Annual Financial Report 2012

Transcription

1 Annual Financial Report 2012 Annual Report Company Financial Statements Statement by the Executive Board O e s t e r r e i c h i s c h e K o n t r o l l b a n k G r o u p

2 EUR million (except lines beginning with Number of ) OeKB Highlights Average number of employees of the OeKB Group Consolidated financial statements Total assets at 31 December 34,252 35,802 37,978 32,768 Equity including minority interest Operating profit Profit before tax Profit for the year attributable to shareholders of the parent Return on equity in % Cost/income ratio in % Guarantees of the Republic of Austria under the Export Guarantees Act New guarantee contracts issued 5,160 3,869 4,658 5,135 Number of new guarantee contracts issued , Aggregate guarantee exposure limit, at 31 December 50,000 50,000 50,000 50,000 Utilisation of the guarantee exposure limit at 31 December 40,650 38,508 37,058 34,836 Number of guarantees in place 3,833 3,859 3,786 3,637 Premium and interest income Gross claims paid by the Guarantor Recoveries on claims paid OeKB Export Financing Scheme New commitments issued 4,971 4,413 5,948 7,085 Total lending commitments outstanding at 31 December 34,075 33,246 32,244 28,054 Of which disbursements outstanding 31,401 29,429 28,362 24,827 Loan funds disbursed 4,441 2,924 5,026 6,846 Repayments received 9,843 4,896 6,093 10,381 Increase/(decrease) in net loans outstanding 5,402 1,972 1,067 3,535 Total funds used under the Export Financing Scheme 41,965 26,787 54,507 65,825 Limit on aggregate guarantee exposure under Export Financing Guarantees Act 45,000 45,000 45,000 45,000 Utilisation of the guarantee exposure limit at 31 December 33,745 31,658 33,695 30,015 Total new guarantees issued 8,230 6,294 12,504 10,567 Capital Market Services Bond market Federal bonds administered by OeKB 18,210 17,007 13,205 11,252 CSD.Austria EUR/ATS bonds 273, , , ,701 DS.A volume of transactions (nominal, internal, double counting) 813, , , ,527 Number of depositors/classes of securities 156/20, /22, /22, /22,382 1 Beginning in 2012, this item is stated net of deferred up-front premiums.

3 Oesterreichische Kontrollbank Aktiengesellschaft Annual Report 2012

4 Why does it say The Complete Perspective on these reports? The reason is that our aim at OeKB and the Group companies is always to balance meticulous attention to detail with a firm grasp of the big picture, in all its intricacy and interconnectedness: The export markets and their risk situation, the capital and energy markets, and the rapidly growing wealth of news and data. With this special combination of wide-angle vision and close-up precision, we deliver services that help our clients achieve success in a complex world, serving everyone from public sector principals, to exporters and outward foreign investors, to capital market participants and energy suppliers.

5 Contents Page Letter from the Executive Board 5 Corporate governance 1 Organisational structure of OeKB 6 2 Supervisory bodies 8 3 Corporate governance 10 4 Shareholders and share capital 12 5 Supervisory Board report 13 Portrait of the OeKB Group 1 Services for exports and outward foreign investment 14 2 Capital Market Services 25 3 Energy Market Services 34 4 Information Services and IT Services 35 5 Sustainability at OeKB 37 Group management report OeKB Group consolidated financial statements Auditor s Report 96 Legend for data presented in this report Amount is zero. 0 Amount is smaller than half of the stated unit. Totals may not add due to rounding. 3

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7 Letter from the Executive Board Dear Reader In 2012 the world economy remained deeply affected by the European debt crisis, leading to an economic slowdown in emerging markets as well. Against this backdrop, the Group companies in OeKB s Export Services business provided the Austrian export industry with the tried and tested services that strengthen its international competitiveness. To further enhance support for large, medium-sized and small companies, the cover terms for export guarantees were significantly improved in several ways, including higher percentages of cover, higher transaction limits and longer credit periods for business in more than 50 countries. In the system of export guarantees, a significant revenue surplus was again generated for the Republic of Austria in The two private credit insurers held their own in a very difficult market setting: PRISMA Kreditversicherungs-AG consolidated its position as market leader, and emerging markets specialist OeKB Versicherung AG was successful with the six-month limit guarantee, a new product that offers customers the peace of mind of non-cancellable cover under global policies. In the middle of 2012 the OeKB Group considerably simplified customers access to short-term export financing: Since then, Exportfonds, a subsidiary that in 2012 increased its total loans outstanding to more than one billion euros, provides revolving credit facilities for all small and medium exporters (via their banks), while all large exporters are serviced by OeKB AG. Oesterreichische Entwicklungsbank AG (OeEB), the development bank, achieved renewed significant growth in its investment financing of private sector projects in developing and newly industrialised countries. In the year under review, OeKB developed a central IT solution for the Austrian financial market for the filing of mandatory disclosures by Austrian fund companies under the Investment Fund Act. Another innovative product, the Bilanz Transfer system for the electronic sharing of accounting information, was in 2012 nominated for the eaward, an Austrian IT prize. The importance of authoritative information on market opportunities and market potential in uncertain economic times is evident in the strong demand for the information broking and research of OeKB s Information Services and for the quarterly leading indicators of the OeKB Business Climate Index for Central and Eastern Europe. Complementing this Annual Report, OeKB publishes the Export Services Annual Review, which documents the significance of OeKB services to exporters and outward foreign direct investors. Our 2012 Sustainability Report with this year s focus on sustainable investment describes how we combine commercial success with environmental and social responsibility, for the long term. Johannes Attems Rudolf Scholten 5

8 Corporate governance Corporate governance 1 Organisational structure of OeKB Executive Board Johannes Attems (born 5 October 1947) Member of the Executive Board [since 1 June 1988] Rudolf Scholten (born 3 November 1955) Member of the Executive Board [since 1 May 1997] Bank and Business Information EDP Systems and Organisation International Finance Capital Market Services Personnel Department Bond Market and Notification Office under the Capital Markets Act Controlling, Reporting and Payments Export Guarantees Claims Management Export Guarantees International Relations and Services Export Guarantees Project Underwriting Credit Department Organisation, Construction, Environmental Issues and Security Project and Environmental Analyses Accounting Guarantees for Export Acceptance Credits The Executive Board is collectively responsible for Internal Audit/Group Internal Audit Risk Controlling Department Secretariat of the Executive Board/Corporate Communications Legal Affairs The employment contract of Johannes Attems runs until 31 December 2014; that of Rudolf Scholten runs until 30 April

9 Corporate governance Senior officers Bank and Business Information Angèle Eickhoff, Head of Department Jutta Leitner, Deputy Head of Department Controlling, Reporting and Payments Robert Anderl, Head of Department Michael Meier, Deputy Head of Department Export Guarantees Claims Management Christine Dangl, Head of Department Peter Gaspari, Deputy Head of Department Norbert Wokusch, Deputy Head of Department Export Guarantees International Relations and Services Sylvia Doritsch-Isepp, Head of Department Gerhard Kinzelberger, Deputy Head of Department Heidemarie Ptacnik Export Guarantees Project Underwriting Ferdinand Schipfer, Head of Department Erwin Marchhart, Deputy Head of Department Karin Roitner, Deputy Head of Department Johannes Pflügl EDP Systems and Organisation Lech Ledóchowski, Head of Department Franz Macsek, Deputy Head of Department Manfred Heppe Michael Nedved International Finance Waltraut Burghardt, Head of Department Anton Ebner, Deputy Head of Department Anish Gupta Elisabeth Schneider Monika Seitelberger Internal Audit/Group Internal Audit Karl Sterrer, Head of Department Gottfried Stocker, Deputy Head of Department Telephone: Capital Market Services Georg Zinner, Head of Department Christian Körbler, Deputy Head of Department Wolfgang Aubrunner Peter Felsinger Norbert Leitgeb Gerhard Mayer Credit Department Dieter Nell, Head of Department Harald Klee, Deputy Head of Department Ilse Czermak Hans-Rainer Miehl Organisation, Construction, Environmental Issues and Security Eveline Balogh, Head of Department Thomas Bammer, Deputy Head of Department Personnel Department Josef Feldhofer, Head of Department Martina Ganzera-Veraszto, Deputy Head of Department Project and Environmental Analyses Werner Schmied, Head of Department Karl Lenauer, Deputy Head of Department Accounting Angelika Sommer-Hemetsberger, Head of Department Markus Schmidt, Deputy Head of Department Gerhard Polterauer Bond Market and Notification Office under the Capital Markets Act Erich Weiss, Head of Department Maria Kucera, Deputy Head of Department Risk Controlling Karl Heinz Überlackner, Head of Department and CRO Christoph Schwärzler, Deputy Head of Department and Deputy CRO Gerda Klaus, Deputy Head of Department Corporate Communications Peter Gumpinger Guarantees for Export Acceptance Credits Wolfgang Pitsch, Head of Department Ulrike Zabini, Deputy Head of Department Gabriele Dietrich-Oppolzer Erna Scheriau 7

10 Corporate governance 2 Supervisory bodies Supervisory Board Erich Hampel (born 1951) Term of office: 1 January 2010 to AGM 2016 Chairman Walter Rothensteiner (born 1953) Term of office: 2 August 1995 to AGM 2016 First Vice-Chairman Chief Executive Officer, Raiffeisen Zentralbank Österreich Aktiengesellschaft, Vienna Franz Hochstrasser (born 1963) Term of office: 19 May 2009 to AGM 2016 Second Vice-Chairman Deputy Chief Executive Officer, Erste Group Bank AG, Vienna Helmut Bernkopf (born 1967) Term of office: 19 May 2009 to AGM 2014 Global Head of Private Banking, UniCredit S.p.A., Milan Peter Bosek (born 1968) Term of office: 25 May 2011 to AGM 2016 Member of the Executive Board, Erste Bank der oesterreichischen Sparkassen AG, Vienna Michael Glaser (born 1967) Term of office: 22 May 2012 to AGM 2017 UniCredit Bank Austria AG, Vienna Dieter Hengl (born 1964) Term of office: 25 May 2011 to AGM 2016 Member of the Executive Board, UniCredit Bank Austria AG, Vienna Friedrich Hondl (born 1960) Term of office: 15 December 2009 to 15 March 2012 UniCredit Bank Austria AG, Vienna Reinhard Karl (born 1964) Term of office: 22 May 2012 to AGM 2013 Member of the Executive Board, Raiffeisenlandesbank Niederösterreich-Wien AG, Vienna Michael Mendel (born 1957) Term of office: 22 May 2012 to AGM 2013 Member of the Executive Board, Österreichische Volksbanken-Aktiengesellschaft, Vienna Herbert Messinger (born 1961) Term of office: 18 December 2012 to AGM 2016 BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse Aktiengesellschaft, Vienna Gernot Mittendorfer (born 1964) Term of office: 25 May 2011 to 22 May 2012 Member of the Executive Board, Erste Group Bank AG, Vienna Heimo Penker (born 1947) Term of office: 20 May 2005 to AGM 2016 Chief Executive Officer, BKS Bank AG, Klagenfurt Christoph Raninger (born 1972) Term of office: 25 May 2011 to 31 October 2012 Member of the Executive Board, BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse Aktiengesellschaft, Vienna Angelo Rizzuti (born 1961) Term of office: 21 May 2003 to AGM 2013 UniCredit Bank Austria AG, Vienna Herbert Stepic (born 1946) Term of office: 3 April 1992 to AGM 2015 Chief Executive Officer, Raiffeisen Bank International AG, Vienna Susanne Wendler (born 1967) Term of office: 25 May 2011 to 22 May 2012 UniCredit Bank Austria AG, Vienna Robert Zadrazil (born 1970) Term of office: 19 May 2009 to AGM 2016 Member of the Executive Board, UniCredit Bank Austria AG, Vienna Franz Zwickl (born 1953) Term of office: 20 May 1999 to AGM 2016 AGM = Annual General Meeting 8

11 Corporate governance Employee Representatives: Martin Krull (born 1976) Since 14 March 2002 Chairman of the Staff Council Erna Scheriau (born 1959) Since 1 April 2001 Vice-Chairman Alexandra Griebl (born 1977) Since 14 March 2010 Anish Gupta (born 1966) Since 14 March 2006 Christian Leicher (born 1968) Since 7 July 2009 Claudia Richter (born 1964) Since 11 July 2002 Otto Schrodt (born 1949) Since 14 March 1998 Markus Tichy (born 1971) Since 1 July 2011 The term of office for current employee representatives ends on 13 March Government commissioners under section 76 Austrian Banking Act Harald Waiglein (born 1967) Commissioner [since 1 July 2012] Austrian Ministry of Finance Government commissioners under section 27 of the Articles of Association (supervision of bond cover pool) Johannes Ranftl (born 1948) Commissioner [since 1 December 1996] Ministerialrat, Austrian Ministry of Finance Edith Wanger (born 1955) Deputy Commissioner [since 1 June 1997] Amtsdirektorin, Austrian Ministry of Finance Independent auditor (for the 2012 financial year) KPMG Austria AG Wirtschaftsprüfungs- und Steuerberatungsgesellschaft, Vienna Certified Public Accountants The auditor within the meaning of the Austrian Stock Corporation Act (Aktiengesetz) also acts as the bank auditor for the purposes of the Austrian Banking Act (Bankwesengesetz). Legal advisers Pöch Krassnigg Rechtsanwälte GmbH, Vienna Peter Pöch, Lawyer, Legal Adviser Thomas Wieser (born 1954) Commissioner [1 January 2011 to 29 February 2012] Austrian Ministry of Finance Johann Kinast (born 1963) Deputy Commissioner [since 1 March 2006] Austrian Ministry of Finance The above government commissioners are also representatives of the Austrian Minister of Finance under section 6 Export Financing Guarantees Act. (Information current as of 28 February 2013) 9

12 Corporate governance 3 Corporate governance Executive Board OeKB AG is not a listed company, but is nevertheless guided by the Austrian Code of Corporate Governance to the extent that the Code s principles are applicable. For non-listed stock corporations, L-rules (rules based on legal requirements) are to be interpreted as C-rules ( comply-or-explain rules). The Austrian Code of Corporate Governance, first presented to the public in 2002, is reviewed and revised annually in the context of national and international developments. The most recent amendments to the Code took effect in January They focused on the development of the diversity criterion and new rules to improve cooperation between supervisory boards and auditors. The Code in its full wording is available at Cooperation between the Supervisory Board and Executive Board The Executive Board provides the Supervisory Board with regular, prompt and comprehensive reports on all relevant business developments, including the risk situation and risk management at OeKB and significant Group companies. The aim of good corporate governance in managing the Group s business is pursued through open discussion and communication between and within the Executive Board and Supervisory Board. The Executive Board sets the Group s strategic direction together with, and subject to the approval of, the Supervisory Board and regularly discusses the status of strategy implementation with the latter Board. The Supervisory Board meets at least four times per financial year. The two-member Executive Board of OeKB AG is responsible for managing the Group. Its decisions comply with all relevant laws, the Articles of Association and the Executive Board s internal rules of procedure. The division of responsibilities and the internal cooperation of the Executive Board are set out in its internal rules of procedure. The Executive Board s compensation includes both fixed and performance-based variable components. The variable portion can represent up to 40% of total compensation. The design of the variable compensation policy ensures that the incentive structure is aligned with the long-term interests of OeKB (see note 54 to the consolidated financial statements). OeKB maintains directors and officers liability insurance (D&O) for members of the Executive and Supervisory Boards. The disclosure under L-rule 29 of the Austrian Code of Corporate Governance concerning the aggregate compensation of the Executive Board is omitted in reliance on section 266(7)b Austrian Commercial Code. Supervisory Board The Supervisory Board is responsible for supervising the Executive Board and supporting it in managing the Group, particularly in making decisions of fundamental importance. At the end of the year under review, the Supervisory Board was composed of 15 shareholder representatives and eight employee representatives. As a result of an agreement among shareholders, the number of board members deviates from C-rule 52, which stipulates that supervisory boards should have a maximum of ten members, excluding the employee representatives. The membership of the Supervisory Board is presented from page 8 onward. The Supervisory Board s remuneration is determined at the Annual General Meeting and is shown in note 54 to the consolidated financial statements. The employee representatives perform their responsibilities on the Supervisory Board in the course of their ordinary employment. 10

13 Corporate governance Transparency and auditing The Supervisory Board has formed an Audit Committee and a Working Committee. The members of these committees are Erich Hampel (Chairman and Financial Specialist), Walter Rothensteiner and Martin Krull. The Audit Committee met twice in The Audit Committee is responsible primarily i) for the auditing, and preparation of the adoption, of the company financial statements, proposal for the appropriation of profit, and company management report; ii) for the auditing of the consolidated financial statements and Group management report; and iii) for recommending to the Supervisory Board the choice of independent auditors. The Audit Committee is also required to monitor the effectiveness of the enterprise-wide internal audit system and the risk management system. The Working Committee oversees borrowing operations to fund the Export Financing Scheme; lending under the Export Financing Scheme; lending under section 3 of the internal rules of procedure (related debt rescheduling facilities and purchase of accounts receivable); and the use of the amounts in the interest stabilisation account. A Compensation Committee was formed to approve compensation policy and supervise its implementation in practice. The members of this committee are Erich Hampel, Walter Rothensteiner, Franz Hochstrasser, Martin Krull and Erna Scheriau. Openness and transparency in communications with its shareholders and other stakeholders is particularly important to OeKB. This priority was upheld in 2012 by the Executive Board and the Investor Relations and Corporate Communications departments. In addition to other communication channels, up-to-date information on the Group and its business segments is always available on the OeKB website at OeKB promotes the development of women in all management positions (L-rule 60). According to the rules 4 to 6 of the Austrian Code of Corporate Governance, the motions submitted to the General Meetings of shareholders and all documents including shareholder motions and countermotions, as well as the candidates nominated for election to the Supervisory Board, and the resolutions passed at the General Meetings, should ordinarily be published on the website. However, OeKB considers such publication to be inappropriate, as this information is reserved for shareholders. Therefore only shareholders may view these documents and the right to confidentiality of shareholders that submit motions must be respected. The company financial statements, company management report, consolidated financial statements and Group management report were audited by KPMG Austria AG Wirtschaftsprüfungs- und Steuerberatungsgesellschaft, the auditor appointed by the Annual General Meeting. The independent auditor s report is found in the section Auditor s Report. 11

14 Corporate governance 4 Shareholders and share capital Share capital of EUR 130 million OeKB AG is a financial services provider in the Austrian banking industry. OeKB was founded on 22 January 1946 to provide specialised banking services. It has its registered office in Vienna (Company Register Number FN b, Vienna Commercial Court). Oesterreichische Kontrollbank Aktiengesellschaft ( OeKB or OeKB AG ), an Austrian public limited company, has a share capital of EUR 130 million. In view of the special functions performed by OeKB, its shares are registered ordinary shares that are not listed on the Vienna Stock Exchange. The shares may be transferred only with the consent of the Supervisory Board. Shareholders Number of shares held Shareholding in % Ownership structure of OeKB AG (at 31 December 2012) CABET-Holding-GmbH, Vienna (UniCredit Bank Austria Group) UniCredit Bank Austria AG, Vienna Erste Bank der oesterreichischen Sparkassen AG, Vienna Schoellerbank Aktiengesellschaft, Vienna AVZ Finanz-Holding GmbH, Vienna Raiffeisen Zentralbank Österreich Aktiengesellschaft, Vienna BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse Aktiengesellschaft, Vienna Raiffeisen OeKB Beteiligungsgesellschaft mbh, Vienna Oberbank AG, Linz Bank für Tirol und Vorarlberg Aktiengesellschaft, Innsbruck BKS Bank AG, Klagenfurt Österreichische Volksbanken-Aktiengesellschaft, Vienna 217, , ,432 72,688 72,600 71,456 44,792 44,000 34,224 26,888 26,888 13, ,

15 Corporate governance 5 Supervisory Board report In 2012 the Supervisory Board, the Audit Committee and the Working Committee supervised the management and approved its actions, on the basis of the regular reports made by management in regular meetings as well as in writing, and through repeated personal contact. The consolidated financial statements for 2012 and the Group management report presented herein, as well as the 2012 company financial statements and management report, of Oesterreichische Kontrollbank AG were audited by KPMG Austria AG Wirtschaftsprüfungs- und Steuerberatungsgesellschaft, Vienna. The financial statements received an audit opinion as being in accordance with the legal requirements. The Supervisory Board and its Audit Committee have reviewed the reports presented by the Executive Board on the result of the audit for the 2012 financial year, and the proposal for the appropriation of profit. The final result of this review did not give rise to objections. The Supervisory Board in its meeting on 20 March 2013 approved the company financial statements for 2012, which were thereby adopted, and declared its agreement with the Executive Board s proposal for the appropriation of profit. The Supervisory Board has approved the consolidated financial statements and Group management report. For the excellent work done during the year, the Supervisory Board would like to express its gratitude and appreciation to the Executive Board and every employee of the OeKB Group. Vienna, March 2013 For the Supervisory Board Erich Hampel Chairman 13

16 Portrait of the OeKB Group Portrait of the OeKB Group 1 Services for exports and outward foreign investment Small, medium and large enterprises that are exporters or are investing abroad can minimise their financial risks by obtaining Austrian government export guarantees and private export credit insurance, all through companies of the OeKB Group. In addition, to be able to offer their foreign buyers attractive payment terms or to finance their own direct investments in other countries, companies in Austria that provide appropriate security can receive financing from the OeKB Group via their own bank. 1.1 Management of Austrian federal government guarantees by OeKB Key programme features and background The guarantee system is based on the provisions of the Export Guarantees Act and the respective regulation issued by the Federal Minister of Finance. The contractual relations between the Republic of Austria and the guarantee holders are set out in the general terms and conditions ( General Business Conditions ) for guarantees of the Republic of Austria under the Export Guarantees Act, and in the respective guarantees or aval endorsements themselves. Guarantees are issued in compliance with the guidelines, directives and regulations of international agreements of the OECD, the EU and the Berne Union. Detailed statistics and the legal requirements concerning the types of guarantees under the Export Guarantees Act and regarding OeKB s Export Financing Scheme are provided in the OeKB Export Services Annual Review. More information on OeKB s Export Services is available at Cover for non-marketable risks OeKB as the agent of the Republic of Austria offers cover for non-marketable risks, focusing on exports of capital goods and Austrian direct investment abroad. In contrast, short-term revolving cover is provided by the private market. In this market segment, two Group subsidiaries, OeKB Versicherung AG and PRISMA Kreditversicherungs-AG, offer export credit insurance Product and service developments in 2012 The trajectory of the world economy in 2012 was to a significant extent shaped by the debt crisis in Europe. Especially in the second half of the year, the down-trend for European countries became more pronounced and led to heightened uncertainty that also affected the emerging markets. In this environment, OeKB provided time-tested support to exporters through its services. 14

17 Portrait of the OeKB Group In the middle of the year, important terms and condi - tions of cover were improved to further strengthen the competitiveness of Austria s export industry in international markets. This included the expansion of available cover for more than 50 countries through higher percentages of cover, higher transaction limits and longer credit periods. In addition, premiums for transactions backed by bank security and for bond collateral were made more attractive. The OeKB website now also shows the ratings of banks relevant for the calculation of premiums. This makes it even easier for customers to price out bank-secured transactions using the fee calculator on the Internet. As in the previous years, OeKB in 2012 made numerous visits to customers and intensified its communication and presentation activity to further raise companies awareness of the benefits of Austria s export promotion facilities and to help new customers initiate cross-border trade transactions International involvement International cooperation and the Berne Union In today s globalised economy, many projects are made possible only by the collaboration of partners from several countries. The dense network of cooperation agreements woven by OeKB with other export credit insurers and financial institutions in recent years facilitates the provision of one-stop insurance and financing for such complex multisourcing projects. In 2012, on the heels of the cooperation agreement concluded in 2011, a master agreement was signed with the Development Bank of Kazakhstan allowing support for projects up to a combined total value of EUR 250 million. Since 1954, OeKB is a member of the London-based Berne Union (the International Union of Credit and Investment Insurers). This global organisation currently comprises 50 export guarantee and investment guarantee institutions from 40 countries. The aims of the Berne Union are the coordination of international trade terms and the extensive sharing of information between members. Environmental responsibility Based on the resolutions of the OECD, environmental impacts have since the middle of 2000 been given increased consideration in the evaluation of project applications and supported projects. The revision of the relevant OECD Recommendation from June 2012 is intended to help drive further improvement and greater compliance with rules in areas such as foreign direct investment and international financial institutions and commercial banks. The impact assessment procedure used by OeKB to analyse projects environmental and social effects was updated to align it with new OECD rules. The goal of the assessment is to identify weaknesses in terms of impacts on the environment and on people as early as possible, exert influence towards their prevention or mitigation if feasible, and thereby help to promote sustainability awareness in the target countries. The assessment procedure itself and large export projects are published on the OeKB website. They are subject to a peer review within the OECD and are thus open to public scrutiny. 15

18 Portrait of the OeKB Group OECD Guidelines for Multinational Enterprises OeKB promotes the awareness and application of the OECD Guidelines for Multinational Enterprises. Since 2008, all guarantee holders and beneficiaries of aval endorsements in respect of foreign investment projects are therefore encouraged to become familiar with these guidelines and to observe them to the greatest possible extent in their international activities. The 2011 Update brought major advances in this code of conduct for multinational companies with its recommendations for responsible business practices (see InvestmentPolicy/Seiten/OECDGuidelinesforMultinationalEnterprises.aspx) Business in 2012 Economic situation Growth in Austrian exports eased in 2012 from the previous year: In total, Austrian exports rose by about 2% from At the same time, outward foreign direct investment by Austrian companies showed a rather subdued trend. With this backdrop, the number of guarantee and aval holders serviced in the export guarantees scheme at the end of the year under review was about 1,200. OeKB is also in ongoing contact with prospective exporters and has a continually growing number of direct contacts with potential outbound foreign direct investors: Increasingly, end-buyers do not decide on their suppliers until after they have found attractive financing options for their projects. The advisory activity of the customer service representatives is supplemented by a wide range of brochures and other written information about the existing export promotion facilities and improvements or additions to these products. Utilisation of the guarantee exposure limit at 31 December EUR million Limit on aggregate guarantee exposure 50,000 50,000 45,000 44,446 40,650 38,508 37,058 34,836 New guarantee contracts issued 12,063 5,160 3,869 4, ,

19 Portrait of the OeKB Group Aggregate exposure limit of EUR 50 billion, with utilisation of EUR 34.8 billion With an exposure limit of EUR 50.0 billion (the limit on the aggregate liability) under the Export Guarantees Act, actual exposure at 31 December 2012 from outstanding guarantees amounted to EUR 34.8 billion, representing 69.7% utilisation. This compared with actual exposure of EUR 37.1 billion or 74.1% one year earlier. Utilisation thus eased by EUR 2.2 billion or 6.0%. The outstanding guarantee with the longest term covers a credit period ending in the year EUR 5.1 billion of new guarantees issued In the year under review, 972 new guarantees (guarantees, aval endorsements, and guarantees issued for OeEB) with a total value of EUR 5.1 billion were issued by the Republic of Austria under the Export Guarantees Act, with the credit management aspects and administrative processing provided by OeKB as its agent (2011: 1,000 new guarantees with a total value of EUR 4.7 billion). Claim payments and premium income Premium and interest income in 2012 totalled EUR 229 million. Gross claims paid (including claim payments under guarantees for debt rescheduling agreements) by the guarantor, the Republic of Austria, amounted to EUR 154 million, while recoveries were EUR 65 million. EUR 99 million was charged off by the Republic of Austria in 2012 as unrecoverable or under debt foregiveness. In setting the premium levels charged to customers for the guarantees, the Guarantor does not seek to realise a profit but to cover the cost of the guarantee system in the long term. In 2012 the positive trend of the past several years continued and guarantee programme income exceeded net costs by EUR 136 million. The amounts at 31 December 2012 stated above included debt rescheduling guarantees for 14 countries in a total amount of EUR 518 million (2011: EUR 606 million). EUR million (except lines beginning with Number of ) Guarantees under the Export Guarantees Act Aggregate guarantee exposure limit, at 31 December Utilisation of the guarantee exposure limit at 31 December Number of holders of outstanding guarantees (rounded) Number of guarantees in place Number of new guarantee contracts issued New guarantee contracts issued New conditional commitments (i.e., new guarantee offers for prospective underlying transactions) Premium and interest income 1 Gross claims paid by the Guarantor Recoveries on claims paid Amounts written off as unrecoverable (all of which have Maastricht relevance) Guarantor s recoverable claims, at 31 December 2 Net interest rate relief 50,000 38,508 1,300 3, ,869 1, ,000 37,058 1,300 3,786 1,000 4,658 2, ,000 34,836 1,200 3, ,135 2, Beginning in 2012, this item is stated net of deferred up-front premiums. 2 Beginning in 2012, this item is stated after foreign currency translation effects. 17

20 Portrait of the OeKB Group 1.2 OeKB Export Financing Scheme Key programme features and background International environment Known as the Export Financing Scheme, this programme serves to provide funding facilities to banks which in turn extend credit to Austrian exporters or investors and foreign importers (supplier and buyer credits for exports, financing for Austrian companies investments in foreign countries, and export acceptance credits). The Export Financing Scheme is also used for funding the direct lending by OeKB for the same purposes. The 1995 Amendment to the Export Guarantees Act allows guarantees to be issued for untied credits. Requirements The credits to banks require a guarantee for the transaction or right underlying the financing. The guarantee must conform to the provisions of the Export Financing Guarantees Act and be of one of the following types: A guarantee by the Republic of Austria under the Export Guarantees Act A guarantee by a credit insurer complying with the same Act A guarantee by Austria Wirtschaftsservice Gesellschaft mit beschränkter Haftung A guarantee by an international organisation. In addition, both the rights arising from the guarantees and the underlying receivables (export or other receivables) typically must be assigned as security. The extension of funding to banks through OeKB s Export Financing Scheme represents an open system available to domestic and foreign credit institutions. They must, however, meet the creditworthiness criteria of OeKB, fulfil the legal requirements regarding the transactions to be financed and satisfy OeKB s standard conditions for uniform financing procedures. The latter applies particularly to collateral management. Lending under the Export Financing Scheme is conducted in adherence to the applicable rules and guidelines established by international agreements of the OECD, the EU and the Berne Union. Financing on commercial terms The financing for banks supplier and buyer credits and investment loans is extended at variable and fixed interest rates. The floating rate is determined by OeKB for periods of three months at a time and is based on OeKB s own average cost of funding itself in the market. In the case of non-revolving loans, the floating-rate portion of the credit is repaid first; the fixed interest rate is applied to the longer-term portion of the facility (base financing). OeKB also offers pure floating-rate financing of supplier and buyer credits and investments, based on 3-month EURIBOR. The financing to banks for the extension of shortterm export credit lines on the basis of governmentendorsed avals is provided at a special floating interest rate. Export financing can also be provided in foreign currency at variable or fixed rates. Supplementing this, fixed-interest foreign currency financing for supplier credits is offered on a CIRR basis. The current interest rates of the Export Financing Scheme can be viewed on the Internet at 18

21 Portrait of the OeKB Group Concessional financing for certain projects Subject to the relevant provisions of the OECD Arrangement, specific projects may be financed on concessional terms upon approval by the export financing committee. The eligibility criteria for soft loans and the financing terms can be found online at Developments in products and services in 2012/2013 Access to short-term export financing from the OeKB Group was simplified: Revolving credit facilities for exports of small and medium companies are provided by Österreichischer Exportfonds GmbH, while large exporters are serviced by OeKB AG. The availability (subject to certain conditions) of financing for supplier and buyer credits in foreign currency at fixed rates on a CIRR basis was extended to the end of In the soft loan project preparatory programme, two new applications were received in One study was completed and, on its basis, three soft loan projects related to e-government were evaluated to date and were positively rated by the committee responsible Business in 2012 The figures in the next table show the utilisation of OeKB s Export Financing Scheme by the export sector via banks. At the end of 2012, the programme was in use by 69 banks and served 1,141 exporters through about 3,200 export credits. In the Export Financing Scheme at the end of the year, there were outstanding total lending commitments (including conditional commitments) of EUR 28,054 million (2011: EUR 32,244 million). Of this total, EUR 24,827 million or 88.5% was drawn (2011: EUR 28,362 million or 88.0%). The net change from one year earlier was thus a reduction of EUR 4,190 million or 13.0% in total commitments (including conditional commitments) and a reduction of EUR 3,535 million or 12.5% in disbursements. The outstanding loan agreement with the longest term expires in the year For 2013, depending on the business trend, credit disbursements in the Export Financing Scheme can be expected to decrease by approximately EUR 1.95 billion. Since the OeKB-operated Export Financing Scheme came into existence 53 years ago, a total of EUR billion of credit has been disbursed to the Austrian export industry and banking sector, and credit repayments of EUR billion have been received. The total of all funds used under the Export Financing Scheme in 2012 was EUR 65.8 billion. OeKB as an export credit agency is thus a major issuer of debt in international financial markets. 19

22 Portrait of the OeKB Group EUR million (except lines beginning with Number of ) OeKB Export Financing Scheme Number of banks/exporters involved Number of export financing contracts outstanding (rounded) Total lending commitments (i.e., financing contracts and conditional commitments) outstanding at 31 December Financing contracts outstanding at 31 December Of which disbursements outstanding New commitments issued New conditional lending commitments issued Loan funds disbursed Repayments received Increase/(decrease) in net loans outstanding Total funds used under the Export Financing Scheme Limit on aggregate guarantee exposure under Export Financing Guarantees Act Utilisation of the guarantee exposure limit at 31 December Total new guarantees issued 68/1,300 3,600 33,246 32,943 29,429 4, ,924 4,896 (1,972) 26,787 45,000 31,658 6,294 69/1,300 3,400 32,244 31,868 28,362 5, ,026 6,093 (1,067) 54,507 45,000 33,695 12,504 69/1,141 3,200 28,054 27,703 24,827 7, ,846 10,381 (3,535) 65,825 45,000 30,015 10, OeKB as an issuer on capital markets The bonds of OeKB are unconditionally and explicitly guaranteed by the Republic of Austria and carry ratings of Aaa/AA+ from Moody s and Standard & Poor s, with short-term debt respectively rated A1+ and P1. OeKB funds itself on international and domestic financial markets through the issue of global bonds, liquid benchmark transactions, private placements, structured medium-term notes and short-term money market instruments. In 2012, long-term transactions totalling EUR 3.8 billion were placed in Austria and abroad. Highlights included a USD global bond as well as CHF 1.45 billion of CHF bonds. OeKB also issued USD 1.85 billion in private placements. Redemption profile at 31 December 2012 > 10 years 6% 7 to 10 years 4% 4 to 6 years 21% Money market instruments 21% 1 year 16% 2 to 3 years 32% 20

23 Portrait of the OeKB Group Issuance programmes EUR 25 billion, at 31 December 2012 OeKB uses derivatives primarily swaps to improve its funding levels and for portfolio hedging and management. Swiss franc issues 17.5% Kangaroo issues 1.0% Samurai issues 2.4% Medium term notes MTNs/ Euroshelf 8.9% EUR Benchmark/ Euroshelf 18.7% Euro commercial paper ECP 14.0% US commercial paper USCP 2.1% Deposit market 2.7% Other 5.3% USD Global issues 27.4% Regular road shows are conducted to diversify and expand the investor base. Aggregate exposure limit of EUR 45 billion and utilisation of EUR 30 billion In 2012 the Republic of Austria gave guarantees under the Export Financing Guarantees Act for a total principal amount of EUR 10.1 billion of funds borrowed by OeKB. At the reporting date of 31 December 2012, EUR 30.0 billion of the EUR 45.0 billion aggregate exposure limit was utilised by guarantees covering principal amounts and exchange rate risks, compared with utilisation of EUR 33.7 billion at the end of the previous year. Selected transactions of Oesterreichische Kontrollbank AG in 2012 Oesterreichische Kontrollbank Aktiengesellschaft Oesterreichische Kontrollbank Aktiengesellschaft CHF 650,000,000 3-months CHF-Libor plus 0.35% Floating Rate Notes due 21 February 2014 USD 1,500,000, % Guaranteed Global Notes due 6 July 2015 unconditionally and irrevocably guaranteed by the Republic of Austria unconditionally and irrevocably guaranteed by the Republic of Austria UBS Investment Bank BNP Paribas Deutsche Bank AG, London Branch Goldman Sachs International J.P. Morgan Securities Ltd. 21

24 Portrait of the OeKB Group 1.4 Österreichischer Exportfonds GmbH Österreichischer Exportfonds GmbH ( Exportfonds ) provides export financing for small- and medium-sized companies via their own bank. Disbursed loans outstanding at 31 December 2012 amounted to EUR 1.39 billion, or about 26% more than one year earlier. Currently Exportfonds serves approximately 1,780 exporters, with an average outstanding loan balance of EUR 616,000. In 2012, the entity approved loans to 332 new customers. Since the beginning of 2005, Wirtschaftskammer Österreich (the Austrian chamber of commerce) holds 30% of the share capital of Exportfonds; the other 70% has been held by OeKB AG since The company is managed by Carl de Colle and Elisabeth Strassmair. Excluding the management, Exportfonds had 14 employees as of 31 December More on Exportfonds and its services: Oesterreichische Entwicklungsbank AG Austria s development bank Oesterreichische Entwicklungsbank AG (OeEB) is a development bank. Having a public mandate, OeEB focuses on long-term financing of private sector projects in developing countries and emerging markets. In scrutinising projects, particular emphasis is placed not just on economic viability but on development effectiveness. Support is not explicitly tied to Austrian investors or suppliers, although the potential of Austrian companies is to be utilised on a project-centred basis. In addition to the income that it generates itself, OeEB also annually receives just under EUR 20 million from the Austrian federal government budget for project identification, preparation, monitoring and for nonfinancial project support provided by OeEB that is to generate development benefits. Since 1 January 2012, OeEB is permitted to use this funding to invest in shares of companies and funds in developing countries and emerging markets that have development value. In these activities, OeEB acts as a trustee of the Re - public of Austria. OeEB s fourth full financial year was a successful one was marked by dynamic growth and, as a result also of intensified project acquisition activities, the year brought many requests for financing, with a number of deals signed by OeEB. To cope with the expansion of activity, OeEB hired more staff and further adjusted its internal structures. At the end of December 2012, OeEB had 25 employees (excluding the Executive Board). The total transaction volume (based on contracts signed) was approximately EUR 230 million. Profit for the year was EUR 901, After transfers to reserves, unallocated profit for the year amounted to EUR 229, OeEB has share capital of EUR 5 million, which is entirely held by OeKB. The work of the development bank s staff focuses on the immediate core activities: the identification, structuring, implementation and management of eligible projects. All support functions, such as accounting, IT, human resources administration, internal audit and asset management have (with the approval of the Financial Market Authority) been outsourced to OeKB on a paid basis. The resulting lean organisation is intended to allow OeEB to operate very cost-effectively. More on OeEB and its services: 22

25 Portrait of the OeKB Group 1.6 OeKB EH Beteiligungs- und Management AG OeKB AG holds a 51% ownership interest in OeKB EH Beteiligungs- und Management AG, a company founded in The other 49% is owned by Hamburgbased Euler Hermes Kreditversicherungs-AG. Euler Hermes is the world s largest credit insurance group. OeKB EH Beteiligungs- und Management AG was the sole owner of PRISMA Kreditversicherungs-Aktiengesellschaft and OeKB Versicherung Aktiengesellschaft. This structure of the insurance holdings serves one main objective: A very comprehensive range of credit insurance products can continue to be offered through a coordinated two-brand, two-company strategy. In 2012, a key priority for PRISMA and OeKB Versicherung lay in their preparations for the implementation of Solvency II, the new Europe-wide regulatory regime for insurance companies. The new set of rules which like its counterpart for banks, Basel II, is divided into three pillars is currently still under development. The work to get ready for the new quantitative requirements (Pillar I) was a focus of activity for the Group s credit insurance companies. The risk control process was tightened and the models for the calculation of solvency capital required were continually adapted to changing supervisory requirements. At the same time the insurers worked on creating and improving processes required in the qualitative component, that of governance and risk management (Pillar II). Pillar III deals with the reporting obligations of insurance companies and will be gradually incorporated by the credit insurers according to the development status of the regulation at European level PRISMA Kreditversicherungs-Aktiengesellschaft PRISMA primarily insures short-term trade receivables in OECD countries against the risk of customer insolvency. PRISMA supports companies in their receivables management with its specialised market knowledge of industries and countries. The customers of insurance clients are assessed for credit quality on an ongoing basis and tracked using a monitoring system. This allows most payment defaults to be avoided. Credit insurance from PRISMA provides a made-tomeasure solution for every insurance client: Large companies find that the Prisma Global policy gives them ideal protection, while smaller businesses are often best served by a Prisma Plus policy. Capital goods transactions can be insured through Prisma Invest. At PRISMA, a healthy and productive corporate culture is considered essential. The three values of helpful partnership, high transparency and strong performance are clearly apparent both in the company s external personality and, especially, in its internal relationships. The common motto behind these principles is to Get closer. To serve its customers, PRISMA gets closer to the markets, companies and creditworthiness information in all important export markets. The values and motto represent a promise of excellence that PRISMA wants clients to experience consistently in working with the company. In 2012, approximately 120 people were employed at PRISMA. In addition to its headquarters in Vienna, PRISMA has offices in Linz, Graz, Innsbruck, and Belgrade (PRISMA Risk Services Serbia). 23

26 Portrait of the OeKB Group PRISMA Kreditversicherungs-AG also holds the majority of the shares of PRISMA Risikoservice GmbH & Co KG. This subsidiary provides most of the insurance company s credit analysis, for which it draws on the information resources of the globe-spanning Euler Hermes network. This network gives Austrian clients access to information on 40 million companies in more than 50 countries. PRISMA remained the market leader in This was despite the fact that writing new business proved challenging in the year under review. Although international insolvencies are persistently high, suppliers are frequently foregoing insurance on their deliveries and making do without the early warning system provided by the credit insurer. More on PRISMA and its services: OeKB Versicherung Aktiengesellschaft In western industrialised countries and domestically in Austria, but especially also in emerging economies, OeKB Versicherung AG provides credit insurance for sales of goods and services. Its defining competencies are complete insurance solutions and special expertise in difficult markets. The company s slogan can be translated as Simply Superior Guarantees. A total of 40 people (excluding the Executive Board) work at the headquarters in Vienna and the office in Linz. In 2012, OeKB Versicherung was not able to repeat the prior year s positive trend, and revenue thus declined. The premium income of EUR 22.0 million was 10.7% below the prior year s. The reasons were the flat export sales of the company s customers, and premium reductions. Nonetheless, thanks to lower claims and costs, OeKB Versicherung had a good year overall with a clearly positive bottom line. Product portfolio For each customer s individual requirements, OeKB Versicherung tailors a complete package of receivables insurance. Without extra charge, clients are covered not just for commercial risks such as payment delay or insolvency, but also for political risks. Political risks include, for instance, receivables with public sector institutions, transfer risk (this risk is growing with the uncertain economic situation in some countries), and defaults as a result of political unrest. The most comprehensive product, the Global Policy known as P6, covers all transactions of the client with all customers worldwide. This automatically includes a six-month limit guarantee for approved customers. Alternatively, Single-Buyer cover (P5) insures all sales to a single customer. For individual transactions, such as the first sale to a new customer, a Single-Transaction policy is the suitable choice. The economic trend in the traditional markets of Austrian exporters is showing a pattern of volatility. Export firms are therefore increasingly targeting emerging markets, where economies are growing more consistently. However, these markets too are associated with considerable risks. This makes comprehensive coverage on the basis of detailed risk analysis highly advisable. With its special expertise in difficult countries, OeKB Versicherung will continue to back its clients sales into new export markets in More on OeKB Versicherung AG and its services: 24

27 Portrait of the OeKB Group 2 Capital Market Services With its broad offering of capital market services, OeKB is a hub for numerous processes required in the financial markets before and after the purchase or sale of securities. For decades now, these services have benefited financial services providers, issuers, investors and the Republic of Austria. OeKB continually updates and upgrades its capital market logistics services. The financial market actors are thus always supported to the latest technical and legal standards. 2.1 Capital market From its very beginnings, OeKB has contributed in many ways to the growth and increasing sophistication of the Austrian securities marketplace, playing a crucial role in the establishment and progressive development of the domestic capital market, especially for bonds. This has always been done in the service of the capital market participants, while acting in agreement with the Vienna Stock Exchange and in coordination with the Federal Ministry of Finance, the Austrian Financial Market Authority, and Oesterreichische Nationalbank (the Austrian central bank) Issuer Services Issuer Information Center OeKB operates a system for the central storage of regulated issuer information, the Issuer Information Center, for issuers whose securities are listed on a regulated market. The core functions of the Issuer Information Center include the electronic receipt, storage, and provision of access to regulated information. As well, at the issuer s request, the Issuer Information Center passes regulated and voluntary information on to specified recipients on an automated basis (for instance, the Vienna Stock Exchange and the Austrian Financial Market Authority). In 2012, a total of 136 issuers used the Portal and sent about 3,200 notifications. Issuer Information Center ( is a centralised Internet platform for required and voluntary disclosures by issuers to investors in Austria and other countries. It is accessible free of charge to the public and to market participants. AGM Services OeKB is a provider of all the processes involved in the preparation and execution of annual general meetings. AGMs of any size for companies in all industries are conducted successfully and smoothly. In AGM registrations, OeKB aims to raise the bar with high standards of data security and integrity. On the day of the general meeting itself, OeKB, working in partnership with the worldwide leader in AGM services, offers straight through processing of the data from the registration process, attendance check, advanced vote counting technology, state-ofthe-art voting methods and stage communications and a backoffice online chat facility with database management. All features and components of the service are scaleable and modular, and are tailored to the size and requirements of the particular AGM. For issuers, banks, proxies and other capital market participants involved in AGM processes, OeKB's AGM Services deliver infrastructure solutions that are efficient, customised and future-proof. 25

28 Portrait of the OeKB Group Principal paying agent As a principal paying agent, OeKB was responsible for 240 classes of securities of Austrian issuers in OeKB acts in this capacity for the payment of principal and interest on domestic bond issues of the Republic of Austria. It also handled the redemptions of 37 other bond issues that had already matured. MERCUR OeKB has the mandate from the Federal Ministry of Justice for managing and publishing MERCUR, a gazette for information under the Act on the Cancellation of Lost or Stolen Securities ( Kraftloserklärungsgesetz ). In 2012 this involved the management of 300 securities classes Organisation and administration of domestic bond issues Austrian federal government bonds issued in 2012 Nominal value in EUR thousand 3.800% Bundesanleihe /1 2,000,000 First reopening 440, % Bundesanleihe /2 3,000,000 First reopening 1,100,000 Second reopening 605,000 Third reopening 550,000 Fourth reopening 660,000 Fifth reopening 714,658 Sixth reopening 550, % Bundesanleihe /3 3,000,000 First reopening 660,000 Second reopening 550,976 Third reopening 702,945 Fourth reopening 550,000 OeKB is the agent for the issuance of bonds of the Republic of Austria at auction. The bond auctions are conducted through ADAS (Austrian Direct Auction System), the automated electronic auction system developed by OeKB. For 2012 the Austrian Federal Financing Agency had indicated its financing requirement as EUR 27 billion to EUR 30 billion, an increase from the year before. Nine auctions with a combined issuance of EUR billion were held. Additionally, a total of EUR 10.0 billion was issued through syndicates in January and June. For 2013 the Federal Financing Agency estimates the financing requirement at EUR 27 billion to EUR 30 billion. As in 2012, monthly auctions are scheduled for % Bundesanleihe /4 2,000,000 First reopening 773, % Bundesanleihe /1 Fifth reopening 741, % Bundesanleihe /1 Sixth reopening 715,000 Seventh reopening 660, % Bundesanleihe /2 Third reopening 550, % Bundesanleihe /2 Sixth reopening 728,725 26

29 Portrait of the OeKB Group Notification office under the Capital Markets Act Legal information system In 1992, under the Capital Markets Act, OeKB became Austria s official notification office. Prospectus repository The notification office acts as the filing destination and database for prospectuses prepared in compliance with the Capital Markets Act, the Investment Fund Act and Real Estate Investment Fund Act; it also maintains a calendar (required by the Capital Markets Act) of planned new issues of securities and investments. The related reports received are published daily on the Internet without stating the names of prospective issuers. In 2012 the notification office processed about one million reports for the new-issue calendar. The repository database currently contains approximately 40,500 prospectuses (including prospectus supplements/amendments) filed under the Capital Markets Act and fund documents filed under Investment Fund Act and Real Estate Investment Fund Act. When the Capital Markets Act entered into force, the Federal Ministry of Finance and OeKB (in its role as the notification office) set up a legal information system to facilitate the application of the Act. Legal opinions on stock exchange and capital markets law obtained from the legal information system continue to be forwarded by the notification office to interested parties, provided that the Ministry of Finance published them in abstract form. The notification office also answers inquiries regarding compliance with the formal disclosure requirements under the Capital Markets Act, Investment Funds Act and Real Estate Investment Funds Act. It supplies copies of the prospectuses filed and informs the Federal Ministry of Finance, the Financial Market Authority and the Austrian central bank of trends observed in the capital market. As of 1 September 2011, with the coming into effect of the Investment Fund Act of 2011, the functions of the notification office were adjusted in line with the new requirements for the electronic filing and storage of fund prospectuses Financial Data Services As part of its key functions in the Austrian capital market, OeKB offers comprehensive financial data services. In addition to master and transaction data on domestic and foreign securities, OeKB calculates and publishes data for domestic and foreign funds, fixed income securities and investment performance results of pension funds. ISIN Services As the National Numbering Agency (NNA), OeKB on request assigns an International Securities Identification Number (ISIN) to a financial instrument. The ISIN allows each financial instrument to be uniquely identified worldwide, something that is of fundamental importance to all capital market participants. The ISIN consists of the country prefix AT, a nine-character core of digits and letters that can be chosen by the issuer, and a check digit. The ISINs are distributed by OeKB in accordance with ISO standard 6166 and are available in the ISIN directory at At year-end the ISIN services were being used by 1,773 issuers. In 2012 OeKB issued 14,885 ISINs, of which 8,661 were for derivatives traded on the Vienna exchange of the CEE Stock Exchange Group (CEESEG). A total of 26,683 active ISINs were searchable in the ISIN directory at the end of

30 Portrait of the OeKB Group The new Internet application, ISIN Services, which allows ISINs to be requested online, has been well-received by ISIN applicants. Automated requests can be placed through an XML interface. Almost all applicants take advantage of the efficiency of this channel. Securities master data and transaction data Convenient search functions Customisable analysis/reports, at data field level Charting tool Download options for all analyses and historical data OeKB maintains databases for Austrian and international securities and other investment vehicles. The data is entered by OeKB after careful research, and its up-to-dateness and accuracy are verified by a standardised quality assurance process. Four hundred and fifty data fields specify every Austrian security. Seven hundred fields are available for foreign issues. Price and rate data For valuation purposes, OeKB provides the following content through data feeds: Prices of securities traded on the Vienna Stock Exchange (CEESEG) Prices of unlisted Austrian securities Prices of international securities Reference exchange rates of the ECB. Profitweb Profitweb is a long-established Internet platform for securities data, offering the following benefits: Master and transaction data on 1,605,156 active domestic and foreign financial instruments Price and transaction data, classification data, performance and risk indicators, volumes and portfolios of all Austrian funds and all foreign funds registered for sale in Austria Publication of capital yield tax data under the Fund Reporting Regulation Portfolio Data This service enables fund companies to exchange detailed fund data (particularly data on full holdings) on an automated basis in the international, standard FundsXML format and thus efficiently make the data available to business partners, data vendors, investors and regulators. Fund Processing Passport Through the Fund Processing Standardisation Group, the European Fund and Asset Management Association (EFAMA) carefully analysed the efficiency of back office processes. Based on the insights gained, the Fund Processing Passport (FPP) was developed. This document is harmonised across Europe and contains all essential operational information about a given fund. Under contract to the Association of Austrian Investment Companies (VÖIG), OeKB collects and distributes the Fund Processing Passport data for the Austrian fund companies. This service for investment companies is available via and is also accessible through EFAMA s central FPP Portal, in which OeKB acts as one of the five European Primary Providers. 28

31 Portrait of the OeKB Group At its website EFAMA offers centralised access to all existing European FPPs. With this FPP Portal, EFAMA intends to move a step closer to its goal of creating an efficient, single European market for investment funds. Financial statement data transfer system Bilanz Transfer, a system developed by OeKB at the initiative of UniCredit Bank Austria and Erste Bank, enables accountants acting on behalf of their clients to transfer the data from balance sheets, income statements, and income and expenditure accounts to banks in standardised XML format. The banks in turn use the system to provide analytical feedback (reports, ratios and ratings). The structure of the data and the electronic transmission technology are based on the data transfer specifications of the Company Register. In 2012 the list grew to include both additional banks and more than 150 accountants as new users of the service. The constantly updated list of all participating banks, along with other information, is found at OeKB publishes these tax amounts for currently 27,000 ISINs on The information is also available in the form of electronic files. In 2012 the reporting of capital yield tax amounts was reorganised to reflect new legislation. Changes included the provision of the required new technical infrastructure and also modifications to the legal and administrative basis for the reporting process. These changes were made in coordination with all parties involved in the reporting process, such as the fund companies themselves, their administrators and tax representatives. Notification of fund actions Under section 133 of the Investment Fund Act, fund companies must inform investors of certain fund actions or events. To enable companies to comply rapidly with their notification obligations, OeKB developed a solution for the Austrian fund industry that makes the following functions available: Transfer of information and documents on fund actions: The data is transferred via the Fund Upload Client, which is also used for filing tax information. Tax data for investment funds In accordance with the Investment Fund Act, OeKB as the notification office under the Capital Markets Act has responsibility for the centralised collection and publication of the data on capital yield tax amounts (the tax is known in Austria as Kapitalertragsteuer, or KESt ) and EU withholding tax amounts for funds. Since the coming into effect of the Fund Reporting Regulation on 1 April 2012, both domestic and foreign fund companies whose funds are classified as capital yield tax reporting funds report their tax data to OeKB. They file ad-hoc reports on distributions and, once per year, report full-year data on income deemed equivalent to distributions. To this end, OeKB provides fund companies with an efficient infrastructure, including the necessary electronic interfaces for collection of the data. Display in Issuer Information Center: The information is made available through the website, which anyone may access free of charge. Investors and others can opt to be notified automatically by when new information is posted on the site. Forwarding by SWIFT/ The notifications of fund actions are distributed via SWIFT (MT564) and/or specifically to custodians and CSD.A account holders. 29

32 Portrait of the OeKB Group OeKB Sustainability Fund Index (OeSFX) A growing number of investors are putting their money into companies whose conduct is particularly ethical in terms of environmental and social responsibility. To achieve the greatest possible diversification of risk, a promising strategy for these investors is to buy environmentally or socially responsible funds. This is often referred to collectively as socially responsible investing (SRI), ethical investing or sustainable investing. With the OeKB Sustainability Fund Index developed by OeKB, investors can compare the performance of such funds to that of the entire universe of sustainable equity funds registered for sale in Austria. The index is another way in which OeKB practices its lasting commitment to sustainable business. Details on the OeSFX and current prices are available at CentralSecuritiesDepository.Austria and processing of off-exchange securities transactions CentralSecuritiesDepository.Austria A book entry transfer of securities at CSD.Austria eliminates the need to move physical securities. Instructions for securities transfers are generally placed electronically through OeKB s DirectSettlement.Advanced (DS.A) system. Through collective custody, banks that maintain accounts at CSD.Austria gain the benefits of heightened efficiency and security in the safekeeping and administration of securities. What is more, they save time and costs in their own in-house custody activities. At 31 December 2012, CSD.Austria held 22,382 classes of securities for 157 depositors 1 (prior year: 22,322 and 162, respectively). Assets under custody at 31 December, EUR billion Securities that are quoted in percent of par value Assets under custody at 31 December, units in million Securities that are quoted per unit ,829 9,742 9,802 9,774 10, Subject to approval by CSD.Austria, the following types of institutions may hold custody accounts: credit institutions, registered securities firms, members of a domestic securities exchange, official brokers of the Vienna Stock Exchange, foreign central securities depositories, and securities clearing houses. CSD.Austria may also admit other legal or natural persons and companies as depositors. 30

33 Portrait of the OeKB Group The transactions settled within the DS.A system are classified into three types as follows: Transactions between two CSD.Austria account holders ( Internal transactions) Transactions between a CSD.Austria account holder and a counterparty having an account at another custodian of CSD.Austria, in a security held at that custodian ( External transactions) The custody account balances shown in these charts underline the important role which CSD.Austria, and hence the non-physical transfer of securities, have come to play in Austria. Approximately 90% of the nominal value of Austrian debt securities, more than 90% of the nominal amount of all listed Austrian equity securities and over 70% of Austrian certificates (the popular structured products known as Zertifikate ) are under custody with and serviced by CSD.Austria. Transactions from the Custody Clearing Link ( CCL transactions). Number of transactions settled by CSD.Austria in thousand 1, , , , CCL External Internal Settlement finality act A decision of Oesterreichische Nationalbank on 9 December 2003 recognised CentralSecurities- Depository.Austria the CSD established and operated by OeKB as a system for the purposes of the Settlement Finality Act. Through the Settlement Finality Act, Directive 98/26/EC of the European Parliament and Council of 19 May 1998 (the Settlement Finality Directive) was transposed into national law in Austria. The purpose of the Settlement Finality Act is to improve the protection of participants in systems defined under the Act in the event of insolvency of another participant. When this occurs, the status of CSD.Austria as a system under the Settlement Finality Act places the customers of CSD.Austria in the best possible legal position. CCL CCL (Custody with Clearing Link), a product designed to complement CSD.Austria, allows the Austrian CSD s customers to reap the benefits of direct 31

34 Portrait of the OeKB Group membership in the Frankfurt Stock Exchange and all seven German regional exchanges without having to build and maintain their own clearing and settlement infrastructure. The securities bought in Germany are credited to the accounts within CSD.Austria (providing a single point of entry), where they are administered. OeKB was the only central securities depository in Europe to offer such a service. As of the end of 2012, five Austrian banks settled their securities trades on the German exchanges via OeKB s CCL product. On these other exchanges, OeKB complements its settlement service by also acting as an execution broker with electronic order routing. To do so, OeKB became a member of all trading floor exchanges in Germany. The orders are sent electronically to OeKB and automatically routed to the appropriate stock exchange for execution. Through efficient risk management and its own dunning system, OeKB optimises the clearing and settlement of securities trades in Germany and the fulfilment of its customers payment and delivery obligations. In the year under review, OeKB upgraded its technological infrastructure and now uses a certified provider of order routing systems. This change did not entail any monetary or other costs for customers. European developments In 2012 the European Commission drew up a proposed Regulation for the improvement of securities settlement in the European Union and on central securities depositories. It is expected that the Regulation will take effect in 2013 and will have to be implemented after a likely transition period of two years. The Regulation will also affect the business activities of CSD.A. At the end of June 2012, OeKB signed the framework agreement on the use of the securities settlement platform, Target 2 Securities (T2S), to be developed by the Eurosystem. The migration of CSD.A s IT systems to the new platform is planned for November CCP Austria Abwicklungsstelle für Börsengeschäfte GmbH CCP.A acts as the clearing agent for the Vienna Stock Exchange (VSE) and is the central counterparty for all trades concluded on the exchange. In this key role, CCP.A makes a major contribution to the stability of the financial market. For the clearing and settlement of stock exchange transactions in the cash market, CCP.A uses the automated SICS system (Settlement Information and Clearing System) developed and operated by OeKB. It uses the CSD.Austria accounts of the Vienna Stock Exchange members to enter the net securities balances. Exchange transactions in the derivatives market are cleared via the EUREX system operated by the Vienna Stock Exchange. More than 9,200 different products are currently processed through these systems. The following table shows the transaction volume contracted and cleared in 2012 by CCP.A as the central counterparty. 32

35 Portrait of the OeKB Group Cash market Stock exchange turnover Number of orders executed 5,936,050 6,319,041 4,511,593 Turnover in EUR million (double counted) 76,556 62,572 36,947 Cleared net positions Total number 305, , ,729 Netting factor Derivatives market Exchange turnover Number of contracts 838, , ,422 Volume of contracts in EUR million 16, , , Volume of exchange-traded options in EUR million Netting factor: Number of trades divided by number of net positions. As of the end of 2012, CCP.A served 68 Austrian and international members, all of them also members of the Vienna Stock Exchange. To ensure the fulfilment of transactions under constantly changing market conditions, CCP.A employs a multi-tiered collateral system, which was approved also by the FMA. The risks are recalculated several times per day and every clearing parti cipant deposits security in a common fund (the clearing fund) according to its particular level of risk or the risk of its Non Clearing Members (NCM). At the end of 2012 the CCP.A held collateral and other security totalling about EUR 540 million in the form of a common fund for the cash and derivatives market and in the form of individual security of clearing members. In August 2012 the European Market Infrastructure Regulation (EMIR) took effect. In connection with this, the European Securities Market Authority (ESMA) and the European Banking Authority (EBA) at the end of September 2012 submitted the regulatory technical standards (RTS) to the European Commission, which approved them at the end of After passage by the EU Parliament and the Council, the standards are expected to enter into force in the first quarter of They represent the requirements which central counterparties recognised in the EU will have to meet in future. Next to changes in processes, the standards will centre on changes in risk management and on capital requirements for CCPs. 33

36 Portrait of the OeKB Group 3 Energy Market Services The liberalised energy market too is a beneficiary of the expertise accumulated by OeKB over decades. As part of the deregulation of the Austrian energy markets which during 2012 culminated in the implementation of the Third Energy Package in the electricity and gas market, OeKB performs the financial clearing, risk management and credit analysis on behalf of the independent clearing agencies created for the determination, clearing and settlement of balancing energy (APCS Power Clearing and Settlement AG and AGCS Gas Clearing and Settlement AG) and on behalf of Energy Exchange Austria (EXAA) and OeMAG, the clearing and settlement agent for green electricity. In addition, the OeKB Group provides a resource-saving outsourcing solution to Austrian companies for the trading of carbon emission allowances (EUAs and CERs, also referred to in Austria as CO 2 emission certificates). Services to the balancing energy market for power and gas In the liberalised Austrian energy market, APCS Power Clearing and Settlement AG (APCS) was licenced in 2001 as the balancing energy clearing agent for electricity, and AGCS Gas Clearing and Settlement AG (AGCS) was licenced in 2002 as the corresponding agent for gas. As clearing agencies, the main responsibility of APCS and AGCS is to provide a competitive balancing energy market for electricity and gas. More on APCS and AGCS and their services: and Services to the clearing and settlement agent for green electricity OeMAG Abwicklungsstelle für Ökostrom AG was set up in July 2006 under the amendment of Austria s Green Electricity Act, which introduced a uniform Austria-wide approach to the subsidisation of electricity from environmentally friendly sources. OeMAG handles the clearing and settlement of the green electricity subsidies and is the appointed sole clearing and settlement agency for subsidised green power in Austria. More on OeMAG and its services: Services as a clearing bank to European Commodity Clearing AG (ECC) Since 2012 OeKB provides services as a clearing bank to the spot energy market. The clearing bank function consists of providing accounts, payment processing and collateral management for exchange members. Carbon emission trading services The OeKB Group provides an easy solution for the cost-efficient and convenient buying and selling of spot carbon dioxide allowances over-the-counter. Under the European Union Emission Trading Scheme (EU ETS), which governs carbon trading in the EU, OeKB supports purchases and sales of allowances. Services for Energy Exchange Austria In 2002, Energy Exchange Austria (EXAA) used the full liberalisation of the Austrian electricity market to open for trading in the electricity spot market. In addition to the usual responsibilities of an exchange, EXAA acts as the central counterparty for all trades. More on EXAA and its services: 34

37 Portrait of the OeKB Group 4 Information Services and IT Services To identify market opportunities and risks at the right time, companies need market intelligence they can count on when making decisions. The team at Information Services uses its well-rounded expertise and proven network to give internationally operating companies and financial institutions an edge through sophisticated information on developments in business and finance. Safe and reliable software solutions that enhance collaboration within and between companies are provided by OeKB Business Services GmbH, a Group company. 4.1 Information Services The crisis in global finance and business has created unprecedented challenges for many market participants. Against this backdrop, 2012 even more than earlier years brought home the great importance of reliable high-quality data: Wise strategic business decisions that can stand the test of time require dependable knowledge both of market opportunities and of the associated risks. At OeKB, the department tasked with making such knowledge available, through macro- and microeconomic analytical reports, is Bank and Business Information (BBI). It services companies in Austria and abroad, as well as all businesses of the OeKB Group. OeKB CEE Business Climate Index The Thomson Reuters & OeKB CEE Business Climate Index was developed by BBI to support companies with international operations, as well as analysts and other market observers, in their Central and Eastern European activities. Leading indicators for a total of 21 countries in Central, Eastern and Southeastern Europe give early signals of opportunities in the region and enable users to keep risks firmly in sight. Amid the trying and geographically very heterogeneous economic situation in the region, the Index again proved its worth in 2012 as an effective bellwether, Economic situation, business climate, investment; CEE overall net change, in %-points Q1 Q3 Q4 Q1 Q2 Q3 Q Q1 Q2 Q3 Q Q1 Q2 Q3 Q Q1 Q2 Q3 Q Q1 Q2 Q3 Q Economic situation Business climate Investment Source: OeKB Information Services OeKB CEE Business Climate Index 35

38 Portrait of the OeKB Group providing a highly nuanced, real-world picture of how global companies in different sectors view the situation and outlook for the CEE region as a whole and its individual countries. The Business Climate Index for Central and Eastern Europe is marketed worldwide through a successful, established partnership with Thomson Reuters. Additionally, in 2012 numerous companies made use of the leading indicators calculated quarterly by OeKB for their strategic decisions in the region. Information Broking/Economic Research The Information Broking service, targeted mainly to business enterprises, financial services providers in Austria and other countries, and scientific and research institutions, continued to be expanded in 2012, as demand for professional, made-to-measure research is progressively rising. Working to customers exact wishes, the specialists at BBI prepare studies, analyses and concise reports on specific aspects of global financial and economic developments. Last year the customer requests focused particularly on analysis of market structure and potential, sector reports, comparative evaluations of business locations, peer group reviews and company profiles: In 2012, leading companies relied on analysis from BBI especially in their globalisation strategies and the further growing of their operating business. Strategic partnerships with international data vendors were further broadened and joint projects were successfully operationalised. BBI thus continued to assert its position as a provider of high-quality market information. Online Press Review In the form of the Online Press Review (which represents a longstanding successful collaboration with APA Austria Presse Agentur), BBI provides companies in various industries with daily, structured information on current affairs: BBI s media analysis team, using customer-specified profiles, searches the national and international press and selects all pertinent news about financial and business developments, relevant markets and companies. This customised news roundup is available to clients daily from 9 am on the Internet, is stored in the company s own media archive and can be retrieved at any time. At the reporting date, BBI s Online Press Review had about 2,500 subscribers in Austria and abroad, for whom it is highly important in the global volatile environment to remain authoritatively informed on developments in the various national and international markets. austrian business monitor With its austrian business monitor, BBI provides comprehensive daily news on industries and industry players: Selected press reports from a wide range of media give a rapid overview of trends in all sectors of the Austrian economy. The publication also focuses on reports about significant international and all Austrian firms, from small family businesses all the way to multinational groups. Working together with APA, which contributes its technical expertise, the daily news update is stored in a company and industry database. This product too, which focuses primarily on business trends in Austria, was very well received in the year under review. It allows subscribers to follow not only broad trends, but also to stay consistently informed on company-specific developments at customers, suppliers and strategic allies. Information Services to the OeKB Group The information services for all business areas of the Bank have undergone extensive customisation in the year under review. It continues to be BBI s strategic goal to generate direct value-added for OeKB s operations. Moreover, BBI seeks to promote the sustained commercial success of OeKB by creating and expanding practice-oriented knowledge management structures. 36

39 Portrait of the OeKB Group 4.2 OeKB Business Services GmbH This specialist IT service provider, which is wholly owned by the Group, supports customers with professional software solutions recognised for their very high quality, security and reliability. The products are based on well-established technologies such as Java,.NET and Microsoft SharePoint. As a leading partner to Prologics IT GmbH and as a Microsoft Silver Partner, OeKB Business Services GmbH provides expert implementation, training and ongoing support for SharePoint and FireStart solutions. Its core competencies are the optimisation of business processes and the management of sensitive business data. All solutions are web-based and designed to heighten collaboration within and between companies. The latest product is the OeKB-BS >Publication- Manager. This software solution is based on familiar Office programmes and allows professional publications to be produced for print, web and mobile applications supported by automated workflow for perfect team work. More on OeKB Business Services GmbH, its products and services: 5 Sustainability at OeKB Labour The ten principles of the UN Global Compact focus on four areas of concern: labour, environmental protection, human rights and anti-corruption. OeKB signed up to the Global Compact in 2007 and is committed to its principles. The Group s sustainability efforts are guided by the Compact. In June 2012 the Fair IT project wound down after more than two years of intensive efforts with the close involvement of NGOs (Südwind in Austria, SACOM in China), the business community (with the commitment of most Austrian banks) and other stakeholders (the national UN Global Compact networks in Austria and Germany). Its activities made a contribution to fostering awareness of working conditions in manufacturing countries, even if measurable results are difficult to attribute directly. OeKB continues to support the Fair IT initiative and will remain mindful of corporate responsibility regarding supply chain management. 37

40 Portrait of the OeKB Group Environment With close attention to environmental criteria, the expansion of the top floor at the Strauchgasse address in Vienna was completed, adding 2,065 square metres of space. In the current facility management budget, costs per square metre were reduced by 8% compared with the 2010 budget through improvements and energy savings achieved in the thermal renovation of the building. In 2012 the high energy efficiency of 42 kwh/m 2 of the Gründerzeit-style building, which dates from 1850, enabled OeKB to join the GreenBuilding Programme (GBP) of the European Union. A contribution to energy efficiency in corporate travel was made by becoming an active member of the Vienna e-mobility zone and acquiring an electric vehicle for inner-city use. A carsharing agreement was completed which, combined with train travel, will support environmentally friendly business trips. Assessment of environmental and social impacts In respect of the products of its Export Services operations, OeKB has a high degree of responsibility regarding the potential impact of transactions on the environment and on society. From 1 January 2013 a revised environmental impact assessment procedure applies for the Export Services segment. It is based on the Recommendation of the Council on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence adopted by the OECD in June 2012 (known simply as the Common Approaches). The new impact assessment methodology introduces additional clarification and specifics in the environmental dimension and the greater inclusion of social aspects, including projectspecific human rights considerations. In its implementation, OeKB is advised by the Ludwig Boltzmann Institute of Human Rights. At an event for customers in late November 2012, exporters and banks joined sustainability representatives of companies to discuss the new assessment procedure and the OECD Guidelines for Multinational Enterprises, which were updated in the previous year. Anti-corruption With support from OeKB, the International Chamber of Commerce held two events in March and October in OeKB s Reitersaal hall on the subject of anti-corruption. The events, which focused particularly on China and the Balkan countries, were designed to show local actors possible ways of dealing with and taking a stand against corruption and how businesses can respond constructively and resolutely to demands for bribes. This collaborative work continues in

41 Group Financial Report Page Group management report Economic and capital markets situation and financial results 40 2 System of internal control and of risk management 48 3 Risk management 49 4 Human resources 50 OeKB Group consolidated financial statements 2012 Consolidated income statement 52 Consolidated balance sheet 53 Consolidated statement of changes in equity 54 Consolidated cash flow statement 55 Notes to the consolidated financial statements of the OeKB Group Accounting policies 56 Segmental information 63 Notes to the consolidated income statement 65 Notes to the consolidated balance sheet 69 Other information and risk report 78 Auditor s Report 96 39

42 Group management report Group management report Economic and capital markets situation and financial results Economic environment in 2012 In 2012 the growth of the world economy slowed visibly: Global economic output rose by a real 3.3%, down from an average annual growth rate of 4.5% in 2010 and Several inhibiting factors coincided in 2012: The euro crisis worsened and the eurozone slid into recession, with real gross domestic product declining by 0.4%. This affected the world economy both directly through foreign trade flows, and indirectly as more and more market participants around the world lost confidence in the effectiveness of economic policy tools. What is more, the drag on world economic growth in 2012 was not exerted only by the eurozone. In the entire OECD region, greater budget consolidation was high on government agendas last year and was pursued largely by cutting expenditures. Estimates put the growth reduction in the OECD at about 1 to 1.5 percentage points for Additionally, economic activity in the emerging markets the prime movers of the world economy slowed unexpectedly sharply last year, caused both by weaker exports and the past several years of restrictive economic policies. Along with the global economy as a whole, world trade also lost momentum significantly in the year under review. The World Trade Organization, the WTO, expects that growth in world trade fell by half, from 5% in 2011 to 2.5% in One of the reasons for this drop is the more cautious lending by banks, especially for project and trade finance worldwide. Particularly the euro area banks, which according to the World Bank accounted for 36% of worldwide trade finance in 2011, noticeably reduced their trade financing in Although non-european banks were able to make up some of the credit shortfall created in regions such as Asia by reduced financing from European banks, the global volume of trade finance in the first nine months of 2012 as reported by data vendor Dealogic slumped by 15% compared with the same period one year earlier. Likewise, the worldwide volume of guarantees provided by export credit agencies fell by 13% in the first three quarters of the year. The global economic trend in 2012 varied by region: While the eurozone slipped into recession, economic growth in the United States held up well despite drought-related crop losses and the destruction wrought by Hurricane Sandy: The OECD is estimating that real US economic output grew by 2.2%, slightly more than the rate of 1.8% reached in Similar to the eurozone, in the USA the crucial requirement for lasting future growth is the restoration of sustainable public finances. After lengthy negotiations, a budget compromise was reached in Congress as 2012 turned into 2013, just in time to avoid triggering spending cuts and tax increases totalling USD 600 billion that could have plunged the American economy into recession. Experts now project US economic growth of about 2% in In Japan the first half of 2012 was defined by reconstruction after the seismic disaster of March In the second half of the year, the softening world trade and diminishing domestic demand made themselves felt in the Japanese economy. For the full year 2012 the OECD estimates Japan s real economic growth at 1.6%. Japan s budget situation too is critical. In 2012 the budget deficit reached approximately 10% of GDP and the public debt climbed to about 214% of the country s entire economic output. Asia provided less impetus for the world economy in 2012 than in the previous year: According to the Asian Development Bank, the developing Asia region (which consists of 44 emerging markets) recorded economic growth in 2012 of 6%, down from 7.2% in With China and India leading the decline, the region s economic momentum ebbed significantly last year. A similar trend was observed in Latin America s largest economy, Brazil, which decelerated in After already relatively modest economic growth of 2.7% in 2011, GDP expansion slowed further to 1.5% in the year under review. In Europe the economic and debt crisis heated up again in 2012, leading to a GDP contraction of 0.3% in the 27- member European Union. As in the prior years, economic realities were harshest in the southern European periphery. Yet the EU s core too was not spared the consequences of the crisis: While France, for instance, was confronted with a stagnating economy in 2012, the 40

43 Group management report Real GDP growth 2012/2013 in % in selected countries and regions Estimate Forecast Euro area EU-27 United Kingdom 0.2 France 0.6 Austria 0.9 Germany OECD Brazil Japan United States World Russia 4.5 India China Sources: WIFO, European Commission, OECD United Kingdom actually went into recession. An economy that proved comparatively resilient was that of Germany, with growth just short of the 1% mark. One of the key reasons for Europe s travails was the high level of uncertainty in the business environment, which made companies quite reluctant to invest. In the southern countries this effect was exacerbated by banks reluctance to lend. However, private consumption too was subdued in 2012 the result not just of high unemployment (at 10.7% in the EU-27) but of the in some cases substantial household debt levels in the crisis countries. On the bright side, exports were a positive driving force. Notably in the first half of the year, shipments to Asia and the Americas increased more strongly than imports. Towards the end of 2012, however, new orders for exports slowed, thus significantly reducing the growth contribution derived from trade with the rest of the world. The euro area was severely affected by the debt problems in Portugal, Italy, Ireland, Greece and Spain. Besides the still precarious state of troubled euro member country Greece, it was above all the ailing Spanish banking system that attracted a spate of negative news headlines. In these five countries another expansion of the austerity programmes was therefore undertaken. In autumn 2012 the calming of financial market jitters was greatly helped by the coming into force of the European Stability Mechanism (the ESM) and the readiness of the European Central Bank to buy government bonds of stricken eurozone countries. Nonetheless, informed commentators agree that there is no way around a structural shift in the countries at the heart of the crisis. The first signs of an economic recovery in the eurozone are therefore not expected until spring 2013 at the earliest. The persistent difficulties in the euro area had ripple effects in Central and Southeastern Europe. Although in 2012 the region as a whole grew somewhat more strongly than Western Europe, there was much heterogeneity between nations. Thus, economic contractions in the year under review occurred in future EU member Croatia, in crisis-ridden Hungary and in Slovenia with its staggering banking problems. Russia, Poland and the Baltics meanwhile reported relatively solid GDP growth as these countries benefit from more stable domestic demand and/or their trade relations are not as exposed to the eurozone. For 2013, economic researchers are predicting an albeit moderate economic recovery for Central and Southern Europe (except Slovenia). Foreign direct investors in Central and Eastern Europe, by contrast, are less optimistic for the future, as demonstrated by 41

44 Group management report the OeKB CEE Business Climate Index. This indicator of business expectations fell in the fourth quarter of 2012 for the second time in succession, pointing to declining optimism about performance in the next six months. The region s high potential, however, remains unquestioned: A glance at the investment strategies shows that most direct investors are maintaining their local presence even in difficult economic times. In Austria, GDP growth in 2012 receded to 0.6%. The economy lost vigour in the second half of the year in particular, due in part to the challenging international environment. Thus, the economic frailty in important European markets like Italy, the Czech Republic and Hungary weighed on exports. The significant rise in exports to non-eu countries only partly offset the drop in intra-eu demand. On balance for 2012, the Austrian Institute of Economic Research (WIFO) predicts slender real growth of 0.8% in merchandise exports. While the investment climate in the year under review was also hurt by the level of uncertainty in Europe, private consumption again had a stabilising effect. Remarkably, inflation pressure decreased from the prior year and prices in Austria, at average inflation of 2.4%, thus were among the most stable in Europe. Conditions in the labour market as well compared favourably to the rest of the region. The Austrian unemployment rate last year by the Eurostat definition was 4.3%. In 2013 joblessness is expected to rise moderately, not least because of the somewhat lacklustre macroeconomic outlook for Austria (with forecast GDP growth of just 1%). International financial markets In the world s financial markets, 2012 was a year of sometimes high volatility. The escalation of the euro crisis, the slowdown in the world economy and world trade, and political tension in the Middle East heightened the global uncertainty and market participants general loss of confidence. However, from the middle of 2012, various measures by central banks, especially the ECB, led to a significant easing of the strain in financial markets. The main events that turned the tide included the decision to conduct Outright Monetary Transactions, the establishment of the European Stability Mechanism, initiatives to strengthen financial stability through a banking union, the reaching of an agreement on the bailout for Greece, and generally the monetary policy easing in the European core markets, the USA, Japan and emerging markets. Heartened by these measures, equity markets rallied vigorously. For the year as a whole, important stock indices such as the S&P 500 and the Euro Stoxx 50 registered gains of 13% to 14%, and the Nikkei 225 even rose by 23%. National finances in 2012 Public debt (horizontal axis) and budget deficits (vertical axis), in % of GDP Denmark Finland Netherlands Spain Austria Germany United States Ireland United Kingdom France Portugal Eurozone Belgium Italy Greece Japan Maastricht criteria Sources: European Commission, OECD 42

45 Group management report In bond markets, long-term government bond yields tended to fall, with some countries instruments reaching record lows. Thus, in July 2012, yields of 10-year US Treasury notes were at their lowest level in over 200 years. In Europe the countries which had been hit hardest by the crisis also saw bond yields decline, along with spreads of credit default swaps: Between the end of August and early December, yields of Greece s long-term sovereign debt instruments fell by more than 800 basis points, while Portugal s saw a decrease of 184, Spain's declined by 148 and Italy s eased by 141 basis points. Austrian financial market The Austrian equity market experienced significant swings in 2012, as documented by the performance of the ATX. After a strong advance in the first quarter, Austria s headline blue chip index lost considerable ground in the middle of the year amid the general state of trepidation in financial markets. Only in the second half of the year did equity investors slowly regain their confidence, driving a continual rising trend for the index. At the end of 2012 the ATX stood at 2, points, a gain of 26.9% for the year. On the other hand, the all-time high around 5,000 marked in summer 2007 remained a distant memory. In 2012 the Vienna stock exchange struggled with receding turnover and falling liquidity. The year s average monthly trading volume of EUR 3.0 billion was well below the 2011 figure of EUR 5.0 billion. In equity corporate actions as well, market activity was limited: 2012 brought only three capital increases and no initial public offering. In a striking trend, overall, barely one-fifth of equity deals in Austrian securities now occur on the exchange. To save expenses and by-pass regulations, most transactions are already executed off exchange. The picture was much more positive in the Austrian bond market, particularly for corporate bonds. In total last year, 29 corporate bonds were placed with a volume of EUR 5.5 billion, further improving on the already strong prior year s 23 bond issues worth a total of EUR 3.3 billion. As the cost of bank credit has risen with banks' own higher borrowing costs and more stringent capital and liquidity requirements, companies are increasingly turning to the capital market for funding. Regarding government bonds, investors continue to see Austrian treasury instruments as a safe haven. Thanks to comparatively good fundamentals, the yield for the country s ten-year federal bonds eased in 2012 from 2.9% to 1.75%. As a result the Republic of Austria was able to borrow relatively inexpensively, despite the loss of the top rating from bond rating agency Standard & Poor s. The favourable conditions are illustrated by the yield spread to the German benchmark 10-year Bund, which in 2012 narrowed from 107 to 43 basis points. Financial results in 2012 The low rate of Austrian export growth in 2012 was reflected in the volume of funding provided by the OeKB Group. While lending exposure under the Export Financing Scheme decreased markedly as a result of early loan repayments and of lower financing of outward foreign direct investment, the balance of loans outstanding from OeKB subsidiary Exportfonds to small and medium-sized businesses was boosted from about EUR 825 million to EUR 1,039 million. OeEB, the development bank, likewise expanded its total project portfolio, from approximately EUR 290 million to EUR 498 million. With interest rates having fallen in the course of the year, the income from securities investments (both the Group s own investment portfolio, and the liquid assets portfolio that supports the Export Financing Scheme) declined to EUR 20.0 million (2011: EUR 25.5 million). The income from unconsolidated investees was almost unchanged at around EUR 1.6 million (2011: EUR 1.7 million). The Group s net interest income, which included these negative effects and the positive one-time impact of early loan repayments, was EUR 96.2 million (2011: EUR 94.5 million). 43

46 Group management report The share of results of equity-accounted investees (joint ventures) grew by EUR 2.2 million to EUR 9.3 million. This was made possible by the replication of the prior year s outstanding result in the private credit insurance group. The item impairment losses on loans and advances and other credit risk provisions represents the year s change in individual impairment charges recognised in respect of microcredits extended by OeKB. The continuing turmoil in capital markets especially during the first part of the year and the resulting lower trading volumes made for a small decline in custody and transaction fees, while the financial data service and notification office benefited from an increase in demand. The income from fees for the processing of export guarantees on behalf of the Austrian government and for administering the guarantees under the Corporate Liquidity Support Act (ULSG) rose modestly. The net fee and commission income of Oesterreichische Entwicklungsbank (OeEB), the development bank, declined significantly as a consequence of a greater volume of projects and the resulting guarantee premiums paid. In total, the OeKB Group recorded net fee and commission income of EUR 49.6 million in 2012 (2011: EUR 50.1 million). Administrative expenses increased to EUR 82.4 million from the prior-year level of EUR 79.9 million. Of this increase, about EUR 1.9 million was contributed by a change in the discount rate for the calculation of pension and termination benefits. The increase in other administrative expenses, at 0.8%, was less than the rate of inflation. As the additional office space from the top-floor expansion at the Strauchgasse 1-3 address was taken into use in 2012, depreciation and amortisation of non-current assets increased as previously predicted, by about EUR 0.5 million. Net other operating income, at EUR 6.2 million, was down somewhat from the prior year s figure of EUR 6.6 million, as the increase in the stability tax (the new levy on banks) could not be fully offset by higher income. Operating profit was EUR 78.8 million. This represented an improvement of EUR 0.4 million from the prior year s EUR 78.4 million. The net gain of EUR 27.8 million on financial instruments reflected the volatility in financial markets (2011: net loss of EUR 13.4 million). The net gain of EUR 29.1 million on disposal and valuation of securities was strongly driven by realised gains on bond redemptions and by positive valuation effects for equities and bonds, which, because of the measurement Operating income of the OeKB Group compared to 2011 and 2007, EUR million 100% % +6.2% Of which net interest income

47 Group management report of securities at fair value through profit or loss, were recognised directly in the income statement. In measuring interests in subsidiaries and other investees in 2012, an impairment charge of EUR 1.2 million (2011: EUR 4.1 million) was recognised on the investment in the Budapest Stock Exchange. This resulted both from the depreciation of the Hungarian forint against the euro and from reduced income expecta tions in light of the difficult economic and political situation in Hungary. Profit before tax amounted to EUR million (2011: EUR 65.1 million). After income tax and noncontrolling interests, profit for the year attributable to shareholders of OeKB was EUR 82.4 million, compared to EUR 50.2 million one year earlier. In 2012 not only did operating profit exceed expectations but the net gain on financial instruments was well above budget. At 31 December 2012, liquid assets in the form of balances at central banks stood at EUR million (2011: EUR million). Loans and advances to banks decreased with the lower lending under the Export Financing Scheme, to EUR 24,549.0 million (2011: EUR 28,736.8 million). Loans and advances to customers were pushed up from EUR 1,409.7 million to EUR 1,526.6 million, thanks largely to an increase in these assets at Exportfonds. A result of the lower volume of lending to banks was a reduction in debt securities in issue (to EUR 27,281.6 million from the 2011 level of EUR 33,350.4 million). The change in holdings of other financial instruments from EUR 1,468.1 million to EUR 1,490,2 million in 2012 is explained mostly by the rise in security prices during the financial year. As a result of the excellent earnings trend in the private credit insurance group, interests in equityaccounted investees (joint ventures) increased in 2012 to EUR 64.0 million (2011: EUR 57.9 million). The decline in value of other assets from EUR 5,629.2 million to EUR 4,913.2 million in 2012 was attributable to the reduced positive fair values of derivatives used to hedge interest rate and currency risks in the Export Financing Scheme. Total assets at 31 December 2012 amounted to EUR 32,767.9 million (2011: EUR 37,978.2 million). Financial performance indicators The cost/income ratio inched higher to 51.1% on increased administrative expenses. (2011: 50.5%). Administrative expenses of the OeKB Group compared to 2011 and 2007, EUR million 100% % +19.8% Of which staff costs

48 Group management report In 2012 the Group s equity was boosted from EUR million to EUR million. Available consolidated regulatory capital under section 24 Austrian Banking Act increased in 2012 by EUR 30.7 million to a new total of EUR million. The capital adequacy ratio (regulatory capital resources as a percentage of risk-weighted assets) decreased from 163.8% in 2011 to 149.3% as a result of higher risk-weighted assets. Return on equity (consolidated profit for the year as a percentage of Tier 1 capital) rose in 2012 from 13.6% to 20.7% amid the positive impact of the net gain on financial instruments. Non-financial performance indicators are presented in section 4, Human resources. Research and development In view of the nature of the OeKB Group s business activities (banking and insurance), no research and development is conducted. Claims for damages There are two law suits of investors pending who bought certificates issued by OeKB for registered shares of Meinl European Land Ltd. ( MEL ). The law suit served on 30 July 2010 amongst others on OeKB asks for payment of about EUR 2,790,000 and was dismissed by judgment of 24 January 2013 (appeal still possible). The second law suit for damages is a model law suit claiming for payment of around EUR 48,500. It is based on the grounds that OeKB as issuer of the MEL certificates did not arrange for an ad-hoc notice pursuant to the Stock Exchange Act on the share-buy-back action in spring 2007 undertaken by MEL (nowadays: Atrium). In the evaluation of OeKB s general counsel chances of success of this law suit are practically zero, taking in account judgments of the first and second instance in another model law suit based on other legal grounds and decided in favor of OeKB. Events after the balance sheet date There were no reportable events after the balance sheet date. Regulatory capital of OeKB Group under Austrian Banking Act compared to 2011 and 2007, EUR million 100% % +42.0% Of which Tier 1 capital

49 Group management report Outlook for 2013 For the macroeconomy, 2013 will be a difficult year and the uncertainties will continue, albeit with regional differences. This poses a very real challenge for the Austrian export industry. As in the past, in these demanding times OeKB will continue to offer exporters support both through export credits and through guarantees for the financing of business acquisitions and company start-ups. However, because of the expiry profile of the portfolio of export financing contracts especially as a result of the reduction in financing of direct investments it appears likely that, depending on the actual course of business, credit disbursements will decrease in 2012 by approximately EUR 2.0 billion from the prior year. For 2013, after outstanding results in 2012 that defied expactations, the two credit insurance sub - sidiaries, OeKB Versicherung AG and PRISMA Kreditversicherungs-AG, too are poised for a difficult 2013 in view of rising insolvency forecasts. The sentiment in financial markets has brightened dramatically since the middle of This improvement was fuelled by market participants growing view that a break-up of the eurozone is no longer looming (or at least not imminent). The extraordinary monetary policy measures of the ECB above all the announcement of the programme of Outright Monetary Transactions under which the Bank can purchase unlimited quantities of euro area government bonds induced a very positive mood in bond markets. The risk premiums on Austrian treasury instruments contracted, which should further improve conditions for OeKB s access to the market. In January 2013, Standard & Poor s affirmed the rating of AA+ for the Republic of Austria and for OeKB and adjusted the rating outlook to stable. Overall, the companies of the OeKB Group are well prepared to meet the challenges ahead and are expecting a sustained good, stable trend in operating income. Cost/income ratio of the OeKB Group EUR million % 44.1% 47.5% 50.2% 50.5% 51.1% Operating income Administrative expenses

50 Group management report 2 System of internal control and of risk management OeKB s system of internal control (the internal control system, or ICS) consists of five components: the control environment, risk assessment, control activities, information and communication, and monitoring. The purpose of the internal control system is to support management in implementing effective and continually improving internal controls regarding, first, compliance with applicable legal requirements and with generally accepted accounting standards, second, the reliability of operational information and, third, the effectiveness and efficiency of operational processes. The ICS is intended to ensure compliance with policies and regulations and to create the necessary conditions for specific control activities in the key processes within accounting and financial reporting. The key objectives include safeguarding the presentation of a fair and transparent view of the financial position, results of operations and cash flows. Control environment The most fundamental aspect of the control environment is the corporate culture in which management and employees operate. Central organisational principles are the avoidance of conflicts of interest through strict separation of risk origination and risk oversight, the transparent documentation of core processes and control activities, and rigorous application of the principle of dual control (i.e., transactions require approval by at least two individuals). The Internal Audit function independently and regularly verifies the adherence to internal rules, including also the accounting rules. The head of Internal Audit reports directly to the Executive Board and Supervisory Board. Risk assessment The goal of risk management at OeKB Group is to detect all identifiable risks and, as appropriate, take measures to avert and prevent risks through optimised processes. This also includes the risk of material misstatement of transactions. The risk management system includes all processes that serve to identify, analyse and evaluate risks. Risks are identified und monitored by management, with a focus on risks that are deemed to be material. The internal control activities performed by the responsible functions are regularly evaluated. Control activities OeKB Group has a governance system that sets out structures, processes, functions and responsibilities within the company. Care is taken to implement all control activities in such a way as to ensure that potential errors or discrepancies in financial reporting are avoided or discovered and corrected. Control activities regarding information technology security represent a cornerstone of the internal control system. Thus, the separation of sensitive responsibilities is supported by restrictiveness in the assignment of IT privileges. For accounting and financial reporting, the software SAP ECC 6.0 is used. The functioning and effectiveness of this accounting system is assured, among other ways, by automated IT controls installed in the system. In subsidiaries, the respective management has ultimate responsibility for the establishment and design of a system of internal control and of risk management appropriate to the respective company s requirements, particularly in relation to the accounting process, and for compliance with the associated Group-wide policies and rules. Information and communication The Supervisory Board is briefed at least every quarter with a comprehensive report on the balance sheet, income statement and other management accounting and risk data. The Executive Board receives this information in regular, significantly more detailed reports prepared monthly or even more frequently. The Executive Board also has a standing Asset Liability Management Committee and Risk Management Committee that receive, analyse and monitor these data. 48

51 Group management report Monitoring Financial statements intended for publication undergo a final review by accounting management staff and the Executive Board before being forwarded to the Audit Committee of the Supervisory Board. By monitoring compliance with all rules and regulations, OeKB Group aims to achieve maximum assurance of all business processes and Group-wide conformity with policies and procedures. When risks and shortcomings in controls are identified, mitigative measures are promptly developed and their implementation is monitored. To be able to assure compliance with requirements within OeKB Group, compliance is monitored in accordance with the annual audit plan of the Internal Audit department. 3 Risk management Risk management essentially, the identification, monitoring, assessment, reporting, planning and treatment of risks consists of important processes integrated in Group strategy that are designed to ensure the lasting stability and profitability of the enterprise. Every risk assumed by the OeKB Group is accepted consciously and is consistent with the Executive Board s risk policy and strategy, which aims to assure a sustained stable return on equity through a conservative approach to all risks, including financial risks and risks arising from business operations in general. The bank s special position by virtue of its public mandate from the Austrian government and of its role as a central provider of essential services to the capital market, along with the associated responsibility for the Austrian economy, are key determinants of OeKB Group s business strategy and risk policy. This approach is also traditionally reflected in a sustainable compensation policy (see note 54). measurement and management of OeKB Group s risk is economic capital; it is calculated using the concept of Value at Risk (VaR) over a one-year time horizon. In the ICAAP, credit risk, market risk, liquidity risk, operational risk and business risk are taken into account quantitatively, through the calculation of economic capital (business risk is considered to be the risk that earnings will suffer as a result of changes in the business environment such as markets, customer behaviour or technology or of inappropriate or inadequately implemented business strategy). In the calculation of risk coverage, the economic capital required is compared with the economic capital available. The comparison is performed in a multi-tier system addressing various risk coverage objectives. Liquidity risk is managed primarily via the specified survival period, which is determined using liquidity gap analysis under stress scenarios. The Internal Capital Adequacy Assessment Process (ICAAP) implemented in the OeKB Group forms an integral part of the management process as a measurement and control tool. A key variable in the 49

52 Group management report In 2012 the further development of the risk measurement and control processes focused on refining the limits system and credit risk management. This included a complete revision of the rating and mapping methodology. Priority was also given to the preparations for Capital Requirements Directive IV (CRD IV) and the Capital Requirements Regulation (CRR), as well as changes in the reporting system. These initiatives are expected to remain at the top of the agenda in Details on the risk management of the OeKB Group are provided in notes to the consolidated financial statements. 4 Human resources Given the Group s central significance for Austria s capital market and export industry, OeKB and its subsidiaries are very aware of the importance of highly qualified and motivated staff. Service quality and expertise, combined with sustained earnings-, costand risk-consciousness, are the critical success factors. OeKB s long-term success depends on the commitment of its people. As a responsible employer, it is important for OeKB to know the interests and needs of its staff. By way of an external review of working conditions, in 2012 OeKB was successfully recertified through the "Work and Family" audit. The certificate was awarded in November of the year. In 2012 a competency framework was developed for OeKB that defines the qualifications and skills which management must have so that OeKB can confidently meet the challenges of the years ahead. Using specific feedback loops, managers self-perception and others perception of them are compared and development plans agreed. The Group s staff count at the end of 2012 was 406 full-time equivalents (prior year: 401); the average count during the year was 398 FTE (prior year: 397). The concerted efforts of the entire staff enabled the Group, even in the difficult market situation, to generate an operating profit of EUR 197,984 per full-time equivalent. The Executive Board would like to express its gratitude and appreciation to all employees for their commitment and contribution to the good business performance achieved. This sincere thank you also goes to the Staff Council, whose members, true to tradition, represented the interests of both the employees and the bank. A variable pay component under the compensation policy is based on personal performance, corporate results and a market benchmark. The compensation policy was reviewed for its conformity with new legal requirements (see the notes to the consolidated financial statements). Comparable remuneration models are in place at Oesterreichische Entwicklungsbank and at Exportfonds. 50

53 Group management report OeKB Group s staff 1 Total number of employees as of 31 December Of whom part-time employees Total employees in full-time equivalents Average number of employees By age in years Up to More than 30 and up to More than 40 and up to More than 50 and up to More than By length of service in years Up to More than 5 and up to More than 10 and up to More than 20 and up to More than 30 and up to More than Indicators Turnover rate 1.6% 4.2% 1.6% Sick days per year and employee Training days per year and employee Proportion of total positions held by women 57.0% 58.2% 57.4% Proportion of management pos. held by women 31.7% 34.4% 34.4% Proportion of positions that are part-time 20.3% 20.3% 21.4% 1 OeKB, including the fully consolidated institutions OeEB and Exportfonds. Vienna, 20 February 2013 Oesterreichische Kontrollbank Aktiengesellschaft Signed by the Executive Board Johannes Attems Rudolf Scholten 51

54 Consolidated financial statements OeKB Group consolidated financial statements 2012 Consolidated income statement of the OeKB Group EUR thousand Notes Change in % Interest and similar income 623, , Interest and similar expense (527,651) (679,677) 22.4 Net interest income 14 96,174 94, Share of results of equity-accounted investees 14 9,330 7, Impairment losses on loans and advances and other credit risk provisions 15 (141) (36) Net fee and commission income 16 49,611 50, Fee and commission income 57,130 57, Fee and commission expense (7,519) (6,949) Administrative expenses 17 (82,404) (79,864) Net other operating income 18 6,228 6, Operating profit 78,798 78, Net gain or loss on financial instruments 19 27,801 (13,371) Profit before tax 106,599 65, Income tax and other taxes 20 (23,879) (14,709) Profit for the year 82,720 50, Attributable to: non-controlling interests (287) (186) Profit for the year attributable to shareholders of the parent 82,433 50, Earnings per share Profit for the year attributable to OeKB shareholders, in EUR thousand ,167 Average number of shares outstanding 880, ,000 Earnings per share in EUR At 31 December 2012, as one year earlier, there were no exercisable conversion or option rights. The stated earnings per share therefore represent basic earnings per share and are not subject to dilution. 52

55 Consolidated financial statements Consolidated balance sheet of the OeKB Group EUR thousand Notes 31 December December 2011 Change in % Assets Cash and balances at central banks , , Loans and advances to banks 23 24,549,025 28,736, Loans and advances to customers 24 1,526,590 1,409, Allowance for impairment losses on loans and advances 7, 25 (401) (259) Other financial instruments 26 1,490,178 1,468, Interests in equity-accounted investees 28 63,983 57, Property and equipment and intangible assets 27 33,262 31, Current tax assets Deferred tax assets 34 67,450 58, Other assets 29 4,913,172 5,629, Total assets 32,767,934 37,978, EUR thousand Notes 31 December December 2011 Change in % Liabilities and equity Deposits from banks 30 1,692, , Deposits from customers , , Debt securities in issue 32 27,281,609 33,350, Provisions , , Current tax liabilities 34 5,355 2, Deferred tax liabilities 34 19,671 14, Other liabilities 35 1,572,479 1,783, Equity , , Attributable to non-controlling interests 4,180 4, Total liabilities and equity 32,767,934 37,978,

56 Consolidated financial statements Consolidated statement of changes in equity of the OeKB Group EUR thousand Called-up share capital Capital reserves Retained earnings Profit for the year attributable to OeKB shareholders Non-controlling interests Total equity 2012 At 1 January ,000 3, ,858 50,167 4, ,405 Changes in retained earnings 30,147 (30,147) Profit for the year 82, ,720 Dividends paid (20,020) (140) (20,160) At 31 December ,000 3, ,005 82,433 4, ,965 EUR thousand Called-up share capital Capital reserves Retained earnings Profit for the year attributable to OeKB shareholders Non-controlling interests Total equity 2011 At 1 January ,000 3, ,895 71,983 3, ,212 Changes in retained earnings 51,963 (51,963) Profit for the year 50, ,353 Dividends paid and Supervisory Board emoluments (20,020) (140) (20,160) At 31 December ,000 3, ,858 50,167 4, ,405 The amounts of called-up share capital and capital reserves shown above are the same as those reported in the separate financial statements of Oesterreichische Kontrollbank AG. More information on changes in equity is provided in note

57 Consolidated financial statements Consolidated cash flow statement of the OeKB Group EUR thousand Profit before tax 106,599 65,062 Non-cash items included in profit before tax, and adjustments to reconcile profit before tax to cash flows from operating activities: Depreciation, amortisation and impairment of property and equipment and intangible assets 4,535 4,046 Changes in provisions 5,403 6,423 Gains/losses from disposal and/or valuation of investments and property and equipment 169,946 (751,155) Unrealised gains/losses from movements in exchange rates (189,445) 769,252 Other non-cash items (11,991) 4,361 Changes in operating assets and liabilities, after adjustment for non-cash components: Loans and advances to banks 3,905,056 (457,437) Loans and advances to customers (117,312) (3,609) Securities at fair value through profit or loss 53,029 (119,221) Other operating assets 14,239 (1,788) Deposits from banks 741,278 (453,303) Deposits from customers 73,274 (7,070) Debt securities in issue (5,548,610) 1,498,899 Other operating liabilities 34,270 1,415 Interest and dividends received 965, ,457 Interest paid (616,564) (695,561) Income tax paid (24,654) (32,639) Net cash (used in)/from operating activities (435,386) 529,132 Proceeds from disposal of: Property and equipment and intangible assets 6 2 Purchase of: Interests in unconsolidated companies Property and equipment and intangible assets (6,486) (6,022) Net cash used in investing activities (6,480) (6,020) Issue of shares Dividends paid (20,020) (20,020) Net cash used in financing activities (20,020) (20,020) Cash and cash equivalents at beginning of period 586,152 83,060 Net cash (used in)/from operating activities (435,386) 529,132 Net cash used in investing activities (6,480) (6,020) Net cash used in financing activities (20,020) (20,020) Cash and cash equivalents at end of period 124, ,152 Further detail on cash and cash equivalents is given in note 22. Additional information on the cash flow statement is provided in note

58 Notes to the consolidated financial statements Notes to the consolidated financial statements of the OeKB Group Accounting policies (1) General information Oesterreichische Kontrollbank Aktiengesellschaft ( OeKB AG or OeKB ) is a special-purpose bank with its registered office in Vienna, Austria. The activities of the OeKB Group consist largely of export services and capital market services. OeKB AG prepared the consolidated financial statements for the year ended 31 December 2012 in accordance exclusively with International Financial Reporting Standards (IFRS) as adopted by the European Union, thus also satisfying the requirements of section 59a Austrian Banking Act and section 245a Austrian Commercial Code. In preparing these financial statements, the OeKB Group applied all IFRS (including IAS) and their interpretations by the International Financial Reporting Interpretations Committee (IFRIC, formerly Standard Interpretations Committee or SIC) that were effective at the balance sheet date. With the exception of the following items, the consolidated financial statements were prepared on a historical cost basis: Derivative financial instruments (measured at fair value). Financial instruments at fair value through profit or loss. For the presentation of the traditional income statement and of other comprehensive income, a choice of two formats is available under IAS 1: either two separate statements the traditional income statement and a statement of comprehensive income or a single statement that combines both these statements. Additionally, IAS 1 introduces new (non-binding) titles for some of the financial statements used under IFRS: In IAS 1 the balance sheet is referred to as a statement of financial position, the income statement (in the case of the single-statement option) as a statement of comprehensive income and the cash flow statement as a statement of cash flows. However, the titles are not mandatory and have not been adopted by the OeKB Group. No statement of comprehensive income is required, as no income or expense was recognised directly in equity in the year under review or in the comparative prior periods. Changes in accounting methods In 2012 there were no changes in the accounting policies applied by the OeKB Group. Uniform accounting policies are used throughout the Group. The accounting principles described below are consistently applied to all financial years represented in these consolidated financial statements. New standards and interpretations not yet applied The following major new and revised accounting standards and interpretations have been adopted into European Union law and will become effective in the future, but have no impact on the OeKB Group, as there are no transactions to which they apply. 56

59 Notes to the consolidated financial statements Effective date IFRS 1 First-time Adoption of IFRS (amendments) 1 January 2013 IFRS 7 Financial Instruments: Disclosures (amendments) 1 January 2013 IFRS 10 Consolidated Financial Statements (new) 1 January 2014 IFRS 11 Joint Arrangements (new) 1 January 2014 IFRS 12 Disclosure of Interests in Other Entities (new) 1 January 2014 IFRS 13 Fair Value Measurement (new) 1 January 2014 IAS 12 Income Taxes (amendments) 1 January 2013 IAS 27 Separate Financial Statements (amendments) 1 January 2014 IAS 28 Investments in Associates and Joint Ventures (amendments) 1 January 2014 IAS 32 Financial Instruments: Presentation (amendments) 1 January 2014 IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine (new) 1 January 2013 The revised IAS 19 (Employee Benefits) effective from 2013 removes the option to recognise actuarial gains and losses in the income statement. In the future these gains and losses will be recognised directly in equity (through the statement of comprehensive income). Critical assumptions and judgements The preparation of the consolidated financial statements in accordance with IFRS requires the Executive Board to make judgements and to proceed on assumptions about future developments. These judgements and assumptions can have a material effect on the recognition and measurement of the assets and debt, the disclosure of other liabilities at the balance sheet date, and the amounts of income and expenses reported for the financial year. The following assumptions involve a not insignificant risk that they may lead to a material change in the carrying amounts of assets and liabilities in the subsequent financial year: Financial instruments for which no active market exists are reviewed for impairment by using alternative discounting-based valuation methods. The inputs used for the determination of fair value are based in part on assumptions about future developments. The measurement of existing retirement and termination benefit obligations involves assumptions regarding interest rate, age at retirement, life expectancy, employee turnover and future increases in pay and benefits. The recognition of deferred tax assets is based on the assumption that sufficient tax income will be realised in the future to utilise them. The off-balance sheet obligations from guarantees and from other contingent liabilities are regularly reviewed as to whether they require recognition in the balance sheet. The estimates and underlying assumptions are reviewed on an ongoing basis. The actual values may deviate from the assumptions and estimates made if the general conditions do not follow the trends expected at the balance sheet date. Changes in estimates of assets, liabilities, income and expense are recognised in the balance sheet or in the income statement as they become known, and the assumptions adjusted accordingly. 57

60 Notes to the consolidated financial statements (2) Scope of consolidation A list of all entities that are represented in the consolidated financial statements of the OeKB Group is provided in note 28, Companies wholly or partly owned by OeKB AG. Three companies are fully consolidated: Oesterreichische Kontrollbank AG ( OeKB, the Group parent) and the Vienna-based Oesterreichische Entwicklungsbank AG ( OeEB ) and Österreichischer Exportfonds GmbH ( Exportfonds ). There was no change during the financial year in the scope of consolidation, i.e., in the lists of entities that are fully consolidated, included by the equity method, or unconsolidated and held at cost. Representing the unconsolidated entities held at cost, two subsidiaries were not consolidated (prior year: two); they are of minor overall significance to the Group s financial position and results of operations. The combined total assets of these two entities represent less than 0.01% of the Group s consolidated total assets, and their combined profit for the year represents less than 0.12% of the Group s consolidated profit for the year. In the OeKB Group s consolidated financial statements, two companies (prior year: two), which are joint ventures, were accounted for by the equity method. 31 December December 2011 Number of companies incl. in the consolidated financial statements or held at cost, by accounting method Fully consolidated companies 2 2 Equity-accounted investees (joint ventures) 2 2 Unconsolidated subsidiaries held at cost 2 2 Other investments in companies held at cost Total (3) Methods of consolidation The consolidation of the Group accounts involves purchase-method accounting; equity-method accounting; consolidation of intercompany balances, expenses and revenues; and the elimination of intercompany profits. The separate annual accounts of the fully consolidated entities and of the entities accounted for by the equity method are uniformly made up to 31 December. The Group elected to make use of an option under IFRS 1 on 1 January 2004 (the date of transition to IFRS) by adopting the carrying amounts from the initial consolidation that was performed under the Austrian Commercial Code, or UGB. Acquisitions of subsidiaries are thus accounted for by the purchase method. Under this method, the cost of the acquired ownership interest is offset against the Group s share of the subsidiary s net assets at the time that control passes to the Group. As in the prior periods, the provisions of IFRS 3 on business combinations were not yet applied in the year under review, as no relevant transactions occurred. Intercompany balances, expenses, revenues, profits and losses are eliminated when significant. Companies classified as joint ventures are accounted for under the equity method and are reported as interests in equity-accounted investees. Measurement by the equity method is based on local financial statements, adjusted to adhere to the Group s uniform accounting methods. The annual results are obtained from the latest available annual separate financial statements and sub-groups consolidated financial statements, and the changes in equity are thus recognised in the year in which they occur. Dividends paid by joint ventures to the Group parent company are eliminated by reversing entries. Profits or losses for the year generated by joint ventures are shown in the consolidated income statement within share of results of equity-accounted investees. 58

61 Notes to the consolidated financial statements (4) Foreign currency translation The consolidated financial statements are presented in thousands of euros, rounded by the standard roundhalf-up convention. The euro is also the OeKB Group s functional currency. Assets and liabilities denominated in foreign currencies are translated at the reference exchange rates of the European Central Bank at the balance sheet date of 31 December Currency Mid rate Currency Mid rate Currency Mid rate Currency Mid rate Foreign exchange reference rates at 31 December 2012 AUD CAD CHF CZK DKK GBP HRK HUF JPY NOK PLN RON SEK USD (5) Financial instruments Loans and advances to banks and customers Loans and advances to banks and customers, to the extent that they are originated by the Group, are carried at their nominal amount or at amortised cost, before deduction of impairment losses and including accrued interest. Individual allowances for impairment losses are recognised for identifiable individual credit risks and for country risks. Impairment losses are not deducted from the corresponding loans and advances but are reported as a separate line item on the face of the balance sheet. Most of the loans and advances to banks made under OeKB s Export Financing Scheme are guaranteed by the Republic of Austria. No collectively assessed provision for credit losses was required. Other financial instruments The item other financial instruments consists of all fixed income and variable income securities (including equities) and investments in unconsolidated subsidiaries and smaller shareholdings in other companies. In other words, investments consist of all securities and all unconsolidated investees. Effects on profit or loss are shown in the income statement within net gain or loss on financial instruments. The date of initial recognition or derecognition of other financial instruments is the settlement date. Bonds and other fixed income securities as well as equity shares and other variable income securities are designated at fair value through profit or loss. As the OeKB Group does not have a trading portfolio, these securities form part of the investment portfolio, which is managed on the basis of market values. The securities are measured at fair value at the balance sheet date, with changes in value recognised in profit or loss. The investments in unconsolidated subsidiaries and other companies are initially measured at amortised cost. 59

62 Notes to the consolidated financial statements Financial liabilities Financial liabilities are initially measured at their actual proceeds. Premiums, discounts or other differences between the proceeds and the repayment amount are realised over the term of the instrument by the effective interest method and recognised in net interest income (amortised cost). Zero coupon bonds are recognised at present value. Where derivatives are used to hedge the interest rate risk or currency risk associated with liabilities, the hedged debt instruments are recorded at fair value in order to avoid accounting mismatches. Derivative financial instruments The fair value of derivative contracts is calculated by generally accepted methods. Derivatives are recognised at the trade date. Those derivative transactions which were entered into substantially to hedge the market values of banking book items in the balance sheet are recognised at their market value (their fair value, being the clean price) within other assets or other liabilities. To avoid accounting mismatches, the change in market values of the hedged balance sheet items, like that of the derivatives, is recognised in profit or loss within net gain or loss on financial instruments. The exchange rate guarantee of the Republic of Austria under the Export Financing Guarantees Act (in German: Ausfuhrfinanzierungsförderungsgesetz, published in Federal Law Gazette No. 216/1981, as amended), which is used to hedge exchange rate risks under the Export Financing Scheme, is treated as a derivative contract and measured at fair value. (6) Determination of fair value The fair value of listed instruments is deemed to be the quoted market price at the balance sheet date (level 1). Unlisted instruments are measured using the present value method (present value of discounted future cash flows) or suitable option pricing models (Black-Scholes models, the multifactor HJM model or the Hull-White model approach). To the extent possible, the input parameters used for these models are the relevant market prices and interest rates observed at the balance sheet date that are obtained from widely accepted external sources (level 2). The net asset values of investment fund units are determined as set out in the Investment Fund Act. (7) Allowance for impairment losses on loans and advances and other credit risk provisions The allowance for impairment losses on loans and advances and other credit risk provisions relates to impairment of loans and advances, and any provision for credit guarantees. The allowance and provisions are raised for all identifiable credit risks and country risks. As part of its risk management system, the OeKB Group employs a credit analysis system and an internal rating procedure. Counterparties are classified into six internal credit rating categories on the basis of external ratings from internationally recognised rating agencies (Standard & Poor s, Moody s and Fitch). Credit ratings are monitored on an ongoing basis for changes. For clients without an external rating, internally developed criteria are applied. As a result, all banking book assets and off-balance sheet business can be classified according to creditworthiness and collateralisation. 60

63 Notes to the consolidated financial statements (8) Property and equipment and intangible assets Property and equipment comprises land and buildings used by the Group, and fixtures, fittings and equipment. Land and buildings used by the Group are those which are used primarily for the Group s own business operations. 1. Property and equipment and intangible assets are recorded at cost less accumulated depreciation and amortisation. The following useful lives are assumed: Years Useful life Buildings 40 Fixtures, fittings and equipment, other than information technology 3 to 10 IT hardware 3 to 5 Software 3 to 5 2. Low-value assets with an individual purchase price of up to EUR 400 are depreciated completely in the year of acquisition. In note 27, Property and equipment and intangible assets, low-value assets are recorded as additions and disposals in the year of acquisition. Intangible assets comprise only purchased software. Their value is periodically reviewed. (9) Sundry liabilities Sundry liabilities are recorded at amortised cost. (10) Employee benefit provisions The provisions for pensions, termination benefits and long-service awards are calculated annually by an independent actuary using the projected unit credit method, in accordance with IAS 19. The biometric basis for the calculations consists of the version of the current computation tables by Pagler & Pagler specific to salaried employees. The key parameters are a discount rate of 3.5% (prior year: 4.75%), an overall rate of salary and pension increases of up to 3.0% (prior year: 4.125%) which represents the collective-agreement trend and regular multi-employee increases and unscheduled individual-employee increases and an assumed age at retirement of 58 years 9 months for women (prior year: 58 years 6 months) and 63 years 9 months for men (prior year: 63 years 6 months) based on the transitional provisions of the Austrian public pension scheme (ASVG) under the Budget Implementation Act In previous years, the pension obligations for a portion of the staff were transferred to a pension fund under a defined contribution plan. The employee benefit provisions include entitlements of former employees who were already receiving a pension before the time of the transfer, and nontransferred entitlements of present employees. For all active employees, the provisions include a component for a disability pension. The provision for termination benefits is determined so as to cover the legal and contractual entitlements. Actuarial gains and losses are fully recognised in the income statement in every financial year. 61

64 Notes to the consolidated financial statements (11) Other provisions Other provisions are recognised where all of the following conditions are met: the OeKB Group has a legal or constructive obligation to a third party as a result of a past event, the obligation is likely to lead to an outflow of resources, and the amount of the obligation can be reliably estimated. Provisions are assessed at the amount representing the best estimate of the expenditure required to settle the obligation. If the present value of the obligation determined on the basis of a market interest rate differs materially from its nominal amount, the present value of the obligation is used. In support of the Export Financing Scheme, an interest rate stabilisation provision is maintained to stabilise the interest rates on export credits, based on the constructive obligation regarding the use of surpluses from the Export Financing Scheme. This de facto obligation has a dual basis: it arises from the rules for the setting of interest rates in the export financing scheme, which specify fixed margins for OeKB; and from a directive from the Austrian Ministry of Finance on the use of surpluses from fixed interest facilities. The amount allocated to the provision is the total of i) the amount by which the interest earned in the Export Financing Scheme exceeds the sum of the borrowing costs incurred and OeKB s fixed margin, and ii) the net gain or loss from the measurement of the derivatives and financial liabilities in the Export Financing Scheme. In accordance with these rules, the provision is used to stabilise the terms of export credits. (12) Current and deferred taxes The recognition and calculation of income taxes is performed in accordance with IAS 12. Current income tax assets and liabilities are measured by reference to local tax rates. Deferred taxes are determined by the balance sheet/liability approach. Under this approach, the carrying amounts of the assets and liabilities in the balance sheet are compared with the respective tax base for the particular Group company. Any temporary differences between the two sets of valuations lead to the recognition of deferred tax assets or liabilities. (13) Consolidated income statement Composition of net gains and losses on financial instruments Net gains and losses on financial instruments are affected by fair value changes recognised through profit or loss, by impairment losses, reversal of impairment through profit or loss, exchange rate movements and derecognition. For financial assets designated on initial recognition as at fair value through profit or loss, and thus measured as such, interest and dividend income is recorded within net interest income. Revenue recognition Income and expenses are recognised as they accrue. Interest income is recognised on an accrual basis using the effective interest method. Dividend income is recognised at the time of the decision to pay the dividend. 62

65 Notes to the consolidated financial statements Segmental information In the segmental analysis presented below, the activities of the OeKB Group are divided into business segments. The delineation of these three segments Export Services, Capital Market Services and Other Services is based on the internal control structure and the internal financial reporting to the Executive Board as the chief operating decision-making body. The financial information for these segments is regularly reviewed to allocate resources to the segments and judge their performance. The Export Services segment encompasses the management of guarantees provided by the Republic of Austria through OeKB as the government s official agent under the Export Guarantees Act (in German: Ausfuhrförderungsgesetz); OeKB s Export Financing Scheme; and the shareholding in Österreichischer Exportfonds GmbH. The Capital Market Services segment comprises all services provided by Oesterreichische Kontrollbank AG relating to the capital market, clearing and settlement of on-exchange and off-exchange securities transactions, the CentralSecuritiesDepository.Austria, and clearing services for the energy market. The Other Services segment consists of OeKB s information services, its own-account investment portfolio and investments, the activities of the OeKB Group in private sector credit insurance, and Oesterreichische Entwicklungsbank AG. EUR thousand Export Services Capital Market Services Other Services Total Results by business segment in 2012 Interest and similar income 603,465 20, ,825 Interest and similar expense (526,972) (679) (527,651) Net interest income 76,493 19,681 96,174 Share of results of equity-accounted investees 2 9,328 9,330 Impairment losses on loans and advances and other credit risk provisions (141) (141) Net fee and commission income 20,775 27,594 1,242 49,611 Fee and commission income 23,552 29,166 4,412 57,130 Fee and commission expense (2,777) (1,572) (3,170) (7,519) Administrative expenses (37,040) (25,447) (19,917) (82,404) Net other operating (expense)/income (869) 1,518 5,579 6,228 Operating profit 59,359 3,667 15,772 78,798 Net gain or loss on financial instruments (20) 27,821 27,801 Profit before tax 59,339 3,667 43, ,599 Income tax and other taxes (14,827) (867) (8,185) (23,879) Profit for the year 44,512 2,800 35,408 82,720 Attributable to non-controlling interests (287) (287) Profit for the year attributable to shareholders of the parent 44,225 2,800 35,408 82,433 Segment assets 31,444,622 13,783 1,309,529 32,767,934 Segment liabilities 31,663,545 35, ,829 32,105,969 63

66 Notes to the consolidated financial statements Segment business performance in 2012 The following factors should be noted: The growth of Oesterreichische Entwicklungsbank (the development bank) contributed to an increase in net interest income in the Other Services segment (at the expense of the Export Services segment), but also led to a corresponding rise in the segment s administrative expenses. The share of results of equity-accounted investees represented a small increase in the valuation of CCP.Austria (in the Capital Market Services segment) and an outstanding result in private credit insurance (Other Services segment). The significant gain on financial instruments in Other Services was attributable both to realised gains in connection with bond redemptions and to the fair value measurement of the Group s own investment portfolio. The gain on financial instruments also included the impairment charge on the ownership interest in Budapest Stock Exchange Ltd. The income tax expenses for the individual segments are based on profit before tax, adjusted for tax base reconciliation items, such as tax-exempt income from investees. Details of the reconciliation items are given in note 20. EUR thousand Export Services Capital Market Services Other Services Total Results by business segment in 2011 Interest and similar income 753,899 20, ,225 Interest and similar expense (678,833) (844) (679,677) Net interest income 75,066 19,482 94,548 Share of results of equity-accounted investees (54) 7,198 7,144 Impairment losses on loans and advances and other credit risk provisions (36) (36) Net fee and commission income 20,320 26,997 2,759 50,076 Fee and commission income 23,395 28,817 4,813 57,025 Fee and commission expense (3,075) (1,820) (2,054) (6,949) Administrative expenses (37,362) (24,147) (18,355) (79,864) Net other operating (expense)/income (748) 1,546 5,767 6,565 Operating profit 57,276 4,342 16,815 78,433 Net gain or loss on financial instruments (38) (13,333) (13,371) Profit before tax 57,238 4,342 3,482 65,062 Income tax and other taxes (14,455) (1,069) 815 (14,709) Profit for the year 42,783 3,273 4,297 50,353 Attributable to non-controlling interests (186) (186) Profit for the year attributable to shareholders of the parent 42,597 3,273 4,297 50,167 Segment assets 36,467,801 11,879 1,498,535 37,978,215 Segment liabilities 36,611,254 33, ,437 37,378,810 64

67 Notes to the consolidated financial statements Transactions offset between segments represent services rendered. Services by Oesterreichische Kontrollbank AG to subsidiaries are provided at cost. No reconciliation of the amounts for the reportable segments to the amounts recorded in the consolidated balance sheet and income statement is necessary, as the consolidation items are assigned directly to the segments. The segment information is, generally speaking, based on the same accounting methods as the consolidated financial statements. As the regional focus of the OeKB Group s activities lies in Austria, a geographic segmentation is not considered meaningful and is omitted. Notes to the consolidated income statement of the OeKB Group (14) Net interest income and share of results of equity-accounted investees EUR thousand Amortised cost 2012 Fair value option 2012 Total 2012 Amortised cost 2011 Fair value option 2011 Total 2011 Interest income 603,872 19, , ,769 25, ,225 Loans and advances and money market instruments 602, , , ,098 Fixed income securities 14,501 14,501 20,240 20,240 Equity shares and other variable income securities 5,452 5,452 5,216 5,216 Investments in unconsolidated subsidiaries and other companies 1,588 1,588 1,671 1,671 Interest expense (292,840) (234,811) (527,651) (355,328) (324,349) (679,677) Money market instruments and current accounts (26,537) (26,537) (26,134) (26,134) Debt securities in issue (266,303) (234,811) (501,114) (329,194) (324,349) (653,543) Net interest income 311,032 (214,858) 96, ,441 (298,893) 94,548 Share of results of equity-accounted investees 9,330 9,330 7,144 7,144 OeKB EH Beteiligungs- und Management Group, a sub-group of companies which is accounted for under the equity method as a result of a joint venture agreement, had equity of EUR million (2011: EUR million) and profit for the year in 2012 of EUR 18.3 million (2011: EUR 14.1 million). In the financial year, OeKB received a dividend of EUR 3,235, (2011: EUR 2,170,000) from OeKB EH Beteiligungs- und Management AG. The sub-group operates primarily in the credit insurance sector. In 2012, with more than 2,374 insurance policies in force, the sub-group generated total premium income of EUR 78.9 million (2011: EUR 83.5 million). The claims ratio (claims expenses as a percentage of premium income) was 38.4% in the financial year (2011: 39.0%). 65

68 Notes to the consolidated financial statements CCP Austria Abwicklungsstelle für Börsengeschäfte GmbH (CCP.A), which is operated as a joint venture with the Vienna Stock Exchange, had equity of EUR 147,161 at the year-end (2011: EUR 143,254) and registered a profit for the year of EUR 3,907 (2011: loss of EUR 108,446). CCP.A acts as the central counterparty for the clearing and risk management of all CCP-eligible securities and derivatives transactions on the Vienna Stock Exchange and assumes or manages the settlement risk and default risk. (15) Impairment losses on loans and advances and other credit risk provisions In the 2012 financial year an impairment loss of EUR 141,380 was recognised in respect of microcredits extended by OeKB. (16) Net fee and commission income EUR thousand Credit operations Securities services 25,164 24,714 Export guarantees 19,499 19,156 Energy clearing 2,326 2,242 Other services 2,330 3,308 Total 49,611 50,076 The export guarantee activities represent services provided by OeKB on behalf of the Austrian government; additional detail is provided in the Segmental information section of this report. (17) Administrative expenses EUR thousand Staff costs 55,290 53,421 Salaries 36,745 36,291 Social security costs 7,778 8,239 Pension and other employee benefit costs 10,767 8,891 Other administrative expenses 22,579 22,397 Depreciation, amortisation and impairment of property and equipment and intangible assets 4,535 4,046 Total 82,404 79,864 66

69 Notes to the consolidated financial statements The auditor s remuneration is included in other administrative expenses and consisted of fees of EUR 353,000 (2011: EUR 348,000) for the audit of the Group s annual accounts for (18) Net other operating income EUR thousand Other operating income 7,691 7,878 Other operating expenses (1,463) (1,313) Total 6,228 6,565 The item other operating income relates largely to service fees received by OeKB from non-fully consolidated subsidiaries for providing outsourced services on their behalf. (19) Net gain or loss on financial instruments Net gain or loss on financial instruments represents gains and losses from the disposal and valuation of securities, interests in investments and other companies. The gains from securities of EUR 31.4 million (2011: EUR 5.6 million) included realised gains of EUR 8.7 million on disposal of securities (2011: EUR 5.4 million). The losses from securities were EUR 2.3 million (2011: EUR 14.9 million). Foreign exchange differences and the fair-valued debt securities in issue and derivatives relate primarily to the Export Financing Scheme and are to be regarded as a single unit from an economic point of view. The strong fluctuations in both items were driven by exchange rate movements, particularly in the US dollar and Swiss franc, but largely offset each other as a result of the hedging function of the derivatives. EUR thousand Net gain or loss on financial instruments Net gain or loss from measurement at fair value through profit or loss Securities 29,094 (9,273) Foreign exchange differences 189,155 (769,914) Debt securities in issue and derivatives (189,217) 769,897 Subtotal 29,032 (9,290) Net gain or loss on investments in unconsolidated companies (1,231) (4,081) Total 27,801 (13,371) 67

70 Notes to the consolidated financial statements The change in fair values of financial liabilities resulted exclusively from changes in market interest rates. The net loss on investments in unconsolidated companies arose from the write-down of the investment in Budapest Stock Exchange Ltd. (20) Income tax and other taxes EUR thousand Income tax Current tax (expense) (27,394) (21,986) Deferred tax benefit 3,515 7,277 Total income tax expense (23,879) (14,709) The actual taxes are calculated on the tax base for the financial year, at the local tax rates applicable to the individual Group companies. The taxation at the standard Austrian income tax rate is reconciled to the reported actual taxes as follows. EUR thousand Income tax reconciliation Profit before tax 106,599 65,062 Tax expense at Austrian standard corporate income tax rate of 25% 26,650 16,266 Tax effect of tax-exempt results of investees (2,730) (2,069) Tax effect of other tax-exempt income (275) (223) Tax effect of non-deductible expenses 319 1,032 Adjustment for prior years (2,252) (1,809) Other tax effects 2,167 1,512 Total income tax expense 23,879 14,709 (21) Appropriation of profit The Executive Board will propose to the 67th Annual General Meeting on 29 May 2013 that the profit available for distribution recorded in the parent company financial statements for the year 2012 in the amount of EUR 30,283, be used to pay a dividend of EUR per share and a special dividend of EUR per share. The amount of the resulting total proposed dividend is EUR 30,008, This represents approximately 23% of the participating ordinary share capital for 2012 of EUR 130,000, After payment of the Supervisory Board emoluments, the balance, amounting to EUR 5,068.25, is to be carried forward. The dividend payment for the 2011 financial year, which was made in May 2012, amounted to EUR per share or a total of EUR 20,020,

71 Notes to the consolidated financial statements Notes to the consolidated balance sheet of the OeKB Group (22) Cash and balances at central banks This item consists solely of cash and balances with central banks and corresponds to cash and cash equivalents reported in the cash flow statement. (23) Loans and advances to banks EUR thousand Repayable on demand Other maturities 31 Dec Dec Dec Dec Domestic banks 2,481 5,718 22,115,263 25,977,176 Foreign banks 7,216 9,748 2,424,065 2,744,146 Total 9,697 15,466 24,539,328 28,721,322 (24) Loans and advances to customers EUR thousand Domestic customers Foreign customers 31 Dec Dec Dec Dec Public sector 7,060 5, , ,464 Other 995, ,122 62,392 32,301 Total 1,002, , , ,765 The analysis by rating category is presented in note 51. (25) Allowance for impairment losses on loans and advances and other credit risk provisions The allowance for impairment losses on loans and advances relates only to loans and advances to customers, and concerns only credit risks. The item also includes any impairment of accrued interest at the balance sheet date. No collective impairment loss has been provided. The amount of non-performing loans and advances before impairment allowances was EUR 0.57 million (2011: EUR 0.26 million). The amount of other credit risk provisions was nil. 69

72 Notes to the consolidated financial statements (26) Other financial instruments EUR thousand 31 Dec Dec Bonds and other fixed income securities 1,158,849 1,163,389 Treasury bills 579, ,262 Bonds 579, ,127 Of which listed bonds 1,158,549 1,162,889 Equity shares and other variable income securities 311, ,876 Equity shares Investment fund units 311, ,876 Of which listed equity shares and other variable income securities 2,091 2,878 Unconsolidated companies 19,612 20,844 Investments in unconsolidated subsidiaries 1,536 1,536 Investments in other unconsolidated companies 18,076 19,308 Total other financial instruments 1,490,178 1,468,109 Bonds and other fixed income securities as well as equity shares and other variable income securities in the amount of EUR 1,471 million (2011: EUR 1,447 million) are held at fair value through profit or loss. No reclassifications were made. At 31 December 2011, bonds and other fixed income securities also included Greek government bonds of a nominal value of EUR 19.8 million with a fair value of EUR 4.8 million. In 2012, under the Private Sector Involvement (PSI) agreement, these bonds were exchanged for new securities that were subsequently sold by tender. Beginning in 2010, as part of liquidity management for the Export Financing Scheme, a liquid assets portfolio has been established that had a market value of EUR million at 31 December

73 Notes to the consolidated financial statements (27) Property and equipment and intangible assets EUR thousand Cost at 1 Jan Additions in Disposals in Cost at 31 Dec Accumulated depreciation and amortisation Net book value at 31 Dec Net book value at 31 Dec Current-year depreciation and amortisation 2012 Property and equipment 100,630 11,865 (6,523) 105,972 (73,768) 32,204 30,517 (4,133) Land and buildings 72,566 9,742 (6) 82,302 (55,047) 27,255 20,267 (2,748) Fixtures, fittings and equipment 22,030 2,123 (483) 23,670 (18,721) 4,949 4,216 (1,385) Assets under construction 6,034 (6,034) 6,034 Intangible assets 3, ,063 (3,005) 1, (402) Software 3, ,564 (3,005) (402) Assets under construction Total 104,038 12,520 (6,523) 110,035 (76,773) 33,262 31,322 (4,535) 1 Including reclassifications. Within the carrying amount of land and buildings used by the Group, the value of the land itself was EUR 4.4 million (2011: also EUR 4.4 million). EUR thousand Cost at 1 Jan Additions in Disposals in Cost at 31 Dec Accumulated depreciation and amortisation Net book value at 31 Dec Net book value at 31 Dec Current-year depreciation and amortisation 2012 Property and equipment 95,874 5,761 (1,005) 100,630 (70,113) 30,517 28,373 (3,600) Land and buildings 71, ,566 (52,299) 20,267 21,719 (2,116) Fixtures, fittings and equipment 22, (998) 22,030 (17,814) 4,216 4,909 (1,484) Assets under construction 1,745 4,296 (7) 6,034 6,034 1,745 Intangible assets 3, (273) 3,408 (2,603) 805 1,109 (446) Software 3, (153) 3,408 (2,603) (446) Assets under construction 120 (120) 120 Total 99,294 6,022 (1,278) 104,038 (72,716) 31,322 29,482 (4,046) 1 Including reclassifications. 71

74 Notes to the consolidated financial statements (28) Companies wholly or partly owned by OeKB AG Company name and registered office Banking Act category 1 Type of investment Shareholding Financial information Credit Institution/ Other Company Directly held Indirectly held in % Reporting date of latest annual accounts Equity as defined in sec. 224(3) UGB 2, in EUR thousand Profit for the year, EUR thousand Fully consolidated companies Oesterreichische Entwicklungsbank AG, Vienna CI x Dec , Österreichischer Exportfonds GmbH, Vienna CI x Dec , Equity-accounted investees (joint ventures) OeKB EH Beteiligungs- und Management AG, Vienna OC x Dec ,533 14,162 OeKB Versicherung Aktiengesellschaft, Vienna OC x Dec ,856 2,607 PRISMA Kreditversicherungs-Aktiengesellschaft, Vienna OC x Dec ,639 13,996 PRISMA Risikoservice GmbH, Vienna OC x Dec ,525 2,956 PRISMA Risk Services d.o.o., Belgrade OC x Dec CCP Austria Abwicklungsstelle für Börsengeschäfte GmbH, Vienna OC x Dec Unconsolidated subsidiaries, held at amortised cost OeKB Business Services GmbH, Vienna OC x Dec , OeKB Zentraleuropa Holding GmbH, Vienna OC x Dec , Investments in other unconsolidated companies, held at amortised cost AGCS Gas Clearing and Settlement AG, Vienna OC x Dec , APCS Power Clearing and Settlement AG, Vienna OC x Dec , CISMO Clearing Integrated Services and Market Operations GmbH, Vienna OC x Dec ,329 2,529 ECRA Emission Certificate Registry Austria GmbH, Vienna OC x Dec Einlagensicherung der Banken und Bankiers Gesellschaft m.b.h., Vienna OC x Dec EXAA Abwicklungsstelle für Energieprodukte AG, Vienna OC x Dec , Garage Am Hof Gesellschaft m.b.h., Vienna OC x Dec ,316 1,129 OeMAG Abwicklungsstelle für Ökostrom AG, Vienna OC x Dec , CEESEG Aktiengesellschaft (former Wiener Börse AG), Vienna OC x Dec ,024 12,890 Budapest Stock Exchange Ltd., Budapest OC x Dec ,346 3,575 Link-up Capital Markets S.L., Spain OC x Dec ,258 (2,355) 1 Other Company (OC) refers to companies that are neither Credit Institutions nor Financial Institutions by the definitions of the Austrian Banking Act. 2 UGB refers to the Austrian Commercial Code. 72

75 Notes to the consolidated financial statements (29) Other assets EUR thousand 31 Dec Dec Sundry assets 16,510 15,693 Positive fair values of derivative contracts 4,865,489 5,567,303 Prepayments and accrued income 31,173 46,233 Total 4,913,172 5,629,229 An analysis of the derivative positions by remaining term to maturity is set out in note 46. (30) Deposits from banks EUR thousand Repayable on demand Other deposits 31 Dec Dec Dec Dec Domestic banks 65, ,496 1,062,276 16,150 Foreign banks 99,565 83, , ,047 Total 164, ,624 1,527, ,197 (31) Deposits from customers EUR thousand Domestic customers Foreign customers 31 Dec Dec Dec Dec Public sector 531, ,155 1,528 2,201 Other 93,142 73,960 47,987 32,667 Total 624, ,115 49,515 34,868 73

76 Notes to the consolidated financial statements (32) Debt securities in issue EUR thousand Debt securities in issue Of which listed 31 Dec Dec Dec Dec Bonds issued 20,988,119 23,054,120 20,988,119 23,054,120 Other debt securities in issue 6,293,490 10,296,272 Total 27,281,609 33,350,392 20,988,119 23,054,120 Debt securities in issue included EUR 17,760.9 million (2011: EUR 20,519.7 million) of liabilities at fair value through profit or loss, for which the amount repayable on maturity was EUR 15,187.3 million (2011: EUR 17,443.2 million). The redemption amount of debt securities in issue maturing in 2013 is EUR 10,204.0 million (2012: EUR 14,104.5 million). (33) Provisions EUR thousand 1 January 2012 Amounts used and release Additions 31 December 2012 Movement in provisions in 2012 Employee benefit provisions 111,886 (4,441) 10, ,454 Other provisions 556,988 (8,258) 193, ,463 Total 668,874 (12,699) 203, ,917 Included in employee benefit provisions are provisions for vacation pay and similar obligations in the amount of EUR 4.5 million (2011: EUR 4.3 million). Movements in provisions for long-term employee benefits were as follows: 74

77 Notes to the consolidated financial statements EUR thousand Pension Termination benefits Total 2012 Total 2011 Movement in non-current employee benefit provisions Present value of defined benefit obligation (DBO), representing the total long-term employee benefit provisions at 1 January 84,016 23, , ,395 Service cost ,529 1,189 Interest cost 3,577 1,062 4,639 3,776 Benefits paid 3, ,210 4,291 Actuarial gain or loss 3,208 (128) 3,080 2,447 DBO at 31 December 88,051 24, , ,516 Long-term employee benefit provisions at 31 December 88,051 24, , ,516 EUR thousand Historical information on DBO Pension provision 84,016 81,368 79,027 75,648 Termination benefit provision 23,500 23,027 21,604 20,999 Long-term employee benefit provisions 107, , ,631 96,647 The pension provisions relate to obligations under direct pension commitments or under single-employee agreements. In the prior years, the pension obligations for a portion of the staff were transferred to a pension fund under a defined contribution plan. In connection with this, contributions in the amount of EUR 0.8 million (2011: EUR 0.7 million) were paid to the pension fund in The pension provisions include entitlements of the other employees, and of former employees who were already receiving a pension before the time of the transfer, as well as disability pension obligations in respect of all present employees. The full change in non-current employee benefit provisions is recorded within staff costs. Staff costs also included the contributions of EUR 0.1 million to the termination benefit fund (2011: EUR 0.1 million). The item other provisions at 31 December 2012 included an interest rate stabilisation provision of EUR million (2011: EUR million) made in order to stabilise the interest rates for the Export Financing Scheme. Information on the measurement of this provision is provided in note 11. In the year under review, an addition of EUR million to the interest rate stabilisation provision was made from interest income and an amount of EUR 58.7 million was used from valuation results. 75

78 Notes to the consolidated financial statements (34) Tax assets and tax liabilities Tax assets and liabilities respectively include deferred tax assets and deferred tax liabilities arising from temporary differences between the IFRS carrying amounts and the corresponding tax base in Group companies. No deferred taxes were recognised for any interests in companies. Deferred taxes arose on the following items: EUR thousand Deferred tax assets Deferred tax liabilities Deferred tax assets and liabilities 31 Dec Dec Dec Dec Securities 6,604 5,228 19,671 14,605 Employee benefit provisions 11,590 10,735 Other provisions 49,256 42,899 Total 67,450 58,862 19,671 14,605 Net deferred taxes 47,779 44,257 (35) Other liabilities EUR thousand 31 Dec Dec Negative fair values of derivative contracts 1,465,756 1,711,009 Accruals and deferred income 32,972 36,117 Sundry liabilities 73,751 36,336 Total 1,572,479 1,783,462 Accruals and deferred income included deferrals of up-front payments received for services in connection with the export guarantee business, and deferrals related to the issue of debt securities by the Group. (36) Capital and capital management The share capital of EUR 130,000,000 is divided into 880,000 no-par-value shares. These registered ordinary shares with restricted transferability are represented by provisional share certificates made out in the name of each individual shareholder. OeKB AG is the parent institution of the OeKB banking group for the purposes of section 30 Austrian Banking Act. The regulatory capital resources of the OeKB Group as determined under the Banking Act showed the following composition at 31 December: 76

79 Notes to the consolidated financial statements EUR thousand Regulatory capital requirement under section 22 Austrian Banking Act Risk-weighted assets (based on Standardised approach to credit risk) 349, ,486 Trading book Total risk-weighted assets 349, ,486 Regulatory capital requirement Banking book 1 27,935 23,959 Foreign exchange risk 7,859 7,133 Operational risk (Basic Indicator approach) 24,011 24,089 Total regulatory capital requirement 59,805 55,181 Consolidated regulatory capital resources under section 24 Austrian Banking Act Paid-up share capital 130, ,000 Reserves (including goodwill or gains on acquisition) 273, ,675 Non-controlling interests 3,026 3,026 Intangible assets (1,058) (805) 50% deductions under section 23(13)4a Banking Act (investments in insurance companies) (8,049) (8,049) Tier 1 capital 397, ,847 Tier 2 capital (reserve for general banking risks under section 57 Banking Act) 131, ,662 50% deductions under section 23(13)4a Banking Act (investments in insurance companies) (8,050) (8,050) Total regulatory capital resources 521, ,459 Surplus regulatory capital 461, , % of total risk-weighted assets. The resulting consolidated capital adequacy ratio (regulatory capital resources as a percentage of total riskweighted assets) at the end of the financial year was 149.3%, compared to 163.8% at the end of The consolidated Tier 1 capital ratio was 113.8%, compared to 122.8% one year earlier. The high excess cover was reflected in a cover ratio (capital resources as a percentage of the capital requirement) of 871.5% (2011: 888.8%). Section 3 Austrian Banking Act exempts OeKB AG in respect of transactions related to export promotion activities under the Export Guarantees Act and the Export Financing Guarantees Act from the requirements on solvency (under sections 22 to 22q Austrian Banking Act), on liquidity, on open foreign currency positions and on large-scale investments (under sections 25 to 27 Austrian Banking Act). The banking group as defined under section 30 Austrian Banking Act, unlike the IFRS basis of consolidation, does not include the investments in insurance companies. The strategic aim of capital management in the OeKB Group is to ensure a sustained stable capital base. There were no material changes in capital management. At all times during the reporting period, the Group satisfied the capital requirements of the national supervisor. The regulatory capital requirement for credit risk is determined in accordance with the provisions of section 22a Austrian Banking Act (Standardised approach to credit risk). The capital required to be held for operational risk is determined by the Basic Indicator approach under section 22j of the Act. The banking group does not hold a trading book. At Group level, the risks are aggregated in accordance with the concept of economic capital. Through the analysis of risk-bearing capacity, the economic capital required is compared with the economic capital available, and both measures are monitored. 77

80 Notes to the consolidated financial statements Other information and risk report (37) Information regarding the cash flow statement The cash flow statement shows the cash position and cash flows of the OeKB Group. The cash position recorded, in the narrow sense, consists of cash and balances with central banks. For credit institutions, the cash flow statement has very limited relevance. The cash flow statement is neither a substitute for liquidity planning, nor is it used in managing liquidity risks. (38) Analysis of remaining maturities EUR thousand Repayable on demand Not more than 3 months Over 3 months but not more than 1 year Over 1 year but not more than 5 years Over 5 years Total Residual maturities at 31 December 2012 Loans and advances to banks 9,697 3,875,754 6,623,115 10,212,593 3,827,866 24,549,025 Loans and advances to customers 1, , , , ,579 1,526,590 Securities at fair value through profit or loss 311,717 24, , , ,929 1,470,566 Total 322,939 4,283,393 7,452,005 10,951,470 4,536,374 27,546,181 Deposits from banks 164, ,835 12, ,131 19,000 1,692,681 Deposits from customers 649,991 24, ,257 Debt securities in issue 3,924,549 5,419,880 14,628,690 3,308,490 27,281,609 Total 814,706 4,597,384 5,431,880 15,452,821 3,351,756 29,648,547 EUR thousand Repayable on demand Not more than 3 months Over 3 months but not more than 1 year Over 1 year but not more than 5 years Over 5 years Total Residual maturities at 31 December 2011 Loans and advances to banks 15,466 3,382,231 8,702,919 12,127,297 4,508,875 28,736,788 Loans and advances to customers 4, , , , ,737 1,409,686 Securities at fair value through profit or loss 283,876 50,478 54, , ,301 1,447,265 Total 303,822 3,926,014 9,250,683 12,792,307 5,320,913 31,593,739 Deposits from banks 557, ,422 10,000 2,775 10, ,821 Deposits from customers 577,875 23, ,983 Debt securities in issue 8,936,703 5,508,337 14,413,564 4,491,788 33,350,392 Total 1,135,499 9,314,125 5,518,337 14,416,339 4,524,896 34,909,196 78

81 Notes to the consolidated financial statements The remaining maturity is the period from the balance sheet date to the contractual maturity date of the asset or liability; in the case of instalments, the remaining maturity is determined separately for each instalment. Accrued and deferred interest is assigned to the maturity class of Not more than 3 months. (39) Loans and advances to and deposits from joint ventures, unconsolidated subsidiaries and other investees EUR thousand 31 Dec Dec Deposits Deposits from customers Joint ventures and unconsolidated subsidiaries 53,370 38,027 Unconsolidated other investees 12,469 9,457 (40) Subordinated assets The balance sheet contains no subordinated assets. (41) Assets pledged as collateral EUR million Securities pledged as collateral (market value) With OeNB for tender 5, ,398.9 For trading on futures (EUREX) For energy trading (ECC) 6.8 For stock exchange trading in Vienna (CCPA) For EUREX Repo platform Collateral for credit risks of derivatives transactions Collateral pledged Collateral received (42) Contingent liabilities and commitments The off-balance sheet contingent liabilities of EUR 87.7 million (2011: EUR 36.3 million) related to guarantees given by Oesterreichische Entwicklungsbank AG. At the balance sheet date the OeKB Group had total undrawn credit commitments of EUR 3,224.6 million (2011: EUR 3,847.9 million). 79

82 Notes to the consolidated financial statements (43) Sundry off-balance sheet obligations As part of the deposit insurance system operated by the Vienna-based Banken and Bankiers GmbH, in accordance with section 93 Austrian Banking Act, OeKB and Exportfonds are required to guarantee a proportionate amount of deposits. Obligations arising under leases (all of which are operating leases) and rental agreements for 2013 amount to EUR 1.6 million (at the end of the prior year the obligations for 2012 were EUR 1.5 million). The corresponding obligations for the five-year period from 2013 to 2017 were EUR 9.2 million (at the end of the prior year the obligations for the five-year period from 2012 to 2016 were EUR 9.2 million). Rent paid for 2012 was EUR 1.5 million (2011: EUR 1.4 million). (44) Fiduciary assets and liabilities EUR thousand 31 Dec Dec Fiduciary positions recognised in the balance sheet Loans and advances to banks 13,266 14,631 Loans and advances to customers Other assets 50,857 11,205 Fiduciary assets 65,113 26,826 Deposits from banks Deposits from customers 64,123 25,836 Fiduciary liabilities 65,113 26,826 Off-balance sheet fiduciary transactions amounted to EUR 16.3 million (2011: EUR 16.6 million). This item consists largely of development-aid credits processed on behalf of the Republic of Austria. (45) Supplementary information on assets and liabilities under the Austrian Banking Act EUR thousand 31 December December 2011 Assets Liabilities Assets Liabilities Denominated in foreign currency 1,654,239 18,887,301 2,192,347 20,974,661 Issued or originated outside Austria 3,156,724 25,287,765 3,606,219 30,766,514 80

83 Notes to the consolidated financial statements (46) Derivative financial instruments EUR thousand Notional amount at 31 Dec by remaining maturity Not more than 1 year Over 1 year but not more than 5 years Over 5 years Total 2012 Positive fair values Negative fair values Interest rate derivatives Interest rate swaps (OTC) 3,941,404 13,621,631 1,073,330 18,636, , ,035 Currency derivatives Currency swaps (OTC) 6,173,130 7,606, ,415 14,308,787 4,331,636 1,060,721 Foreign exchange transactions 145, , Total 10,259,903 21,227,874 1,602,745 33,090,522 4,865,489 1,465,756 EUR thousand Notional amount at 31 Dec by remaining maturity Not more than 1 year Over 1 year but not more than 5 years Over 5 years Total 2011 Positive fair values Negative fair values Interest rate derivatives Interest rate swaps (OTC) 4,800,361 14,178,044 2,873,212 21,851, , ,439 Currency derivatives Currency swaps (OTC) 9,759,521 6,842,742 1,294,812 17,897,075 4,944,680 1,250,571 Foreign exchange transactions Total 14,559,881 21,020,786 4,168,024 39,748,691 5,567,303 1,711,009 (47) Fair value of financial instruments The table below presents the carrying amounts and fair values of financial assets and liabilities, analysed by category. Fair values are determined as described in note 6. The market values of loans and advances to banks and customers and of deposits from banks and customers are based on inputs that in the case of assets and of liabilities are directly or indirectly observable. The same is true of the market values of derivatives reported in other assets and other liabilities (level 2). The determination of the market values of other financial instruments is based on prices quoted on an active market (level 1). No reclassifications occurred in the financial year or prior year. 81

84 Notes to the consolidated financial statements EUR thousand Loans and receivables Other financial Financial instruments Total 2012 instruments, at fair value at amortised cost Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value Fair value 2012 Assets Cash and balances at central banks 124, , , ,266 Loans and advances to banks 24,549,025 25,439,208 24,549,025 25,439,208 Loans and advances to customers 1,526,590 1,553,261 1,526,590 1,553,261 Allowance for impairment losses on loans and advances (401) (401) (401) (401) Other financial instruments 19,613 30,743 1,470,566 1,470,566 1,490,179 1,501,309 Other assets 47,683 47,683 4,865,489 4,865,489 4,913,172 4,913,172 Liabilities Deposits from banks 1,692,681 1,709,884 1,692,681 1,709,884 Deposits from customers 674, , , ,257 Debt securities in issue 9,520,739 10,367,779 17,760,870 17,760,870 27,281,609 28,128,649 Other liabilities 106, ,724 1,465,756 1,465,756 1,572,479 1,572,479 EUR thousand Loans and receivables Other financial Financial instruments Total 2011 instruments, at fair value at amortised cost Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value Fair value 2011 Assets Cash and balances at central banks 586, , , ,152 Loans and advances to banks 28,736,788 29,418,152 28,736,788 29,418,152 Loans and advances to customers 1,409,686 1,427,879 1,409,686 1,427,879 Allowance for impairment losses on loans and advances (259) (259) (259) (259) Other financial instruments 20,844 31,975 1,447,265 1,447,265 1,468,109 1,479,239 Other assets 61,926 61,926 5,567,303 5,567,303 5,629,229 5,629,229 Liabilities Deposits from banks 957, , , ,019 Deposits from customers 600, , , ,983 Debt securities in issue 12,830,703 13,700,889 20,519,689 20,519,689 33,350,392 34,220,578 Other liabilities 72,454 72,454 1,711,009 1,711,009 1,783,463 1,783,463 82

85 Notes to the consolidated financial statements (48) Risk management Risk management essentially, the identification, monitoring, assessment, reporting, planning and treatment of risks consists of important processes designed to ensure the security and profitability of the enterprise in the interest of customers and owners. Every risk assumed by the OeKB Group must be consistent with the Executive Board s risk policy and strategy, which aims to assure a sustained stable return on equity through a conservative approach to all risks, including financial risks and risks arising from business operations in general. The Internal Capital Adequacy Assessment Process (ICAAP) implemented in the OeKB Group serves to assure the maintenance of the defined bank-specific level of capital adequacy and, as a measurement and control tool, forms an integral part of the management process. The key variable in the measurement and management of risk is economic capital; it is calculated using the concept of Value at Risk (VaR) over a one-year time horizon. In the ICAAP, credit risk, market risk, operational risk and business risk are taken into account quantitatively, through the calculation of economic capital (business risk is considered to be the risk that earnings will suffer as a result of changes in the business environment such as markets, customer behaviour or technology or of inappropriate or inadequately implemented business strategy). The ICAAP also covers liquidity risk, which is measured and managed primarily by means of the survival period. The survival period is the period for which the OeKB Group s liquidity buffer is sufficient to allow the Group to operate without restricting its business. The survival period is determined on the basis of cash-flow and funding projections (using idiosyncratic and systemic stress assumptions) that are compared against the counterbalancing capacity. For each risk type, the table below shows the minimum capital required under the Austrian Banking Act and the corresponding Values at Risk based on the ICAAP: EUR thousand Value at Risk under ICAAP Regulatory capital requirement under section 22 Banking Act Risk exposure and capital requirement 31 Dec Dec Dec Dec Credit risk 29,173 36,749 27,935 23,959 Commodity and foreign exchange risk 26,941 36,220 7,859 7,133 Other market risk in the banking book 37,326 26,758 Other risks 16,095 17,280 Operational risk 30,552 33,478 24,011 24,089 In the calculation of risk coverage, the economic capital required is compared with the economic capital available. This is done in a multi-tier system addressing various risk coverage objectives. The available capital is allocated to market risk and credit risk in proportion to the respective economic capital required. In key areas, additional limits are in place at the operations level. 83

86 Notes to the consolidated financial statements Risk assessment is performed at least quarterly. Credit risks that are individually material are measured using Credit Value at Risk (CVaR); individually material market risks are measured using VaR. Credit and market risks that are not individually material are assessed by allowing a lump sum for them. The liquidity risk of potentially higher borrowing costs, and other risks (including business risk), are recognised through flat percentage-based amounts. The assessment of operational risk employs the Basic Indicator approach, expanded by a distribution assumption for estimation at a high confidence level. The systems used for this purpose are SAP, QRM, Bloomberg and proprietary systems. Risk management is supported by the system of internal control, which serves to assure compliance with rules, standards and risk mitigation procedures. Extensive automated IT general controls, as well as reviews performed particularly by the Internal Audit department, contribute to the effectiveness of this internal control system. In 2012 the further development of the risk measurement and control processes focused on the limits system and credit risk management. This included a complete revision of the rating and mapping methodology. Priority was also given to the preparations for Capital Requirements Directive IV (CRD IV) and the Capital Requirements Regulation (CRR), as well as changes in the reporting system. These themes are expected to remain paramount in As an example of improvements in operational risk management, the product launch process was restructured and a guideline prepared for it. Risk management organisation Against the backdrop of the OeKB Group s major business activities and its specific business and risk structure, the bank has adopted a clear functional organisation of the risk management process; well-defined roles are assigned to the following organisational units: Executive Board: In accordance with the responsibilities prescribed for it in the Austrian Banking Act, the Executive Board sets the Group s risk policy and strategy. As part of the Group s enterprise-wide risk management, the Executive Board, working with the Risk Management Committee, determines the acceptable aggregate amount of risk (based on the calculated capacity to assume risk), approves risk limits derived from this aggregate and decides on the procedures for risk monitoring. Risk Management Committee: The function of the Risk Management Committee is derived from the risk policy and consists of strategic risk control and risk monitoring. The Risk Management Committee is the primary recipient of the risk reports, monitors and manages the risk profiles for the individual risk types, and, as needed, decides actions based on the risk reports. The committee consists of the Executive Board, the Chief Risk Officer (CRO) and Deputy CRO, the Operational Risk Manager (ORM), Financial Risk Manager (FRM), internal control system officer and representatives from the Accounting department and business segments. Chief Risk Officer: The implementation of the measures decided by the Risk Management Committee is overseen by the Chief Risk Officer, supported by the Financial Risk Manager, the Operational Risk Manager and the Chief Information Security Officer (CISO). Risk Controlling department: The Risk Controlling department is responsible for the measurement and assessment of financial risks, the operating-level financial risk accounting and the implementation and monitoring of internal controls in respect of financial risk, including the monitoring of internal limits and the actual implementation of the Internal Capital Adequacy Assessment Process. 84

87 Notes to the consolidated financial statements Operational risk management: The directions on the management of operational risk are implemented in the Group s business operations by the Organisation, Construction, Environmental Issues and Security department (known as OBUS), with the exception of information security matters, which are the responsibility of the Chief Information Security Officer. The activities falling into the areas of operational risk management, of information security and of the internal control system officer are subject to ongoing coordination. Asset and Liability Management Committee: The principal responsibilities of the Asset and Liability Management Committee (ALCO) are to manage the balance sheet structure and market risks and to set lending rates under the Export Financing Scheme. Internal Audit: The organisational units involved in the risk management process and the procedures applied are regularly reviewed by the Internal Audit department. Supervisory Board: The Supervisory Board has oversight of all risk management arrangements in the OeKB Group and receives quarterly reports on the Group s risk situation. These risk reports present in detail the financial risk situation and the economic capital for operational risk. The Audit Committee of the Supervisory Board also monitors the effectiveness of the system of internal control. (49) Market risk Market risks arise from a potential change in risk factors that may lead to a reduction in the market value of the financial items. The specific types of market risk distinguished are interest rate risk, foreign exchange risk and equity price risk. The Group s market risks relate only to banking book positions, as no trading book is maintained. Risks are assessed by using the Value-at-Risk concept for estimating maximum potential losses. In addition, interest rate and exchange rate sensitivity ratios are determined, and the effects of extreme market movements are calculated through stress tests using two methods. First, the economic capital determined through the ICAAP is tested under various scenarios (expected shortfall, credit migration, and correlations). Additionally, for market risks, the impact of several specific scenarios is calculated (for example, historical contingencies such as Black Monday and September 11, 2001). The largest amount of economic capital arises in connection with the Group s investment portfolio (see note 26, Other financial instruments), which had a composition of 17.0% investment funds and 83.0% bonds owned by the Group. Of these bonds, EUR million served as a liquidity buffer in the Export Financing Scheme; the buffer s interest rate risk is hedged by interest rate swaps. The Value at Risk of the rest of the investment portfolio is determined monthly. At 31 December 2012 the VaR for general and specific interest rate risk amounted to EUR 39.6 million for a holding period of one year at a 99% confidence level. The interest rate risk is also monitored by using stress scenarios. Thus, it was calculated that a positive interest rate shock of 200 basis points would have led to a change of EUR 22.5 million in the market value of the banking book. In the risk management of the investment portfolio, the in-house portfolio management is supported by an external overlay manager. Exchange rate risks exist above all in connection with raising long- and short-term funds for the Export Financing Scheme. These risks are secured by an exchange rate guarantee of the Republic of Austria under the Export Financing Guarantees Act. An interest rate stabilisation provision is maintained against interest rate risks under the Export Financing Scheme. 85

88 Notes to the consolidated financial statements The following table shows the interest rate sensitivity gap analysis for the OeKB Group (including the Export Financing Scheme). EUR thousand Not more than 3 months Over 3 but not more than 6 months Over 6 months but not more than 1 year Over 1 year but not more than 5 years Over 5 years Total carrying amount Interest rate sensitivity gap analysis at 31 December 2012 Cash and balances at central banks 124, ,266 Loans and advances to banks 12,962, ,198 1,225,183 5,927,230 3,825,483 24,549,025 Loans and advances to customers 1,269, , ,166 4,379 1,526,590 Bonds and other fixed income securities 199, ,350 9, , ,249 1,158,849 Subtotal 14,556,123 1,038,334 1,235,388 6,216,775 4,312,110 27,358,730 Deposits from banks (1,685,700) (5,350) (1,632) (1,692,681) Deposits from customers (647,630) (202) (517) (6,766) (19,141) (674,257) Debt securities in issue (7,470,131) (1,450,480) (3,211,088) (11,065,256) (4,084,654) (27,281,609) Subtotal (9,803,461) (1,456,032) (3,211,605) (11,073,654) (4,103,795) (29,648,547) Effect of derivative contracts (903,298) (710,902) 423,469 1,866,690 (675,959) Total 3,849,364 (1,128,601) (1,552,748) (2,990,189) (467,644) (2,289,817) EUR thousand Not more than 3 months Over 3 but not more than 6 months Over 6 months but not more than 1 year Over 1 year but not more than 5 years Over 5 years Total carrying amount Interest rate sensitivity gap analysis at 31 December 2011 Cash and balances at central banks 586, ,152 Loans and advances to banks 12,153,383 1,638,893 2,705,144 8,201,042 4,038,327 28,736,788 Loans and advances to customers 1,377,290 26, ,311 1,409,686 Bonds and other fixed income securities 189,067 20,500 11, , ,000 1,163,389 Subtotal 14,305,892 1,686,152 2,716,347 8,686,987 4,500,638 31,896,015 Deposits from banks (937,978) (12,068) (5,000) (2,775) (957,821) Deposits from customers (575,270) (208) (541) (7,271) (17,693) (600,983) Debt securities in issue (10,537,336) (2,008,662) (3,441,231) (13,075,349) (4,287,814) (33,350,392) Subtotal (12,050,584) (2,020,938) (3,446,772) (13,085,395) (4,305,507) (34,909,196) Effect of derivative contracts (1,106,332) (2,521,559) 546,604 4,028,687 (947,401) Total 1,148,977 (2,856,346) (183,820) (369,721) (752,270) (3,013,180) 86

89 Notes to the consolidated financial statements Hedging To assist in controlling market risks, the Group employs derivative financial instruments. The derivatives involved are interest rate swaps and cross currency interest rate swaps, which are traded over the counter (OTC) and used largely as hedging instruments for debt securities issued by the OeKB Group. Instead of applying hedge accounting under IAS 39, these hedged financial liabilities are designated at fair value through profit or loss in order to avoid accounting mismatches. The changes in value of the derivative and of the respective hedged liability are thus recorded in the income statement. Credit exposures arising from fluctuations in value are secured with collateral. In 2012 OeKB also prepared for the introduction expected to come with the implementation of Basel III of a central counterparty for derivatives transactions. (50) Liquidity risk Liquidity risk is the risk of not being able to meet present or future payment obligations fully as they fall due. In the wider sense, liquidity risk also includes funding liquidity risk (the risk that funding can be obtained only on unfavourable market terms), and market liquidity risk (the risk that assets can be sold only at a discount). While in the case of potential increases in borrowing costs, the corresponding economic capital is determined and they are thus directly taken into account in the calculation of risk coverage, available liquidity is controlled differently, using a survival period analysis. The goal of the liquidity strategy is to secure sufficient access to required liquidity even in difficult market situations. OeKB s decades-long excellent standing in international financial markets coupled with the high diversification of its funding instruments, markets and maturities and especially the Austrian government guarantee protecting the lenders, combine to facilitate market access for the Group even when markets are under special stress. The funding channels available were further expanded in 2012 by creating access to Eurex Repo in Zurich. The approach to measurement and management of liquidity risk is documented in the liquidity risk management manual. At the core of risk measurement are cash-flow and funding projections based both on idiosyncratic and systemic stress assumptions that are set against the counterbalancing capacity, which is represented primarily by securities eligible for rediscounting by the ECB. Market liquidity risk is taken into account through corresponding haircuts. The average survival period in 2012 determined by this methodology was about four months. OeKB defines the survival period as that period for which the current liquidity buffer is sufficient, under an assumed combination of simultaneous idiosyncratic and systemic stresses, to meet all payment obligations without having to raise additional capital in the financial markets (although the full faith and credit of the Republic of Austria supports such borrowing by OeKB). In a stress period the survival period is thus the time available to take any strategic corrective action necessary. For crisis situations, a liquidity contingency plan is in place. In addition to monitoring the daily liquidity position, long-term liquidity is assessed based on the gap analysis of the maturity profile of assets and liabilities. EUR thousand Not more than 2 years Over 2 years but not more than 5 years Over 5 years but not more than 10 years Over 10 years Liquidity gaps based on long-term asset/liability maturity analysis at 31 December Liquidity gap (454,052) (2,593,777) (3,116,171) (1,234,632) 2,524,007 2,529,704 (1,032,894) (1,227,753) 87

90 Notes to the consolidated financial statements Maturity analysis of liabilities The tables below show the schedule of future cash outflows and inflows based on the nominal amounts of the gross transaction, i.e. without taking netting agreements into account. The mapping into time buckets is based on the contractual maturity structure; liabilities payable on demand are assigned to Not more than 1 month. EUR thousand Net book Total Not more value than 1 month Over 1 but not more than 3 months Over 3 months but not more than 1 year Over 1 but not more than 5 years Over 5 years Liabilities at 31 December 2012 Deposits from banks 1,692,681 1,684, ,715 22, ,632 Deposits from customers 674, , ,733 Debt securities in issue 27,281,609 26,395,146 1,358,117 2,406,198 5,410,081 13,136,095 4,084,654 Undrawn credit commitments and offers 3,081, , , , ,302 34,190 Total 29,648,547 31,806,688 3,187,524 3,317,712 6,409,580 14,773,028 4,118,844 Derivatives 1,465,756 Outflows 9,574,870 1,098,663 1,861,915 2,046,486 4,567,807 Inflows 8,488,339 1,071,377 1,764,034 1,960,806 3,692,123 EUR thousand Net book Total Not more value than 1 month Over 1 but not more than 3 months Over 3 months but not more than 1 year Over 1 but not more than 5 years Over 5 years Liabilities at 31 December 2011 Deposits from banks 957, , ,624 10,000 2,775 Deposits from customers 600, , ,075 Debt securities in issue 33,350,392 32,356,119 2,811,749 5,865,703 5,460,100 13,930,753 4,287,814 Undrawn credit commitments and offers 3,881, ,635 1,302,397 1,386, , ,166 Total 34,909,196 37,755,166 4,743,083 7,168,100 6,856,961 14,540,041 4,446,980 Derivatives 1,711,009 Outflows 9,033, ,781 1,738,764 1,201,091 4,311, ,558 Inflows 7,754, ,196 1,470,571 1,135,903 3,597, ,857 (51) Credit risk Credit risk is the risk of unexpected losses as a result of the default or deterioration in credit quality of counterparties. In view of its business structure, the OeKB Group distinguishes the following types of credit risk: counterparty risk/default risk, investee risk and concentration risk. The critical measure used for credit risk is Credit Value at Risk, representing the difference between an unexpected loss at a 99.98% confidence level and the expected loss associated with the respective default. 88

91 Notes to the consolidated financial statements Counterparties are classified into internal credit rating categories on the basis of external ratings from internationally recognised rating agencies and internal credit ratings. The rating and mapping methodology, at the heart of which is a 22-point internal master scale, was fully revised in The credit exposure of the OeKB Group consists largely of export credits. In keeping with the Group s exacting lending standards, the approval of these loans and commitments is subject to high loan security requirements (such as, notably, guarantees of the Republic of Austria). To secure credit risks in connection with derivative transactions, collateral agreements are concluded with all counterparties, and downgrade trigger provisions are in place with all counterparties. These trigger clauses permit contracts to be assigned to third parties, or to be cancelled, upon a pre-defined deterioration in rating. The entire Export Financing Scheme is treated as investee risk with its own dedicated supply of available economic capital (interest rate stabilisation provision). The distribution of assets in the banking book (including the investment portfolio) across rating categories was as shown in the table below. Guaranteed assets are, to the extent of the guarantee, assigned to the rating category of the guarantor; assets guaranteed by the Republic of Austria are assigned to rating category 1; no credit derivatives are employed. EUR thousand Rating category 1 (AAA/AA) Rating category 2 (A) Rating category 3 (BBB) Rating category 4 (BB) Rating category 5 (B) Rating category 6 (CCC and below) Total carrying amount Credit portfolio by rating category 2012 Cash and balances at central banks 124, ,266 Loans and advances to banks 22,947,179 1,579,665 20, ,842 24,549,025 Loans and advances to customers 1,466,204 38,665 15,854 5,867 1,526,590 Allowance for impairment losses on loans and advances (401) (401) Other financial instruments 1,173,118 58, ,462 2, ,787 1,490,179 Derivatives 3,955, ,671 71,659 4,865,489 EUR thousand Rating category 1 (AAA/AA) Rating category 2 (A) Rating category 3 (BBB) Rating category 4 (BB) Rating category 5 (B) Rating category 6 (CCC and below) Total carrying amount Credit portfolio by rating category 2012 Cash and balances at central banks 586, ,152 Loans and advances to banks 27,693,495 1,042, ,736,788 Loans and advances to customers 1,356,023 34,194 11,900 7,570 1,409,686 Allowance for impairment losses on loans and advances (259) (259) Other financial instruments 1,129,550 90, ,417 22, ,323 1,468,109 Derivatives 4,840, ,299 5,567,303 89

92 Notes to the consolidated financial statements The table below analyses the banking book assets by country category; export credits backed by a guarantee under the Export Financing Act are included under Austria. EUR thousand 31 Dec Dec Credit portfolio by country category Austria 29,434,021 33,814,731 EU (excluding Austria) 2,684,864 3,411,007 Other countries 436, ,040 As at 31 December 2012 the highest exposures within the region EU (excluding Austria) were with the United Kingdom (EUR 1,104.0 million), France (EUR million) and Germany (EUR million). The highest exposures under Other countries were with the United States (EUR million), Australia (EUR 21.0 million) and Norway (EUR 10.3 million). The Group s business operations are subject not only to the regulatory requirements but also to the volume limits set by the Executive Board at the transaction type, portfolio and counterparty level. (52) Operational risk Operational risk is the risk of losses resulting from inadequacy or failure of internal processes, people or systems, or from external events, including legal risks. Standards, rules and processes are derived from the risk policy and documented in the operational risk manual. This also includes emergency management manuals and emergency plans, as well as crisis scenarios, all of which are annually reviewed. The maintenance and evaluation of the loss database on an ongoing basis helps to assure a permanent process of optimisation of operational risks. In view of the high importance of information security, the Group has a dedicated information security officer. Risk mitigation is also promoted by an effective system of internal control. (53) Staff count During the financial year, the Group had an average of 398 employees (2011: 397 employees). The number of employees represents in full-time equivalents. (54) Boards remuneration and loans The following table gives details of the aggregate compensation of the Executive Board and Supervisory Board members and the termination benefits and pension expenses for Executive Board members, key management and other employees (including changes in entitlements and provisions). 90

93 Notes to the consolidated financial statements EUR thousand Boards remuneration and loans Aggregate remuneration Current members of the Executive Board Not disclosed Not disclosed Former members of the Executive Board Members of the Supervisory Board Pension and termination benefit expenses for Executive Board 2,248 2,525 Key management 1,175 1,313 Other employees 6,685 4,427 As permitted under section 266(7)b Austrian Commercial Code, the aggregate remuneration of current Executive Board members is not stated. At 31 December 2012 there were no outstanding loans to members of the Executive Board or Supervisory Board. There were also no guarantees by OeKB for these individuals. There are no management share option plans for the Executive Board or for key managers. Based on the corporate business strategy, and in harmony with the Group s risk policy, the Executive Board of OeKB sets the compensation policy for OeKB. The compensation policy is reviewed annually. The Supervisory Board of OeKB formed a Compensation Committee. This Board committee will review the compensation policy. In implementing the compensation policy, the principle of proportionality was followed by taking into account the size of OeKB AG (about 400 employees), the complexity of the business model and the need for a relatively conservative compensation structure. The human resources strategy seeks to foster sustainability and quality assurance. A key pillar of the HR strategy is to offer appropriate compensation, both for employees and management. Compensation is benchmarked annually against the market. OeKB also takes care to achieve a sound relationship between fixed and variable pay. The design of the variable compensation policy ensures that the incentive structure is aligned with the longterm interests of OeKB. The variable pay achievable represents an appropriate share of total compensation and is based both on individual performance and on the performance of the company or Group against one-year and multi-year targets. The targets are quantitative and measurable and are based on a mix of corporate performance indicators. The performance targets are weighted such that one-third of the bonus pool is determined by corporate earnings, one-third by sustained growth in enterprise value and one-third by risk parameters. For OeKB AG as a whole (all staff, including the Executive Board), the aggregate variable compensation for 2012 amounted to approximately 9% (2011: 9%) of aggregate gross total salaries (including the variable component). For the Executive Board, the individual variable component payable is capped at an upper limit of 40% of the individual s total compensation. From the second tier of management (department heads) on down, the upper limit for the variable component is 20% of individual total compensation. 91

94 Notes to the consolidated financial statements If the variable compensation accrued exceeds 20% of individual total compensation, a deferred-payment process is applied to promote the regulatory values of sustainability and risk awareness. In this case, 40% of the variable compensation is paid out conditionally over a period of five years ( deferred ). Until the actual disbursement of deferred compensation, the beneficiary has only a non-vested future interest in the deferred amount. The annual instalment payable from the deferred amount is reassessed every year. The size of the individual tranches follows the relative movement in Tier 1 capital. In the event of an unfavourable financial position and low or negative profitability, the Executive Board and/or Supervisory Board (Compensation Committee) reserve the right to reduce the current variable compensation and deferred bonus payments. To the extent consistent with the law, this may include the complete cancellation of the current and deferred variable compensation. In 2012, a total of EUR 4,691, (2011: EUR 4,658,597.56) of fixed compensation and EUR 902, (2011: EUR 853,300.00) of variable compensation was paid to 21 senior managers (the Executive Board, department heads and compliance officer). The variable pay represented 16.1% (2011: 15.5%) of total compensation. As permitted under the Data Protection Act, the compensation of the Executive Board, the amount of deferred compensation and any reductions of deferred compensation are not disclosed separately. For senior management and for OeKB s employees in general, the fixed salary represents the major share of total compensation. This leaves scope for a high degree of flexibility regarding the policy for variable compensation, including the possibility of not paying a variable component at all. In keeping with sound and effective risk management, the low ratio of variable to total compensation helps to ensure that no staff member has a bonus-related incentive to take risks that exceed the intended corporate risk appetite or risk tolerance. At OeKB, guaranteed variable pay is not considered compatible with the principle of performance-based compensation and is therefore not used. Comparable policies are in place at Oesterreichische Entwicklungsbank and at Exportfonds. 92

95 Notes to the consolidated financial statements (55) Board members and officials Members of the Executive Board Johannes Attems Rudolf Scholten Members of the Supervisory Board Erich Hampel, Chairman Walter Rothensteiner, 1st Vice-Chairman Franz Hochstrasser, 2nd Vice-Chairman Helmut Bernkopf Peter Bosek Michael Glaser (since 22 May 2012) Dieter Hengl Friedrich Hondl (until 15 March 2012) Reinhard Karl (since 22 May 2012) Michael Mendel (since 22 May 2012) Herbert Messinger (since 18 December 2012) Gernot Mittendorfer (until 22 May 2012) Heimo Penker Christoph Raninger (until 31 October 2012) Angelo Rizzuti Herbert Stepic Susanne Wendler (until 22 May 2012) Robert Zadrazil Franz Zwickl Staff representatives: Martin Krull Erna Scheriau Alexandra Griebl Anish Gupta Christian Leicher Claudia Richter Otto Schrodt Markus Tichy Government commissioners under section 76 Austrian Banking Act Harald Waiglein, Commissioner (since 1 July 2012) Thomas Wieser, Commissioner (until 29 Feb. 2012) Johann Kinast, Deputy Commissioner The above government commissioners are also representatives of the Austrian Minister of Finance under section 6 Export Financing Guarantees Act. Government commissioners under section 27 of the Articles of Association (supervision of bond cover pool) Johannes Ranftl, Commissioner Edith Wanger, Deputy Commissioner (56) Other related party transactions As a specialised institution for export services and capital market services, OeKB engages in many transactions with its shareholders. All these transactions are conducted at arm s length. The following balance sheet items include transactions with related parties of OeKB: 93

96 Notes to the consolidated financial statements EUR thousand 31 Dec Dec Related party transactions with shareholders of OeKB Loans and advances to banks 19,494,938 23,062,464 Other financial instruments 73,428 83,634 Deposits from banks 17,782 13,843 Related party transactions with unconsolidated subsidiaries Deposits from customers 6,360 5,674 Related party transactions with equity-accounted investees Deposits from customers 47,010 32,352 Related party transactions with other investees Deposits from customers 12,469 9,457 There were no transactions with Executive Board or Supervisory Board members. (57) Date of approval for publication The date of submission of these financial statements to the Supervisory Board for approval is 20 March Vienna, 20 February 2013 Oesterreichische Kontrollbank Aktiengesellschaft Signed by the Executive Board Johannes Attems Rudolf Scholten 94

97 95

98 Auditor s Report Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Oesterreichische Kontrollbank Aktiengesellschaft, Vienna, for the year from 1 January 2012 to 31 December These consolidated financial statements comprise the consolidated balance sheet as of 31 December 2012, the consolidated income statement, the consolidated cash flow statement and the consolidated statement of changes in equity for the year ended 31 December 2012 and a summary of significant accounting policies and other explanatory notes. Management's Responsibility for the Consolidated Financial Statements and for the Accounting System The Company s management is responsible for the group accounting system and for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors Responsibility and Description of Type and Scope of the Statutory Audit Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with laws and regulations applicable in Austria and in accordance with International Standards on Auditing, issued by the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC). Those standards require that we comply with professional guidelines and that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Group s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. 96

99 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion Our audit did not give rise to any objections. In our opinion, which is based on the results of our audit, the consolidated financial statements comply with legal requirements and give a true and fair view of the financial position of the Group as of 31 December 2012 and of its financial performance and its cash flows for the year from 1 January to 31 December 2012 in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. Report on the Management Report for the Group Pursuant to statutory provisions, the management report for the Group is to be audited as to whether it is consistent with the consolidated financial statements and as to whether the other disclosures are not misleading with respect to the Company s position. The auditor s report also has to contain a statement as to whether the management report for the Group is consistent with the consolidated financial statements. In our opinion, the management report for the Group is consistent with the consolidated financial statements. Vienna, 20 February 2013 KPMG Austria AG Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Bernhard Gruber ppa Wolfgang Höller Austrian Chartered Accountants This report is a translation of the original report in German, which is solely valid. The financial statements together with our auditor's opinion may only be published if the financial statements and the management report are identical with the audited version attached to this report. Section 281 paragraph 2 UGB (Austrian Commercial Code) applies. 97

100 Oesterreichische Kontrollbank AG Statement by the Board of Executive Directors We confirm to the best of our knowledge that the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group as required by the applicable accounting standards and that the Group directors report gives a true and fair view of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties the Group faces. We confirm to the best of our knowledge that the separate financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the parent company as required by the applicable accounting standards and that the directors report gives a true and fair view of the development and performance of the business and the position of the company, together with a description of the principal risks and uncertainties the company faces. Vienna, 20 February 2013 Oesterreichische Kontrollbank Aktiengesellschaft Board of Executive Directors Johannes Attems Rudolf Scholten

101 Oesterreichische Kontrollbank Aktiengesellschaft Company Financial Report 2012

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103 Oesterreichische Kontrollbank AG Contents Page Management report Economic and capital markets situation and financial results 4 2 Risk management 9 3 System of internal control and of risk managment 13 4 Human resources 14 OeKB AG company financial statements Balance sheet 16 2 Income statement 18 Notes to the company financial statements 1 General information on accounting policies 19 2 Notes to the balance sheet 20 3 Regulatory capital under the Austrian Banking Act 27 4 Notes to the income statement 28 5 Supplementary disclosures 29 Proposal for the appropriation of profit 31 Auditor s Report 32 Legend for data presented in this report Amount is zero. 0 Amount is smaller than half of the stated unit. Totals may not add due to rounding. 3

104 Oesterreichische Kontrollbank AG Management report Management report Economic and capital markets situation and financial results Economic environment in 2012 In 2012 the growth of the world economy slowed visibly: Global economic output rose by a real 3.3%, down from an average annual growth rate of 4.5% in 2010 and Several inhibiting factors coincided in 2012: The euro crisis worsened and the eurozone slid into recession, with real gross domestic product declining by 0.4%. This affected the world economy both directly through foreign trade flows, and indirectly as more and more market participants around the world lost confidence in the effectiveness of economic policy tools. What is more, the drag on world economic growth in 2012 was not exerted only by the eurozone. In the entire OECD region, greater budget consolidation was high on government agendas last year and was pursued largely by cutting expenditures. Estimates put the growth reduction in the OECD at about 1 to 1.5 percentage points for Additionally, economic activity in the emerging markets the prime movers of the world economy slowed unexpectedly sharply last year, caused both by weaker exports and the past several years of restrictive economic policies. Along with the global economy as a whole, world trade also lost momentum significantly in the year under review. The World Trade Organization, the WTO, expects that growth in world trade fell by half, from 5% in 2011 to 2.5% in One of the reasons for this drop is the more cautious lending by banks, especially for project and trade finance worldwide. Particularly the euro area banks, which according to the World Bank accounted for 36% of worldwide trade finance in 2011, noticeably reduced their trade financing in Although non-european banks were able to make up some of the credit shortfall created in regions such as Asia by reduced financing from European banks, the global volume of trade finance in the first nine months of 2012 as reported by data vendor Dealogic slumped by 15% compared with the same period one year earlier. Likewise, the worldwide volume of guarantees provided by export credit agencies fell by 13% in the first three quarters of the year. The global economic trend in 2012 varied by region: While the eurozone slipped into recession, economic growth in the United States held up well despite drought-related crop losses and the destruction wrought by Hurricane Sandy: The OECD is estimating that real US economic output grew by 2.2%, slightly more than the rate of 1.8% reached in Similar to the eurozone, in the USA the crucial requirement for lasting future growth is the restoration of sustainable public finances. After lengthy negotiations, a budget compromise was reached in Congress as 2012 turned into 2013, just in time to avoid triggering spending cuts and tax increases totalling USD 600 billion that could have plunged the American economy into recession. Experts now project US economic growth of about 2% in In Japan the first half of 2012 was defined by reconstruction after the seismic disaster of March In the second half of the year, the softening world trade and diminishing domestic demand made themselves felt the Japanese economy. For the full year 2012 the OECD estimates Japan's real economic growth at 1.6%. Japan s budget situation too is critical. In 2012 the budget deficit reached approximately 10% of GDP and the public debt climbed to about 214% of the country s entire economic output. Asia provided less impetus for the world economy in 2012 than in the previous year: According to the Asian Development Bank, the developing Asia region (which consists of 44 emerging markets) recorded economic growth in 2012 of 6%, down from 7.2% in With China and India leading the decline, the region s economic momentum ebbed significantly last year. A similar trend was observed in Latin America s largest economy, Brazil, which decelerated in After already relatively modest economic growth of 2.7% in 2011, GDP expansion slowed further to 1.5% in the year under review. In Europe the economic and debt crisis heated up again in 2012, leading to a GDP contraction of 0.3% in the 27-member European Union. As in the prior years, economic realities were harshest in the southern European periphery. Yet the EU s core too was not spared the consequences of the crisis: While France, for instance, was confronted with a stagnating economy in 2012, the United Kingdom actually went into recession. An economy that proved comparatively resilient was that of Germany, with growth just short of the 1% mark. 4

105 Oesterreichische Kontrollbank AG Management report One of the key reasons for Europe s travails was the high level of uncertainty in the business environment, which made companies quite reluctant to invest. In the southern countries this effect was exacerbated by banks reluctance to lend. However, private consumption too was subdued in 2012 the result not just of high unemployment (at 10.7% in the EU-27) but of the in some cases substantial household debt levels in the crisis countries. On the bright side, exports were a positive driving force. Notably in the first half of the year, shipments to Asia and the Americas increased more strongly than imports. Towards the end of 2012, how-ever, new orders for exports slowed, thus significantly reducing the growth contribution derived from trade with the rest of the world. The euro area was severely affected by the debt problems in Portugal, Italy, Ireland, Greece and Spain. Besides the still precarious state of troubled euro member country Greece, it was above all the ailing Spanish banking system that attracted a spate of negative news headlines. In these five countries another expansion of the austerity programmes was therefore undertaken. In autumn 2012 the calming of financial market jitters was greatly helped by the coming into force of the European Stability Mechanism (the ESM) and the readiness of the European Central Bank to buy government bonds of stricken eurozone countries. Nonetheless, informed commentators agree that there is no way around a structural shift in the countries at the heart of the crisis. The first signs of an economic recovery in the eurozone are therefore not expected until spring 2013 at the earliest. The persistent difficulties in the euro area had ripple effects in Central and Southeastern Europe. Although in 2012 the region as a whole grew somewhat more strongly than Western Europe, there was much heterogeneity between nations. Thus, economic contractions in the year under review occurred in future EU member Croatia, in crisis-ridden Hungary and in Slovenia with its staggering banking problems. Russia, Poland and the Baltics meanwhile reported relatively solid GDP growth as these countries benefit from more stable domestic demand and/or their trade relations are not as exposed to the eurozone. For 2013, economic researchers are predicting an albeit moderate economic recovery for Central and Southern Europe (except Slovenia). Foreign direct investors in Central and Eastern Europe, by contrast, are less optimistic for the future, as demonstrated by the OeKB CEE Business Climate Index. This indicator of business expectations fell in the fourth quarter of 2012 for the second time in succession, pointing to declining optimism about performance in the next six months. The region s high potential, however, remains unquestioned: A glance at the investment strategies shows that most direct investors are maintaining their local presence even in difficult economic times. In Austria, GDP growth in 2012 receded to 0.6%. The economy lost vigour in the second half of the year in particular, due in part to the challenging international environment. Thus, the economic frailty in important European markets like Italy, the Czech Republic and Hungary weighed on exports. The significant rise in exports to non-eu countries only partly offset the drop in intra-eu demand. On balance for 2012, the Austrian Institute of Economic Research (WIFO) predicts slender real growth of 0.8% in merchandise exports. While the investment climate in the year under review was also hurt by the level of uncertainty in Europe, private consumption again had a stabilising effect. Remarkably, inflation pressure decreased from the prior year and prices in Austria, at average inflation of 2.4%, thus were among the most stable in Europe. Conditions in the labour market as well compared favourably to the rest of the region. The Austrian unemployment rate last year by the Eurostat definition was 4.3%. In 2013 joblessness is expected to rise moderately, not least because of the somewhat lacklustre macroeconomic outlook for Austria (with forecast GDP growth of just 1%). 5

106 Oesterreichische Kontrollbank AG Management report International financial markets In the world s financial markets, 2012 was a year of sometimes high volatility. The escalation of the euro crisis, the slowdown in the world economy and world trade, and political tension in the Middle East heightened the global uncertainty and market participants general loss of confidence. However, from the middle of 2012, various measures by central banks, especially the ECB, led to a significant easing of the strain in financial markets. The main events that turned the tide included the decision to conduct Outright Monetary Transactions, the establishment of the European Stability Mechanism, initiatives to strengthen financial stability through a banking union, the reaching of an agreement on the bailout for Greece, and generally the monetary policy easing in the European core markets, the USA, Japan and emerging markets. Heartened by these measures, equity markets rallied vigorously. For the year as a whole, important stock indices such as the S&P 500 and the Euro Stoxx 50 registered gains of 13% to 14%, and the Nikkei 225 even rose by 23%. In bond markets, long-term government bond yields tended to fall, with some countries instruments reaching record lows. Thus, in July 2012, yields of 10-year US Treasury notes were at their lowest level in over 200 years. In Europe the countries which had been hit hardest by the crisis also saw bond yields decline, along with spreads of credit default swaps: Between the end of August and early December, yields of Greece s long-term sovereign debt instruments fell by more than 800 basis points, while Portugal s saw a decrease of 184, Spain's declined by 148 and Italy s eased by 141 basis points. Austrian financial market trend for the index. At the end of 2012 the ATX stood at 2, points, a gain of 26.9% for the year. On the other hand, the all-time high around 5,000 marked in summer 2007 remained a distant memory. In 2012 the Vienna stock exchange struggled with receding turnover and falling liquidity. The year s average monthly trading volume of EUR 3.0 billion was well below the 2011 figure of EUR 5.0 billion. In equity corporate actions as well, market activity was limited: 2012 brought only three capital increases and no initial public offering. In a striking trend, overall, barely one-fifth of equity deals in Austrian securities now occur on the exchange. To save expenses and by-pass regulations, most transactions are already executed off exchange. The picture was much more positive in the Austrian bond market, particularly for corporate bonds. In total last year, 29 corporate bonds were placed with a volume of EUR 5.5 billion, further improving on the already strong prior year s 23 bond issues worth a total of EUR 3.3 billion. As the cost of bank credit has risen with banks' own higher borrowing costs and more stringent capital and liquidity requirements, companies are increasingly turning to the capital market for funding. Regarding government bonds, investors continue to see Austrian treasury instruments as a safe haven. Thanks to comparatively good fundamentals, the yield for the country s ten-year federal bonds eased in 2012 from 2.9% to 1.75%. As a result the Republic of Austria was able to borrow relatively inexpensively, despite the loss of the top rating from bond rating agency Standard & Poor s. The favourable conditions are illustrated by the yield spread to the German benchmark 10-year Bund, which in 2012 narrowed from 107 to 43 basis points. The Austrian equity market experienced significant swings in 2012, as documented by the performance of the ATX. After a strong advance in the first quarter, Austria s headline blue chip index lost considerable ground in the middle of the year amid the general state of trepidation in financial markets. Only in the second half of the year did equity investors slowly regain their confidence, driving a continual rising 6

107 Oesterreichische Kontrollbank AG Management report Financial results in 2012 The only slight Austrian export growth in 2012 showed in the amount of funding provided under OeKB s Export Financing Scheme. Thus, the EUR 6.8 billion of loans disbursed were exceeded by repayments of EUR 10.4 billion received. The resulting decrease in net export loans outstanding, despite positive one-off effects from early loan repayments, was reflected in net interest income, which amounted to EUR 87.5 million in the year under review (2011: EUR 89.8 million). Income from securities and investees, at EUR 7.9 million, was EUR 1.0 million more than the year-earlier result of EUR 6.9 million, owing largely to an increase in dividends from the investments in private credit insurance companies. The turmoil in capital markets and the resulting lower trading volumes led to a slight dip in account and transaction fees, while the financial data service and notification office benefited from an increase in demand. A small increase was also seen in the income from fees for the processing of export guarantees on behalf of the Austrian government and for administering the guarantees under the Corporate Liquidity Support Act (ULSG). In total, OeKB recorded net fee and commission income of EUR 44.8 million in 2012 (2011: EUR 42.3 million). Net expense from financial operations was essentially stable compared with one year earlier. Other operating income, at EUR 9.5 million, represented mainly service fees and staff costs (for seconded staff) charged to subsidiaries. Total operating income was thus EUR million (2011: EUR million). Within administrative expenses of EUR 73.4 million (2011: EUR 71.2 million), there were increases both in staff costs and other administrative expenses. Most of the rise in staff costs was attributable to the change in discount rates for pension and termination benefit provisions. The increase in other administrative expenses, at 1.6%, was held below the rate of inflation. As the additional office space from the top-floor expansion at the Strauchgasse 1-3 address was taken into use in 2012, depreciation and amortization of noncurrent assets increased as previously predicted, by about EUR 0.5 million. Operating expenses totalled EUR 79.4 million, which was EUR 2.9 million more than the prior-year level of EUR 76.5 million. The operating profit of EUR 70.3 million in 2012 represented a reduction of 2.1% from the prior year. The significant net gain of EUR 8.4 million on disposal and valuation of loans, advances and securities was strongly driven by the price appreciation of bonds, which was realised on redemption because of the conservative measurement of non-current assets at the lower of cost or market value. In measuring interests in subsidiaries and other investees in 2012, an impairment charge of EUR 1.2 million was recognised on the investment in the Budapest Stock Exchange. This resulted both from the volatility of the Hungarian forint against the euro and from reduced income expectations in light of the difficult economic and political situation in Hungary. Profit before tax amounted to EUR 77.4 million (2011: EUR 59.1 million). After income tax, profit for the year of EUR 59.5 million was substantially higher than the prior year s EUR 44.9 million. In view of the coming more stringent regulatory capital requirements under Basel III, OeKB transferred EUR 29.2 million to reserves in 2012 (2011: EUR 24.6 million) to strengthen the capital base. The reported profit available for distribution was EUR 30.3 million, up from EUR 20.3 million. To conclude the review of the income statement, as a result of positive one-time effects from early loan repayments, the decrease in income from the Export Financing Scheme was less pronounced than had been expected at the beginning of the year. The result on disposal and valuation of loans, advances and securities also improved markedly. 7

108 Oesterreichische Kontrollbank AG Management report At 31 December 2012, liquid assets in the form of balances at central banks stood at EUR million (2011: EUR million). Correspondingly, the item deposits from banks decreased from EUR million in 2011 to EUR million at the 2012 balance sheet date. Loans and advances to banks rose (as a result largely of higher time deposits) from EUR million in the prior year to EUR million at the end of December The size of OeKB s investment portfolio eased somewhat in 2012 as, amid the uncertainty in financial markets, not all redemption proceeds were reinvested immediately. The portfolio s carrying amount at 31 December 2012, determined by conservative measurement at the lower of cost or market value, was EUR million (2011: EUR million), while the market value was EUR million (2011: EUR million). The liquid assets portfolio, used to support the Export Financing Scheme and consisting of bonds, remained constant at EUR 830 million by nominal value. The balance sheet amount related to export financing decreased in 2012 by EUR 4,405.2 million or 14.3%, to EUR 26,427.6 million. A major reason for this was the decrease in loans and advances to banks. Accordingly, the volume of debt securities in issue was reduced. Total assets at 31 December 2012 amounted to EUR 27,566.5 million (2011: EUR 32,138.5 million). Financial performance indicators The cost/income ratio increased to 53.0% from the prior year s 51.6%, helped mainly by the drop in operating expenses. Available regulatory capital under section 23 Austrian Banking Act increased in 2012 by EUR 28.9 million to a new total of EUR million. The Tier 1 capital ratio (Tier 1 capital under the Banking Act as a percentage of risk-weighted assets) was 108.7% at the end of 2012 (2011: 116.9%) as a consequence of the increased regulatory capital requirement for credit risk. Return on equity (profit for the year as a percentage of Tier 1 capital) increased in 2012 from 12.1% to 14.9% as a result of the higher profit for the year. Non-financial performance indicators are presented in section 4, Human resources. Research and development In view of OeKB s business purpose, no research and development is conducted. Claims for Damages There are two law suits of investors pending who bought certificates issued by OeKB for registered shares of Meinl European Land Ltd. ( MEL ). The law suit served on 30 July 2011 amongst others on OeKB asks for payment of about EUR 2,790,000 and was dismissed by judgment of 24 January 2013 (appeal still possible). The second law suit for damages is a model law suit claiming for payment of around EUR 48,500. It is based on the grounds that OeKB as issuer of the MEL certificates did not arrange for an ad-hoc notice pursuant to the Stock Exchange Act on the share-buy-back action in spring 2007 undertaken by MEL (nowadays: Atrium). In the evaluation of OeKB s general counsel chances of success of this law suit are practically zero, taking in account judgments of the first and second instance in another model law suit based on other legal grounds and decided in favor of OeKB. Events after the balance sheet date There were no reportable events after the balance sheet date. 8

109 Oesterreichische Kontrollbank AG Management report Outlook for 2013 For the macroeconomy, 2013 will also be a difficult year and the uncertainties will continue, albeit with regional differences. This poses a very real challenge for the Austrian export industry. As in the past, in these demanding times OeKB will continue to offer exporters support both through export credits and through guarantees for the financing of business acquisitions and company start-ups. However, because of the expiry profile of the portfolio of export financing contracts especially as a result of the reduction in financing of direct investments it appears likely that, depending on the actual course of business, credit disbursements will decrease in 2013 by approximately EUR 2.0 billion from the prior year. For 2013, after outstanding results in 2012 that defied expectations, the two credit insurance subsidiaries, OeKB Versicherung AG and PRISMA Kreditversicherungs-AG, also are poised for a difficult 2013 in view of rising insolvency forecasts. The sentiment in financial markets has brightened dramatically since the middle of This improvement was fuelled by market participants' growing view that a break-up of the eurozone is no longer looming (or at least not imminent). The extraordinary monetary policy measures of the ECB above all the announcement of the programme of Outright Monetary Transactions under which the Bank can purchase unlimited quantities of euro area government bonds induced a very positive mood in bond markets. The risk premiums on Austrian treasury instruments contracted, which should further improve conditions for OeKB s access to the market. On balance, OeKB is well prepared to meet the challenges ahead and is expecting a sustained good, stable trend in operating income. 9

110 Oesterreichische Kontrollbank AG Management report 2 Risk management Risk management essentially, the identification, monitoring, assessment, reporting, planning and treatment of risks consists of important processes integrated in the business strategy that are designed to ensure the sustained, long-term security and profitability of the enterprise. Every risk assumed by the Group is taken consciously and is consistent with the Executive Board s risk policy and strategy, which aims to assure a sustained stable return on equity through a conservative approach to all risks, including financial risks and risks arising from business operations in general. The Internal Capital Adequacy Assessment Process (ICAAP) implemented as a measurement and control tool forms an integral part of the management process. Risk measurement is based on the concept of economic capital: In the calculation of risk coverage, the economic capital required is compared to the economic capital available. In 2012 the further development of the risk measurement and control processes focused on refining the limits system and credit risk management. This included a complete revision of the rating and mapping methodology. Priority was also given to the preparations for Capital Requirements Directive IV (CRD IV) and the Capital Requirements Regulation (CRR), as well as changes in the reporting system. These themes are expected to remain central in Risk management organisation Against the backdrop of OeKB s major business activities and its specific business and risk structure, the bank has adopted a clear functional organisation of the risk management process; well-defined roles are assigned to the following organisational units: Executive Board: In accordance with the responsibilities prescribed for it in the Austrian Banking Act, the Executive Board sets the risk policy and strategy. As part of the Group s enterprise-wide risk management, the Executive Board, working with the Risk Management Committee, determines the acceptable aggregate amount of risk (based on the calculated capacity to assume risk), approves risk limits derived from this aggregate and decides on the procedures for risk monitoring. Risk Management Committee: The function of the Risk Management Committee is derived from the risk policy and consists of strategic risk control and risk monitoring. The Risk Management Committee is the primary recipient of the risk reports, monitors and manages the risk profiles for the individual risk types, and, as needed, decides actions based on the risk reports. The committee consists of the Executive Board, the Chief Risk Officer (CRO) and Deputy CRO, the Operational Risk Manager, Financial Risk Manager, internal control system officer and representatives from the Accounting department and business segments. Chief Risk Officer: The implementation of the measures decided by the Risk Management Committee is overseen by the Chief Risk Officer, supported by the Financial Risk Manager, the Operational Risk Manager and the Chief Information Security Officer (CISO). Risk Controlling department: The Risk Controlling department is responsible for the measurement and assessment of financial risks, the operating-level financial risk accounting and the implementation and monitoring of internal controls in respect of financial risk, including the monitoring of internal limits and the actual implementation of the Internal Capital Adequacy Assessment Process. Operational risk management: The directions on the management of operational risk are implemented in OeKB s business operations by the Organisation, Construction, Environmental Issues and Security department (known as OBUS), with the exception of information security matters, which are the responsibility of the Chief Information Security Officer. The activities falling into the areas of operational risk management, of information security and of the internal control system officer are subject to ongoing coordination. Asset and Liability Management Committee (ALCO): The principal responsibilities of the ALCO are to manage the balance sheet structure and market risks and to set lending rates under the Export Financing Scheme. 10

111 Oesterreichische Kontrollbank AG Management report Internal Audit: The organisational units involved in the risk management process and the procedures applied are regularly reviewed by the Internal Audit department. Supervisory Board: The Supervisory Board has oversight of all risk management arrangements at OeKB and receives quarterly reports on OeKB s risk situation. These risk reports present a detailed view of the financial risk situation and the economic capital for operational risk. The Audit Committee of the Supervisory Board also monitors the effectiveness of the system of internal control. 2.1 Market risk Market risks arise from a potential change in risk factors that may lead to a reduction in the market value of the financial items. The specific types of market risk distinguished are interest rate risk, foreign exchange risk and equity price risk. OeKB s market risks relate only to banking book positions, as no trading book is maintained. Risks are assessed by using the Value-at-Risk concept for estimating maximum potential losses. In addition, interest rate and exchange rate sensitivity ratios are determined, and the effects of extreme market movements are calculated through stress tests. The largest amount of economic capital arises from OeKB s own investment portfolio, which had a composition of 51.4% investment funds and 48.6% bonds in the banking book. The Value at Risk is determined monthly. At 31 December 2012 the VaR for general and specific interest rate risk amounted to EUR 39.6 million for a holding period of one year at a 99% confidence level. In the risk management of the investment portfolio, the in-house portfolio management is supported by an external overlay manager. Exchange rate risks exist above all in connection with raising long- and short-term funds for the Export Financing Scheme. These risks are secured by an exchange rate guarantee of the Republic of Austria under the Export Financing Guarantees Act. An interest rate stabilisation provision is maintained against interest rate risks under the Export Financing Scheme (these risks are measured using Earnings at Risk). Derivative financial instruments Derivative financial instruments are used to assist in controlling market risks. The derivatives involved are largely interest rate swaps and cross currency interest rate swaps, which are traded over the counter (OTC) and are used largely as hedging instruments for debt securities issued. Credit exposures arising from fluctuations in value are secured with collateral. In 2012 OeKB also prepared for the introduction expected to come with the implementation of Basel III of a central counterparty for derivatives transactions. Total derivatives positions at 31 December 2012 were as follows (fair values shown represent clean prices): EUR million Interest rate derivatives Notional amount at 31 Dec by remaining maturity Not more than 1 year Over 1 year but not more than 5 years Over 5 years Total 2012 Positive fair values Negative fair values Interest rate swaps (OTC) 3,941 13,622 1,073 18, Currency derivatives Currency swaps (OTC) 6,173 7, , ,061 Foreign exchange transactions Total 10,260 21,228 1,603 33,091 1,064 1,466 11

112 Oesterreichische Kontrollbank AG Management report 2.2 Liquidity risk Liquidity risk is defined as the risk of not being able to meet present or future payment obligations fully as they fall due or of not being able to obtain required liquidity on the terms expected. While in the case of potential increases in borrowing costs, the corresponding economic capital is determined and they are thus directly taken into account in the calculation of risk coverage, adequacy of liquidity is ensured differently, using a survival period analysis. At the core of risk measurement are cash-flow and funding projections based both on idiosyncratic and systemic stress assumptions that are set against the counterbalancing capacity, which is represented primarily by securities eligible for rediscounting by the ECB. For crisis situations, a liquidity contingency plan is in place. In day-to-day operational liquidity management, due regard is had to the diversification of financial instruments, markets and maturities, thus mitigating funding liquidity risk. OeKB s access to liquidity is greatly enhanced by its longstanding strong credit ratings in international financial markets and also, and especially, by the federal guarantee on debt raised under the Export Financing Scheme. 2.3 Credit risk Credit risk is the risk that customers will not meet their payment obligations. It comprises the default risk of individual borrowers and instruments, country risk, settlement risk, investee risk and concentration risk. The credit exposure of OeKB consists largely of export credits. In keeping with OeKB s exacting lending standards, the approval of these loans and commitments is subject to high loan security requirements (such as, notably, guarantees of the Republic of Austria). To secure credit risks in connection with derivative transactions, collateral agreements are concluded with all counterparties, and down-grade trigger provisions permit contracts to be assigned to third parties, or to be cancelled, upon a pre-defined deterioration in rating. The entire Export Financing Scheme is treated as investee risk with its own dedicated supply of available economic capital (interest rate stabilisation provision). Counterparties are classified into internal credit rating categories on the basis of external ratings from internationally recognised rating agencies and internal credit ratings. The rating and mapping methodology, which revolves around a 22-point internal master scale, was fully revised in

113 Oesterreichische Kontrollbank AG Management report 2.4 Operational risk Operational risk is the risk of losses resulting from inadequacy or failure of internal processes, people or systems, or from external events, including legal risks. Enterprise-wide standards, rules and processes are derived from the risk policy and documented in the operational risk manual. This also includes emergency management manuals and emergency plans, as well as crisis scenarios, all of which are annually reviewed. The effectiveness of these plans and procedures is tested in scenario training events. The maintenance and evaluation of the loss database on an ongoing basis helps to assure a permanent process of optimisation of operational risks. In view of the high importance of information security, OeKB has a dedicated information security officer. 3 System of internal control and of risk management Control environment OeKB's system of internal control (the "internal control system", or ICS) has five components: the control environment, risk assessment, control activities, information and communication, and monitoring. The purpose of the internal control system is to support management in implementing effective and continually improving internal controls regarding, first, compliance with applicable legal requirements and with generally accepted accounting standards, second, the reliability of operational information and, third, the effectiveness and efficiency of operational processes. The ICS is intended to ensure compliance with policies and regulations and to create the necessary conditions for specific control activities in the key processes within accounting and financial reporting. The major objectives include safeguarding the presentation of a fair and transparent view of the financial position, results of operations and cash flows. The most fundamental aspect of the control environment is the corporate culture in which management and employees operate. Central organisational principles are the avoidance of conflicts of interest through strict separation of risk origination and risk oversight, the transparent documentation of core processes and control activities, and rigorous application of the principle of dual control (i.e., transactions require approval by at least two individuals). The Internal Audit function independently and regularly verifies the adherence to internal rules, including also the accounting rules. The head of Internal Audit reports directly to the Executive Board and Supervisory Board. Risk assessment The goal of risk management at OeKB is to detect all identifiable risks and, as appropriate, take measures to avert and prevent risks through optimised processes. This also includes the risk of material misstatement of transactions. The risk management system includes all processes that serve to identify, analyse and evaluate risks. Risks are identified und monitored by management, with a focus on risks that are deemed to be material. The internal control activities performed by the responsible functions are regularly evaluated. 13

114 Oesterreichische Kontrollbank AG Management report Control activities OeKB has a governance system that sets out structures, processes, functions and responsibilities within the company. Care is taken to implement all control activities in such a way as to ensure that potential errors or discrepancies in financial reporting are avoided or discovered and corrected. Control activities regarding information technology security represent a cornerstone of the internal control system. Thus, the segregation of sensitive responsibilities is supported by the restrictive assignment of IT privileges. For accounting and financial reporting, OeKB uses SAP ECC 6.0 software. The functioning and effectiveness of this accounting system is assured, among other ways, by automated IT controls integrated in the system. Monitoring Financial statements intended for publication undergo a final review by accounting management staff and the Executive Board before being forwarded to the Audit Committee of the Supervisory Board. By monitoring compliance with all rules and regulations, OeKB aims to achieve maximum assurance of all business processes and Group-wide conformity with policies and procedures. When risks and shortcomings in controls are identified, mitigative measures are promptly developed and their implementation is monitored. To be able to assure compliance with requirements within OeKB, compliance is monitored in accordance with the annual audit plan of the Internal Audit department. Information and communication The Supervisory Board is briefed at least every quarter with a comprehensive report on the balance sheet, income statement and other management accounting and risk data. The Executive Board receives this information in regular, significantly more detailed reports prepared monthly or even more frequently. The Executive Board also has a standing Asset Liability Management Committee and Risk Management Committee that receive, analyse and monitor these data. 4 Human resources In light of its key significance as a hub of Austria s capital market and export industry, OeKB is very aware of the importance of having highly qualified and motivated employees. Service quality and expertise, combined with sustained earnings-, cost- and riskconsciousness, are essential to maintaining and strengthening the competitiveness of the bank and the entire Group. OeKB s long-term success depends on the commitment of its staff. As a responsible employer, it is important for OeKB to know its employees interests and 14

115 Oesterreichische Kontrollbank AG Management report needs. In an external review of working conditions, OeKB was successfully recertified in 2012 through the Work and Family audit. The certificate was awarded in November of the year. OeKB s staff In 2012 a competency framework was developed for OeKB that defines the qualifications and skills which management must have so that OeKB can confidently meet the challenges of the years ahead. Using specific feedback loops, managers self-perception and others perception of them are compared and development plans agreed. A variable pay component under the compensation policy is based on personal performance, corporate results and a market benchmark. The compensation policy was reviewed for its conformity with new legal requirements (see the notes to the financial statements). The number of employees increased very slightly to 368 full-time equivalents at the end of the year (prior year: 366). Profit for the year per full-time equivalent was EUR 164,255. The Executive Board would like to express its gratitude and appreciation to all employees for their commitment and contribution to the good business performance achieved. This sincere thank you also goes to the Staff Council, whose members, true to tradition, represented the interests of both the employees and the bank. Total number of employees as of 31 December Of whom part-time employees Total employees in full-time equivalents Average number of employees By age in years Up to More than 30 and up to More than 40 and up to More than 50 and up to More than By length of service in years Up to More than 5 and up to More than 10 and up to More than 20 and up to More than 30 and up to More than Indicators Turnover rate 1.5% 4.1% 1.8% Sick days per year and employee Training days per year and employee Proportion of total positions held by women 56.1% 57.0% 56.0% Proportion of management pos. held by women 29.6% 32.1% 32.1% Proportion of positions that are part-time 21.7% 21.9% 23.0% Vienna, 15 February 2013 Oesterreichische Kontrollbank Aktiengesellschaft Signed by the Executive Board Johannes Attems Rudolf Scholten 15

116 Oesterreichische Kontrollbank AG Financial statements 2012 Balance sheet of OeKB AG at 31 December December 2011 EUR EUR thousand Assets 01 Cash and balances at central banks 124,162, , Treasury bills and similar securities eligible for rediscount at the central bank 61,887, , Loans and advances to banks 441,391, ,704 a) Repayable on demand 9,186, ,281 b) Other loans and advances 432,205, ,423 Of which to subsidiaries 70,000, , Loans and advances to customers 5,665, ,097 Of which to: Subsidiaries Investees other than subsidiaries Bonds and other fixed income securities 141,756, ,483 a) Of public sector issuers 1,323, b) Of other issuers 140,432, ,171 Of which: Own bonds Debt issued by investees Equity shares and other variable income securities 175,202, , Interests in investees other than subsidiaries 18,045, ,276 Of which in banks Interests in subsidiaries 28,640, ,641 Of which in banks 10,987, , Non-current intangible assets 1,056, Property and equipment 32,156, ,473 Of which land and buildings occupied for own business use 26,689, , Other assets 3,955, , Prepayments and accrued income 104,924, , Assets related to export financing 26,427,642, ,832, Treasury bills and similar securities eligible for rediscount at the central bank 470,972, , Loans and advances to banks: Others (with agreed maturity or notice period) 24,976,904, ,377,196 Of which to subsidiaries 1,182,828, , Loans and advances to customers 466,377, , Bonds and other fixed income securities 485,519, ,852 Of which own bonds 92,951, , Other assets 45, , Prepayments and accrued income 27,822, ,909 Of which for issue of own debt securities 27,822, ,909 Total assets 27,566,487, ,138,547 Memo items 1 Foreign assets 2,868,917, ,403,977 16

117 Oesterreichische Kontrollbank AG Financial statements December 2012 EUR 31 December 2011 EUR thousand Liabilities and equity 01 Deposits from banks 441,405, ,487 a) Repayable on demand 225,868, ,138 b) With agreed maturity or notice period 215,536, ,349 Of which from subsidiaries 61,153, , Deposits from customers (sub-item: Non-savings deposits) 96,472, ,685 Of which: aa) Repayable on demand 96,472, ,685 bb) With agreed maturity or notice period From subsidiaries 53,369, ,027 From investees other than subsidiaries 12,468, , Sundry liabilities 7,488, , Accruals and deferred income 7,269, , Provisions 155,610, ,736 a) Termination benefit provisions 23,852, ,890 b) Pension provisions 87,359, ,102 c) Tax provisions 5,134, ,392 d) Other provisions 39,263, , Called-up share capital 130,000, , Allocated capital reserves 3,347, , Retained earnings 237,978, ,469 a) Statutory reserve 10,601, ,602 b) Other reserves 227,377, , Liability reserve under section 23(6) Austrian Banking Act 23,850, , Profit available for distribution 30,283, , Untaxed reserves 5,140, ,469 a) Valuation reserve from special depreciation 5,140, ,469 b) Other untaxed reserves Liabilities related to export financing 26,427,642, ,832, Deposits from banks 1,281,403, ,816 a) Repayable on demand b) With agreed maturity or notice period 1,281,403, , Deposits from customers 545,137, ,754 a) Repayable on demand 518,239, ,708 b) With agreed maturity or notice period 26,897, , Debt securities in issue 23,506,907, ,073,805 a) Bonds issued 18,091,467, ,360,231 b) Other debt securities in issue 5,415,440, ,713, Sundry liabilities 34,169, , Accruals and deferred income 86,391, , Provisions (sub-item: Other provisions) 973,633, ,603 Total liabilities and equity 27,566,487, ,138,547 Memo items 1 Off-balance sheet credit risks 3,226,515, ,881,573 2 Available regulatory capital under section 23(14) Austrian Banking Act 510,160, ,239 3 Minimum regulatory capital requirement under section 22(1) Austrian Banking Act 58,848, ,057 4 Foreign liabilities 25,268,731, ,756,482 17

118 Oesterreichische Kontrollbank AG Financial statements 2012 EUR 2012 EUR 2011 EUR thousand Income statement of OeKB AG for the year ended Interest and similar income 772,155, ,946 Of which from fixed-income securities 14,031, , Interest and similar expense 684,634, ,130 I. Net interest income 87,520, , Income from securities and investees 7,926, ,938 a) Income from equity shares, other ownership interests and variable income securities 2,503, ,503 b) Share of results of investees other than subsidiaries 1,588, ,671 c) Dividends from subsidiaries 3,835, , Fee and commission income 53,530, , Fee and commission expense 8,731, , ± Income/(expense) from financial operations (38,650.07) (24) Other operating income 9,477, ,255 II. Operating income 149,685, , Administrative expenses 73,416, ,181 a) Staff costs 51,891, ,992 Of which: aa) Salaries 33,457, ,955 bb) Statutory social security costs, pay-based levies, and pay-based other compulsory contributions 7,034, ,498 cc) Other social expenses 1,308, ,474 dd) Expenses for retirement and other post-employment benefits 4,153, ,983 ee) Additions to pension provision 4,257, ,696 ff) Expenses for termination benefits and contributions to termination benefit funds 1,679, ,386 b) Other administrative expenses 21,525, , Impairment losses on asset items 9 and 10 4,515, , Other operating expenses 1,457, ,304 III. Operating expenses (79,389,806.57) (76,506) IV. Operating profit 70,295, , ± Net loss on disposal and valuation of loans and advances and securities 8,357, (8,579) 12. ± Net loss on disposal and valuation of securities measured as non-current financial assets and of interests in subsidiaries and other investees (1,231,451.44) (4,082) V. Profit before tax 77,422, , Income tax 17,961, , Other taxes (unless shown under item 13) VI. Profit for the year 59,460, , Transfer to reserves 29,181, ,577 Of which transfer to liability reserve VII. Unallocated profit for the year 30,279, , Profit brought forward from the prior year 4, VIII. Profit available for distribution 30,283, ,292 Items in the financial statements are shown only if a non-zero amount is associated with them. 18

119 Oesterreichische Kontrollbank AG Financial statements notes Notes to the company financial statements 1 General information on accounting policies The separate financial statements of Oesterreichische Kontrollbank Aktiengesellschaft ( OeKB AG, OeKB or the Bank ) were prepared in accordance with the provisions of the Austrian Commercial Code (UGB, or Commercial Code ) and the bank-specific portions of the Austrian Banking Act (BWG, or Banking Act ). Consistent with its existing accounting practice, OeKB elected to make use of the capitalisation option under section 198(7) Commercial Code. Format of the balance sheet and income statement For greater clarity, the format of the balance sheet provides more detail than the format set out in annex 2 to section 43 Banking Act, in that items related to the OeKB-operated Export Financing Scheme are shown separately. The use of this expanded format is permitted by section 43(2) Banking Act. Measurement principles Assets and liabilities are measured in accordance with the provisions of sections 201 to 211 Commercial Code, subject to the departures arising from sections 55 to 58 Banking Act. Measurement of certain balance sheet items Securities are measured at cost (using the weighted average cost formula), applying conservative valuation at the lower of cost or market value (section 207 Commercial Code, subject to section 57 Banking Act). In respect of the securities investments serving as a liquid assets portfolio for the Export Financing Scheme, interest rate swaps (in the form of asset swaps) were used to hedge the interest rate risk. The hedging periods and amounts of the hedged items and corresponding derivatives are identical, which means that hedge effectiveness is given. The respective hedged items and hedging instruments thus qualify for hedge accounting. Any valuation effects from changes in credit spreads are accounted for by conservative measurement at the lower of cost or market. Interests in investee companies are measured at cost less any impairment. Property and equipment and intangible assets (buildings, fixtures, fittings and equipment, leasehold improvements, software and other non-current assets) are measured at cost less depreciation and amortisation. The valuation reserve from accelerated tax depreciation effected in prior years is presented as a separate item under reserves, in accordance with the standard format set out in the Austrian Banking Act. Foreign currency items are ordinarily measured at middle rates of exchange in effect at the balance sheet date. However, where the Republic of Austria has furnished an exchange rate guarantee under the Export Financing Guarantees Act (AFFG, published in Federal Law Gazette No. 216/1981, as amended), measurement is made at the guaranteed exchange rate. 19

120 Oesterreichische Kontrollbank AG Financial statements notes Provisions for current and future pension obligations and for termination benefits are determined on the basis of generally accepted actuarial principles, using the projected unit credit method in accordance with International Accounting Standard 19. The calculations assume a discount rate of 3.5% (2011: 4.75%) and an age at retirement of 63 years 9 months for men (2011: 63 years 6 months) and 58 years 9 months for women (2011: 58 years 6 months), and are based on the computation tables by Pagler & Pagler. Deferred taxes are recognised in accordance with section 198(9) and (10) Commercial Code. The provision for interest rate stabilisation relates to the future support of interest rates on export credits for which OeKB carries the interest rate risk, and also to the interest rate risk from the funding of the Export Financing Scheme. Any surplus of (i) interest income (after deduction of OeKB s required interest margin) on financing facilities not subject to interest support over (ii) the respective funding costs is added to the interest rate stabilisation provision; in the event of a deficit, this provision is used to cover the shortfall, which is the purpose of the provision. In the case of swap contracts which relate almost exclusively to funding operations for export financing the interest payable both on the hedged transaction and on the swap is recognised in the time periods in which it accrues. To the extent of any timing differences between the interest payment obligations of OeKB and of the swap counterparty, the amounts payable are recognised within other loans and advances to banks. Where covered by an exchange rate guarantee under the Export Financing Guarantees Act, foreign currencies are translated at the guaranteed rates of exchange. 2 Notes to the balance sheet 2.1 Financial position To highlight the overall trends in the balance sheet of OeKB AG in the 2012 financial year, a condensed balance sheet, divided into two sections, is presented in the accompanying table for the last three years. The decrease visible in the table of about EUR 4.6 billion (14.2%) in total assets compared with the prior year, to a new balance of EUR 27.6 billion, was attributable largely to a reduction in lending under the Export Financing Scheme, with loans and advances to banks easing by approximately EUR 4.4 billion to a new total of EUR 25.0 billion. 20

121 Oesterreichische Kontrollbank AG Financial statements notes Assets EUR thousand 31 Dec Dec _ Change in % 31 Dec Financial position I. Own account 803,935 1,305, , ,138,845 Cash and balances at central banks Treasury bills and similar securities Loans and advances to: Banks Customers Securities Interests in subsidiaries and other investees Property and equipment and intangibles Other assets 83,057 66,865 55,062 7, ,178 51,999 29,421 93, , , ,162 54, , , , , ,392 7,097 1, , ,816 59, ,958 47,917 1, ,686 31, , , , , ,880 II. Export financing account 30,213,162 30,832,863 4,405, ,427,643 Treasury bills and similar securities Loans and advances to: Banks Customers Bonds and other fixed income securities Other assets Prepayments and accrued income 470,994 28,844, , , , ,479 29,377, , ,852 8,424 41, ,494 4,400,291 76,626 79,668 8,378 14, ,973 24,976, , , ,822 Total assets 31,017,097 32,138,547 4,572, ,566,488 Liabilities and equity EUR thousand 31 Dec Dec _ Change in % 31 Dec I. Own account 803,935 1,305, , ,138,845 Deposits from: Banks Customers Equity 180,821 87, , ,487 83, , ,082 12,787 29, ,405 96, ,317 Employee benefit provisions Profit available for distribution Other liabilities II. Export financing account 102,770 20,297 66,148 30,213, ,992 20,292 54,092 30,832, ,220 9,991 5,064 4,405, ,212 30,283 59,156 26,427,643 Deposits from: Banks Customers Debt securities in issue Sundry liabilities Accruals and deferred items Provisions 1,246, ,040 27,592,544 5,742 84, , , ,754 29,073,805 5,675 90, , ,587 31,384 5,566,897 28,494 3, , ,281, ,138 23,506,908 34,169 86, ,634 Total liabilities and equity 31,017,097 32,138,547 4,572, ,566,488 21

122 Oesterreichische Kontrollbank AG Financial statements notes 2.2 I. Own-account section of the balance sheet The decrease of EUR 0.2 billion in the own-account portion of the balance sheet resulted chiefly from the decrease in OeKB s credit balance with Oesterreichische Nationalbank (the Austrian central bank) and a contraction in the holdings of securities. The change in deposits from banks also reflects this latter factor. The item land and buildings included land valued at EUR 4,398, Of the securities held, securities in the amount of EUR 43,727, are maturing in For the purposes of section 64(1)10 and 11 Banking Act, the analysis of securities holdings is as follows: EUR Treasury bills and similar securities eligible for rediscount at the central bank Bonds and other fixed income securities Equity shares and other variable income securities Admitted to trading on exchange and listed 61,887, ,756, ,091, Of which securities held as non-current assets As a disclosure under section 208(3) Commercial Code in conjunction with section 56 Banking Act, the difference between the market value and carrying amount of securities held as current assets was EUR 13,211, For the entire investment portfolio, the difference between market value and carrying amount was a total of EUR 73,652, While interests in subsidiaries and other investees by their nature represent non-current assets, the Executive Board has adopted rules for the other securities categories to the effect that the classification of securities to non-current assets is made on the basis of, among other factors, maturity and the relationship between cost and face amount. As at 31 December 2012, like one year earlier, all securities holdings were classified as current assets; OeKB does not hold a trading portfolio and therefore has no trading book. The asset items contained no subordinated assets. The government bonds of the Republic of Greece held within securities at 31 December 2011 (at a carrying amount equalling their prior market value of EUR 4.8 million) were exchanged in 2012 under the Private Sector Involvement (PSI) agreement for new securities that were subsequently sold by tender. In total, this resulted in net disposal proceeds of EUR 1.4 million. The item other assets in the condensed balance sheet consists mainly of prepayments and accrued income and other receivables, including accounts receivable from subsidiaries. The increase of 8.8% compared to the prior year was attributable to a rise in deferred tax assets. The increase in the item other liabilities (which consists primarily of sundry liabilities, accruals and deferred items, and provisions) stemmed both from higher sundry liabilities and higher tax provisions. Prepayments and accrued income included deferred tax assets under section 198(10) Commercial Code in the amount of EUR 102,681, (2011: EUR 94,084,512.26). In accordance with section 3(2)1 Banking Act, OeKB is exempt from the special liquidity requirements set out in the Banking Act. 22

123 Oesterreichische Kontrollbank AG Financial statements notes Company name and registered office Banking Act category 1 Type of investment Shareholding Financial information Companies wholly or partly owned by OeKB AG Credit Institution/ Other Company Directly held Indirectly held in % Reporting date of latest annual accounts Equity as defined in sec. 224(3) UGB 2, in EUR thousand Profit for the year, EUR thousand Subsidiaries Oesterreichische Entwicklungsbank AG, Vienna CI x Dec , Österreichischer Exportfonds GmbH, Vienna CI x Dec , OeKB EH Beteiligungs- und Management AG, Vienna OC x Dec ,533 14,162 OeKB Versicherung Aktiengesellschaft, Vienna OC x Dec ,856 2,607 PRISMA Kreditversicherungs-Aktiengesellschaft, Vienna OC x Dec ,639 13,996 PRISMA Risikoservice GmbH, Vienna OC x Dec ,525 2,956 PRISMA Risk Services d.o.o., Belgrade OC x Dec CCP Austria Abwicklungsstelle für Börsengeschäfte GmbH, Vienna OC x Dec OeKB Business Services GmbH, Vienna OC x Dec , OeKB Zentraleuropa Holding GmbH, Vienna OC x Dec , Other investees AGCS Gas Clearing and Settlement AG, Vienna OC x Dec , APCS Power Clearing and Settlement AG, Vienna OC x Dec , CISMO Clearing Integrated Services and Market Operations GmbH, Vienna OC x Dec ,329 2,529 ECRA Emission Certificate Registry Austria GmbH, Vienna OC x Dec Einlagensicherung der Banken und Bankiers Gesellschaft m.b.h., Vienna OC x Dec EXAA Abwicklungsstelle für Energieprodukte AG, Vienna OC x Dec , Garage Am Hof Gesellschaft m.b.h., Vienna OC x Dec ,316 1,129 OeMAG Abwicklungsstelle für Ökostrom AG, Vienna OC x Dec , CEESEG Aktiengesellschaft (former Wiener Börse AG), Vienna OC x Dec ,024 12,890 Budapest Stock Exchange Ltd., Budapest OC x Dec ,346 3,575 Link-up Capital Markets S.L., Spain OC x Dec ,258 (2,355) 1 Other Company (OC) refers to companies that are neither Credit Institutions nor Financial Institutions by the definitions of the Austrian Banking Act. 2 UGB refers to the Austrian Commercial Code. 23

124 Oesterreichische Kontrollbank AG Financial statements notes 2.3 II. Export finance section of the balance sheet In 2012 the total assets associated with export financing decreased by about EUR 4.4 billion from one year earlier, a decrease of 14.3%. In the year under review, EUR 6.8 billion was used for the disbursement of export loans. EUR 10.4 billion was received under loan repayments. At the end of the year, export finance loans and advances outstanding had thus decreased by EUR 3.6 billion. The export financing loan book comprised a total of about 3,200 credits at the year end. New borrowings in 2012 amounted to EUR 55.4 billion, and OeKB repaid EUR 59.0 billion on debts (both new borrowings and the serviced existing debt instruments were denominated in euros and foreign currencies). At 31 December 2012, OeKB had access to EUR 4.3 billion of overnight funds under the ECB's marginal lending facility. In the reporting period, as in the prior year, most of the debt securities were issued abroad. The amount of export finance lending was increased by 21% compared to the prior year. The securities holdings totalling EUR 956,492, are all classified as current assets. All are admitted to trading on a stock exchange and are listed. The aggregate carrying amount of these securities exceeded their market value by EUR 40,721, There are no maturities in Fiduciary assets and liabilities The transactions overseen by OeKB as trustee represent neither financial nor legal exposure for the Bank. They are recognised in the balance sheet within the following items: Own account: Fiduciary assets: EUR 990, within loans and advances to customers Fiduciary liabilities: EUR 990, within deposits from banks with agreed maturity or notice period. Export financing account: Fiduciary assets: EUR 13,265, within loans and advances to banks Fiduciary liabilities: EUR 13,265, within deposits from customers with agreed maturity or notice period. 24

125 Oesterreichische Kontrollbank AG Financial statements notes 2.5 Supplementary information regarding the balance sheet Liabilities in connection with the Export Financing Scheme Amounts issued (nominal value) in currency units thousand Amount outstanding at 31 Dec (incl. premium) in EUR thousand Maturity Amounts issued (nominal value) in currency units thousand Amount outstanding at 31 Dec (incl. premium) in EUR thousand Maturity Debt securities in issue and other liabilities in connection with the Export Financing Scheme I. Debt securities in issue 35,318, ,032,309 1 a) Issued in euros Euros b) Issued in foreign currency US dollars Japanese yen Swiss francs Pounds sterling Australian dollars Norwegian kroner Total of b) Total of a) + b) c) Interest expense accrual, and redemption payments in the course of transmission to security holders Commercial paper EUR 12,995,000 12,995, USD 12,350,000 8,768, JPY 80,000, , CHF 6,520,000 4,188, GBP 450, , AUD 850, , NOK 1,500, , ,813,216 27,808, ,403 7,288,164 EUR 10,274,000 10,274, USD 12,600,000 8,597, JPY 80,000, , CHF 6,920,000 4,454, GBP 150, , AUD 850, , NOK 1,500, , ,548,535 24,822, ,891 4,076,883 II. Other liabilities in connection with export financing 28, ,530 Austrian lenders in euros in foreign currencies Foreign lenders in euros in foreign currencies 26, ,046 2, , , ,898 1, ,632 Total long-term debt: I. a) + b) + II. 27,837,037 25,651,065 Of which contractual maturities in the subsequent year 6,817,129 6,127,894 Of which bonds 6,816,364 6,127, For a portion of these borrowings, related positions existed in swaps. Of its debt securities in issue, OeKB held EUR 6,265 million itself at the end of 2011 and EUR 5,617 million at the end of Open market operation of the ECB: EUR 800 million. 25

126 Oesterreichische Kontrollbank AG Financial statements notes Provisions The provision recognised in connection with export financing (EUR million) consisted entirely of an interest rate stabilisation provision to stabilise interest rates on export lending facilities. Under the provisions unrelated to export finance, other provisions pertained primarily to risks in relation to various software projects and general business risks (EUR 28.5 million). EUR Cost at Additions 1 1 January 2012 in 2012 Disposals 1 in 2012 Accumulated depreciation and amortisation Net book value at 31 Dec Net book value at 31 Dec Depreciation and amortisation in 2012 Non-current assets in 2012 Non-current intangible assets Property and equipment Interests in investees other than subsidiaries Interests in subsidiaries 3,254, , ,852, ,056, , , ,488, ,848, ,519, ,660, ,156, ,472, ,119, ,742, ,503, ,519, ,513, ,213, ,270, ,515, ,055, ,010, ,045, ,276, ,231, ,640, ,640, ,640, Total 159,438, ,503, ,519, ,524, ,899, ,187, ,747, Including reclassifications. EUR At 1 January 2012 Additions in 2012 Releases in 2012 At 31 December 2012 Valuation reserves Land and buildings Fixtures, fittings and equipment Securities 2,156, , ,872, , , , ,012, ,012, Total 5,469, , ,140,

127 Oesterreichische Kontrollbank AG Financial statements notes 3 Regulatory capital under the Austrian Banking Act OeKB s regulatory capital as defined in the Banking Act is shown in the table below. Pursuant to section 3(1)7 Banking Act, transactions in connection with the Export Financing Scheme are exempted from the administrative regulations of sections 22 to 22q and 25 to 27 Banking Act. In the year under review, no transfer to the liability reserve was required. The valuation reserves under section 12 Austrian Income Tax Act (EStG, Income Tax Act ) resulting from special depreciation under sections 8 and 122 Income Tax Act 1972 were drawn down through use for their intended purpose. EUR 29.5 million was transferred to the uncommitted reserve. EUR thousand Regulatory capital requirement under section 22 Austrian Banking Act Risk-weighted assets (based on Standardised approach to credit risk) 359, ,790 Trading book Total risk-weighted assets 359, ,790 Regulatory capital requirement Banking book 1 28,787 24,783 Foreign exchange risk 7,709 7,133 Operational risk (Basic Indicator approach) 22,352 23,141 Total regulatory capital requirement 58,848 55,057 Regulatory capital resources under section 23 Austrian Banking Act Paid-up share capital 130, ,000 Reserves 270, ,136 Intangible assets (1,057) (798) 50% deductions under section 23(13)4a Banking Act (investments in insurance companies) (8,050) (8,050) Tier 1 capital 391, ,288 Tier 2 capital (reserve for general banking risks under section 57 Banking Act) 127, ,000 50% deductions under section 23(13)4a Banking Act (investments in insurance companies) (8,049) (8,049) Total regulatory capital resources 510, ,239 Surplus regulatory capital 451, , % of total risk-weighted assets. Oesterreichische Kontrollbank AG has a share capital of EUR 130 million, divided into 880,000 shares of no par value. These registered ordinary shares with restricted transferability are represented by provisional share certificates made out in the name of each individual shareholder. The ownership structure of OeKB AG as at 31 December 2012 is presented in the Group annual report. 27

128 Oesterreichische Kontrollbank AG Financial statements notes 4 Notes to the income statement The following table summarises the main items of the company income statement of OeKB AG for the last three years. EUR thousand _ Change in % 2012 Condensed income statement Net interest income and income from securities and investees Net fee and commission income Income and expense from financial operations and other operating income Operating income Staff costs, including social security and pension costs Other administrative expenses Depreciation, amortisation and impairment losses on property and equipment and intangible assets Other operating expenses Operating expenses Operating profit Net loss on disposal and valuation of loans and advances, securities, and interests in subsidiaries and other investees Profit before tax Taxes Profit for the year Net movement in reserves Unallocated profit for the year Profit brought forward from the prior year 98,602 96,754 1, ,447 43,208 42, , ,800 7,243 9, , , , , ,686 50,468 49, , ,891 21,937 21, ,525 4,169 4, ,516 1,316 1, ,458 77,890 76, , ,390 71,163 71,796 1, ,296 (13,633) (12,661) + 19, ,126 57,530 59, , ,422 12,706 14, , ,962 44,824 44, , ,460 (24,535) (24,577) 4, (29,181) 20,289 20, , , Profit available for distribution 20,297 20, , ,283 As the table shows, operating profit in 2012 decreased by 2.1% from the prior year. This was driven mostly by a rise in staff costs (due partly to a change in discount rates for the calculation of employee benefit provisions) and also by higher depreciation of property and equipment, as the new office space from the top-floor expansion of the Strauchgasse 1-3 address was taken into use. Despite the continuing volatility in financial markets, the net loss on disposal and valuation of loans and advances, investees and securities significantly improved from the year before. In the financial year, the ownership interest in the Budapest Stock Exchange was written down by EUR 1.2 million. After taxes, profit for the year was EUR 59.5 million in 2012, representing an increase of 32.5% compared to the prior year. The auditor s remuneration is included within other administrative expenses and consists of an expense of EUR 258, for the audit of the 2012 company financial statements (2011: EUR 258,000.00). As the regional focus of the activities lies in Austria, a geographic segmentation is omitted. 28

129 Oesterreichische Kontrollbank AG Financial statements notes 5 Supplementary disclosures Obligations from the use of off-balance sheet property and equipment: a) In the subsequent financial year: EUR 1.2 million b) In the subsequent five financial years (total): EUR 7.2 million. Derivative financial instruments at the balance sheet date: EUR million Notional amount Positive Fair values Negative Interest rate swaps Of which to subsidiaries Currency swaps Of which to subsidiaries Foreign Exchange Forwards 18, , , The fair values shown represent the clean prices of the derivatives. These transactions to hedge the interest rate risk and exchange rate risk are managed entirely in conjunction with export finance funding operations (debt capital raising) and thus form an economic unit with these debt instruments. In view of the exchange rate guarantee under the Export Financing Guarantees Act, no provision was made for negative market values of these derivatives. The fair values of derivatives are calculated by generally accepted methods. Other off-balance sheet transactions: The off-balance sheet credit risks of EUR 3,226,515, shown as memorandum items relate to undrawn credit facilities and commitments to lend, all of which are in connection with the Export Financing Scheme. Assets pledged as collateral: EUR million Securities pledged as collateral (market value) With OeNB for tender 5, ,398.9 For trading on futures exchanges (EUREX) For energy trading (ECC) 6.8 For stock exchange trading in Vienna (CCPA) For EUREX Repo platform Collateral for credit risks of derivative transactions Collateral pledged Collateral received

130 Oesterreichische Kontrollbank AG Financial statements notes Assets and liabilities denominated in foreign currency: The balance sheet contained foreign-currency-denominated items in the following translated amounts, largely related to export financing: Assets: EUR 1,560,638, Liabilities: EUR 18,794,743, Maturity analysis of loans and advances and financial liabilities not repayable on demand (remaining maturities, in EUR thousand): Credit balances at banks and loans and advances to banks and customers Deposits from banks and customers and debt securities in issue Not more than 3 months 2,094,654 Not more than 3 months 4,305,443 Over 3 months but Over 3 months but not more than 1 year 8,723,872 not more than 1 year 5,194,752 Over 1 year but not Over 1 year but not more than 5 years 11,211,251 more than 5 years 12,752,990 Over 5 years 4,621,836 Over 5 years 3,204,353 The disclosures required under section 26 and 26a Austrian Banking Act are provided in the consolidated financial statements of the OeKB Group. Related-party transactions: As a specialised institution for export services and capital market services, OeKB engages in many transactions with its shareholders. All these transactions are conducted at arm s length. The following balance sheet items include transactions with related parties of OeKB: EUR thousand 31 Dec Dec Related party transactions with shareholders of OeKB Loans and advances to banks 19,494,938 23,062,464 Bonds and other fixed income securities 73,423 83,634 Deposits from banks 17,782 13,843 Related party transactions with unconsolidated subsidiaries Loans and advances from banks 1,252, ,446 Deposits from banks 61,152 25,514 Deposits from customers 53,370 38,026 Related party transactions with other investees Depostits from customers 12,469 9,457 There were no transactions with Executive Board or Supervisory Board members. 30

131 Oesterreichische Kontrollbank AG Financial statements notes Average number of employees (all were salaried): 2012: 362 (2011: 365) Expenses for pensions and termination benefits (including net additions to provisions): a) Executive Board members (including former members or their surviving dependants): EUR 2,247, (2011: EUR 2,524,644.50) b) Key managers EUR 1,113, (2011: EUR 1,262,093.03) c) Other employees: EUR 6,729, (2011: EUR 4,278,229.95) d) The item expenses for termination benefits and contributions to termination benefit funds included EUR 110, of contributions to termination benefit funds. Total remuneration of the Boards: a) Executive Board: Not disclosed, as permitted by section 241(4) Austrian Commercial Code b) Supervisory Board: EUR 270, c) Former members of the Executive Board or their surviving dependants: EUR 137, Members of the Executive Board Johannes Attems Rudolf Scholten Members of the Supervisory Board Erich Hampel, Chairman Walter Rothensteiner, 1st Vice-Chairman Franz Hochstrasser, 2nd Vice-Chairman Helmut Bernkopf Peter Bosek Michael Glaser (since 22 May 2012) Dieter Hengl Friedrich Hondl (until 15 March 2012) Reinhard Karl (since 22 May 2012) Michael Mendel (since 22 May 2012) Herbert Messinger (since 18 Dec. 2012) Gernot Mittendorfer (until 22 May 2012) Heimo Penker Christoph Raninger (until 31 October 2012) Angelo Rizzuti Herbert Stepic Susanne Wendler (until 22 May 2012) Robert Zadrazil Franz Zwickl Staff Delegates: Martin Krull Erna Scheriau Alexandra Griebl Anish Gupta Christian Leicher Claudia Richter Otto Schrodt Markus Tichy Government commissioners under section 76 Austrian Banking Act Harald Waiglein, Commissioner (since 1 July 2012) Thomas Wieser, Commissioner (until 29 Feb. 2012) Johann Kinast, Deputy Commissioner The above government commissioners are also representatives of the Austrian Minister of Finance under section 6 Export Financing Guarantees Act. Government commissioners under section 27 of the Articles of Association (supervision of bond cover pool) Johannes Ranftl, Commissioner Edith Wanger, Deputy Commissioner 31 31

132 Oesterreichische Kontrollbank AG Proposal for the appropriation of profit Calculation of profit available for distribution in respect of the 2012 financial year: Unallocated profit for the year 2012 EUR 30,279, Profit brought forward from the prior year EUR 4, Profit available for distribution for 2012 EUR 30,283, The Executive Board proposes that the profit available for distribution be used as follows: Payment of a dividend of EUR per share on 880,000 no-par value shares EUR 20,020, Payment of a special dividend of EUR per share on 880,000 no-par value shares EUR 9,988, Payment of profit-based emoluments to the Supervisory Board EUR 270, Profit to be carried forward EUR 5, Vienna, 15 February 2013 Oesterreichische Kontrollbank Aktiengesellschaft Executive Board Johannes Attems Rudolf Scholten 32

133 Oesterreichische Kontrollbank AG Auditor s Report Report on the Financial Statements We have audited the accompanying financial statements, including the accounting system, of Oesterreichische Kontrollbank Aktiengesellschaft, Vienna, Austria for the fiscal year from 1 January 2012 to 31 December These financial statements comprise the balance sheet as of 31 December 2012, the income statement for the fiscal year ended 31 December 2012, and the notes. Management s Responsibility for the Financial Statements and for the Accounting System The Company's management is responsible for the accounting system and for the preparation and fair presentation of these financial statements in accordance with Austrian Generally Accepted Accounting Principles and Austrian Banking Act. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors Responsibility and Description of Type and Scope of the statutory audit Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with laws and regulations applicable in Austria and Austrian Standards on Auditing. Those standards require that we comply with professional guidelines and that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements

134 Oesterreichische Kontrollbank AG We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion Our audit did not give rise to any objections. In our opinion, which is based on the results of our audit, the financial statements comply with legal requirements and give a true and fair view of the financial position of the Company as of 31 December 2012 and of its financial performance for the year from 1 January 2012 to 31 December 2012 in accordance with Austrian Generally Accepted Accounting Principles. Report on Other Legal Requirements (Management Report) Pursuant to statutory provisions, the management report is to be audited as to whether it is consistent with the financial statements and as to whether the other disclosures are not misleading with respect to the Company s position. The auditor s report also has to contain a statement as to whether the management report is consistent with the financial statements. In our opinion, the management report is consistent with the financial statements. Vienna, 15 February 2013 KPMG Austria AG Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Bernhard Gruber ppa Wolfgang Höller Wirtschaftsprüfer Wirtschaftsprüfer (Austrian Chartered Accountants) This report is a translation of the original report in German, which is solely valid. The financial statements together with our auditor's opinion may only be published if the financial statements and the management report are identical with the audited version attached to this report. Section 281 paragraph 2 UGB (Austrian Commercial Code) applies. 34

135 Publication information This report is a translation of the German-language original and is provided solely for readers convenience. In the event of discrepancies or dispute, only the German version of the report shall be deemed definitive. Oesterreichische Kontrollbank Aktiengesellschaft Am Hof 4 and Strauchgasse 3 P.O. Box Vienna, Austria Tel or extension Owner and publisher: Oesterreichische Kontrollbank Aktiengesellschaft Editor and layout: Controlling, Reporting and Payments/ Robert Anderl [email protected] Internet: Bank code number Registered office: 1010 Vienna Companies register no. FN 85749b Commercial Court Vienna UID: ATU , DVR: Graphic design: Gerald Schuba Corporate Communications+, Translation: Martin Focken Translating & Editing, North Bay, ON, Canada Information in this report is current as of 28 February Photography: Christina Häusler, Vienna (page 8) Philipp Horak, Vienna (page 2) 98

136 Am Hof 4, Strauchgasse Vienna, Austria Tel O e s t e r r e i c h i s c h e K o n t r o l l b a n k G r o u p