TRANSLATION. Financial Statements for the Year Ended 31 December 2011 including Management Report and Audit Opinion

Transcription

1 TRANSLATION Financial Statements for the Year Ended 31 December 2011 including Management Report and Audit Opinion ABN AMRO Commercial Finance GmbH Cologne

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3 TRANSLATION Financial Statements for the Year Ended 31 December 2011 including Management Report and Audit Opinion ABN AMRO Commercial Finance GmbH Cologne KPMG AG Wirtschaftsprüfungsgesellschaft

4 Balance sheet as at 31 December 2011 ABN AMRO Commercial Finance GmbH, Cologne Assets EUR EUR EUR Prior year EUR 1. Cash reserve a) Cash in hand 1, , b) Balances at Central Banks including: balances at Deutsche Bundesbank EUR 0.00 (prior year: EUR 0.00) c) Balances at postal giro transfer offices , Public sector securities and bills admitted for refinancing at Central Banks a) Treasury notes and treasury discount notes similar public sector securities including: similar public securites at Deutsche Bundesbank EUR 0.00 (prior year: EUR 0.00) which can be refinanced b) Bills of exchange Claims on banks a) payable on demand 6,657, ,532, b) other claims 1,132, ,790, ,700, Claims on clients 233,634, ,326, including: those secured by morgage EUR 1,675, (prior year: EUR 1,765,901.00) Public sector loans EUR 0.00 (prior year: EUR 0.00) 5. Bonds and other fixed itnerest-bearing securities a) Money market papers aa) of public issuers including: those eligible as collateral at Deutsche Bundesbank EUR 0.00 (prior year: 0.00) ab) of other issuers including: those eligible at Deutsche Bundesbank EUR 0.00 (prior year: EUR 0.00) b) Loans and bonds ba) of public issuers including: those eligible as collateral at Deutsche Bundesbank EUR 0.00 (prior year: EUR 0.00) bb) of other issuers including: those eligible as collateral at Deutsche Bundesbank EUR 0.00 (prior year: EUR 0.00) c) own bonds par value EUR 0.00 (prior year: EUR 0.00) 6. Shares and other non fixed interest-bearing securities a. Trading portfolio Investments 1, , including: those in banks EUR 0.00 (prior year: EUR 0.00) including: those in financial service institutes EUR 0.00 (prior year: EUR 0.00) 8. Shares in affiliated companies including: those in banks EUR 0.00 (prior year: EUR 0.00) including: those in financial service institutes EUR 0.00 (prior year: EUR 0.00) 9. Trust assets including: fiduciary loans EUR 0.00 (prior year: EUR 0.00) 10. Recovery claims against public authorities including conversion bonds Intangible assets a) internally generated industrial rights and similar rights and assets b) purchased concessions, industrial rights and similar rights and assets, and licenses in such rights and assets 134, , c) goodwill d) prepayments , Tangible assets 249, , Capital called up, but not yet paid including: that called up EUR 0.00 (prior year: EUR 0.00) 14. Other assets 27, , Prepaid expenses 56, , Deferred tax assets 77, , Difference arising on the offset of assets Deficit not covered by equity Total of assets 241,973, ,463,261.70

5 Shareholders' equity and liabilities EUR EUR EUR Prior year EUR 1. Liabilities to banks a) payable on demand 16,275, ,668, b) with an agreed term or period of notice ,275, Liabilities to clients a) savings deposit aa) with an agreed period of notice of three months ab) with an agreed period of notice of more than three months b) other liabilities ba) payable on demand 61,257, ,259, bb) with an agreed term or period of notice 104,041, ,298, ,298, ,019, Securitised liabilities a) bonds issued b) other securitised liabilities including: money market papers EUR 0.00 (prior year: EUR 0.00) own acceptance and promissory notes outstanding EUR 0.00 (prior year: EUR 0.00) 3a. Trading portfolio Liabilities incurred as trustee including: fiduciary notes EUR 0.00 (prior year: EUR 0.00) 5. Other liabilities 410, , Deferred income a. Deferrec tax liabilities Provisions a) provisions for pensions and similar obligations 629, , b) provisions for taxes 826, c) other provisions 1,035, ,491, , Subordinated liabilities Profit participation capital including: amounts due before expiry of two years EUR 0.00 (prior year: EUR 0.00) 11. Fund for general bank risks Shareholders' equity a) capital called up subscribed capital 40,000, ,000, less outstanding contributions not called in b) capital reserves c) revenue reserves ca) statutory reserves cb)reserve for own shares in a controlling company or in a company holding the majority cc) statutory reserves cd) other revenue reserves 13,920, ,920, ,453, d) Net profit/loss for the year 3,577, ,497, , Total liabilities 241,973, ,463, EUR EUR Prior year EUR 1. Contingent liabilities a) Contingent liabilites from bills transferred and cashed b) Liabilities from guarantees and warranty contracts c) Liability from securites provided for third party liabilities Other liabilities a) Obligations from non-genuine repurchase agreements b) Placing and underwriting obligations c) Irrevocable loan promise 10,629, ,629, ,752,817.27

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7 Income statement of AB AMRO Commercial Finance GmbH, Cologne for the period from 1 January to 31 December 2011 Prior year EUR EUR EUR EUR 1. Interest income from a) credit and money market transactions 14,803, b) fixed interest-bearing securities and debt register claims ,803, ,916, Interest expenses 1,472, ,330, , Current income from a) shares and other non fixed interest-bearing securities b) investments c) shares in affiliated companies Income from profit pools, profit or partial profit transfer agreements 5. Commission income 1,266, , Commissions paid 1,534, , ,270, et income/expense of the trading portfolio 8. Other operating income 115, , General administrative expenses a) Personnel expenses aa) Wages and salaries 3,831, ab) Social security, post-employment and other employee benefit costs 865, ,697, ,491, including: those for old age pensions EUR 262, (prior year: EUR 232,235.09) b) other administrative expenses 1,893, ,591, ,585, Amortisation, depreciation and write-downs on intangible and tangible assets 129, , Other operating expenses 55, , Write-downs on receivables and specific securities and additions to provisions for possible loan losses 1,107, ,813, Income from write-ups on receivables and specific securites and from the reversal of provisions for possible loan losses ,107, Write-downs on investments, shares in affiliated companies and on securities treated as fixed assets Income from write-ups on investments, shares in affiliated companies and on securities treated as fixed assets Expenses from the assumption of loss 19. Result from ordinary activities 5,294, , Extraordinary income Extraordinary expenses , Extraordinary result , Taxes on income 1,713, , including: expense from deferred taxes EUR 10, (prior year: income from deferred taxes EUR 88,242.90) 24. Other taxes, unless shown in item 12 3, ,716, , Income from the assumption of loss Profit transferred due to a profit pool under a profit or partial profit transfer agreement et income/loss for the year 3,577, , Profit/loss brought forward from prior year Withdrawals from the capital reserve Withdrawals from revenue reserves a) from the statutory reserve b) from the reserve for shares in a controlling company or in a company holding the majority c) from statutory reserves d) from other revenue reserves Withdrawals from profit participation capital 32. Transfers to revenue reserves a) to the statutory reserve b) to the reserve for shares in a controlling company or in a company holding the majority c) to statutory reserves d) to other revenue reserves Restoration of profit participation capital et profit/loss for the year 3,577, ,654.91

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9 otes to the financial statements for the financial year ) General Due to the license permitting ABN AMRO Commercial Finance GmbH to carry out specific operations (Teilbank), the Bank meets the criteria of a large corporation (Kapitalgesellschaft) as defined in 340 a (1) HGB (German Commercial Code). ABN AMRO Commercial Finance GmbH started to carry out banking transactions on 1 November The financial statements of ABN AMRO Commercial Finance GmbH were prepared for the financial year 2011 in accordance with the rules of German Commercial Code (HGB), of the Law on Limited Liability Companies and of the German Banking Act and of the Regulation on the Accounting of Credit Institutes and Financial Service Institutions ( RechKredV ). For the income statement the Bank chose the form based on the step-down report. 2.) Accounting policies The financial statements have been prepared in accordance with the following accounting policies: Claims on banks and clients as well as other assets are accounted for at par value. Specific bad debt allowances/provisions are recognised to take account of all discernible risks. Claims are reduced by specific bad debt allowances. Investments and shares in affiliated companies are stated at acquisition cost/at the lower fair value. Intangible and tangible assets are recognised at acquisition cost and amortised/depreciated over their useful lives, using the straight-line method. Pursuant to 248 (2) HGB, the Company did not exercise the option to capitalise internally generated intangible assets. Prepaid expenses have been recognised. Deferred tax assets were capitalised in exercising the option as provided for in 274 (1) sentence 2 HGB. Liabilities are shown at their settlement amounts. Provisions for pensions and similar obligations are shown at the value permissible under German Commercial Code. As the actuarial valuation method for pension entitlements, the projected unit credit method was used on the basis of the reference table RT 2005 of Prof. Dr. Heubeck and of the discount rate of 5.14%. Furthermore, a salary trend of 2.50% and a pension trend of 1.75% were taken as a basis. The provision for old age part time obligations was recognised at the settlement amount, as required in 253 HGB and IDW RS HFA 3. The provision was calculated at the present value based on a discount rate of 3.81%. The reference tables 2005 G (RT 2005 G) of Prof. Dr. Heubeck and a salary trend of 2.50 % were used as a valuation basis. An offset as defined in 246 (2) sentence 2 HGB with the available fund assets was made. 1

10 Provisions are shown at the expected settlement amounts and take account of all discernible risks and contingent liabilities. Foreign currency liabilities and receivables were measured at the spot exchange rate ruling at the balance sheet date. Expense and income were offset for the first time in the income statement with regard to the provision recognized for loan losses. For reasons of comparability, the offset of expense and income was also made for the financial year

11 3.) Comments on the balance sheet Assets Claims on banks 31/12/ /12/2010 a) payable on demand 6,658 5,532 31/12/ /12/2010 b) other cliams 1,132 5,701 Maturity breakdown ( 9 RechKredV) Due 31/12/ /12/2010 within three months 1,132 5,701 after more than three months up to one year 0 0 after more than one year up to five years 0 0 after more than five years 0 0 Total 1,132 5,701 of which receivables from affiliated companies ( 3 RechKredV) 31/12/ /12/2010 Total 0 0 3

12 Claims on clients 31/12/ /12/2010 Total 233, ,327 Maturity breakdown ( 9 RechKredV) Due 31/12/ /12/2010 within three months 224, ,701 after more than three months up to one year 8,805 2,812 after more than one year up to five years 21 3,814 after more than five years 0 0 Total 233, ,327 of which receivables from affiliated companies ( 3 RechKredV) 31/12/ /12/2010 Total Foreign currency items ( 35 RechKredV) 31/12/ /12/2010 Claims on banks 20 0 Claims on clients 14,282 10,344 Total 14,302 10,344 4

13 Fixed assets Cost 1/1/2011 Additions Disposals 2011 Depreciation/ amortisation total 2011 Disposals depreciation/amo rtisation Residual carrying amounts RCA prior year Depreciat ion/amort isation Thsd. EURThsd.EUR Intangible assets Software Operating and office equipment Hardware Tangible assets Investments Deferred tax assets were recognised on the differences existing in respect of the provisions for pensions and old age part time and were measured at a total tax rate of 32.45%. 5

14 Liabilities Liabilities to banks 31/12/ /12/2010 a) payable on demand 16,275 15,669 31/12/ /12/2010 b) with an agreed term or period of notice 0 0 of which liabilities due to affiliated companies ( 3 RechKredV) 31/12/ /12/2010 Total 0 0 Liabilities to clients 31/12/ /12/2010 a) payable on demand 61,257 50,260 31/12/ /12/2010 b) with an agreed term or period of notice 104,041 77,019 Maturity breakdown ( 9 RechKredV) Due 31/12/ /12/2010 within three months 104,041 77,019 after more than three months up to one year 0 0 after more than one year up to five years 0 0 more than five years 0 0 Total 104,041 77,019 of which liabilities due to affiliated companies ( 3 RechKredV) 31/12/ /12/2010 Total 104,041 77,280 Liabilities to clients payable on demand include mainly purchase price retentions of business partners. 6

15 Liabilities to clients, based on an agreed term and period of notice, include an amount of EUR 104,041 thousand (prior year: 77,019 thousand) for the refinancing through the shareholder ABN AMRO Commercial Finance Holding B.V. Foreign currency items ( 35 RechKredV) 31/12/ /12/2010 Liabilities to banks 6,687 5,647 Liabilities to clients 6,197 5,980 Total 12,884 11,627 Other liabilities include mainly an amount of EUR 215 thousand (prior year: EUR 187 thousand) for VAT charges for the months November and December Other provisions consist mainly of an amount of EUR 414 thousand for bonuses, of EUR 168 thousand for fee refunds and of EUR 95 thousand for old age part time obligations. Existing fund assets recognized at a fair value of EUR 248 thousand were offset with old age part time obligations of EUR 343 thousand. The amortised cost equals the fund assets. The income of EUR 6 thousand resulting from the revaluation of fund assets was offset with the expenses of EUR 78 thousand for old age part time obligations. Equity a) Capital called up cd) Other revenue reserves d) Net profit Total As at 31 December 2010 ABN AMRO Commercial Finance Holding B.V., Rotterdam/Netherlands has a 100% shareholding in the company. Based on the shareholders resolution dated 9 January 2012, the Company made, on 26 January 2012, a profit distribution of EUR 13,920 thousand to the shareholders. 7

16 Off balance The irrevocable loan promises relate to the difference between the financing facilities granted and the amounts actually used at the balance sheet date. Depending on the type of credit, financing facilities are sometimes granted for a period of 12 months. Comments on the income statement EUR 48 thousand of other operating income relates to prior period income from the reversal of provisions. Other operating expenses consist chiefly of expenses (EUR 40 thousand) from the addition to provisions for pensions and old age part time incurred in connection with changes in interest rates. Other prior period income of EUR 236 thousand (prior year: EUR 367 thousand) results mainly from the reversal of the provision for risks and from incoming payments on receivables written off. Taxes on income include EUR 1,703 for current taxes. Expense of EUR 10 thousand results from the change of deferred taxes accounted for. 4.) Other disclosures a) Advisory Board According to the Company s articles of association, there exists an Advisory Board with the following members: Mr. Lucas Henricus Geradus Mannerts Mr. Anthony Norman Cox Managing Director ABN AMRO Commercial Finance Holding B.V. Private persons The members of the Advisory Board did not receive any remuneration for the financial year b) Management and representation: In the financial year 2011, the Company s managing directors were: Mr. Mario Lüdtke, Cologne, managing director and chairman of the board of management of ABN AMRO Commercial Finance GmbH Mr. Hans-Joachim Kader, Kreuzau, managing director of ABN AMRO Commercial Finance GmbH The managing directors are authorized to jointly represent the Company. The protection clause according to 286 (4) of the HGB was applied. 8

17 c) Inclusion in the Group: The financial statements of ABN AMRO Commercial Finance GmbH for the year ended 31 December 2011 are included, through ABN AMRO Commercial Finance Holding B.V. s Hertogenbosch/Netherlands, in the consolidated financial statements of ABN AMRO Bank N.V. Amsterdam/Netherlands, which can be obtained at the registered office of ABN AMRO Bank N.V. in Amsterdam/Netherlands. d) Other financial commitments: At the balance sheet date other obligations arising from rental and leasing agreements are as follows: Other obligations 31/12/ /12/2010 Rental and leasing agreements Other obligations include an amount of EUR 295 thousand due to affiliated companies. e) Headcount The average number of persons employed by the Bank was 63 (37 female and 26 male employees) in the financial year f) Information on the auditor s fee according to 285 sentence 1 no. 17 HGB The total fee payable to the auditor for the audit of the financial statements is EUR 110 thousand. In addition, a fee of EUR 72 thousand was charged for other services rendered by the auditor. Cologne, 10 April 2012 ABN AMRO Commercial Finance GmbH (signed) Mario Lüdtke Managing director Chairman of the Board of Management (signed) Hans Joachim Kader Managing director 9

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19 Management report for the financial year 2011 In the year 2011 German economy registered a growth of 3%. Consequently, the growth rate of the year 2011 reached nearly prior year s level despite the euro zone and global crisis and the weakening global economy. In 2011 the German factoring market could again profit from this trend, even on an above-average basis compared to the general economic growth. The sales of the 26 factoring institutes, members of the German Factoring Association (Deutsche Factoring-Verband e.v.), increased by 18.9% to a total of EUR billion. The ongoing growth is attributable not only to the good economic development in the important factoring sectors, but also to the increase in national consumer spending, higher investments and the high export rate realized with Made in Germany products and services during the year. This enabled the factoring service to continue to perform well and to become an important element of corporate financing. Since many years ABN AMRO Commercial Finance GmbH has been one of the continuously successful factoring service providers in Germany. As a competent and reliable partner for the group of medium-sized companies, the Company provides customised and flexible financing solutions in the factoring sector and for banking products offered as a supplement, such as inventory financing. Focus of the Company s activities is on the so-called genuine factoring connected with the assumption of the delcredere risk. Additionally, solvent customers are also offered bogus factoring and individual solutions for short term financing of other elements in current assets based on various collaterals. Most clients of ABN AMRO Commercial Finance GmbH are medium-sized enterprises with annual sales varying between EUR 1 million and EUR 300 million and operating in different industries. In the selection of its clients ABN AMRO Commercial Finance GmbH pays special attention to their creditworthiness and to the factorable character of the receivables purchased. The internal risk and profitability criteria are applied to new clients as part of the client acceptance process and the credit decision and are permanently monitored during the period of the business relationship. This risk management aimed at security has had a positive effect on the development of the client portfolio and shows the sustainability of the business and risk strategy pursued. ABN AMRO Commercial Finance GmbH is a member of the German Factoring Association (Deutsche Factoring-Verband e.v.), of the Association of Foreign Banks in Germany (Verband der Auslandsbanken in Deutschland e.v.), of the International Factors Group, Brussels as well as of the Factors Chain International, Amsterdam. 1

20 General business conditions For the shareholder the financial year 2011 was marked by the successful, strategic restructuring resulting from the merger of the former Fortis Bank into ABN AMRO Bank N.V. Amsterdam/Netherlands in the year Moreover, the Fortis Commercial Finance Group, also a member of the ABN AMRO Bank Group, was sold as at 3 October 2011 and the business segment Commercial Finance was declared to be the Bank s core business. As a result, this division was reorganized and has now its registered office in s-hertogensbosch/netherlands. Within the ABN AMRO Commercial Finance Group ABN AMRO Commercial Finance GmbH represents the Group s activities carried out in Germany. Its business policy is oriented towards both predominantly medium-sized companies in Germany and to Dutch clients of ABN AMRO Bank who have business interests in Germany. As a consequence, ABN AMRO Commercial Finance GmbH is gaining more and more in importance within the ABN AMRO Bank Group. The generally favourable economic situation had an extraordinarily positive effect on the existing client business of ABN AMRO Commercial Finance GmbH and on the new client business. Thanks to an increase in receivables purchased from existing and new clients, ABN AMRO Commercial Finance GmbH achieved the highest business volume (total assets plus irrevocable credit commitments) in its history. The sales based on factoring, the total of all purchased receivables, rose by EUR 609 million to EUR 2,480 million, representing a growth of 33%. This is reflected in an increase in total assets: Sales based on factoring 2,480,107 1,871,000 Business volume 252, ,216 Total assets 241, ,463 Claims on clients 233, ,327 Liabilities due to clients 165, ,279 Equity (without net profit) 53,920 53,454 Net profit 3,

21 As a result of the attraction of new clients, especially in the segments consumer goods and household articles and due to the extension of the business with customers from these sectors, the sector-related allocation of prepayments to clients is as follows at the end of the year 2011: 2011 Share in 2010 Share in EUR million % EUR million % Consumer goods and household articles % % Electronic components % % Industry products % % Textile and clothing industry % % Forestry and paper products % % Packages % % Home improvement and furniture % % Commercial services % % Computer hardware % % Other % % % % ABN AMRO Commercial Finance GmbH s particular attention is paid to the further risk-adequate structuring of its client portfolio, concentrating on high-margin clients with a controllable risk potential. Furthermore, ABN AMRO Commercial Finance GmbH could win several major clients who will lead to a substantial increase in sales and income. Besides the core business factoring, inventory financing, purchase financing, loans and short-term guarantees form part of the product portfolio of ABN AMRO Commercial Finance GmbH. However, ABN AMRO Commercial Finance GmbH generally provides these forms of financing only in existing factoring client relations. This product portfolio was well received in the year 2011 and led to a positive development of the new business. Notably the sector of special, client-group-oriented financing solutions was extended through existing client relations. This enabled ABN AMRO Commercial Finance GmbH to generate stable basic income realised in the segment of smaller clients with lower acquisition costs. 3

22 Company s net assets, financial position and results of operations a) et assets and financial position Increase in total assets Considering the favourable general economic development with its positive impact on the existing business and the acquisition of new profitable clients, the business volume rose by 22.5% (EUR 46.4 million) to EUR million and total assets increased by 21.9% (EUR 43.5 million) to EUR million. At the end of the year 2011, the claims on clients went up by 26.1% (EUR 48.3 million) to EUR million. The greater need for refinancing funds was covered through funds borrowed from the shareholder for one month. Equity The subscribed capital was EUR 40 million in the financial year Other revenue reserves amounted to EUR 13.9 million. As per shareholders resolution dated 23 May 2011, the net profit of EUR 466 thousand as at 31 December 2010 was transferred to other revenue reserves. As per shareholders resolution dated 9 January 2012, other revenue reserves of EUR 13.9 million were distributed to ABN AMRO Commercial Finance Holding B.V. on 26 January The net profit as at 31 December 2011 is also to be distributed to ABN AMRO Commercial Finance Holding B.V. At 20,73% (prior year: 25.24%), the Bank complied with the minimum requirement for the ratio of 8% between liable capital and risk-weighted assets. The funds to be deposited under 10 of German Banking Act (KWG) were available at any time in the reporting year. The equity requirement is also complied with after the withdrawal. Provisions Provisions increased by EUR 1.2 million to EUR 2.5 million compared to prior year. This development is attributable mainly to the tax provision of EUR 827 thousand recognized for current corporate income tax and trade tax liabilities. Financial position The liquidity ratio according to 11 of German Banking Act was 1.19 (prior year: 1.30) at the balance sheet date. The minimum requirement for the ratio is 1.0. Sufficient liquidity reserves are available to ABN AMRO Commercial Finance GmbH within the Group at any time. 4

23 b) Results of operations Interest income 13,330 10,274 Commission income Other operating result (on balance) Total income 13,122 9,922 Administrative expenses/depreciation of fixed assets/other taxes 6,724 6,212 Expenses for credit insurances 1,188 1,235 Operating result before risk reserves 5,210 2,475 Allowances on clients and debtors (net) -81 1,578 Operating result after provision for possible loan losses 5, Extraordinary expenses Taxes 1, Net income for the year/net profit 3, Interest income As the sales based on factoring significantly rose in 2011, income from fees and interest income increased disproportionally to interest expense. Consequently, the interest result clearly increased by 29.7% (EUR 3,056 thousand) to EUR 13,330 thousand. Administrative expenses The salary adjustments made as a result of collective agreements and special remuneration paid to employees involved an increase in personnel expenses by 4.6% (EUR 205 thousand) to EUR 4,697 thousand. In the financial year other administrative expenses rose by 19.5% (EUR 309 thousand) to EUR 1,894 thousand, chiefly owing to higher legal and consulting costs incurred in connection with projects and legal opinions prepared at the Company s request. 5

24 Addition to the provision for possible loan losses Prior years restrictive risk policy and the favourable general economic development had a positive effect on the provision for possible loan losses in the financial year Furthermore, prior year s situation was adversely affected by the addition to a provision recognized for a client loan loss. In total, allowances on clients and debtors (net) result in an income of EUR 81 thousand. et profit The considerable increase in net profit by EUR 3,110 thousand to EUR 3,577 thousand was caused primarily by higher interest income with lower risk provisioning expenses and a disproportionally low rising of cost level. 6

25 Personnel The average number of persons employed by ABN AMRO Commercial Finance GmbH was 64 as at 31 December Female employees accounted for 59%. Four new employees joined/two employees left the Company. Details relating to the employment of and the salary paid to the bank clerks of ABN AMRO Commercial Finance GmbH are generally stipulated according to the most recent collective agreements for the private banking sector and for public banks. In addition, the employees subject to collective agreements receive a non-performance-related extra pay in the amount of half of a month s salary guaranteed and paid by ABN AMRO Commercial Finance GmbH on a voluntary basis. This extra pay is an additional element of the employment contracts concluded with the salaried employees and must be repaid to ABN AMRO Commercial Finance GmbH upon termination of employment, provided that specific requirements are met. Specially qualified employees, team leaders, area directors and proxies work for the Company under individual contracts and are not subject to the collective agreement made for the banking sector. ABN AMRO Commercial Finance GmbH uses a standard contract for the individual employment contracts to ensure comparability. Both the receipt of fixed and variable salary elements are stipulated in these contracts. Intra-group rules require that variable salary elements be generally limited to a maximum rate of 30% of the fixed salary and that they be yearly determined by the management by reference to individually agreed targets. The total amount of the salaries granted to employees outside collective agreements are agreed between the management and the Advisory Board and are usually below the maximum limit. The contracts concluded with the two managing directors provide for the payment of a yearly fixed salary. In addition to this fixed salary, a variable amount is paid. This variable salary element is fixed as set out in the intra-group rules. Moreover, the managing directors receive a so-called sustainability bonus at a rate of 25% of the actually variable amount of a financial year. This bonus falls due and is paid only in the third year after completion of this financial year, when specific ratios will be realised in the following years. 7

26 The total of the individually agreed salaries paid by ABN AMRO Commercial Finance GmbH to employees and of the fixed and variable salaries paid to managing directors is allocated to the different segments as follows: Salary schedule of ABN AMRO Commercial Finance GmbH / calendar year 2011 ( in EURO) Sales & Relationship Riskmanagement Sonstige Bereiche Summe Number of recipients Fixed salary Variable salary Share of the variable salary 21% 25% 14% 20% Apart from the remuneration paid to the employees, ABN AMRO Commercial Finance GmbH promotes its staff through further and advance training. In the year 2011, the complete staff took part in the training series MS office More than 20 employees attended bank-specific courses fully paid by the Company. 8

27 Risk report The risk strategy adopted by management and the related guidelines and limit systems provide the basis for the whole risk management of ABN AMRO Commercial Finance GmbH. The risk management of ABN AMRO Commercial Finance GmbH results from the factoring business and the credit transactions additionally offered. The associated risks must individually be considered, identified and valued in terms of their amount. The management is fully responsible for the risk management with various tasks being assigned to different organisational areas. In the reporting year, the Company continued implementing the minimum requirements for the risk management as prescribed by the regulatory authorities. The risk strategy of ABN AMRO Commercial Finance GmbH was adjusted in May 2011, as part of its regular revision. Particularly default risks, verity risks and operational risks are relevant to ABN AMRO Commercial Finance GmbH. The Company can also be confronted with legal, liquidity and market risks which are currently considered to be less material. ABN AMRO Commercial Finance GmbH quarterly examined its risk-taking capability. According to the definition of the Bank, the available capital for risk coverage is based on the allowable equity capital (according to the Solvency Regulation) of the earnings (before taxes) forecast for the following year less a security discount of 15% of the forecast earnings. There will also be a deduction of the Bank s own equity capital used to ensure its minimum capital level and of the planned capital repayments. The Company defined as maximum loss limit 1 the forecast earnings less the security discount and it defines as maximum loss limit 2 the maximum loss limit 1 plus the allowable equity capital of 10% (according to the Solvency Regulation). The available capital for risk coverage was allocated and limited to the various risks. In 3 various scenarios ( standard, doubling and worst case ) the capital requirement was regularly determined and compared to the available capital for risk coverage. In the scenario standard losses expected to result from counterparty and verity risks are considered. In the scenario doubling losses expected to result from counterparty and verity risks are doubled and operational risks are considered according to the basic indicator approach. In the scenario worst case the loss of the largest borrower unit and of the largest credit commitment of a client is considered in inventory financing and recourse factoring. Furthermore, a case of fraud is considered, for which the related loss is higher than the maximum loss from a fraud which occurred during the last three years. The other risks in this scenario are considered according to the scenario doubling. As a result, it can be stated that the maximum loss limits were exceeded only in the worst case scenario. However, the available capital for risk coverage could compensate for the limits exceeded. ABN AMRO Commercial Finance GmbH also carried out and documented a number of stress tests. On the basis of its business and risk strategy, ABN AMRO Commercial Finance GmbH defined a limit system for monitoring its risks. Compliance with the limits defined is evaluated in a portfolio analysis quarterly prepared. Moreover, ABN AMRO Commercial Finance GmbH is continuously working on the optimisation of its risk management and risk classification system. 9

28 Counterparty risk The Bank defines a counterparty risk as a risk associated with the partial or complete loss of payments contractually agreed by the counterparty. a) Debtor risks At request of the client, the Bank grants credit limits to each debtor. The limits are internally granted on the basis of existing powers and depending on the creditworthiness evaluated according to available information, and on the experiences from the payment management. All purchased receivables are verified on a test basis and permanently monitored. Dunning letters are regularly sent for overdue receivables and credit limits are terminated when a specific dunning level has been reached. Necessary collection measures are initiated where receivables are still unpaid after completion of the dunning process. The loans granted by ABN AMRO Commercial Finance GmbH are covered by an insurance policy of EulerHermes Krediversicherungs-AG. ABN AMRO Commercial Finance GmbH also concluded special contracts providing that counterparties are required to assign claims arising from credit insurance contracts. b) Client risks Client risks exist for ABN AMRO Commercial Finance GmbH in connection with credit products offered as a supplement or with factoring solutions for which no delcredere risks are assumed (bogus factoring). Based on a broad analysis of the creditworthiness and the related collaterals, clients are granted a credit limit, where the agreed collaterals are provided. The credit limit is given within the scope of the responsibilities granted. After the first payment, customer relationship and the actual value of the collaterals are currently being supervised. As part of this supervision, the customers financial conditions are regularly analysed and on-site tests performed. The collaterals provided are also subject to tests and evaluations. External service providers are sometimes instructed to evaluate the volume available in the storage financing. Management is involved in the process and is continuously informed of the results of this supervision. Moreover, compliance with instructions issued by the Company is examined in an internal audit. Default risks are classified using a system introduced within the whole group. c) Correspondents in the international factoring (factoring partner) These risks arise from payment and collection obligations assumed by factoring partners in export transactions. In accordance with internal guidelines, the factoring partners involved are selected and supervised on such basis that country risks are considered and financial statements, the shareholder background etc. are evaluated for an ongoing control of the creditworthiness. 10

29 Verity risks These risks arise from non-existence of receivables sold to ABN AMRO Commercial Finance GmbH, from the non-transfer of payments received by the client and from other non-insurable client risks in factoring operations. To identify these risks the Bank installed a system of strict risk monitoring. This includes evaluating the overall development of the client business on an ongoing basis and auditing each commitment generally on a yearly basis. Compliance with the related guidelines and work instructions are continuously documented and controlled. Management will always be involved in these processes. The internal audit regularly monitors compliance with the related guidelines and observance of the competences concerned. The client fraud risk is covered by an insurance policy of Valour Insurance Company Ltd. St. Peter Port, Guernsey. Operational risks In continuously rendering our services we are exposed to technical and human errors. Risks also arise from inappropriate controls and process operations. Permanent controls integrated into these processes will reduce these risks. ABN AMRO Commercial Finance GmbH has also established a reliable internal audit system regularly monitoring the implemented controls. On an ongoing basis analyses of internal risks are made and documented. Material risks are covered by insurance contracts. In the case of a temporary or total failure of the EDP equipment, there exists a detailed and tested emergency plan enabling the business operations to be resumed within a reasonable period. ABN AMRO Commercial Finance GmbH also records the legal risks in the operational risks. Legal risks can arise from unwanted legal obligations of ABN AMRO Commercial Finance GmbH and from unenforceable claims against other contracting partners. Largely standardised contract modules for factoring and credit transactions are used to take account of these risks. Any exceptions to this are subject to the appropriate check by the legal department and by external advisers. The same applies to other contracts which are generally reviewed from a legal point of view. Liquidity risks A liquidity risk arises from possible insolvency of the Bank. In the year 2011, sufficient funds were available at any time through credit commitments given by a bank and through the shareholder. At the balance sheet date the ratio of the liquidity principle was 1.19 (prior year: 1.30). The finance and accounting department is responsible for the liquidity management. 11

30 Market risks Market risks are considered to exist, where there may be income losses resulting from changes in market prices for securities, foreign currencies and derivatives and in interest rates and interest structures. According to its status as a bank for specific operations (Teilbank), ABN AMRO Commercial Finance GmbH does not carry out commercial or other transactions with securities and precious metals. Possible exchange rate risks associated with receivables purchased in foreign currencies are borne by the counterparty involved. In the assessment of the Bank, it is not exposed to a material risk of changes in interest rates, as the purchase price advance payments to the customers are generally based on matched interest rate refinancing. Changes in interest rates are generally borne by clients. Events of special importance after the balance sheet date Events of special importance have not occurred after the balance sheet date. Outlook Despite the economic slowdown the need for financing solutions will continue to be high in the year In this situation factoring can reasonably cover the need of medium-sized companies for liquidity on the basis of collaterals provided in the form of receivables. The still growing interest of many traditional bank clients in alternatives for the financing by a firm s bank will have a positive effect on the Company s position. In view of the generally favourable general economic situation, the Company expects a very positive development in the sales realised with the existing client portfolio and with new clients. The purpose is to achieve a continuous increase in the business volume. All efforts will concentrate on strengthening the Dutch/German business relations. However, generally, ABN AMRO Commercial Finance GmbH predicts that market conditions will still be characterised by fierce competition. The financial products and factoring services offered by ABN AMRO Commercial Finance GmbH will be extended in the years 2012 and Focus will be on providing medium-sized companies with various financing solutions as a supplement to the usual factoring contract. For this reason, ABN AMRO Commercial Finance GmbH plans to increase its factoring volume by 28.4% for the year 2012 and by 12.7% for the financial year In the sector of complementary banking products, an extension of the business activities by 16.6% is also intended for the financial year ABN AMRO will also endeavour to extend its product portfolio of complementary banking products. In the planned business extension, ABN AMRO Commercial Finance GmbH s focus will also be on the riskadequate structuring of the client and product portfolio. For this purpose, ABN AMRO Commercial Finance GmbH uses the already established and continuously optimised risk management instruments to keep counterparty and verity risks at a low level. 12

31 As regards the strategic orientation of ABN AMRO Commercial Finance GmbH as realised both within the ABN AMRO Group and outside the Group, Management considers the Company to be very well positioned also from a strategic point of view. For a long time ABN AMRO Commercial Finance GmbH has proved to be a solid, modern and innovative partner, clearly stands out from competitors and enjoys an exceptionally good reputation. Factors such as the secure refinancing possibilities available in the Netherlands on the basis of state guarantees and the stable business organization allow ABN AMRO Commercial Finance GmbH to forecast a still positive business development for the years 2012 and Based on higher factoring and interest revenues, ABN AMRO Commercial Finance GmbH expects earnings at prior year s level, where the risk provisioning expenses equal the anticipated losses. With regard to the positive business development, ABN AMRO Commercial Finance GmbH predicts a rise in earnings for the financial year Cologne, 10 April 2012 ABN AMRO Commercial Finance GmbH (signed) (signed) Mario Lüdtke Managing director Chairman of the Board of Management Hans-Joachim Kader Managing director 13

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33 AB AMRO Commercial Finance GmbH Financial Statements and Audit Opinion for the Year Ended 31 December 2011 Auditor s Report We have audited the annual financial statements, comprising the balance sheet, the income statement and the notes to the financial statements, together with the bookkeeping system, and the management report of the ABN AMRO Commercial Finance GmbH, Cologne, for the business year from 1 January to 31 December The maintenance of the books and records and the preparation of the annual financial statements and management report in accordance with German commercial law are the responsibility of the Company s management. Our responsibility is to express an opinion on the annual financial statements, together with the bookkeeping system, and the management report based on our audit. We conducted our audit of the annual financial statements in accordance with Article 317 HGB ( Handelsgesetzbuch : German Commercial Code ) and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany, IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the annual financial statements in accordance with German principles of proper accounting and in the management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Company and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the books and records, the annual financial statements and the management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the annual financial statements and management report. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations /D/NN 1

34 AB AMRO Commercial Finance GmbH Financial Statements and Audit Opinion for the Year Ended 31 December 2011 In our opinion, based on the findings of our audit, the annual financial statements comply with the legal requirements and give a true and fair view of the net assets, financial position and results of operations of the Company in accordance with German principles of proper accounting. The management report is consistent with the annual financial statements and as a whole provides a suitable view of the Company s position and suitably presents the opportunities and risks of future development. Düsseldorf, 11 April 2012 KPMG AG Wirtschaftsprüfungsgesellschaft (signed) Kügler Wirtschaftsprüfer (signed) Lehnen Wirtschaftsprüferin /D/NN