Consolidated Income Statement
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flow
Notes to the consolidated financial statements
1.	General Information
2.	Accounting Policies
3.	Purposes and rules of financial risk management.
4.	Information about segments of activity
5.	Interest income and expense
6.	Fee and commission income and expense
7.	Dividend income
8.	Result on financial instruments at fair value
9.	Result on investment securities
10.	Changes in fair value - hedge accounting
11.	Other operating income and expenses
12.	Overhead costs
13.	Net impairment losses on loans and advances
14.	Impairment
15.	Discontinued operations
16.	Share of profit of associates
17.	Income tax
18.	Earnings per share
19.	Dividends paid and proposed for payment
20.	Cash and amounts due from Central Bank
21	Amounts due from banks
22.	Financial assets held for trading
23.	Derivative financial instruments
24.	Other financial instruments at fair value through profit and loss
25.	Loans and advances to customers
26.	Net investments in financial leases
27.	Investment securities
28.	Investments in associates and joint ventures entities
29.	Investments in subsidiaries
30.	Intangible assets
31.	Tangible fixed assets
32.	Investment property
33.	Other assets
34.	Assets used to pledge liabilities
35.	Amounts due to the Central Bank
36.	Amounts due  to other banks
37.	Financial liabilities held for trading
38.	Amounts due to customers
39.	Debt securities in issue
40.	Other liabilities
41.	Provisions
42.	Employee benefits
43.	Contingent liabilities
44.	Share capital
45.	Other reserves attributable to the Company’s equity holders
46.	Additional information for the cash flow statement
47.	Transactions with related entities
48.	Mergers
49.	Assets and liabilities of the Company’s Social Benefits Fund („ZFŚS”)
50.	Events after the balance sheet date
51.	First time adoption of International Financial Reporting Standards

Consolidated Income Statement for the 1st Half of 2005 and the 1st Half 2004 (*) 
Notes	1st Half of 2005	1st Half 2004
	
	(in ‘000 PLN)	(in ‘000 PLN)	
I.                  Interest income	5	1 954 316	1 813 449	
II.                Interest expense	5	(822 238)	(710 712)	
III.              Net interest income		1 132 078	1 102 737	
IV.              Fee and commission income	6	830 083	860 847	
V.                Fee and commission expense	6	(82 468)	(82 360)	
VI.              Net fee and commission income		747 615	778 487	
VII.            Dividend income	7	48	6	
VIII.          Result on financial instruments at fair value	8	53 186	5 133	
IX.              Result on  investment securities	9	33 859	4 119	
X.                Foreign exchange result		146 478	149 986	
XI.              Other operating income	11	135 470	142 724	
XII.            Other operating expenses	11	(104 460)	(118 403)	
XIII.          Net other operating income		31 010	24 321	
XIV.       Net impairment losses on loans and advances	13	(128 670)	(187 550)	
XV.            Overhead costs	12	(1 153 489)	(1 148 926)	
XVI.          Operating profit		862 115	728 313	
XVII.        Share of profit of associates	16	22 149	20 683	
XVIII.      Profit before income tax		884 264	748 996	
XIX.          Income tax expense	17	(158 871)	(87 177)	
XX.            Net profit (loss)		725 393	661 819	
1. Attributable to equity holders of the Company		727 296	663 619	
2. Attributable to minority interest		(1 903)	(1 800)	

Earnings per share 				
–	basic	18	4,37	3,99	
–	diluted	18	4,37	3,99	
(*)Consolidated Income Statement for the 1st Half of 2005 and the comparative data for the 1st Half of 2004 were prepared applying the accounting policies consistently in both the periods. The two areas of IAS 39 are exemptions  from this rule: estimation of impairment of financial assets and valuation of loans and advances at amortized cost using the effective interest method.

Consolidated Balance Sheet  as at 30  June of 2005, 31 December  2004 and the 30 June 2004 (*)

 		as at	as at	as at	
 (in ‘000 PLN)	Notes	30 Jun 2005          	31 Dec 2004         	30 Jun 2004          	
Assets	 	 	 	 	
I. Cash and amounts due from Central Bank	 20	3 200 041	3 939 275	3 053 596	
II. Debt securities eligible for rediscounting at the Central Bank	 	8 851	8 768	7 134	
III. Amounts due from banks	 21	7 286 094	5 961 477	8 541 961	
IV. Financial assets held for trading 	 22	2 508 823	3 195 771	1 117 639	
V. Derivative financial instruments	 23	631 694	503 482	355 887	
VI. Other financial instruments at fair value through profit or loss	 24	1 736 328	1 336 721	1 608 305	
VII. Loans and advances to customers	 25	26 739 530	26 219 531	25 889 023	
VIII. Net investments in financial leases	 26	638 502	547 324	647 236	
IX. Investment securities	 27	14 477 687	15 036 457	16 832 544	
    1. Available for sale	 27	11 694 383	10 106 484	11 380 562	
    2. Held to maturity	 27	2 783 304	4 929 973	5 451 982	
X. Investments in subordinated undertakings	 28,29	149 312	124 662	207 993	
XI. Intangible assets	 30	629 512	631 925	612 197	
XII. Tangible fixed assets	 31	1 489 705	1 541 828	1 600 386	
XIII.  Investment property	 32	99 384	102 869	104 829	
XIV. Income taxes	 17	170 943	97 769	116 212	
    1. Current tax assets	 	317	13 131	-	
    2. Deferred income tax assets	 17	170 626	84 638	116 212	
XV. Other assets	 33	750 210	729 488	1 189 425	
Total  assets	 	60 516 616	59 977 347	61 884 367	
					
Liabilities	 	 	 	 	
I. Amounts due to the Central Bank	 35	2 054 190	2 151 743	2 237 868	
II. Amounts due to other banks	 36	2 081 117	1 332 557	2 425 519	
III. Financial liabilities held for trading	 37	90 424	590 119	151 530	
IV. Derivative financial instruments 	 23	736 257	623 683	353 627	
V. Other financial liabilities at fair value through profit or loss	 	-	-	-	
VI. Amounts due to customers	 38	45 993 771	45 821 645	46 540 749	
VII. Debt securities in issue	 39	2	23 205	563 021	
VIII. Other liabilities	 40	1 609 508	1 060 370	2 092 002	
IX. Current income tax liabilities	 	117 570	256	22 721	
X. Provisions for deferred income tax	 17	2 866	1 222	892	
XI. Provisions	 41	106 176	349 066	357 533	
Total  liabilities	 	52 791 881	51 953 866	54 745 462	
Capital and reserves attributable to the Company’s equity holders	 				
XII. Share capital	 44	166 482	166 482	166 122	
XIII. Retained earnings	 45	-26 288	185 839	-117 366	
XIV. Other capital and reserves	 45	7 568 085	7 652 384	7 070 571	
XV. Minority interest	 	16 456	18 776	19 578	
T o t a l    e q u i t y	 	7 724 735	8 023 481	7 138 905	
Total  equity  and  liabilities	 	60 516 616	59 977 347	61 884 367	
(*)Consolidated Balance Sheet  as of 30th June 2005 and the comparative data  were prepared applying the accounting policies consistently in all periods. The two areas of IAS 39 are exemptions  from this rule: estimation of impairment of financial assets and valuation of loans and advances at amortized cost using the effective interest method
Consolidated Statement of Changes in Equity as of  30 June 2005, 30 December 2004 and 30 June 2004 
	Attributable to equity holders of the parent				
	Share capital	Retained earnings	Other equity	Total	Minority interest	Total equity	
			Reserve capital	Revaluation reserve	General banking risk fund	Other reserves	Foreign exchange differences	Convertible Bond-equity component	Net profit				
	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	
Previous GAAP balance at 1 January 2005	166 482	(91 912)	1 599 142	154 634	1 067 850	3 664 251	177	-	1 343 001	7 903 625	17 328	7 920 953	
Subsidiary shares valuation	-	4 232	-	(7 837)	-	8 416	-	-	(17 329)	(12 518)	-	-12 518	
Previous results from loans provisions adjustments	-	(222 030)	-	-	-	-	-	-	-	(222 030)	-	(222 030)	
Employee share option proceeds from shares issued 	-	(795)	-		-	-	-	5 595	(4 800)	-	-	-	
Total recognized sell-buy-back and buy-sell-back	-	188	-		-	-	-	-	(689)	(501)	-	(501)	
Fixed assets revaluation	-	157 520	-	(157 520)	-	-	-	-	-	-	-	-	
Change in fixed assets values 	-	148 888	-	-	-	-	-	-	(4 547)	144 341	-	144 341	
Change in consolidation rules	-	1 168	2 361	-	-	-	-	-		3 529	1 448	4 977	
Accrued fees adjustment	-		-	-	-	-	-	-	(15 819)	(15 819)		(15 819)	
Valuation of investment property	-	(1 893)	-	-	-	-	-	-	555	(1 338)		(1 338)	
Adjustment of deffered tax	-	(1 987)	-	-	-	-	(2 676)	-	17 619	12 956		12 956	
Adjustment related to IFRS/IAS introduction	-	85 291	2 361	(165 357)	-	8 416	(2 676)	5 595	(25 010)	(91 380)	1 448	(89 932)	
IFRSs balance at 1 January 2005	166 482	(6 621)	1 601 503	(10 723)	1 067 850	3 672 667	(2 499)	5 595	1 317 991	7 812 245	18 776	7 831 021	
Shares issued	-	-	-	-	-	-	-	-	-	-	-	-	
Transfer to statutory reserve	-	-	17 206	-	-	260 312	-	-	(277 518)	-	-	-	
Dividend to shareholders	-	-	-	-	-	-	-	-	(1 065 483)	(1 065 483)	-	(1 065 483)	
Retained earnings transfer	-	(25 010)	-	-	-	-	-	-	25 010	-	-	-	
Valuation of securities available for sale (net)	-	-	-	227 312	-	-	-	-	-	227 312	-	227 312	
Employee share option proceeds from shares issued 	-	-	-	-	-	-	-	2 831	-	2 831	-	2 831	
Minority interest	-	-	-	-	-	-	-		-	-	(2 320)	(2 320)	
Currency translation differences from foreign entities	-	-	-	75	-	-	7 074	-	-	7 149	-	7 149	
Other	-	5 343	-	118	-	(8 532)	-	-	-	(3 071)	-	(3 071)	
Net profit	-	-	-	-	-	-	-	-	727 296	727 296	-	727 296	
IFRSs balance at 30 June 2005	166 482	(26 288)	1 618 709	216 782	1 067 850	3 924 447	4 575	8 426	727 296	7 708 279	16 456	7 724 735	

	Attributable to equity holders of the parent				
	Share capital	Retained earnings	Other equity	Total	Minority interest	Total equity	
			Reserve capital	Revaluation reserve	General banking risk fund	Other reserves	Foreign exchange differences	Convertible Bond-equity component	Net profit				
	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	
Previous GAAP balance at 01 January 2004	166 122	(291 889)	1 502 059	19 668	895 583	3 937 851	6 818	-	919 815	7 156 027	20 347	7 176 374	
Subsidiary shares valuation	-	18 330	-	-	-	-	-	-	-	18 330	-	18 330	
Employee share option proceeds from shares issued 	-	-	-	-	-	-	-	795	(795)	-	-	-	
Total recognized sell-buy-back and buy-sell-back	-	-	-	-	-	-	-	-	188	188	-	188	
Fixed assets revaluation	-	157 520	-	(157 520)	-	-	-	-	-	-	-	-	
Change in fixed assets values 	-	148 888	-	-	-	-	-	-	-	148 888	-	148 888	
Change in consolidation rules	-	(5 904)	1 035	2	-	1 637	-	-	(379)	(3 609)	1 031	(2 578)	
Adjustment of deffered tax	-	(31 553)	-	-	-	-	(1 727)	-	-	(33 280)	-	(33 280)	
Adjustment related to IFRS/IAS introduction	-	287 281	1 035	(157 518)	-	1 637	(1 727)	795	(986)	130 517	1 031	131 548	
IFRSs balance at 1 January 2004	166 122	(4 608)	1 503 094	(137 850)	895 583	3 939 488	5 091	795	918 829	7 286 544	21 378	7 307 922	
Shares issued	360	-	23 137	-	-	-	-	-	-	23 497	-	23 497	
Transfer to statutory reserve	-	-	17 291	-	172 267	92 301	-	-	(281 859)	-	-	-	
Dividend to shareholders	-	-	-	-	-	-	-	-	(747 548)	(747 548)	-	(747 548)	
Retained earnings transfer	-	(110 578)	-	-	-	-	-	-	110 578	-	-	-	
Merger of leasing companies	-	309 435	57 981	-	-	(356 973)	-	-	-	10 443	-	10 443	
Valuation of securities available for sale (net)	-	-	-	126 839	-	-	-	-	-	126 839	-	126 839	
Employee share option proceeds from shares issued 	-	-	-		-	-	-	4 800	-	4 800	-	4 800	
Minority interest	-	-	-		-	-	-	-	-	-	(2 602)	(2 602)	
Currency translation differences from foreign entities	-	-	-	1 125	-	-	(7 590)	-	-	(6 465)	-	(6 465)	
Rother	-	(8 410)	-	(837)	-	(2 149)	-	-	-	(11 396)	-	(11 396)	
Net profit	-	-	-	-	-	-	-	-	1 317 991	1 317 991	-	1 317 991	
IFRSs balance at 31 December 2004	166 482	185 839	1 601 503	(10 723)	1 067 850	3 672 667	(2 499)	5 595	1 317 991	8 004 705	18 776	8 023 481	

	Attributable to equity holders of the parent				
	Share capital	Retained earnings	Other equity	Total	Minority interest	Total equity	
			Reserve capital	Revaluation reserve	General banking risk fund	Other reserves	Foreign exchange differences	Convertible Bond-equity component	Net profit				
	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	
Previous GAAP balance at 1 January 2004	166 122	-291 889	1 502 059	19 668	895 583	3 937 851	6 818	-	919 815	7 156 027	20 347	7 176 374	
Subsidiary shares valuation	-	18 330	-	-	-	-	-	-	-	18 330	-	18 330	
Employee share option proceeds from shares issued 	-	-	-	-	-	-	-	795	-795	-	-	-	
Total recognized sell-buy-back and buy-sell-back	-	-	-	-	-	-	-	-	188	188	-	188	
Fixed assets revaluation	-	157 520	-	-157 520	-	-	-	-	-	-	-	-	
Change in fixed assets values 	-	148 888	-	-	-	-	-	-	-	148 888	-	148 888	
Change in consolidation rules	-	-5 904	1 035	2	-	1 637	-	-	-379	-3 609	1 031	-2 578	
Adjustment of deffered tax	-	-31 553	-	-	-	-	-1 727	-	-	-33 280	-	-33 280	
Adjustment related to IFRS/IAS introduction	-	287 281	1 035	-157 518	-	1 637	-1 727	795	-986	130 517	1 031	131 548	
IFRSs balance at 1 January 2004	166 122	-4 608	1 503 094	-137 850	895 583	3 939 488	5 091	795	918 829	7 286 544	21 378	7 307 922	
Shares issued	-	-	-	-	-	-	-	-	-	-	-	-	
Transfer to statutory reserve	-	-	17 225	-	172 267	92 367	-	-	-281 859	-	-	-	
Dividend to shareholders	-	-	-	-	-	-	-	-	-747 548	-747 548	-	-747 548	
Retained earnings transfer	-	-110 578	-	-	-	-	-	-	110 578	-	-	-	
Valuation of securities available for sale (net)	-	-	-	-85 673	-	-	-	-		-85 673	-	-85 673	
Employee share option proceeds from shares issued 	-	-	-	-	-	-	-	-	-	-	-	-	
Minority interest	-	-	-	-	-	-	-	-	-	-	-1 800	-1 800	
Currency translation differences from foreign entities	-	-	-	-226	-	-	-1 544	-	-	-1770	-	-1 770	
Other	-	-2 180	-	140	-	4 226	-	-	-	2 186	-	2 186	
Net profit	-	-	-	-	-	-	-	1 969	663 619	665 588	-	665 588	
IFRSs balance at 30 June 2004	166 122	-117 366	1 520 319	-223 609	1 067 850	4 036 081	3 547	2 764	663 619	7 119 327	19 578	7 138 905	

Consolidated Statement of Cash Flow 
for first half of 2005 and first half of 2004
CONSOLIDATED STATEMENT			
OF CASH FLOW	1st Half 2005	1st Half 2004	
A. Cash flow from operating activities - indirect method	 	 	
   I. Net profit (loss)	727 296	663 619	
Adjustments:	(831 684)	(1 164 461)	
Depreciation	161 244	159 170	
Share of profit of associates	(22 149)	(20 683)	
Foreign exchange differences	(200 355)	7 844	
(Profit) loss on investing activities	(32 731)	(6 519)	
Impairment	-	7 286	
Interest and dividend	(462 801)	(459 423)	
Change in loans and advances to banks	(344 231)	(406 206)	
Change in financial assets as held for trading and other financial instruments at fair value through profit or loss	287 341	43 018	
Change in derivative financial instruments	(128 212)	(98 063)	
Change in loans and advances to customers	(990 565)	(860 830)	
Change in net investment in the finance lease	(91 178)	(66 158)	
Change in deferred income tax assets	(95 176)	(41 695)	
Change in other assets	(166 234)	(173 167)	
Change in amounts due to banks	651 007	494 067	
Change in liabilities as held for trading	(499 695)	151 530	
Change in derivative financial instruments and other financial liabilities at fair value through profit or loss	112 574	(85 605)	
Change in amounts due to customers	172 126	(750 920)	
Change in provisions	5 563	(35 452)	
Change in other liabilities	665 776	828 283	
Income tax paid	(120 992)	20 345	
Current tax	267 004	128 717	
Net cash from operating activities	(104 388)	(500 842)	
 	 	 	
B.Cash flows from investing activities	 	 	
Investing activity inflows	15 505 287	12 050 734	
Sale of shares in associates	-	273	
Sale of investment securities	15 203 026	11 778 060	
Proceeds from sale of intangible assets and tangible fixed assets	2 055	983	
Other investing inflows	300 206	271 418	
Investing activity outflows	(14 071 061)	(10 627 989)	
Purchase of associates	(25 000)	157	
Purchase of investment securities	(13 938 091)	(10 513 159)	
Purchase of intangible assets and tangible fixed assets	(107 907)	(114 987)	
Other investing outflows	(63)	-	
Net cash used in investing activities	1 434 226	1 422 745	

C. Cash flows from financing activities 	 	 	
Financing activity inflows	2	108 513	
Issue of debt securities 	2	94 710	
Other financing inflows	-	13 803	
Financing activity outflows	(1 088 688)	(806 548)	
Redemption of debt securities	(22 479)	(59 000)	
Dividends and other payments to shareholders 	(1 065 483)	(747 548)	
Other financing outflows	(726)	-	
Net cash from financing activities	(1 088 686)	(698 035)	
		 	
D. Total net cash flow (A.III+/-B.III+/-C.III)	241 152	223 868	
E. Net change in cash and cash equivalents	241 152	223 868	
F. Cash and cash equivalents at the beginning of the period	7 276 426	8 047 902	
G. Cash and cash equivalents at the end of the period (F+/- D)	7 517 578	8 271 770	

Notes to the consolidated financial statements 
1.	General Information 
Consolidated financial statements of the Bank Pekao S.A Group were prepared in compliance with International Financial Reporting Standards as adopted by the European Union and with respect to matters not regulated by the above standards, in accordance with  the Accounting Act dated 29 September 1994 (Official Journal from 2002, No. 76, item 694 with amendments) and the respective laws and in accordance with the Decree of the Council of Ministers dated 21 March 2005 on current and periodical information provided by issuers of securities (Official Journal from 2005, No. 49, item 463). 
Bank Pekao S.A. banking group consolidated financial statements cover the 6 month period from 
1 January 2005 to 30 June 2005 and include the financial data used for comparability purposes to the period from 1 January 2004 to 30 June 2004, for the balance sheet and statement of changes in equity the previous year’s results was also presented.
Bank Pekao S.A. (“Parent  entity”, “Parent company”„the Bank”) with the Head Office in Warsaw – Grzybowska Street 53/57 was entered into Commercial Register on 29 October 1929 on the basis of the Regional Court in Warsaw and since then has been continuously operating.
The Parent  entity is entered into the entrepreneurs National Court Register managed by the 19th Commercial Department of the Regional Court in Warsaw under the reference number KRS 0000014843.
The Parent  entity statistic number is REGON 000010205.
The live time of the Parent  entity and other group entities are unlimited.
Bank Pekao S.A. is a part of the UniCredito Italiano S.p.A capital group.
Shares of the Bank are quoted on the Warsaw Stock Exchange.
The activities of the Bank as the Parent  entity in domestic and foreign financial markets are: 
1)	Acceptance and maintenance of demand and term deposits,
2)	Running other bank accounts,
3)	Granting bank loans
4)	Conducting financial settlements in all forms recognized in domestic and international banking environments
5)	Performing cheque and bill of exchange operations,
6)	Accepting and placing deposits in domestic and foreign banks,
7)	Granting sureties and bank guarantees and issuance of letters of credit,
8)	Servicing State Treasury lendings and providing fund management services,
9)	Issuing of and trading in bank securities and maintaining securities deposit accounts
11)	Provision of services related to the issuing and financial servicing of securities,
12)	Safekeeping of valuable items, documents and securities and providing safe deposit boxes
13)	Organizing and participating in banking syndicates,
14)	Trading in cash receivables both on own account and on behalf of clients,
15)	Performing future and forward financial operations,
16)	Providing custodial services
17)	Issuing payment cards and servicing related operations,
18)	Performing Housing Society operations (“Kasa Mieszkaniowa”)
19)	Providing advisory/consultancy services on financial matters
20)	Taking up or acquiring shares and related rights in other non-bank entities or participation units of mutual/investment funds
21)	Entering into commitments related to the issue of securities,
22)	Trading in securities on the Bank’s account and on behalf of clients,
23)	Participating in debt-to-equity swap operations in accordance with terms and conditions agreed upon with the debtor,
24)	Purchasing and selling real estate,
25)	Trading in derivatives on own account and on behalf of clients,
26)	Engaging in solicitation activities described in the Act on Organization and Operation of Pension Funds
27)	Organizing and providing leasing and factoring services
28)	Selling participation units and investment certificates of mutual/investment funds in accordance with the Act on Investment Funds
29)	Acting as an insurance agent
30)	Providing transport services in relation to cash and other valuable items
31)	Maintaining securities accounts
32)	Acting as a custodian bank in accordance with the Act on Organization and Operation of Pension Funds and the Act on Investment Funds
33)	Intermediation in foreign money transfers initiated by residents and settlements with non-residents in the country
34)	Issuance of electronic money instrument
35)	Collection of debts on behalf of other banks
The activities described in detail above refer to the following types of activities according to the Polish Classification of Business Activities (PKD):
1)	Other banking services – PKD 65.12.A,
2)	Other forms of loan granting – PKD 65.22.Z
3)	Other financial intermediation services, not classified elsewhere – PKD 65.23.Z
4)	Financial risk management – PKD 67.11.Z,
5)	Investment fund management and the whole securities portfolio management  – PKD 67.12.B,
6)	Supporting financial activities, not classified elsewhere – PKD 67.13.Z.

Group constituts
The Group consists of The Bank Pekao SA and the following subsidiaries:
Name of company	Location	Core activity	% of Shareholder’s share capital 	
			30.06.2005	30.06.2004	
Bank Pekao (Ukraina) Ltd.	Łuck, Ukraina	 banking	100,00	100,00	
Centralny Dom Maklerski Pekao S.A.	Warszawa	 brokerage	100,00	100,00	
Pekao Fundusz Kapitałowy Sp. z o.o.	Warszawa	 financial	100,00	100,00	
Pekao Leasing Sp. Z o.o.	Warszawa	 leasing	100,00	100,00	
Pekao Faktoring Sp. z o.o.	Lublin	 financial	100,00	100,00	
Pekao Pioneer Powszechne Towarzystwo Emerytalne S.A.	Warszawa	 financial	65,00	65,00	
Drukbank Sp. z o.o.	Zamość	not operating	100,00	100,00	
Centrum Kart S.A.	Warszawa	 financial support	100,00	100,00	
Pekao Financial Services Sp. z o.o. 	Warszawa	 financial services	100,00	100,00	
Pekao Development Sp. z o.o.	Warszawa	real estate management	100,00	100,00	
Pekao Access Sp. z o.o.	Warszawa	 economic advisory services	55,26	55,26	
BDK Consulting Sp. z o.o.	Łuck, Ukraina	consulting, hotel and transport services	99,99	99,99	
Fabryka Maszyn Sp. z o.o.	Janów Lubelski	Machinery and equipment manufacturing	86,68	86,68	
Pekao Immobililier s.a.r.l.	Paryż, Francja	real estate	100,00	100,00	
Nowe Ogrody  Sp. z o.o.	Gdańsk	real estate management and sale  	94,00	94,00	
The Group of the Bank Pekao SA owns the following affiliated entities and joint-ventures:

Name of company	Location	Core activity	%of votes on the Shareholder equity	
			30.06.2005	30.06..2004r.	
Associates	
Central Poland Fund LLC	Wilmington, DE, USA 	 Financial brokerage	53,19	53,19	
Xelion. Doradcy Finansowi Sp. z o.o.	Warszawa	 Supporting, financial and insurance	50,00	50,00	
Pioneer Pekao Investment Management S.A.	Warszawa	 Financial brokerage	49,00	49,00	
Krajowa Izba Rozliczeniowa S.A.	Warszawa	 Clearing house	22,96	22,96	
Grupa Inwestycyjna NYWIG S.A.	Warszawa	 Financial advisory	24,60	24,60	
Hotel Jan III Sobieski Sp. z o.o.	Warszawa	 Hotels	37,50	37,50	
Fabryka Sprzętu Okrętowego 
”Meblomor” S.A.	Czarnków	 Ship equipment manufacturing	23,81	23,81	
CPF Management	Tortola, British
Virgin Islands	 Financial brokerage	40,00	40,00	
Pracownicze Towarzystwo Emerytalne „Nowy Świat” S.A.	Warszawa	PTE management	39,57	39,57	
Joint – Ventures	
Anica System S.A. *	Lublin	IT	33,84 / 13,49	33,84 / 13,49	
* - is consolidated by equity method

As of 30th June 2005
The Group controls over 50% of votes/potential voting rights in the Central Poland Fund LLC. In Group’s opinion, it does not control the entity due to the provisions in this company’s articles of association.
The Group controls over 50% of votes in Xelion Doradcy Finansowi Sp. z o.o. entity. Due to the provisions in this company’s articles of association this entity constitutes Group’s investment – an associate entity.

Members of the Management Board of Bank Pekao S.A.
	30.06.2005 		         31.12.2004 	
1.	Jan Krzysztof Bielecki 
President, CEO	1.	Jan Krzysztof Bielecki
President, CEO	
2.	Luigi Lovaglio 
Deputy President , COO	2.	Luigi Lovaglio
Deputy President, COO	
3.	Sabina Olton 
Deputy President 
Chief Accountant	3.
	Sabina Olton
Deputy President 
Chief Accountant	
4.	Przemysław Figarski
Member of the Management Board	4.	Przemysław Figarski
Member of the Management Board	
5.	Irene Grzybowski
Member of the Management Board	5.	Irene Grzybowski
Member of the Management Board	
6.	Paolo Iannone 
Member of the Management Board	6.	Paolo Iannone 
Member of the Management Board	
7.	Christopher Kosmider  
Member of the Management Board	7.	Christopher Kosmider  
Member of the Management Board	
8.	Marian Ważyński
Member of the Management Board	8.	Marian Ważyński
Member of the Management Board	

During the period covered by the financial statements there were no changes in the Management Board of the Bank 

Members of the Supervisory Board of Bank Pekao S.A.
	         30.06.2005 		        31.12.2004 	
1.	Jerzy Woźnicki
Chairman 	1.	Alessandro Profumo
Chairman	
2.	Paolo Fiorentino
Deputy Chairman, Secretary	2.	Paolo Fiorentino
Deputy Chairman, Secretary	
3.	Andrea Moneta
Deputy Chairman	3.	Jerzy Woźnicki
Deputy Chairman	
4.	Paweł Dangel	4.	Paweł Dangel	
5.	Fausto Galmarini	5.	Fausto Galmarini	
6.	Oliver Greene	6.	Oliver Greene	
7.	Enrico Pavoni	7.	Enrico Pavoni	
8.	Leszek Pawłowicz	8.	Leszek Pawłowicz	
9.	Jerzy Starak	9.	Jerzy Starak	
During the period covered by the financial statements following there were no changes in the Supervisory Board of the Bank.
Approval of the financial report
This financial report was approved by the Board of the Bank for publishing on 12 th September 2005.
2.	Accounting Policies
Basis for the preparation of consolidated financial statement
Consolidated financial statements of the Bank Pekao S.A Group were prepared in compliance with International Financial Reporting Standards as adopted by the European Union and with respect to matters not regulated by the above standards, in accordance with  the Accounting Act dated 29 September 1994 (Official Journal from 2002, No. 76, item 694 with amendments) and the respective laws and in accordance with the Decree of the Council of Ministers dated 21 March 2005 on current and periodical information provided by issuers of securities (Official Journal from 2005, No. 49, item 463). 
This consolidated report is the first interim financial report, containing a complete set of financial statements, prepared in accordance with IFRS 1. 
The date of adoption of  IFRS is the date of the opening balance sheet of the earliest of the periods presented, i.e. January 1st, 2004.  Previously published financial statements of the Bank and Group, along with statements for 2004, were prepared in accordance with the Polish Accounting Standards (PAS).  Reconciliations of equity as at 1st January 2004, 30th June 2004, 31st December 2004 and 1st January 2005 as well as net profit for the 6 month period ended 
30th June 2004 and for the year ended 31st December 2004 prepared in accordance with PAS and IFRS, are presented in Note 51. 
The Group applied the same accounting policies in preparing the opening balance sheet according to IFRS for January 1st, 2004, and throughout all presented periods.  Accounting policies applied are compliant with provisions of each IFRS in force as of June 30th, 2005, i.e. on the reporting date, apart from the exemptions allowed by IFRS.  Any changes of accounting policies are introduced retrospectively, except for exclusions allowed by the IFRS, mentioned hereinafter, which the Group decided to apply:
•	Combining business units (IFRS 1.15, Appendix B).
The Group has taken advantage of the exception related to combining of business units. Therefore, the Group did not apply IAS 22 in relation to business units combinations implemented before the date of moving to IFRS, i.e. by January 1st, 2004
•	Fair value or re-valuation as deemed cost (IFRS 1.16-19).
Taking advantage of the exception allowed by IFRS 1, the Group has measured selected items of tangible fixed assets at the fair value as of the date of adopting the IFRS, and used that fair value as deemed cost at that date.
•	Cumulated differences due to foreign currency recalculation (IFRS 1.21-22).
Taking advantage of the exception allowed by IFRS 1, the Group assumed that accumulated differences due to foreign currency translation for units operating abroad have zero value for the day of adopting IFRS.
•	Designation of previously recognized financial instruments (IFRS 1.25A).
The Group performed the designation of financial instruments as assets or financial liabilities reported at fair value through profit and loss account or as available for sale for the date of adoption of IFRS, i.e. in the case of IAS 39 – for January 1, 2005.
•	Share-based payment transactions (IFRS 1.25B).
The Group applied the standard of IFRS 2 with reference to the equity instruments that were granted after 7 November, 2002, if such equity instruments were not vested before 1 January, 2005.
Additionally, the Group used the exemption from the requirement of restating comparatives regarding IAS 32, IAS 39 and IFRS 4.  For these standards, the date of migration to IFRS is January 1st, 2005.  Comparatives pertaining to those standards are prepared using previously applied accounting policies.
The consolidated financial statements are prepared in accordance with the historical cost method, except for derivative financial instruments, financial assets available for sale, and financial assets at fair value through profit or loss, which are measured at fair value. 
The consolidated financial statements are presented in PLN, and all amounts, unless indicated otherwise, are stated in thousands (PLN ‘000).
Consolidation policies
The consolidated financial statements include the financial statements of Bank Pekao S.A. and financial statements of its subsidiaries, prepared for June 30th, 2005.  Financial statements of subsidiaries are prepared for the same reporting date as the statements of the parent company.  Adjustments are made in order to eliminate any inconsistencies in the accounting policies applied
All balances and transactions between entities in the Group, including unrealized profits resulting from transactions within the Group, have been fully eliminated.  Unrealized losses are also eliminated, unless they provide proof of permanent impairment, which should be taken into account in the consolidated financial statements. 
Subsidiaries are consolidated in the period from the date of the Group’s taking control, until the date of cessation of control. 
The consolidated financial statements account for results for that part of the period of the report, when the Group had such control. 

Associates
Associated entities are any entities in which the Group has significant influence and are not subsidiaries or joint venture entities. The Group usually determines significant influence by possession of 20 to 50 % of the total number of votes in governing bodies.
Financial statements of an associate entity are the basis for the valuation of shares held by the group using the equity method.  Balance sheet dates of the associates and of the Group are identical, and both entities apply coherent accounting policies.  Adjustments are made in order to eliminate any inconsistencies in the accounting policies applied.
An investment in an associate entity is presented in the balance sheet at cost plus subsequent changes in the Group’s share in the net assets of the entity, minus any impairment write-offs.  The profit and loss account reflects the share in the results of activities of the associate entity.  In the case of a change recognized directly in the equity of the associate entity, the Group recognizes its share in each change and discloses it, if appropriate, in the statement of changes in equity. 
When the share of the Group in the losses of the associate becomes equal or larger than the share of the Group in such associate entity, the Group discontinues recognition of further losses, unless it incurred an obligation or made a payment on behalf of the associate.
Unrealized profits and losses on transactions between the Group and its associate entities are eliminated in proportion with the Group’s shares in associates. 
Participation in joint ventures
The Group’s participation in joint ventures is recognized using the equity method, in accordance with the principles described for investments in associate entities.
Accounting estimates
i)	Preparing financial statements in accordance with IFRS requires the Management Board of the Bank to make certain estimates and to adopt certain assumptions, which affect the amounts presented in the financial statements and in explanatory notes.
The estimates which were made as of the date of migration to IFRS, i.e. for January 1st, 2004, and for each balance sheet date, reflect the conditions which existed at those dates (e.g. market prices, interest rates, foreign exchange rates).  While the estimates are based on the best knowledge regarding current conditions and activities which the Group will undertake, the actual results may differ from such estimates. 
Principal assumptions/subjective judgments adopted in making estimates by the Group pertain, primarily, to:
•	Impairment of financial assets
The assumptions presented herein, regarding measurement of impairment of credit and loans are described in this note, in the part titled “Impairment of financial assets”.
•	Impairment of investments in associate entities
For each balance sheet date, the Group assesses the existence of premises to indicate whether impairment of investments in associates has occurred.  If such premises exist, the Group estimates the value-in-use of the investment.  This requires assumptions to be adopted regarding, among others, future cash flows, which the Group may obtain from dividends or cash inflow from a potential sale of the investment.  Adoption of a different measurement assumption could affect the carrying value of some of the investments.
•	Impairment of other non-current assets 
For each balance sheet date, the Group assesses the existence of premises indicating impairment of a non-current asset (or cash generating unit).  If such premises exist, the Group performs a formal estimation of recoverable value.  Estimation of value-in-use of a non-current asset (or cash generating unit) requires assumptions to be adopted, regarding, among others, future cash flows, which the Group may obtain from the given non-current asset (or cash generating unit), any changes of amounts or times of occurrence of these cash flows, and other factors such as lack of liquidity.  Adoption of different measurement assumption could affect the carrying value of some of the investments.
•	Measurement of derivatives and debentures available for sale that do not have a quoted market price
The fair value of non-optional derivatives and debentures available for sale that do not have a quoted market price on an active market are measured using valuation models based on discounted cash flows.  Options are valued using option valuation models.  Variables used for the valuation include, where possible, data from observable markets.  However, the Group also adopts assumptions which affect the valuation of instruments.  Adoption of a different measurement assumption could affect the carrying value of financial instruments. 
•	Measurements of management options 
The assumptions adopted, regarding measurement of management options, are described in Note 42
•	Calculation of retirement and sick pension severance payments provision
The severance payments provision is determined on an individual basis, separately for each employee.  The reserve is valuated on the basis of the current value of future, long-term liabilities of the Bank for retirement and sick pension severance payments.
The basis for the calculation of a provision for an employee is the expected amount of retirement or sick pension severance pay which the Bank undertakes to pay under the Group Bargaining Agreement (GBA).  The expected severance pay amount is calculated as the product of the following factors:
•	expected amount of the basis of calculation of severance pay, in accordance with provisions of the GBA,
•	expected increase of the calculation basis until the retirement age,
•	percentage factor depending on the amount of years of employment, in accordance with the GBA.
The amount calculated as above is discounted using an actuarial technique.  The discounted amount is reduced by amounts of annual reserve write-offs actuarially discounted for the same date, which the Bank effects in order to increase the employee’s provision.
Amounts of annual write-offs are calculated using the projected unit credit method.
Actuarial discount is the product of the financial discount and of the probability of the given person’s reaching retirement age as an employee of the Bank.
The probability mentioned above has been determined using the competing risks method, with the following risks taken into account:
•	possibility of abandoning employment,
•	risk of complete disability for work,
•	risk of death.
Valuation of the foreign currency items
•	The functional currency and the presentation’s currency
The items contained in presentations of particular units of the Group, including the Bank’s branch in Paris, are priced in the functional currency, i.e. in the currency of the basic economic environment in which a given entity operates.
The consolidated financial report is presented in Polish Zloty. The Zloty is the functional currency and the presentation currency of the parent business entity.
As the closing exchange rate, the Group adopted the average NBP exchange rate as of the balance sheet date. 
•	Transactions and balances 
Transactions expressed in foreign currency are translated into the functional currency by applying the exchange rate at the date of the transaction. Exchange rate profits and losses due to settlements of these transactions and to the balance sheet valuation of assets and monetary commitments expressed in foreign currency are accounted for in the profit and loss account.
Exchange rate differences due to non-monetary items, such as equity instruments classified to financial assets designated for fair value valuation through the profit and loss account, are accounted for together with changes in the fair value of the profit and loss account.
Exchange rate differences due to non-monetary items, such as equity instruments classified to financial assets available for sale, are included in the revaluation reserve update.
•	Companies of the Group
At consolidation, assets and liabilities of foreign business entities are translated into the Polish currency, i.e. to the presentation currency, as per the closing exchange rate for the balance sheet date. Revenues and costs in the profit and loss account are recalculated as per average exchange rates calculated on the basis of the exchange rates from particular days of the reporting period, except for the situations when exchange rates fluctuate significantly and the average exchange rate is not an acceptable approximation of the exchange rate from the transaction date. In such a situation, income and costs are translated on the basis of the exchange rate from the date of transaction.
The data recognized in financial statements of: the Bank’s Paris branch, and of the Bank Pekao (Ukraine) subsidiary are converted into PLN from the functional currencies of these entities, using the following exchange rates:
•	for conversion of balance sheet items, average exchange rates announced by the National Bank of Poland on June 30th, 2005, which were:
	30.06.05	31.12.04	30.06.04	
PLN for 1 UAH	0,6644	0,5642	0,7041	
PLN for 1 EUR	4,0401	4,0790	4,5422	
•	for conversion of profit and loss account items, arithmetic means were used of average exchange rates on the last day of each ended month for 6 months of 2005 and 2004, which were:
	I half 2005	I half 2004	
PLN for 1 UAH	0,6198	0,7263	
PLN for 1 EUR	4,0805	4,7311	
The foreign exchange differences from the valuation of foreign entities are accounted for as a separate component of equity.
During the sale of a business entity conducting operations abroad, such exchange rate differences are recognized in the profit and loss account as part of profit or loss on sales.
The goodwill arising on acquisition of the entity operating abroad, as well as any adjustments of the balance sheet value of assets and liabilities to fair value, arising on acquisition of the entity operating abroad, are treated as assets and liabilities of an overseas entity, i.e. they are expressed in the functional currency of the overseas entity and translated at the closing exchange rate, as described above.
Derivative instruments
The Group conducts operations in derivative financial instruments: currency transactions (spot, forward, currency swap, and currency options), exchange rate transactions (FRA, IRS), derivative transactions based on securities prices, exchange rates and stocks indices. Companies of the Group do not apply hedge accounting, therefore, all the above mentioned instruments are classified to the trading portfolio. Derivative financial instruments are initially recorded at fair value as of the transaction date, and subsequently valued to the fair value. The fair value is established on the basis of quotations of the instruments in active markets, including prices of recent transactions, as well as on the basis of valuation techniques, including the models based on discounted cash flows and options valuation models, depending on which of the valuation models is appropriate. The valuation of derivative financial instruments is presented in the balance sheet in the item of “Derivative financial instruments”, on the assets side, if the fair value is positive, and on the liabilities side, if the fair value is negative. Changes in the financial instruments valuation to fair value are reflected in the profit and loss account.
In case of purchasing a financial instrument which has a built-in derivative component, the whole or part of cash flows related to such a financial instrument changes in the way similar to what would be the case with the built-in derivative instrument on its own. The built-in derivative instrument is reported separately from the basic contract. This happens when the following conditions are met jointly:
•	the financial instrument is not included in assets for trading or in assets designated for fair value valuation through the profit and loss account, whose revaluation results are reflected in financial income or cost of the reporting period, 
•	the nature of the built-in instrument and the related risks are not closely tied to the nature of the basic contract and to the risks resulting from there,
•	a separate instrument, whose characteristics correspond to the features of the built-in derivative instrument, would meet the definition of the derivative instrument,
•	it is possible to reliably establish the fair value of the built-in derivative instrument.
In case of contracts that are not financial instruments with a component of an instrument meeting the above conditions, the built-in derivative instrument is classified in financial assets meant for trading, or to financial liabilities, and is valued at fair value, and changes in the fair value are accounted for in the profit and loss account.
Interest income and expense 
The Group recognizes interest income and expense related to financial instruments measured at amortized cost using the effective interest rate method. Also, interest income on financial assets available for sale is recognized using the effective interest method. 
The effective interest rate is the rate which exactly discounts the estimated future cash inflows and payments made in the expected period until expiry of the financial instrument, and in a shorter period where justified, to the net carrying value of the financial asset or liability.  The calculation of the effective interest rate includes all commissions paid (and?) received by parties to the agreement, points which are an integral part of the effective interest rate, transaction costs, and all other premiums and discounts. 
The interest income contains interest itself, as well as commissions received or due for credits, inter-bank deposits, and securities held-to-maturity and available for sale, recorded in calculation of the effective interest rate.
Upon finding an impairment of a financial asset measured at amortized cost and financial assets available for sale, interest income is still recognized in the profit and loss account, but is calculated from the newly determined fair value of the financial instrument (from the new, lower value of the instrument, (i.e. value decreased by the revaluation write-off).  For the calculation of interest income on the newly determined fair value, that interest rate is used, according to which future cash flows were discounted for the purpose of impairment measurement. 
Costs of the reporting period applicable to payables due to interest on customer accounts and to commitments for issuing the Group’s securities are accounted for in the profit and loss account using the effective interest rate
Fee and commissions income
Commission income and costs received from banking operations on client accounts, from operations on payment cards, as well as from brokerage, factoring and selling operations are recognized as revenue at the time the service is rendered, other fees and commissions are deferred and recognized as revenue over time.
The Group recognizes two basic types of commissions related to credit operations: 
- loan origination fees and commissions;
- commitment fees. 
- loan origination  fees and commissions are treated as adjustments to the effective interest rate and recognized as interest income. 
Commitment fees are recognized on the accrual basis throughout the life of the facility they relate to. 
In case of loans and advances without a defined repayment schedule and without an interest rate changes schedule (e.g. overdraft facilities and credit card products commissions) are recorded over time throughout the life of the facility, using the straight line method.
Foreign exchange result 
Foreign exchange result is calculated taking into account foreign exchange gains and losses, both realised and unrealised, arising from daily valuation of assets and liabilities denominated in foreign currencies and recorded under foreign exchange income and cost. The exchange rate used for valuation of a given foreign currency used for valuation is the average exchange rate set by the President of NBP on the balance sheet day. The foreign exchange result also includes the exchange differences resulting from valuation of net investments in foreign entities on the date of sale of the given investment. Until the date of sale, foreign exchange differences arising from valuation of net assets in a foreign entity are recognised as a separate component of equity. 
Other operating income and expenses 
Other operating income include mainly gains realized on sale/liquidation of items of fixed assets and assets repossessed for debt, amounts of uncollectible debts recovered, amounts of received damages, penalties, fines, income on rental of real estate, write backs of provisions for court litigations and repossessed assets.  Other operating costs comprise primarily: the costs of sold or liquidated tangible fixed assets and assets seized for debts; debt collection costs; provisions for receivables under dispute and assets seized for debts and donations
Financial assets
Financial assets are classified in the following categories:
•	financial assets valued at fair value through the profit and loss
This category comprises two sub-categories: financial assets held for trading and financial assets designated at initial recognition for fair value valuation through the profit and loss.
Financial assets held for trading include in particular: debt and equity securities, loans, and receivables purchased or classified here with the aim of selling in the short term. The Group also classifies derivative instruments here.
•	held-to-maturity.
These are financial assets of identified or identifiable payment terms and due dates, that were purchased with the aim of holding them until their due date and the Group intends  to hold them until that date.
The financial assets of that category are valued at amortized cost using the effective interest rate. Recognition of amortized cost, taking into account the effective interest rate, is recorded in interest income.
•	available for sale
These are the financial assets with a non-defined holding period. The portfolio is composed of debt and equity securities, as well as loans and receivables not accounted for in other categories. Interest on assets available for sale is calculated using the effective interest rate method and accounted for in the profit and loss account.
 Financial assets available for sale are measured at fair value, and profits and losses resulting from a change of fair value in relation to amortized cost are charged to the revaluation reserve.  The revaluation reserve item is carried to the profit and loss account upon sale of asset or its impairment.  In the event of permanent impairment of the asset, previously recognized surpluses from fair value measurement decrease the "Revaluation reserve".  If the amount of previously recognized increases is insufficient to cover permanent impairment, the difference is charged to the profit and loss account, under the heading “Reserve write-offs and revaluation”.
Dividends due to equity instruments are accounted for in the profit and loss account at the moment of establishing the entity’s right to receive payments.
•	loans and receivables
Loans and receivables are financial assets not quoted on the active market, characterized by payments that are constant or identifiable, other than derivative instruments. This category contains both the debt securities bought from the issuer, for which there is no active market, credits, loans and other receivables received and granted. Loans and receivables are measured at amortized cost, using effective interest rate and considering impairment.
Standardized purchase and sale transactions of financial assets valued at fair value through the profit and loss statement, held for trading (with the exclusion of derivative instruments), held to maturity and available for sale are recognized and excluded from the books by the Group on the day of the transaction settlement, i.e. the day of the receipt or delivery of the asset.
Changes in the fair value of the asset to be received between the date of the transaction and the date of the settlement are recognized in the same way, as for the possessed asset.
Loans are recognized at the time of disbursement to the debtor. 
Derivative instruments are recognized and excluded from the books at the date of the transaction.
Sale and re-purchase agreements
Repo and reverse-repo transactions, as well as sell-buy back and buy-sell back transactions, are security sale or purchase operations with promise of repurchase or resale at an agreed date and price.
Sales transactions with the repurchase promise granted (repo and sell-buy back) are recorded, at the transaction date, in payables to other banks or in payables to customers due to deposits, depending on the transaction’s contractor. The purchased securities with the resale promise granted (reverse-repo and buy-sell back) are recorded as receivables from banks or as credits and loans granted to customers, depending on the transaction’s contractor.
The difference between the selling and buying price is treated as interest costs/revenue, respectively, and accounted for during the duration of the contract, using the effective interest rate. 
Impairment of financial assets
For each balance sheet date, the Group assesses, whether there is objective evidence of impairment of a given financial asset or of a group of such assets. Impairment  of a financial asset or of a group of financial assets was incurred only if there is objective evidence for the impairment due to events that followed the initial recording of the specific asset (“the loss event”), and when the events affect the expected cash flows regarding these assets, and the flows may be estimated in a reliable way.
The objective evidence for impairment of financial assets includes – as per the Group’s principles – information on the following loss events:
•	substantial financial problems of the issuer or debtor;
•	failure to keep to the contract terms, e.g. failing to repay or delay in repayment interest or part of capital;
•	the Group’s granting concessions or privileges to the debtor, for economic and legal reasons following financial problems of the debtor, which in other circumstances would not be taken into account;
•	high probability of bankruptcy or of another financial reorganization of the debtor;
•	disappearance of the active market for the particular financial assets due to financial difficulties.
•	observable data indicating a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group, including:
- adverse changes in the payment status of borrowers in the group or
- national or local economic conditions that correlate with defaults on the assets in the group.   
The Group classifies credit receivables by size of engagement, into the individual and group portfolios.
In the individual portfolio, each particular credit exposure is subjected to an impairment test. If there is objective evidence of impairment, the carrying amount of the  receivable is reduced. If for a given exposure no objective evidence of impairment exists, the exposure is included in the credit portfolio subject to group assessment. 
In a group portfolio, groups of similar credit risk characteristics are identified, which are then assessed collectively for the impairment.
If there is any objective evidence of impairment of financial assets classified as loans and receivables, or as investments held-to-maturity, then the amount of the impairment is the difference between the carrying amount of an asset and the current value of estimated future cash flows (excluding future credit losses that were not incurred), discounted using an original effective interest rate established with the initial recognition of a given financial asset. The carrying amount of the asset is then reduced through use of the allowance account, and the amount of loss is recognized in the profit and loss account.
Calculation of the present value of estimated cash flows related to the impaired collateralized financial asset also takes into consideration the cash flows resulting from the liquidation of the collateral reduced by the costs of repossession and disposal. 
Expected future cash flows related to the group of financial assets for impairment on a group basis are estimated on the basis of the historical cash recoveries recorded for assets of similar risk characteristics.
Historical parameters of recoveries are adjusted on the basis of the data coming from current observations, so as to take into consideration the influence of current conditions and to exclude the influencing factors in the historical period, that are not presently valid. 
If in the next period the amount of impairment is lower due to an event taking place after the impairment (e.g. an improvement in the debtor’s credit rating), then the reduction of impairment is reversed through an appropriate adjustment of an amount on the allowance account. The amount of the reversal is recognized in the profit and loss account.
Derecognition of financial instruments
A financial instrument is derecognized when the Group loses control over the contractual rights constituting a given financial instrument; usually, this occurs in the case of selling an instrument, or when all cash flows assigned to a given instrument are transferred to an independent third party. 
In particular, the Group derecognizes a loan or part of it, when it loses control over rights under the loan or a part of the loan.  The Group loses control, if rights pertaining to the credit agreement expire, the group waives such rights, or sells the loan.  Most often, the Group derecognizes loans in the event of:
•	discontinuation of execution proceeding,  
•	death of borrower,
•	conclusion of bankruptcy procedures, 
•	unconditional cancellation of a part of the loan.  
Contingent liabilities and promised liabilities 
The Group enters into transactions which are not recognized in the balance sheet as assets or liabilities upon signing, but they cause contingent liabilities and promised liabilities.  Contingent liabilities are characterized as being: 
- a potential obligation, whose existence will be confirmed upon occurrence or non-occurrence of uncertain future events that are beyond control of the Group (e.g. disputes in progress);
- a current obligation, which arises as a result of past events, but is not recognized in the balance sheet, as it is improbable that it will be necessary to make expenses to fulfill the obligation, or the obligation amount cannot be reliably measured (mostly: unused credit lines and guarantees and letters of credit issued).
Non-current assets held for sale	
Non-current assets held for sale include assets whose carrying value is to be recovered by way of their resale, and not in their continued use.  Only those assets are classified as held for sale that are available for immediate sale in their present condition, whose sale is highly probable, i.e. the decision has been made to fulfill the plan of selling the given asset, an active programme has been launched to find a buyer and to complete the selling plan.  Also, such an asset is offered for sale at a price which is rational in reference to its present fair value, and it is expected that the sale will be treated as sale completed within one year from the date of the asset’s classification in this category. 
Non-current assets held for sale are recognized at the lower of carrying value and fair value less the costs of selling such assets.  For assets classified in this category, depreciation is not applied. 
Tangible fixed assets
Tangible fixed assets are the controlled fixed assets and outlays made to build such assets. Tangible fixed assets include fixed assets with an expected period of use above one year, maintained to be used to serve the Group’s needs or to be transferred to other entities, based on the lease contract or for administrative purposes. 
Tangible fixed assets are recorded at historical costs reduced by depreciation/amortization and impairment write-downs. The historical costs are made up of the purchase price/cost of creation, and costs directly related to the purchase of assets.
Each component part of property, plant and equipment items, whose purchasing price or generation cost is material in comparison with the purchasing price or generation cost of the entire item, is depreciated separately.  The Group allocates the initial value of the property, plant and equipment items into its significant parts. 
Costs of modernization of property, plant and equipment increase their carrying value or are recognized as a separate item of property, plant and equipment only when it is probable that such expenditures will ensue with an inflow of economic benefits to the Group, and the cost of such expenses can be reliably measured. 
Costs of repairs and maintenance of property, plant and equipment are charged to the profit and loss account in the reporting period in which they were incurred.
Investment properties
Initially, investment property assets are recognized at cost, including the transaction costs.  After the initial entry, investment property assets are measured in accordance with requirements of the purchasing price model. 
Investment property assets are derecognized when disposed of, or in the case of permanent decommissioning of a property, when no further benefits from its sale are expected.  Any profits or losses due to derecognition of an investment property are charged to the profit and loss account in the period in which such derecognition occurred.
Intangible assets
Intangible assets are deemed to include assets which fulfill the following requirements:
- they can be separated from an economic entity and sold, transferred, licensed or granted for use for a fee to third parties, both separately, and together with their accompanying contracts, assets or liabilities, or
- arise from contractual titles or other legal titles, irrespective of whether those are transferable or separable from the business entity or other rights and obligations.
Goodwill	
Goodwill on acquisition of a business entity is initially recognized at cost, which is the surplus of the costs of merger of business entities over the share of the acquiring entity in the net fair value of identifiable assets, liabilities, and contingent liabilities.  After the initial recognition, goodwill is presented at cost less all accumulated impairment write-offs.  The test for impairment is conducted annually.  The carrying value of goodwill in the opening balance sheet according to IFRS, i.e. for January 1st, 2004 was established at the value recognized using previously applied principles, taking into account IFRS 1 requirements, which included its subjection to the impairment review.
Goodwill on acquisition of subsidiaries is presented among intangible assets, and goodwill on acquisition of associates is presented under the heading “Investments in associates”.
As of the date of acquisition, the acquired goodwill is allocated to each of the cash generating units, which may benefit from the synergies of merger.  Impairment is determined by estimating the recoverable value of the cash generating unit to which the given goodwill pertains.  In the event of the recoverable value of the cash generating unit being less than the carrying value, an impairment write-off is made.  If the goodwill is a part of the cash generating unit, and a part of activity of that unit is sold, then in measuring the profit or loss on selling such activity, goodwill related to the activity sold is included in the carrying value of the sold part of activity.  Goodwill sold in such circumstances is measured on the basis of the relative value of the activity sold, and the value of the remaining part of the cash generating unit. 
Other intangible assets
Intangible assets are assets controlled by the Group, which do not have a physical form, which are identifiable and represent future economic benefits for the Group, directly attributable to such assets. 
These are mainly:
•	computer software licenses,
•	copyrights,
•	costs of completed development work,
•	know-how.
Intangibles acquired in a separate transaction are recognized at cost.  Intangibles acquired in transactions of acquisition of a business entity are recognized at fair value as of the date of acquisition.  After initial recognition, this category of intangibles is treated using the historic cost model.  The useful life of intangible assets is assessed and considered to be limited or indefinite.  In the case of amortisation being calculated from assets with limited useful life, such costs are indicated in the profit and loss account under the heading “Overheads”.  Amortisation write-offs are not made for intangible assets with indefinite useful life. 
With the exception of development works, intangible assets generated by the Group on its own resources are not recognized in assets, and outlays incurred for their generation are recognized in the profit and loss account for the year in which they were incurred. 
As regards intangible assets with limited useful life, the Group makes a judgment as to whether there are indications of their impairment.  Where it is found that such indications exist, the Group estimates the recoverable value of such intangible assets.  Useful lives are also subject to review annually, and where necessary, adjusted starting from the next financial year. 
In the case of intangible assets of an indefinite useful life, the Group performs, on an annual basis, a test for impairment, irrespective of whether there are indications of impairment.
Costs of research works are charged to the profit and loss account at the time when they are incurred.  Outlays for development work performed within the given project are carried forward to the next period, if it can be acknowledged that they will be recovered in the future.  After the initial recognition of outlays for development work, the historic cost model is applied, which requires that assets be recognized at cost less accumulated amortisation and accumulated impairment write-offs.  All outlays carried forward to the next period are amortized throughout the expected period of obtaining profits from selling the given project. 
Costs of development work are reviewed for any impairment on an annual basis – if an asset has not yet been commissioned, or more often – when during a reporting period indications of impairment appear, indicating that their carrying value may not be recoverable. 
Loss or profit due to derecognition of intangible assets are measured as the difference between the net sales income and carrying value of the given asset, and are recognized in the profit and loss account upon derecognition of the asset. 

Depreciation and amortization charge
Depreciation charge of tangible and intangible fixed assets is applied using the straight line method, using defined depreciation rates throughout the period of their useful lives. Depreciation rates defined for balance sheet purposes are periodically verified, with results of verification effective starting from the year following the year of verification. Fixed assets and intangible assets for tax purposes are depreciated in compliance with tax regulations.  
Balance sheet depreciation rates applied to the basic groups of fixed assets, and to intangible assets, are as follows:
a/ depreciation rates used for fixed assets

Buildings; cooperative ownership right to an apartment, cooperative right to non-residential property	1,5 % - 10,0%	
Technical equipment and machines	2,5%  - 30,0 %	
Means of transport	12,5% - 20,0%	
b/ depreciation rates for intangible assets

Software licenses, copyrights	14,0% - 50,0%	
Costs of completed development works	33,3 %	
Know-how and other intangible assets 	20,0%	
Assets that are not depreciated include land, outlays on fixed assets and, certain intangible assets. 
Depreciation value increases the overhead costs of the Group’s operations, while the write-off for impairment is included in other operating costs. 
Recoverable value of non-current assets
For each balance sheet date, the Group reviews its assets for indications of impairment.  Where such indications exist, the Group makes a formal estimation of the recoverable value.  In the event of the carrying value of a given asset being in excess of its recoverable value, its impairment is stated, and a write-off is made to adjust its value to the level of recoverable value.  Recoverable value is the lower of the following two values: fair value of the given asset or cash generating unit less costs of disposal, or the value in use, determined for each asset separately, in the event that the given asset generates cash flows significantly independent from those generated by other assets or groups of assets.
If there are indications of impairment of common property, i.e. assets which do not generate cash independently from other assets or groups of assets, and the recoverable value of the individual asset included among common property cannot be determined, the Group determines the recoverable value at the level of the cash generating unit, to which the given asset belongs.
Provisions
Provisions are established when the Group has an obligation (legal or constructive) resulting from past events, and where it is probable that the fulfillment of such obligation will cause a necessity of transfer of assets representing economic benefits, and it is possible to reliably estimate the amount of such liability.  In the event of the money-in-time value impact being significant, the amount of provisions is established by discounting forecasted future cash flows to the present value, using a rate of discount reflecting current market evaluations of money-in-time, and any risk related to the given obligation.
Also, this item includes provisions related to actuarial long-term employee benefits.  All provisions are charged to the profit and loss account. 
Employee benefits provisions
The amount of provision for retirement payment is established on the basis of an actuarial valuation performed by an independent actuary at least twice a year. 
The provision for restructuring costs is established when general criteria for recognition of provisions are met, as well as detailed criteria for the obligation to establish restructuring provisions as per IAS 37.
The amount of employment restructuring provision is established by the Group on the basis of the best available estimates of direct outlays, which necessarily result from restructuring and are not connected with the Group’s current activities. 
Provisions established are recognized on the liabilities side under the “Provisions” heading, and accordingly in the profit and loss account, as remuneration costs. 
Share-based Payments 
The Group conducts an employee participation program, under which senior and lower management staff are granted preemptive rights to buy shares of the Bank (see Note 42).
The Group used transitional provisions of IFRS 2 in respect to share-based payments, and applied IFRS 2 only to share-based payments granted after November 7th, 2002, the rights to which were not vested until December 31st, 2004, inclusively. 
Transactions settled in equity instruments 
The cost of transactions settled with employees in equity instruments is measured by reference to the fair value as of the granting date.  The fair value is established on the basis of the Black-Scholes model for appraisal of dividend-yielding stock options, according to expectations of the Management Board concerning the number of rights to be exercised. The amount of the employee share program is adjusted as of every balance sheet date if expectations of the Management Board change concerning the number of rights to be exercised. No efficiency/results data except those related to the price of shares (“market conditions”) are taken into account in the assessment of transactions settled in capital instruments.
The cost of share-based payments is recognized together with the accompanying increase of the value of equity in the period in which effectiveness/performance conditions were fulfilled, ending on the date when certain employees acquire full rights to the benefits (“vesting date”).  The accumulated cost recognized for transactions settled in equity instruments for each balance sheet date until the vesting date reflects the extent of elapse of the vesting period and the number of rights to shares, the rights to which – in the opinion of the Bank’s Management Board for that date, based on best available estimates of the number of equity instruments – will be eventually vested. 
In the event of modifications of conditions for granting remuneration settled in equities, as part of fulfillment of the minimum requirement, costs are recognized if such conditions have not changed.  Also, costs are recognized resulting from each increase in the value of the transaction, resulting from modifications, measured for the date of change. 
In the event a right is cancelled, it is treated in such way as if the rights were acquired on th\e date of cancellation, and any unrecognized costs resulting from such rights are immediately recognized.  In the case, however, where the cancelled share right is replaced by a new share right, the cancelled right and the new right are treated as if they are a modification of the original right, i.e. in the manner described in the paragraph above. 
The diluting effect of options issued is taken into account when establishing the amount of earnings per share, as additional dilution of shares (see Note 18).
Leases
The Group is a party to lease contracts, on the basis of which it grants for paid use or benefit non-current assets or intangible assets for an agreed period of time.
In the case of lease contracts, which result in transferring substantially all the risks and rewards incident to ownership of the asset under lease, the subject of lease is derecognized.  A receivable amount is recognized, however, in the amount equal to the present value of minimum lease payments.  Lease payments are divided into financial income and reduction of the balance of receivables in such way as to enable reaching a fixed rate of return from the outstanding receivables. 
Lease payments for contracts which do not fulfill qualifications of finance lease are recognized as income in the profit and loss account, using the straight-line method, throughout the period of the lease.
The Group is also a party to lease contracts, under which it takes for paid use or drawing benefits another party’s non-current assets or intangible assets for an agreed period. 
In the case of lease contracts, under which essentially all risks and rewards incident to ownership of the lease are transferred, the subject of lease is recognized in assets as a non-current asset, and a liability is recognized in the amount equal to the present value of minimum lease payments as of the date of commencement of the lease.  Lease payments are divided into financial costs and reduction of the balance of the liability in such way as to enable obtaining a fixed rate of interest on the outstanding liability.  Financial costs are recognized directly in the profit and loss account. 
Fixed assets which are the basis of the finance lease contract are depreciated in the manner defined for the Group’s non-current assets.  However, if it is uncertain whether the ownership of the subject of the contract has been transferred, then non-current assets used pursuant to finance lease contracts are depreciated over the shorter of: the expected useful life or the period of lease. 
Lease payments for contracts which do not fulfill qualifications of a finance lease agreement are recognized as costs in the profit and loss account in a straight-line method throughout the period of the lease. 
For purposes of financial reporting, the income tax provision is established using the balance-sheet liabilities method in reference to all temporary differences as at the balance sheet date between the taxable amount of assets and liabilities, and their carrying value as presented in the financial statements.
The deferred tax provision is recognized in reference to all positive temporary differences:
•	except for situations where the deferred income tax provision arises from amortisation of goodwill or from the initial recognition of an asset or liability in a transaction other than merger of entities, and at the point of the transaction they have no influence on the gross financial result, nor for the taxable income or deductible loss, and 
•	in the case of positive temporary differences resulting from investments in subsidiaries or associates and participation in joint ventures – except for situations where the dates of reversal of temporary differences are subject to control and where it is probable that in the foreseeable future the temporary differences will not be reversed. 
The carrying value of a deferred tax asset is verified for each balance sheet date, and is reduced accordingly to the extent that it is no longer probable that the taxable income will be achieved sufficient for partial or full realization of a deferred income tax asset.
•	except for situations where deferred tax assets concerning negative temporary differences originate from initial recognition of an asset or liability in a transaction other than merger, and at the point the transaction has no influence on the gross financial result, nor for the taxable income or deductible loss, and
•	in the case of positive temporary differences resulting from investments in subsidiaries or associates and participation in joint ventures, the deferred tax asset is recognized in the balance sheet only in such an amount, in which it is probable that the above temporary differences will be reversed and taxable income will be achieved which will allow the negative temporary differences to be deducted.
The carrying value of a deferred tax asset is verified for each balance sheet date, and is reduced accordingly to the extent that it is no longer probable that the taxable income will be achieved sufficient for partial or full realization of a deferred income tax asset.
Deferred tax assets and deferred tax provisions are measured at tax rates which are predicted to be in force in the period in which an asset is realized or a provision is dissolved, assuming as the basis the tax rates (and tax regulations) which are legally or actually in place as of the balance sheet date.
The income tax regarding items directly recognized in equity is recognized in equity.
The Group offsets deferred tax assets and deferred tax provisions, where it has legal title to effect such offsetting, and the deferred assets and provisions pertain to the same taxpayer. 
Current income tax is assessed at the tax rate in force and is calculated on the basis of the gross profit determined on the basis of relevant accounting regulations, adjusted by non-taxable income and non-deductible expenses. 
Other taxes
Incomes, costs, and assets are recognized and reduced by the amount of VAT, tax on civil law acts, and other taxes on sales, except where:
•	the tax on sale, paid upon purchase of goods and services, is not recoverable from the tax authorities; in that case, the sales tax is recognized accordingly as a part of the cost of acquisition of an asset, or as  part of a cost item, and
•	receivables and payables are presented with the amount of sales tax taken into account.
The net amount of sales tax recoverable from or payable to the tax authorities is recognized on the face of the balance sheet as a part of receivables or liabilities. 
Prepayments
Prepayments refer to particular expenditure types that will be recognized in the profit and loss proportionally to time elapsed in the future reporting periods The items represent a pre-payment for future income streams due to fund participation premium. Prepayments are presented in the balance sheet as “other assets”.
Deferred income and Accrued expenses  
This item mainly covers the income of commissions settled using the straight line method, and other income charged in advance; types that will be recognized in the profit and loss in the future reporting periods
Costs accounted for over time include reserves for material costs resulting from the services provided for the Group by contractors, which will be settled in the following periods, as well as reserves for payables to employees (incl. annual bonus and holiday bonus, extra payments, awards, and unused holiday allowance). 
Deferred income & accrued expenses are presented in the balance sheet in the item of “other payables”. 
Other income and operating costs
Other operating income mainly covers the income from sales/liquidation of fixed assets and assets repossessed for debts, recovered lost receivables, compensations received, penalties, fines, income from hire/lease of property and from resolved provisions for disputed items, and for assets repossessed for debt. Other operating costs are mainly costs of sale/liquidation of fixed assets and of assets repossessed for debts, costs of receivables collection, and costs of provisions for: disputed items, assets repossessed for debts, and donations.
Equity of the Capital Group 
Equity is comprised of the capital and funds created by the companies of the Capital Group in accordance with the binding legal regulations i.e. the appropriate laws, Statutes and Articles of Association. Equity also includes retained profit (loss). The items comprising the equity of subordinated entities, other than statutory capital, are added to the appropriate positions of the parent entity’s equity to the extent in which the Parent  entity owns the subsidiaries.
The equity of the Capital Group includes only those parts of the subsidiaries’ equity which were created after the date of purchase of shares or stocks by the parent entity.
In particular this applies to the change in equity resulting from the achieved net profit or incurred loss or revaluation. 
 a) Statutory capital relates only to the capital of the Bank as the Parent  entity and is presented at nominal value specified in the Statute and in the entry in the Enterprises Registry,
b) Reserve capital is created from appropriations of profits and premiums arising on the issue of shares, in accordance with the Statutes of the companies,
c) Revaluation reserve includes: the effects of revaluation of financial assets available for sale, foreign exchange differences arising from revaluation of foreign branch’s result at the average weighted exchange rate established as of the balance sheet date in relation to the average NBP exchange rate; and the value of deferred tax for items that comprise temporary differences. Revaluation reserve is presented net in the balance sheet
d) Other reserve capital utilized in accordance with the purposes defined in the Statute is created from appropriations of profits,
e) Exchange rate differences  include differences arising from recalculation of the result of a foreign branch at the weighted average exchange rate for the balance sheet date, in relation to the average National Bank of Poland exchange rate, and from valuation of net assets in foreign entities;
f) B bonds convertible into equity  includes the equity fair value of financial instruments issued as part of transactions settled in equity instruments in accordance with IFRS 2,
g) General banking risk provision represents accumulated appropriations of net profit in accordance with the terms of the Banking Law of 29 August 1997,
i) Retained earnings comprises the total retained profits and uncovered losses of the companies consolidated under the full method,
Minority interest
Minority interest equity is the share in the equity of the subsidiary entity consolidated under the full method, and belonging to entities other than those comprising the Capital Group. 
Insurance contracts
The Bank sells to its customers products which fulfill the definition of an insurance contract in accordance with IFRS 4 Insurance Contracts.  These involve mainly financial guarantees and letters of credits, under which the Bank assumes a substantial insurance risk from the client, in agreeing to indemnify the customer for the adverse impact of a specific uncertain future event. 
In accordance with the currently applicable IFRS 4, in using IFRS for preparing financial statements, the Group may continue with the accounting principles and provisioning methodology used to date.  IFRS 4, however, requires, among others, testing the adequacy of adopted insurance liabilities (in the case of the Group – provisions for guarantees and letters of credit) and disclosure of information regarding insurance contracts in accordance with IFRS 4.  Using the exemption in IFRS 1, the Group did not apply IFRS 4 for comparatives, i.e. the date of migration to IFRS, in respect to IFRS 4, is January 1st, 2005. 
Cash and cash equivalents
Cash and cash equivalents in the Cash Flow Statement include “Cash-in-hand, due from the Central Bank” (except for the NBP bonds) and amounts current amounts due from banks with maturity up to three moths.

3.	Purposes and rules of financial risk management.
The Bank’s Management Board is responsible for achieving the strategic goals set within the risk management policy.
The Asset and Liability Management Committee controls the capital adequacy of the Bank, as well as the liquidity risk and the market risk (interest rate and foreign exchange rate risks) related to the external banking supervision limits and to the internal limits of the Bank.
Main classes of risk related to the financial instruments of the Group cover credit risk, interest rate risk, liquidity risk, and foreign currency risk. Management Board of the bank reviews and verifies the policies of managing each of the above areas of risk – these policies were briefly presented below. The group is also monitoring the market risk related to all of the possessed financial instruments. The accounting policy of the Group covering derivative instruments were presented in Note 2	
Credit risk
Credit risk is one of the basic risks associated with the activities of the Bank. The percentage share of loans in the Bank’s balance sheet leads to the significance of maintaining this risk at a safe level for the result of the activities carried out by the Bank.
The credit risk is minimized due to the Bank’s procedures, in particular those relating to the rules of transaction risk evaluation, establishing collateral, setting authorization limits for granting loans, and limiting of exposure to some areas of  business activity. To increase security the Bank’s lending activity is limited by the restrictions of the Banking Law as well as internal safety norms set by the Bank, including in particular concentration limits for specific sectors of the economy, share of large exposures in the loan portfolio of the Bank, and exposure limits for particular foreign countries, banks, and domestic financial institutions.
Protection of the quality of the Bank’s loan portfolio is also ensured by periodical reviews and on-going monitoring of loan repayments and the financial condition of the borrowers.
The Banking Law establishes maximum exposure limits for banks. 
Concentration of credit risk
According to Article 71.1 of the Law the total balance sheet and off-balance sheet exposure of a bank to the risks associated with a single borrower or a group of related borrowers may not exceed 20% of the bank’s equity when at least one of those entities is related to the bank or 25% when no relation between those entities and the bank exists. 

Moreover, Article 71.2 of the Law specifies a maximum total exposure limit with entities whose individual exposure exceeds 10% of the bank’s equity, at a level of 800% of this equity.

As of 30 June 2005 no exposures exceeded the limit set forth by Article 71.2, whereas one exposure of the Bank exceeded the limits specified in Article 71.1 in the case of one group of related entities. This exposure resulted mainly from the financing of central state investment. Loans granted for the central state investment are guaranteed by the surety of State Treasury. According to Article 71.3.3. such exposure is excluded from calculations of exposure limits and as a consequence the maximum exposure limits set forth in the Banking Law were not exceeded.

a)	Concentration by entity:
		     as of 30.06. 2005 
Exposure to 10 largest clients of the Bank	% of portfolio	
Client 1	4,8	
Client 2	2,0	
Client 3	1,7	
Client 4	1,5	
Client 5	1,1	
Client 6	1,1	
Client 7	0,9	
Client 8	0,9	
Client 9	0,8	
Client 10	0,8	
		
Total 	15,6	

In the table above 52,8 % is a credit exposure, with the risk on the level of the State Treasury. Other exposure  is due to transactions with local governments (12,4 %) and large corporate customers (34,8 %). None of the exposures mentioned above were classified as irregular.

b)	Concentration by capital group: 
as of  30. 06. 2005
Exposure to 5 largest capital groups
which are the Bank’s clients	% of  portfolio	
 Group 1	5,6	
 Group 2	2,0	
 Group 3	1,8	
 Group 4	1,7	
 Group 5	1,5	
		
Total 	12,6	

c)	Concentration by industrial sector:
In order to minimize credit risk associated with industrial sector concentration, the Bank employs a system monitoring the sector structure of its credit exposure. The system involves setting concentration limits for particular sectors, monitoring the loan portfolio and gathering appropriate information. The system is based on the lending exposure in particular types of business activity according to the classification applied by the Polish Classification of Economic Activities (Polska Klasyfikacja Dzialalnosci—PKD). Concentration limits are determined on the basis of investment risk, quality of the Bank’s lending exposure, current economic trends in particular sectors, the Bank’s equity, and the total exposure to particular sectors. A monthly comparison of the Bank’s exposure to particular sectors with the current limits allows timely identification of the sectors in which the concentration of sector risk may become excessive. If such a situation arises, an analysis of the economic situation of that sector is performed considering the current and predicted trends and the quality of the current exposure to that sector. These measures enable the Bank to develop policies that reduce sector risk and allow for a timely reaction to a changing environment.

The table below presents the structure of the exposure by industrial sectors.

	% of portfolio	
Sector description	as of  30.06.2005	as of  30.06.2004	
Wholesale and retail trade, repair of motor vehicles and motorbikes, articles for personal use and household goods	17,0%	15,2%	
Production and supply of utilities (electricity, gas, water)	12,0%	12,3%	
Public administration and national defense, guaranteed social insurance	11,5%	10,1%	
Financial services	7,3%	11,4%	
Other manufacturing activities and waste management	6,7%	6,1%	
Construction and real estate management	6,2%	6,0%	
Production of food, beverages and tobacco products	5,6%	4,8%	
Transport, storage and communication	5,3%	5,0%	
Production of metals and processed metal products	3,4%	3,6%	
Production of electrical and optical equipment	3,4%	3,7%	
Production of transport equipment	3,3%	3,8%	
Production of celluloid pulp, paper and paper products, publishing and printing	3,2%	3,2%	
Rental and other business, IT services, education	3,0%	2,0%	
Production of chemicals	2,3%	2,2%	
Other exposure	9,8%	10,6%	
			
Total	100,00	100,00	

Market risk 
In its trading, retail, corporate and investment activities the Bank is exposed to market risk, i.e. the interest rate, foreign exchange rate, and equity price risks of the securities held by the Bank, as well as other risks resulting from changes in market conditions.
Interest rate risk
The table below presents the classification of assets and liabilities according to their exposure to interest rate risk:
	
Assets and financial liabilities exposed to fair value risk related to interest rate	
debt securities with fixed interest rate	
Loans with fixed interest rate	
Client deposits with fixed interest rate	
Liabilities due to the issue of securities	
	
Assets and liabilities exposed to Cash flow risk related to interest rate	
Debt securities with variable interest rate	
Loans with variable interest rate	
Client deposits with variable interest rate	
	
Assets and financial liabilities not directly exposed to the interest rate risk	
Equity securities	
The Group is also exposed to the interest rate risk due to sheet transactions, which notional amounts are recognized off-balance and which fair values are recognized as assets or liabilities of the balance sheet. These transactions include derivative transactions, Forward Rate Agreements (FRA), Interest Rate Swaps (IRS), currency swaps, and foreign currency forward contracts .
While managing interest rate risk, the Group is aiming at maximizing the economic value of the capital employed and achieving the planned interest result, within the accepted limits. The financial position of the Group in relation to the changing interest rates is monitored through the interest rate gap (revaluation gap), duration analysis simulation analysis, and stress testing. 
The sensitivity of the interest result to the interest rate changes and sensitivity of the economic value of the equity of the Group was within the internally accepted limits.

The table below presents the assets, liabilities and off-balance sheet exposures of the Group classified as of 30 June 2005 by interest rate risk criterion	
								
Balance sheet items	up to1  month inclusive	from 1 month to  3 months inclusive	from 3 months to 1 year inclusive	from 1 year to 5 years inclusive	above 5 years	Non interest bearings assets/liabilities	Total	
Assets:	25 863 030	6 424 680	9 747 999	9 663 610	3 928 348	4 888 949	60 516 616	
Cash and amounts due from Central Bank	965 354	-	-	-	-	894 392	1 859 746	
Debt securities eligible for rediscounting at the Central Bank	2 042	6 809	-	-	-	-	8 851	
Amounts due from banks	5 045 137	906 130	1 334 827	-	-	-	7 286 094	
Loans and advances to customers	18 895 209	3 711 470	1 929 420	1 405 703	735 206	-	26 677 008	
Net investments in financial leases	279 464	56 684	105 610	196 744	-	-	638 502	
Debt securities*	675 824	1 743 587	6 378 142	8 061 163	3 193 142	27 293	20 079 151	
Others	-	-	-	-	-	3 967 264	3 967 264	

Liabilities:	37 835 586	6 242 870	3 960 762	1 454 233	721 489	10 301 676	60 516 616	
Amounts due to banks	1 527 581	458 910	389 390	1 082 724	676 702	-	4 135 307	
Amounts due to customers	36 308 005	5 723 942	3 571 370	366 886	23 568	-	45 993 771	
Debt securities in issue 	-	-	2	-	-	-	2	
Others	-	60 018	-	4 623	21 219	10 301 676	10 387 536	

								
								
Gap	(11 972 556)	181 810	5 787 237	8 209 377	3 206 859	(5 412 727)	-	

 Off- balance sheet exposures 
Assets	9 395 302	11 195 313	20 834 692	5 767 191	844 481	-	48 036 979	
Liabilities	7 377 031	10 937 334	21 831 477	5 880 835	2 074 953	-	48 101 630	
								
Gap	2 018 271	257 979	(996 785)	(113 644)	(1 230 472)	-	(64 651)	
Assets								
Liabilities								

Total gap	(9 954 285	439 789)	4 790 452	8 095 733	1 976 387	(5 412 727)	(64 651)	

*/ This item contains unquoted debt instruments presented in the balance sheet under Cash-in-hand, amounts due from the Central Bank, Due from banks, Loans and advances to customers 
The table below presents the assets, liabilities and off-balance sheet exposures of the Group classified as of 30 June 2004 by interest rate risk criterion (‘000 PLN)	

 
Balance sheet items	up to1  month
inclusive	from 1 month to  3 months inclusive	from 3 months to 1 year inclusive	from 1 year to 5 years inclusive	above 5 years	Non interest bearings assets/liabilities	 
Total	
Assets:	26 066 413	7 114 879	13 460 446	6 236 181	3 809 604	5 196 844	61 884 367	
Cash and amounts due from Central Bank	782 143	-	-	-	-	932 762	1 714 905	
Debt securities eligible for rediscounting in the Central Bank 	3 028	4 106	-	-	-	-	7 134	
Amounts due from banks	5 924 941	724 440	1 892 580	-	-	-	8 541 961	
Loans and advances to customers	17 150 499	2 970 101	2 470 916	1 578 409	1 091 631	-	25 261 556	
Net investments in financial leases	89 711	208 900	106 913	241 712	-	-	647 236	
Debt securities*	2 116 091	3 207 332	8 990 037	4 416 060	2 717 973	25 689	21 473 182	
Others	-	-	-	-	-	4 238 393	4 238 393	
	26 066 413	7 114 879	13 460 446	6 236 181	3 809 604	5 196 844	61 884 367	
								
Liabilities:	40 081 912	5 262 308	4 548 701	1 333 632	1 201 153	9 456 661	61 884 367	
Amounts due to banks	2 207 023	105 576	398 375	1 041 287	911 126	-	4 663 387	
Amounts due to customers	37 863 296	5 104 882	3 426 898	145 645	28	-	46 540 749	
Liabilities arising from securities issued	11 593	-	551 428	-	-	-	563 021	
Other	-	51 850	172 000	146 700	289 999	9 456 661	10 117 210	

								
								
Gap	(14 015 499)	1 852 571	8 911 745	4 902 549	2 608 451	(4 259 817)	-	

Off-balance sheet exposures
Assets	8 935 132	5 771 920	12 996 573	1 758 837	336 053	-	29 798 515	
Liabilities	7 410 150	6 630 599	12 298 197	2 480 490	1 074 656	-	29 894 092	
								
Gap	1 524 982	(858 679)	698 376	(721 653)	(738 603)	-	(95 577)	

	-12 490 517	993 892	9 610 121	4 180 896	1 869 848	-4 259 817	-95 577	
Total gap	(12 490 517)	993 892	9 610 121	4 180 896	1 869 848	(4 259 817)	(95 577)	
								
*/ This item contains unquoted debt instruments presented in the balance sheet under Cash-in-hand, amounts due from the Central Bank, Due from banks, Loans and advances to customers 
The below table presents the effective interest rates pertaining to each classes of financial assets and liabilities to which it applies, broken down by major currencies: 
As of 30th June 2005
	 PLN	EUR	 USD	Other	
	%	%	%	%	
Assets					
Cash, amounts due from Central Bank 	4,95				
Due from banks 	5,00	2,13	3,00	5,47	
Loans and advances to customers 	9,02	4,92	4,98	6,20	
Leases 	11,25	7,44	7,00	8,63	
Debt securities 	5,22	3,89	4,23	6,50	
					
Liabilities 					
Due to Central Bank	15,55				
Due to banks 	5,38	2,06	3,56	2,25	
Due to customers 	4,04	1,13	1,14	1,84	
Debt securities in issue 	0	-	-	-	
Following the exemption allowed by IFRS 1 the Group does not present the comparative data relating the effective interest rates.
Currency risk
The objective of the currency risk management is to create a currency profile of the balance sheet and off-balance items which will remain within the external and internal limits. In 2004, the currency risk was low. The Bank’s exposure to the currency risk is measured for internal purposes on a daily basis by means of the Value at Risk (VaR) model, as well as the extreme conditions testing analysis that is supplementary to the VaR method.
The table below presents foreign currency exposure by the separate asset, liabilities and off balance-sheet liabilities types related to financial obligations granted and guarantees granted.														as of  30.06.2005.
	Currency(‘000  PLN)		
	 PLN	EUR	 USD	Others	Total	
Assets:						
Cash and amounts due from Central Bank	1 555 840	118 262	111 958	73 686	1 859 746	
Debt securities eligible for rediscounting in the Central Bank 	8 851	-	-	-	8 851	
Receivables from banks	4 059 802	662 394	2 221 507	342 391	7 286 094	
Loans and advances to customers	20 443 128	4 425 229	1 172 058	636 593	26 677 008	
Net investments in financial leases	478 509	78 158	3 952	77 883	638 502	
Debt securities*	15 801 135	859 462	3 169 575	248 979	20 079 151	
Investments in associated undertakings	144 504	61	4 747	-	149 312	
Others	3 191 232	570 553	45 684	10 483	3 817 952	
						
Total 	45 683 001	6 714 119	6 729 481	1 390 015	60 516 616	

Liabilities:						
Amount due to Central Bank	2  054 190	-	-	-	2 054 190	
Amounts due to banks	1 528 975	297 790	209 665	44 687	2 081 117	
Amounts due to customers	32 825 487	4 489 579	7 820 347	858 358	45 993 771	
Liabilities arising from securities issued	2	-	-	-	2	
Provisions	101 702	2 200	2 274	-	106 176	
Others	9 561 002	589 693	106 662	24 003	10 281 360	
						
Total	46 071 358	5 379 262	8 138 948	927 048	60 516 616	

NET EXPOSURE	(388 357)	1 334 857	(1 409 467)	462 967	-	
OFF-BALANCE SHEET LIABILITIES RELATED TO FINACIAL OBLIGATIONS GARANTED AND GURANTEES GRANTED	8 770 449	1 454 660	1 313 610	429 607	11 968 326	
*/ This item contains unquoted debt instruments presented in the balance sheet under Cash-in-hand, amouts due from the Central Bank, Due from banks, Loans and advances to customers 
As of 30.06.2004.
	Currency (‘ 000. PLN)		
	 PLN	EUR	 USD	Others	Total	
Assets						
Cash and amounts due from Central Bank	1 346 200	172 310	122 395	74 000	1 714 905	
Debt securities eligible for rediscounting in the Central Bank 	7 134	-	-	-	7 134	
Receivables from banks	3 248 202	707 710	3 866 728	719 321	8 541 961	
Loans and advances to customers	17 937 899	4 498 072	1 812 852	1 012 733	25 261 556	
Net investments in financial leases	487 462	59 640	4 995	95 139	647 236	
Debt securities*	16 879 551	847 087	3 575 763	170 781	21 473 182	
Investments in associated undertakings	202 905	-	5 088	-	207 993	
Others	3 719 634	281 451	21 771	7 544	4 030 400	
						
Total 	43 828 987	6 566 270	9 409 592	2 079 518	61 884 367	

						
Liabilities						
Amounts due to the Central Bank	2 237 868	-	-	-	2 237 868	
Amounts due to banks	1 906 315	291 325	91 169	136 710	2 425 519	
Amounts due to customers	30 952 395	4 869 902	9 893 043	825 409	46 540 749	
Liabilities arising from securities issued	563 021	-	-	-	563 021	
Provisions	335 369	3 269	18 653	242	357 533	
Other	9 091 867	397 482	247 263	23 065	9 759 677	
						
Total	45 086 835	5 561 978	10 250 128	985 426	61 884 367	

NET EXPOSURE	(1 257 848)	1 004 292	(840 536)	1 094 092	-	
OFF-BALANCE SHEET LIABILITIES RELATED TO FINACIAL OBLIGATIONS GARANTED AND GURANTEES GRANTED	8 887 163	1 634 868	1 706 916	68 820	12 297 767	
*/ This item contains unquoted debt instruments preseted in the balance sheet under Cash-in-hand, amouts due from the Central Bank, Due from banks, Loans and advances to customers 

Liquidity risk
The objective of managing liquidity risk is:
to ensure and maintain the Bank’s solvency with respect to current and future planned payables, taking into account the cost of acquiring liquidity and return on the Bank’s equity, 
to prevent any crisis situation, and to outline solutions that would allow the Bank to overcome such a situation in case the latter occurred. 
The Bank’s investments (both in PLN and foreign currencies) are carried out in accordance with the requirements of the Banking Law and the recommendations of the Banking Supervisory Board. The Bank invests primarily in treasury securities of the Polish government, financial instruments of countries and financial institutions with the highest ratings, and those with high levels of liquidity and desired yield. Due to their to their liquidity characteristics, the financial instruments would assist the bank to overcome crisis situations.
According to the Banking Supervisory Board recommendations, the Bank introduced internal liquidity indices that reflect the ratios of total adjusted maturating assets to total adjusted maturing liabilities. 
In addition, the Bank employs the appropriate procedures protecting both against the liquidity risk increase and against a substantial deterioration of the Bank’s financial liquidity.
The emergency plan in case of deterioration of financial liquidity of the Bank takes into consideration four levels of liquidity risk, depending on the amount and duration of cash outflow from the non-banking client accounts. The plan also determines the sources from which the expected cash outflows will be covered and states to what extent the Bank’s Management is responsible for making necessary decisions in order to restore the required liquidity level. Both the emergency plan and the possibility of obtaining cash from sources specified in this plan are subject to periodical verification.

The table presents  assets and liabilities of the Group  as of 30.06.2005 by maturity (‘000 PLN)	
							
Balance sheet  items	up to1  month
inclusive	from 1 month to  3 months inclusive	from 3 months to 1 year inclusive	from 1 year to 5 years inclusive	above 5 years	Total	
Assets	24 489 285	3 854 002	9 028 805	7 801 299	15 343 225	60 516 616	
Cash and amounts due from Central Bank	1 859 746	-	-	-	-	1 859 746	
Debt securities eligible for rediscounting in the Central Bank 	2 042	6 809	-	-	-	8 851	
Amounts due from banks	5 188 384	807 384	984 090	263 719	42 517	7 286 094	
Loans and advances to customers	3 580 338	2 873 594	6 601 925	4 791 395	8 829 756	26 677 008	
Net investments in financial leases	16 859	33 614	153 597	411 627	22 805	638 502	
Debt securities*	13 787 269	124 660	1 271 733	1 568 416	3 327 073	20 079 151	
Others	54 647	7 941	17 460	766 142	3 121 074	3 967 264	

Liabilities	15 063 041	12 175 700	14 100 027	11 426 617	7 751 231	60 516 616	
Amounts due to  banks	2 155 005	631 840	346 949	856 371	145 142	4 135 307	
Amounts due to customers	12 093 450	11 525 592	13 727 236	4 448 939	4 198 554	45 993 771	
Liabilities arising from securities issued	-	-	2	-	-	2	
Other	814 586	18 268	25 840	6 121 307	3 407 535	10 387 536	

						
Gap	9 426 244	(8 321 698)	(5 071 222)	(3 625 318)	7 591 994	-	

Off-balance sheet items
Assets	11 891 790	1 695 559	2 243 145	460 976	-	16 291 470	
Liabilities	13 223 777	1 650 461	2 213 686	138 941	4 092 083	21 318 948	
							
Gap	(1 331 987)	45 098	29 459	322 035	(4 092 083)	(5 027 478)	

							
Gap total	8 094 257	(8 276 600)	(5 041 763)	(3 303 283)	3 499 911	(5 027 478)	

*/ This item contains unquoted debt instruments presented in the balance sheet under Cash and amounts due from the Central Bank, Due from banks, Loans and advances to customers 

The table presents  assets and liabilities of the Group  as of 30.06.2004 by maturity (‘000 PLN)	
							
Balance sheet  items
	up to1  month
inclusive	from 1 month to  3 months inclusive	from 3 months to 1 year inclusive	from 1 year to 5 years inclusive	above 5 years	Total	
Assets:	22 133 663	2 719 797	9 465 434	8 079 544	19 485 929	61 884 367	
Cash and amounts due from Central Bank	1 714 905	-	-	-	-	1 714 905	
Debt securities eligible for rediscounting in the Central Bank 	3 028	4 106	-	-	-	7 134	
Amounts due from banks	5 069 606	552 155	1 649 799	1 153 520	116 881	8 541 961	
Loans and advances to customers	1 531 034	1 293 413	4 889 010	4 939 932	12 608 167	25 261 556	
Net investments in financial leases	13 490	44 509	117 304	464 443	7 490	647 236	
Debt securities*	13 777 873	804 794	2 770 298	1 420 484	2 699 733	21 473 182	
Others	23 727	20 820	39 023	101 165	4 053 658	4 238 393	

Liabilities:	13 414 592	10 193 422	15 289 296	8 261 084	14 725 973	61 884 367	
Amounts due to banks	2 437 968	37 164	366 538	272 934	1 548 783	4 663 387	
Amounts due to customers	9 674 775	10 097 158	14 488 855	7 799 342	4 480 619	46 540 749	
Liabilities arising from securities issued	11 380	46 047	405 250	100 344	-	563 021	
Other	1 290 469	13 053	28 653	88 464	8 696 571	10 117 210	

						
Gap	8 719 071	(7 473 625)	(5 823 862)	(181 540)	4 759 956	-	

Off-balance sheet items
Assets	10 685 665	2 423 537	2 531 287	136 041	59 191	15 835 721	
Liabilities	17 570 747	2 474 625	3 424 794	138 371	528 366	24 136 903	
							
Gap	(6 885 082)	(51 088)	(893 507)	(2 330)	(469 175)	(8 301 182)	

							
Gap total	1 833 989	(7 524 713)	(6 717 369)	(183 870)	4 290 781	(8 301 182)	
							
*/ This item contains unquoted debt instruments presented in the balance sheet under Cash and amounts due from the Central Bank, Due from banks, Loans and advances to customers 
Exposure to credit risk and market risk 
The tables below present the exposure of the Bank to credit risk and particular types of market risk. The amounts have been calculated on the basis of Banking Supervisory Board Resolution No 4/2004 dated 8 September 2004. 
The risk weighted value to credit risk of the balance sheet receivables is calculated as the product of the carrying amount and the risk weight appropriate for the client and the type of collateral.
The risk weighted exposure of derivatives to credit risk is calculated on the basis of a balance sheet equivalent of a derivative. The balance sheet equivalent of a derivative instrument is calculated according to original exposure method for transactions in banking portfolio.
In the case of the other off-balance-sheet liabilities the credit risk exposure is calculated as the product of the balance-sheet equivalent (product of the nominal value of off-balance sheet liability and percentage risk weight) and the appropriate risk weight for the given client and the type of potential collateral.
Capital requirements resulting from credit risk are calculated by adding up the risk weighted assets and off-balance-sheet liabilities in the banking portfolio and multiplying this sum by 8%.  
In the case of the instruments classified to trading portfolio, capital requirements are calculated for the individual types of market risk.
Credit and market risk at 30.06.2005r.

Balances instruments			
Instrument 	balance value	risk weighted assets	
	‘000 PLN	‘000 PLN 	
Cash	 888 094	-	
Receivables	37 023 000	25 489 862	
Debt securities	15 662 113	142 848	
Other securities, shares	298 514	298 514	
Fixed assets	1 496 835	1 496 835	
Other	942 541	437 172	
			
Total banking portfolio	56 311 097	27 865 201	
Clearing collateral KDPW	1 736	-	
Investment securities	4 246 238	-	
Reverse repo transactions	102 708	-	
			
Total trade portfolio	4 350 682	-	
			
Total	60 661 779	27 865 201	

Off balance sheet instruments				
Instrument	Replacement cost	Balance sheet equivalent amount	Risk weighted  amount	
	‘000 PLN	‘000 PLN	‘000 PLN	
Derivates				
Interest rate instruments:	468 660	620 485	165 377	
-IRS	377 639	458 685	97 017	
-FRA	21 612	22 612	4 842	
-CIRS	69 409	138 293	63 339	
-Futures – on government bonds	-	-	-	
-call options– securities instruments	-	895	179	
Currency instruments:	152 844	202 952	61 863	
Forward	17 348	38 583	19 270	
Spot 	2 423	2 435	692	
Swap I leg	6	6	1	
Swap II leg	75 328	103 637	20 727	
Options	57 739	58 291	21 173	
Other instruments:	-	15	8	
Warrants	-	15	8	
				
Total: 	621 504	823 452	227 248	

  Including:      banking portfolio	-	-	-	
                        trading portfolio	621 504	823 452	227 248	
				
Other off-balance sheet banking portfolio 			
Instrument 	Off-balance sheet value 	Balance sheet equivalent amount	Risk weighted  amount	
	‘000 PLN	‘000 PLN	‘000 PLN	
Credit line	9 128 363	1 330 853	1 200 872	
Warranties granted	1 344 752	779 251	718 988	
Letters of credit 	214 070	107 035	98 884	
Other	1 536 533	1 510 197	391 823	
				
Total banking portfolio	12 223 718	3 727 336	2 410 567	

Issue guarantees	22 000	1 000	200	
Forwards on securities	1 609 060	525 554	-	
				
Total trade portfolio	1 631 060	526 554	200	

	Off-balance sheet value 	Balance sheet equivalent amount	Risk weighted  amount	
				
Total banking portfolio (credit risk)	68 534 815	30 275 768	2 422 061	

Capital requirements for trading portfolio (Market risk)		
Market risk	64 908	
In this:		
      Currency risk	-	
      Commodity price risk	-	
Equity price risk	32	
      Debt instrument specific risk	5 657	
      Total interest rate risk	59 219	
		
 Settlement risk – delivery and contractor	18 180	
Other	-	
		
Total capital requirement	2 505 149	

Credit and market risk were calculated according to the Resolution 4/2004 of Banking Supervisory Commission dated September 2004 
Fair value of balance sheet financial instruments
The market value cannot be established for numerous financial instruments; therefore, the presented fair values have been estimated on the basis of various valuation methods, including estimation of the present value of future cash flows.
There are certain financial instruments, which are not recognized at fair value in the financial statements of the Group. Fair value represents the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction.   
In the case of certain groups of financial assets, held on the basis of the amount of the payment due, it has been assumed that fair value is equal to book value. This applies, in particular, to cash and cash equivalents, current receivables and client liabilities as well as other assets and liabilities.
It has been assumed that the estimated fair value of loans outstanding including individual impairment is equal to their book value. 
The fair value of investment securities held to maturity amounts to PLN 2 879 084 ths (at 31.12.2004, PLN 5 003 823 ths, at 30.06.2004,  PLN 5 494 565 ths). 
Custodial activities
The Bank has been offering depository services on the basis of the decision of the Securities and Exchange Commission. The Bank’s clients include domestic and foreign financial institutions, banks offering depository and investment services, insurance companies, investment and pension funds, as well as non-financial institutions. The Bank offers services involving settlement of transactions on domestic and foreign markets, client’s asset custody, maintaining securities and cash accounts, assets valuation, and servicing dividend and interest payments.
Custody Services bears the risk of potential liability in case of breach of legal and contractual duties.
In 1st half 2005 the Bank achieved an over 16% increase of assets under custody compared to the end of 2004. The most significant ( c.a. 24%) increase was reached in the domestic clients segment. The growth of assets under custody was due to  higher investment activity of clients. The total value of securities transactions settled by the Bank in 1H 2005 was 2.5 times higher than in 2nd half 2004.
In 1st half 2005 the Bank signed a new custody contract with a newly created investment fund. Moreover, it commenced  operational services for two funds of Pioneer group: newly established “Pioneer Dynamicznej Ochrony Kapitalu SFIO” and “Pioneer Akcji Amerykanskich FIO” that switched to Bank Pekao SA from another provider. In June 2005 the liquidation process of “Pioneer Arbitrazowy FIZ” was completed. Bank Pekao acted as liquidator of this fund.

Subsequent agreements were also concluded with foreign financial institutions for the provision of custodial services by the Bank on the territory of Poland and lending of securities in order to ensure the liquidity of settlements. The Bank maintained the leading position in the area of servicing depositary notes programmes, servicing more than 50% of these programmes

4.	Information about segments of activity
Segmentation by industry is the primary segmentation basis in the Group while segmentation by assets location is supplementary.
The Group settles transactions between segments as if they concerned unrelated entities – using current market prices. Funds transfers between Bank’s business divisions, providing services to retail and corporate customers, and the treasury unit are based on market prices with reference to the funds currency and maturity.
Industrial sectors
Industrial sectors are as follows:
o	Retail banking – full-range of banking activity related to retail clients and micro and small companies with annual turnover not exceeding PLN 10 million, and also income of the Group’s companies consolidated under the full method, providing services to retail clients,
o	Corporate banking – full-range of banking activity related to medium and large companies, and also income of the Group’s companies consolidated under the full method, providing services to corporate clients,
o	Treasury and investment activities – Bank’s involvement in inter-bank market, in debt securities and capital investments in companies, which are not a part of other segments, and also income of the Group’s companies consolidated under the full method and assigned to this activity.
The data on income and working assets and liabilities of each industrial sector of the Group in the first half of 2005 and in the first half of 2004 is presented below. The data for the first half of 2004 is not fully comparable as the Group applied the admissible exemptions of IFRS 1 relating mainly to effective interest rate and impairment charges. 

	1st first 2005
(in ‘000 PLN)	Retail activity	Corporate activity	Treasury and investment activity	Total Group	
 	 	 	 	 	
External interest income	482,056	767,141	705,119	1,954,316	
External interest expense	282,052	468,330	71,856	822,238	
Net external interest income	200,004	298,811	633,263	1,132,078	
Internal interest income	734,110	434,110	-1,168,220	0	
Internal interest expense	244,226	554,461	-798,687	0	
Net internal interest income	489,884	-120,351	-369,533	0	
Net interest income	689,888	178,460	263,730	1,132,078	
					
Non interest income	689,586	242,592	80,018	1,012,196	
					
TOTAL INCOME	1,379,474	421,052	343,748	2,144,274	

Working assets*	7,448,671	19,768,241	27,102,045	54,318,957	
Working liabilities*	30,672,152	15,009,007	4,569,515	50,250,674	
	* Bank only
	1st first 2004
(in ‘000 PLN)	Retail activity	Corporate activity	Treasury and investment activity	Total Group	

External interest income	442,675	659,329	711,445	1,813,449	
External interest expense	258,885	392,936	58,891	710,712	
Net external interest income	183,790	266,393	652,554	1,102,737	
Internal interest income	659,578	337,180	-996,758	0	
Internal interest expense	208,111	442234	-650345	0	
Net internal interest income	451,467	-105,054	-346,413	0	
Net interest income	635,257	161,339	306,141	1,102,737	
					
Non interest income	722,274	206,165	33,613	962,052	
					
TOTAL INCOME	1,357,531	367,504	339,754	2,064,789	

Working assets*	6,988,424	18,239,969	30,507,538	55,735,931	
Working liabilities*	34,334,897	13,238,864	4,403,027	51,976,788	
	* Bank only

Managerial model for budgeting and monitoring the business lines is focused on total income. Costs are managed centrally through dedicated units and allocation to business lines is not performed.

Segmentation by geographical region
The operating activity of the Pekao S.A. Group is concentrated in Poland through the network of Bank Pekao S.A. branches and the Group’s companies.
In addition to Poland, the Group performs its activities also in the following countries:
- France – through the branch of Bank Pekao S.A. in Paris,
- Ukraine – through the Bank Pekao Ukraine – subsidiary company of Bank Pekao S.A.
Results generated by activities of the Group performed outside Poland are insignificant in comparison to the result of the whole Group. 
5.	
Interest income and expense 
	Interest income 
	I half 2005	I half 2004	
	‘000 PLN	‘000 PLN	
Income  on placements in other banks	               148 229	            104 227	
Income  on other placements on money market 	                 34 370	              19 558	
Income on  loans to customers	            1 222 337	         1 133 373	
Income on the investment securities	471 892	498 232	
Income on  financial assets valued at fair value through  profit an loss	
                 77 488	
              58 059	
			
Total	             1 954 316	         1 813 449	

	
	Interest expense
	I half 2005	I half 2004	
	‘000 PLN	‘000 PLN	
Expense on other bank’s deposits 	                 41 074	              35 631	
Expense on other deposits on the money market 	                 63 498	              14 887	
Expense on amounts due to customers  	               695 108	            618 686	
Expense  due to the amortization of premium on investment securities  	
                 21 850	
              27 205	
Expense  on debt securities in issue 	                      708	              14 303	
			
Total	               822 238	            710 712	

	Interest income for the first half of 2005 includes income from impaired financial assets in the amount of PLN 68,861 ths. 
	Total amount of interest income for the 1st half 2005, measured using the effective interest rate method, with reference to financial assets which are not valued at fair value through profit and loss, amounted to PLN 1,602,841 ths. Interest Expense, calculated using the effective interest rate method, with reference to financial liabilities which are not valued at fair value through profit and loss, amounted to PLN 713,897 ths. 
6.	Fee and commission income and expense

	Fee and commission income
	I half 2005	I half 2005	
	‘000 PLN	‘000 PLN	
From the credits and loans granted	                 68 626	              96 283	
From the guarantees and similar operations	                   6 838	               7 189	
From the securities operations 	                 64 545	              62 069	
From the accounts maintenance 	               299 817	            280 654	
From acquisition services 	               156 297	            151 322	
From the payment cards	               169 903	            161 283	
From the servicing of pension and investment funds	                 26 935	             20 876	
Other	                 37 122	              81 171	
			
Total	               830 083	            860 847	

	Fee and commission expense 		
	I half 2005	I half 2004	
		‘000 PLN	‘000 PLN	
Due to the securities operations	                 11 374	              10 276	
Due to acquisition services	                   3 488	               1 452	
Due to the payment cards	                 56 973	              62 789	
Due to the accounts maintenance	                   1 670	               1 415	
Due to the management of pension funds	                   1 472	               1 249	
Other	                   7 491	               5 179	
			
Total	                 82 468	              82 360	

			
7.	Dividend income 
	
	I half 2005	I half 2004	
		‘000 PLN	‘000 PLN	
Dividend income from the issuers:			
Securities classified as held for trading	1	                      6	
Securities classified as available for sale	 47	                      -	
			
Total	                           48	                          6	

			
8.	Result on financial instruments at fair value
	a/ Result on assets and liabilities held for trading

		I half 2005	I half 2004	
			‘000 PLN	‘000 PLN	
Derivative instruments	               (40 498)	              14 364	
Equity instruments	                        33	                (176)	
Debt Instruments	                 75 735	              28 831	
			
Total	                 35 270	              43 019	

			
	b/ Result on financial assets and financial liabilities at fair value through profit and loss 

		I half 2005	I half 2004	
			‘000 PLN	‘000 PLN	
Debt Instruments	                 17 916	           (37 886)	
			
Total	                  17 916	           (37 886)	

			
	Total result on financial instruments 
	valued at fair value (a+b)							53 186		      5 133
	Total change in the fair value of financial instruments valued at fair value through profit and loss established using valuation techniques (where no established quotations were published on the active market) in the first half of 2005 was minus PLN 40,445 ths.  (in the first half of 2004: PLN 15,336 ths.  respectively).

9.	Result on investment securities 
	
Realized result on assets and financial liabilities other than valued at fair value through profit and loss
	I half 2005	I half 2004	
			‘000 PLN	‘000 PLN	
Realized profits			
Financial assets available for sale	                 33 798	               3 810	
Investments held to maturity	                     107	                  743	
			
Total	                 33 905	               4 553	

	
Realized losses			
Financial assets available for sale	                        37	                    16	
Investments held to maturity	                          9	                  418	
			
Total	                        46	                  434	
Net realized profits 	33 859	4 119	
Change in the fair value of financial assets available for sale recognized in the first half of 2005 directly in equity amounted to PLN 284,632 ths  (increase of equity) (in the first half of 2004 – PLN 104,676 ths - decrease of equity).
Profits and losses from financial assets moved in the first half of 2005 from equity to profit and loss account amounted to PLN 33,761 ths PLN (profit) (in the first half of 2004, PLN 3,794  ths  profit).
10.	Changes in fair value - hedge accounting
	The Bank Pekao S.A. capital group does not apply hedge accounting.
11.	Other operating income and expenses 
		I half 2005	I half 2004	
						‘000 PLN	‘000 PLN	
	Other operating income			
	From the sale or liquidation of fixed assets, intangible assets and assets for disposal	
                      769	
              817	
	From the recovered overdue, lost and written-off receivables	7 011	6 837	
	Received damages and penalties	                   1 768	  873	
	Revenue from sale of products and services	                 78 327	              35 352	
	Rent and other revenue  	                 13 271	              14 405	
	Recovered debt recovery Expenses	                   1 513	               3 401	
	Release of provisions for the disputed and other receivables	                   1 648	              20 750	
	Awarded damages receivable	-	              30 000	
	Write-backs 	                   1 325	               3 101	
	Other revenue 	                 29 838	              27 188	
				
	Total	                135 470	            142 724	

		I half 2005	I half 2004	
						‘000 PLN	‘000 PLN	
	Other operating expenses			
	From the sale and liquidation of the fixed assets, intangible assets, and assets for sale	
                   2 879	
               8 903	
	From the written off receivables	                   1 457	               1 720	
	Cost of goods and materials sold	                 54 977	        27 753	
	Paid damages and penalties 	                      217 	                  299	
	Donations made	                   3 125	               3 174	
	Depreciation of company set-up costs	                   1 496	               1 499	
	Debt recovery costs	                   6 288 	               6 737	
	Provision costs for disputed and other receivables	                   1 352	               1 288	
	Depreciation of purchase cost of pension funds	                   8 454 	               8 454	
	Impairment charges of the investments in the associate and joint venture entities – entities valued using the equity method	            
                         -	
               7 287	
	Impairment charges on other assets	                   3 096	             36 441	
	Other costs 	                 21 119	             14 848	
				
	Total	                104 460	            118 403	

12.	Overhead costs 
		I half 2005	I half 2004	
					‘000 PLN	‘000 PLN	
	Payroll/Employee benefits /a 	               597 996	            583 386	
	Non-personnel costs 	               375 650	            375 937	
	Taxes and charges	                 15 518	              25 303	
	Annual Bank Guarantee Fund fee 	                   3 081	               5 130	
	Depreciation	               161 244	            159 170	
				
	Total	             1 153 489	         1 148 926	

a/ 	Payroll/Employee benefits
		I half 2005	I half 2004	
					‘000 PLN	‘000 PLN	
	Wages and salaries	               510 853	            498 439	
	Insurance and other charges related with employees 	                 83 648	              82 353	
	Pension programs costs			
	due to defined contributions programs	                      664	                  625	
	Cost of share-based payments 	                2 831	               1 969	
				
	Total	               597 996	            583 386	

13.	
Net impairment losses on loans and advances

		I half 2005	I half 2004	
					tys. PLN	tys. PLN	
	Impairment charges			
	Impairment charges on loans	609 365	665 748	
	Impairment charges on financial lease receivables	18 348	12 913	
	Impairment charges on other financial assets	-	7 684	
	Provisions created for off-balance sheet liabilities	29 243	30 017	
	Total	656 956	716 362	
				
	Release of the provisions			
	Release of the provisions for loans	487 161	496 981	
	Release of the provisions for financial lease receivables	18 016	5 765	
	Release of the provisions for the other financial assets	-	-	
	Release of the provisions for off-balance sheet liabilities	23 109	26 066	
	Total	528 286	528 812	
				
	Net impairment charges	128 670	187 550	

14.	Impairment

	Impairment 	Adjustment  for the beginning of period	Increase	Decrease	Impairment charges balance at the end of the period	Net impairment charges – influence on the profit and loss statement for 1’s half year 2005	
1st Half 2005	at  the beginning of period		Impairment charges during period 	Foreign exchange differences	Other	Reduction of the impairment balance  due to the write off of assets from the balance sheet	Release of the provisions in the period	Foreign exchange differences	Other 			
					‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	
Impairment of the financial assets not valued at the fair value through the profit and loss:												
Financial instruments valued at cost (non quoted  equity instruments and linked derivative instruments) 	16 811	-	-	2 782	-	-	-	(899)	-	18 694		
Financial assets available for sale valued at fair value through equity. 	7 709	-	-	-	-	-	(41)	-	(744)	6 924	(41)	
Loans to clients and receivables from banks valued at amortized cost 	3 780 452	287 504	609 365	39 414	13 497	(6 841)	(487 161)	(31 883)	(5 932)	4 198 415	122 204	
Financial lease receivables	250 753	-	18 348	-	-	(6 678)	(18 016)	-	-	244 407	332	
Investments held to maturity valued At amortised cost	1 788	-	9	-	-	-	(9)	(17)	-	1 771	-	
Impairment of:											-	
Tangible fixed assets	6 032	-	-	-	2 473	-	-	-	-	8 505	-	
Investment real estate property	-	3 775	-	-	-	-	-	(36)	-	3 739	-	
Intangible assets	1	-	-	-	-	-	-	-	-	1	-	
Goodwill	-	-	-	-	-	-	-	-	-	-	-	
Other intangible assets 	1	-	-	-	-	-	-	-	-	1	-	
Impairment of the investments in the associate and joint venture entities – entities valued using the equity method	2 945	-	-	350	-	-	-	-	-	3 295	-	
Other	136 284	-	3 096	1 724	9 049	(697)	(1 325)	-	(28)	148 103	1 771	
												
Total	4 202 775	291 279	630 818	44 270	25 019	(14 216)	(506 552)	(32 835)	(6 704)	4 633 854	124 266	

	Impairment 	Adjustment  for the beginning of period	Increase	Decrease	Impairment charges balance at the end of the period	Net impairment charges – influence on the profit and loss statement for 1’s half year 2005	
1st Half 2004	at  the beginning of period		Impairment charges during period 	Foreign exchange differences	Other	Reduction of the impairment balance  due to the write off of assets from the balance sheet	Release of the provisions in the period	Foreign exchange differences	Other 			
					‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	
Impairment of the financial assets not valued at the fair value through the profit and loss:												
Financial instruments valued at cost (non quoted  equity instruments and linked derivative instruments) 	20 974	-	-	1 783	-	-	(33)	(1 748)	-	20 976	(33)	
Financial assets available for sale valued at fair value through equity. 	13 088	-	-	-	-	-	-	(3)	(4 414)	8 671	-	
Loans to clients and receivables from banks valued at amortized cost *	3 720 461	-	665 748	175	1 569	(54 021)	(496 948)	(16 008)	(42 865)	3 778 111	168 800	
Financial lease receivables	260 839	-	12 913	-	-	(7 434)	(5 765)	-	-	260 553	7 148	
Investments held to maturity valued At amortised cost	2 068	-	290	-	-	-	(290)	(76)	-	1 992	-	
Impairment of:												
Tangible fixed assets	9 950	-	7	-	2 780	-	-	-	(1 067)	11 670	7	
Investment real estate property	4 366	-	-	-	-	-	-	-	(162)	4 204	-	
Intangible assets	1	-	-	-	-	-	-	-	-	1	-	
Goodwill	-	-	-	-	-	-	-	-	-	-	-	
Other intangible assets 	1	-	-	-	-	-	-	-	-	1	-	
Impairment of the investments in the associate and joint venture entities – entities valued using the equity method	3 684	-	7 287	6	-	-	-	-	(4 114)	6 863	7 287	
Other	125 700	-	44 118	-	4 423	(721)	(3 101)	(25)	(10 262)	160 132	41 017	
												
Total	4 161 131	-	730 363	1 964	8 772	(62 176)	(506 137)	(17 860)	(62 884)	4 253 173	224 226	
(*) Due to the applied exemptions, allowed by IFRS 1, data the 1st half  2004 is not comparable to data for 1st half 2005.  .

	Write-downs and write-backs related to impairment of loans, advances and other receivables measured at amortized costs are presented  in the profit and loss account under “Impairment losses on loans and advances”. Write-downs for depreciation of other assets are presented  under other operating expenses, reversals of write-downs for depreciation of other assets are presented under other operating income. 
	
15.	Discontinued operations
	In the first half of 2005 and the first half of 2004 the Group did not discontinue any of its operations.
16.	Share of profit of associates

		I half 2005	I half 2004	
	Entity name				‘000 PLN	‘000 PLN	
	Xelion. Doradcy Finansowi Sp. z o. o	(5 871)	 (4 596)	
	Pioneer Pekao Investment Management SA	25 413	 19 519	
	Krajowa Izba Rozliczeniowa S.A.	2 956	4 273	
	Grupa Inwestycyjna Nywig S.A.	 (18)	8	
	Central Poland Fund LLC	 (662)	 (110)	
	Fabryka Sprzętu Okrętowego „Memblor” S.A.	 (157)	142	
	„Anica” System S.A.	 488	406	
	Masters S.A.	-	 (303)	
	Zakłady Przemysłu WełnianegoTomtex S.A.	  -	  451	
	Zakłady Wyrobów Uszczelniających i Termoizolacyjnych (ZWUiT) Polonit Sp. z o.o.	 
-	 
(153)	
	Trinity Management Sp. Z o.o.	-	5 033	
	Jupiter NFI S.A.	  -	 (3 987)	
				
	Total	 22 149	20 683	

17.	Income tax
	30.06.2005	30.06.2004	
	‘000 PLN	‘000 PLN	
Accounting profit	884 264 	748 996 	
Tax at applicable tax rate at 19%	(168 010) 	(142 309)	
Tax effect of the permanent differences	9 139 	10 132 	
Tax effect of the changes in the tax law	-	45 000 	
Tax expense	(158 871) 	(87 177)	
The applicable tax rate at 19% is the binding in Poland corporate income tax rate.

		I half 2005	2004	I half 2004	
					‘000 PLN	‘000 PLN	‘000 PLN	
	Current income tax	(267 004)	(274 229)	(130 149)	
	Current tax charge	(273 887)	(278 621)	(137 143)	
	Adjustments related to the tax from previous years	6 883	4 392	6 994	
	Deferred income tax	108 133	61 224	42 972	
	Due to the timing differences	108 133	16 224	(2 028)	
	Due to the changes in the tax rates and new tax charges	-	45 000	45 000	
					
	Tax charge disclosed in the consolidated profit and loss statement	(158 871)	(213 005)	(87 177)	
	Deferred income tax	(52 462)	(30 302)	19 853	
	Due to the occurrence and reversal of timing differences	(52 462)	(30 302)	19 853	
					
	Tax charge disclosed in the consolidated equity	(52 462)	(30 302)	19 853	
	Total	(211 333)	(243 307)	(67 324)	

	Deferred income tax assets/liabilities
	Consolidated balance sheet	Consolidated profit and loss statement	
	30.06.2005	31.12.2004	30.06.2004	30.06.2005	31.12.2004	30.06.2004	
				‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	
Deferred tax liability							
Income receivable from the securities	96 210	188 260	189 917	(92 051)	(16 246)	(14 590)	
Income receivable from the loans given	272 760	282 345	289 549	(9 585)	(3 943)	3 260	
Upward revaluation of the financial assets	155 461	101 965	122 375	2 255	(7 805)	12 605	
Accelerated depreciation	97 235	78 376	62 926	18 859	32 707	17 257	
Investment relief	9 609	10 267	14 992	(658)	(5 810)	(1 086)	
Other	25 424	12 140	12 068	13 283	3 054	2 982	
Gross deferred tax liability	656 699	673 353	691 827	(67 897)	1 957	20 428	
							
Zobowiązanie brutto z tytułu podatku odroczonego							
Deferred tax asset							
Future costs related to securities	12 932	9 994	13 692	3 075	4 421	8 093	
Future costs related to deposits and loans received	240 057	249 886	263 312	(9 829)	(17 003)	(3 576)	
Unrealized losses on financial assets 	104 989	92 765	150 829	14 207	(3 679)	4 257	
Income received to be accounted for over time from the loans and current accounts	36 241	3 006	1 620	5 782	3 006	1 620	
Costs due to the loan provisions charges	307 631	276 719	268 910	28 796	76 175	68 367	
Personnel costs provisions	48 461	51 281	43 294	(2 819)	5 067	(2 919)	
Accruals 	12 752	1 104	7 295	11 648	(7 785)	(1 594)	
Uncovered losses 	24 628	18 721	20 847	5 907	(2 928)	(802)	
Other	36 768	53 293	37 348	(16 531)	5 907	(10 046)	
							
Gross deferred tax assets	824 459	756 769	807 147	40 236	63 181	63 400	
							
Deferred tax charge				108 133	61 224	42 972	
							
Net deferred tax assets	170 626	84 638	116 212	X	X	X	
Net provision for the deferred tax	2 866	1 222	892	X	X	X	
							
As of 30th June 2005 and 30th June 2004 there were no temporary differences related to investments in subsidiaries, branches, affiliates, and joint ventures, for which no deferred tax liability was created due to meeting the condition to control the timing of reversal of the differences and existence of high probability that the differences will not reverse in a foreseeable future.   

The amount of  negative temporary differences, unsettled tax losses, unused tax relieves, in relation to which no deferred tax asset was recognized in the balance sheet, along with the date those differences will elapse is presented in the below table.  

	Year when timing differences elapse 	Amount of difference  30.06.2005	Amount of difference  30.06.2004	
		‘000 PLN	‘000 PLN	
	2004	 	         42 421    	
	2005	         38 796    	         49 746    	
	2006	         53 644    	         46 556    	
	2007	          6 293    	          6 293    	
	2008	          8 464    	          4 134    	
	2009	          4 330    	 	
	Perpetual	         61 718    	         99 055    	
	Total	       173 245    	       248 205    	
18.	Earnings per share
Base earnings per share
Base earnings per share is calculated on the basis of profit or loss attributable to ordinary shareholders of the holding company by dividing their respective profits or losses by the average weighted number of ordinary shares listed during a given period.
Earnings per share

		I half 2005	I half 2004	
	Net profit attributed to ordinary shareholders  (ths PLN)	727 296	663 619	
	Weighted average number of ordinary shares in the period 	166 481 687	166 121 847	
	Earnings per each share (PLN per share)	4,37	3,99	

	Diluted earnings per share
Diluted earnings per share is calculated based on the respective profit or loss of ordinary shareholders of the holding company by dividing the profit or loss of such shareholders by the average weighted number of ordinary shares listed during a given period, adjusted by all potentially diluting ordinary shares.
	There are diluting instruments in the Group in the form of convertible bonds. For calculation purposes, it is assumed that those will be converted into shares.

		I half 2005	I half 2004	
	Net profit attributed to ordinary shareholders  (ths PLN)	727 296	663 619	
	Weighted average number of ordinary shares in the period 	166 481 687	166 121 847	
	Adjustments to the number of shares for the purpose of calculating the diluted profit	27 796	157 686	
	Weighted average number of ordinary shares for the calculation of diluted profit	
166 509 483	
166 279 533	
	Diluted profit per each share (PLN per share)	4,37	3,99	

19.	Dividends paid and proposed for payment
Bank Pekao S.A. prepares a separate financial statement in compliance with IFRS and the net profit recognized in that statement is divided.
Dividends declared after the balance sheet date are not recognized as liabilities existing as of the balance sheet date.
By the publication date of  these financial statements, no decision had been made to pay out dividends for 2005.
During the ordinary Shareholders Meeting of Bank Pekao S.A. on 5 April 2005 a resolution was made to pay out dividends for 2004 in the amount of PLN 6.40 per share, with total dividend payments amounting to PLN 1,065,482.8 thousand.
20.	Cash and amounts due from Central Bank
	
	30.06.2005	31.12.2004	30.06.2004	
	‘000 PLN	‘000 PLN	‘000 PLN	
Cash	884 727	1 081 349	924 056	
Current account in the Central Bank	971 652	1 474 729	783 539	
Other funds	3 367	5 609	7 310	
NBP bonds *	1 340 295	1 377 588	1 338 691	
				
Total	3 200 041	3 939 275	3 053 596	

	(*) The NBP  bond is a non-quoted debt security with maturity on 1st March 2012, issued in relation to reduction of the obligatory reserve rate. The bond is not included under “cash” in the statement of cash flows.  
In the course of the day the Bank may use funds in the mandatory reserve account for ongoing payments pursuant to an instruction submitted to the National Bank of Poland. It must, however, ensure that the average monthly balance in such accounts comply with the requirements described in the mandatory reserve declaration.
	Funds in the mandatory reserve account bear interest in the amount of 0.9 of the rediscount rate for bills of exchange; as of 30 June 2004 this interest amounted to 4.95%.
21	Amounts due from banks
	
	30.06.2005	31.12.2004	30.06.2004	
	‘000 PLN	‘000 PLN	‘000 PLN	
Current account	3 633 469	1 432 951	3 054 382	
Deposits in other banks	2 927 619	3 608 831	4 539 710	
Loans  given	380 106	407 628	455 487	
Unlisted securities	1 156	7 203	9 025	
Repo transactions	86 805	486 093	516 872	
Funds in transit	316 389	60 440	31 370	
Interest	27 790	34 745	28 874	
				
Total	7 373 334	6 037 891	8 635 720	

Provision  for the impairment of receivables	(87 240)	(76 414)	(93 759)	
				
Total net	7 286 094	5 961 477	8 541 961	

The variable interest rate due from banks amounts to PLN 456 311 ths. (as of 30.06.2004: PLN 614 695 ths.), fixed interest rate due from banks amounts to PLN 6 572 844 ths. (as of 30.06.2004: PLN 7 960 781 ths.).
	Receivables from banks according to maturities
	According to remaining residual maturities at the balance sheet date 

	30.06.2005	31.12.2004	30.06.2004	
	‘000 PLN	‘000 PLN	‘000 PLN	
Current accounts	3 633 469	1 432 951	3 054 382	
Term deposits by the repayment period:				
up to 1 month	1 135 259	2 641 887	2 993 134	
from 1 to 3 months	889 104	639 901	509 349	
from 3 months to 1 year	880 433	841 273	1 588 097	
from 1 to 5 years	371 709	300 482	327 039	
above 5 years	40 401	-	-	
receceivables after the due date	78 780	86 212	103 475	
Funds in transit	316 389	60 440	31 370	
Interest	27 790	34 745	28 874	
				
Total	7 373 334	6 037 891	8 635 720	

Provision  for the impairment of receivables	(87 240)	(76 414)	(93 759)	
				
Total net	7 286 094	5 961 477	8 541 961	

22.	Financial assets held for trading 
		30.06.2005	31.12.2004	30.06.2004	
		‘000 PLN	‘000 PLN	‘000 PLN	
	Debt securities	2 505 990	3 191 953	1 115 301	
	- issued by the State Treasury	2 505 990	3 191 953	1 074 433	
	- issued by the local governments	-	-	40 868	
	Stock and shares in other entities	2 833	3 738	2 280	
	- listed in the stock exchange	2 831	3 718	2 181	
	- not listed	2	20	99	
	Other financial instruments	-	80	58	
					
	Total financial assets held for trading	2 508 823	3 195 771	1 117 639	

		30.06.2005		30.06.2004		
		‘000 PLN	Average	‘000 PLN	Average	
			yield		yield	
	Fixed interest debt securities					
	Treasury bills	510 148	4,66	474 526	5,73	
	Treasury bonds	1 755 659	4,61	383 425	7,05	
	Treasury bonds (USD denominated)	-	-	179	1,47	
	Treasury bonds– RP Eurobonds (EUR denominated)	21 086	3,74	183	4,63	
	Treasury bonds– RP Eurobonds (USD denominated)	1 918	4,43	-	-	
	Polish Brady ( „London Club”) bonds	7 069	5,00	2 505	5,80	
	Foreign government bonds (HUF denominated)	-	-	420	9,49	
	Total fixed interest debt securities	2 295 880		861 238		
						
	Variable interest debt securities					
	Treasury bonds	204 335	4,77	213 195	5,45	
	Treasury bonds – RP Eurobonds (EUR denominated)	4 919	2,12	-	-	
	Treasury bonds – RP Eurobonds (USD denominated)	856	3,91	-	-	
	Local authorities bonds	-	-	40 868	5,25	
	Total variable interest debt securities	210 110		254 063		
						
	Total debt securities held for trading	2 505 990		1 115 301		
	Stock and shares in other entities	2 833		2 280		
	Other financial instruments	-		58		
	Total securities held for trading	2 508 823		1 117 639		

	
	Financial assets held for trading according to residual maturities as of 30 June 2005 (book value in ths. PLN):

	- up to 1 month	- between 1 and 3 months	- between 3 months and 1 year	- between 1 and 5 years	- above 5 years	Undefined maturity	Total	
	Book value	Average yield.	Book value	Average yield.	Book value	Average yield.	Book value	Average yield.	Book value	Average yield.	Book value	Book value	Average yield.	
Debt securities														
- issued by the State Treasury	114 768	4,70	290 994	3,73	1 093 932	4,58	579 771	4,62	426 525	4,63	-	2 505 990	4,50	
Shares and stock in other entities														
- listed on the stock exchanges	-	-	-	-	-	-	-	-	-	-	2 831	2 831	-	
- not listed	-	-	-	-	-	-	-	-	-	-	2	2	-	
														
Total financial assets held for trading on 30’th  of June 2005	114 768		290 994		1 093 932		579 771		426 525		2 833	2 508 823		

Including interest	-		26		3 191		10 925		14 092		-	28 234		

		Financial assets held for trading according to maturities as of 30 June 2004 (book value in  ths. PLN)
	- up to 1 month	- between 1 and 3 months	- between 3 months and 1 year	- between 1 and 5 years	- above 5 years	Undefined maturity	Total	
	Book value	Average yield.	Book value	Average yield.	Book value	Average yield.	Book value	Average yield.	Book value	Average yield.	Book value	Book value	Average yield.	
Debt securities														
- issued by the State Treasury	91 418	5,43	320 461	5,72	260 888	6,34	232 924	6,51	168 742	6,52	-	1 074 433	6,15	
- issued by authorities bonds	-	-	-	-	-	-	40 868	5,25	-	-		40 868	5,25	
Shares and stock in other entities														
- listed on the stock exchanges	-	-	-	-	-	-	-	-	-	-	2 181	2 181	-	
- not listed	-	-	-	-	-	-	-	-	-	-	99	99		
Loans	-	-	-	-	-	-	-	-	-	-	58	58	-	
														
Total financial assets held for trading on 30’th of June 2004	91 418		320 461		260 888		273 792		168 742		2 338	1 117 639		

Including interest	6		25		3 587		4 596		16 610		-	24 824		

23.	Derivative financial instruments 
Derivatives used by the Group
In its operations the Group uses different financial derivatives for managing the risk involved in the Group’s business. The majority of derivatives used by the Group include over-the-counter contracts. Regulated stock exchange contracts (mainly futures) represent a small part of those derivatives.
Derivative foreign exchange transactions include either obligation or right to purchase or sell foreign and domestic currency assets. Forward operations are based on the exchange rate specified during the transaction for a predefined date in the future. The Group concludes forward transactions to manage its foreign exchange position and to satisfy its customers’ demand for hedging future foreign currency payments.
Foreign exchange swaps combine the exchange of specific currencies as of the spot date and a reverse transaction as of the forward date, with the exchange rates specified in advance during the conclusion of the contract. While those transactions are being accounted funds are transferred. Foreign exchange swap transactions are mostly concluded in the process of managing the Group’s currency liquidity.
Foreign exchange options are contracts where one of the parties, the option buyer, purchases from the other party, the option issuer, at a so-called premium price, the right without the obligation to buy or sell at a specified point in the future, or during a specified time range, a foreign currency amount specified in the contract at the exchange rate set during the conclusion of the option. Foreign exchange options concluded by the Group are over-the-counter contracts, concluded with the Group’s customers in order to hedge the risk involved in future foreign currency payments. The Group acts both as option issuer and buyer.
Derivatives relating to interest rates enable the Group and its customers to transfer, modify or limit the interest rate risk.
Interest rate swaps are contracts where parties swap between themselves interest cash flows calculated on a specified nominal value of the base instrument. In a typical swap contract, fixed rate interest flow will be swapped for a floating rate interest flow. Both flows will be calculated on the basis of the same nominal value of the base instrument, with no actual funds being transferred during the swap of the base instrument.
Forward Rate Agreements involve both parties undertaking to pay interest on a predefined nominal amount, for a specified period starting in the future and charged according to the interest rate determined on the day of the agreement. As the basis for settlements, the Parties will use the interest rate difference, which will be in proportion to the nominal amount of the agreement and difference between the FRA rate (term rate as of the date of the transaction) and the reference rate applicable two business days before the settlement date.
Cross currency IRS involves both parties swapping capital and interest flows in different currencies in a specified period. Such transactions are used for interest rate and foreign exchange risk management.
Forward transactions on securities are based on prices of securities defined at the conclusion of the transaction for a specified date in the future. The Group uses securities forward transactions to manage its investment portfolio and to satisfy customer demand.
Stock options, stock market indexes and prices of investment fund units are contracts where one of the Parties, the option buyer, purchases from the other party, the option issuer, at a so-called premium price, the right without the obligation to buy or sell a specific base instrument (shares, share market indices, investment fund units or their baskets) at a price specified during the conclusion of the option. The Group uses such transactions to manage securities risk and to satisfy customer demand.
Interest rate futures transactions refer to standardized forward contracts purchased on stock markets in order to ensure protection against the interest rate risk involved in the securities portfolio owned.
Futures for stock market indices and shares are contracts listed on the Warsaw Stock Exchange. Contracts for indices refer to transactions based on MIDWIG and TECHWIG indices.
Warrants are securities issued by the company, entitling the holder to subscribe to a specified number of shares at a predefined price. They are listed on stock exchanges and do not give the holder any entitlements to vote in Shareholders Meetings.
Derivatives embedded in other instruments
The group uses derivatives embedded in complex financial instruments, i.e. such as including both a derivative and base agreement, which results in part of the cash flows of the combined instrument changing similarly to cash flows of an independent derivative. Derivatives embedded in other instruments cause part or all cash flows resulting from the base agreement to be modified as per a specific interest rate, price of a security, foreign exchange rate, price index or interest rate index.
Brady bond options are one of the most important derivatives embedded in balance sheet financial instruments. In this case, embedded financial instruments are closely related to the base contract and thus the embedded derivative does not need to be isolated or recognized and measured separately.
Derivatives are also embedded in loan and deposit agreements. The Bank has deposits on offer which include embedded derivatives. Such derivatives are not by their nature closely related to their respective deposit agreements. The instrument is isolated and classified in the portfolio to be traded and it is subject to measurement. The measurement of that instrument is recognized in the profit and loss account. The Group analyzed the loan agreement portfolio and the ordinary agreement portfolio in order to isolate embedded derivatives and decided that such agreements do not require isolation and separate treatment of embedded instruments.
Risk involved in financial derivatives
Market risk and credit risk are two main categories of derivatives-related risk.
At the beginning, financial derivatives usually have a small market value or no market value at all. This is due to the fact that derivatives require no initial net investment or require only minor net investments as compared with other agreements which react to changes in market conditions in a similar way.
Derivatives gain positive or negative value as a result of change in specific interest rates, prices of securities, prices of commodities, currency exchange rates, price index, credit standing or credit index, or another market parameter. This results in derivatives becoming more or less advantageous than instruments with similar residual maturity available on the market at the same time.
Credit risk related to derivative contracts is a potential cost of concluding a new contract on the original terms and conditions if the other party to the original contract fails to meet its obligations. In order to assess the potential cost of replacement, the Group uses the same method as for credit risk assessment. In order to control its credit risk levels, the Group performs assessments of other contract parties using the same methods as for of credit decisions.
 Credit risk involved in derivatives was presented in Note 3.

The following tables present nominal amounts of financial derivatives and fair values of such derivatives. Nominal amounts of derivatives are recognized as off-balance sheet. Nominal amounts of certain financial instruments are used for comparison with balance sheet instruments, but need not necessarily indicate what future cash flow amounts will be or what the current fair value of such instruments is, and therefore do not reflect the Group’s credit or price risk level.
Derivatives become advantageous (assets) or disadvantageous (liabilities) due to fluctuations of market interest rates, indices, or foreign exchange rates as compared with their terms.
	
Financial derivatives as of 30 June 2005
Nominal values of base instruments and fair value of financial derivatives (in  ths. PLN)
	- up to 1 month	- between 1 and 3 months	- between 3 months and 1 year	- 1 - 5 years	above 5 lat	Total	Fair value (negative)	Fair value (positive)	
Currency transactions									
Currency swaps	3 664 372	2 511 433	1 015 025	-	-	7 190 830	(32 005)	75 931	
Currency purchase	1 846 965	1 262 687	508 697	-	-	3 618 349			
Currency sale	1 817 407	1 248 746	506 328	-	-	3 572 481			
Currency forward contracts	4 592 082	765 013	2 561 528	66 572	-	7 985 195	(42 623)	20 122	
Currency purchase	2 294 674	379 732	1 273 965	33 043	-	3 981 414			
Currency sale	2 297 408	385 281	1 287 563	33 529	-	4 003 781			
Currency options	879 456	1 118 630	1 212 780	365 642	-	3 576 508	(57 739)	57 739	
Purchase	439 728	559 315	606 390	182 821	-	1 788 254			
Sale	439 728	559 315	606 390	182 821	-	1 788 254			
Cross Currency IRS	677 748	-	32 478	278 459	968 652	1 957 337	(66 864)	69 409	
Purchase	339 144	-	16 239	139 232	484 326	978 941			
Sale	338 604	-	16 239	139 227	484 326	978 396			
Exchange rate futures	-	122	82	-	-	204	-	-	
Purchase	-	-	82	-	-	82			
Sale	-	122	-	-	-	122			
									
Interest rate transactions									
Interest rate swaps (IRS)	285 608	400 000	5 158 801	9 757 566	1 915 887	17 517 862	(505 963)	379 821	
Purchase	260 608	200 000	3 161 762	5 189 566	1 500 887	10 312 823			
Sale	25 000	200 000	1 997 039	4 568 000	415 000	7 205 039			
Forward Rate Agreement (FRA)	3 420 000	7 450 000	8 310 000	-	-	19 180 000	(24 063)	21 612	
Purchase	1 800 000	3 900 000	4 310 000	-	-	10 010 000			
Sale	1 620 000	3 550 000	4 000 000	-	-	9 170 000			

Nominal values of base instruments and fair value of financial derivatives (in  ths. PLN):

  	- up to 1 month	- between 1 and 3 months	- between 3 months and 1 year	- 1 - 5 years	above 5 lat	Total	Fair value (negative)	Fair value (positive)	
Interest rate transactions									
Futures for debt securities	-	42 571	20 425	-	-	62 996	-	83	
Purchase	-	-	10 425	-	-	10 425			
Sale	-	42 571	10 000	-	-	52 571			
									
Other transactions									
Securities forward 	3 732 092	-	-	-	-	3 732 092	(3 651)	3 492	
Purchase	1 740 744	-	-	-	-	1 740 744			
Sale	1 991 348	-	-	-	-	1 991 348			
Stock futures	-	3 409	310	-	-	3 719	-	-	
Purchase	-	-	195	-	-	195			
Sale	-	3 409	115	-	-	3 524			
Futures for stock Exchange indexes	-	47	52	-	-	99	-	-	
Purchase	-	-	52	-	-	52			
Sale	-	47	-	-	-	47			
Options related to equity securities 	-	-	-	348 983	-	348 983	(3 349)	3 485	
Purchase	-	-	-	179 056	-	179 056			
Sale	-	-	-	169 927	-	169 927			
Warrants	-	-	-	151	-	151	-	-	
Purchase	-	-	-	151	-	151			
Sale	-	-	-	-	-	-			
									
Total derivative instruments	17 251 358	12 291 225	18 311 481	10 817 373	2 884 539	61 555 976	(736 257)	631 694	

Financial derivatives as of 30 June 2004 
Nominal values of base instruments and fair value of financial derivatives (in  ths. PL):
	- up to 1 month	- between 1 and 3 months	- between 3 months and 1 year	- 1 - 5 years	above 5 lat	Total	Fair value (negative)	Fair value (positive)	
Currency transactions									
Currency swaps	7 164 154	4 558 376	3 507 923	-	-	15 230 453	(68 358)	85 728	
Currency purchase	3 594 493	2 265 716	1 762 804	-	-	7 623 013			
Currency sale	3 569 661	2 292 660	1 745 119	-	-	7 607 440			
Currency forward contracts	5 660 510	560 423	665 522	-	-	6 886 455	(23 084)	24 998	
Currency purchase	2 833 327	280 322	331 728	-	-	3 445 377			
Currency sale	2 827 183	280 101	333 794	-	-	3 441 078			
Currency options	1 420 762	640 536	28 636	-	-	2 089 934	(4 536)	1 036	
Purchase	710 381	320 268	14 318	-	-	1 044 967			
Sale	710 381	320 268	14 318	-	-	1 044 967			
Cross Currency IRS	-	588 866	180 344	133 758	929 390	1 832 358	(69 513)	61 833	
Purchase	-	294 433	90 172	65 625	465 949	916 179			
Sale	-	294 433	90 172	68 133	463 441	916 179			
Exchange rate futures	234	45	-	-	-	279	-	-	
Purchase	46	45	-	-	-	91			
Sale	188	-	-	-	-	188			
									
Interest rate transactions									
Interest rate swaps (IRS)	22 712	13 626	2 178 732	4 801 894	1 335 855	8 352 819	(179 952)	168 036	
Purchase	11 356	6 813	904 659	2 748 838	1 010 855	4 682 521			
Sale	11 356	6 813	1 274 073	2 053 056	325 000	3 670 298			
Forward Rate Agreement (FRA)	2 854 084	3 700 000	4 600 000	70 000	-	11 224 084	(7 099)	7 851	
Purchase	1 550 000	1 700 000	2 450 000	-	-	5 700 000			
Sale	1 304 084	2 000 000	2 150 000	70 000	-	5 524 084			

Nominal values of base instruments and fair value of financial derivatives (in  ths. PLN): 
  	- up to 1 month	- between 1 and 3 months	- between 3 months and 1 year	- 1 - 5 years	above 5 lat	Total	Fair value (negative)	Fair value (positive)	
Interest rate transactions									
Futures for debt securities	-	62 789	-	-	-	62 789	-	-	
Purchase	-	-	-	-	-	-			
Sale	-	62 789	-	-	-	62 789			
									
Other transactions									
Securities forward 	1 607 158	50 000	-	-	-	1 657 158	(1 085)	1 365	
Purchase	894 240	-	-	-	-	894 240			
Sale	712 918	50 000	-	-	-	762 918			
Stock futures	-	1 965	311	-	-	2 276	-	-	
Purchase	-	-	47	-	-	47			
Sale	-	1 965	264	-	-	2 229			
Futures for stock Exchange indexes	-	-	6	-	-	6	-	-	
Purchase	-	-	-	-	-	-			
Sale	-	-	6	-	-	6			
Options related to equity securities 	-	-	-	304 015	-	304 015	-	5 040	
Purchase	-	-	-	160 000	-	160 000			
Sale	-	-	-	144 015	-	144 015			
Warrants	-	-	-	151	-	151	-	-	
Purchase	-	-	-	151	-	151			
Sale	-	-	-	-	-	-			
									
Total derivative instruments	18 729 614	10 176 626	11 161 474	5 309 818	2 265 245	47 642 777	(353 627)	355 887	

24.	Other financial instruments at fair value through profit and loss
		30.06.2005	31.12.2004	30.06.2004	
		‘000 PLN	‘000 PLN	‘000 PLN	
	Debt securities				
	- issued by other financial entities 	812 483	741 528	916 182	
	- issued by non-financial entities	-	21 842	31 862	
	- issued by the State Treasury	923 845	573 351	660 261	
					
	Total other financial instruments at fair value through the financial result	1 736 328	1 336 721	1 608 305	

		30.06.2005		30.06.2004		
		‘000 PLN	Average	‘000 PLN	Average	
			yield		yield	
	Fixed interest debt securities					
	Treasury bonds – RP Eurobonds (EUR denominated)	483 679	3,50	187 920	4,63	
	Treasury bonds – RP Eurobonds (USD denominated)	440 166	4,42	472 341	5,30	
	Other securities issued by the financial entities (USD denominated)	775 678	4,29	874 803	4,71	
	Other securities issued by the financial entities (EUR denominated)	36 805	2,22	41 379	5,44	
	Other securities issued by the non - financial entities (EUR denominated)	-	-	24 943	4,07	
	Total fixed interest debt securities 	1 736 328		1 601 386		
						
	Variable interest debt securities					
	Other securities issued by the non - financial entities (EUR denominated)	-	-	6 919	2,87	
	Total variable interest debt securities 	-		6 919		
						
	Total debt securities at fair value through profit and loss	1 736 328		1 608 305		

Other financial instruments at fair value through profit and loss according to residual maturities as of 30 June 2005 (in  ths. PLN)

	- up to 1 month	- between 1 and 3 months	- between 3 months and 1 year	- 1 - 5 years	above 5 lat	Undefined maturity	Total	
	Book value	Average yield.	Book value	Average yield.	Book value	Average yield.	Book value	Average yield.	Book value	Average yield.	Book value	Book value	Average yield.	
Debt securities														
- issued by other financial entities	-	-	-	-	36 805	2,22	775 678	4,29	-	-	-	812 483	4,19	
- issued by the State Treasury	-	-	-	-	-	-	-	-	923 845	3,94	-	923 845	3,94	
														
Total other financial instruments at fair value through profit and loss at  30 June 2005	-		-		36 805		775 678		923 845		-	1 736 328		

Including interest	-		-		368		8 252		17 414		-	26 034		

Other financial instruments at fair value through profit and loss according to maturities as of 30 June 2004 (in  ths. PLN)
	- up to 1 month	- between 1 and 3 months	- between 3 months and 1 year	- between 1 and 5 years	- above 5 years	Undefined maturity	Total	
	Book value	Average yield.	Book value	Average yield.	Book value	Average yield.	Book value	Average yield.	Book value	Average yield.	Book value	Book value	Average yield.	
Debt securities														
- issued by other financial entities	-	-	-	-	-	-	916 182	4,75	-	-	-	916 182	4,75	
- issued by other non - financial entities	6 919	2,87	-	-	-	-	24 943	4,08	-	-	-	31 862	3,82	
- issued by the State Treasury	-	-	-	-	-	-	-	-	660 261	5,07	-	660 261	5,07	
														
Total other financial instruments at fair value through profit and loss at  30 June 2004	6 919		-		-		941 125		660 261		-	1 608 305		

Including interest	66						10 679		16 720			27 465		

25.	Loans and advances to customers

	30.06.2005	31.12.2004	30.06.2004	
	‘000 PLN	‘000 PLN	‘000 PLN	
Loans	29 727 151	28 012 284	27 556 882	
Payment cards receivables	96 781	84 416	62 480	
Purchased receivables	766 856	709 513	939 470	
Realized guarantees and commitments	39 513	40 833	50 600	
Unlisted securities	69 814	565 779	633 529	
Repo transactions	20 440	388 919	225 309	
Receivables in transit	21 877	8 627	8 124	
Interest	126 967	130 009	117 957	
				
Total	30 869 399	29 940 380	29 594 351	

Impairment provisions 	(4 129 869)	(3 720 849)	(3 705 328)	
				
Total net	26 739 530	26 219 531	25 889 023	

	As of 30 June 2005	Gross value of not - impaired loans 	Gross value of impaired loans 	Individual impairment charges	Collective impairment charges*	Total net value	Fair value	
		‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	
	Loans given to							
	state budget entities	2 832 199	12 607	(10 000)	(34 430)	2 800 376	2 800 376	
	non-banking financial entities	539 494	66 814	(21 909)	(49 585)	534 814	534 814	
	non-financial entities	15 622 811	4 420 342	(1 431 289)	(1 787 191)	16 824 673	16 824 673	
	general public	6 323 935	924 229	(41 424)	(754 040)	6 452 700	6 452 700	
	Interest	126 967	-	-	-	126 967	126 967	
								
	Total	25 445 406	5 423 992	(1 504 622)	(2 625 246)	26 739 530	26 739 530	

* Includes the estimated impairment for losses incurred but not reported (IBNR)

Following the exemption allowed by IFRS 1 the Group does not present the comparative data related to loans and advances to customers. 
Fixed interest rate loans and lending facilities extended to customers as of 30 June 2005 represented 12,98% of the total loans and advances portfolio or PLN 3 986 831  ths. 
Changes in impairment balances in the reporting periods ended 30th June 2005 and 2004 are presented in the Note 14. 

26.	Net investments in financial leases 
The Group runs its lease operations through its subsidiary, Pekao Leasing Sp. z o.o. The Group acting as a lessor in the financial leases embracing mainly means of transport, machines and equipment. 
The value of gross lease investments and minimum lease payments were, respectively:	

	30.06.2005			
	‘000 PLN	Gross leasing investment	Present value of minimum lease payments	
	Up to 1 year	680 074	504 520	
	Between 1 and 5 years	432 223	355 389	
	Above 5 years	40 004	23 000	
				
	Total	1 152 301	882 909	

				
	Unrealized financial revenue	269 392		
	Net leasing investment	882 909		
	Non-guaranteed end value to the lessor 	-		
	Present value of minimum lease payments	882 909		
	Provisions value	244 407		
	Balance sheet value	638 502		

	31.12.2004			
	‘000 PLN	Gross leasing investment	Present value of minimum lease payments	
	Up to 1 year	693 083	480 313	
	Between 1 and 5 years	355 584	295 314	
	Above 5 years	24 743	22 450	
				
	Total	1 073 410	798 077	

				
	Unrealized financial revenue	275 333		
	Net leasing investment	798 077		
	Non-guaranteed end value to the lessor 	-		
	Present value of minimum lease payments	798 077		
	Provisions value	250 753		
	Balance sheet value	547 324		

	30.06.2004			
	‘000 PLN	Gross leasing investment	Present value of minimum lease payments	
	Up to 1 year	708 942	521 919	
	Between 1 and 5 years	412 780	325 106	
	Above 5 years	67 666	60 764	
				
	Total	1 189 388	907 789	

				
	Unrealized financial revenue	281 599		
	Net leasing investment	907 789		
	Unguaranteed end value to the lessor 	-		
	Present value of minimum lease payments	907 789		
	Provisions value	260 553		
	Balance sheet value	647 236		

	Lease transactions concluded by the Group expose it primarily to foreign exchange risk, credit risk and cash flow risk related to interest rates. Financial instruments risk management procedures are standardized throughout the Group. They are described in Note 3.

27.	Investment securities

		30.06.2005	31.12.2004	30.06.2004	
		‘000 PLN	‘000 PLN	‘000 PLN	
	Available for sale	11 701 307	10 114 193	11 389 233	
	Debt securities	11 650 712	10 060 705	11 333 537	
	- issued by central banks	4 390	-	89 898	
	- issued by other banks	45 033	120 270	1 626 169	
	- issued by other financial entities	60 370	28 918	26 771	
	- issued by non financial entities	392 333	395 322	221 335	
	- issued by the State Treasury	10 576 397	8 952 457	8 815 366	
	- issued by local governments	572 189	563 738	553 998	
	Stock and shares in other entities	50 421	53 312	55 517	
	Other financial instruments	174	176	179	
	Securities held to maturity	2 785 075	4 931 761	5 453 974	
	- issued by central banks	-	-	115 408	
	- issued by other financial entities	61 244	60 439	68 876	
	- issued by the State Treasury	2 689 362	4 836 513	5 230 926	
	- issued by local governments	34 469	34 809	38 764	
	Total investment securities gross	14 486 382	15 045 954	16 843 207	
	Impairment of securities available for sale	(6 924)	(7 709)	(8 671)	
	Impairment of securities held to maturity	(1 771)	(1 788)	(1 992)	
					
	Total investment securities net	14 477 687	15 036 457	16 832 544	

Changes in investment securities
		30.06.2005	31.12.2004	30.06.2004	
		‘000 PLN	‘000 PLN	‘000 PLN	
	Securities available for sale				
	Balance at the beginning of the period	10 106 485	9 511 577	9 511 761	
	Increase(purchase)	11 421 059	14 621 217	7 768 602	
	Decrease (sale and redemption)	(10 397 305)	(13 664 727)	(5 794 379)	
	Identified impairment write-offs	-	(452)	-	
	Changes in the fair value	280 858	162 990	-100 023	
	Exchange rate differences	205 803	(519 549)	(15 949)	
	Other increases	345 325	594 060	271 029	
	Other decreases	(267 842)	(598 632)	(260 479)	
	Balance at  the end of the period	11 694 383	10 106 484	11 380 562	
	Securities held to maturity				
	Balance at the beginning of the period	4 929 973	8 501 853	8 501 853	
	Increase(purchase)	2 517 034	5 717 306	2 791 558	
	Decrease (sale and redemption)	(4 715 270)	(9 449 877)	(5 935 977)	
	Changes in the fair value	17	4 443	(78)	
	Exchange rate differences	409	(58 018)	4 546	
	Other increases	139 325	406 695	222 036	
	Other decreases	(88 184)	(192 429)	(131 956)	
	Balance at  the end of the period	2 783 304	4 929 973	5 451 982	
	Total investment securities net	14 477 687	15 036 457	16 832 544	

		30.06.2005		30.06.2004		
		‘000 PLN	Average	‘000 PLN	Average	
			yield		yield	
	Fixed interest debt securities					
	NBP bills	4 390	4,75	89 898	5,56	
	Treasury bills	713 068	4,65	331 858	6,62	
	Treasury Bonds	7 104 637	4,60	5 760 957	7,15	
	Treasury Bonds (USD denominated)	-	-	43 116	1,47	
	Polish Brady ( „London Club”) bonds	473 326	4,88	471 605	5,79	
	Foreign government bonds (EUR denominated)	-	-	41 340	4,02	
	Foreign government bonds (HUF denominated)	248 978	6,50	170 361	10,63	
	Foreign government bonds (USD denominated)	313 848	3,72	146 146	3,91	
	Other securities issued by other banks	45 033	4,50	1 047 394	5,76	
	Other securities issued by financial entities	25 914	4,90	26 771	5,56	
	Other securities issued by non - financial entities	114 379	4,80	114 158	7,79	
	Total fixed interest debt securities	9 043 573		8 243 604		
						
	Variable interest debt securities					
	Treasury Bonds	552 902	4,56	133 839	4,81	
	Treasury Bonds – RP Eurobonds (EUR denominated)	-	-	272 671	2,25	
	Treasury Bonds – RP Eurobonds (USD denominated)	1 132 894	3,91	1 443 473	2,17	
	Foreign government bonds (EUR denominated)	36 744	2,47	-	-	
	Local authorities bonds	572 189	5,25	553 998	6,36	
	Other securities issued by other banks (USD denominated)	-	-	94 124	1,36	
	Other securities issued by other banks	-	-	484 651	4,88	
	Other securities issued by financial entities (EUR denominated)	34 456	2,35	-	-	
	Other securities issued by non - financial entities	277 954	4,93	107 177	5,97	
	Total variable interest debt securities	2 607 139		3 089 933		
						
	Total debt securities available for sale	11 650 712		11 333 537		
	Stock and shares in other entities	43 497		46 846		
	Other financial instruments	174		179		
	Total securities available for sale	11 694 383		11 380 562		

Securities held to maturity
		30.06.2005		30.06.2004		
		‘000 PLN	Average	‘000 PLN	Average	
			yield		yield	
	Fixed interest debt securities					
	NBP bills	-	-	115 408	5,56	
	Treasury bills	378 360	7,41	910 350	6,13	
	Treasury Bonds	1 929 488	8,23	3 917 787	7,52	
	Treasury Bonds (USD denominated)	-	-	466	4,35	
	Treasury Bonds – RP Eurobonds (EUR denominated)	163 489	5,69	183 580	5,69	
	Other securities issued by financial entities (USD denominated)	23 821	7,94	26 687	7,94	
	Other securities issued by financial entities (EUR denominated)	35 652	6,88	40 197	6,88	
	Total fixed interest debt securities	2 530 810		5 194 475		
						
	Variable interest debt securities					
	Treasury Bonds	209 861	4,89	209 554	6,77	
	Foreign governments bonds (EUR denominated)	8 164	3,95	9 189	4,02	
	Local authorities bonds	34 469	2,90	38 764	2,94	
	Total variable interest debt securities	252 494		257 507		
						
	Total debt securities held to maturity	2 783 304		5 451 982		

	Securities available for sale according to maturities as of 30 June 2005 (in  ths. PLN)
	- up to 1 month	- between 1 and 3 months	- between 3 months and 1 year	- between 1 and 5 years	- above 5 years	Undefined maturity	Total	
	Book value	Average yield	Book value	Average yield	Book value	Average yield	Book value	Average yield	Book value	Average yield	Book value	Book value	Average yield	
Securities available for sale														
- issued by central banks	4 390	4,75	-	-	-	-	-	-	-	-	-	4 390	4,75	
- issued by other banks	-	-	4 981	4,43	40 052	4,51	-	-	-	-	-	45 033	4,50	
- issued by other financial entities	25 914	4,90	-	-	-	-	34 456	2,35	-	-	-	60 370	3,44	
- issued by non financial entities	130	5,05	-	-	-	-	114 249	4,80	277 954	4,93	-	392 333	4,89	
- issued by the State Treasury	49 950	4,72	343 156	4,89	874 187	4,56	6 084 840	4,6	3 224 264	4,43		10 576 397	4,55	
- issued by local governments	10 197	5,04	47 223	5,09	26 443	4,93	457 499	5,28	30 827	5,39		572 189	5,25	
Shares in other entities														
- listed	-	-	-	-	-	-	-	-	-	-	-	-	-	
- not listed	-	-	-	-	-	-	-	-	-	-	43 497	43 497	-	
Other financial instruments	-	-	-	-	-	-	-	-	-	-	174	174	-	
														
Total securities available for  sale on 30 June 2005	90 581		395 360		940 682		6 691 044		3 533 045		43 671	11 694 383		

Including interest	691		2 888		13 343		110 309		60 073		-	187 304	-	

Securities available for sale according to maturities as of 30 June 2004 (in  ths. PLN)
	- up to 1 month	- between 1 and 3 months	- between 3 months and 1 year	- between 1 and 5 years	- above 5 years	Undefined maturity	Total	
	Book value	Average yield	Book value	Average yield	Book value	Average yield	Book value	Average yield	Book value	Average yield	Book value	Book value	Average yield	
Securities available for sale														
- issued by central banks	89 898	5,56	-	-	-	-	-	-	-	-	-	89 898	5,56	
- issued by other banks	499 635	4,90	1 012 465	5,75	94 123	1,54	19 946	6,18	-	-	-	1 626 169	4,98	
- issued by other financial entities	26 771	5,56	-	-	-	-	-	-	-	-	-	26 771	5,56	
- issued by non financial entities	4 989	5,76	9 266	5,80	-	-	99 903	8,07	107 177	5,97	-	221 335	6,91	
- issued by the State Treasury	340 455	4,60	32 800	5,51	2 011 072	5,48	3 465 924	5,60	2 965 115	4,32	-	8 815 366	5,10	
- issued by local authorities	5 244	5,16	7 263	5,33	36 554	6,66	462 595	6,32	42 342	7,36	-	553 998	6,40	
Shares in other entities														
- listed	-	-	-	-	-	-	-	-	-	-	-	-	-	
- not listed	-	-	-	-	-	-	-	-	-	-	46 846	46 846	-	
Other financial instruments	-	-	-	-	-	-	-	-	-	-	179	179	-	
														
Total securities available for  sale on 30 June 2004	966 992		1 061 794		2 141 749		4 048 368		3 114 634		47 025	11 380 562		

Including interest	28 672	-	3 823	-	10 211	-	87 455	-	47 995		-	178 156	-	

	 Securities held to maturity according to maturities, as of 30 June 2005 (in PLN ths.).
	- up to 1 month	- between 1 and 3 months	- between 3 months and 1 year	- between 1 and 5 years	- above 5 years	Undefined maturity	Total	
	Book value	Average yield	Book value	Average yield	Book value	Average yield	Book value	Average yield	Book value	Average yield	Book value	Book value	Average yield	
Securities held to maturity														
- issued by other financial entities	-	-	-	-	-	-	59 472	7,30	-	-	-	59 472	7,30	
- issued by the State Treasury	294 186	4,71	118 886	4,78	1 102 694	4,63	1 010 108	4,59	163 489	2,84		2 689 363	4,52	
- issued by local authorities	-	-	-	-	-	-	34 469	2,90	-	-		34 469	2,90	
														
Total securities held to maturity on 30 June 2005	294 186		118 886		1 102 694		1 104 049		163 489		-	2 783 304		

Including interest	-		-		8 874		5 105		3 336		-	17 315	-	

	Securities held to maturity according to maturities, as of 30 June 2004 (in PLN ths.)
	- up to 1 month	- between 1 and 3 months	- between 3 months and 1 year	- between 1 and 5 years	- above 5 years	Undefined maturity	Total	
	Book value	Average yield	Book value	Average yield	Book value	Average yield	Book value	Average yield	Book value	Average yield	Book value	Book value	Average yield	
Securities held to maturity														
- issued by central banks	115 408	5,56	-	-	-	-	-	-	-	-	 	115 408	5,56	
- issued by other financial entities	-	-	-	-	-	-	66 884	7,30	-	-		66 884	7,30	
- issued by the State Treasury	355 297	7,31	896 568	6,70	2 779 235	6,98	1 000 614	8,40	199 212	5,69		5 230 926	7,18	
- issued by local governments	-	-	-	-	-	-	38 764	2,94	-	-		38 764	2,94	
														
Total securities held to maturity on 30 June 2004	470 705		896 568		2 779 235		1 106 262		199 212		-	5 451 982		

Including interest	24 862		-		26 903		12 808		4 601		-	69 174	-	

28.	Investments in associates and joint ventures entities
	Fair value of investments in subsidiaries for which published market quotations are available amounted to:
		30.06.2005	30.06.2004	
Entity’s name	‘000 PLN	‘000 PLN	
Jupiter NFI S.A.	-	70 760	
Masters S.A.	-	1 778	
	Summary information about affiliated entities valued using equity method (in PLN)
:
Entity’s name	Total assets 	Total liabilities	Total revenues	Net profit / (loss)	% share	Book value of shares	
30th June 2005							
Central Poland Fund LLC	16 081	3	-	(1 302)	53,19	4 747	
Krajowa Izba Rozliczeniowa S.A.	101 328	11 028	49 906	13 981	22,96	18 083	
Grupa Inwestycyjna NYWIG S.A.	73 493	62 492	2 850	131	24,60	2 241	
Pioneer Pekao Investment
Management S.A.	249 655	50 759	245 333	52 326	49,00	80 850	
Xelion. Doradcy Finansowi Sp. z o.o.	55 790	2 114	1 152	(11 742)	50,00	25 816	
Fabryka Sprzętu Okrętowego
"Meblomor" S.A.	13 915	3 914	9 791	39	23,81	1 376	
Total						133 113	
30th June 2004							
Jupiter NFI S.A.	225 297	1 101	1 767	(7 019)	37,43	77 060	
Krajowa Izba Rozliczeniowa S.A.	115 846	20 453	73 400	18 613	22,96	18 425	
Grupa Inwestycyjna NYWIG S.A. 
financial statements as at 31/12/2003	71 588	61 868	2 659	111	24,60	2 204	
Pioneer Pekao Investment
Management S.A.	151 165	11 698	222 462	40 034	49,00	55 340	
Xelion. Doradcy Finansowi Sp. z o.o.	31 911	2 056	812	(9 192)	50,00	13 202	
Fabryka Sprzętu Okrętowego
"Meblomor" S.A.	-	4 742	12 370	657	23,81	1 499	
MASTERS S.A.	11 346	4 459	7 842	(856)	33,81	1 796	
Zakłady Przemysłu Wełnianego
TOMTEX S.A.	21 341	5 385	10 317	1 472	30,64	2 369	
Total						171 895	
	Summary information about joint ventures entities valued using equity method (in ths. PLN):

Entity’s name	Total assets 	Total liabilities	Total revenues	Net profit / (loss)	% share	Book value of shares	
30th June 2005							
Anica System S.A.	14 677	2 570	12 551	1 317	33,84	4 053	
Total						4 053	
30th June 2004							
Trinity Management Sp. z o.o.	31 422	541	6 540	10 066	50,00	10 000	
Anica System S.A.	11 810	2 075	8 808	1 200	33,84	3 222	
Total						13 222	

	According to the adopted accounting principle, the Group ceases to recognize the losses of its affiliated entity if the share in the loss is equal or greater than the amount of investment, provided that the Group is not legally or customarily required to cover such amounts. As at 30 June 2005 and 30 June 2004, this rule was applied to Hotel Jan III Sobieski Spółka z o.o.

Entity’s name	Share in the loss for the period	Cumulated share in losses 	Book value of shares 	
30th June 2005				
Hotel Jan III Sobieski Sp. z  o. o.	2 249	(67 599)	0	
				
Razem	2 249	(67 599)	0	

30th June 2004				
Hotel Jan III Sobieski Sp. z o. o.	1 853	(86 340)	0	

Total 	1 853	(86 340)	0	
	
Summary information about affiliated entities not recognized using equity method (in ths. PLN):

Entity’s name	Total assets 	Total liabilities	Total revenues	Net profit / (loss)	% share	Book value of shares	
30th June 2005							
Pracownicze Towarzystwo Emerytalne „Nowy Świat” S.A.	386	184	300	0	39,56	99	
CPF Management  - not operating	-	-	-	-	40,00	-	
Total						99	
30th June 2004							
Pracownicze Towarzystwo Emerytalne „Nowy Świat” S.A.	374	124	172	0	39,57	-	
CPF Management  - not operating	-	-	-	-	40,00	-	
Total						-	

Changes in book value of investments in affiliated and joint-venture entities	

	1st half 2005	1st half 2004	
Book value of subsidiaries at the beginning of the reporting period 	12 000	22 361	
Share in profit / (loss)	-	-262	
Share in tax expense 	-	-	
Other profit adjustments 	-	-	
Dividends declared 	-	-	
Share in changes recognized directly in the entities equity 	-	-	
Capital increase 	-	-	
Other 	47	777	
			
Book value of subsidiaries at the reporting date 	12 047	22 876	
			
Book value of affiliated entities at the beginning of the reporting period 	108 719	163 687	
Share in profit / (loss)	28 998	21 401	
Share in tax expense 	(6 891)	(5 799)	
Other profit adjustments 	(446)	(96)	
Dividends declared 	(22 715)	(4 351)	
Share in changes recognized directly in the entities equity 	-	-	
Capital increase 	25 000	-	
Other 	547	(2 947)	
			
Book value of affiliated entities at the reporting date 	133 212	171 895	

Book value of joint-venture entities at the beginning of the reporting period	3 943	10 578	
Share in profit / (loss)	488	6 743	
Share in tax expense	-	(1 304)	
Dividends declared	-	-	
Share in changes recognized directly in the entities equity	(378)	(2 795)	
			
Book value of joint-venture entities at the at the reporting date 	4 053	13 222	

29.	Investments in subsidiaries
In the Group’s financial statements, financial information on the following subsidiaries Fabryka Maszyn w Janowie Lubelskim Sp. z o.o., Nowe Ogrody Sp. z o. o. and Pekao Immobiller s.a.r.l. was not included due to its insignificance. The amount of shares was recognized in the Group’s statement based on purchase prices. See below for summary information about those companies.

Entity’s name	Total assets 	Total liabilities	Total revenues	Net profit / (loss)	% share	Book value of shares	
30th June 2005							
Fabryka Maszyn w Janowie Lubelskim Sp. z o.o.	41 203	16 672	25 543	(530)	86,68	11 939	
Pekao Immobiller s.a.r.l.	57	-	-	(7)	100,00	61	
Nowe Ogrody Sp. z o.o. financial statements as at 31/12/2004	46	-	-	(1)	94,00	47	
Total						12 047	
30th June 2004							
Central Poland Fund LLC	16 600	97	66	(207)	53,19	5 087	
Fabryka Maszyn w Janowie Lubelskim Sp. z o.o.	44 081	19 463	30 536	773	86,68	11 939	
Zakłady Wyrobów Uszczelniających
i Termoizolacyjnych (ZWUiT)
POLONIT Sp. z o.o.	14  353	4 257	4 143	(189)	80,85	5 803	
Pekao Immobiller s.a.r.l.	64	-	-	(8)	100,00	-	
Nowe Ogrody Sp. z o.o. - financial statements as at 31/12/2003	48	1	-	(3)	94,00	47	
Total						22 876	

30.	Intangible assets
	
Six months ended June 30, 2005	Development cost	Licenses	Other(*)	Total	
	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	
Depreciated historical cost as of 1 January  2005 after increases 	45 966	508 369	77 590	631 925	
Acquisition 	-	1 578	67 261	68 839	
Depreciation 	(7 120)	(62 103)	(2 126)	(71 349)	
Other changes in value 	-	61 866	(61 769)	97	
					
Net book value	38 846	509 710	80 956	629 512	

					
As of 1st January 2005					
Historical cost  (gross book value)	69 777	851 769	82 961	1 004 507	
Accumulated depreciation and impairment 	23 811	343 400	5 371	372 582	
					
Net book value	45 966	508 369	77 590	631 925	

As of 30th  June 2005					
Historical cost  (gross book value)	69 777	912 378	88 372	1 070 527	
Accumulated depreciation and impairment 	30 931	402 668	7 416	441 015	
					
Net book value	38 846	509 710	80 956	629 512	

(*) Other movements include in particular transfers of intangibles in progress to a depreciable group of assets (PLN 61 214 ths)
	The centralized IT transaction system Rocket is a significant asset for the Group. The balance sheet value of the system as of 30 June 2005 amounts to PLN 377 812 ths. As of 30 June 2004 this amounted to PLN 422 957 ths..

Six months ended June 30, 2004	Development cost 	Licenses 	Other	Total 	
	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	
Depreciated historical cost as of 1 January  2004 after increases 	48 710	460 522	68 306	577 538	
Acquisition 	-	1 738	451	2 189	
Depreciation 	-6 174	-51 616	-1 244	-59 034	
Other changes in value 	385	111 909	-20 790	91 504	
					
Net book value	42 921	522 553	46 723	612 197	

					
As of 1st January 2004					
Historical cost  (gross book value)	59 973	700 590	72 798	833 361	
Accumulated depreciation and impairment 	11 263	240 068	4 492	255 823	
					
Net book value	48 710	460 522	68 306	577 538	

As of 30st June 2004					
Historical cost  (gross book value)	60 358	812 181	52 459	924 998	
Accumulated depreciation and impairment 	17 437	289 628	5 736	312 801	
					
Net book value	42 921	522 553	46 723	612 197	

31.	Tangible fixed assets
	30.06.2005	31.12.2004	30.06.2004	
	‘000 PLN	‘000 PLN	‘000 PLN	
Tangible fixe assets:				
a) ) fixed assets, including:	1 466 580	1 488 394	1 558 316	
Land and buildings	1 165 098	1 180 616	1 217 871	
Machinery and equipment	264 579	270 389	296 559	
Means of transport	16 842	14 068	13 577	
Other tangible fixe assets	20 061	23 321	30 309	
b) Capital work in progress and prepayments for capital work in progress	23 125	53 434	42 070	
				
Tangible fixed asse	1 489 705	1 541 828	1 600 386	

	Six months ended June 30, 2005	Land and buildings	Machinery and equipment	Means of transport	Other tangible fixed assets	Total tangible fixed assets	
		‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	
	Opening balance as of January 1, 2005	1 636 263	970 719	40 704	307 965	2 955 651	
	Increases, including:	17 948	45 043	6 009	3 177	72 177	
	 Acquisitions	387	1 041	562	497	2 487	
	Transfer from tangibles under construction	13 359	43 804	4 995	1 934	64 092	
	 Other	4 202	198	452	746	5 598	
	Decreases, including:	(5 100)	(15 300)	(4 574)	(5 902)	(30 876)	
	Liquidation and sale	(3 690)	(15 288)	(4 412)	(5 839)	(29 229)	
	 Other	(1 410)	(12)	(162)	(63)	(1 647)	
							
	Closing balance	1 649 111	1 000 462	42 139	305 240	2  996 952	

							
	Depreciation						
	Opening balance as of January 1, 2005	450 219	699 916	26 636	284 644	1 461 415	
	Increases, including:	30 630	50 096	2 839	6 335	89 900	
	Depreciation of the period	30 190	49 943	2 645	6 172	88 950	
	 Other	440	153	194	163	950	
	Decreases, including:	(4 737)	(14 543)	(4 178)	(5 800)	(29 258)	
	 Liquidation and sale	(1 787)	(14 527)	(4 016)	(5 740)	(26 070)	
	 Other	(2 950) 	(16)	(162)	(60)	(3 188)	
							
	Closing balance	476 112	735 469	25 297	285 179	1 522 057	

							
	Impairment write-downs						
	Opening balance	5 428	414	-	-	5 842	
	Decreases	2 473	-	-	-	2 473	
							
	Closing balance	7 901	414	-	-	8 315	

							
	Net value						
	Opening balance	1 180 616	270 389	14 068	23 321	1 488 394	
							
	Closing balance	1 165 098	264 579	16 842	20 061	1 466 580	

	Six months ended June 30, 2004	Land and buildings	Machinery and equipment	Means of transport	Other tangible fixed assets	Total tangible fixed assets	
		‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	
	Opening balance as of January 1, 2004	1 635 749	972 849	38 473	326 107	2  973  178	
	Increases, including:	21 437	34 338	3 447	2 268	61 490	
	 Acquisitions	168	2 273	584	287	3 312	
	Transfer from tangibles under construction	15 024	31 971	1 974	1 975	50 944	
	 Other	6 245	94	889	6	7 234	
	Decreases, including:	(6 659)	(20 797)	(3 040)	(3 209)	(33 705)	
	Liquidation and sale	(1 896)	(14 034)	(2 948)	(2 775)	(21 653)	
	 Other	(4 763)	(6 763)	(92)	(434)	(12 052)	
	 Other						
	Closing balance	1 650 527	986 390	38 880	325 166	3 000 963	

							
	Depreciation						
	Opening balance as of January 1, 2004	393 246	649 479	25 559	287 933	1 356 217	
	Increases, including:	33 808	54 347	2 318	9 793	100 266	
	 Depreciation for the period 		33 750	54 278	2 315	9 793	100 136	
	Other 	58	69	3	-	130	
	Decreases, including :	(5 338)	(14 399)	(2 574)	(2 869)	(25 180)	
	 Liquidation and sale 	(805)	(13 650)	(2 568)	(2 687)	(19 710)	
	 Other 	(4 533)	(749)	(6)	(182)	(5 470)	
							
	Closing balance	421 716	689 427	25 303	294 857	1 431 303	

							
	Impairment write-downs						
	Beginning value	8 180	404	-	-	8 564	
	Increases 	2 780	-	-	-	2 780	
							
	Closing balance	10 940	404	-	-	11 344	
							
	Net book value 						
	Beginning value	1 234 343	322 966	12 914	38 174	1 608 397	
							
	Closing balance	1 217 871	296 559	13 577	30 309	1 558 316	

As of 30th June 2005 assets under construction amounted to PLN 23 062 ths. (as of 30th June 2004 PLN 42 066 ths). 
The amount of damages received and recognized in the profit and loss, in relation to fixed assets lost in the 1 st half 2005 was PLN 596 ths.
The book value of fully amortized fixed assets, which remained in use as of 30th June 2005 amounted to PLN 694 610 ths (as of 30th June 2004: PLN 641 495 ths) 
The book value of fixed assets withdrawn from use, not classified as „held for sale” in the 1st half ended 30th June 2005 amounted to PLN 5 214 ths. (in the 1st half 2004: PLN 5 411 ths) 
The operational lease payments recognized as expense in the 1st half 2005 amounted to PLN 50 338 ths (in the 1st half 2004 amounted to PLN 56 325 ths.) 
The operational lease payments recognized as income in the 1st half 2005 amounted to PLN 7 106 ths (in the 1st half 2004 amounted to PLN 7 107 ths). 

Investment commitments  
Until 30th June 2005 the Group entities concluded contracts to performin 2005  investments amounting to PLN 36 911 ths. 
32.	Investment property
The Group measures the investment property using the historical cost concept.  
There are no restrictions related to the right to sell and to transfer the profit attributable to investment property owned by the Group. 
	Changes in value of the investment property:
	30.06.2005	30.06.2004	
	‘000 PLN	‘000 PLN	
Gross value			
Opening balance as of 1 January 2005	132,487	141,976	
Increase of balance	349	232	
Acquisitions of real estate	-	93	
Activation of subsequent outlays	-	110	
Transfer from own real estate	-	19	
Other changes	349	10	
Decrease of balance	(2,911)	(6,075)	
Transfer to own real estate	(2,233)	(3,034)	
Other changes	(678)	(3,041)	
			
Value as of the end of the period	129,925	136,133	

Depreciation write-offs			
Opening balance as of 1 January 2005	25,843	26,961	
Increase of balance	1,746	1,626	
Activation of subsequent outlays		2	
Transfer from own real estate		158	
Other changes	77	2	
Depreciation	1,669	1,464	
Differences in exchange rates	77	2	
Decrease of balance	(787)	(1,,487)	
Transfer to own real estate	(609)	(748)	
Other changes	(178)	(739	
			
Value as of the end of the period	26,802	27,100	

Depreciation write-offs due to loss of value			
Opening balance as of 1 January 2005	3,775	4,366	
Decrease	(36)	(162)	
Differences in exchange rates	(36)	(162)	
			
Value as of the end of the period	3,739	4,204	

Net balance value			
Opening balance as of 1 January 2005	102,869	110,649	
			
Value as of the end of the period	99,384	104,829	

	As of  30th June 2005 the fair value of the investment property amounted to PLN 114 596 ths. 
The following amounts of income and expenses were recognized in profit and loss in relation with investment property: 
		2005	2004	
		‘000 PLN	‘000 PLN	
	Income on rental of investment property 	               2 900	                   3 670	
	Direct operational expenses (including repair and maintenence) related to investment property bringing rental income 	              
               1 319	                   1 483	
	Direct operational expenses (including repair and maintenence) related to investment property not bringing rental income	
                  253	
                          -	
33.	Other assets

	30.06.2005	31.12.2004	30.06.2004	
	‘000 PLN	‘000 PLN	‘000 PLN	
Prepaid expenses 	50 394	70 025	32 744	
Perpetual usufruct rights 	8 852	9 073	8 939	
Accrued income 	97 374	92 094	76 799	
Other assets repossessed  	7 312	8 755	13 445	
Interbank and interbranch settlements 	11 001	6 842	7 942	
Other debtors 	575 277	542 699	1 049 556	
				
Total other assets 	750 210	729 488	1 189 425	

34.	Assets used to pledge liabilities
As of 30 June 2005, the portfolio of securities available for sale includes two-year treasury bonds with a nominal value of PLN 16,500 ths. (as of 31 December 2004 – PLN 17,106 ths., as of 30 June 2004 – PLN 25,000 ths.) used as collateral for the loan extended by the Bank Guarantee Fund. The amount of payables which the collateral refers to is PLN 13,822 ths.  (as at 31 December 2004 – PLN 14,828 ths., as at 30 June 2004 – PLN 15,824 ths).
As of 30 June 2005, the portfolio of securities available for sale also includes treasury bonds with nominal value of PLN 182,440 ths. (as of 31 December 2004 – PLN 6,923 ths., as of 30 June 2004 – PLN 0 ths.) used as collateral for securities sold under repo transactions. The amount of liabilities which the collateral refers to is PLN 200,444 ths. (as of 31 December 2004 – PLN 7,153, as of 30 June 2004 – PLN 0 ths.).
The following table presents the balance sheet value of assets pledged as collateral for the liabilities.

		30.06.2005	31.12.2004	30.06.2004	
		‘000 PLN	‘000 PLN	‘000 PLN	
	Treasury two-year bonds constituting security of loans received from Bankowy Fundusz Gwarancyjny	15,936	15,818	23,735	
	Treasury bonds security of liabilities due to sold securities with granted repurchase promise	201,386	7,153	-	

35.	Amounts due to the Central Bank 
		30.06.2005	31.12.2004	30.06.2004	
		‘000 PLN	‘000 PLN	‘000 PLN	
					
	Received credits				
	Up to 1 month	-	-	-	
	From 1 month to 3 months	53 247	52 825	49 596	
	From 3 months to 1 year	154 596	145 331	136 632	
	From 1 to 5 years	877 691	980 770	942 217	
	Over 5 years	944 573	942 161	1 081 722	
	Interest charged	24 083	30 656	27 701	
					
	Total amounts due to Central Bank	2 054 190	2 151 743	2 237 868	

36.	Amounts due  to other banks

		30.06.2005	31.12.2004	30.06.2004	
		‘000 PLN	‘000 PLN	‘000 PLN	
	Current accounts	321 373	571 981	1 436 676	
	Deposits of other banks	1 385 877	475 011	479 644	
	Received credits and loans	81 403	73 784	91 956	
	Financial resources under way	137 428	21 418	41 487	
	Repo transactions	150 090	186 281	373 501	
	Interest charged	4 946	4 082	2 255	
					
	Total amounts due to other banks	2 081 117	1 332 557	2 425 519	

The variable interest rate due to banks amounts to PLN 80 802 ths. (as of 30.06.2004: PLN 91 956ths.), fixed interest rate due to banks amounts to PLN 1 857 941 ths. (as of 30.06.2004: PLN 2 289 821 ths.).
Amounts due to banks according to maturities
	According to the residual maturities
			30.06.2005	30.06.2004	
			‘000 PLN	‘000 PLN	
	Current accounts		321 373	1 436 676	
	Future liabilities with maturity period of:				
	Up to 1 month		791 738	735 957	
	From 1 month to 3 months		505 488	22 273	
	From 3 months to 1 year		234 333	95 212	
	From 1 to 5 years		81 151	46 090	
	Over 5 years		4 660	45 569	
	Financial resources under way		137 428	41 487	
	Interest charged		4 946	2 255	
	Total 		2 081 117	2 425 519	

37.	Financial liabilities held for trading
		30.06.2005	31.12.2004	30.06.2004	
		‘000 PLN	‘000 PLN	‘000 PLN	
	Liabilities due to short securities 	90 424	590 119	151 530	
					
	Total liabilities held for trading	90 424	590 119	151 530	

38.	
Amounts due to customers

		30.06.2005	31.12.2004	30.06.2004	
		‘000 PLN	‘000 PLN	‘000 PLN	
	Amounts due to business entities	13 030 734	13 356 343	10 990 713	
	Resources at current accounts and O/N deposits	6 820 994	7 836 246	6 888 718	
	Deposits and time money	6 141 470	5 477 452	4 048 014	
	Other	47 679	20 058	39 658	
	Interest charged	20 591	22 587	14 323	
	Amounts due to budget entities	3 541 067	2 841 907	3 062 096	
	Resources at current accounts and O/N deposits	2 047 793	2 075 458	1 970 383	
	Deposits and time money	1 489 086	763 834	1 085 211	
	Other	-	-	2 569	
	Interest charged	4 188	2 615	3 933	
	Amounts due to individuals 	27 693 169	27 473 856	31 931 533	
	Resources at current accounts and O/N deposits	11 196 795	9 538 125	11 352 846	
	Deposits and time money	16 426 594	17 839 432	20 426 330	
	Other	7	2 991	-	
	Interest charged	69 773	93 308	152 357	
	Repo transactions	1 728 801	2 149 539	556 408	
	Deposits	1 726 436	2 141 979	555 864	
	Interest charged	2 365	7 560	544	
					
	Total amounts due to customers 	45 993 771	45 821 645	46 540 750	

	According to the residual maturities 
			30.06.2005	30.06.2004	
			‘000 PLN	‘000 PLN	
	Current accounts and O/N deposits		20 065 582	20 211 947	
	Future liabilities with maturity period of:				
	Up to 1 month		13 097 166	10 526 279	
	From 1 month to 3 months		6 676 599	6 934 868	
	From 3 months to 1 year		4 634 428	6 087 164	
	From 1 to 5 years		782 132	1 955 728	
	Over 5 years		593 261	611 380	
	Other 		47 686	42 227	
	Interest charged		96 917	171 157	
	Total 		45 993 771	46 540 750	

Variable interest rate amounts due to customers amounts to PLN24 656 465 ths, fixed rate amounts due to customers amounts to PLN 21 192 703 ths.
39.	
Debt securities in issue 

		30.06.2005	31.12.2004	30.06.2004	
		‘000 PLN	‘000 PLN	‘000 PLN	
					
	Liabilities due to issue of bonds	2	22 479	546 222	
	Interest charged	-	726	16 799	
					
	Total liabilities due to issue of debt securities	2	23 205	563 021	

	30.06.2005	30.06.2004	
	‘000 PLN		‘000 PLN		
	Balance value	Average effective rate	Balance value	Average effective rate	
Liabilities due to issue of maturity period of:					
Up to 1 month	-	-	25 031	5,30	
From 1 month to 3 months	-	-	21 650	6,21	
From 3 months to 1 year	-	-	516 340	4,45	
From 1 to 5 years	2	0	-	-	
Over 5 years	-	-	-	-	
					
Total	2		563 021		

	The Group never defaulted on repayment of  principal or interest or redemption its own securities.
40.	Other liabilities
	30.06.2005	31.12.2004	30.06.2004	
	‘000 PLN	‘000 PLN	‘000 PLN	
Accruals deferred income	67 800	36 676	53 039	
Holiday accruals	37 160	36 492	32 172	
Accruals for other payments form employees	149 687	168 476	144 227	
Non-human resources costs provision 	66 618	11 968	48 536	
Other costs to be paid	155 600	384 488	271 084	
Other creditors	795 884	337 624	761 911	
Inter-bank and inter branch settlements	336 759	84 646	781 033	
				
Total other liabilities	1 609 508	1 060 370	2 092 002	

41.	Provisions

	For the 1st half finished on 30 June 2005	Reserve for restructurings	Reserve for matters of dispute	Reserve for old-age pensions	Reserve for granted liabilities and guarantees	Reserves for general risk	Other reserves	Total 	
		‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	
	Balance as of 31 December 2004	9 000	12 449	58 691	16 325	248 453	4 148	349 066	
	Opening balance adjustment	-	-	-	2 064	(248 453)	-	-246 389	
	Creation / revaluation of reserves	-	1 293	3 137	29 243	-	59	33 732	
	Use of reserves	(4 160)	(328)	(364)	-	-	(400)	(5 252)	
	Dissolution of reserves	-	(1 648)	-	(23 064)	-	(45)	(24 757)	
	Differences in exchange rates	-	62	-	518	-	(16)	564	
	Other changes		(152)	15	4		(655)	(788)	
	Balance as of 30 June 2005	4 840	11 676	61 479	25 090	-	3 091	106 176	
									
	For the 1st half finished on 30 June 2005	Reserve for restructurings	Reserve for matters of dispute	Reserve for old-age pensions	Reserve for granted liabilities and guarantees	Reserves for general risk	Other reserves	Total 	
		‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	
	Balance as of 31 December 2003	21 765	25 436	50 210	32 102	248 453	15 019	392 985	
	Creation / revaluation of reserves	-	1 288	26	16 720	-	13 297	31 331	
	Use of reserves	(14 471)	(372)	(1 090)	-	-	(1 690)	(17 623)	
	Dissolution of reserves	-	(17 675)	-	(26 066)	-	(3 075)	(46 816)	
	Differences in exchange rates	(1)	(23)	-	(105)	-	(83)	(212)	
	Other changes	-	(2 331)	-	(125)	-	324	(2 132)	
	Balance as of 30 June 2004	7 293	6 323	49 146	22 526	248 453	23 792	357 533	

42.	Employee benefits
Employee share programs
On 25 July 2003 the Extraordinary Shareholders Meeting of the Bank adopted resolutions to establish an incentive program for senior management of the Bank’s capital group, essential to the success of the Bank’s strategy.
The program involved a contingent increase of the Bank’s share capital by PLN 1,660,000 by issuing 830,000 ordinary bearer’s F-shares of the Bank and 830,000 ordinary bearer’s G-shares of the Bank, with nominal value PLN 1 each. 1,660,000 bonds with pre-emptive rights to take up the Bank’s shares, applicable to F- and G-shares will also be issued. The issue price of one F-share was established at PLN 108.37 (the average of closing prices of the Bank’s shares quoted on the Warsaw Stock Exchange in July and August 2003), whereas the issue price of one G-share was established at PLN 123.06 (the average of closing prices of the Bank’s shares quoted on the Warsaw Stock Exchange in February and March 2004).
The incentive program will be implemented in two independent phases, one of which started in 2003 and is set to end in 2010 and the other started in 2004 and is scheduled for completion in 2012.
The program includes the Bank’s senior management and employees of the Bank and of the Bank’s capital group that are essential to the success of the Bank’s strategy. Individuals meeting program eligibility criteria will be entitled to purchase bonds with pre-emptive rights to take up the Bank’s shares at a price of 1 grosz per bond, in the amount corresponding to the amount of shares that such employees would otherwise be entitled to purchase. Each bond entitles the holder to acquire 1 share of the Bank.
The period of purchasing pre-emptive rights to take up the Bank’s shares as part of the incentive program is limited to enable eligible employees to exercise their pre-emptive rights to take up the shares once all criteria have been met. The pre-emptive right to purchase the Bank’s shares may be exercised until 31 December 2010 – for bonds issued as part of the program phase commencing in 2003 and until 31 December 2012 – for bonds issued as part of the program phase commencing in 2004. In order to exercise the pre-emptive right, an individual must be the company’s employee as at the date of such exercise and the Bank’s Capital Group must ensure specific ROE levels between 2004 and 2007. In order for senior management to exercise the pre-emptive right, they must meet predefined eligibility criteria for the MBO program. After the pre-emptive right has been exercised, the Bank’s shares will be recognized as equity.
By 30 June 2005, as part of the program all pre-emptive rights to take up the Bank’s shares were granted in the form of program participation agreements signed with eligible employees.
The fair value of pre-emptive rights to take up the Bank’s shares granted from 30 June 2005 as of 30 June 2005  is PLN 32,353 ths and it is settled over time during the estimated period in which rights to acquire the Bank’s shares are granted to participating individuals.
Costs of payroll in the first half of 2005 was increased by PLN 2,831 ths (in 2004: PLN 1,969 ths).
Options (pre-emptive rights to take up shares) for shares to which one is entitled at the end of the period were offered at the following option prices:

Expiry date	Realization price	30.06.2005	30.06.2004	
		Number of options	Number of options	
				
31 December 2010	108,37	830 000	830 000	
31 December 2012 	123,06	830 000	830 000	
				
Total 		1 660 000	1 660 000	

Fair value of the pre-emptive rights to take up the Bank’s shares was recognized as of the day of granting options (pre-emptive rights to take up the Bank’s shares) based on the Black-Scholes model for appraisal of dividend-yielding stock options, according to expectations of the Management Board concerning the number of rights to be exercised. The amount of the employee share program is adjusted as of every balance sheet date if expectations of the Management Board change concerning the number of rights to be exercised. No efficiency/results data except those related to the price of shares (“market conditions”) are taken into account in the assessment of transactions settled in capital instruments.
The following table contains figures estimated for the assessment of fair value of the pre-emptive rights to take up the Bank’s shares:

	Program for 2004	Program for 2003	
			
Dividend rate (%)	5,12	4,27	
Foreseen variability rate (%) (%)	31,75	31,75	
Risk-free interest rate (%)			
I installment	6,66	5,33	
II installment	6,70	5,41	
Foreseen option validity period (in years)			
I installment	6,18	4,76	
II installment	6,68	5,26	
Weighted average of stock price (in PLN)	125,00	112,50	

The expected effective term of the pre-emptive rights to take up the Bank’s shares is determined on the basis of historic data and does not need to specifically define all possible exercise scenarios.
The expected volatility index reflects the assumption according to which the historic volatility index points to future trends, which may naturally turn out to be entirely different altogether.
No other parameters related to the granting of pre-emptive rights to take up the Bank’s shares were taken into account in the assessment of the fair value.

43.	Contingent liabilities
Litigation 
As of 30th June 2005 the number of the legal proceedings in courts, appropriate bodies of arbitration or public administration bodies, concerning the liabilities of the Group was 357. The total value of them was PLN 689.141 ths. 
According to the issuer’s Management Board opinion only one of the largest proceedings, that have been in progress against the Group during the reporting period, give rise to risk of cash outflow as a result of fulfilling the obligation.
The action in the course of proceedings brought by Ispat Polska Stal S.A. against Bank Pekao S.A.  The subject of litigation is to devoid the Bank execution deed issued by the Bank and to adjudge PLN 8.405 ths. from the Bank.  
As of the reporting day it was not possible to reliably estimate the value of potential cash outflow related to these proceedings.  
As regards all other significant proceedings in progress against the Group, the risk of cash outflow is nominal.  
Financial obligations granted

	30.06.2005	31.12.2004	30.06.2004	
	‘000 PLN	‘000 PLN	‘000 PLN	
Granted financial liabilities in total:	10 604 037	10 518 643	11 077 114	
- towards financial entities	1 522 758	1 119 486	1 441 565	
- towards non-financial entities	8 544 256	9 009 100	9 325 601	
- towards the budget	537 023	390 057	309 948	
Including: granted irrevocable liabilities	10 399 004	10 383 642	10 500 044	

The Group granted fixed-rate financial commitments  (which expose the Group to interest rate risk) in the nominal amount of PLN 1,266,180 ths. 

The below table presents granted fixed-rate financial commitments  according to their maturities 
	30.06.2005	30.06.2004	
	‘000 PLN	‘000 PLN	
Granted fixed-rate financial liabilities in total:	1 266 180	1 250 781	
- with maturity date within a year of the balance day	635 227	249 014	
- with maturity date within more than a year of the balance day	630 953	1 001 767	
including: granted irrevocable liabilities	1 266 180	1 250 781	

Guarantees granted

	30.06.2005	31.12.2004	30.06.2004	
	‘000 PLN	‘000 PLN	‘000 PLN	
1) Liabilities granted towards financial entities:	154 703	127 841	504 909	
- guarantees	116 759	97 520	478 696	
- sureties	22 352	18 403	15 485	
- confirmed export letters of credit	15 592	11 918	10 728	
2) Liabilities granted towards non-financial entities: 	1 148 219	753 405	652 870	
- guarantees	1 147 747	752 664	652 375	
- sureties	431	236	7	
- confirmed export letters of credit	41	505	488	
3) Liabilities granted towards the budget: 	61 367	61 223	62 874	
- guarantees	57 617	57 473	57 424	
- endorsements 	3 750	3 750	5 450	
Granted liabilities in total	1 364 289	942 469	1 220 653	

Sub issue program
As of 30 June 2005  the following securities programs were subject to sub issue
Issuer name	Type of securities	Remaining amount of submission to which the Group undertook to engage 
‘000 PLN	Contract validity period	Type of submission	
City Council of Poznań	Municipality’s bonds	20,000	20.06.05 - 31.12.05	unconditional	
Poviat Starost’s Office
Zduńska Wola	County’s bonds	2,000	25.01.01 – 31.12.10	unconditional	
Securities issued by the County of Zduńska Wola, underwritten by the Bank, are securities with unlimited transferability, not listed on stock exchanges and not traded on regulated over-the-counter markets. Securities issued by the Municipality of Poznań are traded on regulated over-the-counter markets.

Assets held as collateral for conditional liabilities 
As of 30th June 2005 there were no assets held as collateral against conditional liabilities. As of 31st December 2004 the deposit placed with UniCredito Italiano New York, amounting to USD 
9 336 ths. (as of 30th June 2004: USD 26 557 ths.) represented a collateral of a guarantee granted to UniCredito Italiano New York, in amount of USD 25 019 ths. (as of 30th June 2004: USD 112 347 ths. and EUR and 1 818 ths.). 

44.	Share capital

INITIAL CAPITAL (STRUCTURE)	 	 	 	 	 	
Series / 	Type of	Type of	Type of limitation  	Number of	Value of	Manner of capital	Date of	Right to	
Issue	stocks	preference	of right to stocks	stocks	series / issue according to nominal value	coverage	registration	dividend (as of)	
A	bearer common stocks	Not applicable	Not applicable	137,650,000	137,650	paid in full	21.12.1997	1.01.1998	
B	bearer common stocks	Not applicable	Not applicable	7,690,000	7,690	paid in full	6.10.1998	1.01.1998	
C	bearer common stocks	Not applicable	Not applicable	10,630,632	10,631	paid in full	12.12.2000	1.01.2000	
D	bearer common stocks	Not applicable	Not applicable	9,777,571	9,777	paid in full	12.12.2000	1.01.2000	
E	bearer common stocks	Not applicable	Not applicable	373,644	374	paid in full	29.08.2003	1.01.2003	
H	bearer common stocks	Not applicable	Not applicable	359,840	360	paid in full	12.08.2004	1.01.2004	
Total number of stocks	 	166,481,687	 	 	 	 	
Total initial capital in thousand PLN	 	 	166,482	 	 	 	
Nominal value of one stock = 1.00 PLN	 	 	 	 	 	

	I half 2005
in stocks					
		Stocks issued and paid in full	Stocks issued and not paid in full	Entity’s own shares or stocks in its possession or possessed by dependent and associated entities	Total 	
	Balance as of the beginning of the period	166 481 687	-	-	166 481 687	
	Stocks issue	-	-	-	-	
	Purchase / sale of own stocks	-	-	-	-	
	Stocks taken by employees under motivation programs	-	-	-	-	
						
	Balance as of the end of the period	166 481 687	-	-	166 481 687	

The Bank has implemented an Incentive Program involving the issue of convertible bonds. As of 30 June 2005 no shares to replace the convertible bonds were issued. For a detailed description of the program, see Note 42.
45.	Other reserves attributable to the Company’s equity holders
		30.06.2005	31.12.2004	30.06.2004	
		‘000 PLN	‘000 PLN	‘000 PLN	
	Reserve Capital	1 618 709	1 601 503	1 520 319	
	Share premium	1 361 034	1 361 034	1 337 897	
	Other 	257 675	240 469	182 422	
	Revaluation reserve 	216 782	(10 723)	(223 609)	
	Valuation of the portfolio of financial assets available for sale	265 679	(15 477)	(278 474)	
	Deferred tax	(50 716)	2 575	54 075	
	 Other 	1 819	2 179	790	
	General banking risk fund	1 067 850	1 067 850	1 067 850	
	Other reserve capital	3 924 447	3 672 667	4 036 081	
	Differences in the rate of exchange	4 575	(2 499)	3 547	
	Bonds convertible into stocks – capital constituent	8 426	5 595	2 764	
	Undistributed result of previous years	(26 288)	185 839	(117 366)	
	Net profit (loss)	727 296	1 317 991	663 619	
					
	Balance as of the end of the period, in total	7 541 797	7 838 223	6 953 205	
					
	Spare capital				

46.	Additional information for the cash flow statement
a) Cash and cash equivalents

Balance items	2005	2004	
	‘000 PLN	‘000 PLN	
Cash, amounts due from Central Bank*	1 859 746	1 714 905	
Receivables from banks up to 3 month	5 657 832	6 556 865	
(…)			
Financial resources and equivalents of financial resources presented in the cash flow statements	7 517 578	8 271 770	
			
*The item „Cash, amounts due from Central Bank ” does not include the NBP Bond in amount of  PLN 1 340 295 ths. (30.06.2004 - PLN 1 338 691 ths.)

Limited availability cash and cash equivalents as of 30 June 2005 amounted to PLN 1 550 002 ths. (as of 30 June 2004 PLN 1 653 467 ths).
b) Explanation of the differences between changes of the balance sheet amounts shown in the consolidated cash flow statement
The differences between changes of the balance sheet amounts and changes shown in the consolidated cash flow statement resulted from IAS 39 adjustments: impairment and valuation of loans and receivables at amortized cost using the effective interest rate. The differences concern the following consolidated cash flow statement captions:
- changes of loans and receivables;
- changes of deferred income tax assets; and 
- changes of the provisions.

47.	Transactions with related entities
The consolidated financial statements include the financial statements of Bank Pekao S.A. and financial statements of subsidiaries are listed in the following table:

	Entity name	 Registering body	Percentage participation in the capital	
			30.06.2005		
	Bank Pekao (Ukraina) Ltd.	National Bank of Ukraine, National Bank Register. no. 265	100,00	100,00	
	Centralny Dom Maklerski Pekao S.A.	District Court for the capital city of Warsaw, XX Commercial Department of the National Court Registry	100,00	100,00	
	Pekao Fundusz Kapitałowy Sp. z o.o.	District Court for the capital city of Warsaw, XIX Commercial Department of the National Court Registry	100,00	100,00	
	Pekao Leasing Sp. Z o.o.	District Court for the capital city of Warsaw, XX Commercial Department of the National Court Registry	100,00	100,00	
	Pekao Faktoring Sp. z o.o.	District Court for the city of Lublin,  XI Commercial Department of the National Court Registry	100,00	100,00	
	Pekao Pioneer Powszechne Towarzystwo Emerytalne S.A.	District Court for the capital city of Warsaw, XX Commercial Department of the National Court Registry	65,00	65,00	
	Drukbank Sp. z o.o.	District Court for the city of Lublin, XI Commercial Department of the National Court Registry	100,00	100,00	
	Centrum Kart S.A.	District Court for the capital city of Warsaw, XIX Commercial Department of the National Court Registry	100,00	100,00	
	Pekao Financial Services Sp. z o.o. 	District Court for the capital city of Warsaw, XX Commercial Department of the National Court Registry	100,00	100,00	
	Pekao Development Sp. z o.o.	District Court for the capital city of Warsaw, XIX Commercial Department of the National Court Registry	100,00	100,00	
	Pekao Access Sp. z o.o.	District Court for the capital city of Warsaw, XIX Commercial Department of the National Court Registry	55,26	55,26	
	BDK Consulting Sp. z o.o.	Executive Committee of the City Council of Łuck, no. 04051327Ю0060469	99,99	99,99	
	Bank Pekao S.A. is the holding company of the Bank Pekao S.A Capital Group. UniCredito Italiano SpA is the superior holding company.
	Information on subsidiaries and related and affiliated entities is provided in Notes 28 and 29.
	
The credit procedure applicable to the Bank’s Management and entities related to the Bank
Under the Banking Law, credit transactions with members of the Bank’s Management Board and Supervisory Board as well as with the Bank’s senior management and entities related thereto are subject to the Bylaws adopted by the Bank’s Supervisory Board.
Members of the Bank’s Management and entities related thereto may use lending facilities offered by the Bank on standard terms and conditions applied by the Bank. In particular, the Bank may not offer such individuals or entities better interest rates for lending facilities.
Credit risk assessment follows methodologies used by the Bank with regard to the customer’s segment and type of transaction.
The Bylaws lay down detailed decision-making procedures applicable to transactions with such individuals and entities, including authority levels on which different decisions are allowed and competencies assigned thereto. In particular, concluding a transaction with a member of the Bank’s Management Board or Supervisory Board or with an entity related thereto, in amounts specified in the Bylaws, requires authorization of the Bank’s Management Board and Supervisory Board.
Standard credit procedures are applied to entities affiliated with the Bank, and transaction decisions are made exclusively from the Bank’s Head Office level.
Loan and lending facilities granted to affiliated entities 

	Entity name	Credits and loans as of 30 June 2005	Income from interest from related entities for 1st half 2005	Credits and loans as of 30 June 2004	Income from interest from related entities for 1st half 2004	
		‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	
	Group dominant company					
	UniCredito Italiano SpA	-	-	-	-	

	Subsidiaries					
	Fabryka Maszyn w Janowie Lubelskim Sp. z o.o.	2 968	130	3 225	112	

	Associated entities					
	Hotel Jan III Sobieski Sp. z o.o.	74 745	866	85 797	2 001	
	Nywig Grupa Inwestycyjna S.A.	38 893	1 430	44 771	850	
	Polonit Sp. z o.o.	-	-	484	22	
	Joint ventures in which the entity is a partner	-	-	-	-	
	Key managing staff of the Bank or it’s Parent Company 	
-	
-	1 696	30	
	Other related entities 	414	5	11	-	
						
	Total 	117 020	2 431	135 984	3 015	

Deposits received from affiliated entities 
	
			Entity name	Deposits as of  30th June  2005 	Interest expense from related entities  for 1st half 2005	Deposits as of  30th June  2004 	Interest expense from related entities  for 1st half 2004	
		‘000 PLN	‘000 PLN	‘000 PLN	‘000 PLN	
	The Parent Entity for the Group 					
	UniCredito Italiano SpA	-	-	-	-	
	Subsidiaries 	-	-	-	-	
	Fabryka Maszyn w Janowie Lubelskim Sp. z o.o.	2	1	217	-	
	Joint-venture entities 					
	Trinity Management Sp. z o.o.	-	-	7 398	146	
	Affililated entites 					
	Xelion Doradcy Inwestycyjni Sp. z o.o.	49 528	303	25 052	683	
	Hotel Jan III Sobieski Sp. z o.o.	524	2	1 548	7	
	Pioneer Pekao Investment Management S.A.	91 662	1 423	14 873	225	
	Krajowa Izba Rozliczeniowa SA	3	-	726	34	
	Grupa Inwestycyjna NYWIG S.A.	-	2	21	-	
	F-ka Sprzętu Okrętowego MEBLOMOR S.A.	41	-	36	-	
	Zakłady Przemysłu Wełnianego TOMTEX S.A.	-	-	90	3	
	Joint ventures in which the entity is a partner					
	Key managing staff of the Bank or it’s Parent Company 	3 164	45	1 371	19	
	Other related entities 	13	-	-	-	
		144 937	1 776	51 332	1 117	

The off-balance sheet exposure related to: financing of related entities as of 30th June 2005 amounted to PLN 213 ths. (as of 30.06.2004 PLN 138 ths.); related to guaranting amounted to PLN 185 ths. (as of 30.06.2004 PLN 208 ths.); credit cards limits towards related entities as of 30th June 2005  amounted to 156 ths. (as of 30.06.2004 PLN. 79 ths.).
Fee and commission income from related entities in the 1st half 2005 amounted to PLN 285 ths.(in 1st half  2004: PLN 280 ths.).
As of 30th June 2005 the impairment write down related to non-performing amounts due from related entities amonted to PLN 33 770 ths. and pertained to Hotel Jan III Sobieski Sp. z o.o.
As of 30th June 2004 the impairment write down related to non-performing amounts due from related entities amounted to PLN 38 388 ths. and pertained to Hotel Jan III Sobieski Sp. z o.o.
Impairment loss during the 1st half 2005 pertaining to non-performing amounts due from related entities amounted to PLN 791 ths. PLN and related to Hotel Jan III Sobieski Sp. z o.o.
In the 1st half 2005 income on release of impairment write downs on non-performing amounts due from related entities amounted to PLN 690 ths. and pertained to Hotel Jan III Sobieski Sp. z o.o.
In the 1st half 2004 income on release of impairment write downs on non-performing amounts due from related entities amounted to PLN 472 ths. and pertained to Hotel Jan III Sobieski Sp. z o.o.
In the 1st half 2005 the share capital of Xelion Doradcy Inwestycyjni Sp. z o.o. was raised by PLN 50 000 ths. The  Bank possesses 50% share in the company. The number of shares possessed by the Bank increased by 25 000 up to to 25 025 ths. 
Transactions with related entities are based on standard market rates and conditions. 
Management Board and Supervisory Board Remuneration 

		30.06.2005	30.06.2004	
		‘000 PLN	‘000 PLN	
	Management Board of the Bank			
	Short-term employee benefits	9 432	5 501	
	Share-based payments*	1 328	743	
	Total 	10 760	6 244	
	Supervisory Board of the Bank			
	Short-term employee benefits	233	218	
	Total 	233	218	
	Grand total 	10 993	6 462	

(*) The value of Share-based payments was established as part of Payroll/Employee Expenses recognized by the Group, according to IFRS 2 during the reporting period,  representing the amortization of initial fair value of options (pre-emptive rights to take up the Bank’s shares) pertaining to options granted to members of the Management Board of the Bank.  Detailed information about the employee share program, including the method of the options fair value estimation are presented in the note 42 “Employee benefits”.  

Remuneration of members of the Management Boards and Supervisory Boards of the subsidiary companies 
			
		30.06.2005	30.06.2004	
		‘000 PLN	‘000 PLN	
	Short-term employee benefits	6 138	6 888	
	Share-based payments(**) 	207	120	
	Total 		6 888	
	Total	6 345	7 008	

(**) The value of Share-based payments was established as part of Payroll/Employee Expenses recognized by the Group, according to IFRS 2 during the reporting period,  representing the amortization of initial fair value of options (pre-emptive rights to take up the Bank’s shares) pertaining to options granted to members of the Management Boards of the subsidiary companies.  Detailed information about the employee share program, including the method of the options fair value estimation are presented in the note 42 “Employee benefits”.  
48.	Mergers
No mergers occurred in the first half of 2005 or in the first half of 2004.

49.		Assets and liabilities of the Company’s Social Benefits Fund („ZFŚS”)
The Social Benefits Fund Act of 4th March 1994, with subsequent amendments introduced the requirement to create a Company’s Social Benefits Fund by all employers employing over 20 employees.  The Bank and Group companies employing over 20 staff have created the ZFŚS Fund and are making periodic charges to the ZFŚS Funds in amounts prescribed by the Act. Apart that, the Company contributed to the Fund in kind of fixed assets. The aim of the ZFŚS Fund is financing of social activity in benefit of the employees and subsidizing the social premises. The liabilities of the ZFŚS Fund represent the cumulated value of charges made by the Company towards the ZFŚS Fund decreased by the amount of non-returnable expenditures of the ZFŚS Fund. 
In the consolidated balance sheet the Group netted the ZFŚS Fund’s assets against the ZFŚS Fund’s liabilities, due to the fact that the assets of the ZFŚS Fund do not represent the assets of the Group. For this reason the amount pertaining to the ZFŚS Fund in the consolidated balance sheet as of 30th June 2005 and 30th June 2004 was nil. 

The below table sets forth the categories and book values of assets and liabilities of the ZFŚS Fund:

	30.06.2005	30.06.2004	
Advances to employees 	12 666	10 808	
Cash in the current account 	18 051	35 378	
Other 	14	1	
ZFŚS liabilities	-	-	
			
Net assets and liabilities of ZFŚS 	30 731	46 187	
			
Charges made towards the ZFŚS in the period	8 101	8 613	
Non-returnable expenditures of the period 	19 572	18 330	

50.	Events after the balance sheet date
Since the date of signing the consolidated financial statements for the 6 months ended on 30 June 2005 no events after the balance sheet date have occurred which should have been, but were not, disclosed in the financial statements.

51.	First time adoption of International Financial Reporting Standards 

This note presents the reconciliation of net assets as of 1 January 2004 and as of 31 December 2004 (as well as net assets as of 1 January 2005) and the reconciliation of net financial result for the year ended on 31 December 2004 between the previously published financial information according to Polish Accounting Standards and the transformed comparative data according to International Financial Reporting Standards disclosed in these financial statements.
A comparison of the balance sheet according to PAS and IFRS was also presented as of 31 December 2004 and 1 January 2005 as well as a comparison of the profit and loss account for the year ended on 31 December 2004 according to PAS and IFRS.
The Group prepared these financial statements based on IFRS 1. Note 2 to these financial statements includes a description of optional exemptions allowed under IFRS 1, which the Group has used.
Accounting principles (policies) according to IFRS differ in many respects from the Polish accounting principles (policies). See below for a discussion of differences between IFRS and PAS, which significantly affected the net financial result and net assets in 2004 and 2005.
Recognition of assets and liabilities based on amortized cost
The International Accounting Standard 39 requires that certain financial assets should be recognized at amortized cost using the effective interest rate method.
Previously the Group used fair value to recognize securities available for sale, for which interest revenues are recognized using the effective interest rate method. Securities held to maturity, financial lease receivables, and central investment-related receivables and payables were recognized at amortized cost using the effective interest rate method. Other financial assets and liabilities were recognized according to the amount payable increased with linearly accrued interest.
The Group took advantage of the exemption from the requirement to transform comparative data pertinent to IAS 32, IAS 39 and IFRS 4. For those standards, the IFRS were adopted on 1 January 2005. Comparative data concerning those standards were prepared using previously applied accounting principles (policies).
As of 1 January 2005 the Group made adjustments related to the recognition of other financial assets and liabilities at amortized cost using the effective interest rate method, as required under IAS 39. The results of adjustments made as of 1 January 2005 were disclosed in the following reconciliation of net assets as of 1 January 2005 and in the comparison of the balance sheet based on IFRS as of 31 December 2004 (without applying IAS 39, 32 or IFRS 4) and the balance sheet based on IFRS as of 1 January 2005.
Impairment  of financial assets
According to IAS 39, a financial asset is depreciated if its balance sheet value is higher than its estimated economic value. As of the balance sheet date, an economic entity is required to assess if there is objective evidence confirming such impairment of the financial asset. Such evidence may include information about the issuer’s significant financial difficulties or actual violation of an agreement by e.g. failure to pay interest or principal or falling behind with payments. If the depreciation occurs, the revaluation write-down will amount to the difference between the asset’s balance sheet value and the current value of expected, future discounted cash flows using the initial effective interest rate (economic value) for financial assets recognized at cost and using the current interest rate as well as for financial assets recognized at fair value.
According to the Polish Accounting Standards (PAS), banks at least once a quarter review and classify their credit exposures into different risk groups (standard receivables, monitored receivables, substandard receivables, bad receivables and lost receivables). Classification is based on how long the receivables have been overdue and what the economic and financial situation of the borrower is. Special purpose provisions for credit exposures are created at least in amounts required of provisions applicable to different risk groups (from 1.5% to 100% of the purpose provision basis). In addition, under PAS the required specific provisions for credit exposures:
- related to retail lending facilities and loans classified as “standard” – are diminished by a 25% provision for general risk;
- classified as “monitored” – to be diminished by a 25% provision for general risk, created under Article 130 of the Banking Law.
The Group took advantage of the exemption from the requirement to transform comparative data pertinent to IAS 32, IAS 39 and IFRS 4. For those standards, the IFRS were adopted on 1 January 2005. Comparative data concerning those standards were prepared using previously applied accounting principles (policies).
As of 1 January 2005 the Group made adjustments related to the recognition of other financial assets and liabilities at amortized cost using the effective interest rate method, as required under IAS 39. The results of adjustments made as of 1 January 2005 were disclosed in the following reconciliation of net assets as of 1 January 2005 and in the comparison of the balance sheet based on IFRS as of 31 December 2004 (without applying IAS 39, 32 or IFRS 4) and the balance sheet based on IFRS as of 1 January 2005.
Financial Assets and liabilities portfolios according to IAS 39
The IAS 39 lays down definitions of portfolios other than those defined in PAS. The requirement to move some financial instruments between portfolios results from the requirement to classify financial instruments in different portfolios according to IAS 39. In addition, pursuant to the exemption included in IFRS 1, the Group was also entitled to assign its financial instruments to financial asset at fair value through profit and loss or available for sale portfolios.
In view of the above, the Group categorized financial instruments as financial assets or liabilities recognized at fair value through profit and loss or available for sale as of 1 January 2004. The movement of financial instruments between portfolios measured pursuant to different principles did not affect the Group’s financial result.
The effect of hyperinflationary economy 
The International Accounting Standard 29 „Financial Reporting In Hyperinflationary Economies” (IAS 29) requires that assets and liabilities disclosed in a period of hyperinflation should be recognized in current prices as of the end of the hyperinflation reporting period and be the basis for measuring assets and liabilities in financial statements for the periods to come. This standard is applicable for non-monetary balance sheet items. Significant non-monetary items for the Group include fixed assets, shares classified as non-current assets, and equity. From 1982 to 1984 and from 1988 to 1996 the Bank operated in a hyperinflationary economy. The Bank did not apply IAS 29 in previous years when performing fixed assets revaluation as of 1 January 1995, in accordance with applicable Polish regulations in force, in order to reflect the inflation’s impact on their balance sheet value by adopting revaluation indexes determined by the Ministry of Finance for respective groups of fixed assets. This revaluation was performed in compliance with IAS 29, as the Bank did not use the general price indices nor did it perform a fixed assets revaluation as of 31 December 1996.
Taking advantage of the exemption allowed by IFRS 1, the Group recognized selected items  of tangible assets acquired before the period of hyperinflation at a fair value as of the day of transition to IFRS, that is, as of 1 January 2004, and it used this fair value as the deemed cost determined for that day. 
The effect of adjustments made on that account as of 1 January 2004 is presented in the following reconciliation of net assets as of 1 January 2004. The aggregate amount of fair value used as the anticipated cost as of 1 January 2004 in accordance with IFRS 1 was PLN 148.888 ths.
IAS 29 “Financial Reporting in Hyperinflationary Economies” requires to restate all components of of owners’ equity, exept retained earnings and any revaluation surplus, by applying the general price index for the period of hyperinflation. Such retrospective application would result in an increase of share capital and other capitals and a corresponding decrease in retained earnings. 
The scope of financial statement consolidation
In accordance with the IFRS, consolidated financial statements should include all subsidiaries and shares in joint ventures that are significant for the financial statement. Companies are exempt from the consolidation requirement if they are acquired only for resale or if there are long-term limitations on the flow of funds to the holding company. 
So far, the Bank adopted the full consolidation method to financial statements of all of its major subsidiaries and related entities except for non-financial businesses which are not providers of ancillary banking services. According to IAS 27 the subsidiaries: Pekao Financial Services, Pekao Access and Pekao Development were consolidated using the full consolidation method. Previously those companies were valued using the equity method.
Share based payments
The Group applied IFRS 2 with reference to capital instruments that were granted after 7 November 2002, if these capital instruments were not acquired until 1 January 2005. Therefore, under the IFRS 2, it was required to include only the capital part of bonds with pre-emptive rights to take up the Bank’s shares, granted to the Bank’s employees as part of the Incentive Program. 
General risk provision 
In accordance with IAS 30, general risk provisions are not to be part of liabilities Instead, they should be disclosed as a separate item of the undistributed result. The value of the general provision which is presented in the undistributed result, as required by IAS, is PLN 248.453 ths.  as of 1 January 2005.
The aforementioned adjustments resulting from differences between the requirements of PAS and IFRS affected the value of assets/income tax provision as of 1 January 2004, 31 December 2004, and 1 January 2005.
The below tables present a comparison of financial data published previously with comparative data converted in accordance with IFRS (data according to PAS are presented in the new classification).

Consolidated balance sheet as of 31 December 2004
		PAS		IAS (*)	
Position	Note	31.12.2004 r.	Adjustment 	31.12.2004 r.	
Assets					
I. Cash and amounts due from Central Bank	(1)	2 561 676	1 377 599	3 939 275	
II. Debt securities eligible for rediscounting at the Central Bank		8 768	-	8 768	
III. Amounts due from banks	(2)	5 470 793	490 684	5 961 477	
IV. Financial assets held for trading 	(3)	2 485 330	710 441	3 195 771	
V. Derivative financial instruments	(4)	231 177	272 305	503 482	
VI. Other financial instruments at fair value through profit or loss	(5)	-	1 336 721	1 336 721	
VII. Loans and advances to customers	(6)	28 208 809	(1 989 278)	26 219 531	
VIII. Net investments in financial leases	(7)	-	547 324	547 324	
IX. Investment securities	(8)	16 979 940	(1 943 483)	15 036 457	
    1. Available for sale		10 110 174	(3 690)	10 106 484	
    2. Held to maturity		6 869 766	(1 939 793)	4 929 973	
X. Investments in associated undertakings	(9)	198 787	(74 125)	124 662	
XI. Intangible assets	(10)	628 382	3 543	631 925	
XII. Tangible fixed assets	(11)	1 449 501	92 327	1 541 828	
XIII.  Investment property	(12)	-	102 869	102 869	
XIV. Income taxes	(13)	99 194	(1 425)	97 769	
    1. Current tax assets		-	-	13 131	
    2. Deferred income tax assets		-	-	84 638	
XV. Other assets	(14)	1 011 407	(281 919)	729 488	
Total  assets		59 333 764	643 583	59 977 347	
					
Liabilities					
I. Amounts due to the Central Bank		2 151 743	-	2 151 743	
II. Amounts due to other banks	(15)	1 089 830	242 727	1 332 557	
III. Financial liabilities held for trading	(16)	-	590 119	590 119	
IV. Derivative financial instruments 	(17)	334 023	289 660	623 683	
V. Other financial liabilities at fair value through profit or loss		-	-	-	
VI. Amounts due to customers	(18)	43 753 576	2 068 069	45 821 645	
VII. Debt securities in issue		23 205	-	23 205	
VIII. Other liabilities	(19)	3 712 163	(2 651 793)	1 060 370	
IX. Current income tax liabilities	(20)	-	256	256	
X. Provisions for deferred income tax	(21)	-	1 222	1 222	
XI. Provisions	(22)	348 271	795	349 066	
Total  liabilities		51 412 811	541 055	51 953 866	
					
Equity					
Capital and reserves attributable to the Company's equity holders		7 903 625	101 080	8 004 705	
XII. Share capital		166 482	-	166 482	
XIII. Retained earnings	(23)	(91 912)	277 751	185 839	
XIV. Other capital and reserves	(24)	7 829 055	(176 671)	7 652 384	

XV. Minority interest	(25)	17 328	1 448	18 776	
T o t a l    e q u i t y		7 920 953	102 528	8 023 481	
Total  equity  and  liabilities		59 333 764	643 583	59 977 347	
(*) Without changes due to amortized cost measurement of loans and advances using EIR and without changes relating to impairment of loans and advances

	Description of adjustments  as at  31.12.2004 		
	Assets 		
(1)	Cash and amounts due from Central Bank		
(a)	Reclassification of existing investment portfolios 	1 377 588	
(b)	Change of consolidation perimeter - extension of line-by-line method	11	
	Total impact of the above changes 	1 377 599	
(2)	 Loans and advances to banks		
(a)	Elimination of restricted interest, which under PAS were presented as liabilities 	(5 706)	
(b)	Reclassification of existing investment portfolios 	255	
(c)	Recognition of  sell-buy-back and buy-sell-back	486 340	
(d)	Reclasssification of other amounts due from banks 	9 800	
(e)	Change of consolidation perimeter - extension of line-by-line method	(5)	
	Total impact of the above changes 	490 684	
(3)	Financial assets as held for trading 		
(a)	Reclassification of existing investment portfolios 	(1 332 984)	
(b)	Recognition of  sell-buy-back and buy-sell-back	2 043 425	
	Total impact of the above changes 	710 441	
(4)	Derivative financial instruments		
(a)	Reclassification of fair value of derivatives 	273 312	
(b)	Recognition of  sell-buy-back and buy-sell-back	(1 007)	
	Total impact of the above changes 	272 305	
(5)	Other financial instruments at fair value through profit or loss		
(a)	Reclassification of existing investment portfolios 	1 336 721	
(6)	 Loans and advances to customers		
(a)	Elimination of restricted interest, which under PAS were presented as liabilities 	(2 325 726)	
(b)	Reclassification of existing investment portfolios 	561 950	
(c)	Recognition of  sell-buy-back and buy-sell-back	388 938	
(d)	Reclassification of finance leases 	(547 324)	
(e)	Change of consolidation perimeter - extension of line-by-line method	(67 116)	
	Total impact of the above changes 	(1 989 278)	
(7)	Net investment in the finance lease		
	Reclassification of finance leases from loans 	547 324	
(8)	Investment securities		
(a)	Reclassification of existing investment portfolios 	(1 943 530)	
(b)	Change of consolidation perimeter - extension of line-by-line method	47	
	Total impact of the above changes 	(1 943 483)	
(9)	Investments in associated undertakings		
(a)	Change of consolidation perimeter - extension of line-by-line method	(74 125)	
(10)	Intangible assets		
(a)	correction of goodwill 	(874)	
(b)	Change of consolidation perimeter - extension of line-by-line method	4 417	
	Total impact of the above changes 	3 543	
(11)	Tangible fixed assets		
(a)	Reclassification of investment fixed assets to Investment property	(50 131)	
(b)	Correction related to revaluation of part of fixed assets to deemed cost 	144 142	
(c)	Reclassification of perpetual usufruct rights to Other assets 	(8 874)	
(d)	Change of consolidation perimeter - extension of line-by-line method	7 190	
	Total impact of the above changes 	92 327	
(12)	Investment property		
(a)	Reclassification of investment fixed assets from Tangible fixed assets	50 131	
(b)	Reclassification of perpetual usufruct rights to Other assets 	52 738	
	Total impact of the above changes 	102 869	
(13)	Deferred income tax assets		
(a)	Change of consolidation perimeter - extension of line-by-line method	407	
(b)	Adjustment of deffered tax	(1 832)	
	Total impact of the above changes 	(1 425)	
(14)	Other assets		
(a)	Correction valuation of Investment property	(52 738)	
(b)	Reclassification of perpetual usufruct rights from Tangible fixed assets 	9 073	
(c)	Reclassification of fair value of derivatives from other assets 	(281 206)	
(d)	Derecognition of assets attributable to the Company Social Fund 	(75 365)	
(e)	reclassification of receivables 	(9 800)	
(f)	Change of consolidation perimeter - extension of line-by-line method	152 312	
(g)	Reclassification of fair value of derivatives from other liabilities 	(13 131)	
(h)	Correction valuation of Investment property	(11 064)	
	Total impact of the above changes 	(281 919)	
			
	Liabilities		
			
(15)	Amounts due to other banks		
(a)	Recognition of  sell-buy-back and buy-sell-back	186 298	
(b)	Change of consolidation perimeter - extension of line-by-line method	(9 071)	
(c)	Reclassification of  amounts due to subordinated entities	65 500	
	Total impact of the above changes 	242 727	
(16)	Financial liabilities held for trading		
	Reclassification of  financial liabilities held for trading	590 119	
(17)	Derivative financial instruments 		
(a)	Reclassification of fair value of derivatives from other liabilities 	290 267	
(b)	Recognition of  sell-buy-back and buy-sell-back	(607)	
	Total impact of the above changes 	289 660	
(18)	Amounts due to customers		
(a)	Recognition of  sell-buy-back and buy-sell-back	2 142 385	
(b)	Change of consolidation perimeter - extension of line-by-line method	(8 816)	
(c)	Reclassification of  amounts due to subordinated entities	(65 500)	
	Total impact of the above changes 	2 068 069	
(19)	Other liabilities		
(a)	Reclassification of fair value of derivatives 	(298 160)	
(b)	Derecognition of liabilities attributable to the Company Social Fund 	(75 365)	
(c)	Reclassification of deferred income and reserves 	15 819	
(d)	correction of negative goodwill 	(1 704)	
(e)	Elimination of restricted interest 	(2 331 432)	
(f)	Change of consolidation perimeter - extension of line-by-line method	39 305	
(g)	Adjustment of current tax	(256)	
	Total impact of the above changes 	(2 651 793)	
(20)	Current income tax liabilities		
(a)	Adjustment of current tax	256	
(21)	Provisions for deferred income tax		
(a)	Change of consolidation perimeter - extension of line-by-line method	3 427	
(b)	Correction valuation of Investment property	(2 205)	
	Total impact of the above changes 	1 222	
(22)	Provisions		
(a)	Change of consolidation perimeter - extension of line-by-line method	795	
(23)	Retained earnings		
(a)	Change of consolidation perimeter - extension of line-by-line method	(8 384)	
(c)	Corrections related to share-based payments per IFRS 2 	(795)	
(d)	Recognition of  sell-buy-back and buy-sell-back	188	
(e)	Reversal of revaluation reserve relating to fixed assets 	179 425	
(f)	Change of presentation of retained earnings of subsidiaries 	1 169	
(g)	Correction related to revaluation of part of fixed assets to deemed cost 	148 888	
(h)	Adjustment of deffered tax	(31 556)	
(i)	correction of negative goodwill 	12 615	
(j)	Correction of retained earnings	(21 905)	
(k)	Correction valuation of Investment property	(1 894)	
	Total impact of the above changes 	277 751	
(24)	Other capital and reserves		
(a)	Corrections related to share-based payments per IFRS 2 	5 595	
(b)	Change of consolidation perimeter - extension of line-by-line method	(4 096)	
(c)	Change of presentation of retained earnings of subsidiaries 	12 906	
(d)	Reversal of revaluation reserve relating to fixed assets 	(179 425)	
(e)	Adjustment of deffered tax	(1 026)	
(f)	Correction of retained earnings	21 904	
(g)	Net profit - Changes described furhter 	(25 010)	
(h)	Correction valuation of Investment property	(7 519)	
	Total impact of the above changes 	(176 671)	
(25)	Minority interest		
	Change of consolidation perimeter - extension of line-by-line method	1 448	

	Consolidated Balance Sheet as at 30th June 2004 			
						
			PAS		IFRS	
	Position	Note	30.06.2004	Adjustmenr 	30.06.2004	
	Assets					
	I. Cash and amounts due from Central Bank	(1)	1 714 897	1 338 699	3 053 596	
	II. Debt securities eligible for rediscounting at the Central Bank		7 134	-	7 134	
	III. Amounts due from banks	(2)	8 017 495	524 466	8 541 961	
	IV. Financial assets held for trading 	(3)	2 373 201	- 1 255 562	1 117 639	
	V. Derivative financial instruments	(4)	169 593	186 294	355 887	
	VI. Other financial instruments at fair value through profit or loss	(5)	-	1 608 305	1 608 305	
	VII. Loans and advances to customers*	(6)	27 954 411	- 2 065 388	25 889 023	
	VIII. Net investments in financial leases	(7)	-	647 236	647 236	
	IX. Investment securities		18 799 256	- 1 966 712	16 832 544	
	    1. Available for sale		11 380 562	-	11 380 562	
	    2. Held to maturity	(8)	7 418 694	- 1 966 712	5 451 982	
	X. Investments in associated undertakings	(9)	295 789	- 87 796	207 993	
	XI. Intangible assets	(10)	578 063	34 134	612 197	
	XII. Tangible fixed assets	(11)	1 518 937	81 449	1 600 386	
	XIII.  Investment property	(12)	-	104 829	104 829	
	XIV. Income taxes		135 771	- 19 559	116 212	
	    1. Current tax assets		-	-	-	
	    2. Deferred income tax assets	(13)	135 771	- 19 559	116 212	
	XV. Other assets	(14)	1 477 488	- 288 063	1 189 425	
	Total  assets		63 042 035	- 1 157 668	61 884 367	
					-	
	Liabilities					
	I. Amounts due to the Central Bank		2 237 868	-	2 237 868	
	II. Amounts due to other banks	(15)	2 051 750	373 769	2 425 519	
	III. Financial liabilities held for trading	(16)		151 530	151 530	
	IV. Derivative financial instruments 	(17)	239 243	114 384	353 627	
	V. Other financial liabilities at fair value through profit or loss		-	-	-	
	VI. Amounts due to customers	(18)	46 001 786	538 963	46 540 749	
	VII. Debt securities in issue		563 021	-	563 021	
	VIII. Other liabilities	(19)	4 560 909	- 2 468 907	2 092 002	
	IX. Current income tax liabilities		22 404	317	22 721	
	X. Provisions for deferred income tax	(20)	-	892	892	
	XI. Provisions	(21)	356 550	983	357 533	
	Total  liabilities		56 033 531	- 1 288 069	54 745 462	
						
	Equity					
	Capital and reserves attributable to the Company's equity holders		6 990 461	128 866	7 119 327	
	XII. Share capital		166 122	-	166 122	
	XIII. Retained earnings	(22)	- 401 352	283 986	- 117 366	
	XIV. Other capital and reserves	(23)	7 225 691	- 155 120	7 070 571	
						
	XV. Minority interest	(24)	18 043	1 535	19 578	
	T o t a l    e q u i t y		7 008 504	130 401	7 138 905	
	Total  liabilities and  equity  		63 042 035	- 1 157 668	61 884 367	
(*) Without changes due to amortized cost measurement of loans and advances using EIR and without changes relating to impairment of loans and advances
Description of adjustments  as at  30.06.2004 
	Assets 				
(1)	Cash and amounts due from Central Bank				
(a)	Reclassification of existing investment portfolios 		1 338 690	
(b)	Change of consolidation perimeter - extension of line-by-line method	9	
	Total impact of the above changes 			1 338 699	
(2)	 Loans and advances to banks				
(a)	Elimination of restricted interest, which under PAS were presented as liabilities 	 (6 605)	
(b)	Reclassification of existing investment portfolios 		320	
(c)	Recognition of  sell-buy-back and buy-sell-back		516 958	
(d)	Reclasssification of other amounts due from banks 		9 800	
(e)	Change of consolidation perimeter - extension of line-by-line method	4 494	
(f)	Reclassification of finance leases 			 (501)	
	Total impact of the above changes 			524 466	
(3)	Financial assets as held for trading 				
(a)	Reclassification of existing investment portfolios 		 (1 608 305)	
(b)	Change of consolidation perimeter - extension of line-by-line method	13 147	
(c)	Recognition of  sell-buy-back and buy-sell-back		339 596	
	Total impact of the above changes 			 (1 255 562)	
(4)	Derivative financial instruments				
(a)	Reclassification of fair value of derivatives 			187 628	
(b)	Recognition of  sell-buy-back and buy-sell-back		 (1 334)	
	Total impact of the above changes 			186 294	
(5)	Other financial instruments at fair value through profit or loss		
(a)	Reclassification of existing investment portfolios 		1 608 305	
(6)	 Loans and advances to customers				
(a)	Elimination of restricted interest, which under PAS were presented as liabilities 	 (2 175 625)	
(b)	Reclassification of existing investment portfolios 		627 702	
(c)	Recognition of  sell-buy-back and buy-sell-back		225 492	
(d)	Reclassification of finance leases 			 (646 735)	
(e)	Change of consolidation perimeter - extension of line-by-line method	 (96 222)	
	Total impact of the above changes 			 (2 065 388)	
(7)	Net investment in the finance lease				
	Reclassification of finance leases from loans 			647 236	
(8)	Investment securities				
(a)	Reclassification of existing investment portfolios 		 (1 966 712)	
	Total impact of the above changes 			 (1 966 712)	
(9)	Investments in associated undertakings				
(a)	Change of consolidation perimeter - extension of line-by-line method			 (87 796)	
(10)	Intangible assets				
(a)	Change of consolidation perimeter - extension of line-by-line method			9 745	
(b)	Reclassification of prepayments for capital work in progress	24 389	
	Total impact of the above changes 			34 134	
(11)	Tangible fixed assets				
(a)	Reclassification of investment fixed assets to Investment property	 (54 743)	
(b)	Reclassification of perpetual usufruct rights to Other assets 	 (8 838)	
(c)	Correction related to revaluation of part of fixed assets to deemed cost 	147 055	
(d)	Change of consolidation perimeter - extension of line-by-line method	22 364	
(e)	Reclassification of prepayments for capital work in progress	 (24 389)	
	Total impact of the above changes 			81 449	
(12)	Investment property				
(a)	Reclassification of investment fixed assets from Tangible fixed assets	54 743	
(b)	Correction valuation			 (12 670)	
(c)	Change of consolidation perimeter - extension of line-by-line method			62 756	
	Total impact of the above changes 			104 829	
(13)	Deferred income tax assets				
(a)	Change of consolidation perimeter - extension of line-by-line method			268	
(b)	Adjustment of deffered tax			 (19 827)	
	Total impact of the above changes 			 (19 559)	
(14)	Other assets				
(a)	Reclassification of perpetual usufruct rights from Tangible fixed assets 			8 838	
(b)	Reclassification of fair value of derivatives from other assets 			 (286 783)	
(c)	Derecognition of assets attributable to the Company Social Fund 			 (86 091)	
(d)	reclassification of receivables 			 (9 800)	
(e)	Change of consolidation perimeter - extension of line-by-line method			85 773	
	Total impact of the above changes 			 (288 063)	
					
	Liabilities				
(15)	Amounts due to other banks				
(a)	Recognition of  sell-buy-back and buy-sell-back		373 751	
(b)	Change of consolidation perimeter - extension of line-by-line method			18	
	Total impact of the above changes 			373 769	
(16)	Financial liabilities held for trading				
	Recognition of  sell-buy-back and buy-sell-back		151 530	
(17)	Derivative financial instruments 				
(a)	Reclassification of fair value of derivatives from other liabilities 	115 459	
(b)	Recognition of  sell-buy-back and buy-sell-back		 (1 075)	
	Total impact of the above changes 			114 384	
(18)	Amounts due to customers				
(a)	Recognition of  sell-buy-back and buy-sell-back		556 407	
(b)	Change of consolidation perimeter - extension of line-by-line method			 (17 444)	
	Total impact of the above changes 			538 963	
(19)	Other liabilities				
(a)	Reclassification of fair value of derivatives 			 (214 613)	
(b)	Derecognition of liabilities attributable to the Company Social Fund 			 (86 091)	
(c)	Reclassification of deferred income and reserves 		8 530	
(d)	correction of negative goodwill 			 (18 540)	
(e)	Elimination of restricted interest 			 (2 182 230)	
(f)	Change of consolidation perimeter - extension of line-by-line method			24 037	
(g)	Total impact of the above changes 			 (2 468 907)	
(20)	Current income tax liabilities				
(a)	Change of consolidation perimeter - extension of line-by-line method			317	
(21)	Provisions for deferred income tax				
(a)	Change of consolidation perimeter - extension of line-by-line method			892	
(22)	Provisions				
(a)	Change of consolidation perimeter - extension of line-by-line method			983	
(23)	Retained earnings				
(a)	Change of consolidation perimeter - extension of line-by-line method			 (8 107)	
(b)	correction of negative goodwill 			18 705	
(c)	Corrections related to share-based payments per IFRS 2 	 (795)	
(d)	Recognition of  sell-buy-back and buy-sell-back		188	
(e)	Reversal of revaluation reserve relating to fixed assets 	157 525	
(f)	Change of presentation of retained earnings of subsidiaries 	1 169	
(g)	Correction related to revaluation of part of fixed assets to deemed cost 	148 888	
(h)	Correction valuation of Investment property			 (1 900)	
(i)	Adjustment of deffered tax			 (31 687)	
	Total impact of the above changes 			283 986	
(24)	Other capital and reserves				
(a)	Corrections related to share-based payments per IFRS 2 	2 764	
(b)	Change of consolidation perimeter - extension of line-by-line method			10 365	
(d)	Reversal of revaluation reserve relating to fixed assets 	 (157 525)	
(e)	Adjustment of deffered tax			 (1 335)	
(f)	Correction valuation of Investment property			 (7 604)	
	Net profit - Changes described furhter 			 (1 785)	
	Total impact of the above changes 			 (155 120)	
(25)	Minority interest				
	Change of consolidation perimeter - extension of line-by-line method			1 535	

Reconciliation of net assets previously published under PAS with the comparative data, restated under IFRS:

As at 1 January 2004		
		
Net equity according to PAS ( in ths. PLN)	7 156 027	
changes:		
subsidiary shares valuation 	18 330	
total recognized sell-bay-back and buy sell-back	188	
change in fixed assets 	148 888	
change in consolidation rules	(3 609)	
adjustment of deferred tax	(33 280)	
total changes	130 517	
Net equity according to IAS as at 1 January 2004	7 286 544	

As at 30 June 2004		
		
Net equity according to PAS ( in ths. PLN)	6 990 461	
changes:		
subsidiary shares valuation 	16 625	
total recognized sell-bay-back and buy sell-back	96	
change in fixed assets 	147 156	
change in consolidation rules	3 526	
accrued fees adjustment	(8 527)	
valuation of investment property	(10 183)	
 adjustment of deferred tax	(19 827)	
total changes	128 866	
Net equity according to IAS as at 1 June 2004	7 119 327	

As at 31 December 2004		
		
Net equity according to PAS ( in ths. PLN)	7 903 625	
changes::		
subsidiary shares valuation 	(12 518)	
total recognized sell-bay-back and buy sell-back	(501)	
change in fixed assets 	144 341	
change in consolidation rules	3 529	
accrued fees adjustment	(15 819)	
valuation of investment property	 (1 338)	
 adjustment of deferred tax	(16 614)	
total changes	101 080	
Net equity according to IAS as at 31 December 2004	8 004 705	

As at 1 January 2005		
		
Net equity according to PAS ( in ths. PLN)	7 903 625	
changes:		
subsidiary shares valuation 	(12 518)	
Previous results from loans provisions adjustment	(222 030)	
total recognized sell-bay-back and buy sell-back	(501)	
change in fixed assets 	144 341	
change in consolidation rules	3 529	
accrued fees adjustment	(15 819)	
valuation of investment property	(1 338)	
 adjustment of deferred tax	12 956	
total changes	(91 380)	
Net equity according to IAS as at 1 January 2005	7 812 245	

Profit and Loss account for the I half 2004 – a comparison of previously published financial data with comparative data converted in accordance with IFRS (data according to PAS are presented in the new classification)

Item 	Profit and loss statement for 01.01-30.06.04 (PAS)	Effect of transition to IFRSs	Profit and loss statement for 01.01-30.06.04          (MSSF*)	
Interest  income	1 801 422	12 027		1 813 449	
		(14)	/1		
		12 041	/2		
Interest expense	(696 266)	(14 446)		(710 712)	
		442	/1		
		(14 888)	/2		
Fee and commission income	856 633	4 214		860 847	
		12 741	/1		
		(8 527)	/3		
Fee and commission expense	(83 832)	1 472	/1	(82 360)	
Dividend income	6	-		6	
Result on financial instruments at fair value	2 378	2 755	/2	5 133	
Result on  investment securities	4 119	-		4 119	
Foreign exchange result	149 999	(13)	/1	149 986	
Other operating income	103 766	38 958	/1	142 724	
Other operating expenses 	(88 286)	(30 117)		(118 403)	
		(30 009)	/1		
		(108)	/4		

Impairment losses on loans and advances 	(187 550)	-		(187 550)	
Overhead costs 	(1 133 088)	(15 838)		(1 148 926)	
		(11 567)	/1		
		(2 302)	/4		
		(1 969)	/5		
Amortization of goodwill on subordinated entities 	(694)	694	/6	-	
Amortization of negative goodwill on subordinated entities	2 400	(2 400)	/6	-	
Share in profit of associates 	29 930	(9 247)	/1	20 683	
Profit before income tax 	760 937	(11 941)		748 996	
Income tax expense 	(97 838)	10 661		(87 177)	
		(2 534)	/1		
		13 195	/2-6		
Net profit (loss)	663 099	(1 280)		661 819	
1. Attributable to equity holders of the Company 	665 403	(1 784)		663 619	
2. Attributable to minority interest 	(2 304)	504	/1	(1 800)	

(*) Without changes due to amortized cost measurement of loans and advances using EIR and without changes relating to impairment of loans and advances 	
					
Changes: :					
1/ change in the scope of consolidation (inclusion of the new subsidiary companies)			
2/ recognition of adjustments related to financial assets and liabilities due to sell-buy-back 
 and buy- sell-back transactions 		
3/ adjustments due to amortization of fees and commissions over time 				
4/ adjustments to depreciation costs due to the revaluation of some fixed assets and property rights 	
5/ inclusion of share-based payments according to IFRS 2				
6/ adjustments related to the revaluation of equity investments				

Reconciliation of financial net result previously published under PAS with the comparative data, restated under IFRS for the year ended 31st December 2004

	 ' 000 PLN	
		
Net result disclosed (according to PAS)	            1 343 001	
		
Adjustments:	              (25 010)	
		
1/ inclusion of share based payments according to IFRS 2	                (4 800)	
2/ recognition of adjustments related to financial assets and liabilities due to      sell-buy-back and buy-sell-back transactions.	                   (689)	
3/ adjustment to due to the revaluation of some fixed assets and property rights	                (3 913)	
4/ adjustment due to amortisation of fees and commissions over time	              (15 819)	
5/ adjustments related to the revaluation of equity investments	              (17 329)	
6/ deferred tax correction related to the introduction of IFRS	                17 540	
		
Net result after transition to IFRS/*	1 317 991	
(*) Without changes due to amortized cost measurement of loans and advances using EIR and without 
changes relating to impairment of loans and advances