Supplementary Information

1) 2014 Dividend

The Bank has approved a dividend policy of distributing between 35% to 50% of net profit what is also subject to regulatory recommendations. Up to the date of publications of financial statements, the Management Board of the Bank has not yet submitted its recommendation regarding 2014 net profit distribution.

2) Data about assets, which secure liabilities

As at 31 December 2014 following assets of the Bank constituted security of liabilities (PLN’000):

As at 31 December 2013 following assets of the Bank constituted security of liabilities (PLN’000):

3) Securities covered by transactions with a buy-back clause (SBB)

As at 31 December 2014 following securities (presented in the Group’s balance-sheet) were underlying Sell-buy-back transactions:

In result of conclusion of Sell-Buy-Back transactions with the underlying securities presented in the table above, the Group exposed to risks, which are the same as in case of holding securities with the same characteristics in its treasury portfolio.

As at 31 December 2013 following securities (presented in the Group’s balance-sheet) were underlying Sell-buy-back transactions:

4) Offsetting of assets and liabilities on the basis of ISDA agreements

The majority of the Group's derivatives portfolio arises due to conclusion by the Bank framework ISDA agreements (International Swaps and Derivatives Agreements). Provisions included in the agreements define comprehensive procedures in case of infringement (mainly difficulties in payments), and provide possibility to cancel a deal, making settlements with counterparty base on offset amount of mutual receivables and liabilities. To date, the Bank has not exercised that option, however, in order to meet information requirements as described in IFRS 7 the following table presents the fair values of derivative instruments (both classified as held for trading and dedicated to hedge accounting) as well as cash collaterals under ISDA framework agreements with a theoretical maximum amount resulting from the settlement on the basis of compensation.

5) Additional explanations to the cash flow statement

For the purpose of the cash flow statement the following financial assets are classified by the Group as cash or its equivalents.

In the periods presented in the financial statements the Group has received and made interest payments in the following amounts:

For the purpose of the cash flow statement the following classification of activity types was adopted:

1. Operating activities – cover the basic scope of operations connected with services provided by the Group’s units covering events whose purpose is to earn profit and not being investment or financial activity,
2. Investment activities cover operations connected with the purchasing and selling of fixed assets, in particular financial assets not included in the ”for trading” category, shares and shares in subsidiaries, tangible and intangible fixed assets.
3. Financial activities cover activities connected with raising of funds in the form of capital or liabilities, as well as servicing sources of funding.

6) Information on custody activity

As of 31.12.2014 the Custody Department maintained 11,476 accounts in which Customers’ assets were kept with the total value of PLN 32.21 billion (including assets of the Group’s companies in the amount of PLN 0.33 billion). Net revenue from the custody business for 2014 amounted to PLN 7.84 million (of which PLN 0.01 million falls on Group’s companies). The Custody Department serves as a depositary bank for 80 mutual funds including 11 of Millennium TFI S.A.

7) Operating leasing

The Group has lease agreements for office space, which according to IAS 17 are posted under operating leasing. As a standard, the Group’s companies usually make agreements of lease of commercial property for a specified period of maximum 5 years’ time, with a clause providing the right of the lessee to extend the term of the lease for another 5 years upon presentation of a statement. The Bank (parent company) made in the past also other agreements with no time limitation, which may be terminated with adequate notice, usually 3 to 6 months.

8) Securitisation

In December 2007 Millennium Leasing Sp. z o.o. (“ML”), carried out a transaction of securitisation of the portfolio of leasing receivables with value remaining within the defined limit of up to PLN 850 million (“securitisation”, “transaction”). The concluded transaction was a traditional securitisation, i.e. it consisted in transferring the ownership right to the securitised leasing receivables by ML to the Orchis Sp. z o.o. (“Orchis”) special purpose vehicle, which issued debt securities on the basis of the securitised assets.

Entities that participated in financing of Orchis were as follows:

1. European Investment Bank – fixed senior tranche investor in the amount of PLN 420,000,000,
2. Clipper Receivables LLC – variable senior tranche investor with maximum limit of PLN 379,000,000 and of the mezzanine tranche in the amount of PLN 35,275,000,
3. European Investment Fund – underwriter of mezzanine tranche,
4. Millennium Leasing Sp. z o.o. – junior tranche investor in the amount of PLN 15,725,000.

Privileged tranches were subject to depreciation, accordingly repayments of securitised portfolio.

In December 2013, Orchis redeemed all debt securities issued to the external entities involved in the financing of the transaction. As at 31 December 2014 the only remaining securitisation balances are mutual transactions between ML and Orchis that due their nature (intra-group transactions) are eliminated in the consolidation process and therefore do not generate additional risks for the Group.

9) Share based payments

In 2012 the Bank implemented Variable Remuneration Policy for Persons Holding Managerial Positions in Bank Millennium S.A. Group in accordance with requirements described in Resolution of Polish Financial Supervisory Authority no 258/2011.

According to the mentioned Policy, Bank’s and Group’s employees who are covered by this Policy, who have significant impact on Group’s risk profile, will be paid variable remuneration on the basis of individual results and on the basis of unit / department and the entire Bank and Group results.

Part of the variable remunerations for employees of the Bank and Group will be paid in the form of Bank’s phantom shares. Those payments fulfil definition of the cash-settled share-based payments. 

Profit and Loss Account for 2014 has been charged with change in the value of the phantom shares assigned for the years 2012 and 2013, and the provision for phantom shares to be assigned for 2014.

Until the publication of the Annual Report, the Personnel Committee of the Supervisory Board has not taken a decision on the amount of variable remuneration for the members of the Management Board for 2014.

10) Essential events between the date, for which the financial report was prepared and its publication date

CHF Appreciation

On 15th January 2015, the Swiss National Bank (SNB) announced that it was discontinuing maintaining the minimum exchange rate of CHF 1.20 per euro. At the same time, SNB announced that it was lowering the interest rate on sight deposit account balances to −0.75%. As a reaction, the EUR and the PLN depreciated versus the CHF.

The Bank does not expect significant worsening of the loans repayment as the influence of the Swiss franc appreciation against the Polish zloty will be partly offset by the decrease of CHF LIBOR3M rate. At the same time Polish banks have pledged to take measures against hypothetical problems with fx-loans repayment including non-increase of charges (collateral, new insurances), decrease of  servicing of the debt for the clients (prolongation of the loan maturity, “holidays” in instalment repayment, temporary reduction of fx spread).

However, taking into consideration the structure of the CHF denominated mortgage loan portfolio, temporary higher instalments may increase the level of non performing loans and subsequently the cost of risk. Additionally, proposals put forward by different polish authorities may trigger, if enforced, losses for the Bank.