk

Asset & Liability

Operational Risk

Capital Allocation

Board of Directors

Credit Committee(Credit Risk)

Asset & Liability Committee(Asset & Liability, Market Risk, Liquidity, Capital Allocation)

Governance & Control Committee

(Corporate Govemance, Compliance, Internal Audit,

Operational Risk)

PMT(portfolio monitoring)




(C.c.) Adjustment Calculation

Adjustments are calculated according to Decree of the Czech

National Bank No. 123/2007 Coll. (hereinafter the “Decree”),

applying coeffi cient and statistical methods.

Statistical methods have been used for un-secured products

since 2010, while coeffi cients were applied to calculate

adjustments for all products in the past, except for retail

overdraft loans. This change in the estimate had no material

impact on the adjustments reported.

Coeffi cient Method:

Adjustments to individually approved small and medium-

sized enterprises’ loans, mortgage loans and secured

consolidations, including secured troubled debt restructuring,

are calculated using the coeffi cient method defi ned in the

Decree. Coeffi cients are applied to the gross book value of

an individual receivable reduced by the realizable value of

collateral as follows:

• Watch 1%

• Sub-standard 20%

• Doubtful 50%

• Loss 100%

Statistical Method:

Adjustments for products where the coeffi cient method is

not applied (un-secured products) are based on statistical

models developed according to the Decree. Coverage levels

(ratio of the statistical estimate of losses to the portfolio)

derived from models for a given product are applied to the

gross book value of the individual receivables.

Statistical models for standard receivables are based on

the incurred but not recognized loss principle, where the

probability of default (PD) and discounted recoveries are

applied. The PD is scaled to a loss identifi cation period of 6

months.

Statistical models for watch receivables and receivables with

debtor’s default are based on discounted lifetime recoveries

capped at 48 months.

The average contractual interest rate for a particular product

line is used as the discount rate.

(C.d.) Credit Risk Management

The fi eld of credit risk management is divided into two main

domains.

Retail exposures include credit risk associated with

exposures to natural persons, natural persons acting as

entrepreneurs, and small and medium-sized enterprises

(SME) that are granted credits on the basis of an automated

approval process (based on scoring models).

Commercial exposures cover credit risk associated with

exposures to small and medium-sized enterprises (SME),

to which credits are provided on an individual basis, and

exposures to banks and institutions. Credit risk management

in the mortgage business has a specifi c position as

mortgages form part of the retail exposures, but a number

of the processes and methods used fall within the category

of commercial exposures.


(C.e.1.) Internal Rating

The Bank uses an internal statistical model to estimate

the probability that its commercial clients will default. The

rating model assigns clients that are not in default to 9

rating classes (rated 0 to 8). Clients in default constitute the

tenth rating class. The prediction power of this rating tool

is reviewed annually and changes in the model, if any, are

approved by the CRCO.

(C.e.2.) Approval Process

The SME credit approval process is based on individual

evaluation and each exposure has to be approved by two

persons with appropriate approval authorities. Apart from

some selected products permitting the granting of credits

by 2 commercial bankers from the Commercial Banking

Division, all other credits have to be approved by an

authorized employee of the Commercial Banking Division

and by an authorized employee of the Risk Division. Approval

authorities are set on an individual basis and are determined

by combining the level of exposure, the debtor’s internal

rating, as well as the maturity, product and collateral.

Within the frame of the approval process, the Bank analyzes

in particular the fi nancial situation of the debtor and the

persons economically related to the debtor, as well as

evaluates collateral and uses external data sources including

credit registers.



(C.a.) Categorization of Receivables (continued)

• The debtor had repayments of a mortgage loan deferred

more than 18 months and less than 3 years ago;

• The debtor had repayments of a consumer loan deferred

more than 12 months and less than 30 months ago; and

• Internal rating of the debtor is 8.

Receivables With Debtors Default

Receivables with debtor default are considered non-

performing receivables. The Bank assigns them to the

following subcategories:

a) Sub-standard Receivables

A receivable is regarded as substandard if, given the debtor’s


uncertain, although its partial settlement is highly likely. The

Bank involves in this category receivables where the principal

or accessions are being paid with problems, but with none of

them more than 180 days past due. Receivables meeting at

least one of the following criteria are also considered sub-

standard:

• A debtor’s receivable has been restructured owing to

a worsening fi nancial situation within the last 6 months;

• The debtor had its mortgage loan repayments deferred

less than 18 months ago;

• The debtor had its consumer loan repayments deferred

less than 12 months ago; and

• The debtor’s internal rating is 9.

b) Doubtful Receivables

A receivable is regarded as “doubtful” if, given the debtor’s


highly unlikely, although its partial settlement is possible and

likely. The Bank includes in this category receivables where

the principal or accessions are being paid with problems,

but with none of them being more than 360 days past due.

A receivable is also considered doubtful if a competent court

has issued a decision on settling the debtor’s bankruptcy via

a discharge from debts or reorganization.

c) Loss Receivables

A receivable is regarded as “loss” if, given the debtor’s fi nancial

and economical situation, its full repayment is impossible.

The expectation is that such receivable will not be repaid or

will only be repaid in part in a very small amount. The Bank

involves in this category receivables where the principal or

accessions are more than 360 days past due. A receivable

from a debtor who is subject to bankruptcy or settlement

proceedings is also considered to be a loss receivable.

The categorization in 2010 was carried out on a daily basis

and the evaluation concerns in particular the following:

• Debt service performance;

• Financial situation of the debtor;

• Meeting of the obligation regarding information with

respect to the Bank;

• Restructuring of the debt, if any; and

• Adjudication of bankruptcy or an authorization to

discharge, reorganize, or settle the debtor’s property.

(C.b.) Collateral Assessment

The Bank requires collateral covering credit receivables

either by means of an individual assessment of the obligor

or as a standard part of the given credit product. The Bank

considers the following types of collateral to be acceptable

to decrease the gross credit exposure for the purpose of

calculating the adjustment:

• Cash;

• Securities;

• Reliable receivables;

• Bank guarantees;

• Guarantee of a reliable third party;

• Real estate properties; and

• Movable assets (machinery, equipment, breeding stock).

To determine the realizable value of collateral, the Bank uses

external expert appraisals or internal assessments made by

the Collateral Management Department of the Risk Division,

a department operating independently of the Bank’s

business units. The ultimate realizable value of collateral is

then set by applying the correction coeffi cient refl ecting the

Bank’s ability to realize the collateral in case of need. The

Bank has its own rules and methodology for the collateral

assessment and regularly reviews the values of correction

coeffi cients, which are approved by the CRCO.




(C.f.4.) Credit Risk Measurement Models (continued)


The coverage coeffi cient for standard receivables is based on

the gross coverage and the discounted recovery percentage.

The PD is scaled to the loss identifi cation period set at 6

months.

b) Watch Receivables and Receivables with Debtor

Default

The migration among delinquency categories over the period

of 48 months is monitored. The percentage of accounts that

moved to the doubtful or loss categories during the period

is calculated.

For loans whose full repayment was enforced at the

beginning of the period, the gradual pattern of repayment

of receivables is refl ected in the model. For these loans, the

coverage calculated shows what part of the accounts is

recovered during 48 months. This percentage is discounted

by the average interest rate applicable to the given portfolio.

The outputs of the statistical models are reviewed annually

using the data as at 30 September. In the event of a signifi cant

change in the macroeconomic environment, the review is

performed more frequently. The CRCO approves any update

of the coverages.

(C.f.5.) Collection

The Collections unit of the Operations Division is in charge

of the initial phase of collection. If no solution is found

within 60 days after the due date, receivables from the

automatically approved commercial credits and mortgages

are transferred to the administration of the Remedial &

Collection department of the Risk Division. Other receivables

are collected by the Collections unit of the Operations

Division with the aim of achieving maximum recovery. The

Bank uses external agencies and/or sales of receivables in

the collection process as well.

(C.g.) Financial Market Operation Exposures

The main tool for measuring the credit risk of countries and

counterparties (institutions) with respect to transactions

in fi nancial markets is the rating of international rating

agencies: Standard & Poor’s, Moody’s, and Fitch. The Bank

sets individual limits for individual countries and institutions,

for which it requires a minimum short-term rating of A-1 /

P-1 / F1.

(C.h.) Credit Risk Capital Requirement

The Bank uses the standardized approach (STA) in the credit

risk capital requirement calculation.

(D.) Risk of Concentration

The risk of concentration means the risk arising from the

concentration of exposures with respect to (one) person,

an economically related group of persons, sector, region,

activity, or commodity.

The Bank manages the risk of concentration through limits

applicable to countries, counterparties and economic

sectors.

(E.) Interest Rate Risk

Interest rate risk is the risk of a loss arising from changes of

interest rates on fi nancial markets.

The Bank is exposed to interest rate risk as interest bearing

assets and liabilities have different maturity periods or

interest rate change/adjustment periods, as well as different

volumes in these periods.

The Bank strives to minimize interest rate risk. Its activities

in the area of interest rate risk management are aimed at

reducing the risk of losses.

To monitor and measure interest rate risk, a model of

interest rate sensitivity is used, which serves to determine

the sensitivity of the Bank to changes in the market interest

rates. The model is based on the inclusion of interest-

sensitive assets and liabilities into relevant time bands.

The Bank prefers to use behavioral features of cash fl ows

rather than those that are purely contractual. All behavioral

assumptions are approved regularly by the ALCO. The model

works with 1-month time bands up to the 10 year period and

a time band exceeding 10 years.

To measure interest rate risk, the Bank also applies the

historical method of calculating Value at Risk (VaR) for the

investment portfolio at the confi dence level of 99%. Taking

into account the stable structure of the investment portfolio

with respect to the interest rate risk, the Bank uses a 1 year

horizon for calculating VaR.



(C.e.) Commercial Banking (SME Credits) (continued)

The Bank has implemented its own IT solution supporting

the process of SME credit approval and administration

facilitating the preparation of credit applications, the linking

thereof with data warehouses, document storage and the

subsequent production of contract documentation. The

system enables access to fi nancial analysis tools including

internal ratings.

(C.e.3.) Monitoring

All SME clients are monitored both individually and on the

portfolio basis. Individual monitoring and any potential

remedial measures are dealt with by the CMMC, which

also decides on categorization changes in cases when the

change does not clearly follow from the categorization rules.

Reports on the quality of the SME portfolio are discussed by

the CRCO each month and if necessary or required by CRCO;

the CRCO also deals with individual credit exposures.

(C.e.4.) Claiming of Debtors’ Receivables

In order to achieve maximum recovery, the Remedial &

Collection Department of the Risk Division administers

receivables whose recoverability is endangered. This

department deals with debtors and discusses possible

solutions, including receivable restructuring; takes relevant

legal steps to realize collateral in order to collect receivables

in legal proceedings or to sell receivables; and represents the

Bank in creditors’ committees in the event a debtor declares

bankruptcy.

(C.f.) Retail Banking

(C.f.1.) Scoring Instruments

When approving retail exposures, internal scorings are

used. These statistical models classify individual clients

into categories of homogeneous exposures using socio-

demographic and behavioural data. The development of

these scoring models and approval strategies is carried out

by the PMT Department of the Risk Division. In order to ensure

methodological and factual accuracy, ERM checks them and

regularly monitors the predictive power of individual models.

The outcomes are regularly discussed by the CRCO.

(C.f.2.) Approval Process

The approval process in the retail exposures segment is (with

the exception of mortgages) based on the use of internally

developed scoring models and the access to external data

sources (in particular credit registers). Approval strategies

are set by the Risk Division.

Risk Division underwriters may approve individual exposures

that do not pass the automatic approval process. For car

fi nancing products approval process is automated and


Mortgages are approved individually by the Risk Division

underwriters on the basis of individually set approval

authorities.

(C.f.3.) Monitoring

The Risk Division regularly monitors individual retail

portfolios, and monthly reports on the quality of the retail

portfolios are presented to the CRCO.

(C.f.4.) Credit Risk Measurement Models

The models refl ect the historical performance of the

portfolios by product line. The average contractual rate is

used to discount the expected payments on a product-by-

product basis.

Given the different nature of individual products, the Bank

applies the following approaches to the coverage calculation:

• Models for Unsecured Closed-End Loans and Troubled

Debt Restructuring




percentage. The probability of default (PD) is scaled to the

loss identifi cation period set at 6 months.

b) Watch Receivables and Receivables with Debtor

Default

The percentage of receivables for each particular category

that are not repaid in a given period are identifi ed.

Repayments of receivables are monitored over the product

life time of 48 months. The repayment percentage identifi ed

hereby is discounted using the average interest rate for the

given portfolio and is applied as a coverage coeffi cient to the

particular category of receivables.

• Models for Unsecured Revolving Loans




The ERM regularly reviews the contingency plan and liquidity

management scenarios, which are based on the analysis of

historical data, and forwards them to the ALCO for approval.

Residual Maturity of the Bank’s Assets and Liabilities


(E.) Interest Rate Risk (continued)

Simultaneously, GEMB carries out stress testing based

on the parallel shift of the yield curve by 200 basis points

for all currencies that account for more than 5% of the

Bank’s assets. In 2010 the 5% share of the Bank’s assets

was exceeded only by the portfolio denominated in Czech

Koruna.


CZK 000 2010 2010 2010

VaR of interest rate instruments 264,057 262,785 310,595

Interest rate risk management uses the following limits:

• Ratio of assets to liabilities in each time band; and

• Impact of stress test on capital (Tier 1 and Tier 2).

To manage the discrepancy between the interest sensitivity

of assets and liabilities, interest rate derivatives are used in

most cases.

(F.) Foreign Exchange Risk

Foreign exchange risk is the risk of a loss owing to changes

in the market exchange rates of the individual foreign

currencies in the Bank’s portfolio.

Assets and liabilities in foreign currencies, including off-

balance sheet exposures, represent the Bank’s exposure to

foreign exchange risk.

To measure foreign exchange risk, the Bank uses, on a daily

basis, net currency positions and a VaR model based on

historical data.

The Bank strives to minimize foreign exchange risk. For

this purpose, the Bank maintains a balance of assets and

liabilities in foreign currencies and uses the following limits:

• Ratio of the absolute value of the net currency position to

capital for each foreign currency;

• Ratio of the absolute value of the net currency position in

Czech Koruna to capital;

• Ratio of the absolute value of the total currency position

to capital;

• Absolute value of the total currency position;

• VaR (maximum expected loss per business day at the

99% confi dence level) for the foreign currency portfolio;

and

• Ratio of assets to liabilities for each foreign currency, if

a net currency position of a currency exceeds a given

limit.


CZK 000 2010 2010 2010

VaR of currency instruments 48 52 21

(G.) Liquidity Risk

Liquidity risk is the risk of losing the ability to meet fi nancial

liabilities when due or losing the ability to fi nance assets.

The daily measurement of liquidity risk in main currencies

(share of the balance sheet total exceeding 5%) includes:

• Calculation of the liquidity position based on the liquidity

gap model, which measures net cash fl ows in set time

bands;

• Calculation of the expected outfl ow (99% quantile of the

distribution of a one-day outfl ow of cash from GEMB in

the given period); and

• Assessment of the impact of the liquidity management

stress scenarios on the Bank’s liquidity position.

To manage the liquidity risk for main currencies, the Bank

applies a system of the following limits:

• Liquidity positions in individual time buckets;

• Ratio of highly liquid assets to expected outfl ows;

• Ratio of highly liquid assets to the total deposit base; and

• Volume of assets intended to cover the stress scenario.

For other currencies, the Bank uses limits for the ratio of

quickly liquid assets to liabilities.

The Bank has access to diversifi ed sources of fi nancing. The

fi nancing sources consist of savings and other deposits,

credits taken, as well as the Bank’s equity. To diversify and

stabilize liquidity sources and to deposit excess fi nancial

assets, the money market and bond market is used. The

Bank also has a fl exible credit line within the General Electric

Group, which, together with the diversifi cation of other

sources of fi nancing, signifi cantly increases the fl exibility of

source acquisition and reduces the dependency on partial

sources.

For the purpose of liquidity management under extraordinary

circumstances, the Bank has a contingency plan containing

measures for recovering liquidity.




At 31. 12. 2010


State debt securities 999,103 6,083,591 2,024,573 1,985,400 0 11,092,667

Receivables from banks 3,688,345 8,752,298 3,222,714 0 0 15,663,357

Receivables from customers 10,650,107 15,628,614 34,670,585 27,050,212 9,262,178 97,261,696

Debt securities 751,349 0 0 0 0 751,349

Shares, units 0 0 0 0 47,015 47,015


Participation interests with controlling infl uence 0 0 0 0 6,832,968 6,832,968

Other assets 1,424,758 8,119 0 0 3,391,772 4,824,649


Total 19,509,890 30,472,622 39,917,872 29,035,612 20,684,366 139,620,362

Due to banks and credit institutions 296,674 0 0 0 0 296,674

Due to customers 100,546,504 3,859,943 5,017,622 244,680 273,695 109,942,444

Other liabilities 1,899,713 990,651 33,321 0 26,440,712 29,364,397


Total 102,742,891 4,850,594 5,050,943 244,680 26,731,254 139,620,362

Gap (83,233,001) 25,622,028 34,866,929 28,790,932 (6,046,888) 0

Cumulative Gap (83,233,001) (57,610,973) (22,744,044) 6,046,888 0 0

At 1.1.2010


State debt securities 4,992,625 3,499,887 2,051,946 1,922,000 0 12,466,458

Receivables from banks 9,954,841 7,752,907 0 0 0 17,707,748

Receivables from customers 5,585,346 22,363,569 32,891,470 35,600,191 135,801 96,576,377

Debt securities 0 0 0 0 0 0

Shares, units and other investments 0 0 0 0 43,597 43,597


Participation interests with controlling infl uence 0 0 0 0 0 0

Other assets 2,749 1,087,662 0 0 3,058,760 4,149,171


Total 22,701,047 34,704,025 34,943,416 37,522,191 5,074,399 134,945,078

Due to banks 658,254 0 0 0 0 658,254

Due to customers 94,388,571 8,235,599 5,188,750 140,121 881,542 108,834,583

Other liabilities 811,589 2,429 0 0 24,635,735 25,449,753


Total 95,858,414 8,238,028 5,188,750 140,121 25,519,765 134,945,078

Gap (73,157,367) 26,465,997 29,754,666 37,382,070 (20,445,366) 0

Cumulative Gap (73,157,367) (46,691,370) (16,936,704) 20,445,366 0 0


31. INTERNAL CAPITAL ADEQUACY (CONTINUED)

(A.) Internal Capital Requirement

on the One-Year Horizon (continued)

In addition, a workshop with the senior management team

takes place at the end of each accounting period. During

the workshop, risks are identifi ed that may turn to become

material in the following year. After identifying any risks,

the ALCO decides, based on expert judgment, whether the

identifi ed risks will be covered by an additional stock of

capital, by creating a specifi c reserve, or by adopting an

action plan to reduce the potential impact.

(B.) Three-Year Forward-Looking Capital Outlook

In addition to internal capital requirement assessment, once

a year GEMB designates a 3-year capital outlook, which

includes base case development expectations and at least

one scenario of stressed development. The capital outlook

includes an outlook of the regulatory capital requirement, an

outlook of the internal capital requirement and an outlook of

capital sources. Stressed cases are based on stress scenarios

that refl ect a signifi cant downgrade of risk factors that could

occur approximately once in 25 years. Stress scenarios are

developed in cooperation with the senior management team

and discussed at a separate workshop.

Currently, based on one base case and two stress scenarios

the capital outlook shows that, measured by CAR (Capital

Adequacy Ratio), GEMB will have enough capital sources

to cover both regulatory and internal capital requirements

under both stressed cases. Calculations show that CAR

would not drop below 10% (target capital adequacy ratio),

even in the worst case scenario.

32. LITIGATION

In the past, three lawsuits against the Bank as a defendant

were fi led, which contested the validity of the agreement

on the sale of a part of the enterprise of Agrobanka Praha,

a.s. from 22 June 1998 (see the Annual Report for 2009). The

Bank concluded a settlement agreement with the involved

parties of the Agrobanka Praha, a.s. v likvidaci case on 1

July 2010. In the following months, the settlement process

has been progressing satisfactorily and initial settlement

conditions have been satisfi ed, including the withdrawal

of the lawsuits. The settlement process will continue in the

next accounting period. Following satisfaction of the initial

settlement conditions, part of the provision created for this

case was used (refer to Note 25).

33. SUBSEQUENT EVENTS

There have been no events subsequent to the balance

sheet date that require an adjustment of or disclosure in the

fi nancial statements or notes thereto.



The increase in receivables from customers reported under

the “Without specifi cation” category was caused by the

change in the applicable Czech National Bank reporting

methodology (watch receivables and receivables with

debtor default are excluded from the assigment of residual

maturity) . If the same principles were applied to the data as

at 1 January 2010 the amount of CZK 6,023,440 thousand

would be added to the “Without specifi cation” category.

(H.) Operational Risk

Operational risk is defi ned as the risk of a loss owing to the

drawbacks or failure of internal processes, the human factor

or systems, or owing to external circumstances, including

the risk of loss owing to the breach of or non-compliance

with a legal or a regulatory standard or to endangerment to

the Bank’s reputation. It also covers legal risk.

(H.a.) Operational Risk Management

Within the scope of operational risk management, the Bank

uses identifi cation and classifi cation models to identify and

describe events, risk factors, effects, the organizational

structure, and indicators. The ERM maintains the models

following the Basel II methodology and notifi es the GCC of

changes. The CRO approves models and their modifi cations.

Individual organizational units have operational risk

coordinators who provide employees with methodological

support in the area of the operational risk management

and who cooperate with the ERM in activities relating to

operational risk.

The operational risk measurement uses the LDC process

(Loss Data Collection, the collection of data on loss events).

Events whose impact exceeded the limit (CZK 10 thousand)

are the subject of the data collection.

Key risk indicators are monitored as well.

The basic limit for the operational risk management is the

operational risk tolerance (represented as the expected loss

caused by operational risk in the given year). The limit is

approved by the GCC on the basis of the outcomes of the

annual RCSA process (Risk Control Self Assessment).

To mitigate the operational risk, the Bank produces and

maintains:

• A business continuity plan for critical situations and

operations recovery, with the aim to ensure business

activities at a backup workplace; and

• IT disaster recovery plans (activity recovery plans) for key

IT applications;

and applies the following methods:

• Mitigation of the risk by means of process improvements,

process changes, organization, introduction of limits and

checks, and use of technologies;

• Transfer of the risk via outsourcing or insurance; and

• Avoidance of the risk by terminating risk-inducing

activities.

(H.b.) Calculation of Operational Risk Capital Requirement

The Bank used the alternative standardized approach (ASA)

to calculate the capital requirement for operational risk in

2010.

31. INTERNAL CAPITAL ADEQUACY

(A.) Internal Capital Requirement on the One-Year Horizon

Internal capital requirement represents the stock of capital,

which is needed to cover unexpected losses in the following

12 months on a chosen confi dence level.

Currently, GEMB uses a model called “ECAP”, which was

developed in 2008 to assess its internal capital requirement.

The ECAP model covers all regular risks that are identifi ed as

material for GEMB and for which GEMB decided to reserve

capital. The confi dence level used in the ECAP model is set up

to respect the General Electric Bank target rating AAA. Risks

covered by the ECAP model are:

• Credit risk, including concentration risk;

• Interest rate risk in the banking book;

• Operational risk; and

• Business risk: a risk that GEMB will miss its planned profi t

due to common volatility in business volumes.

Notes to the Financial Statements of GE Money Bank, a.s. 123122 GE Money Bank Consolidated Annual Report 2010

GE Money Bank, a. s., BB Centrum, Vyskočilova 1422/1a, 140 28 Prague 4-Michle

Tel.: +420 224 441 111, +420 224 443 636, Fax: +420 224 448 199

Information line: 844 844 844

www.gemoney.cz

Documents

GEMB en Annual Report 2010